Report on Finance in the Hospitality Industry

FINANCE
IN THE
HOSPITALITY
INDUSTRY

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Sources of finance for business and services industries...................................................1
1.2 Methods of generating income for large chain restaurants..............................................3
TASK 2............................................................................................................................................4
2.1 Elements of cost, Gross profit and selling price ..............................................................4
2.2 Method of controlling stock and cash..............................................................................7
TASK 3............................................................................................................................................9
3.3 Process and purpose of budgetary control........................................................................9
3.4 Analysis of variance ......................................................................................................11
TASK 4..........................................................................................................................................13
3.1 Sources and structure of the trial balance.......................................................................13
3.2 Evaluation of business accounts, adjustments and notes................................................14
4.1 Solution of ratios............................................................................................................15
4.2 Recommending future strategies....................................................................................18
TASK 5..........................................................................................................................................19
5.1 Categorising costs as fixed, variable and semi-variable costs........................................19
5.2 and 5.3 BEP in units and value and Number of unit require to sold to meet target ......20
CONCLUSION..............................................................................................................................24
BIBLIOGRAPHY .........................................................................................................................25

INTRODUCTION
Finance is essential part of every organisation. It is required for every firm to have
effective financial management so that they can meet future expectation of business. Funds are
required for operation of company (Altinay, Paraskevas and Jang, 2015). It provides assistance
to business to make production as the market demand so that they can stand in market for long
run. There are different sources available to raise fund as loan from bank and Financial
institution, use of savings, loan from friends and family, issue of shares and debentures etc.
Hospitality industry provides various services to their customers as their needs and wants. It is
important task for the company to fulfil their expectation so that they can provide maximum
satisfaction to them. This industry offers various type of services to market so it is required for
this sector to have effective management of finance so that they are able to fulfil expectation
level.
Magrat is the organisation that offers their services in hospitality industry. It is important
for such organisation to focus on their financial management so that they can fulfil the future
expectation of business. They offers various kind of services to tourist to attract them toward
their firm (Bar-Tal, 2012). This company has different product and services that they provides
to their consumer so that they can last for long time. Cited organisation provides different
packages for different destination and this firm is able to offer various kind of services at tourist
destination so that they can provide maximum assistance to them.
TASK 1
1.1 Sources of finance for business and services industries.
Finance is important part of business organisation which is related to monetary terms. It
only element of all organisation which is used in operation of concern and supports in competing
with competitors of organisational (Bowie, Buttle and Brookes, 2016). There different sources
of finance from which organisations can allocate funds required for operation. The some of
sources of funds for business and service industries is described as follows:-
Issue of Equity shares:- It is is the process of raising finds by issuing shares of
organisation. Raising funds by issue of equity share is most commonly used by industries. The
share issued to individuals are knowns as equity share holder of business and they are co owners
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of business. This is the best way to raise funds. The certain amount is paid on the share issued as
a dividend. The amount is paid only when business earns profits. Thus its also known as risk
investment.
Debt financing:- It is a process of generating finance for organisation by issuing of
debentures. It is also referred to a borrowed capital. It is also a promise made in written by
business that the amount borrowed will be repaid on the date mentioned in debenture. The
individuals who purchases debentures of business organisation are referred to debenture holders
of business and they are creditors of organisation (Chan and Hawkins, 2010). The debenture are
issued by organisation for certain time period after which the amount is repaid by business. The
certain amount of fixed interest is paid on debentures till they are not redeemed holder.
Bonds:- Industries can issue bonds to general public for raising funds. The amount raised
by business organisation is referred to a loan for company. Individuals who invests in bonds are
creditors of company and certain amount is paid to individuals as an interest on amount invested.
Bonds is secured investment as in is fully repaid with amount of interest within specified time
period even though organisation faces losses.
Retained earning:- It a source of raising funds internally by businesses. The some part
of past years net profits can be kept aside in the form of reserve. This amount of profits in
reserve can be utilised by the business for future expansion and development as per their need.
This is beat method to raise funds as required as not interests are paid and it is a owned capital.
The amount of raised fund through this not repaid till liquidation of organisation and do not incur
any additional cost on raising finance.
Loan from banks:- Borrowing funds from different banks is the most common source
for raising funds by business. Organisations can raise short term and long term funds from
different financial institutions. Certain amount of interest is charged by banks for amounts
provided to business (Chang, Gong and Shum, 2011). The amount raised by business by
borrowing from banks is repaid within time period.
Trade credit:- Businesses can raise short term funds by trade credit. Trade credit helps
organisation for raising working capital. It is a source where amount of raw material purchased
by firm for operation is paid later. Suppliers of concern provide time for payment for materials
purchased and not interest is charged on amount raised through it.
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Bank Overdraft:- It a best source of raising short term finance for business. The bank
provides facility to its good customer to withdraw certain amount of money within the limit set
by the bank. The bank overdraft helps business to meet working capital requirements. Interest is
charged by bank on excess amount withdrawn by business.
Discounting of bills:- It a good source of raising funds immediately. Organisation can
raise money from bank against bill receivable. The certain amount of interest is charged by the
bank on discounting of bills and rest amount is paid to the business.
1.2 Methods of generating income for large chain restaurants.
The business have different methods which helps business to generate income for the
products and services provided by them to users. It is difficult for business to generate income.
The some of methods which supports large chain restaurants in generating income and their
contribution in business is described as follows:-
Methods of generating income:
The tools of generation of income depends upon type of business i.e. whether it provides
product or service. The organisation which provides products more of revenue is generate by
selling apart from this business which provided service the revenue is generated from provided
service (Chen. and Chang, 2012). The revenue generation for large chain restaurants can be
form core business and non-core part of business this are discussed as follows:-
Core business:- In this revenue is generated by the products and services provided by
organisation to customers.
 Food and beverage:- It is a main tool of generating income for large chain
restaurants. The restaurants provides foods and beverage products to their
customer daily which supports organisations in generating high amount of
revenues.
 Packages:- Many restaurants provides significant packages on daily meals,
lunches and dinners. These packages helps to attract customers to uses following
services. The more of customers using services helps to generate more revenue
for business.
 Room occupancy:- The room occupancy service provided to clients of restaurants
it the method which supports business to generate revenues for business. The
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more of revenue is incurred by the organisation in the seasonal time period when
more individuals visits tourist destinations.
Non-core business:- The revenue generate by business from other activities undertaken
by business is considered as income from non-core business. This includes revenues from
investments done by organisation and interests received from different sources (Chung and
Parker, 2012). The following are described as follows.
 Investments:- The income generated by the dividends generated on the
investments made by business organisation comes under income from
investments.
 Interests:- This includes revenue generated by the business in a form of interests
from loan provided by organisation, interests charged on debtors and on bills
receivable.
Contribution of generated income on business: All revenues generated by business supports
organisation in many ways. Some of contribution of revenue on business is described as
follows:-
Growth in capital:- Income generated form different sources have helped business in
increasing the capital. The availability of funds within organisation have directly increased
which supports in day to day operation. It have helped business to make more investments which
incurs revenue for organisation.
Tax minimization:- Income generation have supported industry to make new investments
which significantly utilises the funds and supports in minimising the payable amount of tax.
Expansion of business:- High amount of revenue generation for organisation from
different sources have supported business organisation in expansion of business organisation in
new areas and also helps in start up of new type of business. This expansion also generates
income for industry.
TASK 2
2.1 Elements of cost, Gross profit and selling price
There are many factors that are affected in the production of product. It is required to
business to mange such elements most effectively so that they can generate maximum benefit out
of it (Fu and et. al., 2011). In production process, there are various things that are required to
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