Finance in the Hospitality Industry
Added on 2020-07-22
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Finance in theHospitality Industry
Table of ContentsINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1PART A...........................................................................................................................................11.1 Review of source of funding:...........................................................................................11.2 Evaluate contribution of the sales of old oven and the sub-letting of unused spaces andselling of recipes on business profitability and cash flow:.....................................................32.1 Elements of cost, profit percentages and selling prices for products and services offered bya restaurant:............................................................................................................................32.2 Evaluation of methods of controlling stock and cash in the restaurant:...........................4PART B............................................................................................................................................53.1: Assess the sources and structure of trail balance............................................................53.2 Evaluation of business account form................................................................................6PART C............................................................................................................................................63.3 Process and purpose of budgetary control........................................................................63.4 Analysis of variance in budgeted and actual figures and suggestions for futuremanagement action.................................................................................................................8CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10
INTRODUCTIONNowadays, finance becomes the crucial parts for operating business in each sector(Altinay, Paraskevas and Jang, 2015). Although, this can be said that each company needs toknow about the source of finance and pick the best among them. Under this report, variousfinancial raising tools are elaborated. There is huge importance of management of the finance inorganisations. It provides the opportunity regarding use best resources which helps in attainingpredetermined objectives. The hospitality sector is UK is on Boom right now. There are largenumber of opportunities are available which to earn large number of profits. There are largenumber of sources from which organisations raise their finance includes bank loan, hirepurchase, Factoring, venture capitalists etc.In the present report explain about, different sources of funds, different factors whichhelps in generation of income and major elements of cost, gross margin and selling prices. Also,analysis of the methods which helps in controlling stock, sources of trial balance and purpose ofbudgetary control.TASK 1PART A1.1 Review of source of funding:There is various source of finance which can be used by an enterprise while raising funds.But mainly, internal and external sources are the most famous among all. These are required toknow about the various finance tools that may be used by the firm in internal and externalfactors.Internal sources of finance: This is the source which is related to the internal parts ofthe organisation. In other words, these are the sources of finance for a business that are producedby the business itself from its normal course of operations. The fund raised under this would takefrom either owners capital, retained earnings or internal parts of the organisation. This is themost usable form for raising capital by the finance manager in the firm. These internal sourcesare defined in details:Retained Earnings: This is the capital of the company which can be used by the firm formeeting the financial needs of the company. Although, this can be said that the companyby using retained earnings accumulate various advantages such as, higher term finance,1
no dilution of control and ownership, cost efficiency. But, there are drawback too, as thisdoes not consider cost of equity capital much effective.Sale of assets: This is also the another tool for internal source of finance. During sellingthe business assets and cash generated is implemented internally for financing of capitalneeds. Bank overdraft: This is the overdraft which is simple mode of short term financing.Businesses are required to need money for their routine needs which emerge due to atime gap between their accumulation and payments. To satiate these requirements, bankoverdraft is the most effective tool in the short term source of capital of finance.Trade credits: Trade credit is rendered to an organisation by their creditors/suppliers.This enables an organisation to delays its payments by some period. The period of creditbased on credit terms between business and suppliers.Factoring of debt: This is an arrangement whereby organisation sell out its accountreceivables/ debtors during discount, in this arrangement, buyer who is known due toknown as the factor, gather finance from the debtors on behalf of organisation andcharges a premium for this service. This is debtor does not pay for any reason, factorcould get back to the organisation for the payment.Fund from operations: It is effective source which include about raise the funds by themanagement of restaurant through their own personal operations. Such sources areconsidered as their own profits which are earn by restaurant through their differentfunctions. These funds are used by the management of restaurant regarding effectiveoperation of their day to day operations. External source of finance: There are so many external sources of finance whichemerges from outsiders. Capital raised from public by exercising IPOs and FPOs and debentures.These are some of the external factors which are elaborated in details:Equity shares: This is the common source of finance as this is only exercised for bigtech organisation. Not entire organisation could apply this source as this is controlled bythe various legislations. A crucial feature of equity shares is the sharing ownership rightsand henceforth, current shareholder’s rights are diluted to few extents.2
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