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Report | Finance in Hospitality

   

Added on  2020-01-21

19 Pages5301 Words51 Views
FINANCE IN HOSPITALITY1

TABLE OF CONTENTSINTRODUCTION......................................................................................................................3TASK 1......................................................................................................................................3AC 1.1 Available finance sources for business and service industries.............................3AC 1.2 Ranges of method of generating income for a large chain restaurant..................4TASK 2......................................................................................................................................5AC 2.1 Elements of cost, gross profit percentage and selling price.................................5AC 2.2 Evaluate method of controlling stock and cash in business and serviceenvironment......................................................................................................................7TASK 3......................................................................................................................................8AC 3.1 Budgetary control, process and purpose...............................................................8AC 3.2 Variance analysis and corrective actions..............................................................9TASK 4....................................................................................................................................10AC 3.1 Source and structure of trial balance..................................................................10AC 3.2 Evaluation of business accounts with necessary adjustments and required notes11AC 4.1 computation of ratios for R. Riggs.....................................................................14AC 4.2 Memorandum report about appropriate future strategies...................................14TASK 5....................................................................................................................................15AC 5.1 Categories of costs behaviour.............................................................................15AC 5.2, 5.3 BEP, contribution per product, cost-volume relationship and short-term...15management decisions....................................................................................................15(1) Break-even point in units and value terms................................................................15(2) Number of units required to be sold to meet target profits.......................................17(c) Reasons for the best proposal with justifications......................................................17CONCLUSION........................................................................................................................17REFERENCES.........................................................................................................................18INDEX OF TABLESTable 1: Adjustment entries for R. Riggs.................................................................................13Table 2: Profitability statement of R. Riggs for the year ended 31st December, 2012............13Table 3: Balance sheet of R. Riggs as on 31st december, 2012...............................................132

INTRODUCTIONSuccessful business operations are greatly depends upon availability of sufficientquantum of funds. Every firm need funds for their operational activities and capitalexpenditures. Hence, financial requirement can be arise for short, medium and long termperiod. In the present report, various internal as well as external finance sources will beevaluated that assist users in identifying most appropriate source to meet out their financialneed. Along with this, the report explain that how financial information are recorded in thecompany's accounts. This will help to determine business performance and take strategic andqualified decisions. Another, various managerial tools for controlling inventory, cash andbudgetary tool will be discuss. Lastly, ratio analysis technique will be used for evaluatingfinancial performance of the business.TASK 1AC 1.1 Available finance sources for business and service industriesThere are two types of finance source, internal and external. Internal are availableinside the organization whilst external sources are available outside the business, explainedhereunder:Owner’s funds and retained earnings: Owner may invest their personal savings intothe firm. However, retained earnings are the balance of profits that are not distributedas shareholders dividend and kept as reserves or reinvested in the business (Romaniand Stern, 2013). Its advantage is firm do not need to pay any interest and repaymentof the investment. However, its disadvantage is high risk is associated with theowner's funds.Bank Loans: It is most frequently used source. Bank provides funds in the way ofloans to all the organizations (Khan, 2015). Its good aspect is it do not dilute controlrights hence, negative aspect is bank charges some interest over the loans.Bank overdraft: It facilitates short-term financial need, in which firms are allowed towithdraw some extent amount than their available account balance. It will help toeliminate urgent financial need but still bank charges some high interest rates on thisfacility. Hire purchase: It allow users to purchase assets at some down payment and balancecan be repaid in fixed instalment (Peirson and et.al., 2014). Thus, it mitigate large3

amount of expenditures at the time of purchase whereas disadvantage is instalmentcontain some interest charges.Trade credit: It facilitate businesses to make payment after a short duration of 30days so that they can sell their products first and pay later to creditors. Cash discountis not available in trade credit. Government grants: Government provide funds in the form of grants that can be usefor specific purpose. Business do not need to repay it with no interest obligationswhile it is available only for the specific objectives and may be time-consuming also.Family, friends and relatives: They provide financial support without any extra cost.However, it will available up to a limited extent hence, can not be use for longerduration.Share capital: Funds can be generated through issuing preference and ordinary shares(Růčková, 2015). Advantage is it diversify business control to the shareholders whilenegative aspect is firms has to pay return in the form of dividend to them.Personal savings and hire purchase are the best source to acquire machinery costingworth £50000. Through this, owner will be able to make down payment from personalsavings and balance amount of hire purchase can be paid in equal instalment. AC 1.2 Ranges of method of generating income for a large chain restaurantThere are ample ways of generating money for large units of restaurants. Some of theexciting and unique ideas to create more income to achieve a worldwide growth arementioned belowProviding rent facility- Restaurants serves the facility of providing the space fornumerous events such as party,business events,product launching,seminars and thelike.Conducting seminars and workshops- Simultaneously,conducting demonstrationlessons on cooking in the said restaurant will help to grab the attention of localities.This will result in growth of the restaurant along with brand building. Renegotiating the contracts- Alternatively, the company should put its efforts torenegotiate all of its contracts such as the contracts with its vendors,suppliers,creditcard provider,landlord etc. As a result of this, the company surprisingly gets a hugeamount of saving.4

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