Managing Financial Resources & Decision | Marriott Hotel
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Added on 2020-02-05
Managing Financial Resources & Decision | Marriott Hotel
Added on 2020-02-05
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Managing Financial Resources & Decision
TABLE OF CONTENTSTable of Contents.................................................................................................................................2Introduction..........................................................................................................................................4Assignment 1........................................................................................................................................41.1 Sources of finance..................................................................................................................41.2 Implications of financial sources...........................................................................................51.3 Appropriate source of finance:..............................................................................................72.1 Cost of financial sources........................................................................................................7Assignment 2........................................................................................................................................82.2 Importance of financial planning...........................................................................................82.3 Main users of information and qualitative characteristics of information to met the users needs92.4 Impact of finance on financial statements...........................................................................103.1 Cash budget..........................................................................................................................103.2 Unit cost and pricing decisions............................................................................................113.3 Investment appraisal techniques..........................................................................................124.1 Financial statements.............................................................................................................134.2 Comparisons of formats of financial statements..................................................................144.3 Financial ratios of Marriott Hotel........................................................................................17Conclusion..........................................................................................................................................19ASSESSMENT 2................................................................................................................................20Question 1..................................................................................................................................201. Journal entries of Mr. Rao Business for the period of August 2013.....................................202
2. Preparation of three column cash book..................................................................................223. Preparation of ledgers account...............................................................................................23Capital a/c..................................................................................................................................23Wages a/c...................................................................................................................................24Commission received.................................................................................................................24Purchase return..........................................................................................................................24Postage and telegram a/c............................................................................................................25Stationary a/c.............................................................................................................................25Salary a/c....................................................................................................................................25Rent a/c......................................................................................................................................25Prepaid rent a/c.........................................................................................................................264. Trial balance of Rao business for the period of August, 2013..............................................27Question 2..................................................................................................................................28Question 4..................................................................................................................................31References..........................................................................................................................................343
INTRODUCTIONFinancial management is the system or a tool which is used by the organization to govern and oversee its income andexpenditures. It is beneficial system which supports the entities in improving performances of the business. It ensures financialhealth of a corporation through sound investment activities and economic strategies. Present report is based on Marriott hotelwhich is engaged in the hospitality field (Kondo, 2015). Assignment will discuss several available sources of finance to businessand their implication. Evaluation of most appropriate source will be done in this study. Qualitative characteristics of informationto meet the user needs will be illustrated in this report. Financial performance of Marriott hotel will be focused in thisassignment. Ratios of Marriott hotel and Hilton will be compared in this study. Triple column cash book and trail balance will beprepared in this assignment for the given data.ASSIGNMENT 11.1 Sources of financeMoney is the prime requirement of any business unit and without the availability of sufficient funds organizations cannotoperate their business smoothly. There are several sources through which the Marriott hotel can raise its funds:Retained earnings: It is the most common financial sources which are used by most of the corporation. In this, entitiesretain some portion of profit for further development of the company. Marriott hotel can use this economic source forraising funds, as the internal money can be reinvested for the operations (Sidek, Mohamad and Nasir, 2015). Bank loan: This is type of debt financing, if firms have solid business plan, good track record then company can borrowmoney from the financial institution. This is the most appropriate source through which Marriott hotel can collect hugeamount and can fulfill its monetary requirements. 4
Venture capitalist: It is another external financial source available for Marriott hotel. There are many professionalinvestors those who invest in startup companies to get the higher return. But in this, firms have to give possession in thebusiness and have to pay dividend to all capitalist (Mainardes, Raposo and Alves, 2014). Sales of assets: It is another internal financial source in which Marriott hotel can sell its assets to generate money in thebusiness. This is the cheaper and quick tool of raising funds in the organization. 1.2 Implications of financial sourcesEvery financial source has some advantage and disadvantage and on the bases on this, Marriott hotel needs to select mostappropriate source for the organization. Source of financeFinancial implicationLegal implicationOwnerandcontrollingRetained earning Advantage:The main advantage ofthis source is thatMarriott hotel is notrequired to repay thisamount to any lender.As it is internal fundsso it can be reusedwithout any economicburden.Another advantage ofNo legal implications Advantage:Controlling willremain in the hand ofowner. No need to shareownership with anylender.5
this source is that it ischeaper and givesstability to thebusiness (Buchner andet.al, 2014). Disadvantage:It does not allow thestakeholders to enjoydividend.If company fails toutilize funds well thenit may harm positionof the Marriott hotel.Bank loanAdvantage:The main benefit ofthis source is that it isnon profit sharingfinancial source.Tax benefit and lowrate of interest areother advantages ofAdvantage:Legal contract madebetween borrower andlender that helps toreduce confusionsrelated to repayment.Disadvantage:If company fails to payAdvantage:Ownership andcontrolling do not getdiluted. 6
this source.Disadvantage:It can enhance liabilityof Marriott hotel forthe longer period.If cited firm fails torepay then it will haveto bear penalty, apartfrom this manyfinancial institutescarry prepaymentpenalties with theborrower.interest on time thenbanks can ceaseproperty as per thelegal contract (Mina,Lahr and Hughes,2013). Venture capitalistAdvantage:Marriott hotel cancollect huge funds.Disadvantage:Cited firm will have togive dividend to thestakeholders.Disadvantage:Due to the legalimplication, itbecomes necessary forthe entity to involvecapitalist in the boardmeetings. Disadvantage:Ownership gets dilutedand Capitalist get the rightto influence decisionsof the company. 7
Investors charge someamount on theircapital.Sales of assetsAdvantage:No need to repay toany lender.Disadvantages:Due to this, assets sideof the company getsdown and it can harmthe economic positionof the organizationLegal contract madebetween both sellerand purchaser.Advantage:Ownership does notget diluted.Controlling powerremains in the hand ofMarriott hotel. 1.3 Appropriate source of finance:As Marriott hotel is working in the hospitality industry, so for the cited firm bank loan would be the appropriate financialsource. By this way, it would be able to collect huge funds that will help to run its business smoothly. As banks give loans tofirms at lower interest rates which is easy to repay so no economic burden creates on the entity (Lin, Whinston and Fan, 2015).If Marriott hotel goes with the financial source then it would get tax benefit on it. Though it enhances liability of thecompany but with the help of this, cited firm will be able to fulfill it’s the monetary requirements. 8
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