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Project Report On Various Sources Of Finance | Elements Of Business

   

Added on  2020-02-14

18 Pages5436 Words147 Views
FINANCE INHOSPITALITY

Table of ContentsINTRODUCTION......................................................................................................................1TASK 1......................................................................................................................................1AC 1.1 Funding sources available to business and service industries...................................1AC 1.2 Contribution made by various methods of generating income for the large chain...2Restaurant..............................................................................................................................2TASK 2......................................................................................................................................3AC 2.1 Elements of cost, gross profit percentage and selling prices....................................3AC 2.2 Controlling business cash and inventory..................................................................4TASK 3 .....................................................................................................................................5AC 3.3 Process and purpose of budgetary control................................................................5AC 3.4 Variance analysis and appropriate future management decisions............................6TASK 4......................................................................................................................................7AC 3.1 Source and structure of trial balance.........................................................................7AC 3.2 Necessary adjustments to the profit and loss account and balance sheet of R. Riggs...............................................................................................................................................8AC 4.1 calculation of ratios for R. Riggs..............................................................................9AC 4.2 Take necessary decisions to improve the business performance............................10TASK 5....................................................................................................................................10AC 5.1 Fixed, variable and semi-variable cost....................................................................10AC 5.2 calculation of contribution and cost volume profit relationship.............................11AC 5.3 Justify short term management decisions based on profit/loss potential and breakeven......................................................................................................................................12calculations..........................................................................................................................12CONCLUSION........................................................................................................................13REFERENCES.........................................................................................................................14

INTRODUCTIONFinance is the life blood of every business and service organisation. Successfulbusiness operations depend upon the availability of adequate funds. These sources areclassified into two broad categories that are internal and external sources. Internal sources areavailable inside the corporations while external sources are available outside the organization.Present project report will help us in identifying the type of various sources through whichfunds can be generated. Moreover, the report will help us in determining different elements ofbusiness cost, gross profit and selling prices as well. In addition to it, every organizationneeds to maintain their inventory and cash availability in order to ensure smooth functioningof their operations. Furthermore, the report will focus in analysing the business financialperformance through the company’s financial statements. TASK 1AC 1.1 Funding sources available to business and service industriesThe given scenario depicts that a sole trader business organization desire to purchasesome new machinery costing 50000£. Therefore, he needs to collect the funds from possiblesources which include minimum cost to him. The sources are described below: Internal finance sources: Every organization has certain amount of funds availablein the organization which is termed as internal finance sources, explained as below:Ploughing back of profits: One of the most important and regular type of finance isretained earnings. Businesses earn profits from their operating functions and they do notdistribute all of the profits among the shareholders. Therefore, the undistributed profits of thebusiness are known as retained earnings (Bernstein, 2015). Thus, it can be said that throughploughing back of business profits, organizations will be able to fulfil their financialrequirements. Personal savings: Owners can invest their personal savings in the business toaccomplish their finance need. The benefit of that source is that it will be available atcheaper rates and helps to reduce debt funds to a great extent. Squeezing cash: Another important source of finance is cash squeezing operations.Business organization can make policies to receive their debts earlier and negotiate paymentto creditors. By doing this, organizations will be able to have greater availability of funds inthe business. This in turn, helps to mitigate the financial need of the business. 1 | P a g e

Sale of assets: Assets which are not used for productive purpose can be resale at themarket place. This in turn generates greater availability of funds for the organization andfulfils their financial need. External finance sources: This type of finance sources are available outside theorganization, explained here as under:Issuing shares: There are two types of shares that are; ordinary shares and preferenceshares. Ordinary shares represent the ownership on business. However, preference shareshave two kind of preference over the equity share for repayment of capital and dividend(Fraser, Bhaumik and Wright, 2015). Business organizations can issue both the type of sharesin the market to receive appropriate funds.Bank loans: Bank loans represent the debt capital to business. Business organizationscan take bank loans through providing collateral security. Further, before providing loans tothe businesses, bank analyse the business solvency position to receive interest income withthe fixed amount and on right time (Van Auken, 2015). Business organization can get loansfrom banks and other financial institution at implied interest rates.Debentures: It is a debt acknowledgement through which debenture holders haveright to get fixed interest incomes at a fixed interval of time (External finance debt andforeign direct investment, n.d.). Through issuing debentures in the market, both theorganizations will be able to satisfy their long term funds requirement. Grants and subsidy: In every country, government provide grants and subsidies withthe intention of providing help to the organizations. The objective of the government grantsand subsidies are to make economic development and growth through making industrialgrowth. Overdraft facility: It is a great solution to fulfil short term financial needs of thebusiness. In every country, bank provides this facility to withdraw higher the amount fromthe available account balance (Kregal, 2004). The facility is provided at a higher the interestrates comparatively than interest rates on bank loans. Furthermore, bank provides theoverdraft facility up to a certain limit. AC 1.2 Contribution made by various methods of generating income for the large chainRestaurantIncreasing the revenues leads to enhance the contribution to the business. There arenumber of methods available for large chain restaurant businesses to get higher income,which are described as below: 2 | P a g e

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