Financial Management Strategies : Report

Finance in
hospitality

TABLE OF CONTENTS
Introduction......................................................................................................................................3
TASK 1 ...........................................................................................................................................3
a) Sources of funding available for opening new restaurant .......................................................3
b) Sources of income generation .................................................................................................5
Task 2...............................................................................................................................................5
A: Evaluation of cost and gross profit.........................................................................................5
B: Evaluation of business methods..............................................................................................6
Task 3...............................................................................................................................................7
A: Source and structure of trial balance.......................................................................................7
B: Evaluation of business accounts..............................................................................................8
C: Purpose of financial budgets and the process suitable for the budgetary control...................9
D: Variance analysis of budgeted and actual figures...................................................................9
Task 4.............................................................................................................................................10
A: Computation of financial ratios............................................................................................10
B: Recommendation for City Brasserie Ltd for making improvement in their financial
management strategies...............................................................................................................12
Task 5.............................................................................................................................................12
A: Categorization of cost using examples from City Brasserie Ltd..........................................12
B: Calculation of contribution and relationship between cost, profit and volume....................13
C: Recommendation of tickets to be sold in order to earn desired profit..................................14
Conclusion.....................................................................................................................................14
References......................................................................................................................................16
2

INDEX OF TABLES
Table 1: Format of trial balance .....................................................................................................8
Table 2: Variance analysis of budgeted and actual figures of City Brasserie Ltd.........................10
Table 3: Computation of financial ratios of City Brasserie Ltd.....................................................11
3

INTRODUCTION
Finance is regarded as one of the most significant resource of the business without which it
is not possible for company to operate efficiently in the market. Further, hospitality sector
delivers large number of services to its target market due to which its financial requirement is
high. Companies operating in this sector have to consider different sources through which their
financial needs can be satisfied in appropriate manner. Apart from this, different business
accounts are prepared so as to know overall performance of firm such as balance sheet, income
statement etc. (Shim and Siegel, 2008). The present report being prepared is based on City
Brasserie Ltd where at present business is planning to open new restaurant in London. Therefore,
it is required to identify the appropriate source of finance for business. Various tasks have been
covered in the study which involves sources of income generation, elements of cost, source and
structure of trial balance, usefulness of balance sheet, income statement etc.
TASK 1
a) Sources of funding available for opening new restaurant
Different sources of finance are available with city Brasserie Ltd which business can
consider for satisfying its overall need. At present business is planning to open a new restaurant
near the strand in central London. Therefore, to accomplish this overall aim it is required for
business to adopt appropriate source of finance (Hussey and Ong, 2005). Opening up of new
restaurant in the market of UK requires high investment and due to this basic reason company
has to select source which is cheap and in turn large amount of funds can be easily obtained by
business. Following are the sources of finance which are as follows: Debt financing: It is regarded as the act of raising business finance by borrowing money.
Business can consider this source by taking loan from the financial institutions present in
the market. Further, it can enhance liquidity position of the business where expansion can
also take place easily. Main advantage of using debt financing as a source is that it leads
to effective utilization of resources of firm as business has to pay some amount in the
form of interest due to which it becomes necessary to fully utilize the resources. Tax
advantage is also one of the main benefits of considering this source where business can
obtain tax advantage as interest is deductible for income tax purpose. Simple loan
4