Detailed Finance Report for Belgravia Hotels: Strategies and Analysis

This report provides a comprehensive financial analysis of Belgravia Hotels, a UK-based international hospitality organization. It examines various aspects of the company's financial management, including identifying and reviewing funding sources (internal and external), evaluating income generation methods, and analyzing cost and profit elements. The report delves into methods for controlling stock and cash, explains trial balances, and evaluates business accounts and budgetary control. It also assesses financial ratios to measure performance and provides recommendations for future management strategies. Furthermore, the report explores cost components, contribution per unit, and the importance of the break-even point (BEP), offering a complete overview of Belgravia Hotels' financial operations and strategies.

Finance in the hospitality
industry

Contents
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
P1 Identify and review of the sources of funding and service industries and implementing the
Belgravia Hotels:....................................................................................................................4
1.2 Evaluate contribution made by range of methods of producing income within Belgravia
Hotels:.....................................................................................................................................6
TASK 2............................................................................................................................................6
2.1 Discuss the elements of cost and profit and the role of setting selling prices:.................6
2.2 Evaluate the methods of controlling stock and cash and discuss the cost and benefit:....7
TASK 3............................................................................................................................................8
3.1 Explain trail balance and evaluate source and structure:..................................................8
3.2 Evaluate Business accounts, adjustment and notes:.........................................................9
3.3 Purpose and process of budgetary control in Belgravia Hotels:.......................................9
3.4 Analysis of budget variance:..........................................................................................10
TASK 4..........................................................................................................................................10
4.1 Measuring of the diverse ratios of Belgravia Hotels:.....................................................10
4.2 Recommendation for future management strategies to enhancing performance:..........12
TASK 5..........................................................................................................................................13
5.1 Categories cost of components:......................................................................................13
5.2 Measuring of contribution per units:..............................................................................13
5.3 Importance of BEP:........................................................................................................14
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Finance is the tool which are used for making the business objectives in an effective
manner. however, there is a strong need to adopt various financial tools which can be used by the
organisation for attaining the business objectives in an effective manner. This report is based on
the UK based international hospitality organisation which name is Belgravia Hotels that operates
in three parts: lodging, contract services and restaurant (Schneider and dos Santos, 2013). And
this is looking to enhance their operations for that it need much finance so that they could
develop strategy effectively and make the business objectives sustainable and reliable.
TASK 1
P1 Identify and review of the sources of funding and service industries and implementing the
Belgravia Hotels:
Finance is the basic need which are required to be adopted in the business for making the
business sustainability. Now, this can be totally said that the management of the cited company
grab finance by way of the internal and external sources which could ultimately assist to have
sustainability in an effective manner. finance is the capital which is totally incorporated in the
business. Capital does not only need for beginning but also for expansion of the organisation.
Sources of finance available to the organisation which are internal sources of finance and
external sources of finance, some of them are mentioned hereunder:
Internal source of finance: This is the main source of finance which consider all the
inner source which are the retained earnings, entrepreneur capital and others. these are the best
tool for implementing in the business but in the large extent, can’t be used due to lack of the
funding. Henceforth, for small finance needs can be satiated under this. But if the large finance is
required then the fund can be taken by using external source of finance. Internal source of
finance is the basic tool that can be used by the organisation in order to gain the sustainable
development.
Sale of assets: this is one of the tool for raising the capital internally. Now, this can be
rightly said that the management by disposing of sales in an effective manner.
External sources of finance: There are so many tools which are used as the external
source of finance. Some of them are mentioned as under:
3

Bank loan: This is the main common source that can be used by the organisation as the
loan. This can be used as the loan or overdraft for a longer time period of time. Now, this can be
rightly said that this can be started as a shorter time to medium and come to an end for longer
time period. The borrower is required to pay an interest rate on the loan amount which is the
much higher than the other sources. But the bank before going to take the loan, they are required
to give the collateral security.
Share capital: This is the tool which is used in order to collect the finance in an effective
manner. via this, capital is raised by issuing share in an effective manner. now, this can be rightly
said that the management of the cited organisation for raising the capital, gather the capital in an
effective manner so that they could effectively gather the finance. There are various kinds of the
share capital modes. Such Initial public offer, further public offer, right issues ESOP, ESPS, and
others. if the organisation is limited capital, and is looking for the raising the capital, then the
shares can be issues for the public for raising the capital (Guerrier, 2013).
Advantages and disadvantages of sources of finance:
Advantages of Reinvest profits:
 Income could render a return for the investors through which investors plough back into
organisation to assist it to develop.
 This does not require to have the associated costs.
 This does not have to be repaid unlike loans.
 No interest charges
Disadvantages:
 Profits might be limited that would be constrain rate through which organisation expands.
Advantages of Sale of assets:
 Sold to gather cash.
 Incorporate sense to sold off of under used assets.
 Finance emerged without additional borrowings.
Disadvantages
 Loss assets but has to implement of the cash.
External Sources:
Advantages of Bank Overdraft:
 Sound way of boosting regular finance.
4

Disadvantages:
 Other organisation might be reluctant to trade along with organisation if they do not get
strong time.
The above mentioned ways are the tools through which the finance can be raised in an
effective manner. Now, this can be rightly said that the Bank loan are the most effective tool
which are used in order to gain the funding in an effective manner. As this would provide large
amount which can be used by the organisation for expanding their operation in an effective
manner.
1.2 Evaluate contribution made by range of methods of producing income within Belgravia
Hotels:
A hotel can have diverse kind of the methods through which the income is generated in the
business. Basically, this can be rightly said that the there are two tools which are used by the
organisation for generating income. The earnings are the major sources that can be used by the
cited hotel group for sustaining the business.
Core business: On the basis of the types of the organisation their core business is identified.
Hospitality business is totally relied upon the service industry. Majority of the revenues emerges
from the core business. Henceforth, if it is a product organisation, then in that case, this would
earn their revenue from selling its core business of if it’s a service organisation then they could
earn their services in rendering services.
Non-Core business: Organisation could likewise gain the revenues from their non-core activities
such as the dividends from the investments, interest from the bank loan provided, and rent earned
by giving the land on lease.
Apart from that the cited hotel, might doing tasks like rendering membership and henceforth
rendering providing particular profits. This is connected to the core business activity.
TASK 2
2.1 Discuss the elements of cost and profit and the role of setting selling prices:
In travel and tourism sector there are a number of cost which are incurred on daily basis
and becomes a major part of total value of a cost (Varghese, 2013). It has different elements such
as the material, labour and expenses. The total cost of the firm is further segmented into direct
5

and indirect cost and needs to be controlled so that overall efficiency of business remains
unaffected. Price is one of the most important element of marketing mix and hence it is
important that it is decided with maximum care so that Belgravia Hotels can earn maximum
revenues. Consumers are very much sensitive for the value they pay for any goods or services
and ensures that they receive maximum satisfaction on spending a specific amount. Apart from
this in the present competitive world clients use the process offered by different entrepreneurs as
a medium to judge the efficiency of each brand as it is examined that which brand is giving the
most effective service at minimum cost. In tourism business the profitability is determined by the
pricing decisions taken by the officials as it indicates their effectiveness as well as the standards
maintained. It has to be endured that the tour operators fix a price in a way that it does not affect
the demand for a particular destination. It is beneficial that the officials of the referred enterprise
maintain flexibility in its price so that according to the present conditions of market it can deliver
the service to the users of same.
2.2 Evaluate the methods of controlling stock and cash and discuss the cost and benefit:
To maintain the required level of profit margins it is important that management of
Belgravia Hotels manages the level of stock in an appropriate manner. it is crucial as both excess
and deficit of same leads to loss for the firm (Ndoda, 2013). Focus should be there how to
develop the stock management so that optimum utilisation of the resources can be made. For
same management has to determine the optimum stock level every time. Apart from this under
this system the organisation department concern for the stock maintenance also decides the right
time when it should place the order to its suppliers so that procurement of resources can be made
at reduced price. For same the referred institution has the following choices;
Save on storage cost – In order to minimise the cost of organisation and to manage the
inventory the best way is to maintain the optimum level of quantity of stock in storage. By
monitoring the expected demand of future it can be anticipated that how much will be required in
coming time so that accordingly arrangements are made for same.
Regular auditing – In an enterprise management can take help of doing auditing on regular
basis so that it can identify what areas needs improvements. Through this it can be examined that
weather the present quantity is sufficient enough or it needs to be reduced if found that it is in
excess (Singh, 2016). This way the warehouse cost can be saved and hence the profit margins
can be raised.
6

TASK 3
3.1 Explain trail balance and evaluate source and structure:
Trial balance: This contains list of accounts and their balances at the provided point of
time. This is the base for making financial statements and also make sure that each debit entry
recorded, a corresponding credit entry which have been recorded in the books. Here are various
sources of information which are used for making trail balance.
All accounts in the general ledger which have balances:
Assets= Debit balance
Liabilities=Credit balance
Expenses= Debit balance
Equity= Credit balance
Revenue= Credit balance
On the other hand, this can be rightly said that the trail balance is measured from ledger books of
the organisation. These ledgers will help out the organisation in an effective manner. hence, there
is a strong need to have book keeping entry and after that these ledger account are combined in
order to form the trial balance. As this contains the debit and credit section.
Structure of trial balance:
7

3.2 Evaluate Business accounts, adjustment and notes:
Business accounts are major documents which are used by the cited hotel for gaining sustainable
development in an effective manner (Nwokorie and Ezeibe, 2016). Various stakeholders are
expected to have the firm’s financial data which could be used for making their business
decisions in an effective manner. However, there is a strong need to adopt strong need that could
be used by the organisation for making the business sustainable and reliable. Diverse kinds of
stakeholders are expected to measure financial statements so that they can make the decisions
according to their needs. Now, this can be rightly said that the adjustments and notes are to be
adopted as per the organisational need.
3.3 Purpose and process of budgetary control in Belgravia Hotels:
There are diverse kinds of procedures that are needed to be adopted for making the
budgets and control business operations. Here are few of them which are elaborated as
under:
 Form adequate consultation of ideas along with the diverse division before forming
budgets.
 Adopted an effective assumption and forecasted projection of the data.
Incorporating systemic details of budget for achieving future aims and objectives (Campo, Díaz
and Yagüe, 2014).
 To identify and calculates accurate performance by comparing it with the previous
records.
Objective of Budgetary control:
There is the important motive or object for budgetary control. Few of them are elaborated
as under:
 Communication: This is the crucial tool in order to enable budgets by communicating
along with diverse an efficient planning or controlling system.
 Performance analysis: This is the total aim of account officers to form implementing of
budgets for incorporating assessment of their entire development objectives in the future
time.
3.4 Analysis of budget variance:
This is essential to form use of data for aiming of assessing entire variance emerge into
material and labour variance. Organisations are implementing for making budget that are helpful
8

for achieving business performance. Entire budget costs permit them to fix prices and total
forecasting of profit.
Budget variance
Particular Standards Actual Variances
Unit sold 100000 70000 -30000
Material (£)15,000 22500 7500
Direct labour (£)22500 24375 1875
Particular Material(£) Labour (£)
Price / Variance Efficiency -4500 3750
Variance -3000 -5625
Total Variance -7500 -1875
From the above mentioned table, collected information is assessed on relying of total
10000 units. Total variance elaborates by implementing material and labour costs which are
totally relied upon the discussion in an effective manner (Bowie and et. al., 2016). the outcomes
are displaying negative implication related to the expenses that are to be elaborated in the cited
hotels in the data analysis. This is required to be done as per the actual and forecasting variances
that are totally demonstrated in a company.
TASK 4
4.1 Measuring of the diverse ratios of Belgravia Hotels:
For determining an entire performance of any organisation, this is essential for
calculating and evaluating ratios that assist in current position of the cited organisation. There are
diverse kinds of ratios that are totally required to be implemented for assessing performance of
cited organisation. Few of them are elaborated as under:
Particulars Formulas Amount
(£)
9

Profitability Ratio
Gross Profit 62645
Net profit 24437
Revenue 157165
Gross profit margin Gross profit/Sales 39.86
Net profit margin Net Profit / Net sales*100 15.55
CURRENT RATIO Current assets/current liabilities 3.51
Current assets 19874
Current liabilities 5657
After Balance sheet
Current assets 25550.06
Current liabilities 5770
Current ratios 4.4280869
665
Stock Turnover Net sales – Gross / stock 39.38
CGS 94520
Stock 2400
DEBTORS COLLECTION
PERIOD
Debtor/sales*365 27.45
DEBTORS 11820
Credit Collection period Creditors/sales*365 12.18
Creditors 5245
After Balance sheet
10

Credit Collection period 13.4
Acid Test Ratio 3.09
inventory 2400
Liquid assets Current assets- inventory 17474
From above mentioned report, this can be rightly said that ratios are measured. This can be
discussed where whole data is required to make on the presumption basis (McManus, 2013).
Profitability of the cited organisation is indicating highly valuable net profits margin of 15%
while on the other hand, liquidity position is much appropriate amount which helps to meet out
their shorter time period and longer time period cash needs. Hospitality sectors is emerging with
the faster rate for gaining with existing trends which requires to form data in an effective
manner.
4.2 Recommendation for future management strategies to enhancing performance:
By implementing an efficient ratio, a cited hotel group could compare their existing position with
other organisation. These strategic planning are highly useful for assessing an entire growth and
positions. Basically, hotel company could gain competitive advantages by emerging growths.
From the above mentioned ratios, this can be rightly said that the total growth and potential of
potential of Belgravia Hotels in according to the organisation. Growth rate of abovementioned
hotel is enhancing at a faster rate. As per this outcome, whole investment in their project is
required to be enhanced shareholders’ values in the forthcoming time. The cited organisation has
an enough cash and net earnings which could assist in maximising return in the forthcoming
period. Gross profits margin is 39.86% that are collected from the total sales which are done
which are for rendering rooms and other facilities to their guest. By assessing net profits for the
organisation, this is find out that the total profits of the cited organisation are generated 15%
during the period of time. While in case of liquidity position, they are required to have current
ratio of 3.5 that are more as compare to the managers (Leung and Law, 2013). This would help
out in an effective planning that will be future assisting in enhancing performance of the cited
hotel.
11

TASK 5
5.1 Categories cost of components:
Cost are basically of two types which are namely: direct and indirect. Direct costs are
those which are directly related to the production of the goods and services. While on the other
hand, indirect cost is those which do not directly connected but indirect related to the production
of good in an effective manner. these are further subcategorised in an effective manner:
Variable cost: This simply refers to that costs that could vary with the manufacturing of
an extra unit. This can change with the change in the quantity of the production level. Here are
some of them which are: direct material, direct labour, direct overhands.
Fixed costs: This can be rightly said that these costs are fixed irrespective of the change in the
production. This can’t be change as this will remain fixed if nothing is produced. The production
department is required to have payment of these kinds of costs (Martínez, Pérez and Rodríguez
del Bosque, 2013). Here are few of the examples which are like office rent, taxes and insurance
etc.
Semi fixed costs: This is rightly said that the merging of fixed and variable costs, called
the semi-variable costs. Some of the amount are fixed as variable costs and rest are considered as
the fixed amount.
5.2 Measuring of contribution per units:
Total number of people: 80
Normal charges= £25
Sales: 85*25=2125
Variable cost= 85*£15.50= 1317.5
Total contribution: Sales – Variable cost
: 2125-1317.5=807.5
Margin of safety = 807.5-380/2125*100
= 427.5/2125=20.11%
In case of increase in 100 people with increasing charges of ticket prices.
Sales= 100*22= 2200
Variable cost: 1550
Total contribution: Sales- Variable cost
12