Financial Resources and Analysis: Belgravia Hotels Hospitality

This report provides a comprehensive financial analysis of Belgravia Hotels within the hospitality industry. It begins by identifying various financial resources, both internal and external, that can assist the hotel. The report then evaluates the contribution of different methods in generating income. Task ...Read More

FINANCE IN THE
HOSPITALITY INDUSTRY

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Identification of various financial resources which will be assistive to Belgravia Hotels....3
1.2 Evaluating the contribution of different methods in generating income...............................5
TASK 2............................................................................................................................................6
2.1 Ascertaining the adequate elements of costs and profits and their effective influences in
setting the prices over business services......................................................................................6
2.2 Analyzing the techniques to administered stock controlling and presenting methods for
costs and benefits.........................................................................................................................9
TASK 3..........................................................................................................................................10
3.1 Assessing the sources of business performance in relation with making the effective
analysis through trial balance....................................................................................................10
3.2 Evaluating business accounts adjustments and notes..........................................................11
3.3 Demonstrating the purpose and process of budgetary control.............................................11
3.4 Analyzing budgetary variances in the context of chosen organization...............................12
TASK 4..........................................................................................................................................12
4.1 Interpreting the business performance on the basis of ratio analysis..................................12
4.2 Recommendation on the basis of future management strategies helpful in improving
business performance.................................................................................................................14
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TASK 5..........................................................................................................................................14
5.1 Determining the various kinds of costs...............................................................................14
5.2 Measuring the per customer or per product contribution which will be assistive in
analyzing the relationship between cost profit and volume.......................................................15
5.3 Determining the usefulness of break-even point and short-term decision making.............17
CONCLUSION..............................................................................................................................18
REFERENCES..............................................................................................................................19
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INTRODUCTION
To have managed business operations as well as set targets this in turn will be effective
for the revenue generation as well as growth of the entity. Therefore, in relation with analyzing
the effectiveness of various budgetary and costing techniques the analysis over financial
statements of the business will be helpful to the managers in decisions making. In the present
assessment there will be analysis over the various operations made by Belgravia Hotels.
However, the study comprises with the various costing budgeting techniques which will be
assertive to the managers of this hospitality industry in terms of analyzing the prices over the
services. It also comprises with the discussion based on break-even point as well as the short
terms financing technique which will make improvements in the operational practices.
TASK 1
1.1 Identification of various financial resources which will be assistive to Belgravia Hotels
Operating a business on a domestic and global level there can be essential requirements
of the financial funding. There can be various sources which will bring the satisfactory amount
of gains to the Belgravia Hotels. Therefore, in a hospitality industry there are several
departments and each of them have the different level of funds required. It can be used for
purchasing material, maintaining accommodation or infrastructure facilities, salaries to
employees etc. which can be gathered from various sources (Sipe and Testa, 2018). Moreover,
the need of satisfactory capitals from the market there are various sources which will be assistive
such as:
Internal sources of finance:
These are the sources which helps the professionals of the business to gather the effective
amount of funds from the internally available sources. It will be through the revenue gained by
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the business through its operations as well as the contribution made by the directors. Therefore,
the main advantage from collecting funds through internal sources is that there is no need of
making payment of any interest (Peters and Kallmuenzer, 2018). Similarly, Belgravia Hotels will
procure the funds through several sources such as:
Retained earnings: These are the profits which are generally retained by the developing
or growing corporations. It is the amount which is not being distributed by the professionals to
their members in the form of dividends (Pérez-Pineda, Alcaraz and Colón, 2017). Therefore, use
of such funds for the operational activities. In relation with the Belgravia Hotels it will be helpful
as if they will have the appropriate amount of earnings and utilize it in the operational
functioning of the entity.
Working capital management: These are the funds which are generally required for
daily operational activities of the business. Therefore, it can be used by the firm in terms of
making the day to day operations. There can be two sources of techniques which help in
gathering the funds such as sales and payments to creditors. It insists that Belgravia Hotels will
have adequate revenue gains from the sales of its services which will be beneficial in developing
the operational efficiency as well as bring the optimum amount of funds for the operations (Mun
and Jang, 2017). On the other side, it has been assumed that if the business makes delays in
making the payments to its creditors which will also be effective in retaining the funds.
Therefore, there can be use of various operational activities which in turn bring the adequate
amount of revenue to the professionals.
External sources of finance:
There can be use of various external sources which in turn makes effective gains to the
business. Therefore, the implications of various sources which will be helpful in retaining the
adequate amount of funds, but there are is major disadvantage is that with all the sources a
company is acquiring funds needs to make payments of the proportionate returns. Moreover, it
will be a revenue sources to the parties who makes their investments in the business or from
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whom the entity has acquired funds (Jung and Yoon, 2018). Similarly, Belgravia Hotels will
have satisfactory funds from the sources like:
Equity shares: These are the sources which will be beneficial to the industry in relation
with having large numbers of monetary benefits. Therefore, selling securities in market which
will bring higher market value of entity as well as it brings required amount of capital gains.
Additionally, the equity holders make investments in the firm in relation with attaining the
appropriate future gains in terms of dividends (Munjal and Bhushan, 2017). Therefore, Belgravia
Hotels has to make a satisfactory dividend policy which in turn brings effective satisfaction
among shareholders.
Loans: The desired level of funds will be obtained by the business as to have appropriate
gains from taking loans through banks and financial institutions (Ali, 2018). Therefore, they will
require the interest on loan till the loan amount ids fully payable by the business. Belgravia
Hotels will meet the requirements of funds from taking loans through banks and financial
institutions.
Governmental grants: Belgravia Hotels can have funds from the governmental grants for
the purpose of meeting the operational requirements. Therefore, these are the welfare institution
which helps in promoting the growing business to have appropriate business activities and
developed themselves (Arbelo and et.al., 2017). Moreover, these are the most effective and
satisfactory sources which will be helpful to the hospitality industry.
Sale of assets: the sale of non useful assets will be helpful in generating the appropriate
amount of funds. Therefore, Belgravia Hotels needs to sale the assets which are not in use or
have huge depreciable value (Sipe and Testa, 2018). Therefore, these are the assets which are
needed to be sold out in the market. In relation with the assets like land, building etc which will
be helpful in giving the bulk revenue to the business.
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1.2 Evaluating the contribution of different methods in generating income
The impacts of various methods in generating the adequate capital funds for the business
is quite necessary in building the strong financial strength. It improves the capital stability, costs
control mechanism as well as bring the ability to prepare accurate budgets for the future
operations. Professionals at Belgravia Hotel will have appropriate information regarding the past
transaction and the level of expenses which have to be made by them in meeting profitability
level. However, in relation with considering the various methods for gathering the appropriate
amount of fund on which shareholders or equity investment will be more effective to have the
higher capital gains.
TASK 2
2.1 Ascertaining the adequate elements of costs and profits and their effective influences in
setting the prices over business services
To develop the favorable strategies will be helpful in terms of analyzing the prices over
the services offered by the business (Peters and Kallmuenzer, 2018). Therefore, Belgravia Hotels
must implicate appropriate strategies which will be helpful to business in terms of effective
growth and profitability. Similarly, there are various costs and profits on basis of which the hotel
would have ability to set the satisfactory prices.
Classification of costs:
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Figure 1 Types of costs associated with business
(Source: Manufacturing and Nonmanufacturing Costs. 2017)
Direct costs: these are the costs which are directly attributable to the products or services
of industry. It mainly includes direct labor, material and overhead expenses which will be
chargeable over the products and services (Pérez-Pineda, Alcaraz and Colón, 2017). Belgravia
Hotels will be beneficial if they become unable to allocate the costs of such operations.
Moreover, it might be from the room charges, rent etc. which are to be collected through to the
numbers of consumers take advantages of the business services. Moreover, it will be a
appropriate technique in analyzing the prices over services.
Indirect costs: These are the expense which was being barred by the business in indirect
manner. Therefore, there are various costs such as internet, wi-fi charges, taxi, snacks,
maintenance etc. thus, these are the costs which makes huge deficits in the profit index of the
business. Similarly, the professionals from Belgravia Hotels will be suggested to make the
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necessary improvements in the costing techniques and control such expense. On the other side,
they can make rise in the prices of the services so all the expense will be overcome by them.
Fixed costs: The nature of this kind of costs is that it remains constant for the longer
period. However, these are the costs which were being incurred over the expenses like, telephone
bills, rent etc. however, it remains constant and the fixed amount of charges has to be payable by
the business (Mun and Jang, 2017). In addition, Belgravia Hotels need to analyze such kinds of
costs and tried to plan strategies to resolve these issues with the alternative solutions.
Variable costs: In terms with the variable costs of the business these are costs which have
fluctuation periodically. Therefore, it does not remain same as fixed costs. The variations are due
to requirements of the costs in several activities. Therefore, it will be in travelling charges,
seasonal charges over the room rent etc. moreover; these are the costs which will be helpful in
gathering the adequate amount of gains while it will have negative outcomes too (Jung and
Yoon, 2018). Thus, in relation with such operational expenses Belgravia Hotels need to have
proper control over such kinds of expenses which will be managed and reduced by them.
Elements of profit:
Gross profit: These are the gains which were being derived from deducting the costs of
manufacturing from the sale revenue or the period. The cost includes all the manufacturing costs
such as material, labor packaging etc. these are denoted as the costs of goods sold. The motive of
deducting these costs at the initial stage is to assure that the essential requirements of the
business which were considered and the essential part has been covered. Belgravia Hotels will
analyze this profit for effective pricing decisions.
Operating profit: This profit can be known as the revenue generated by the business from
operating activities. Therefore, these are the profits which will be presented after deducting all
the operating expenses such as salaries, rent, telephone bills, selling and administrative expense,
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advertisement expenses etc. Similarly, managers at Belgravia Hotels need to plan the strategies
and make replacements with the alternatives to reduce such costs (Munjal and Bhushan, 2017).
In addition, appropriate control over such expense which will lead the firm in making effective
business analysis.
Net profit: These are the annual turnover which will be received by the firm in relation
with making the appropriate gains after making payments to all the taxes, depreciation and
interest charges. Additionally, these are the revenue which will be helpful to Belgravia Hotels in
making payments to the creditors, shareholders and meet all the debts.
Selling price: A determination of a prices which will be offered to the consumers on the
basis of level of operations made by an organization with respects to atati9ning the adequate
gains. Thus, in respect with this a selling price has been determined on the basis of analyzing the
cost implied in such activity. Thus, it is mainly relevant with the Labour costs, material,
depreciation, insurance etc. thus, these are the costs which defines the selling prices for an
operation.
2.2 Analyzing the techniques to administered stock controlling and presenting methods for costs
and benefits
To administer and ascertain the availability of cash and stock in the business there is need
to have appropriate management to the work. However, there have been various techniques and
methods which bring appropriate knowledge in advancing the operational efficiencies.
Minimum stock level: this is a reorder level it funnels the professionals in analyzing the
ability of business to take reorders. Moreover, in relation with the operations of the entity it
occurs at the time when stock reaches to its minimum level.
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Just in time: This technique implies framework that the business must keep the minimum level
of stock for the operations which will be helpful to them in terms of controlling the cots as well
as managing the business operations (Ali, 2018).
Economic order quantity: These are the statistical technique which determines the costs
incurred by the business in keeping the stock such as holding cost etc. Thus, these costs bring the
proper valuation of the stock cost which is needed to be controlled as per effective decision made
by professionals.
Bank reconciliation: Apart from bank passbook and statements there is need to make a
BRS statements on own basis. Therefore, it will give proper records of monetary transactions on
which the theft and fraud will easily be tracked and the chances of repeating will be reduced.
Therefore, it administered the proper records of all the transactions and considers that there will
be no manipulation of funds.
Voucher system: It comprises with the codes and numbers of every transactional entries
which ensures that there must not be any manipulation or double entry of the same transaction
(Arbelo and et.al., 2017).
TASK 3
3.1 Assessing the sources of business performance in relation with making the effective analysis
through trial balance
By considering the proposed trail balance it can be said that there are various elements
such as sales, share capital and various operating expenses. Therefore, in accordance with the
sales of firm which are 150000, inventory at 84000 and share capital as 600,000. However, it
determined that the firm has appropriate gains during the period as well as there are satisfactory
number of shareholders in the firm.
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Along with this as per analyzing the sources of trail balance which will be useful for the
business. Thus, trail balance is constructed with considering two sides such as debit and credit
columns. There has been influences of the double entry principle which determines transactional
entries of journal in specific ledger and late4r on summarized in trail balance.
3.2 Evaluating business accounts adjustments and notes
TB advertisements FINAL
TB
Particulars DR (£) CR (£) DR (£) CR (£) DR (£) CR (£)
Retained profit 15000 15000
sales 600000 600000
share capital 84000 84000
inventory 40000 40000
purchases 160000 160000
trade payable 30000 30000
trade receivables 90000 90000
bank 4000 4000
motor expenses 8000 8000
stationary 2000 2000
salaries and wages 200000 200000
administration
expenses
35000 35000
telephone [phone]
heat and light 14000 14000
equipment at cost 158000 158000
motor vehicles at cost 25000 25000
rent 18000 1200 16800
advertising 15000 15000
bad debts 6000 6000
long term loan 7% 50000 50000
prepayments (rent) 1200 1200
Accrual: tel [phone]
Accrual: interest 3500 3500
interest 3500 3500
783000 783000 5700 5700 787500 787500
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3.3 Demonstrating the purpose and process of budgetary control
The importance of budgets and budgetary control will be helpful in meeting the cost level
of the firm. The revenue has been generated through various sources will be implicated in
various activities as per the operational determination and gains of business. Professionals ate
Belgravia Hotel will have access through the past transaction and the operational requirements of
the firm which in turn will be planned for the future expected costs in such activities. Therefore,
mostly in the case of restaurant area, seasonal events etc. thus, during such session there will be
requirement of proper planning and higher costs will be implied in such activities.
3.4 Analyzing budgetary variances in the context of chosen organization
particulars budgeted actual variance
units 225000 unit/price 175000 unit/price 50000
Raw material 25000 0.25 35000 0.5 -10000
direct labour 35000 0.45 52250 0.65 -17250
material labour
price/ rate variance -40000 -38333
usage/ efficiency variance -20000 -26538
-60000 -64872
TASK 4
4.1 Interpreting the business performance on the basis of ratio analysis
Ratio analysis of Belgravia Hotels for the year of 2016 and 2017 is enumerated below:
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particulars formulas
201
6 ratio
201
7 ratio
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return on
equity net income 500 500/20 =25 200 200/30= 6.67
total equity 20 30
return on assets net income 500 500/553 = 0.90 200
200/203.5=
0.98
average total assets 553
203.
5
gross profit gross profit
*10
0 625
625/75*100 =
83% 720
720/820*100=
88%
net sales 750 820
asset turnover
ratio net sales 750 750/553= 1.36 820
820/203.5=
4.03
average total assets 553
203.
5
current ratio current assets 442 442/205 = 2.16 335 335/119= 2.81
current liabilities 205 119
quick ratio
current assets-
inventories 398 398/205= 1.94 272 272/119= 2.28
current liabilities 205 119
debt to equity
ratio total debts 8 8/20= 0.4 12 12/30= 0.4
total equity 20 30
Interpretation: By considering the above table it can be said that there are various
operations which are needed to be made by the professionals as to have appropriate gains.
Therefore, there can be use of various techniques which will made reduction in the costs and
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improves the operational efficiency for better gains. in terms with the gross profit ratio of the
firm in 2016 it was 83% while in 2018 it become 88%. Therefore, it can be said that during that
period the numbers of sales has been increase as well as the costs incurred in producing such
articles has been reduced.
4.2 Recommendation on the basis of future management strategies helpful in improving business
performance
By considering the competition and the financial ability of the firm it will be recommended
to the professionals at Belgravia Hotels that they must consider several areas which are needed to
be improved.
 There must be proper control and administration over the costs of production or any
activity in the business.
 The proper records of all the transactions with consideration of BRS statement and
voucher system.
 Proper managements of inventories and administering the optimum utilization of such
resources.
 To improve liquidity there will be main emphasis payable on enhancing the current assets
as well as reduction on the debts payable by the company.
 In term of enhancing profitability in industry there will be requirement of reducing the
costs implied in each activities.
 To increase the business efficiency there can be use of various techniques and
improvements in the capital assets as well as payout ratios.
TASK 5
5.1 Determining the various kinds of costs
In a business entity that are various kinds of costs which are in associated with the
business operations such as:
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Batch costing: these are the costs which will be tracked on the basis of production of
products and services per batch. Therefore, it comprises with the all the direct costs such as
labor, material and overhead expenses which in turn have direct relation with the prices of
products.
Job costing: these are the costs which incurred while performing any particular tasks. For
instance, in kitchen area there has been expenses relevant with purchasing material, preparing
meals, staff salaries etc. However, these are the costs which will require proper control over the
business activities.
Activity based costing: The activity-based costing mainly comprises with the costs
incurred in each activities. Therefore, in relation with such costs and expense it becomes quite
easy for the professionals in terms of planning and decision making (Sipe and Testa, 2018).
Therefore, they will make adequate plans and budgets for each activity.
Fixed cost: These are the costs which will remain unchanged for a specific period of
time. These are mainly charges in income statement on the same level of spending in each
period. It includes costs like, telephone bills, rent, salaries etc.
Variable cost: These are the costs which varies in each time. It consists of the level of
expenses made in activity which will be high or will be less than the past cost. It includes,
purchases, refreshment expenses, travelling expenses etc.
Semi variable cost: These are the costs which varies in amount but not frequently as the
variable costs. There will be changed but which are generally after a completion of specific
period.
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5.2 Measuring the per customer or per product contribution which will be assistive in analyzing
the relationship between cost profit and volume
CVP:
This is the analysis which will be implicated to the identify the variations in the costs and
the volume which affect and organization in its operating income as well as in net income.
Therefore, such demonstration will help in analyzing the profit retained by an entity over the cost
implied in a product or service.
In accordance with analyzing the profitability of the organization there are several
techniques which will be assistive in analyzing costs profit volume index of the firm. Therefore,
in relations with the favorable outcomes there will be consideration of various data such as:
Sales= 150000
Selling price/unit 10
Total fixed cost= 32000
Budgeted numbers of unit = 20000
Total variable costs = 75000
Variable cost/ unit= 7
particulars prop.1 prop. 2 prop. 3
selling price/ unit 9 11 10
variable cost/ unit 6 7 8
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contribution per unit 3 4 2
P/V ratio (contribution/ sales) *100 33% 36% 20%
BEP in units = Fixed costs/ contribution margin 10666.66667 8000 16000
BEP in sales = BEP Units* selling price/ unit 96000 88000 160000
BEP in variable costs= variable cost/ contribution 32000 22000 80000
check
sales 96000 88000 160000
less: variable costs 32000 22000 80000
contribution 64000 66000 80000
less: fixed costs 32000 32000 32000
profits 32000 34000 48000
Interpretation: in relation with analyzing the profitability of the firm there have been
consideration of various costs and income generated in various prop. Thus, selling price per unit
had been analyzed as 9,11 and 10. Similarly, there have been various rates associated with the
variable cost as 6,7 and 8 that brings the const6ribution per unit as 3,4 and 2. Moreover, on the
basis of such measurement the BEP had been analyzed as units it is 10666.67, 8000 and 16000.
BEP in sales as 96000, 88000 and 160000. BEP in variable cost as 32000, 22000 and 80000. On
the other side, as per analyzing the profits all the costs such as variable and fixed had been
deducted from the analysis which bring the outcomes as 32000, 34000 and 48000.
5.3 Determining the usefulness of break-even point and short-term decision making
There have been various uses of the break-even analysis which in turn brings the accurate
information and knowledge to the professionals in terms of quality decision making. Moreover,
it has the importance which will be ascertained as:
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 It benefits the business with appropriate safety margin on which will be decided by the
professionals in making appropriate decisions.
 There has been proper measurement of the sales which will be necessary for achieving
the targeted profits (Peters and Kallmuenzer, 2018).
 It brings proper access to the changes in the costs and prices of the products and services
which were being offered by the firm during a period.
Short-term decision making:
There has been influences of various short-term decision-making process which determines the
small targets and goals will be attained in a specific period. Thus, there are mainly involve:
 Special Pricing Decision
 Product mix decisions for determining the capital constraints
 Producing or purchasing decisions
 Replacement or disposing off an equipment.
CONCLUSION
On the basis of above report, the professionals of Belgravia Hotels have been suggested
to implicate various costing and budgeting techniques which in turn bring the proper access to
control the costs of the business. Moreover, there has been proper use of all the financial tools
which brings roper access to the financial health of entity. Similarly, in relation with improving
the operational efficiency in the hospitality industry, it is required that professionals must make
cost controlling decisions.
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REFERENCES
Books and journals
Ali, M. A., 2018. Antecedents and consequences of price wars among hotels in
Egypt. International Journal of Hospitality & Tourism Systems, 11(2), pp.1-14.
Arbelo, A. and et.al., 2017. Cost and profit efficiencies in the Spanish hotel industry. Journal of
Hospitality & Tourism Research, 41(8), pp.985-1006.
Jung, H. S. and Yoon, H. H., 2018. Understanding workplace bullying: Its effects on response
and behavior in the hospitality industry. International Journal of Contemporary
Hospitality Management, (just-accepted), pp.00-00.
Mun, S. G. and Jang, S., 2017. “Understanding restaurant firms” debt-equity
financing. International Journal of Contemporary Hospitality Management, 29(12),
pp.3006-3022.
Munjal, S. and Bhushan, S., 2017. Economics of the Indian Hotel Industry—An Overview: A
Global Benchmarking Across Different Segments of Hotel Offerings and Mapping the
Growth Trajectory of the Industry Sudhanshu Bhushan. In The Indian Hospitality
Industry (pp. 23-38). Apple Academic Press.
Pérez-Pineda, F., Alcaraz, J. M. and Colón, C., 2017. Creating sustainable value in the
hospitality industry: a (critical) multi-stakeholder study in the Dominican
Republic. Journal of Sustainable Tourism, 25(11), pp.1633-1649.
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