Financial Analysis in Hospitality Industry: A Comprehensive Report

This report comprehensively examines financial management within the hospitality industry, encompassing various crucial aspects. The introduction highlights the significance of finance in the sector, emphasizing its role in day-to-day operations and overall success. Task 1 explores diverse funding sources, differentiating between internal and external options like equity financing, owner's capital, retained earnings, debt financing, bank loans, leasing, and government grants, evaluating their advantages and disadvantages. Task 2 delves into cost elements, gross profit percentages, and selling price strategies, followed by an evaluation of stock and cash control methods. Task 3 focuses on budgetary control processes and variance analysis, while Task 4 addresses trial balance, business accounts, adjustments, and financial ratio calculations with recommendations for future strategies. Task 5 categorizes costs and performs break-even analysis. The conclusion synthesizes the key findings, and the report is supported by references to relevant literature.

Finance in Hospitality
Industry

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Sources of funding available to business and services industries....................................1
1.2 Evaluate contribution made by different methods of income generation.........................4
TASK 2............................................................................................................................................6
2.1 Elements of cost,gross profit percentages and selling price ............................................6
2.2 Evaluate methods of controlling Stock and cash..............................................................8
TASK 3............................................................................................................................................9
3.3 Process and purpose of budgetary control........................................................................9
3.4 Yuri budget variances analysis......................................................................................11
TASK 4..........................................................................................................................................13
3.1 Source and structure of trail balance..............................................................................13
3.2 Evaluate Business accounts, adjustments and notes.......................................................14
4.1 Ratios calculation and its evaluations.............................................................................16
4.2 Recommendation future strategies.................................................................................20
TASK 5..........................................................................................................................................21
5.1 Categorise fixed, variable and semi- variable costs.......................................................21
5.2 & 5.3 BEP in units and No. of units required to achieve the target...............................21
CONCLUSION..............................................................................................................................24
REFERENCES..............................................................................................................................25
.......................................................................................................................................................26

INTRODUCTION
Finance is the most essential thing that is needed in order to start an enterprise and then
make it operated successfully as without finances it will not be possible to do the day to day
operations (Altinay, Paraskevas and Jang, 2015). As in hospitality industry, is concern finance
plays important role in managing services and operations which are associated with accounting
or financial transaction. The initial part of Project, focuses on various sources of finance and its
implication that have on hospitality as a whole. In later stage, various methods of costing are
derived to used it in our business operations. On the basis of calculation, company may be able
to take decision by using those method.
The hospitality industry is wide category with relation to service industry which includes
lodging event organisation, cruse line and additional segment with tourism industry. Financial
management present concepts and explain various method that can be used by the company in
their daily operations within hospitality sectors. By taking help of financial statement, different
ratio has been done. This ratio analysis will provide valuable information about working and
controlling of company. As per the mentioned project data, evaluation and interpretation of
various related aspects of company has been done and recommendation that should be followed
in effective response generation toward hospitality industry.
TASK 1
1.1 Sources of funding available to business and services industries
In order to start a new venture huge amount of capital is required which will be collected
from various sources. The fund required by hospitality industry is depend upon the size of
business. Short term capital is required for working capital management and long term capital
for increasing business operation. There are various sources of finance available to hospitality
industry:
Internal Sources:
 Equity Financing: It is a kind of process, by which funds is being raised by issuing
shares in the market. It is said to be most expensive sources of finance as it involves
payment of dividend to the shareholders from net gains after paying all government
taxes,interest on debt and other preferences dividend. It is a kind of techniques those are
used to by enterprises by selling shares to raise capital.
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Advantage:
1. Outside investors are expected that their business should deliver value to them.
2. Some of venture capitalist can bring value through their skills, contract and its
experiences.
Disadvantage:
1. It is costly and time consuming it take management away from its core business.
2. Investors losses its power in taking some kind of management decision.
 Owners capital: These are those finance that are brought by owner of industry in
operating its business (Bowie, Buttle and Brookes, 2016). They are less risky as it does
not have any thing to give other members. As it is important source of raising finance for
industry. It is owners stake in business. It indicated that how much assets of a company is
owned by owners of the business.
Advantage:
1. Profit is shared among partners and owners only.
2. Owner of the business have the right to take more benefits and take decision regarding
success of business.
Disadvantage:
1. Risk is being whole share by owner only.
2. Growth of business is depend on the amount of capital invested by the owner.
 Retained earning: It is that percentage of net income which is not paid out as
dividends,but retained by the company to uses it or reinvest in its core operation,or to pay
debt (Bar-Tal, 2012). Accumulated net profit of the business firm that has been retained
by the company at the same time, at the closing of financial year.
Advantage:
1. Economical sources of financing because it does not allowed any kind of acquiring cost.
2. Provide financial stability to boost position of business in terms of fund.
Disadvantage:
1. Improper utilization of funds, if its uses are not explain properly.
2. Over capitalization because of conservative dividend policy.
External sources:
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 Debt Financing: It is a kind of borrowing funds from outsiders. It is associated with net
amount to be paid as interest ,at during that period and also to pay principle amount at
closing end. It created if the company raise capital in relation to working capital and
capital expenses by selling bonds, bills etc.
Advantages:
It allows to pay for newly building, equipments and other commodity those are used to expand
business before earn fund for business.
Disadvantage:
The main disadvantages of this is to repay loan with interest.
 Bank loan: It is another important sources of fund which is taken as loan from bank that
carry fixed interest amount on it. The main purpose of taking bank loan is because if the
company want large amount of fund they can't fulfil it from internal sources so they go
for external sources because it only the way by which huge amount of fund is taken. It
obtained from following various steps: a) Understanding preferences through see what
competitors are offering. b) Regular question is being asked about loan package. c) Know
about limitation regarding credit history and current score. d) prepare a checklist based on
bank information and last right expectation. To clear debt the society need to sale assets
to pay it.
Advantages:
1. Convenient and accessible banks are always accessible because they are used to deposit
and withdrawing them.
2. Multiple loan options through advertising various offers and schemes to sole
entrepreneurs in running a business
Disadvantage:
1. Lengthy application process because bank need to verify all critical application before
sanctioning a loan.
2. Risk of losing collateral against house and property.
 Leasing: It is a kind of contract by which one party agrees to rent some of his portion that
are owned by another party. It is a kind of written or implied contract by owner for a
specific commodity to second party.
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