Finance Report: Holiday Inn's Funding, Cost Control, and Analysis

This report provides a comprehensive financial analysis of Holiday Inn, a global hospitality chain. It explores various funding sources, including retained earnings, debt, and equity capital, and discusses different methods to generate income such as sales promotion and sponsorship. The report delves into cost elements like materials, labor, and expenses, along with inventory and cash control techniques. It covers trial balance preparation, budgetary control processes, and variance analysis, including material variance calculations. Finally, the report includes break-even analysis, cost-volume-profit relationships, and contribution per unit calculations, providing a detailed overview of financial management within the hospitality industry.

FINANCE IN THE
HOSPITALITY INDUSTRY

INTRODUCTION
Finance in hospitality industry termed out as significant hospitality industry that gives
details of financial performance and stability. Thus, finance department business functions
includes mainly planning, organizing, auditing, accounting and controlling the overall firm's
finance (Clarke, Pockney and Gani, 2019). Thus, financial department within hospitality industry
produces the financial statements of the firm.
In this assignment it is described about Holiday Inn, it is hospitality chain that provide
hospitality services and this is set up at global level. Therefore, purpose of report is to discuss
varied source of funding to obtain capital by companies.
Furthermore, assignment lay emphasises on activities as sources of funding avail to new
organisation, undertaking evaluation about range of techniques use to generate income with
business service and operation. Moreover, study will undertake elements of cost and method of
controlling stock in hospitality industry. Lastly, calculation has been undertaken to compute
input per product.
1.1
The enterprise mainly needs capital findings that aids to expand business into new
markets to undertake invest in R&D for undertaking effective functioning within enterprise.
Thus, source of funding for hospitality industry defined as-
 Retained earning- It is an enterprise that makes revenue by selling commodity or service
(Ferrer, 2018). Therefore, this is one of the most basic source of funds. This can be
distributed in as dividend to shareholders.
 Debt capital- It is a type of bank loans and publicly with use of Debt issue. Corporate
bond termed out as debt issue. This allows many investors to become payables to firm
(Singh and Misra, 2019). Therefore, the interest amount paid on debt is deducted from
tax.
 Equity capital- An enterprise can raise capital with help of selling part of share to
investor and it can be called out as equity funding. Therefore, equity shareholder have
right to vote that means the entity can dilutes its ownership control and sell shares.

1.2
The different methods are described below:-
 Sales promotion- This is defined as pull marketing technique. It is process that termed out
as carry likely customer to buy the commodity. It helps in generating profit from sales for
short term. This is defined as method that builds loyalty of customer for long time
(Calcagno and Hefner, 2018 ).
 Sponsorship- This is also vital technique. In this, sponsors are corporate entities that
provide support within financial service industry. Henceforth, the support can include
providing underwriting for stock, exchange traded fund offering and mutual fund.
 Tracking mechanisms- It is defined as tracking system that mainly used to observe person
and objects to move and supply about the timely order sequence of location data. This
defines the locations and direction of the target on near.
LO 2
2.1
The cost of the product and services are broken down into the three main categories as
labour, materials and expenses etc. Thus, this defined as-
Elements Explanation using example
Material It is defined as cost of materials that used to
manufacture product and service. Henceforth,
electricity, fuel and other cost of material are
needed for production (Walker, and Snider,
2018). It makes the significant share of total
cost that closely linked with the firm products.
Labour This plays an active and direct part in the
production of particular commodity. It is
inclusive of wages, salaries, commission and
bonus etc. On the other hand, indirect labour
defined as cost in which things covered as
salaries of staff, directors fees etc.

Expenses This is classified into categories as direct and
indirect expenses (Clarke, Pockney and Gani,
2019). It is directly interconnect with job,
commodity and unit of service. It can be
defined as chargeable expenses. On the other
hand, indirect expenses defined that incurred
by enterprise to produce a commodity.
Additionally, overheads termed that
combination of the both indirect material,
expenses and labour.
2.2
There are several methods that is explained below :-
Techniques of controlling sock- These are as-
 Economic order quantity- It is defined as compound mathematical method that supports
to maintain stock at an optimum level that depend on type of enterprise. Thus, calculation
under this method can be time consuming. Thus, EOQ can be interconnected with the
other forms of stock management (Ferrer, 2018).
 Just in time inventory control- It is one of the most effective method of controlling
inventory. This is technique that delivers only exact quantities needs for current
production. Thus, JIT is highly depends over ability of entity supplier to deliver on
demand.
 Safety stock levels- This is defined as additional amount of inventory that carried over
the normal level of stocking requirements against the uncertainty.
Techniques of controlling cash-
Controlling cash in the enterprise inclusive of diligent bookkeeping and security. Thus, method
of controlling cash as are-
 Keep logs- With help of keeping logs the all activities can be undertake effectively. Thus,
it enables to conduct accurate boo-keeping and also helps in verifying cash transaction.

 Segregating duties- This is part of internal cash control and several individuals are in
charge of cash transaction auditing (Walker, and Snider, 2018).
 Securing cash- It is defined as cash receipts with bank deposit on the daily basis and to
take the collection of monthly reviews of firm.
LO 3
3.1
It is defined as total list of general ledger accounts of both revenue and capital that
contained in the ledge of trade. Thus, it assists in presenting the multiple entries in varied
accounts that makes ledger.
Purpose- The main object is to ensure about the all entries made into enterprise general ledger
and all are properly balanced. Henceforth, the objects are defined as-
 To ensure about the arithmetical accuracy of books of accounts.
 To prepare financial statement as trial balance manner as base for preparing final account
at the end of fin financial year.
 To act as summary of ledger as it complies with balance of all accounts.
Source and structure-
Trial balance is a list of columns, that are categorised as debit and credit. This is very
crucial for enterprises to check the errors made while doing day to day transaction into the
general accounts (Singh and Misra, 2019). Here, certain principles are implemented to the
recording of transactions in ledger accounts. Thus, debit balance will be equalitarian to the total
credit column in the trial balance. Thus, it is useful in finding out errors generated at time of
recording the transaction with help of comparing the total and credit columns. Secondly, this is
base for the preparing financial statements effectively at the end of the accounting period. Thus,
structure of the Trail balance will be as-
The format is defined as two column schedule with all the debit balance that is listed in
the one column and all credit balance listed in other side of the column. Additionally, it is
prepared after the transactions and this journalized and entered to the General Ledger.
Procedure of trail balance-
 Extracting the closing balance of ledge accounts.
 Record of balance with account titles.

 Add debit and credit balance separately.
 Comparing the hotels.
 Limitation of trail balance.
3.2 Adjustments to trial balance.
The machine has been acquired on credit terms from M/s Ramsay machine tools for a
credit note of £200,000. Thus, the machine account amount will be increased from £200,000 and
recorded on debit side of the trial balance. Being purchase on credit, the creditors side will also
be increased as well as credited by £200,000 amount. On the other hand, wages which has been
recorded incorrectly as Salaries needs to be deducted from it part by £43000 and then added to
the wages part by correct amount of £43000. Both adjustments will be done on debit side.
b. Preparation of trial balance
Trial balance of ABC Trade as of 31st August 2015
Particulars Debit side
(in £)
Credit side
(in £)
Inventory at the beginning of period
Purchases
Salaries
Wages
Carriage Inwards
Trading Charges
Carriage Outwards
Rent received
Cash
Capital
BO
Commission
Bills payables
Revenue
Bills receivables
Machinery
86,000
1,136,000
110,000
61,000
26,900
64,000
52,500
62,500
42,780
256,000
178,300
344,700
37,980
468,000
1,548,700

6,80,000
Total 2577680 2577680
3.3
This is the process in which manager’s works as to set the fiscal and performance goals with
budgets. Thus, undertaking the comparison of the actual result and alter it as needed (Budgetary
Control: Steps, Objectives and Advantages, 2019). Additionally, main aim of budgetary control
is to undertake the activities that aids to plan and control the scarce resources. Hence. One of the
major requirements is to operate various cost centres and department with economy and
efficiency. This helps the management to find out the variance with help of undertaking the
corrective actions without any delay. Henceforth, the process of budgetary control defined as-
 To establish action plan
 To undertake activities with actual budget
 To calculate variances
 To establish reason for variance
 To take effective actions.
Thus, the main objective of budgetary control defined as follows-
 To combine all the ideas of level of of management in undertaking the preparation of the
budgets (Calcagno and Hefner, 2018).
 To coordinate all activities of the business enterprise.
 To centralize the effective control.
3.4 Calculation
a) Material total variance
Material total variance = Direct material price variance + Direct material usage variance
Direct material price variance
17600

Direct material usage variance -20400
Outcome -2800
b) Direct material price variance
Direct material price variance = (Actual Quantity x Actual Price) - (Actual Quantity x
Standard Price)
Actual prices 140
Actual Quantity 1000
Standard Price 102
Standard Quantity 1200
AQ x AP 140000
(AQ x SP) 122400
Result 17600 F
c) Direct material usage variance
Material usage variance = (Actual Quantity – Standard Quantity) x Standard Price
AQ 1000
SQ 1200
SP 102
Variance -20400
TASK 4 – DISCLOSED IN POWERPOINT PRESENTATION
TASK 5
AC 5.1 Bifurcating
1. FC amount - £380 for order being taken
2. Variable cost - £15.50 per guest including the cost of catering

3. Sales - £25.00 per guest according to the event
Guests required for restaurant to attain breakeven point.
Break even Point (in Units) = Fixed Costs / (Price – Variable Costs)
Selling price per unit £25
Less: VC £15.5
C £9.5
FC £380
BEP £380 / £9.5
= 40 guests
Guests required for restaurant to reach breakeven is 40.
Value of revenue
Revenue = Units x Sales Price
Revenue = 40 guests x £25.00 per guest
Revenue = £1000
AC 5.2 Contribution per unit (CPU) calculated
Sales £25
less : VC £15.5
CPU 25 – 15.5
= £9.5
Cost/profit/volume relationship is basically defined as a relationship in between cost,
sales volume and profit margin which its main focus on evaluating how sales and its related
factors such as price, level, fixed as well as variable cost of such product which has been sold is
affecting the overall profitability aspect. In this case scenario, the restaurant is having its sales
price £25 per guest which is yielding a profit of £1000 on delivering its services to 40 guests.
If 80 guest booked profit and Margin Of Safety
Revenue
Revenue = Units x Sales Price

Revenue = 80 guests x £25.00 per guest
Revenue = £2000
Margin Of Safety
Margin Of Safety = (Actual sales – break - even point)/ Actual sales
Particulars Amount (in £)
sales 2000
BEP (in units) 40
MOS 0.98
If 100 guest booked profit made with price £22 per guest and Margin of Safety
Revenue
Revenue = Units x SP
Revenue = 100 guests x £22.00 per guest
= £ 2200
Margin of Safety (MOS)
(MOS = (Actual sales – break - even point)/ Actual sales
Particulars Figures (in £)
Revenue 2200
BEP 58
MOS 0.97
AC 5.3 Justify
For making effective decisions with its main basis on revenue and loss including risk or
break - even calculations, it can be concluded that on by booking 100 guests the margin of profit
at the price level of £22 per guest will be £2200.

Margin of Safety ensures proper measuring as well as assessing the total amount of sales
which has exceeded the break – even point of the business. In case of 80 guest with its selling
price of £25 per guest, the margin of safety determined is 0.98 which is considered better as
compared to serving to 100 guests.

CONCLUSION
From the above file it can be concluded that by formulating sound budgetary plans and
strategies, it will help the company in capturing current market share. Thus by making use of
available business as well as financial resources in an effective as well as efficient manner, it has
helped Holiday in gaining competitive advantages. But making use of budgetary frameworks and
improved marketing processes, it has been able to capture the market share along with high
customer base. By making use of financial ratio, business liquidity as well as solvency aspects
has been ascertained.

REFERENCES
Books and Journals
Arkan, T., 2016. The importance of financial ratios in predicting stock price trends: A case study in
emerging markets. Finanse, Rynki Finansowe, Ubezpieczenia. 79(1). pp.13-26.
Ma, M., Huang, J., Lin, S. and Yang, S., 2019. From finance to marketing: Initial public offering
ownership overhang and marketing in the hospitality industry. International Journal of
Hospitality Management, 76, pp.71-82.
Penman, S. H., 2015. Financial Ratios and Equity Valuation. Wiley Encyclopedia of Management,
pp.1-7.
Tian, S. and Yu, Y., 2017. Financial ratios and bankruptcy predictions: An international evidence.
International Review of Economics & Finance. 51. pp.510-526.
Clarke, L., Pockney, P., Gillies, D., Foster, R. and Gani, J., 2019. Direct access colonoscopy service
for bowel cancer screening produces a positive financial benefit for patients and local health
districts. Internal medicine journal, 49(6), pp.729-733.
Ferrer, J.N., 2018. Financial Instruments and Promotional Banking in the EU are Growing—But is
this Justified?. Intereconomics, 53(6), pp.326-331.
Singh, K. and Misra, M., 2019. Financial determinants of cash holding levels: An analysis of Indian
agricultural enterprises. Agricultural Economics–Czech, 65.
Calcagno, P. and Hefner, F.L., 2018. Economic Development Tax Incentives: A Review of the
Perverse, Ineffective, and Unintended Consequences. For Your Own Good: Taxes,
Paternalism, and Fiscal Discrimination in the Twenty-First Century. Arlington, VA:
Mercatus Center at George Mason University.
Walker, R.L., Nickerson, H.J. and Snider, B., Rain Bird Corp, 2019. Volumetric budget based
irrigation control. U.S. Patent Application 16/218,202.
Online
Direct material variance. 2019. [Online]. Available through:
<https://www.accountingtools.com/articles/what-is-the-direct-material-variance.html>.
Budgetary Control: Steps, Objectives and Advantages. 2019. [Online] Available
through:<http://www.yourarticlelibrary.com/accounting/budgetary-control-accounting/budgetary-
control-steps-objectives-and-advantages/62080>.