Comprehensive Financial Management Report: Marriott Hotel Analysis

This report provides a comprehensive analysis of financial management principles applied to Marriott Hotel. It begins by exploring various sources of finance available to the hotel, evaluating their implications, and determining the most appropriate funding source. The report then delves into the importance of financial planning, identifying key users of financial information and the qualitative characteristics required to meet their needs. A significant portion of the report focuses on the impact of finance on financial statements, including the preparation of a cash budget, unit cost and pricing decisions, and the application of investment appraisal techniques. The report also includes analysis of financial statements, comparison of different formats, and the calculation of financial ratios for Marriott Hotel. Finally, the report includes journal entries, cash book, ledgers and trial balance for Mr. Rao's business.

Managing Financial Resources & Decision

TABLE OF CONTENTS
Table of Contents.................................................................................................................................2
Introduction..........................................................................................................................................4
Assignment 1........................................................................................................................................4
1.1 Sources of finance..................................................................................................................4
1.2 Implications of financial sources...........................................................................................5
1.3 Appropriate source of finance:..............................................................................................7
2.1 Cost of financial sources........................................................................................................7
Assignment 2........................................................................................................................................8
2.2 Importance of financial planning...........................................................................................8
2.3 Main users of information and qualitative characteristics of information to met the users needs 9
2.4 Impact of finance on financial statements...........................................................................10
3.1 Cash budget..........................................................................................................................10
3.2 Unit cost and pricing decisions............................................................................................11
3.3 Investment appraisal techniques..........................................................................................12
4.1 Financial statements.............................................................................................................13
4.2 Comparisons of formats of financial statements..................................................................14
4.3 Financial ratios of Marriott Hotel........................................................................................17
Conclusion..........................................................................................................................................19
ASSESSMENT 2................................................................................................................................20
Question 1..................................................................................................................................20
1. Journal entries of Mr. Rao Business for the period of August 2013.....................................20
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2. Preparation of three column cash book..................................................................................22
3. Preparation of ledgers account...............................................................................................23
Capital a/c..................................................................................................................................23
Wages a/c...................................................................................................................................24
Commission received.................................................................................................................24
Purchase return..........................................................................................................................24
Postage and telegram a/c............................................................................................................25
Stationary a/c.............................................................................................................................25
Salary a/c....................................................................................................................................25
Rent a/c......................................................................................................................................25
Prepaid rent a/c.........................................................................................................................26
4. Trial balance of Rao business for the period of August, 2013..............................................27
Question 2..................................................................................................................................28
Question 4..................................................................................................................................31
References..........................................................................................................................................34
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INTRODUCTION
Financial management is the system or a tool which is used by the organization to govern and oversee its income and
expenditures. It is beneficial system which supports the entities in improving performances of the business. It ensures financial
health of a corporation through sound investment activities and economic strategies. Present report is based on Marriott hotel
which is engaged in the hospitality field (Kondo, 2015). Assignment will discuss several available sources of finance to business
and their implication. Evaluation of most appropriate source will be done in this study. Qualitative characteristics of information
to meet the user needs will be illustrated in this report. Financial performance of Marriott hotel will be focused in this
assignment. Ratios of Marriott hotel and Hilton will be compared in this study. Triple column cash book and trail balance will be
prepared in this assignment for the given data.
ASSIGNMENT 1
1.1 Sources of finance
Money is the prime requirement of any business unit and without the availability of sufficient funds organizations cannot
operate their business smoothly. There are several sources through which the Marriott hotel can raise its funds: Retained earnings: It is the most common financial sources which are used by most of the corporation. In this, entities
retain some portion of profit for further development of the company. Marriott hotel can use this economic source for
raising funds, as the internal money can be reinvested for the operations (Sidek, Mohamad and Nasir, 2015). Bank loan: This is type of debt financing, if firms have solid business plan, good track record then company can borrow
money from the financial institution. This is the most appropriate source through which Marriott hotel can collect huge
amount and can fulfill its monetary requirements.
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 Venture capitalist: It is another external financial source available for Marriott hotel. There are many professional
investors those who invest in startup companies to get the higher return. But in this, firms have to give possession in the
business and have to pay dividend to all capitalist (Mainardes, Raposo and Alves, 2014).
 Sales of assets: It is another internal financial source in which Marriott hotel can sell its assets to generate money in the
business. This is the cheaper and quick tool of raising funds in the organization.
1.2 Implications of financial sources
Every financial source has some advantage and disadvantage and on the bases on this, Marriott hotel needs to select most
appropriate source for the organization.
Source of finance Financial implication Legal implication Owner and
controlling
Retained earning Advantage:
The main advantage of
this source is that
Marriott hotel is not
required to repay this
amount to any lender.
As it is internal funds
so it can be reused
without any economic
burden.
Another advantage of
No legal implications
Advantage:
Controlling will
remain in the hand of
owner.
No need to share
ownership with any
lender.
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this source is that it is
cheaper and gives
stability to the
business (Buchner and
et.al, 2014).
Disadvantage:
It does not allow the
stakeholders to enjoy
dividend.
If company fails to
utilize funds well then
it may harm position
of the Marriott hotel.
Bank loan Advantage:
The main benefit of
this source is that it is
non profit sharing
financial source.
Tax benefit and low
rate of interest are
other advantages of
Advantage:
Legal contract made
between borrower and
lender that helps to
reduce confusions
related to repayment.
Disadvantage:
Advantage:
Ownership and
controlling do not get
diluted.
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this source.
Disadvantage:
It can enhance liability
of Marriott hotel for
the longer period.
If cited firm fails to
repay then it will have
to bear penalty, apart
from this many
financial institutes
carry prepayment
penalties with the
borrower.
If company fails to pay
interest on time then
banks can cease
property as per the
legal contract (Mina,
Lahr and Hughes,
2013).
Venture capitalist Advantage:
Marriott hotel can
collect huge funds.
Disadvantage:
Cited firm will have to
give dividend to the
stakeholders.
Disadvantage:
Due to the legal
implication, it
becomes necessary for
the entity to involve
capitalist in the board
Disadvantage:
Ownership gets diluted
and
Capitalist get the right
to influence decisions
of the company.
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Investors charge some
amount on their
capital.
meetings.
Sales of assets Advantage:
No need to repay to
any lender.
Disadvantages:
Due to this, assets side
of the company gets
down and it can harm
the economic position
of the organization
Legal contract made
between both seller
and purchaser.
Advantage:
Ownership does not
get diluted.
Controlling power
remains in the hand of
Marriott hotel.
1.3 Appropriate source of finance:
As Marriott hotel is working in the hospitality industry, so for the cited firm bank loan would be the appropriate financial
source. By this way, it would be able to collect huge funds that will help to run its business smoothly. As banks give loans to
firms at lower interest rates which is easy to repay so no economic burden creates on the entity (Lin, Whinston and Fan, 2015).
If Marriott hotel goes with the financial source then it would get tax benefit on it. Though it enhances liability of the
company but with the help of this, cited firm will be able to fulfill it’s the monetary requirements.
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2.1 Cost of financial sources
Debt and equity are two types of financing available to the business, there are many costs attached with both these types
of funding options: Possession and dividend cost (venture capitalist): It is the cost which is attached with venture capitalist financial source.
In this, Marriott hotel will have to give stake to investor in the business. By this way, individual will get the right to take
decision for the organization. Opportunity cost (Retained earnings and sales of assets): It is another cost which is attached with the equity financing.
As if Marriott hotel fails to utilize its retained funds effectively then company and owner have to face huge loss. For
raising funds, Marriott hotel can sell its assets such as building, inventories etc. But due to this economic position of the
company can negatively affect.
 Interest cost (Bank loan): It is the cost which is associated with the bank loans. In this, cited firm will have to pay
interest, documentation charges, and prepayment penalties to the financial institutes. This can create financial burden on
the entity and increase its liability for the longer period (Harrison, 2013).
ASSIGNMENT 2
2.2 Importance of financial planning
For making sensible decisions for the well fare of the company it is important to have sound financial planning.
Economic forecasting is the tool of determining the capital requirement of the organization. It is the process of making policies
related to investment and procurement. Significance of economic forecasting are as following:
 To ensure adequacy of funds in the corporation.
 It helps in making balance between cash inflow and outflow so that stability can be maintained.
 It is beneficial tool that supports for sustaining the business for longer period.
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 It assists to reduce uncertain events in the organization like Marriott hotel.
 Financial planning is very important for ensuring maximum utilization of resources of the company so that cost can get
minimized (Alhabeeb, 2014).
 It supports in preparing budget so that proper allocation of funds can be done.
2.3 Main users of information and qualitative characteristics of information to met the users needs
In the Marriott hotel there are many persons those who play vital role in the organization. Main users of information in
the cited firm are employees, investors, lenders, owner or partners, managers etc. They all need variety of information for
making sound decisions:
Employees:
Marriott hotel treats its workers as assets of the company, they need information like market position of the
organization, credit worthiness, perception of customers, growth opportunities etc. By this way staff members will get to know
about their growth in the cited firm (Zikmund and et.al, 2013).
Investors:
As Marriott hotel is working well and its profit is increasing every year. That is why many investors are taking interest in
the firm and want to invest their capital in the business to get higher return. But before investing their huge capital in the cited
firm they need information like dividend policy, profitability ratio, number of customers, market share, market worth, etc. By
looking upon all these detail capitalist can take their own decision of investments.
Lenders:
Company borrow money from banks, these financial institutes are the lenders of the organization. Before granting loan to
the Marriott hotel, banks need information like credit worthiness of owner, market position, repay capacity, profitability, interest
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bearing capacity, value of assets, previous liabilities, litigation history etc. By looking upon all these details banks will be able to
know the economic position of the company and they will be able to take their decisions regarding granting loan.
Managers:
They need in-dept information about earning capacity of the company, previous sales history, revenues, expenditures,
liabilities etc. So that they can make effective strategies to enhance profit and sales of the organization (Pallegedara, 2017).
Owner or partners:
there are many partners in the cited firm they need information like number of customers, employees, policies, working
capital etc. According to this information they will invest their own capital in the business.
2.4 Impact of finance on financial statements
Finance is the most important part of business and it impacts on the financial statements of the business to great extent.
As if Marriott hotel goes with the bank loan then it will enhance the capital side in the balance sheet. On other hand I will also
increase liability of the cited firm for longer period. Apart from this company will get tax benefit that will impact on the income
statement of the company. Cash flow statement will also get affected as due to this cash inflow will get raised up (Dumitru and
Gligor, 2014).
Venture capitalist is another financial source that impacts on the financial statements of the organization. It will raise
funds of the company thus capital side gets strong and impact on the balance sheet. Apart from this Marriott hotel will have to
pay dividend to all investors so it will show as expenditure of the company. Retained earning will impact on the income
statement as reinvestment of profit generate income that show in the income side of the company's statement. By selling is
assets, assets side of balance sheet will get down, on other hand it will enhance capital side and will impact on the balance sheet
of the entity. Income statements will also get affected as it will generate income in the corporation. But for selling assets cited
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firm will have to give advertisement in newspaper that would be expenses for the firm and will impact on the income statement
(Joseph, 2015).
3.1 Cash budget
Entities always have to prepare cash budget so that they can monitor their financial activities and can control over
unnecessary expenditures. Projected cash budget for the Marriott hotel is as below prepared:
Revenues/
Disbursement January February March April May June
Cash revenue
Cash sales income 25000 30000 40000 61000 75000 90000
Total incomes 25000 30000 36000 61000 75000 90000
Acquisition 12000 13000 13000 25000 35000 40000
Rent of premises 2500 2500 2500 2500 3000 3300
Purchase equipment 5000 - - 4100 - 2100
Salaries to staff
members 3200 3200 3000 3200 3200 3200
Additional
disbursement(Interest
and utilities) 700 700 600 650 720 750
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