Sources Of Funding And Financial Management Strategies For Hospitality Industry

Methods of Revenue Enhancement

Following are few sources of findings which could be used by the hospitality industry to raise the funds:

1. Private equity and angels
2. Debt finance
3. Personal finances
4. Enterprise investment scheme
5. Equity crow funding.  
6. Income generation method:

Following are few methods, on the basis of which the revenue of the company could be enhanced:

Financial management in hospitality industry:

The main key decision maker in the hospitality industry is financial manager in context of finance. Finance manager evaluates all the financial transaction and performance of the company and make the new financial strategies on the basis of that. A financial manager is required to analyze every single factor related to financial position and performance of the company so that it becomes easy for them to make financial strategy for the business.

Following are few factors which must be considered by the companies which evaluating the cost:

1. Customers
2. Profit
3. Positioning
5. Gross profit margin or net profit margin:

Gross profit is calculated by deducting the cost of sales from total sales whereas net profit is calculated after deducting all the expenses of a particular period from total sales. Following is the formula to calculate the gross profit margin and net profit margin:

Gross profit margin = (Gross profit / sales) *100

Net profit margin = (Net profit / sales) *100

The profit margin of XYZ is as follows:

Sources of finance:

Irish government could evaluate the following sources for the resorts:

1. Private equity and angels
2. Debt finance
3. Government funds
4. Enterprise investment scheme
5. Equity crow funding (Damodran, 2011).  

According to the study and evaluation, it is suggested to the company to consider the private equity and equity crow funding for the resorts.

1. Generating income from holiday resort:

The evaluation on the hospitality industry of the company briefs that the income could be generated by resort through many sources. The hotel, food and the adventures are the main sources of the company. These should be the main focus of the management of the resort.

1. Different income of sources:

There are various other different sources for a resort to generate the profits. Holiday resort of Irish government could generate the income through following the below methods:

1. Inside water park
2. Restaurant, nightclubs and bars
3. Retail shops
4. Family entertainment canter
5. Multipurpose theatre
6. A day spa
7. Coffee shops and eateries etc.

All these methods would help the resort to attract more guests and enhance the revenue of the resort.

1. Vat and its purpose:

VAT stands for value added taxes. It is a type of consumption tax which is collected incrementally and it directly bases on the value of a service or product at every stage of distribution and production. VAT is collected by the government of the country and it is an indirect tax form. The main purpose of VAT is to collect the tax amount on indirect activities and income of a business or individual.

1. Main challenges in hospitality industry:

Financial Management in Hospitality Industry

Stocktaking is a procedure to calculate the total amount of stock which is held by an organization. Various issues are faced by the hotels to measure the stocktaking. Some of them are as follows:

Lack of objectivity and confidentiality

Risk of accidents

Higher cost due to payment of overtime

Lack of necessary know-how

Lack of knowledge

Risk of getting wrong results

Failure to detect some losses etc (Brigham & Ehrhardt, 2013)

Corporation tax is company tax which is directly imposed by the government of a country on total income or capital of a business. These taxes are levied either at national level or local level.

Ireland is an attractive place for the companies because of lower corporate tax. The corporate tax of Ireland is 12% only (IDA Ireland, 2018).

1. Examples of cost:

1. Calculations:
2. Breakeven point:

1. Profit calculation:

1. Sales units:

 Limitations:

Cost volume profit analysis explains about the approximate results only. It is based on many assumptions such as total sales and total cost is linear to each other.

1. Pricing strategies:

Hotel Cocana could use the penetration pricing strategies. This pricing strategy explains that the initial pricing must be set low and with the time, the price of the product or the service should be higher. It makes it easy for the hotel to grab more customers and make loyal customers.

1. Stock and cash flow controlling techniques:

The stock and the cash flow would be controlled by the comapny through following some methods such as LIFO, FIFO, better credit policies etc. In case of souvenir shop, it is recommended to use the weighted average method to control the stock and better cash conversion cycle should be maintained for better cash flows.

Task 3:

1. Explanation:

Financial consultant:

Trial balance is a statement of all financial transaction of a company. It bases on the double entry account book. Structure of trial balance is as follows:

Further, budgetary control process is a procedure to evaluate and predict the future performance of an organization. These procedures evaluate the future sales, expense, profits etc of the company and make it easy for the manager of the company to make future strategies and better decisions about the future performance of the company.

Notes to the accounts brief that how the amount has been calculated and the relevant information about the figure. Notes to account should be evaluated by the company to measure and evaluate the performance of the company.

1. Calculations:

(Arnold, 2013)

These material variances have taken place due to lower material price and huge product requirement. On the other hand, labour variances have taken place due to high labour cost as well as lower labour hours. It explains that the company is required to focus on the labour cost as well as material requirement to manage and reduce the level of cost.
Task 4:

1. Financial ratios:

1. Recommendation on financial strategies:

The above analysis on financial statement briefs that the gross profit margin of the company has been enhanced but on the other hand, return on capital employed of the company has been lower. It briefs that the profitability position of the company has been better but it is required for the company to reduce the level of debt amount so that the better position could be maintained.

Further, it explains that the current cash conversion cycle of the company is quite higher and it is required for the company to manage and reduce the level of cash conversion cycle.

Task 5:

1. Explanation:

1. Breakeven point:

1. Calculation of sales unit:

References:

Arnold, G., (2013). Corporate financial management. Pearson Higher Ed.

Brealey, R., Myers, S.C. & Marcus, A.J., (2007). FundamentalsofCorporate Finance. Mc Graw Hill, New York.

Brigham, E.F. & Ehrhardt, M.C., (2013). Financial management: Theory & practice. Cengage Learning.

Brigham, F., & Michael C. (2013). Financial management: Theory & practice. Cengage Learning.

Bromwich, M. & Bhimani, A., (2005). Management accounting: Pathways to progress. Cima publishing.

Damodaran, A. (2011). Applied corporate finance. 3rd edition, John Wiley & sons, USA

IDA Ireland. (2018). Corporate Tax. (Online). Retrieved as on 14^th April 2018 from https://www.idaireland.com/invest-in-ireland/ireland-corporate-tax.

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