Unit 2 Finance in the Hospitality Industry
Aim of Unit 2 Finance in the Hospitality Industry
The main aim of this unit is to provide learners with clear understanding about the importance of finance in the hospitality industry. In the hospitality industry the finance and funding plays a significant role. In order to run a successful business, understanding cost and its evaluation in terms of performance is extremely necessary. The funding and the finance give a clear understanding about the performance and income generated in the business. This also allows the learners to gain knowledge about the budgets and will be able to evaluate the accounts and the costing technique involved in the business in the hospitality industry.
LO1 Understand sources of funding and income generation for business and services industries
To further understand the finance in the hospitality industry, the learner’s first need to understand about the sources involved in funding for the business. The hospitality industries receive funds from different sources including the loans from the banks and through different investors. The business involves partnership with various other companies and the funds are therefore shared. The industries also seek for sponsorships and creditors for the funds. The generations of income consists of different methods like sales and commissions.
LO2 Understand business in terms of the elements of cost
In terms of elements of cost, the finance involved in the sales, the raw materials and labour plays a very important role. The selling prices like product costing, servicing and gross profit percentage the effect in the finance due to the competition, freelancing and commission are important aspects related to finance and are very important in establishing the business. Proper control over the stocks and costs over finance related to the purchase of goods, security and reconciliation are key factors that the learners must be aware of. The taxes also play a major role in finance in the hospitality industry.
LO3 Be able to evaluate business accounts
For the clear understanding about the finance in the hospitality industry, evaluation of the business accounts as to how the finance is being distributed and received is something that needs to be monitored. The trial balance like the funds received from sales and purchase and the final accounts that mostly comprises of accounts of trades, profits, partnerships and assets like that from their capital and notes or accounts are to be evaluated and kept into account. The profits and the budgets of the company must also be accounted for and evaluated.
LO4 Be able to analyse business performance by the application of ratios
In order to analyze the business performance, the application of ratios plays a key role. The ratios generated from the sales profit include the total net profit in the business. The liquidity, efficiency and financial ratios comprise of the performance ratios generated from current, debtors and creditors and the interest earned.
LO5 Be able to apply the concept of marginal costing
The marginal costing are categorized into two categories, cost and contribution categorization comprising of costs generated from customers and fixed and variable cost and application that comprise of the potentials of profit/loss, the selling prices and discounts.
Learning outcomes and assessment criteria
|Learning outcomes On successful completion of this unit a learner will:||Assessment criteria for pass The learner can:|
|LO1 Understand sources of funding and income generation for business and services industries||review sources of funding available to business and services industriesevaluate the contribution made by a range of methods of generating income within a given business and services operation|
|LO2 Understand business in terms of the elements of cost||discuss elements of cost, gross profit percentages and selling prices for products and servicesevaluate methods of controlling stock and cash in a business and services environment|
|LO3 Be able to evaluate business accounts||assess the source and structure of the trial balanceevaluate business accounts, adjustments and notesdiscuss the process and purpose of budgetary controlanalyse variances from budgeted and actual figures, offering suggestions for appropriate future management action|
|LO4 Be able to analyse business performance by the application of ratios||calculate and analyse all ratios to offer a consistent interpretation of historical business performancerecommend appropriate future management strategies for a given business and services operation|
|LO5 Be able to apply the concept of marginal costing||categorise costs as fixed, variable and semi-variable for a given scenariocalculate contribution per product/customer and explain the cost/profit/volume relationship for a given scenariojustify short-term management decisions based on profit/loss potentials and risk (break-even) calculations for a given business and services operation|
This unit may be linked to other units, including:
- Unit 7: The Developing Manager
- Unit 8: Marketing in Hospitality
- Unit 19: External Business Environment
- Unit 21: Small Business Enterprise.