UNIT 2: FINANCE IN THE HOSPITALITY INDUSTRY

UNIT 2: FINANCE IN THE HOSPITALITY INDUSTRY

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LO1 Understand sources of funding and income generation for business and services industries
 Funding: sources eg retained profits, loans, banks, investors, small business schemes, franchise, hire purchase, sponsorship, lease schemes, creditors, debt factoring Income generation: methods eg sales, commission, sub-letting, sponsorship, grants, tracking mechanisms


LO2 Understand business in terms of the elements of cost Elements of cost
 sales; materials; consumables; labour; overheads; capital; gross and net profits; discount costing Selling prices: product and service costing; formula to achieve a specific gross profit percentage; differential gross/net profit margins; marginal costing; effect of competition; freelance; commission; peak/off-peak trading Control of stock and cash: methods eg storage, purchasing, cash, security, reconciliation, stock-taking Taxation: income tax; Value Added Tax (VAT); corporation tax; schedules; rates; personal/capital allowances; post-tax profits, implications

LO3 Be able to evaluate business accounts
 Trial balance: source; structure eg summary of accounts from sales, purchase and nominal ledgers Final accounts: types eg sole trader, partnerships, limited company, trading account, profit and loss account, balance sheet, adjustments for depreciation, accruals, prepayments, bad debt provision; format eg vertical, double-entry, appropriation account; assets/liabilities eg capital, fixed, current, notes to accounts Profit and cash budgets: purpose; types eg profit, cash flow, operating, master; variance analysis to include sales (volume and average spend), cost variances (raw material, labour, overhead), profit variances (gross and net)

LO4 Be able to analyse business performance by the application of ratios
Sales profitability ratios: gross and net profit; Return On Capital Employed (ROCE) Liquidity ratios: current; acid test Efficiency ratios: debtors and creditors payment periods; stock turnover Financial ratios: interest earned; gearing
UNIT 2: FINANCE IN THE HOSPITALITY INDUSTRY

LO5 Be able to apply the concept of marginal costing
Costs categorisation and contribution: fixed and variable costs; contribution calculation eg product/customers, cost/profit/volume relationship Application: break-even; profit/loss potentials; setting selling price and discounting
UNIT 2: FINANCE IN THE HOSPITALITY INDUSTRY
Learning outcomes and assessment criteria
Learning outcomes
On successful completion of this unit a learner will:
 LO1 Understand sources of funding and income generation for business and services industries
1.1 review sources of funding available to business and services industries
1.2 evaluate the contribution made by a range of methods of generating income within a given business and services operation
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LO2 Understand business in terms of the elements of cost

2.1 discuss elements of cost, gross profit percentages and selling prices for products and services
2.2 evaluate methods of controlling stock and cash in a business and services environment

LO3 Be able to evaluate business accounts
3.1 assess the source and structure of the trial balance
3.2 evaluate business accounts, adjustments and notes
 3.3 discuss the process and purpose of budgetary control
3.4 analyse variances from budgeted and actual figures, offering suggestions for appropriate future management action
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LO4 Be able to analyse business performance by the application of ratios

4.1 calculate and analyse all ratios to offer a consistent interpretation of historical business performance
4.2 recommend appropriate future management strategies for a given business and services operation

LO5 Be able to apply the concept of marginal costing

5.1 categorise costs as fixed, variable and semi-variable for a given scenario
5.2 calculate contribution per product/customer and explain the cost/profit/volume relationship for a given scenario
5.3 justify short-term management decisions based on profit/loss potentials and risk (break-even) calculations for a given business and services operation

UNIT 2: FINANCE IN THE HOSPITALITY INDUSTRY
Unit 7: The Developing Manager Unit 8: Marketing in Hospitality Unit 19: External Business Environment Unit 21: Small Business Enterprise.It should be made clear to learners that all units have financial components. This unit links to the following Management NVQ units:


A1: Manage your own resources
B6: Provide leadership in your area of responsibility
B8: Ensure compliance with legal, regulatory, ethical and social requirements
B10: Manage risk
E1: Manage a budget
E2: Manage finance for your area of responsibility
 E3: Obtain additional finance for the organisation
F1: Manage projects
F3: Manage business processes
F12: Improve organisational performance.
Essential requirements
Adequate access to computer and appropriate financial software is essential. When giving presentations, learners must also have access to the latest technological equipment and software. Tutors must develop suitable banks of case study materials based on real situations for demonstration and practice by learners. These must be in the context of the hospitality industry and include examples from different aspects of the industry, such as the front office, food and beverage costs, service costs etc
Employer engagement and vocational contexts
A visiting speaker, with some financial responsibility in the hospitality industry, will enhance delivery of the unit

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