Finance In The Hospitality Industry
Unit Code : R/601/1789 QCF Level : 4 Credit Value : 15
This unit will enable learners to develop a practical understanding of the accounting techniques used to control costs and profits and to support managers in making effective short-term decisions.
Learners will gain an understanding of the sources of funding and income generation for business and services industries. They will also understand business in terms of the elements of cost and how to analyze business performance by the application of ratios.
Learners will have opportunities to investigate control systems, income generation, and methods of measuring and analyzing performance.
On completion of the unit, learners will be able to evaluate business accounts and apply the concept of marginal costing.
Learners must ensure that their evidence relates to the hospitality industry.
On successful completion of this unit a learner will:
- LO1 Understand sources of funding and income generation for business and services industries
- LO2 Understand business in terms of the elements of cost
- LO3 Be able to evaluate business accounts
- LO4 Be able to analyze business performance by the application of ratios
- LO5 Be able to apply the concept of marginal costing.
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; labor; 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, labor, overhead), profit variances (gross and net)
LO4 Be able to analyze business performance by the application of ratios
Sales profitability ratios: gross and net profit; Return On Capital Employed (ROCE) Liquidity ratios: current; the acid test
Efficiency ratios: debtors and creditors payment periods; stock turnover Financial ratios: interest earned; gearing
LO5 Be able to apply the concept of marginal costing
Costs categorization and contribution: fixed and variable costs; contribution calculation eg product/customers, cost/profit/volume relationship
Learning Outcomes And Assessment Criteria
|Learning outcomes||Assessment criteria for pass|
|On successful completion of||The learner can:|
|this unit a learner will:|
|LO1 Understand sources of||1.1||review sources of funding available to business and|
|funding and income||services industries|
|generation for business and||1.2||evaluate the contribution made by a range of methods|
|of generating income within a given business and|
|LO2 Understand business in||2.1||discuss elements of cost, gross profit percentages and|
|terms of the elements of||selling prices for products and services|
|cost||2.2||evaluate methods of controlling stock and cash in a|
|business and services environment|
|LO3 Be able to evaluate business||3.1||assess the source and structure of the trial balance|
|accounts||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|
|LO4 Be able to analyse business||4.1||calculate and analyse all ratios to offer a consistent|
|performance by the||interpretation of historical business performance|
|application of ratios||4.2||recommend appropriate future management strategies|
|for a given business and services operation|
|LO5 Be able to apply the concept||5.1||categorise costs as fixed, variable and semi-variable for|
|of marginal costing||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|
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.
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 the delivery of the unit.