Intro to Finance: Budget - Assignment Example

| Word Limit: 750 7 May Budget Candi ment I hereby declare that this assignment is my own work and any use of materials from other sources has been referenced accordingly. Candidate Signature: Date: Tutor Statement I hereby confirm that this assignment, to the best of my knowledge, is the candidates own work and they have not collaborated in the production of this assignment with any other person. I also confirm that I have a record of this candidate’s progress tutorial/s. Tutor Signature: Date: Explanation of the scenario The restaurant which is under discussion will be located in the market place which can easily be approached from the airports and transport and railway stations.

The hotel will be located in the mid of the city with high class interior and high class amenities to cater services to international tourists. The hotel will be one of its kinds in the city and will be the centre of attraction due to the facilities it provides to the local and international guests. The hotel will also include the cultural touch of he city and provides ethnic services. The size of the hotel is moderate and has 50 rooms to accommodate the guests (O'Fallon and Rutherford, 2010).

The hotel has a large area and garden place for providing the guests with an excellent view of the city. The ownership of the hotel is in single hands and the owner holds the hundred percent shares of the hotel. The funding for opening the hotel will be done by the way of bank long term loans and with an initial investment by the owner. There is a capital investment of 2.5 lakh dollars in all combining the bank loan of 1.5 lakh and 1 lakh dollars of capital investment by the owner (Bardi, 2010).

Supporting statements justifying the numbers in the budgeted P&L and the Opening Budget/Capital expenditure Looking at the figures in the opening budget the justification can be made as there is an inflow of capital by the owner and there is also an amount of loan taken from the bank to initiate the operations of the hotel business. There is a high amount of fund requirement for initiating the operations of the business for this purpose several expenditures or outflow needs to be made. There is a need for the expenditure on purchasing the equipments for operating the hotel business, this may includes the bar refrigerators, garbage cans, ovens, freezers, sandwich boards, microwave and so on.

There is also an expenditure on furniture this includes the expenditure on sofas, bar tools, cocktail tables etc. the expenditure of fixtures can also be justifies as the expenditure on lighting fixtures, track lights and kitchen fixtures are among these expenses (Bardi, 2010). There are also expenditure of the capital on the construction activities these expenses includes the expenditure on carpentry, plumbing of the sanitary fittings, the electrical work of the whole hotel, the finishes of the whole hotel and accessories and kitchen ceilings etc.

The opening budget or expenditure also includes the expenditure on opening inventory this includes food, beer, wine, spirits etc. there are other expenditures also like the expenditure on security and phones, expenditure on opening party and media launch, insurance deposits and so on (O'Fallon and Rutherford, 2010). Looking at the budgeted Profit and loss statement it can be justified that the operations of the hotel business is divided into different departments and the profitability and expenses are different for different departments.

So the profitability and expenditure of each department has been budget for the hotel organization. The revenue of the hotel business is divided into the revenues from rooms, F&B department, Telephone, Parking and other services. The expenses for all these departments have also been shown in order to arrive at the profitability. All these data can be justified as the hotel business has the maximum revenue from the accommodating the rooms of the hotel and the second most profitable department of the business is the F&B department which includes the revenue from food and restaurant (Bardi, 2010).

The budgeted profitability of the business has been shown looking at the aspect of the hotel being at the centre locality and near the tourist spot so the occupancy rate of the hotel will be high. There is also a high profitability from the F&B department as being at the centre of the city all the local community are attracted towards the hotel and thus have a high profitability. The profits from the other departments were also moderate and are expected to increase in the coming years with the increase in the popularity of the hotel.

There is also a high expenditure on the management, as the management is highly efficient and it is expected that they will be able to earn high revenuers and attract large number of customers in the initial year. At last the replacement reserve has been maintained in order to keep the service running all over the period and provide service recoveries in case of service failures (O'Fallon and Rutherford, 2010). References O'Fallon, M.J. and Rutherford, D.G. 2010. Hotel Management and Operations.

John Wiley & Sons. Bardi, J.A. 2010. Hotel Front Office Management. John Wiley and Sons. Appendices Capital expenditures / Opening Budget Opening Budget Amount Inflow   Capital $150000 Bank loan $100000 Outflow   Equipments $ 28,935 Furniture’s $ 27,500 Fixtures $ 5,800 Construction $ 84,670 Opening Inventory $ 37,000 Security and phone systems $ 3,500 Grand opening Party $ 2,000 Grand opening Media $ 2,000 Utility Deposits $ 1,500 Insurance Deposits $ 5,275 Opening Pay roll Hotel $ 3,500 Contingency $ 5,000 Grand Total $ 206,680 Cash Balance $ 43,320 Profit and Loss Budget Particulars Total Hotel Rooms F&B Telephone Parking Others               Revenue $ 400,000 $ 194,000 $ 85,000 $ 54,000 $ 45,000 $ 22,000 Expenses $ 266,000 $ 154,000 $ 42,000 $ 37,000 $ 20,000 $ 13,000 Operating Margin $ 134,000 $ 40,000 $ 43,000 $ 17,000 $ 25,000 $ 9,000 Management Fee $ 54,000           Replacement reserve $ 42,000           Net income $ 38,000