Business Finance: Understanding the Finance Function in GotoHolidays

Handout

Business Finance

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Slide 1:

Slide 2:

Slide 3: Introduction

Slide Content:

Overview of GotoHolidays

• The Tourism organisations major in the market in Europe (Vellas, 2016).

• A focus on elements that different platforms offer, as well as the customer experience.

• Finance in the tourism industry

• Essential for facilitating the organisation's business operations and for charting the organisation's future development.

• Shapes the offer of development communication, and investment perspectives (Dwyer, Forsyth, and Dwyer, 2020).

Goals of the Presentation

• To know more about the dynamics of the finance function in any business organisation.

• To discuss internal and external financing the following criteria are used.

• To explain the benefits and drawbacks of different kinds of financial sources.

Speaker notes

In the case of GotoHolidays a tourism company that operates in the European tourism industry finance presents an important aspect in realising its business objectives. They were ensuring that the company offered Universality of travel experiences and satisfaction of the client is complemented by good money management. Finance has an implied input on numerous managerial decisions within organisations such as the question of price. This is particularly important in the planning and decision-making process in an organisation concerning; product or service, branding and messaging, promotional activities or key investments an advantage within the context of the tourism business. In this presentation, the finance function will be discussed, the internal and external sources of finance will be discussed, as well as the advantages and disadvantages of various financing options.

Slide 4: Finance Function

Slide Content:

Definition of Finance in Business

• A way of managing resources for the highest return and the least expense (Yang, Ishtiaq, and Anwar – 2018).

Key Roles:

• Planning

• Funding

Managing Resources:

• As part of understanding the company’s strategic management, the current paper finds the importance of financial management to be very crucial.

• It has been used to secure a sustainable future for health services and their growth.

• Assists in risk analysis and therefore decision-making regarding strategy.

Speaker notes

Finance management in an organisation is mainly the management of money with a view of maximising its utility and consequently minimising its expenses. A major component of the finance function is planning which is the process of estimating and predicting the future financial needs of the organisation for it to undertake its purposes and meet its obligations. Thus, it becomes clear that the financial resources required for the growth or other operational activities in Businesses like GotoHolidays can be foreseen with ease if proper planning is done. The next one is funding where the companies seek funds from different sources like debts or equity to fund expansion or to carry out their operations. Businesses and individuals thus may find themselves in situations where they lack enough finances for their financiers. Moreover, the finance function has responsibilities for resources and cheques company funds to attain the best revenues for the business.

Slide 5: Relationship with other functions

Finance and Marketing

• Finance ensures the approval of marketing expenses and the execution of related promotion plans (Farquhar and Meidan, 2017).

• Adopts cost analysis as a basis for deciding on the right price models.

Finance and Operations

• Work hand in hand with operation managers to control costs and maximise resources (Brown, Bessant, and Jia, 2018).

• Enables adequate funding for sundry expenses.

Finance and Human Resources

• Affects and influences the hiring approach and provider remuneration (Greer, 2021).

• Matches the physical capital with training and development programmes for employees.

Speaker notes

Finance is not an independent field but it has some correlation with other fields within the organisation. For instance, in marketing, finance is significant in outlining how much cash can be spent on promotions and what strategies of the prices to use depending on cost evaluation. If both, the finance and marketing departments cooperate, they can establish such pricing strategies to fit the organisation’s objectives and the needs of the market space. In cooperation with operations, finance guarantees the optimal utilisation of resources to achieve both operational and financial results. This partnership makes GoToHolidays provide affordable travel yet quality services will not be compromised. Furthermore, finance also influences human resources, particularly in areas such as recruitment, remuneration, and staff training and development. This means that financial resources have to be directed to the right talent acquisition and development and be able to meet the core objective of the business, which is to employ qualified talent within the firm. This system of integration between finance and other functions enables GoToHolidays to remain competitively cheap and financially sustainable while delivering excellent services consistently.

Slide 6: Internal Sources of Finance

Slide Content:

Internal Sources of Finance

• Retained Earnings: Profits reinvested in the business for growth.

• Working Capital: Funds available for day-to-day operations, ensuring liquidity (Yenni et al, 2021).

Speaker notes

Internal financial resources are means created within the enterprise. A common source is retained earnings, which are profits reinvested back into the company. This allows businesses to grow without taking on additional debt. Another internal resource is working capital, which represents the company's available funds to cover normal operations. Internal resource management is essential for businesses like GotoHolidays as it ensures liquidity and helps maintain operational efficiency without relying on external borrowing.

Slide 7: Internal Sources of Finance – Examples

Sale of Assets

Selling unused or underperforming assets to raise funds.

Generates immediate cash flow without taking on debt.

Owner’s Capital

Personal funds are invested by the business owner (Sun et al, 2016).

Keeps full control without external interference.

Speaker notes

Common examples of internal sources include the sale of assets and equity. Businesses can raise immediate funds by selling unused or non-performing assets. This helps generate cash flow without incurring additional liabilities. Equity refers to personal funds invested by the owner, allowing the business to grow while maintaining full control without outside interference. Both of these internal sources are beneficial because they provide liquidity without increasing debt obligations, which is crucial for companies like GotoHolidays.

Slide 8: External Sources of Finance

External Sources of Finance

• Bank Loans: Debt financing from financial institutions (Belo, Lin, and Yang, 2019).

• Equity Financing: Raising funds by selling shares to investors.

Speaker notes

Foreign sources of financing include funds obtained from outside the enterprise. A common form of external financing is a bank loan, where businesses borrow from financial institutions, often for significant expenses. Another external source is equity financing, where companies raise capital by selling shares to investors. This type of financing is particularly attractive to startups or businesses looking to expand because it provides substantial capital without the need for immediate repayment. For companies like GotoHolidays, access to external finance is essential to finance long-term investment and expansion projects.

Slide 9: External Sources of Finance – Examples

Venture Capital

• Investment from firms in exchange for equity.

• Provides funding along with industry expertise.

Crowdfunding

• The ability to fund small amounts from numerous people over the Internet (Kuppuswamy and Bayus, 2018)

• Helps to check the feasibility of business concepts and foster a community.

Trade Credit

• Credit is given to customers for products and services that they have bought.

• Improves the cash flow through the option of paying suppliers at a later date than expected.

Speaker notes

Some of the examples of external sources include venture capital, crowdfunding, and trade loans. Venture capital signifies firms that invest in securities in exchange for taking positions in companies’ equity capital and sometimes offering funding and experience. Crowdfunding is a way through which many people contribute small amounts of money towards funding companies without having to place their money in a single pool. Trade credit has been defined as the credit extended by the buyer to the seller where the buyer can buy goods and pay for them at a later date. These options give some funding strategies to mitigate risk and expand effective scale for GotoHolidays and other firms.

Slide 10: Advantages of Sources of Finance

Bank Loans

• Advantages: Approval of structured repayment plan; ready access to money.

Equity Financing

• Advantages: No repaying can be done; the business risk is split.

Crowdfunding

Advantages: Shielding of business propositions; public opinion.

Venture Capital

• Advantages: Again, I have observed that large funding amounts and wide access to the industry’s expertise are also key sources of funding (Lerner and Nanda, 2020).

Trade Credit

• Advantages: Enhances liquidity; relatively easy to acquire.

Speaker notes

Every funding source has its advantages since no organisation would allocate its resources blindly without expecting to benefit from the outcome. While bank loans offer flexible and systematic payment methods and cash facilities they are best suited for long-term liabilities. Equity financing also enables the firm to get capital without paying back the capital while sharing risks with stockholders. The chief advantage of crowdfunding is that it allows starting businessmen to test their ideas and attract the first customers. Venture capital offers a lot of capital and industry knowledge, and trade credit enhances cash flow because buyers can pay their suppliers at a later time.

Slide 11: Limitations of Sources of Finance

Bank Loans

• Limitations: Interest costs; risk of default; collateral requirements.

Equity Financing

• Limitations: Dilution of control; potential for conflicts with investors.

Crowdfunding

• Limitations: Success is not guaranteed; it is time-intensive to manage campaigns.

Venture Capital

• Limitations: High expectations for returns; loss of some ownership control.

Trade Credit

• Limitations: Risk of over-reliance; potential negative impact on supplier relations.

Speaker notes

While each funding source has clear advantages, it also brings limitations. Bank loans involve interest costs, and there is a risk of default if repayments cannot be met; in particular, collateral may be required. Equity financing dilutes ownership and can lead to conflicts between business owners and investors, especially when it comes to decision-making. Crowdfunding success is not guaranteed, and campaign management can be time-consuming. Venture capitalists often have high expectations of returns, and businesses must have some control over their investors. Trade credit can create dependency on suppliers, and excessive use can damage supplier relationships and affect future purchases. Businesses must consider these limitations when considering financing options.

Slide 12: Why Different Sources

Diverse Financing Needs

• Different phases of business growth require various types of funding (e.g., startups vs. expansion).

Mitigating Risk

• Using multiple sources spreads financial risk and avoids over-dependence on one type of financing (Zhou, 2021).

Flexibility in Financial Strategy

• A varied financing mix allows for adaptive strategies in response to market conditions and opportunities.

Speaker notes

Businesses often rely on a combination of funding sources, as different stages of growth and development require different forms of capital. For example, startups typically use equity financing or crowdfunding to raise seed capital without having to repay the funds immediately. Sustainable companies, on the flip side, may use bank loans or business loans if they want to expand their companies or need capital for operations. This means that through the use of several sources of funds, businesses can reduce the risks to the maximum with a view of not engaging in a particular method of financing. This approach also enables the organisation to make more adjustments to the financial strategies based on changes in the market environment as well as other opportunities. The continuation of the growth directly depends on the ability to rebalance the company’s financials according to its objectives and circumstances.

Slide 13: Most Suitable Source of Finance

Scenario Overview

• Companies that are interested in the growth of the business and laying down fresh capital.

• Sudden future needs for having capital requirements at short notice and long-term capital requirements.

Recommended Sources:

Bank Loans

• More structured methods of repayment (Atrill & McLaney, 2018a).

• Used for long-term investment, such as making large purchases that are expected to be used for a long time.

• Fixed interest rates will not fluctuate or change from time to time which makes banking easy to manage.

Equity Financing

• Suitable for seeking substantial funds without required repaying (Atrill and McLaney, 2018b).

• Especially for startup companies or companies with growth potential.

• Brings investors who can provide special skills and other social capital.

Venture Capital

• The high growth companies are characterised by massive capital investments (Weetman, 2019)

• Provides industrial guidance and support.

• It is not required for one to pay back as soon as they receive the loan from the company.

Conclusion

• An integration of internal and external sources is possible, and it is less risky than getting the entire space from internal sources.

Speaker notes

If a business is planning expansion, then the most suitable sources of funds include internal and external sources. Banking loans, on the other hand, provide immediate capital for large development while equity financing provides growth financing without repayments. Venture capital is suited for companies that will experience dramatic growth and provide funding in addition to skills. Retained earnings can also be a source of funding growth without reliance on external financing. This combination makes it possible to offer several options while operating with minimum financial responsibility.

Slide 14: Conclusion

Recap of Key Points

• Role and significance of solving problems related to finance in business management.

• Types of internal and external funds and their significance.

• Why Financial Knowledge Matters in a Business

• Money management which is informed improves on the companies’ growth and competitive edge.

• Summary of Financing Strategies of GotoHolidays

• Stress that there is a huge potential for the need to tailor the financing methods and needs toward company objectives.

Speaker notes

It is important for any business to know that finance can originate from various places, mainly essential for managing the company. There are internal sources like retained earning, working capital that offer the firm’s financial security while external sources like bank borrowings, equity funding enables the firm to invest and expand. Thus, an efficient financial plan using the company’s internal and external funds will enable firms such as GoToHolidays to run their tourism businesses. Informed choices concerning funding will contribute to a favourable development, better solvency and the ability to secure a leading position among competitors in the longer term. In conclusion, it is necessary to underline that companies need to choose flexible and specific methods of financing that would be suitable for everybody’s goals and conditions.

Slide 15: References

Atrill, P. and McLaney, E. J. (2018) Financial accounting for decision makers. 9th ed. Harlow: Pearson

Atrill, P. and McLaney, E.J. (2018) Accounting and Finance for Non-Specialists. 11th ed. Pearson

Belo, F., Lin, X. and Yang, F., (2019). External equity financing shocks, financial flows, and asset prices. The Review of Financial Studies, 32(9), pp.3500-3543.

Brown, S., Bessant, J. and Jia, F., (2018). Strategic operations management. Routledge.

Dwyer, L., Forsyth, P. and Dwyer, W., (2020). Tourism economics and policy (Vol. 5). Channel View Publications.

Farquhar, J. and Meidan, A., (2017). Marketing financial services. Bloomsbury Publishing.

Greer, C.R., (2021). Strategic human resource management. Pearson Custom Publishing.

Kuppuswamy, V. and Bayus, B.L., (2018). A review of crowdfunding research and findings (pp. 361-373). Edward Elgar Publishing.

Lerner, J. and Nanda, R., (2020). Venture capital’s role in financing innovation: What we know and how much we still need to learn. Journal of Economic Perspectives, 34(3), pp.237-261.

Sun, J., Ding, L., Guo, J.M. and Li, Y., (2016). Ownership, capital structure and financing decision: evidence from the UK. The British Accounting Review, 48(4), pp.448-463.

Vellas, F., (2016). The international marketing of travel and tourism: A strategic approach. Bloomsbury Publishing.

Weetman, P. (2019) Financial accounting. 8th ed. Harlow: Pearson

Yang, S., Ishtiaq, M. and Anwar, M., (2018). Enterprise risk management practices and firm performance, the mediating role of competitive advantage and the moderating role of financial literacy. Journal of Risk and Financial Management, 11(3), p.35.

Yenni, Y., Arifin, A., Gunawan, E., Pakpahan, L. and Siregar, H., (2021). The impact of solvency and working capital on profitability. Journal of Industrial Engineering & Management Research, 2(4), pp.15-38.

Zhou, S., (2021). EURASIAN JOURNAL OF ECONOMICS AND FINANCE. Eurasian Journal of Economics and Finance, 9(4), pp.217-234.