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Diploma in Business (Marketing)
Unit Number and Title
Financial Management in TT Sector
Business organisation manage different set of activities in order to run their overall business. Financial management in TT sector assignment is focused on that how the fianancial decisions are tken to run business in the desired manner. They manage their routinely activities so that they attain their set objectives in desired manner. Travel and tourism sector falls under service industry and they need to manage their costs and other factors in order to attract number of tourists towards their business. Tourism industry provide their services in different segments that include resorts, theme parks, etc. in order to attract them. To discuss the various points Merlin Entertainment Plc and The Restaurant Group Plc is taken into consideration.
Merlin Entertainment Plc is an multi service provider organisation as it get indulge into different activities and these activities include Resort Theme Parks, The LEGOLAND parks and Midway Attractions. They are well known name in the travel and tourism industryand with the help of their diverse business they attract number of tourists. They incur huge costs for different activities and make use of different volume methods in order to measure their productivity. Different aspects such as costs and volume, pricing methods and profit influencing factors get discussed in effective manner.
Cost and Volume both plays important role within the financial management of travel and tourism businesses. There are various activities include accommodations, transportation, entertainment, etc. get performed by Merlin Entertainment PLC in order to run their activities and over these activities they incur lot many costs (Hutchinson, 2015). Majorly the cost is segregated into two parts such as variable cost and fixed costs and meaning of these costs get discussed below such as: -
There are different segments in which Merlin Entertainment is performing their activities and among these segment they invest lots of costs so that they get adequate output from it in the form of profits. They make use of different methods in order to measure their overall profitability such as CVP or Cost-Volume-Profit analysis. They make use of this method in order to know the effect of change in costs and volume over their operating income as well as net income. For this purpose they assume that there are some features remain constant such as selling price, variable cost and total fixed cost, everything get sold and none remain left (Curran-Everett, 2013).They also make use of the Break-even point analysis in order to measure the level of their profitability. Break-even point is that point where their sales revenues become equals to zero. After that point their earnings would be pure profit (Curran-Everett, 2013).
Travel and tourism sector make use of different pricing methods and some of them are discussed below such as: -
Cost plus pricing
This pricing method get utilised commonly by the organisations and as per this method first total cost get measured after that they add up adequate margin of profits. The combination of two (cost + profit) results into final price (Dexter, et. al., 2011).
This pricing method is effective pricing method and get utilised by the market leaders or such businesses that has high brand image within their respective market as they set high prices for their respective budget as compare to others. Their motive is to fast recovery of their incurred cost and after that they enjoy huge profits with the sale of their products (Dexter, et. al., 2011).
This pricing method is focused over fixing low prices of their products in order to increase their sales as organisation set lower prices for their products as compare to other competitors. With the effect of it there is increase in sales that impact over others performance.
Merlin Entertainment Plc follows the "Cost Plus Pricing Method" in order to set their prices as with the help of it they set their prices reasonable as well as earn adequate profits with the help of it (Inkson & Minnaert, 2012).
Profit Margin: - The amount which remain left after the deduction of their expenses from their revenues is termed as profit margin (Michalczyk, 2014). There are various factors that influence the profit earning capacity of the organisation that get discussed below such as: -
This factor put adequate impact over the profit earning capacity of the Merlin Entertainment Plc as in the peak season they are efficient in order to get the high level profits whereas during off-season they might struggle to earn adequate funds in order to meet out their fixed costs.
Nature of Merlin Entertainment is service based activities as they effectively need to focused over their services. They need to enhance their services and remain attentive in order to satisfy their customers need. If they fail to do so it will direct impact over their overall profit earning capacity. If customers are not satisfied with their services they are not able to earn adequate funds.
Social, political and Cultural
Profit earning capacity of the Merlin Entertainment Plc get influenced highly with the impact of these factors as they need to strictly follow the imposed rules and regulations by their respective government. Along with this they need to take care of their culture and society while performing their activities as their activities didn't put adverse impact over their performance.
Conclusion: -It is interpreted that Merlin Entertainment Plc running their business activities in three different segments and they incur different costs over these segments in order to attain adequate level of profits. With the help of different methods they evaluate their overall profitability. They follow cost plus pricing method out of the available pricing methods for the purpose of setting their final prices for their products. There are various factors in the form of season, business nature, etc. put impact over the profit earning capacity of Merlin Entertainment Plc
In order to interpret the financial accounts of the TRG PLC or The Restaurant Group PLC ratio analysis is made with the help of their two year's ratios. Ratio calculation is made in the below table such as: -
The Restaurant Group (TRG) Plc for the year ended 27 December 2015
Profit Margin Ratio(%)
Return on Equity (%)
Total shareholders’ equity
Current Ratio (%)
Acid Test Ratio
Inventory Turnover Ratio
Cost of goods sold
Asset Turnover Ratio
Earnings per Share
Dividend per share
Earnings per share: EPS measures the earnings that each equity shareholders are eligible to. EPS shall be calculated by dividing the net profit by the number of equity shares. As per the analysis of the above table it can be reported that the EPS of the current year 2015 is better as compared to that of the last year (Weaver & Lawton, 2014).
Dividend per share: DPS measures the dividend that each equity shareholders are eligible to. DPS shall be calculated by dividing the total dividend distributable earnings by the number of equity shares. As per the analysis of the above table it can be reported that the DPS of the current year 2015 is better as compared to that of the last year (Weaver & Lawton, 2014).The overall performance of the company has depreciated over the year as compared that of the last year. Analysing the performance of the company the investors looking for a short term investment can invest the funds in the company as there is an increase trend in the returns.
It is concluded that there are various methods get followed by the organisation in order to evaluate their overall performance. With the help of different methods such as marginal cost, contribution margin, break even analysis they effectively analyse their overall performance. The profit earning capacity of the travel and tourism industry get affected by the different factors. Management accounting information is the effective set that get utilised for gathering different information set in order to make use of it for their decision making. There are different sources of funds are available in order to support travel and tourism capital projects. Ratio analysis is made over the TRG Plc. in order to interpret their financial statements.
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