Delivery in day(s): 5
Unit 2 Finance and Funding in Travel Tourism Assignment ME
Diploma in Business
Unit Number and Title
Finance and Funding in Travel Tourism
The Finance and Funding in Travel Tourism has been executed over the topic “Finance and funding in the travel and tourism sector” with a motive to gain to knowledge of the various concepts or aspects related to the financial condition or the financial performance of the business. In the first task of the report discussion will be made over the importance of the costs and volume in the financial management of travel and tourism businesses, the pricing methods in the sector and analysis of the factors which influence the profit of the businesses of travel and tourism. Second task covers a presentation which will be prepared over the various types of management accounting information and assessing the use of the management accounting information for the purpose of decision making. The third task of the report will cover the interpretationof the financial accounts of The Restaurant Group (TRG) Plc. Fourth task of the program will cover a poster which will be prepared over the analysis of the sources and distribution of the funds for the purpose of development of the capital projects being related with tourism. Different scenarios are given for the tasks.
For the execution of the task 1 and task 2 a case study of Merlin Entertainments Plc. has been provided. As per the scenario Merlin Entertainments Plc. is an entertainment company based in United Kingdom which is operating around 115 attractions in 23 countries across the globe. It is operating with three different segments and these segments are midway attractions, LEGOLAND parks and resort theme parks. All these segments are offering various services to the customers.
1.1 Explain the importance of costs and volume in financial management of travel and tourism businesses using Merlin Entertainments Plc. as your case study
The term cost can be explained as the sum total of the various expenditures incurred by the business for producing the products and services for the satisfaction of the expectations or the demands of the customers. Every business needs to maintain the cost of the product or service effectively for the better functioning of the business. Cost is the inclusion of the different types of costs which is incurred for the execution of the operations of the business. The various types of costs include the fixed cost, variable cost, direct cost, indirect cost, allocation cost and other overheads. Merlin Entertainments Plc. is providing services to the customers and for providing these services it is incurring costs (Carruth & Carruth, 2010). Various techniques or tools are available which can be used by the businesses so as to make decisions for business. These techniques include break-even analysis, cost volume profit analysis and economies of scale.Merlin Entertainments Plc. has used various cost volume profit analysis for the purpose of taking decisions for the business in relation with the cost, volume and profit. Cost volume profit analysis has helped Merlin Entertainments Plc. in gaining understanding of the level of sales which will help in the generation of the desired amount of profit to it. Cost volume profit analysis is an effective tool which helps in the analysis of the actual cost and helps in the analysis of the capacity of Merlin Entertainments Plc. in producing the products or services. There are various benefits of using cost volume profit analysis by Merlin Entertainments Plc. and these benefits include better controlling, better decision making, forecasting and fixing prices (Law, et. al., 2015).
1.2 Analyse pricing methods used in the travel and tourism sector. You need to use examples from different types of businesses in travel and tourism
Travel and tourism sector is one of the major industries, which is growing at a very fast speed. Travel and tourism sector is one of the most important sources of income generation which provide support to the economy of a country. Pricing methods are being used by the businesses so as to set the price of the products and services offered by them. For the purpose of deciding prices in the travel and tourism sector various methods can be used.The pricing methods which are available are discounted pricing, value adding, cost plus pricing, market led pricing, return on investment pricing, profit led pricing and competition oriented pricing (Bozhkova & Ryabchenko, 2012). All these pricing methods need to be analysed so as to select the most suitable method. In discounted pricing companies offers discount in the off seasons so as to attract customers. Cost plus pricing is used for the purpose of attainment of the short term and long term goals of the business by analysing the various types of cost involved in the services and adding the profit margin in the cost so as to determine the price of the services. In market led pricing the prices are determined on the basis of the market forces. Asia Odyssey is using market led pricing for deciding the prices of the honeymoon packages to the customers. In value adding pricing methods companies add additional services in the existing services for attracting customers. In competition oriented pricing the prices of the services are determined on the basis of the market analysis so as to analyse the pricing strategies of the competitors. Carrier holidays is using competition oriented pricing method so as to deal with the increasing competition in the tour and travel sector. In return on investment pricing the prices of the products and services are determined on the basis of the interest rate and the return over the investments (Aravind, 2015).
For task 3 a case study of The Restaurant Group (TRG) has been given. The Restaurant Group (TRG) is operating around 470 restaurants. It is engaged in concessions division which is trading with various brands.
3.1 Interpret financial accounts of The Restaurant Group (TRG) Plc. For the year ended 27 December 2015 showing at least two year performance.
Total shareholders’ equity
Cost of goods sold
Earnings per share
Dividend per share
Profit Margin ratio
(Net profit/sales revenue) * 100
(68,886/685,381) * 100
(66,999/635,225) * 100
Return on equity
(Net income/ Total shareholders' equity) * 100
(68,886/283,560) * 100
(66,999/244,524) * 100
Current assets/current liabilities
Quick asset/ Current liabilities
Inventory turnover ratio
Cost of goods sold/average inventory
Asset turnover ratio
Sales revenues/Total assets
Earnings per share
Dividend per share
Interpretationof the ratios:
Profit margin ratio: this ratio is used for the purpose of measurement of the profitability of the business. The profit margin ratio for 2015 has decreased by .50% in comparison to 2014 which can be interpreted that the fall on the profit margin ratio shows that the performance and the profitability has decreased and the reason behind the decline in the performance and profitability of The Restaurant Group (TRG) Plc. is the decreasing difference between the revenue and expenses (Domínguez, et. al., 2013).
- Return on equity: Return on equity can be understood as the profitability ratio which is being used for the purpose of measurement of the ability of the business in generating profits from the investment made by the shareholders of the company. The return on equity of The Restaurant Group (TRG) Plc. has decreased by 3.11 % which shows the lack of capability of The Restaurant Group (TRG) Plc. in generating profits from the investments.
- Current ratio:It is a liquidity ratio which shows the ability of the business for the purpose of making payment of the short and long-term liabilities. The current ratio of The Restaurant Group (TRG) Plc. has increased but the ideal current ratio is 2:1. The current ratio of The Restaurant Group (TRG) Plc. is less than 1 which depicts that TRG may faces problems in paying the current liabilities.
- Quick ratio: The purpose of calculation of quick ratio is to calculate the liquidity of the business in paying off its short-term liabilities. The quick ratio of The Restaurant Group (TRG) Plc. has increased by .03 in 2015 in comparison to 2014. But the quick ratio of TRG is less than 1 which shows thatThe Restaurant Group (TRG) Plc. is not capable of paying its short term liabilities.
- Inventory turnover ratio: This ratio shows the number of times the inventory of the business is being sold. The inventory turnover ratio of The Restaurant Group (TRG) Plc. for the year 2015 has decreased in comparison to 2014. This decrease in the inventory turnover ratio shows that the time for which the inventory is hold by The Restaurant Group (TRG) Plc. has increased (Foggia, et. al., 2012).
- Asset turnover ratio: This ratio is used for the purpose of analysis ofthe ability of the business in generation of the sales by using assets.The asset turnover ratio of The Restaurant Group (TRG) Plc. has decreased in 2015 in comparison with 2014. The decrease in the asset turnover ratio shows that The Restaurant Group (TRG) Plc. is ineffective in generating sales.
- Earnings per share: It can be explained as the part of the profit of the business which has been allocated to the outstanding share of the stock. The earnings per share of The Restaurant Group (TRG) Plc. have increased in 2015 in relation with the year 2014. This shows that the price of the stock of The Restaurant Group (TRG) Plc. will rise.
- Dividend per share: It can be explained as the amount of dividend which is being received by the shareholders on every share. The dividend per share of The Restaurant Group (TRG) Plc. is increasing which shows that the dividend given by The Restaurant Group (TRG) Plc. on every share has increased(Domínguez, et. al., 2013).
The report has been executed for the purpose of developing an understanding of the various financial aspects which indicates the performance of the business. This program has discussed the covered various aspects including costs, volume and profits which are crucial aspects of contract and the indicator of the profitability of the business. It has also discussed the management accounting information, sources and distribution of funding which are being used in the travel and tourism sector and the financial accounts so as to analyse the performance of the business.
Aravind, M. 2015, "Pricing of Exchange Traded Gold Funds: Capital Asset Pricing Method", SCMS Journal of Indian Management, vol. 12, no. 4, pp. 64.
Bozhkova, V.V. & Ryabchenko, I.M. 2012, "Systematization of marketing pricing methods", Marketing ì Menedžment Innovacìj, vol. 3, no. 4, pp. 74-80.
Carruth, P.J. & Carruth, A.K. 2010, "The Financial And Cost Accounting Implications Of Medical Tourism", The International Business & Economics Research Journal, vol. 9, no. 8, pp. 135.
Domínguez, T., Fraiz, J.A. & Alén, E. 2013, "Economic profitability of accessible tourism for the tourism sector in Spain", Tourism Economics, vol. 19, no. 6, pp. 1385-1399.
Foggia, G.D., Lazzarotti, V. & Pizzurno, E. 2012, "THE ECONOMICS AND MANAGEMENT OF INNOVATION IN TRAVEL AND TOURISM SERVICES: THE CASE OF EUROPEAN CRUISE INDUSTRY IN DUBAI", UTMS Journal of Economics, vol. 3, no. 2, pp. 167.
Law, R., Leung, R., Lo, A., Leung, D. & Fong, L.H.N. 2015, "Distribution channel in hospitality and tourism: Revisiting disintermediation from the perspectives of hotels and travel agencies", International Journal of Contemporary Hospitality Management, vol. 27, no. 3, pp. 431-452.
Nassar, M.A., Mostafa, M.M. & Reisinger, Y. 2015, "Factors influencing travel to Islamic destinations: an empirical analysis of Kuwaiti nationals", International Journal of Culture, Tourism and Hospitality Research, vol. 9, no. 1, pp. 36-53.
Park, D., Lee, K., Choi, H. & Yoon, Y. 2012, "Factors influencing social capital in rural tourism communities in South Korea", Tourism Management, vol. 33, no. 6, pp. 1511-1520.