Unit 2 Finance and Funding in TT Assignment Merlin

Unit 2 Finance and Funding in TT Assignment - Merlin

Unit 2 Finance and Funding in TT Assignment Merlin


Diploma in Travel and Tourism

Unit Number and Title

Unit 2 Finance and Funding in TT

QFC Level

Level 5


Organization is the complex set of activities in which several function s are performed. Tours and travel business has been gaining momentum throughout the time and has been putting high amount of return for the entrepreneur indulge in this ramified environment.. The company operates around more than 115 attractions in 23 countries across the countries. In addition to finance and funding in TT several cost and volume in financial management of tours and travel business will be discussed. Pricing methods which can be deployed to come up with effective pricing policies are also described. Furthermore several factors that has contributed to influence the profit of Merlin Entertainment Plc. Business are the main major factors in this business report to make a critical decision making.

Task-1 Importance of cost, volume and profit for the management decision making in Merlin entertainment Plc.

1.1 Explain the importance of costs and volume in the financial management of travel and tourism business using Merlin entertainment Plc.

Merlin entertainment Plc is the British based organization which has been running its business all over the world with a view to grab more clients in determined approach. It is the simple understanding fact that in order to grab the more clients Merlin entertainment has to reduce its price of the packages offered in the market. Therefore gradually there will be need to make effective equilibrium between costs, volume, and profit. It is the clear fact that effectiveness of the tours and travel packages depends upon how several cost are incurred to drive the determined conclusion (Zhang, et. Al., 2014).

  • Direct cost- These are the cost which are directly related with company’s productions and value chain activities e.g. expenses made on destination, booking buses and flights for the clients and further more.
  • Indirect cost- These are the cost which have correlation with the company’s productivity but indirect in nature. E.g. expenses made to advertisement and promotional activities.
  • Fixed cost-These are the cost which is fixed in nature and helps organization to increase its productive simultaneously helps Merlin to reduce its cost in determined approach with the increment in the output units. E.g. - payment to employees, setting up of new enterprises resources planning and further more.
  • Variable cost – This cost is related with the tours packages volume and increase with the increment in the volume of torus packages.
  • Allocation and apportionment- This is related with absorption and apportion of cost in several department. In this apportionment several tours packages cost is bifurcated within the various value chain activities.
  • Volume-It is the turnover of the travel and tourism packages Merlin entertainment in order to reduce its cost needs to develop new torus and travel package at the certain volume.  In addition to this break even points could also be taken as aid to promote newly developed tours package’s in determined approach. Economic of scale provides the equilibrium points at which Marline will be earning high profit and high sales. The importance of determining the right level of volume is making turnover high in order to take full advantages of fixed cost.
  • Profit-it is the amount of return earned by the organization from its value chain activities. Merlin entertainment needs to keep its price according to the rivals offering in the market. Apartfrom that for the increment in the newly developed product sales it has to come up with cost leadershipstrategy. There are several pricing methods to achieve the certain amount of profit such as top down approach, break even analysis, reducing the marginal cost, cost plus profit pricing policies. Other factors that could influence the profit earned by Merlin entertainment are economic condition, brand name, quality of the packages.

1.2 Analysis the pricing method used by Merlin entertainment?

Pricing method are the way in which price of the tours and travel packages can be calculated by considering all the related factors such as target audience, nature of business, economic condition, seasonal variation, current trends, developed products. Political environment. There are several pricing methods which can be sued by Merlin entertainment for the development of its tours packages. Clients are more inclined to availed tours packages services which are in their budget. Therefore organization needs to develop its newly organized tours and travel packages as per client’s choice of action.

  • Cost plus pricing method- In this pricing method Merlin entertainment needs to add fixed percentage of profit in its cost of development of tours and travel packages.
  • Demand based pricing-Merlin entertainment could use this method to determine the price of the product as per the demand of clients.
  • Seasonal pricing fixing method- This method is developed in order to take the complete advantage of fixed cost in non- seasonal time period. Merlin entertainment could fix high price at the seasonal time and low price when there is no Season.
  • Market derived pricing- This pricing technique is very effective and provides the clear idea about the client’s choice of action in certain price of developed packages.
  • Competition based pricing method- This pricing method depicts the actual pricing of the product which is used to develop an effective pricing of the tours packages in context with rivals offering.

Company’s name

Price of the tours packages

Number of Tours package’s orders in month

Austral Travel (SA) Pty Ltd

 £ 600-  £800


21st century travel UK Ltd

£ 1000- £1500


Aussie Gateway tours and travel Ltd.

£2000- £ 3000


Merlin entertainment Ltd.

£1200- £ 1500


With the above dissection it could be easily identified that in order to grab more number of torus and travel packages from clients Merlin needs to lower down its price of torus and travel packages.

1.3 Factors influencing the profit for travel and tourism business?

  • Influencing factors- These are the factors which have positive and negative relation with the organization profit earning capacity and affect Merlin entertainment working system at large. Such as target audience, nature of business, economic condition, seasonal variation, current trends, developed products. Political environment Merlin entertainment has been operating its business all over the world and there are several factors which could influence profit earning capacity, and price determination factors.
  • Purchasing power of clients- This is related with the country’s economic condition and per capital income of individual. Therefore it has interrelation between demand of the tours packages and purchasing power of clients at large.
  • Seasonal demand- As per the gathered data it is found that during the season time there is more demand of tour and travel packages from the clients. In addition to this it also assist in increasing the turnover of the developed packages at large (Bujaki&Durocher, 2012).
  • Political environment- Profit earned by Merlin is highly dependent upon the political changes. As all the strategic decision made by top department is completely based upon the political policies, rules and regulation at large. Therefore changes in the political condition of the economy may results into drastic loss to the Merlin entertainment.
  • Legal factors-statutes and issued regulation are the critical part for the complete sustainability of the organization. Therefore Merlin needs to make proper corporate governance in its working system in order to avoid high penalty imposed by government.
  • Environmental factors-Merlin operates its business in three business segment such as indoor attraction, legendary park, and resort them park. Therefor in all of this area Merlin could easily deploy sophisticated technology to increase the client’s satisfaction at large (Plagens, et. Al., . 2016).


2.1 Presentation

Presentation in TT Sector 1

Presentation in TT Sector 2

Presentation in TT Sector 3

Presentation in TT Sector 4Presentation in TT Sector 5

Presentation in TT Sector 6

Presentation in TT Sector 7

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3.1 Interpreted the financial accounts of the restaurant group Plc. for the year ended 27 December 2015?


In this report the study have been computed on the restaurant group and has been depicting that company operates over 470 restaurants and pub.  The principle brand    are Frankie & Benny’s Chiquita, cost to cost and further more. There will be made computation of several financial ratio of two relevant year in order to understand the organization performance (Bujaki, &Durocher,2012)

  • Financial accounts-The restaurant group Plc. has been running its business since very long time. There are several methods which could be used to interpret the financial results of organization e.g.
  • Financial statement-It Is comprised of several statement such as trading, P&l, balance sheet that is useful to evaluate the company’s efficiency to deploy its assets in the productive activities. Balance sheet of the restaurant group Plc shows the developed packages and assets used in drawing an effective conclusion (Paper, 2016).
  • Cash flow statement- This statement divulges how the restaurant group Plc is making effective strategies to rotate its cash assets in its develop business. It is comprised of three main activities such as operating activities. Investment activities, financial activities (Billard, 2014).
  • Ratio analysis: Ratio of the restaurant group Plc depicts the relation between two valuable factors which are used by management department and other stake holder to come up with effective decision making.
  • Liquidity ratio-This ratio depicts the restaurant group Plc ability to pay off its short term and long term debts. This ratio could be divided into two main parts
  • Current ratio-This ratio shows the relation between current assets and current liabilities. The restaurant group has been showing negative current ratio in both year.

Current ratio = current assets/ current liabilities

Current Ratio


2014 ( Amount € million)

2015 ( Amount€ million)

Current Ratio



Acid test ratio-This ratio shows company’s ability to pay off its short term debts.  This depicts that company has negative Quick ratio in both year. This depicts that company has less cash to pay off its contingent liabilities (Lakshmi, et. Al., 2016).

Quick Ratio


2014 ( Amount € million)

2015 ( Amount€ million)

Quick Ratio



Efficiency ratio-This ratio show how the restaurant group has been efficient in its productive department (Zhang, et. Al., 2014).

Creditor turnover ratio –This divulges company’s ability to shuffle its cash amount with the help of taking credit purchase from the suppliers. In both the year the restaurant group is having negative credit turnover which is not fruitful for the company’s working system.

Creditor’s turnover ratio= Net Credit purchase/ Average account payable


2014 ( Amount € million)

2015 ( Amount€ million)

Creditors turnover ratio



Receivable turnover ratio- this ratio is useful to reduce cash chain involved in the working capital of the company. It depicts the time involved that credit sales made by the organization behaviour.

Creditors Ratio

Receivable turnover Ratio= Credit sales/ Average receivables


2014 ( Amount € million)

2015 ( Amount€ million)

Receivable turnover Ratio



Average stock turnover ratio- This ratio measure the number of time inventories is sold or used in a time period in the stock holding. In this computation it is found that company is having negative average stock turnover during both years.

Average Stock


2014 ( Amount € million)

2015 ( Amount€ million)

Average stock turnover of the company



Solvency ratio-This ratio depict company’s capital structure and its sustainability in the given time period. In addition to this the restaurant group could depicts its ability to pay off its debts in given time span. Company has negative interest ratio which is not much effective for the better sustainability of the organization.

Solvency ratio = Interest coverage/ net profit

Covrage Ratio


2014 ( Amount € million)

2015 ( Amount€ million)

Interest  coverage ratio



Debt equity ratio-This ratio shows the relation of debts and equity of the company. Company is having negative debt equity ratio in both year. Therefor company needs to consider this matter in significant approach.

Debt equity ratio = Debt/ equity


2014 ( Amount € million)

2015 ( Amount€ million)

Debt equity Ratio



Profitability ratio- This ratio shows company’s ability to earn significant amount of profit. It is useful to establish relation between assets and profit earned by the organization.

Net profit margin ratio- It is concerned with the relation between sales and profit earned by the restaurant organization. There is earned very low amount of profit by the organization therefore company should come up with effective working productive system.

Net profits= Net profit/ net sales

Net Profit Margin ratio



Dividend payout ratio-The restaurant group is giving a high amount of dividend to its shareholder and it is distributing 17.40 Pound of dividend to its shareholders.

Net Profit




Travel And Tour World

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In this report Merlin Entertainment Plc. has been taken into consideration for developing a good understanding over return, risk and management decision at large. Now in the end it will be said that ratio analysis is the most suitable tool to make effective business decision.


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