Unit 2 Finance and Funding in Travel Tourism Assignment Solution

Finance and Funding in Travel Tourism Assignment Solution

Unit 2 Finance and Funding in Travel Tourism Assignment Solution

Programme

Diploma in Travel and Tourism Management

Unit Number and Title

Unit 2 Finance and Funding in Travel Tourism

QFC Level

Level 5

Unit Code

J/601/1742

Introduction

The case study of the Merlin Entertainment Plc. has been studied for the research report. The various pricing methods and the significance of the costs and the volumes are discussed under this report. The report will show the power point presentation to describe the concept of the management accounting information and the various importance of the management accounting information system in an organization to make the effective decisions. Further in this report the case study of the Restaurant Group Plc. is also discussed in which the financial accounts of the company for the two years and the comparison between them are done. The report will be showing the poster presentation which will discuss about the sources of funds needed for the capital projects in the travel and tourism sector.

The aim or the purpose of the report prepared is to build an understanding related with the costs, volume and the profit as well as to understand the sources of funds and the management information system needed in the decision making process in the business.

unit 2 Funding travel

Task 1

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 Merlin Entertainment Plc. is the company which is offering the entertainment and its unusual unique services around the world. Merlin Entertainment Plc. is best company which is serving on the international level and expanding its business all over the world. The importance of the costs and the volume in the business are discussed below.

Cost- Costs are the expenses that the company faces in the operational or the financial activities of the company. The value of the money is the cost. Majorly the business is affected by the costs. It maintains the financial balance in the business. The changes in the costs influence the business (Hosni, et.al, 2013).

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Volume-Volume is the amount of the expenses or the quantity of the costs in the business activity. The Volume is also the expenses that the company will face in the amount of the quantity. The volume is denoted in the monetary terms (Hosni, et.al, 2013).

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Significance of the costs in the travel and tourism sector:

  1. Effective decisions- costs in the travel and tourism sector is important as it provides the effective decision making of the business and the information related the returns and the investment.
  2. Increases the performance of the business- Costs helps in enhancing the performance if the business management as the various costs of the business are compared and the financial position and the stability of the company is also managed.
  3. Reduce cost- The costs can be reduced or increased as per the conditions and the requirements of the business which helps the business to gain the maximum benefit to the business and the financial balancing also remains the part of the business (Kim & Dale, 2015).

The Merlin Entertainment Plc. uses the cost reduction strategy to attract the customers and gain the extra benefits and the profits to the company.

Importance of the volume to the travel and tourism business are:

  1. Economies of scale- The travel and tourism business with the use of the economies of scale can reduce the costs as the economies of scale increases the production level and save the cost.
  2. Diseconomies of scale- It helps the business know about the functioning of the business and the business working.
  3. Break even analysis- It is the point on which the business will cover its costs and the expenses. The travel and tourism business needs to analyze the break-even point to know the recovery point of the business for the cost and the expenses occurred.

Merlin Entertainment Plc. works on the analysis of the break-even point so as to know when the cost of the business can be recovered (Kim & Dale, 2015).

1.2 Analyze pricing methods used in the travel and tourism sector. You need to use examples from different types of businesses in travel and tourism.

There are different pricing methods for the business to attract the customers and gain the benefit of maximum profits but the cost of the company should be covered under these pricing methods. The various pricing method of the travel and tourism business are-

  • Cost led method- The cost led pricing is the pricing method in which the business set the prices on the basis of the costs and the volume expenses of the business and the business analyze the break-even point so as to fix the prices above the break-even point to get the maximum profits and the benefits to the business.
  • Profit led method- In this type of pricing method the profits are analyzed by the business by fixing the prices on the basis of competitor’s price and on the basis of customers.
  • The competitor’s based pricing strategy provides the pricing strategy to the business to fix the prices considering the prices of the competitors (Herman bin Mohammad Afandi, et.al, 2013).
  • In customer based pricing strategy the prices are fixed considering the customer needs and the income as well as the other factor of the customer’s behavior.
  • Market led method- In this the business plays the strategic role in penetrating the prices and in skimming the prices. The business strategy is to gain the maximum customers by penetrating or reducing the prices in the market. The skimming strategy of the business helps the business to gain the maximum benefits by increasing the prices of the business services.
  • Investment return method- In this the business sets the prices according to the return on the investment.

Examples of some of the businesses in the travel and tourism sector are here below-
City and guilds is the company which is in UK follow the market led method of pricing so as to attract more and more customers and increases profit earning of the company. The Kenya safari uses the profit led method of pricing strategy to make the business safe from the risk of reducing or losing the customers (Herman bin Mohammad Afandi, et.al, 2013).

1.3 Analyze factors influencing profit for travel and tourism businesses using Merlin Entertainments Plc businesses as your case study.

Some of the factors that influence the profits of the travel and tourism business of Merlin Entertainment Plc. are mentioned here:

  • Terrorism- Terrorism affects the business of the travel and tourism in a worst manner as the terrorism provides fear stage to the travelers in visiting the places where the most terrorists attack take place. This reduces the travel and tourism business of the Merlin Entertainment Plc.
  • Currency- Currency is the biggest factor that affects the travel and tourism business as the different currency rates in the different countries provides the high or the low cost to the travelers to spend which they avoid. The high currency rates of the country produces the less business from the travel and tourism sector (Bulin, 2014).
  • Government- Government plays an important role in the traveling and tourism sector as it provides the restrictions to the various features and the restricted policy and the governmental laws and the taxation policies affects the business and the profitability of the company.
  • Seasons- Travel and tourism sector is based on the seasons. The holidays and the vacations period of time provides the huge business to the tourism sector than that of the off season. This affects the profits and the business of the travel and tourism sector (Bulin, 2014).
  • Natural disasters- Natural calamities or the disasters are the uncertain as well as uncontrollable factors which the business faces. The business because of the uncertain events and the natural disasters decreases and provide the lower profits and the huge losses to the business as the travelers will not travel in the high risk areas.

As because of the terrorist attacks in the Mumbai, India the travelling and the tourism sector of India was affected worst for some time. City and guilds business is impacted by the seasonal change.

Task 3

3.1 Interpret financial accounts of The Restaurant Group (TRG) Plc for the year ended 27 December 2015 showing at least two years performance.

The case study of the Restaurant Group Plc. is discussed here. The financial performance of the company is interpreted here to understand the financial position of the business and to understand the company’s profitability and the liquidity status. The financial performance of the company is interpreted here:

Financial accounts for the two years of The Restaurant Group Plc. is shown below:

Particular

2014 ( Amount £ million)

2015 ( Amount £ million)

Revenue

635,225

685,381

Market price share

680

631

EPS

33.99

34.55

NPAT

66,999

68,886

Current Assets

29410

38,005

Total Assets

424,419

468,078

Current  Liabilities

121,634

136,403

Total shareholders’ equity

244,524

283,560

Noncurrent liabilities

58,261

48,115

Receivables

8,991

13,366

Creditors

112,254

125,388

COGS

521,325

558,491

Profitability ratios

Gross profit

113,900

126,890

Operating profit

87,312

88,891

Liquidity ratios

Quick Assets

23,880

31,616

Quick Ratio (Total Current assets – Inventory – Prepaid expenses/ Total Current Liabilities)

0.196326685

0.231783758

Current Ratio (Current Assets/ Current Liabilities)

0.312453755

0.278622904

Net Profit Margin ratio (Net Income/Net sales)

0.105472864

0.100507601

Average Account Receivable

15674

17861.5

Average creditors

174948

819153.5

Activity ratios

Inventories

5,530

6389

Receivable turnover Ratio (net credit value/average account receivable)

70.65120676

51.27794404

Average stock turnover of the company

1.218481753

1.227201513

Assets turnover ratio ( Net Sales/ Average Total Assets)

1.496693126

1.464245275

Leverage ratios

Solvency Ratio (Total Current assets – Inventory – Prepaid expenses/ Total Current Liabilities)

0.15786051

0.14716778

Market ratios

Dividend payout per share

1.12

1.19

P/E ratio (Price per share/ Earnings per share)

0.049985294

0.054754358

Gross profit ratio (Gross profit/ Net sales)

0.179306545

0.185137901

Operating Profit ratio (Operating profit/ Net sales)

0.13745051

0.129695746

Above is the calculation of the different ratios that shows the financial performance of the business for 2015. The company from the above calculation shows that the revenues of the company and the current assets of the company has increased in the year 2015 whereas the company’s liabilities are shown a decrease in the year 2015 which helps the company in gaining the higher financial performance (Marchini & D’Este,  2015). The profitability ratios of the company has a increase over a year which tells that the profits of the company increases. The liquidity of the company has increased which provides the trustworthy company image to the Restaurant Group Plc. and the current ratio is also increased in the year 2015. The net profit ratio and the gross profit ratio of the company has an increase from the last year which determines the company has the profitability performance in the year 2015 and the liquidity of the company has been measured easily liquid (Drew & Dollery, 2016).

From the above interpretation it can be concluded that the business of the company has an increase over the last year and the performance of the company is enhanced in the year 2015. The company has the growing stage and the financial performance of the company shows the huge profits to the company. The ratios of the company provides the growing aspect to the business and the increment in the profitability of the company provides the overall increment in the financial performance of the company (Delen, et.al, 2013).

Task 4

Poster presentation

unit 2 travel and tourism

Conclusion

From the above report prepared the conclusion can be dawn that the Merlin Entertainment Plc. is using the various pricing and the profit strategy to attract the customers and the costs and volume analysis are done by the company to measure the financial position of the company as well as the business financial performance is properly analyzed the different benefits of the costs and the volume which the company has are discussed. The factors which affects the travel and tourism business of the company are also discussed in the above report to understand the various influencing factors of the business of the travel and tourism in the world. The aim of the report to understand the costs and the volume and the source of the funds are achieved by the study of this report.

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