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Unit 2 Financial Management in Travel and Tourism Assignment
Diploma in Travel and Tourism
Unit Number and Title
Unit 2 Financial Management in Travel and Tourism
The research report prepared will discuss about the case study of Merlin Entertainments Plc. The report contains the importance of costs and volume in the financial management. It will also describe the different pricing methods that can be used in travel and tourism as well as various factors influencing the profit of the travel and tourism industry. Further this report includes the power point presentation which will describe the different types of management information required for the travel and tourism industry and how these management information could be used in the decision making process. It also contains the case study of The Restraunt Group Plc in which it will show the interpretation of the financial accounts of the company and comparison of two financial years’ accounts. In the end the report is featured with the poster presentation analysing the sources of funding for the capital projects of travel and tourism industry.
The whole report is bifurcated into four different tasks which will relate the information with the provided company or the organizations. The report discusses the use of management accounting information in the decision making process of the business.
1.1 Explain the importance of the cost and volume in financial management of travel and tourism businesses using Merlin Entertainments Plc
Merlin Entertainment Plc: It is one of the biggest European companies delivering entertainment in more than 23 countries and 115 locations across the world. It aimed at providing its services to the millions all over the globe.
- The monetary value of the expenses. The costs are the money which occurs in the business operations and activity. Costs are the crucial factor in the business which affects the business activities.
- Volume is the quantity of the expenses denoted in the monetary terms in the business. Volume is basically the measurement of the finance of the business.
Importance of cost in the financial management of travel and tourism business:
- Cost reduction- The costs are the crucial factor in the business as they provide the cost reduction in the business activities and provide huge profit to the business. The cost can be reduced or increased as per the need of the business. The costs manage the financial account of the business.
- Decision making- The costs are used in decision making process on capital budgeting for maximum return on investment.
- Designing financial structure- The financial structure of the business are designed and managed with different costs of travel and tourism activity.
- Improving management performance- The cost helps in improving the financial management performance as it provides different costs of the projects to compare the financial ability of the business of travel and tourism.( Lai, et.al, 2010)
Volume is of different types in the business. For the business like travel and tourism the volume analysis is necessary:
- Break even analysis- The break even analysis is the process of determining the point on which the business will cover its cost spent on the expenses. For travel and tourism business it is important to analyse the break-even point to perceive the cost covering period.
- Economies of scale- The economies of scale are the gained cost saving with the increment in the production level. Travel and tourism business can save the costs by using economies of scale.
- Diseconomies of scale- The stage at which the economies of scale do not function for the business is known as diseconomies of scale.For the tourism business the analysis of this volume should be done to know about the business working.(Nassopoulos, et.al, 2012)
1.2 Analyse pricing method used in the travel and tourism sector. You need to use the examples from different types of business in travel and tourism.
Different pricing methods used in travel and tourism business:
- Rack rates- The rack rates are the full rates described by the business without discounts or offers. They are the rates for the whole season printed on the brochures.
- Seasonal pricing- During the whole year different seasons is considered for the maximum tourists visits. The seasonal rates are based on the tourists’ visits in that particular season and vary according to the seasons.
- Last minute pricing- The last minute pricing are the different prices of the travel and tourism business which are varied according to the forward bookings or the last minute booking. The business needs to manage the pricing according to the bookings.
- Discounting- The discounting are the pricing method which is based on the discounts provided to the tourists.
- Package deals- The package deals are the pricing technique of the travel and tourism business which is decided according to the different facilities provided in the package to the tourists. These are the most effective and used pricing method.
- Commissions- The commission is charged on the basis of booking done by the third party. The commissions are the pricing method which charges more from the tourists.(Martens,et. al, 2012;2011)
Examples of different businesses from travel and tourism sector:Tourism victoria is the state government tourism which uses the seasonal pricing method in general but prefers dynamic pricing as their pricing method as they can change according to the needs and boom of the travel and tourism industry. Cape tours are the travel and tourism business providing the tours in South Africa and near with the seasonal and package pricing. Easy to book is another travel and tourism business working on the discounting and package deals pricing methods.
1.3 Analyse factor influencing profit for travel and tourism businesses using Merlin Entertainment Plc as your case study.
There are different factors which influence or impact the profit of the travel and tourism businesses, these are discussed below:
- Events- The events affects the travel and tourism sector profit as the events can change the pricing methods and different events can invite the tourists to visit and enjoy the events which increases the profits. The events organized by the Merlin Entertainment Plc invite the tourists as well as profits.
- Seasons- Different seasons influence the profits of the travel and tourism business as these describe the peak season and the normal one. Merlin Entertainment Plc invites the travellers in the peak season the most which increases the profit accordingly.
- Currency rates- The currency of the different countries have different rates. These differ the profits accordingly of the business. As in the Merlin Entertainment Plc the company has various tourists from different nations enables the impact on profit.
- Government- The government factors also influence the profits such as petrol prices and etc.
- Natural calamity- The natural disasters are the factors which influence the profits as the tourists avoid such place to travel in such areas.
- Terrorism- The terrorists attacks on the areas effects the profit of the business.(Nyborg, K. 2014)
2.1 Explain different types of management accounting information that could be used in travel and tourism businesses using Merlin Entertainment Plc.
2.2 Assess the use of management accounting information as a decision making tool for Merlin Entertainment Plc.
3.1 Interpret financial accounts of The Restaurant Group Plc for the year ended 27 December 2015 showing at least two years performance.
This task includes the financial performance interpretation of The Restaurant Group Plc for the year ended 27 December, 2015. In this particular task the different ratios are calculated which is describing the performance of the business organisation .(Bujaki, et.al, 2012) Here is the interpretation of the financial performance of the company in the tabular form:
Comparison of financial accounts of two years:
The restaurant group plc:
2014 ( Amount € million)
2015 ( Amount€ million)
Market price share
Total shareholders’ equity
Net Profit Margin ratio
Average Account Receivable
Receivable turnover Ratio
Average stock turnover of the company
Assets turnover ratio
Dividend payout per share
Gross profit ratio
Operating Profit ratio
The different ratios determine the company’s financial performance for the particular year. The detailed interpretation is attempted below for the comparison of two financial performance of the company.(Uechi, et.al,2015)
According to the calculated performance of the company the quick ratio has increased from the year 2014 in the year 2015 to .231783758€. The current ratio has decreased in the year 2015 from .312453755€ to .278622904€. The net profit margin ration has decreased. The receivables have increased over the year to 17861.5€. The creditors has increased to 819153.5€ whereas the receivable turnover ratio has decreased. The value of inventories has increased up to 859€. The solvency ratio has decreased from 0.15786051€ in the year 2014 to 0.14716778€. The company’s assets turnover ratio has also decreased to 1.464245275€. The dividend pay-out per share is increased till0.7€. The P.E ratio of the company has increased in comparison to the year 2014. Overall the company’s gross profit ratio has increased up to 0.185137901€. The operating profit ratio of the company has decreased.
As per the interpretation of the Restaurant Group Plc business performance it is analyzed that the performance of the business is growing and the overall profit of the business is increasing. The business is on its growing period and increasing profits for the business. The financial performance of the business is shown enhanced from the last year. And the profit ratios are providing increment in the year 2015 which is a positive performance aspect for the business. The profit earning ratio of the business had increased which shows the growth in the performance of the business.( Omar, et. al, 2014)
The report researched about the two different companies. The Merlin Entertainment Plc is the travel and tourism business. The report is prepared to understand the importance of cost and volume in the business of travel and tourism and the different pricing method the travel and tourism business uses. The report also presents the management accounting information used as the decision making tool for the travel and tourism business. By conducting this research we can conclude that there are different factors influences the profits of the business of travel and tourism. The report enables us to conclude that the Restaurant Group Plc has the growing performance and the different ratios are interpreted in it. This report concludes that the financial managementand the management accounting is the crucial functioning of the business which overall improves the business performances and the financial position. It increases the profit and enables growth to the business. The report brings us to conclusion that the capital projects of the travel and tourism industry needs a large amount of funds as they are the long term projects and are conducted on the big scale. The funds needs to be distributed properly and according to the government determined percentage.
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