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Analysing Finance and Funding in Travel and Tourism

   

Added on  2019-12-28

14 Pages4573 Words166 Views
FINANCE AND FUNDING INTRAVEL AND TOURISM

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................................3TASK 1..........................................................................................................................................................31.1Importance of cost and volume in financial management in travel and tourism business.................31.2 Analysis of pricing methods used in travel and tourism sector..........................................................41.3Factors influencing profit in travel and tourism business...................................................................6TASK 2 .........................................................................................................................................................7TASK 3..........................................................................................................................................................73.1 Interpretation of travel and tourism accounts...................................................................................7TASK 4..........................................................................................................................................................94.1 Source and distribution of fund for development of capital projects................................................9CONCLUSION.............................................................................................................................................10REFERENCES..............................................................................................................................................12

INTRODUCTIONTravel and tourism industry is growing at fast pace in the UK. In the present report,importance of cost and volume is explained. Different pricing methods that can be used by thebusiness firms are explained briefly. In middle part of the report, different managementaccounting information’s that can be used in the business are discussed in detail. Along with this,the way in which management accounting information can be specifically used in tourismbusiness is disused briefly. At end of the report, ratio analysis is done and results are interpreted.Along with this sources of finance are also described in the report.TASK 1Importance of cost and volume in financial management in travel and tourism businessCost refers to the amount that is incurred by the firm in order to produce goods and services.In current time period price competition increases and due to this reason firms are laying downmush emphasis on reducing their costs. Those firms that cannot reduce cost are curtailing theirmargin on sales. In order to understand importance of cost its types must be comprehend.Different types of cost are explained below.Direct cost: Direct cost refers to those expenses that are incurred for production of goodsand services by the firm and directly contribute to manufacturing of the product. There isgreat importance of direct cost because if it will be easily controlled and reduced by the firmthen total cost of product or service will decline sharply and profit will increase rapidly(Sheldon and Dwyer, 2010). There are many firms like Toyota which are following methodslike Kaizen to reduce direct cost. The direct cost is a price that can be completely attributedto the production of specific goods and services. Some costs, such as depreciation oradministrative expenses, are more difficult to assign to a specific product and therefore areconsidered to be indirect costs. Examples of direct costs are direct labor, direct materials,commissions, piece rate wages, manufacturing supplies etc. salaries for project staff andmaterials required for a particular project is also a example of direct costs.

Indirect cost: Indirect cost is one that does not have any contribution to the production ofgoods and services but indirectly support the production or service delivery process. There isimportance of indirect cost because for controlling same there is no need to use scientificmethods like Kaizen. Simply by monitoring expenses cost can be controlled by the firm andprofit can be enhanced.Fixed cost: Fixed cost is one that remains fixed and never gets changed. This cost cannotbe reduced but by making best use of asset good return can be generated in the business.Merlin entertainment can be developing a building that has excellent interior and exterior. Bydoing so it can enhance customer footfalls. A fixed cost is a cost that does not change with anincrease or decrease in the amount of goods or services produced or sold. Fixed costs areexpenses that have to be paid by a company, independent of any business activity. Examplesof fixed costs are amortization, depreciation, insurance, interest expenses, property taxes,rent, salaries, utilities etc.Variable expenses: These are those expenses or cost that keeps on changing consistentlyand fluctuate with change in the production. Variable cost has significance for the firmbecause it will be incurred by Merlin entertainment in systematic way cost will remain incontrol and profit will increase.Return on investment: The ROI usually expressed as a percentage and is typically usedfor personal financial decisions, to compare a company's profitability or to compare theefficiency of different investments. The return on investment formula is ROI = Net profit /Cost of Investment * 100. It is the ratio of a profit or loss made in fiscal year expressed interms of an investment and shown as a percentage of increase and decrease in the value ofthe investment during the year. For example the investment made is 1,00,000 GBP and returnafter fiscal year is 1,50,000 GBP, so the return on investment is 50%.It can be said that for Merlin it is very important to understand impact of cost on the firmbecause if same will be incurred in proper way cost will be curbed and profit will elevate(Whitelaw, King and Tolkach, 2014). On other hand, if cost will not be incurred in legitimateway then service cost for Merlin will increase which will lead to loss in the business. Apart fromcost volume also have lots of significance for the business firm and it is necessary for Merlin to

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