Assignment On Financial Analysis Of Thomas Cook

FINANCE AND FUNDING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Importance of cost and volume in financial management of travel and tourism.............3
1.2 Analysis of pricing methods used in travel and tourism..................................................4
1.3 Analysis of factors including profit for travel and tourism business................................5
TASK 2............................................................................................................................................6
2.1 Different type of management accounting information's that are used by the travel and
tourism business.....................................................................................................................6
2.2 Use of management accounting information as a decision making tool..........................7
TASK 3............................................................................................................................................8
3.1 Interpretation of travel and tourism accounts...................................................................8
TASK 4............................................................................................................................................9
4.1 Sources of funds for the projects......................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
Appendix........................................................................................................................................13

INTRODUCTION
Management accounting play very important role in taking cost related decisions.
Thomas cook is a large travel and tourism company that have operations in the number of
nations of the world. In the report various techniques like break even analysis are described in
detail. After that factors that need to be keeping in mind while determining a price are also
discussed in the report. Along with this, some of the factors that need to be analyzed in order to
understand travel and tourism industry are discussed in detail. In the middle part of the report
ratio analysis is done and its results are interpreted in relation to Thomas cook. At the end part of
the report, sources of finance are proposed for the Thomas cook and their suitability to the
mentioned firm is also discussed in detail.
TASK 1
1.1 Importance of cost and volume in financial management of travel and tourism
Cost and volume have a great importance in the financial management of Thomas cook.
It is cost and volume that determine firm finance needs. Cost refers to the costs like fixed and
variable. Whereas, volume refers to the quantity of goods that firm produce in a given year. Cost
and volume both are interlinked to each other if volume gets increased then cost will certainly
increase vice-verse. In order to pay cost funds are required and to produce specific quantity of
product funds are required. Currently, economy is uncertain and due to this reason price of the
commodities are increasing (DRURY, 2013). This trend is seen especially in case of base metals.
Due to increase in price of the base metals firms production cost is elevated. Simultaneously,
funds requirement of the firms also get increased. Thomas cook is operating in the travel and
tourism industry and currently due to recession in an economy less people are taking interest in
visiting any place. In some nations it is growing but at the low pace. Due to this reason
companies like Thomas cook are facing lots of problems in their business. Staying cost and
travel cost is increased all over the nations and due to this reason cost also gets increased. This
increase package cost and firm need more finance to fund its requirements (Nandan, 2010). In
such a competitive business environment firm cannot pass burden of increase in cost on its
customers. In this situation firm will need to generate economies of scale in its business. It refers
to the measures that will be taken in order to reduce cost of packaging. If this cost will be
reduced then funding requirements of the firm will also get declined. Hence, complexity related

to finance management for the firm will reduce to some extent. So, it can be said that both cost
and volume are closely related to the financial management of the firm. As mentioned above that
if fund requirement is high then high amount of fund need to be raised from the banks and other
financial institutions. If the raised amount is high then it becomes very difficult for the managers
to allocate fund among different expenses. Managers have to consider lots of things in order to
make this allocation in proper manner. If higher amount of funds are raised then complexity of
funds also get increased. Hence, cost and volume are closely related to the financial
management.
1.2 Analysis of pricing methods used in travel and tourism
In order to determine price several factors are considered by the Thomas cook. Price of
package is prepared on the basis of fixed and variable cost. Fixed cost refers to the cost that
never gets changed during life time of the firm. This cost can be increased with purchase of
machines and other equipment's but cannot get declined (van der Steen, 2011). On the other
hand, there is a variable cost which refers to the cost that keeps on changing continuously. This
cost includes the expenses like wages and electricity etc. By combining fixed and variable cost
Thomas cook determine a total cost of the package. After determination of cost firm takes an
average of the customers that normally visit through its agency. It divides cost of package by the
average number of tourists in order to arrive at per unit cost that will be charged on the tourists.
On this cost Thomas cook add a commission and by adding that commission final price of the
package is determined. Apart from this, there are several other factors that are considered for
determining a price. Some of these factors are as follows:
1. Competition- Thomas cook is operating in the highly competitive industry and in order to
give stiff competition firm needs to consider price that is charged by its competitors. It
cannot solely focus on the cost of its package. It is possible that cost of package of
Thomas cook may be higher than competitor package (Haiza Muhammad Zawawi and
Hoque, 2010). If due attention will be given only on cost then firm will legged behind in
competition. Hence, firm needs to determine price by keeping in mind competitor pricing
strategy.
2. Demand- In particular session demand from tourist side gets increased. This is a time
period in which there is a lot of opportunity that is available to the firm. In such time