Finance and Funding Report

Added on - 06 Jan 2020

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Finance andFunding
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1................................................................................................................................................11.2................................................................................................................................................21.3................................................................................................................................................3TASK 2............................................................................................................................................42.1................................................................................................................................................42.2................................................................................................................................................5TASK 3............................................................................................................................................63.1................................................................................................................................................6TASK 4............................................................................................................................................74.1................................................................................................................................................7CONCLUSION................................................................................................................................8REFERENCES..............................................................................................................................10
INTRODUCTIONFinance and funding is one of the most imperative feature of any prosperous businessentity that aids in managing the cost of the concern. Without a financier an organization cannotfunction efficiently. The following study is conducted in the similar context of the MerlinEntertainment limited which carries out travel and tourism operations. These company's providea wide variety of services to its customers which require huge amount of investment in form offunds. Main objective of the current study is to provide readers with an in-depth understanding ofvaried skills, techniques, knowledge that is essential to undertake management decision-makingin travel and tourism industry (Abbasi, 2014). Furthermore, in the present research variouspricing methods such as market-led, discounted, cost-plus and value added methods have beenaddressed that are used by several businesses entities. Apart from it, importance of managementaccounting information and their use as decision making tool for the firm have also beendescribed.TASK 11.1Every business entity incurs several expenses in the form of purchasing raw materials,equipment, salaries and many more. These costs are essential to be maintained as they have adirect and consequent impact on the sales of company. Likewise, Merlin Entertainment PLC alsospends a huge amount in the form of arranging fun and leisure activities for its tourists, bookingtickets, accommodating rooms, etc. It is imperative to revise and analyse these costs periodicallyas it aids in reviewing the financial position of firm thereby, increasing the overall revenue oforganisation (Ahrendsen and Katchova, 2012). These expenditures are either fixed, variable,semi-variable, indirect or direct cost of business. CVP analysis is a technique used by theconcerned organization in order to ascertain relationship between cost and sales of the firm.Some of the importance of cost and volume for the travel and tourism firms have been discussedhereunder:Many of he organization uses this method to identify the difference between theoperation and producing cost and aids in identifying the level profit that is likely to beascertained from its concerned activities.This method is also important in measuring and identifying the financial position of thefirm. The Cost volume and profit of the companies are ascertained and used to make1
varied financial decision. For instance, the revenue generated for the period can be usedto cover the variable expenses of fixed assets and then considered is at profit.These decisions can be in terms of investment, dividend and finance. The cost volumeand profit of the firm can be used in various purposes. If there is sufficient revenue than itcan be invested in some beneficial activities. The residual amount can be used to increaseor decrease the dividends of the shareholdersThese industries spend a huge amount of money on the fixed cost of company. Thesecosts remain constant for a longer duration and changes according to the increase in level ofproduction. This means that hotel industry carries a high amount of risk as decrease in the salescan lead consequent losses for Merlin entertainment PLC (Bhowmik and Saha, 2013). Therefore,CVP analysis is used to analyse the cost and sales of firm and decisions based on this are takento keep the cost stable. These enterprises provide its customers with a wide variety of productsand services which determine a constant sales mix. Therefore, CVP is used to ascertain breakeven analysis for the firm which demonstrates a clear understanding where company's overallrevenue meets its total cost. Likewise, there are several other expenditure incurred in form ofvariable cost (Brigham and Ehrhardt, 2013). The Merlinentertainment carries out severalactivities such as recruiting new staff, buying or leasing new vessels as well as maintenance andfuel cost for these vessels. All are categorized under the head variable cost. In certaincircumstances, the enterprise is able to gain economies of scale thereby reducing the input priceper unit. It also increases due to rise in the demand of tourism services.Expenditure in form of paying electricity and telecommunication bills are the semivariable costs that are incurred by such organisations. These amount are fixed as well as variablein nature as such payments are made every month which comprises of fixed amount ofexpenditure. Therefore, it can be said that all these costs and volume are important for the saidenterprise in arriving to several conclusions and making decisions based on it.(Dollery, Korttand Grant, 2013).1.2Pricing is a crucial element of every business concern that aids in determining the initialcost, actual investment and the overall revenue of firm. There are several strategies availablewith the Merlin entertainment PLC that can be used in order to gain competitive advantage.Some of the strategies have been highlighted as below:2
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