Analysis of Financial Performance and Capital Projects
Added on 2020-07-23
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FINANCE AND FUNDING IN THE TRAVEL ANDTOURISM SECTOR
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 Explaining the importance of cost and volume in financial management.............................31.2 Analyze pricing methods used in travel and tourism sector..................................................41.3 Factors affecting travel and tourism business........................................................................5TASK 2............................................................................................................................................62.1 Different types of management accounting information that can be used in business..........62.2 Use of management accounting information as decision making tool..................................7TASK 3............................................................................................................................................83.1 Interpreting financial statements of TRG Plc for the year of 2014 and 2015........................8TASK 4..........................................................................................................................................12Analyzing sources and distribution of funding for capital projects...........................................12CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14
INTRODUCTION In the recent times, travel and tourism industry of UK is growing with the very high pace.Every year, several inbound and outbound customers prefer to visit the attraction points ofLondon. Now, travel & tourism is one of the sectors which make remarkable contribution inGDP of Britain. Further, on the basis of forecast worth of tourism industry will be £257 billion atthe end of 2025. This aspect clearly shows that growth of travel sector is high, so in this regard, itis highly required for the concerned firms to make optimum utilization of financial resources andprovides tourists with high quality services. The present report is based Merlin EntertainmentsPlc which has around 115 attractions in 23 countries. Major brands of Merlin Entertainmentinclude Legoland, Alton Towers, Chessington etc. In this, report will provide deeper insightabout the significance of cost and financial management in travel sector. Besides this, report willalso shed light on the pricing methods and other factors that have significant impact on the profitmargin of firm. It also depicts the extent to which financial position and performance of TheRestaurant Group Plc is sound in the period of 2015 over 2014. TASK 11.1 Explaining the importance of cost and volume in financial managementCost and volume is one of the main aspects that have high level of influence on the aspectof financial management. Moreover, in the case of high cost firm is not in position to generatehigh profit margin. Thus, cost is the major factor that closely impacts the pricing decision ofMerlin Entertainment Plc. Cost may be served as sum of all the expenses which are incurred bythe firm for delivering services to the customers. There is huge importance of cost and volumein the business because cost and volume are associated with each other. When volume is highthen in that case cost on each unit of sale is very low. Similarly, in case sales volume is low thencost on each unit is high. Thus, it can be assuemed that there is contrast relationship between costand volume and both move in different direction. There are varied sort of expenses that formpart of cost and need to be controlled so that on each unit sold less cost can be observed in thebusiness.
Fixed expenses: These are those expenses that remain constant in every condition evenvolume increase or decrease (Lam, 2010). Thus, it can be said that fixed expenses havenot much impact on cost and volume relationship until fresh capital expenditure is notmade in the business.Variable expenses: Variable expenses are those that keeps on fluctuating consistently. Itis very important to control variable expenses in business so that cost reduce at fast ratewith increase in volume.Semi variable expenses: These are those expenses whose some portion remain fixed andsome remain variable. With increase in volume proportion of semi variable expenses oneach unit also reduce.It can be said that it is very important to understand the cost and volume relationship inbusiness. Main focus must be always on increasing volume. If at current price level firmfailed to increase volume then it can reduce price of its products.1.2 Analyze pricing methods used in travel and tourism sectorThere are number of pricing methods that are used by the business firms for pricing oftheir products. It can be observed that there are multiple pricing strategies that can be used by thebusiness firms. It depend on them that which of pricing strategy they prefer to use in theirbusiness (Irwin and Scott, 2010). Usually, it is observed that firms select pricing strategy whichthey think is most suitable to their business in terms of competition with rivals. Some of thepricing methods that can be used by the business firm are given below.Competitor based pricing: Competitor based pricing is the one of the most importantapproach that is used for pricing of the product. Under this pricing strategy price that isset by rivals of Merlin entertainment is taken in to account to determine price of theproduct. By doing so it is ensured that firm will be able to compete with its rival andcustomers will be indifferent towards Merlin and its rivals in terms of price.Market based pricing: Market based pricing is another strategy that is used to price theproducts in the market. This is because under this strategy price that is prevailed in themarket is taken in to consideration for determining price of the product. It can be said thatmarket based pricing is also one of the best alternative that is available to the businessfirms (Gatti, 2013). By determining price according to prevailed price Merlin
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