Finance and Funding in Travel and Tourism

This report focuses on the importance of finance and funding in the travel and tourism industry. It discusses different costs involved in the business, various pricing strategies, and profit determination. It also explores how management accounting can help reduce costs and improve profitability. The report provides insights into budgeting and cost control techniques in the industry.

FINANCE AND FUNDING
IN TRAVEL AND TOURISM

Table of Contents
INTRODUCTION.......................................................................................................................................3
TASK 1.......................................................................................................................................................3
1.1............................................................................................................................................................3
1.2............................................................................................................................................................4
1.3............................................................................................................................................................6
TASK 2.......................................................................................................................................................6
2.1............................................................................................................................................................6
2.2............................................................................................................................................................7
TASK 3.......................................................................................................................................................8
3.1............................................................................................................................................................8
TASK 4.....................................................................................................................................................10
4.1 Enclosed in poster............................................................................................................................10
CONCLUSION.....................................................................................................................................10
REFERENCES..........................................................................................................................................12

INTRODUCTION
Finance is life line of every business enterprise as without which the existence of business is not
possible. Funding is that feature which involves in the business in which financial resources are
utilized by an enterprise that assists the entity in cost reduction. The efficiency of the business is
higher with the existence of stockholders and financiers who will give recognition to an entity by
uplifting their existing status. Merlin entertainment is that enterprise whose significance has been
showcase with the help of this report. The following report will give emphasis on the internal
business proceedings of this enterprise as it is related to travel and tourism operations. This
project report is all about describing various needs of the current organizations in order to collect
various kinds of financial resources as per their current business requirement. This report stresses
on different forms of investment taken up by an enterprise. The major objective of this report is
to analyze various skills, tools, knowledge that has been emerged with the help of different
management decision making tools in travel and tourism industry. It also involves various
pricing methods that can be used by the business throughout the report.
TASK 1
1.1
Business is a combination of income and expenses which are incurred in daily routine business
as the owner needs to control their expenses in order to increase the amount of the sales and the
revenues (Ward and Peppard, 2016). Different expenses involved in the business enterprise such
as operating expenses includes material expenses, use of equipments, wages and salaries and
different other expenses which may be fall in the business at particular time interval. There are
different kinds of costs involved in an enterprise which needs to be maintained by preparing
budgets and using different monitoring tools and techniques (Stewart, 2014). The costs can be of
two major categories that is fixed costs and variable costs. The fixed costs is that kind of costs
which will be not be reduces as it is jointly connected with the opening of business such as rent
of the premises and utility bills.
On the other hand variable costs are that costs which may vary according to the changes in the
production level of the business. The nil production unit may doesn’t produce any variable costs
as it is increases or decreases with the changes takes place in the activity level of production of
an entity. Various costs involved in the business of Merlin Entertainment include preliminary
costs involved in arranging funds and financial resources from the external business environment
(Mulley and Walters, 2014). It also involves various costs such as expenses involved for providing
fun and leisure activities for visitors who visits different tourists destinations, ticket booking
services by opening travel centers to facilitate all its customers, booking accommodation facility
which requires costs as the owner will collaborate with different hotels in order to provide this
kind of feature to all their customers who books tickers for various destinations.

The costs should be reviewed and revised periodically in order to attract wide number of
customers as the higher prices will de-motivated various customers and hence reduces the level
of sales and the revenue (Kaplan and Atkinson, 2015). Another perspective involve in revision of
costs is that all the changes are taken into considerations in the price of tickets which includes
increasing fares of flights, increase in the cost of visa services, higher taxation burden such as
service tax, excise duty and value added tax. It helps an enterprise in determining the financial
position by identifying the actual proportion among the income and expense ratio. This ratio
assists an entity in order to increase their overall profitability by collecting income from several
kinds of sources.
This enterprise will also use various techniques that are cost volume profit analysis technique
which is concerned with an entity in order to firm relationship between cost and sales of the firm.
The importance of CVP analysis which is beneficial for an entity for operating in this fast
growing and emerged industry that is travel and tourism sector which are given as below:
 It helps Merlin enterprise in assessing their costs as the burden of fixed costs on the
business will suppress the existing business conditions (WisCombe, 2016). CVP used to
forecast the future sales and specific percentage of sales and also identify that amount of
sales level at which the entity will not earn profit nor loss just top cover their basic costs
involved in the business entity.
 It helps to provide different sales mix which facilities variety of customers as wide
variety of products or services. It also used to carry out analysis in which variety of
activities are conducted by Merlin entertainment plc, such as recruitment of new staff,
buying or selling of existing assets, leasing new machines in order to reduce costs to a
greater extent.
 It assists management to consider all its potential expenses even in the form of small
categories to the higher range of expenses (Stewart, 2014). It includes various expenses
such as maintenance of premises, fuel costs and oiling of the machines to operate the
machines without any kind of stoppage which allows an entity to increase their overall
productivity which in turn increase the sales and revenue of the entity in order to earn
higher amount of profit.
 The basic thing involved in this technique is that it gives emphasis on the division of
costs in tow major categories such as fixed and variable costs (Ward and Peppard, 2016).
This division of cost is essential for the business as the future action of an entity will be
totally based on the division criteria utilized by the business enterprise.
1.2
Integral part of every business is price element which is essential for Merlin entertainment plc
which is operating in the business which deals in different variety of services related to the travel
and tourism (Mulley and Walters, 2014). Price is that attribute of an organization which able to
attract wide number of customers by framing their prices as per the budget and income capability
of an entity. It play crucial role in the current organization as it aids in determining the initial

costs that is the basic costs involved in the business of an entity which can be covered by
generating higher sales. Different pricing strategies adopted by an enterprise will help an
enterprise in order to gain competitive advantage over its rivals which creates several threats and
tough business situation in order to maintain the existence of an enterprise which are given as
below:
Value added pricing- It is that pricing strategy which is commonly used by an enterprise in
order to gain higher level of customer satisfaction as their main motive is to catch the interest of
several kind of customers (Stewart, 2014). This form of pricing strategy in which states and
preferences of buyers given higher priority as they are rational action who make several
decisions regarding quality of services offered by the enterprise to various number of customers
with a clear cut approach to gain popularity among wide set of customers. This popularity among
customers will be able to generate higher amount of sales (WisCombe, 2016). Merlin
entertainment can utilize this efficient technique as selling travel related services require much
patience as the expensive services will not be purchased by the customers easily as it involves
various kinds of risks related to flights. Tourists attractions of the famous tourist destinations
such as LEGO-LAND and other theme parks based on the resort which provides refreshment
services to all the visitors is an attractive feature that can be adopted by this enterprise in order to
attract wide number of customers.
Skimmed pricing- In this particular sector that is travel and tourism where all the expensive
services will be not easily taken up by the business due to its expensiveness the initial business
owner will adopt this strategy. It is strategy which will catches interest of wide number of
peoples as there is less profit margin as the main focus of the owner is attracting different set of
customers with less cost and various benefits in form of cash backs, free and complimentary
services (Stewart, 2014). It is also regarded as discounted pricing technique in which all the
services are offered to all the customers in discounted prices to lute different kinds of clients
towards he efficient quality of the business. The enterprise will able to create loyalty among
customers and all the existing customers will do mouth publicity that reduces marketing cost for
the business for greater extent.
Cost plus pricing- It is commonly used technique in used by an organization in which all the
costs are covered in the pricing of tour packages offered by tour operators with determined
percentage of profit included in the price (Mulley and Walters, 2014). It will cover two basic kinds
of costs such as all fixed and variable costs with specific percentage of profit as their main
motive is to earn profit. The owner help responsible for uplifting their company with a clear
goals and objective is to maximize the wealth of all the shareholders for whom business held
responsible (Stewart, 2014). It is that strategy which is best suitable strategy for an enterprise
which is best suitable technique which can be used in this travel and tourism and the owner can
earn amount of profit by producing higher level of sales and the revenue.

1.3
Profit is the final outcome after meeting all kind of expenses that involves in operating of
business from the revenue generated by the owner (Inderst, 2013). It is those things which every
business will make efforts in order to earn this much of amount as their main aim is o earn higher
profit by boosting their level of sales and revenue. Higher sales doesn’t mean to be in higher
profit as the expenses also play a significant role as higher the expenses lower will be its profit
and vice-versa . It can also be said that revenue generated by an enterprise by providing their
precious services with quality oriented approach used by the enterprise. The service is important
in travel and tourism industry by offering good quality services and earn high amount of profit.
The management is concern with reducing costs in order to increase the level of profit (Hanna,
2014). It also plays crucial role play in determination of selling price of goods and services as
their main aim is to identify all the factors that affect an entity in the different situations in order
to increase the profit level by providing wide range of services to facilitate all the customers.
There are various factors which help marlin entertainment in order to determine the price of
goods and services which are given as below:
Economic factors- Inflation and recession are the main dangerous things involved in economical
factors of the economy which may boost or reduces the standard of living or financial status of
the economy (Hanna, 2014). The stability of the economy will helps an entity in inducing their
sales level which is far more important thing for an entity. The increasing business complexities
in the external business environment troubles the survival of an entity will get impossible which
creates depression and financial stress which increases the variable cost (Inderst, 2013). In this
sector people will spend less in different activities such as travel bookings, entertainment
services such as exploring theme parks such as LEGOLAND, luxurious products and many more
services as per the availability and dependability of customers as per their tastes and preferences.
Political factors- It also involves different political factors such as government and its
authorities which intervenes in the price determination as the taxation will be incorporated in the
prices which will increases the prices and by providing services at low prices the business will
required to decrease their profit as higher prices will not entertain different set of customers
quality and price are the main elements which every customer looks as primary component in the
determination of prices.
TASK 2
2.1
The major concern of management accountant is to reduce the costs as the specialized function
of managements is to reduce all their expenses to a greater extent in order to avoid all kinds of
problems that may arise in the path of business in form of challenges (WisCombe, 2016). These
challenges can be of any shape such as uncertain future expenses, heavy burden of taxation,

merger and acquisition costs involves in the business. Increasing cost of goods sold includes cost
of purchases, salaries and wages costs increases due to high staff turnover. Identifying a different
costs center which helps in reducing costs by analyzing their impact on a business in order to
increase the profitability of the business (Stewart, 2014). All the accounting records and financial
records are prepared to ascertain the affect the increasing costs as the future of an entity has been
determine by identifying the future impact of these kinds of costs. There are various kinds of
management accounting information which will be helpful for an enterprise which are given as
below:
Ascertainment of costs- Cost plays a significant role in an entity as the determination of costs
will help an enterprise owner in order to determine the price of products as the cost element will
be involved in the price of products (Inderst, 2013). The costs has also further divided as per their
nature, element, relevancy and controllability in order to bifurcate the total costs into various
categories which assist an entity in order to include or exclude their different costs by prioritizing
the costs.
Budgeting- After analyzing and determining the costs takes place in an enterprise another tool
which also commonly used by management in planning their current as well as future expenses
and incomes by preparing budgets. The budgets are that weapon used in the business which is
also regarded as one of the controlling tool which has utilized in the business for planning. There
various kinds of budgets prepared in an enterprise such as cash, material, operating, sales and
expenses budget (Kaplan and Atkinson, 2015). Different aspects of the business majorly
categorized in income and expenses basis in which the favorable balances generated from these
budgets will helps an entity in return to showcases their ability to deal complex business
situations.
2.2
Management takes several steps in order to move ahead in the business as their main aim is to
reduce the costs which further help an entity in order to form business decisions. The accounting
information is also helpful for an entity in decision making as one of the important decision
making tool (Inderst, 2013.). Forming business decision are also one of the vital part of the
business concern as it involves accepting or rejecting a business project on the basis of the
information which will assist an entity to gain competitive advantage over its competitors which
are given as below:
Market trends- The travel and tourism business is that business which will directly affect by the
external market changes in form of market trends and styles that may affect the business
performance (Hanna, 2014). The globalization is that approach which enhances the scope of an
entity in terms of expanding their services by increases its various services and getting brand
recognition and image.

Forecasting- It is also terms as one of the predictive tool that uses business analytics in form of
statistical tools applied to assess the currents facts and figures of the business in order to forecast
the future efficiency (DRURY, 2013). It can be done by preparing budgets that uses different
components of the business such as cash and other expenses to strengthen the business position
by increasing their goals by meeting desired outcomes in period.
Capital budgeting- different tools of capital budgeting is also used to assess the viability of the
project in form of investing in the proposal or rejecting the project by applying various
techniques (Figge and Hahn, 2013). It involves various techniques like payback period, net present
value, and internal rate of return and also involves average rate of return which helps
management in order to accept or reject the proposal.
TASK 3
3.1
Ratio analysis is that technique which helps an enterprise in order to ascertain the financial
performance of the business as their main motive is to beat all the customers by strengthening
their financial conditions (Bhowmik and Saha, 2013). There are several ratios that reflect the
business in efficiency in two standard forms that is internal and external to assess the burden
created by other rivals exists in the business environment. The financial status of Restaurant
group plc has been evaluated and assessed by analyzing their internal business operations which
are reflected with the help of various ratios which are given as below:
Financial Ratios Formulas 2015 2014
Liquidity Ratios
Current Ratio Current Asset / Current Liabilities 0.28 0.24
Quick Ratio (Current asset – closing
inventory)/Current Liabilities
0.12 0.08
Profitability Ratios
Gross Profit Ratio (Gross Profit/ Net Sales)*100 18.51 17.93
Net Profit Ratio (Net Profit/ Net sales)*100 10.05 10.55
Operating Profit Ratio (Operating profit/ Net sales)*100 12.97 13.75
Gearing Ratios
Debt Equity Ratios Debt/ Equity 0.12 0.17

Total asset Turnover ratio Net sales/ total assets 1.54 1.54
Inventory turnover ratio COGS/ inventory 93.71 98.22
Liquidity ratios- It is one of the category used in ratio analysis as one of the tool used I the
business to evaluate their business efficiency by assessing current assets and current liabilities by
identifying their existing proportion in the entity. It helps to calculate the available balance held
by an enterprise in order to meet all the short term obligations occur in form of current liabilities
in the business (Figge and Hahn, 2013). There are certain sub parts of this main heading are also
helped an enterprise by assessing their own weakness or strengths in relation to the specific
factors are given as below:
 Current ratio- It is that ratio which is essential part of the liquidity ratio in which the
current assets are evaluated that it is sufficient to meet all the current liabilities sands also
contributes in the business by maintaining available cash balance in the organization
(Bhowmik and Saha, 2013). In the above table, the ratio has increases from 2014 to 2015
due to gather decease in the amounts of current liabilities held by an enterprise.
 Quick ratio- It is that ratio which assess the efficiency of an entity of the current assets
without involving closing stock in the amount of current assets. The efficiency of an
entity has been increased from previous year but doesn’t show significant efforts made by
the business in order to increase or decrease the ratio (Ahrendsen and Katchova, 2012). In
the given case, the quick ratio of the restaurant group plc has increases its quick ratio that
shows the efficient of current asset without inclusion of closing stock.
Profitability- The main of every enterprise is to earn profit by generating more sales and the
revenue (Abbasi, 2014). There are two main ratios that helps a entity in order to ascertain there
profitability by analyzing two kind of profit before tax and one is after tax, There are common
part of this kind of ratios which are given as below:
 GP ratio- It is usually found in every enterprise as the GP I that raw profit generated by
an organization after deducting cost of sales from the sales figure. It is one of the
components of profit and loss statement (DRURY, 2013). The GP ratio has increases from
previous which shows firm’s ability in generating higher level of sales and the revenue
and at the same time it also depicts that the cost of goods sold also gets reduces.
 Net profit – It is regarded as complete profit which is widely used every entity in
ascertaining their profitability of a particular year as it also states in the annual reports
generated by the enterprise and circulated to different shareholders in order to convey
efficient and transparent business conditions of the entity. It is commonly used ratio as it
involves tax implications on the profit generated by an enterprise (Inderst, 2013). Tax will
be deducted from the gross profit amount generated after excluding cost of sales from the

net sales. This ratio has decreases from its earlier years as this shows heavy tax burden on
enterprise which reduces its overall net profit.
 Operating profit- It is another most important element forms part of profit and loss
statement as it is that profit which is generated after deducting all kind of operating costs
from the figure of net sales. It has produced after deducting cost of sales from the sales
and further excluding selling and distribution and administration expenses from GP then
operating profit arrived (Hanna, 2014). Operating ratio has declined from previous year
which totally denotes the negligence of an enterprise in order to increase the burden on
their overall business by increasing their operating expenses in proportion to the sales
generated by an entity.
Gearing ratios- It is that ratios which help to find out the relationships between capital and asset
held by an entity which is further discussed by the business.
 Debt equity ratio- this ratio helps to find out the perfect alignment among these two
components which is widely used as alone or in combination (Kroenke and Boyle, 2015).
This ratio helps to find out the proportion among debt and equity held by an entity. The
debt shows burden and on the contrary to it equity shows ability of the firm by increasing
their strength. The financial performance of an entity has declining from previous years
as the debt component in form of debentures or bank loan is higher which dominates the
firm’s ability in order to create a larger impact on their overall performance.
 Assert turnover- It shows the contribution of assets in generating higher amount of the
sales and revenue (Mulley and Walters, 2014). The proportion between the net sales in
relation the total number of sales produces by an entity will have significant importance
or not has been explained with the help of this kind of ratio. The constant ratio shows
careless attitude adopted by the entity in order creates significant positive changes in the
ratios.
 Inventory turnover- It is that kind o ratio which helps an entity in order to ascertain
their business efficiency by analyzing the major part of the organization that is the
inventory (WisCombe, 2016). The declining ratio shows that cost of goods sold increases
as compared to the inventory held by an enterprise creates bi significant changes in
uplifting and fostering their current and existing working conditions.
TASK 4
4.1 Enclosed in poster
CONCLUSION
It can be summarized from the above project report that financial resources and there is funding
is essential aspect of a enterprise as an enterprise’s current working conditions will be improved
by following various kinds of standards and measures. Merlin entertainment that provides their

extended services which includes entertainment services and majorly includes travel and tourism
services in these sectors will bring lots of opportunities whole using wide range of sources in
order to attract different kinds of customers. The above report also stresses on the cost element in
contrast with the impact on the profit component which helps to increase the profitability of an
enterprise. This report has also focused on various aspects which an enterprise owner needs to
give emphasize in order control its costs. The major concern of management accountant is to
maintain coordination among the enterprise by maintaining discipline and peaceful working
environment. Ratio analysis has also used as one of the comparative analysis tool that helps an
enterprise in order to assess it business efficiency by judging current ability in comparison with
the previous figures in the category of different aspects of the business such as profitability,
liquidity, financial health and gearing ratios that assess all the components of the balance sheet.

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