Finance and Funding in the Travel and Tourism Sector

FINANCE AND FUNDING IN
THE TRAVEL AND TOURISM
SECTOR

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Importance of cost and volume analysis in financial management of travel and tourism
businesses...............................................................................................................................1
1.2 Pricing methods used in travel and tourism sector...........................................................2
1.3 Factors influencing profit for travel and tourism businesses............................................5
TASK 2............................................................................................................................................6
2.1 Different types of management accounting information..................................................6
2.2 Use of management accounting information as a decision-making tool..........................6
TASK 3............................................................................................................................................6
3.1 Financial performance of The Restaurant Group.............................................................6
Interpretation....................................................................................................................................7
TASK 4............................................................................................................................................9
4.1 Sources and distribution of funding for development of capital projects........................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Finance plays a significant role in business to survive in the market. Funding is a process
of collecting money as well as allotting in the business. The present report describes about the
finance and funding in a travel and tourism industry which is the fast growing industry
worldwide. In present case, Merlin Entertainment Plc is used to describe about the finance and
funding. The report throws light on cost, volume and profit elements which play an important
role in managing financial accounts of the firm. It describes about management accounting
information as well as sources of finance. It gives overview of financial performance of The
Restaurant Group Plc.
TASK 1
1.1 Importance of cost and volume analysis in financial management of travel and tourism
businesses
Cost and volume is a term which is used by the financial managers to derive cost of
product and services. The analysis has various components such as fixed and variable cost, direct
and indirect cost etc. In this, the cost must be included in the product, price for selling the
product must be constant in a financial year and all units which are produced within an
accounting year must be sold in the market (Evans, Stonehouse, and Campbell, 2012). The
analysis is very important to Merlin Entertainment firm to manage financial situation. Various
importance of the cost volume analysis is given as below: Fixed cost: Fixed cost is a cost which does not change and vary according to the
production units. If the services and products of the firm will change then the cost will
remain constant in the travel and tourism enterprise. The cost plays important role to
derive a break even point of the firm and it is helpful to determine cost and price of the
product and service. It is a basic expense of the production process which cannot be
avoided by the organisation (Eagles, 2014). It will help the Merlin entertainment to know
about the total cost as well as to derive prices of services offered by the travel and
tourism company. Examples of fixed cost are rent of building, amortization, taxation
amount, depreciation on assets etc. Variable cost: It is a cost of product which varies according to the production volume. If
in the business, production level increases or decreases then variable cost gets fluctuate.
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Variable cost varies in same direction of the production level for example; if production
level increases then variable cost will also increase. On the other hand, if output level
decreases then respective cost will decrease. It is very helpful to determine cost as well as
price of products and services. Example of variable cost are raw material cost, fuel cost,
labour cost, commission which charges on the basis of production level. Labour cost
fluctuates when cost charges as per the production units of the organisation. Direct cost: Another component of cost volume profit analysis is direct cost which is
incurred to produce products and services (Mancini, 2012). The cost is directly associated
with the production process as well as business entity. It is clearly associated in specific
activity of production process. In the business, very few direct costs are attached with the
total cost and with the specific activity of production. Direct costs of business are such as
direct material, direct labour, manufacturing supplies etc. The cost volume analysis is
important to determine direct cost of the products and services of the mentioned firm. Indirect cost: A cost which is not directly associated with production process is known as
indirect cost. The cost which is not directly accountable in total cost is the fixed cost or
variable cost. Indirect cost include various overhead cost which are associated with the
enterprise rather than total cost of goods and services. Indirect costs are such as
administration costs, labour overhead cost, security costs, personnel costs etc. These costs
are accounted in other costs instead of production cost of total cost. Administration costs
are such as utilities, rent of facilities as well as property and building, depreciation on
assets or equipments etc (Morrison, 2013).
 Contribution margin: Contribution margin can be counted as a portion of profit. It is a
margin which remains after deducting all the variable expenses from total revenue or
sales of the organisation. The mentioned analysis is helpful for Merlin Entertainment to
derive contribution margin. Sum of money which remains is used by the firm to cover the
overall fixed cost and after that whatever remains is considered as a profit of the
organisation.
1.2 Pricing methods used in travel and tourism sector
Price is an important factor of an organisation and motto of the firm is to earn maximum
profit. . There are various pricing strategies which are helpful to the management at the time of
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