Finance and Funding in Travel and Tourism Sector

Finance and Funding in
Travel and Tourism Sector

Table of Contents
INTRODUCTION...........................................................................................................................1
Task 1...............................................................................................................................................1
1.1 Importance of cost and volume in financial management of T&T sector:.......................1
1.2 Pricing methods used in travel and tourism sector:..........................................................3
1.3 Factors influencing profits of travel and tourism business:..............................................4
TASK 2............................................................................................................................................6
2.1 Different types of management accounting information:.................................................6
2.2 Use of management accounting information as a decision making tool:.........................7
TASK 3............................................................................................................................................8
3.1 Interpretation of the financial accounts of The Fulham Shore Plc for the year ended 25th
March, 2018............................................................................................................................8
TASK 4..........................................................................................................................................13
Covered in Leaflet................................................................................................................13
CONCLUSIONS............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
To start any business, there is a requirement of finance and funding to run the business
operations effectively and efficiently. Finance is defined as a process in which funds are
provided for business activities, making purchases or investing purposes. Financing and funding
are used in business to get money from different sources and applied them in required areas of
business in optimum way. This report describes importance of finance and funding activities in
the context of travel and tourism sector. This report is divided in four task and in each task, there
is a different scenario given. Task one defines the importance of cost and volume in financial
management of travel and tourism (T&T) sector for which company Carnival Plc is selected and
this provides analysis of various pricing methods used in this sector. Task two tells about
different types of management accounting information that could be used in this industry by
taking Fulham Shore plc as a case study while task three defines interpretation of financial
statements of given company. At last, task four describes about the sources and distribution of
funding for capital projects development.
Task 1
1.1 Importance of cost and volume in financial management of T&T sector:
For understanding this, a company named Carnival Plc is taken. The details about this
company is as:
Carnival Plc: Carnival Corporation & plc is a UK based travel, tourism and cruise operator
company, currently the world's largest travel leisure company, with a combined fleet of over 100
vessels across 10 cruise line brands. Company is planning a holiday trip to a resort lasting one
month for its tourists. The company will also book a floor of a hotel at a resort to accommodate
its tourists. While conducting this tour, various aspects relating to financial management relating
to this is considered by the business organisation working in tour and travel industry to make this
tour profitable for the Carnival Plc (Evans, Stonehouse and Campbell, 2012). For this,
organisation should have a knowledge of following terms, which are: Cost: It is an important aspect in conducting any tour package, there should be a
proper knowledge of cost factor of tour package. For Carnival Plc, It is necessary to
have a cost estimation to achieve the desired profits which company wants to achieve
and to know whether it is profitable for company or not. In estimation of cost, it can be
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classified as fixed cost (cost that is stay fixed when changes occur in the volume of
activity) and variable cost (cost which vary according to volume of activity). Its
importance in context of this industry are as follows:
 Cost reduction: For any organisation in this sector like Carnival Plc, which plans to
conduct a tour, Cost is very important area, which should require to measure by the
company to reduce it. As a result, company can utilise its fund in better way for
financial management and enhance the profitability of company.
 Decision-making: Cost analysis is very helpful in financial management of a
Carnival Plc in evaluating company's performances and accordingly, take decision
for the betterment of organisation. Important decisions means the decisions for
achieving goals and to achieve sustainable growth by focusing various area of
financial management (Kimbu and Ngoasong, 2013). Hence, performance
evaluation of cost is important for an organisation working in tour and travel sector.
 Increasing performance of managers: Cost analysis is helpful for the improving the
performance of managers of Carnival Plc. By the help of data, which is collected
through cost analysis, it can be used by these managers to take meaningful
decisions about the current & future business activities related to financial
management. By the help of cost analysis, financial managers of Carnival Plc can
improved their performance in various areas of financial management. Volume: It refers to quantity of products and services which an organisation serves to
target customers (Thakran and Verma, 2013). Cost and various budget are allocated to
volume of product or service. Volume denotes the level of production in quantity terms.
In the context of tour and travel business, volume has a different meaning depending on
what is being estimated and for what purpose the data are being used. Generally, most
companies in this sector use number of tickets people are purchasing from company.
The importance of volume analysis are as follows:
 BEP analysis: By using this analytical tool, Carnival Plc can find level of volume of
activity, which provides it optimum profitability. Break-even analysis will help a
company to determine the sales quantity or number of products that should be sold
by it, in order to, manage its various aspects related to earn enough money to pay its
entire expenses. In Break-even analysis, company shall calculate different break-
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