Finance and Funding in the Travel and Tourism Sector

Finance and Funding in the
Travel and Tourism Sector

Table of Contents
INTRODUCTION...........................................................................................................................1
1.1 Importance of costs and volume in financial management of travel and tourism businesses
of Carnival Corporation & plc....................................................................................................1
1.2 Analyse pricing methods used in the travel and tourism sector in Carnival Corporation &
plc................................................................................................................................................3
1.3 Analyse factors influencing profit for travel and tourism businesses using Carnival
Corporation & plc cruise brands.................................................................................................6
TASK 2 ...........................................................................................................................................7
2.1 Different types of management accounting information that could be used in avel and
tourism businesses using Dalata Hotel Group plc.......................................................................7
2.2 Use of management accounting information as a decision-making tool for Dalata Hotel
Group plc.....................................................................................................................................9
TASK 3..........................................................................................................................................10
3.1 financial ratios.....................................................................................................................10
Current ratio:..................................................................................................................................10
TASK 4..........................................................................................................................................12
4.1- Analysing sources and various methods of funding in accordance with the development
of capital projects associated with tourism...............................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
It has been known that finance department is very significant for the organisation which
helps them to find the financial position of the business in the market place and their position
amongst the competitors. Other than that, every organisation need proper fund in order to
operate their business, in that case financing plays very crucial role. Fund collection is not only
the part but firm need to manage, supervise and administrate it so that they can make strong
financial goals and objectives. Carnival Corporation & plc is a US based cruise company which
serves different tours and trips at the different destination all over the world in their cruise.
Organisation also serves luxury services to all tourists to serve them a wonderful travelling
experience within their cruise. The key aim of the current research is to analyse the different
aspects of success of the business which consist of various aspects such as pricing, cost etc. these
factors have great impact over the profitability of the venture. This is the reason firm need to
find the different managerial tools such as cost-volume-profit analysis, investment appraisal and
other methods of management accounting which helps them to enhance their profitability. Other
than that, in order to find the financial position of the firm, different ratios have been calculated
such as liquidity, solvency and profitability. This will suggest new techniques to the firm in
order to enhance the financial performance of the venture.
1.1 Importance of costs and volume in financial management of travel and tourism businesses of
Carnival Corporation & plc.
There are different types of cost that are being incurred by the venture in order to operate
their business such as salary to the workers, advertisement expenses, production cost etc. When
the venture fund on these activities, it helps them to enhance their profitability and revenue. All
these expenses are known as cost and this plays very significant role in the venture in order to
increase the earnings (Waudo and Stanley, 2015). When all of the expenses of the firm, this can
reduce the profit margin of the venture and if the firm make balance expenditure, then it can
enhance the revenues of the venture. Carnival Corporation & plc operates in different types of
cruise, need to modify their operations and activities according to the needs and wants of the
customers. Other than that in order to attain the aim and objectives of the business, firm need to
have control over their different expenditures (Sun and Kim, 2013).
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Cost-Volume-Profit (CVP) Analysis is the significant cost volume accounting tool which
helps the firm to gain the significance of short term management decision. There are several
elements that are included in the cost such as sales volume, selling price etc. the key aim of this
tool is to manage the different elements of the cost so that they can reduce the expenditure made
by the business (Pittman and McLaughlin, 2012). Cost is being classified under two categories
that are fixed and variable which is sub divided into manufacturing, administrative, marketing
and others. CVP analysis helps the venture to perform the sensitivity analysis which helps them
to enhance their profitability by enhancing the number of tourist in their cruise.
There are many benefits which are included in the analysis of cost volume profit.
Profit planning- Cost-volume-profit is very much important finding the factors which will most
profitable.
Decision-making- CVP makes the management to understand about various elements which are
in relation with each other. It makes them to take decisions effectively and efficiently.
Price determinants- CVP is the best tool which can help the management to decide the prices. It
is because CVP shows the method which will make maximum profits for the company.
Preparation of the budgets- Cost-volume-profit makes the company to understand the various
elements which are necessary for the preparation of budget.
Cost control- Cost-volume-profit analyses the impact of cost on the income generation. This
helps in finding the methods to control the cost.
It has already being known that there are several costs that are incurred by the business,
that are as follows:
Fixed costs: It is the cost which remains stable whether the production increases or
decreases. In simple words it can be said that this cost have no effect on change of production
unit. There are different cost that are associated with the fixed cost that are salaries to workers,
office lease, utility bills, trade association membership fees, web hosting, banking services, etc.
there are different expenses that organisation need to pay in order to manage their activities and
operations (Philippon, 2015). If the firm is spending huge amount on these activities, then it can
enhance the operating cost of the business and it will have negative impact over the financial
statement of the venture. All these expenses are very much significant for the firm, such as
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salary to the workers. This will help the organisation to satisfy their workers and if they are
satisfied, then they can serve better services to the customers. It can be said that income
statement have great impact by the satisfied employees and customers and will enhance
profitability of the organisation, thus, it is very significant for the venture to forecast the
different fixed expenditure of the business so that they can plan it in effective manner and judge
the sales over the expenditure. So, finance manager will be able to make proper planning to
reduce expenditures in the travel business (Pantano and Di Pietro, 2013).
Variable costs: This is the cost which is opposite to the fixed cost. It stated that these
cost changes and the production changes. There are several costs that are included in the variable
cost such as tax rates, material, visa costs etc. if the sales rate of the organisation is decreasing
then it has adverse impact over the organisation's profitability and the financial management of
the will be damaged (Mihalicand Buhalis, 2013). Variable cost is very significant for the venture
because it has direct impact over the profit margin of the firm. If the variable cost increases, then
it will decrease the profit margin of the business. Other than that needs and wants of the
customers also plays significant role in the cost of venture. If the needs of the customers are
increasing then the firm need to invest in the labour and transport. Thus, it is significant for the
venture to have proper planning for the variable cost so that they can enhance their profit.
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Illustration 1: Break even analysis
(Source: Break even analysis, 2016)
Break even analysis is also one of the important tool which helps the venture to run their
business smoothly by analysing the sales volume of the Carnival Corporation & plc by
recovering their outgoing cost. With the help of break even and Cost-Volume-Profit-Analysis,
firm can make effective decision regarding the fund investment and to reduce the future losses.
ost and volume are very important in financial management in travel business as with the help of
these tools, manager of Carnival Corporation & plc can gather reliable information and can make
control over unnecessary expenditures (Kastenholz and Carneiro, 2013). It helps the firm to gain
the expected profit in the same and coming financial year by analysing the variable and fixed
cost. With that, by estimating the volume and cost. Firm can find out the areas where they need
to modify.
Total cost- These are the cost which shows about the final amounts of expense which is incurred
by the company. These are in relation with the fixed cost.
1.2 Analyse pricing methods used in the travel and tourism sector in Carnival Corporation & plc
There are several pricing methods by which firm can set their prices of products and
services. Other than that there are several factors at which selection of the pricing decision is
dependent up such as objective, size and scope of entity. In order to gain high profit and
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