Financial Analysis of TRG Group

This assignment delves into the financial analysis of TRG Group, examining its performance through various financial ratios. The analysis encompasses profitability, efficiency, and solvency ratios to provide a comprehensive understanding of the organization's financial health. The report also highlights the role of costing, budgeting, and pricing techniques in achieving organizational goals. Additionally, it acknowledges the government initiatives aimed at boosting tourism sectors globally.

Finance and Funding in
Travel and Tourism

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Financial management and the importance of cost, volume in travel and tourism..........1
1.2 Type of business and pricing methods for Organisation..................................................3
1.3 Factors affecting profit gathering for Merlin Entertainments plc....................................4
TASK 2............................................................................................................................................5
2.1 Various management accounting informations used for Merlin Entertainments.............5
TASK 3............................................................................................................................................5
3.1 Analysing the financial statement and organisational positions of TRG for year 2017...5
TASK 4............................................................................................................................................7
4.1 Distribution of the funds and available sources for capital projects................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Travel and Tourism industries are the main revenue generator of any nation. Hence, there
will be requirement of large numbers of funding in context with having adequate operational
activities. In the present report, there will be discussion based on considering the requirement of
capital revenue for Merlin Entertainments plc. However, it will also highlight the requirement of
funds for operating the travel and tourism firms. Thus, there will be analysis of various ratios and
evaluating methods to lower down the cost. Hence, the professionals in TRG will be able to
make corrective forecasting decisions as per the profitability and liquidity of the firm. On the
other side, in this study there will discussion based on various cost techniques such as
forecasting, budgeting as well as pricing techniques which will help such organisation in having
adequate amount of funds as well as attracting numbers of investors for capital gathering.
TASK 1
1.1 Financial management and the importance of cost, volume in travel and tourism
By considering the growth of Merlin Entertainment as well as it operational functioning
in the long run which indicates that the firm has good market strength and have large numbers of
consumers (Robinson and et.al., 2016). It operates in more than 23 nations and has facilitated the
touring at more than 115 locations in the world. Hence, the business normally deals making tours
at various attractions such as LEGOLAND parks, Midway attractions, Rides and shows etc.
which are the main requirements of the tourists as well as it attracts travellers from all categories
such as kids, family, adults as well as senior citizens.
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Illustration 1: Costs used in managerial decision making
Source: (Said, 2016)
Direct cost: Such an expense which are initially required to fulfil the tasks or attaining
the operations of the organisation such as labour, resources etc. hence, In Merlin Entertainments
there will be require of skilled and talented employees such as drivers, guides, managers as well
as other supporting employees which will execute the all the tours and have direct interaction
with consumers (Roy, 2016). Thus, in context with hiring the adequate number of workforce
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there is need to manage the requirements giving the salary and wages as well as various
allowances to them.
Indirect cost: These are the expenses which are not the priority of organisation but has to
be done in order to have smooth business operations such as rent, lights and electricity,
refreshment to employees etc. Hence, these are the overhead expenses for Merlin Entertainments
which are need to be paid (Said, 2016). Thus, by considering such expenses the managers of
entity must make proper budgets for such costs.
Variable cost: It includes the expense which varies as per the time and requirements.
Thus, such kinds of costing include changes in the sales volume, demand in the market, increase
in the numbers of travellers as well as increase in the taxes or exchange rates of currencies at
various countries (da Silva Etges and et.al., 2016). Hence, the professionals need to consider all
such requirements as well as need to have quick decision making and the effective solutions to
overcome such costs.
Fixed cost: These are the expenses which remains constant and unchanged such as
interest on loan, rent, depreciation, telephone bills etc. hence, Merlin Entertainments has to
measure costs incurred in such activities (Vollmers and et.al., 2016). Thus, expansion of these
kinds of expenses will lead the organisation to losses as well as low generation of income.
Trading Volume: It indicates the amount of sales made in the years as well as the
demand generated by the organisation in market which enhances the expense of firm. Hence, by
considering such kinds of demands Merlin Entertainments need to make the fruitful efforts as to
meet such requirements (Pradhan and Paudel, 2017). Thus, they will need to analyse the needs of
consumers as well as gain information related with main tourist attractions.
CPV analysis: These are the analysis which helps the professional in analysing the actual
requirement of cost and volume for the specific locations. Thus, the professionals at Merlin
Entertainments can make better decisions in context with assumptions made in the favour of such
analysis (Cantú, 2016). However, there has been measurements of all the expense on the basis of
assumptions such as selling prices of the services and products must remain same and unchanged
as well as this all articles which are produced in the premises must be sold. Hence, while
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measuring the profit over such operations there will be use of Contribution margin and various
financial ratios.
Break-Even analysis: This method will help Merlin Entertainments in analysing sales
and profit volume as well as the supply and demands generated by the firm in the specific period.
Hence, there will be requirement of skilled accounting professionals in analysis of all the
business transactions held in the operational year (Chung and Jung, 2016).
1.2 Type of business and pricing methods for Organisation
There have been various kinds of pricing techniques used to enhance the efficiency of
Merlin Entertainments. However, it facilitates the professionals in making the fruitful changes in
the pricing and cost deciding techniques. These are as follows:
Return on investment: In order to consider this pricing strategy, the accounting
professionals at Merlin Entertainment will be beneficial in analysing the results they have on
such tasks or operations on which they have made investments. Hence, these can be known as
the cost for the business activities such as travelling expenses, accommodation facilities as well
as booking of tickets (Lopes Miiller and Lopo Martinez, 2016). Thus, these kinds of expenses are
made earlier the operation and then the entity gains as per responses of consumers.
Cost plus pricing: In this technique, all the costs which are going to be incurred in the
operational activities of the organisation, all measured and summarised such as direct material,
labour as well as overheads. Thus, such method will help Merlin Entertainments in analysing the
actual costs held in such operations they come up with the optimum solution to lower down such
costs or expenses (roy, 2016).
Skimming Pricing: By considering this technique the managers of firm sets out the high
rates over the product or service in the initial start-up and then as per the requirements of demand
in market they lower down such prices. Hence, these method helps in gathering the adequate
amount of funds which increases the capital gains as well as strengthen the organisational
revenue structure (What Are the Benefits of Skimming Pricing Strategy? 2017). Merlin
Entertainments adopts the technique in the ways that they could offer higher rate of tickets and
charges over travellers in accordance with the tour in festive season or holidays. Hence, if the
demand raises for such tour than they can lower down such rates.
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Penetration Pricing: In accordance with these pricing technique Merlin Entertainments
can offer low prices for its services such as ticket rate, booking charges as well as
accommodation and travelling fees (Robinson and et.al., 2016). Hence, these will help them in
gathering large numbers of consumers as well as they could be able to make the profitable
earning.
Current Trends: There will be current trends which are normally seen in the travel
industries which are based on the requirements and season on which there will be large numbers
of consumers (Pradhan and Paudel, 2017). Thus, in the festive season, changes in climate
conditions and national events the numbers of traveller will increase so in accordance with
satisfying them there is need to analyse their preferences as well as Merlin Entertainments need
to fix plans budgets for that.
1.3 Factors affecting profit gathering for Merlin Entertainments plc
The profitability of an industry can be affected by various factors which are in
accordance with internal or external requirement of the firm. Hence, the professionals at Merlin
Entertainments need to understand the following factors which influences the revenue gathering
in business:
Events: There will be high numbers of travellers during any festive season as well as in
national holidays. Hence, in accordance to meet such demands on the articular event Merlin
Entertainments need to make pre-plans as well as they can make various promotional decisions
which will help them in gathering more buyers as well as pre-planning for such events (Said,
2016).
Economy: As per the revenue and income generated by consumers as well as their
economic standard, Merlin Entertainments need to plan packages and set prices for the tours.
Hence, there will be variations in the profit generation of the business which is not according to
their desire but they can satisfy their clients as per facilitating the packages in accordance with
their requirements (Vollmers and et.al., 2016).
Political influence: In accordance with the variations in economic policies set by
government in different nations or locality which are the main obstacle for a Tours and Travel
industry (Chung and Jung, 2016). Hence, Merlin Entertainments need to identify such difference
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like changes in exchange rates, taxation, laws rule and regulations etc. are to be analysed by
Professionals as well as they must make effective planning in order to satisfy such needs.
Seasonal variations: As per the Festive season of changes in the environment of te
organisation. There has been increase and decrease in the numbers of clients in seasonal time
which influences the profitability of organisation. Hence, there will be more numbers of buyer
during the peak seasons and Merlin Entertainments will be beneficial in gathering better revenue
gains. On the other side, it will be totally opposite in the off season (Lopes Miiller and Lopo
Martinez,2016). Thus, in such cases the industry will start depending over the seasons. Hence, in
accordance with these Merlin Entertainments need to plan tours for schools and colleges which
will be fruitful for them in gathering profits as well as consumers will also have lower rates.
TASK 2
2.1 Various management accounting informations used for Merlin Entertainments
Enclosed in PPT
TASK 3
3.1 Analysing the financial statement and organisational positions of TRG for year 2017
In context with analysing the actual financial performance of any entity there can be use
of various financial tools such as ratio analysis as well as the annual reports. Hence, there will be
analysis of the various ratios of The Restaurant Group which will help the managers or
professionals of the organisation in analysing the actual profitability. Thus, analysis can be based
on considering the data of 2016 and 2015. Hence, the profitability ratio of TRG will be as
follows:
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Illustration 2: Profitability ratio analysis for TRG
Interpretation: On the basis of above listed illustration, the profitability ratio of TRG is
measured by considering revenue, Gross profit and net profit during 2015 and 2016. Hence, the
Gross profit of the business for the year 2015 is 99% and in 2016 it is 81.46%. Thus, net profit
margin of organisation in 2016 is -5.63% and in 2016 is 10.07% which indicates that in 2016 the
firm is suffered from losses. As the cost incurred in the operating activities are higher than
compared to the previous year. On the other side, the capital employed for firm in 2015 is 297.41
and in 2016 is 294.98. Hence, It can be said that the firm has reduced in the capital investment
which is reflected in the ROCE in 2016 as -13.560 and in 2015 it is 23.20. The ROA in the year
2016 is -9.020 and in 2015 it is 15.44 respectively.
Illustration 3: Solvency Ratio Analysis of TRG
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Interpretation: In order with analysing the Solvency Ratio of TRG, the debt equity for
the year 2016 is 5.53 and in 2015 it is 9.29 respectively which indicates the reduction in the
shareholder's equity in 2016. Hence, the debt assets ratio of the firm in 2015 is 0.39 and in 2016
it is 0.50 respectively.
Illustration 4: Liquidity ratio of TRG
Interpretation: The Liquidity of firm to meet the Short and long-term debts by
considering the following ratios such as current ration in the year 2016 is 0.36 and in 2015 it is
0.28. Thus, the acid ratio in 2015 is 0.04 and in 2016 it is 0.10 which describes that the firm
iscarrying the liquid assets as compare to previous year. Hence, the working capital ratio for
2015 is -21.02 and in 2016 it is -21.34 respectively.
Illustration 5: Efficiency Ratio of TRG
Interpretation: In order to have the information related to the firm's efficiency the ratios
can be analysed on inventory of the organisation for the period 2015 and 2016. Hence, the Stock
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turnover ratio in year 2015 is 93.71 while in 2016 it is 117.77 which indicates that the firm is
efficient enough to handle inventories. The total assets turnover for the business in 2015 as 1.54
and in 2016 it is 1.6 which says that the firm is having enhanced sales in 2016.
TASK 4
4.1 Distribution of the funds and available sources for capital projects
Enclosed in Poster
CONCLUSION
On the basis of above study, it can be said that, there has been various financial benefits
which are facilitated to tours and travel industries in making the profitable growth in the future.
Hence, as per Merlin Entertainments the managers of the organisation were suggested various
costing, budgeting as well as pricing techniques which will help them in attaining the
organisational goals. However, the financial ratio analysis of TRG group had made and that
reflects the profitability, efficiency as well as solvency of the organisation. Further it can be said
that, various governments at different nations are facilitating funding in capital projects in order
to enhance the tourism sector in their countries.
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REFERENCES
Books and Journals
Cantú, F., 2016. The determinants of future economic growth Sabbatical programme report.
Chung, H. and Jung, W. O., 2016. Financial Disclosure Incentives and Organizational Form
Changes. Asia‐Pacific Journal of Financial Studies. 45(6). pp.839-863.
da Silva Etges, A.P.B. And et.al., 2016. USING COST-VOLUME-PROFIT TO ANALYSE
THE VIABILITY OF IMPLEMENTING A NEW DISTRIBUTION CENTER. Brazilian
Journal of Operations & Production Management. 13(1). pp.44-50.
Lopes Miiller, D. and Lopo Martinez, A., 2016. BOOK-TAX DIFFERENCE, EARNINGS
MANAGEMENT AND BOND RATINGS IN THE BRAZILIAN MARKET. Revista
Universo Contábil. 12(3).
Pradhan, R. S. and Paudel, L., 2017. Impact of fundamental factors on stock price: A case of
Nepalese c
Robinson, P. and et.al., 2016. Operations management in the travel industry. CABI.
Roy, C., 2016. Financial Reporting Irregularities in Indian Public Sector Units: An Analysis of
Current Practices. Browser Download This Paper.
Said, H. A., 2016. Using Different Probability Distributions for Managerial Accounting
Technique: The Cost-Volume-Profit Analysis. Journal of Business and Accounting. 9(1).
p.3.
Vollmers, G. and et.al., 2016. Cost Accounting for War: Contracting Procedures and Cost-plus
Pricing in WWI Industrial Mobilization in Italy. European Accounting Review. 25(4).
pp.735-769.
Online
What Are the Benefits of Skimming Pricing Strategy? 2017. [Online]. [Available
through] :<http://smallbusiness.chron.com/benefits-skimming-pricing-strategy-5122.html>.
[Accessed on 26th October. 2017].
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