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Finance and Funding in Travel and Tourism - solution

   

Added on  2019-12-28

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Finance and Funding in Travel and Tourism1
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Table of ContentsINTRODUCTION................................................................................................................................3TASK 1.................................................................................................................................................31.1.....................................................................................................................................................31.2.....................................................................................................................................................41.3.....................................................................................................................................................6TASK 2.................................................................................................................................................7TASK 3.................................................................................................................................................73.1.....................................................................................................................................................7TASK 4.................................................................................................................................................94.1.....................................................................................................................................................9CONCLUSION..................................................................................................................................10REFERENCES...................................................................................................................................112
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INTRODUCTIONTravel and tourism sector is service-oriented enterprises operates in hospitality industry whichobjective is to deliver wide range of services like lodging, travelling, entertainment and manyothers. All the establishments that operate in the sector require procuring adequate quantity of fundsand managing it adequately so as to generate maximum return and fulfil financial objectives.Moreover, with the changing market conditions and customer preferences, it becomes essential forthe entities to make sure proper funds availability, so that, they can respond quickly marketchallenges and manage risk as well. The aim of the present project report is to acquire knowledgeand skills that will assist management to make best quality of decisions for the smooth functioning.Moreover, the significance of cost, volume and profit analysis will be demonstrated, through which,travel and tourism companies can manage their operations successfully. Along with this, the reportwill also explain various pricing methods by which Merlin Entertainment Plc can decide theirproduct prices for revenue collection. At the end, assignment will interpret annual statement of TheRestaurant Group (TRG) to examine and evaluate the operational performance and financialstrength. Along with this, report will also explain different type of funding sources wherebycompanies can raise money to meet their capital requirement. TASK 11.1According to the given scenario, Merlin Entertainment Plc (MEP) is a United Kingdom basedentertainment company which is operation around 115 attractions in 23 countries across fourcontinents. It is running its operations through three segments that are Midway Attraction,LEGOLAND Parks and Resort Theme Parks. Out of these, first segment conduct limited number ofoperations as it is located in city centers and resorts, while, LEGOLAND Park comprises LEGOthemed accommodation, rides and shows as well. Similarly, Resort Themes Parks encompassesrides, accommodation and shows. With the volatility in consumer demand, tough competition, high pricing pressure, MEP’smanagers are responsible to manage their business cost and maximize their return. Cost-Volume-profit (CVP) analysis is an effective technique which companies can use to measure the impact ofvolatility in cost and volume on their operational expenditures and net yield (Altinay and et.al.,2015). CVP technique works as an important managerial way that will assist MEP’s managers toexamine the relationship between business cost and their overall return. With the help of this, theycan identify that how changes in cost of goods production and distribution will bring changes in net3
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profitability. Cutting-down of both fixed and variable cost and larger sales volume are the basicways to improve net earnings. CVP analysis is of great importance because through applying thismodel in business practice, MEP can determine the most profitable combination so as to generategreater yield (Quattrone, 2016). This mechanism assists companies in making effective short-termdecisions and reach targets easily. The significance of CVP tool for MEP is outlined below: Break-even analysis:The most important benefit of CVP analysis is that it will assist MEP todetermine their break-even point (BEP). It represents the situation at where cost becomes similar tothe total revenue that is a sign of maximum and optimal utilization of available business resources.It is necessary for the company to know their BEP because through this, they can identify that howmuch units they are essential require to sale to cover their total cost and thereby eliminate thepossibility of loss. Every additional unit after this level contributes towards more profitability whileif MEP made less sales than it will bear loss. Contribution: According to marginal costing practices in cost accounting, contributionrepresents the different between total turnover and variable cost. Thus, it does not take into accountfixed cost because MEP will have to bear such expenditures even at the time of nil production. Insuch regards, variable expenditures are those which will be increase simultaneously with theincrease in sales volume (WisCombe and et.al., 2016). However, fixed expenditure remains constantand does not tend to vary according to the change in output. With regards to MEP, its variable costcomprises meal cost, cost of entertainment services, accommodation facilities etc. Throughemploying CVP analysis, it can determine their contribution margin by subtracting total variablecost from the total sales. Thus, by controlling of variable expenditures and larger turnover, MEPwill be able to maximize their contribution to a great extent. Profit margin: Contribution less of total fixed cost represents net yield or profit. ReferringMEP, insurance, depreciation, rent of premises etc. are the fixed cost which business needs to beareven when it does not produce a single unit of product or service (Camilleri, 2015). CVP analysisenables entrepreneur to determine their net yield by deducting their total of fixed and variable costfrom total turnover. Profit volume ratio: PVR measure the contribution percentage over the total sales revenues.Higher the contribution % is a good sign of business return because it indicates that MEP hasmaintained an effective control over variable cost so as to enlarge their contribution.1.2Not only the determination of cost is sufficient, but also, it is essential for MEP to set correctselling price for their goods and services offered to the consumers. It is because; very high product4
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