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Finance and Funding of Eurocarib

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Added on  2020-10-22

Finance and Funding of Eurocarib

   Added on 2020-10-22

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FINANCE AND FUNDING
Finance and Funding of Eurocarib_1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1P1.1 concept of CVP analysis and its importance for financial management of EUROCARIB1P1.2 Pricing methods that EUROCARIB can use to determine its price....................................1P1.3 Factors affecting the profitability of Eurocarib ................................................................1TASK 2............................................................................................................................................4P2.1 Different types of management accounting information that Eurocarib can use...............4P2.2 Application of investment appraisal techniques for decision making tools.......................5TASK 3............................................................................................................................................8P3.1 interpretation of appropriate ratios for profitability, liquidity and investment...................8TASK 4..........................................................................................................................................11P4.1 Analysing sources and distribution of funding organization for development of hotel.. .11CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................15APPENDIX....................................................................................................................................17
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INTRODUCTIONFunding is considered as actual money given through organization or throughgovernment sector with specific objective and in similar aspect, finance is referred as process forreceiving capital or money with perspective of business and mostly it is provided via financialinstitutions like banks along with other lending agencies. The present report will discuss aboutfinancial performance and position of EUROCARIB along with concept of cost volume andprofit analysis with its importance with context of financial management. In the similar aspect, itwill be showing analysis of multiple pricing method for identifying expense of each tourist alongwith factors which are influencing margin. There will be description about types of managementaccounting information and application of range of techniques for improving performance andactivities. There is assessment of investment appraisal techniques as tool for decision making andinterpretation about financial ratio of EUROCARIB in appropriate manner. Henceforth, it will beanalysing bothy internal and external source along with distribution of funding for purpose ofdevelopment.TASK 1P1.1 concept of CVP analysis and its importance for financial management of EUROCARIBCost- volume profit is the method of cost accounting by which company will carry outthe impact which is varying level of cost and volumes of organisation to measure operating profitof the organisation. This method generally used to determine the break- even point which is usedto calculate sales volumes and for cost structures which is useful for managers in developingshort term economic decisions for organisation. In this method of cost analysis, sales price, fixedcost and variable per unit will remain constant where cost- volumes develops several assumptionso that relevant analysis is measured in organisation (Polzin, Toxopeus and Stam, 2018). Assumption in this analysis is that all units which is produced in organisation will assumeto be sold and cost remain variable or fixed. Second assumption of CVP analysis is that chargesin expenses occurs because of change in an activity level of organisation.1
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Its importance for financial management of EUROCARIB is that it is used to measurechanges to be developed in organisation regarding cost and volumes which affects overalloperating expenses and net income of the company (Boesel, Kool and Lugo, 2018). For thebusiness of tour and travel industry, CVP helps in comparing the cost of operating and producinggoods, amount of goods sold and profit which is generated by sales of those goods. There arethree elements which used to measure CVP in EUROCARIB business that is cost, volume andprofit. By measuring cost, company will able to measures expenses which is involved inproducing or selling products or services of organisation. Volume helps in determine unitproduced in organisation and amount of services sold to customers. Profit determines differencebetween selling prices of services minus cost to provide that services (Clauss and Remhof,2018). Therefore, CVP helps EUROCARIB company to determine its contribution margin,which incur after deducting all the variable expenses and remaining sales revenue will beconsider as contribution margin of company. Therefore, it is the most important process of theEUROCARIB organisation which helps to determine overall profits and sales volume of thecompany.2Illustration 1: cost -volume profit analysis(source: Cost-Volume Profit (CVP) analysis, 2018)
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P1.2 Pricing methods that EUROCARIB can use to determine its priceThere are various pricing methods that can be used by Eurocarib to determine its price tocharge from its tourists. These pricing methods are as follows :Market penetration pricing : Thos pricing strategy is used in which the price of theproduct and services is kept lower to increase its sales and attract more customerstowards the organisation product and services (Santosuosso and Scarlett, 2018).Eurocarib can use this pricing strategy in which it can keep the price of its products andservices and after increasing its customer base can higher the price of product to increaseits profitability.Cost – based pricing : This pricing strategy is used by organisation in which the price ofthe product is determined on the basis of cost of its products and services. In this pricingstrategy organisation determine the price of its products and services by adding the profitmargin to the cost of products and services to determine the final price of its product.Eurocarib can use this pricing strategy in which the price of its product and services isdetermined by adding the profit margin to the cost incurred for providing that product andservice to customers.Competition based pricing :It is a pricing strategy used by organisation to determine theprice of its product and services on the basis of competitors price offered for the sameproduct and services (Kay, 2018). Organisation use this pricing strategy to attract morecustomers towards their brand by providing the same product and services of competitorsat less price. Eurocarib can use this pricing strategy by determining the price of itsproduct and services on the basis of price offered by competitors to attract more touristtowards the organisation.P1.3 Factors affecting the profitability of Eurocarib There are various factors that affect the profitability of the organisation which consist ofthe following:Seasonal variations : This factor affect the profitability of the Eurocarib due to thechanging season the demand for tourism increases or decreases. Tourism is mostlypopular in winter due to the increased demand in that season which generate more profitfor the tourism industry but on the contrary, In summer season the demand for travel andtourism decreases which affect the profitability of the eurocarib.
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Political factors :These are those factors which affect the profitability of organisation dueto changes inn the government, changes in tax policy etc (Bergset, 2018). Theprofitability of eurocarib is affected by these factors for example if there is increase in taxrate than the organisation will have to high pay taxes due to which it profitability will bereduced. Economic factors : These are those factors which affect the profitability of the firm byvarious changes in the economic conditions. Economic factors includes inflation,economic instability etc. Eurocarib is affected by these factors for example, high inflationrate will result into high prices of travel packages due ton which many people will not beable to afford the travel packages and thus there is low profitability for the eurocarib.Current trend : This factor affect the profitability of the organisation due to the changingtrend in industry. Current trend refers to the change in the taste and preference of thecustomers in choosing the place for the destination (4 Types of Pricing Methods, 2016).Nowadays there are various changes in the trend of tourism which includes differenttypes of tourism preferred by different age group. For example, adventure tourism ismostly preferred by young generation people whereas religious tourism and culturetourism is mostly preferred by old generation people. Eurocarib in order to reduce theimpact of this factor must provide tourism relating to all types to attract customers of allage group.2
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