Finance and Funding in Travel Tourism Sector Assignment (Doc)
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Added on 2020-10-05
Finance and Funding in Travel Tourism Sector Assignment (Doc)
Added on 2020-10-05
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FINANCE IN FUNDING INTRAVEL AND TOURISMSECTOR
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1 ...........................................................................................................................................1A. The concept of CVP analysis and its importance in financial management in EUROCARIBtours..............................................................................................................................................1B. Analysis of different pricing methods for EUROCARIB tours..............................................2C. Factors that will influence the profitability of EUROCARIB.................................................4TASK 2............................................................................................................................................5A. Different types of management accounting information can be used in Eurocarib................5B. Investments appraisal techniques as decision- making tool....................................................6TASK 3............................................................................................................................................9A. Main financial statements and interpretation of financial statements using rations such asprofitability, liquidity and investment..........................................................................................9TASK 4..........................................................................................................................................13A. Sources of finance available for Eurocarib for the development of new hotel.....................13CONCLUSION..............................................................................................................................14REFERENCES..............................................................................................................................16
INTRODUCTION The topic of this study is finance and funding in travel and tourism sector. Finance andfunding is related to different sources of funding available for travel and tourism sector toperform its various functions. Finance is related to the financial requirement of the companywhich assist in performing its various operations. The company selected for this project isEUROCARIB TOURS. This company is providing various services relating to torus and travelto customers. It is a London- based company that focuses on Caribbean holidays. This study willinclude task in which it will provide with Cost – volume profit analysis and importance offinancial management. Furthermore, it will provide analysis of pricing methods which theorganization can use to determine the price of products and services. Moreover, it will includemanagement accounting information as a decision- making tool. It will also provideinterpretation of financial accounts to assist in decision – making.TASK 1A. The concept of CVP analysis and its importance in financial management in EUROCARIBtours.Cost volume profit analysis is a tool to determine the relationship between cost, volume ,profit and price. Cost in CVP analysis means the expenses which are made for producing theproduct or service. Volume in CVP analysis is related amount of service sold. Profit in CVPanalysis is provided by subtracting the selling price of the product from its cost.CVP analysis helps the management in forecasting about future volume and cost toidentify the profitability of EUROCARIB. This analysis Is based on certain assumptions whichinclude sales price per unit is constant, variable cost per unit remains constant and Total fixedcost also remain constant (What Is CVP, and How Is It Important to Managerial Accounting,2018). Cost – volume profit analysis is also used by EUROCARIB tours to determine its breakeven point. Break even point refers to the point of sales at which the firm does not occur any lossand also does not generate any profit. Break even point is calculated by dividing the organizationfixed cost by contribution margin. Fixed cost refers to the cost of production which remains constant over the period.Contribution margin refers to the organization income before deducting the fixed cost. Variablecost in CVP analysis changes as per changes in the volume of sales unit. CVP analysis is assist1
organization in identifying various changes in cost and volume which affect the firm'sprofitability. Importance of CVP analysis in financial managementCVP analysis is important in financial management of EUROCARIB tours as it provideunderstanding of changes in cost which have its impact on various functions of firm. Costvolume profit analysis helps EUROCARIB tours in controlling cost by identifying the variablecost and fixed cost due to which its profitability is reducing. CVP analysis is also helpful inmaking decisions regarding future improvement of operations to increase the productivity andprofitability of firm. Effective decision- making assist the organization in formulating various strategies whichwill provide support to EUROCARIB in reducing its cost and increasing prfits. CVP analysis isalso provided assistance to financial management as it support in prepare budget through whichthey can take necessary action for reducing the deviation in budget. CVP analysis also helpEUROPCARIB in determining its maximum sale volume to avoid losses and the sale volume atwhich the goals of the organization are achieved.B. Analysis of different pricing methods for EUROCARIB toursPrice of the product or service places an important part in attracting customers towardsthe organization. EUROCARIB tours uses different pricing methods to determine the price ofproduct to attract more customers. This pricing methods consist of the following:Cost – based pricing : Cost based pricing method is used to determine the price ofproduct by adding profit margin to the cost of product. Cost of product include manufacturingcost of product to determine the selling price of a product and service.Advantages of cost based pricingThis method of calculating price of product is beneficial for organization as it cover allthe cost of production to determine the selling price before profits are calculated.This method of determining price is a straight – forward and simple strategy.Disadvantages of cost based pricing This method may lead to under prices products.This method may ignore the opportunity cost of the investment.2
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