Importance of Cost in Financial Management | Assignment
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Added on 2020-02-05
Importance of Cost in Financial Management | Assignment
Added on 2020-02-05
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FINANCE AND FUNDING IN THE TRAVELAND TOURISM SECTOR
TABLE OF CONTENTSIntroduction......................................................................................................................................3Task 1...............................................................................................................................................31.1 Importance of costs and volume in financial management....................................................31.2 Pricing methods used in the travel and tourism sector..........................................................51.3 Factors that influence profit of travel and tourism business..................................................7Task 2...............................................................................................................................................92.1 Different types of management accounting information.......................................................92.2 Use of management accounting information as a decisions making tool..............................9Task 3...............................................................................................................................................93.1 Financial accounts of The Restaurant Group (TRG).............................................................9Task 4.............................................................................................................................................114.1 Sources and distribution of funding for the development of capital projects......................11Conclusion.....................................................................................................................................13References......................................................................................................................................142
INTRODUCTIONFinance is an integral part that supports organizations in accomplishing their objectives.Proper planning, controlling and monitoring are only possible when management of funds in thefirms are strong. Present report is based on different case studies. Merlin Entertainment is theUK based firm that is operating in more than 23 countries across the world. Assignment willdiscuss the importance of cost in financial management of travel and tourism business. Also,several factors that influence the profit of entities will be highlighted in this report (Zhou-Grundyand Turner, 2014). Different types of management accounting information that are used in theMerlin Entertainment Plc will be covered in this assignment as well. The Restaurant Group(TRG) plc is the leading brand that is working in hospitality industry. Financial performance ofTRG will be illustrated in this study. Poster will also be created for Cross Railway project inwhich sources and distribution of funding for the development of capital project will behighlighted (Costa and et.al, 2016). TASK 11.1 Importance of costs and volume in financial managementCost can be explained as the total expenditure of organizations that are incurred forproducing products and for satisfying the needs of customers. For better functioning of thebusiness, it is essential to maintain the cost (Bao, 2014). Travel and tourism is the big industrywhere companies have to concentrate on traveler's needs. Travel needs of customers can getchanged any time so to meet the expectations of consumers, firms have to modify theiroperations accordingly. As Merlin Entertainment Plc is engaged in the entertainment sector,there are several costs which are necessary to bear by the cited firm. CPV analysis is the modelthat supports cited firm in knowing its expenditure and volume. If expenditures are high thenprofit may get reduced to a great extent (Cárdenas-García, Sánchez-Rivero and Pulido-Fernández, 2015). There are several techniques such as Break-even analysis, cost volume profit,etc. through which importance of cost and volume can be analyzed significantly. CPV analysiscan assist Merlin Entertainment Plc in gaining knowledge about level of sales for generating thedesired profit. 3
Fixed costs: As Merlin Entertainment Plc is operating in the entertainment field so fixedcost of firm are like salaries paid to employees, utility bills, membership fees, bankingservices, etc (Whitford and Ruhanen, 2016). Entity has to invest the amount in theseactivities to run business smoothly. But it is necessary to look upon the total cost ofexpenditures, if operational cost is high then overall profit can get reduced to a greatextent. On the other hand, if Merlin Entertainment Plc pays timely to its staff membersthen they would be satisfied and they will perform better that can enhance the profit oforganization. By forecasting the total cost and sales, finance manager of the companywill be able to make effective decisions for controlling the cost so that revenues can beincreased (Arabska and Terziev, 2015).Variable costs: Apart from the fixed costs, Merlin Entertainment Plc. is having variablecosts as well such as tax, visa costs, etc. Changes in any expenditure can put a directimpact on the sales of corporation. To match with the standards, cited firm needs toinvest some amount for improving transportation facilities and have to hire skilled peoplein the organization (Ghaderi, Mat Som and Henderson, 2015). By analyzing the variablecost, cited firm will be able to make effective financial decisions. Break-even analysis is another method that can support Merlin Entertainment Plc indetermining the sales against cost. Volume and cost are two important elements in travel andtourism sector with the help of CPV and break-even analysis techniques. Manager of cited firmwill be able to gather relevant information through which individuals can make effectivedecisions for the welfare of company (Briones, Yusay and Valdez, 2017). These tools cansupport Merlin Entertainment Plc in planning the business operations and taking futuredecisions. With the help of CPV analysis, organization can be able to determine its capacity tosatisfy the needs of consumers against investments. 4
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