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Report On Financial Management & Importance Of Cost

Added on - 27 Jan 2020

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Finance and Funding in theTravel and Tourism Sector
Table of ContentsINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1Explain the importance of costs and volume in financial management.................................31.2 Analyse pricing methods used in travel and tourism sector..................................................41.3 Analyse factors influencing profit for travel and tourism businesses....................................6TASK 2 Enclosed in PPT................................................................................................................7TASK 3............................................................................................................................................73.1 Interpretation of ratios...........................................................................................................7TASK 4..........................................................................................................................................104.1 Enclosed in poster................................................................................................................10CONCLUSION..............................................................................................................................10REFERENCES..............................................................................................................................112
INTRODUCTIONFinance is act like a rescue ship which rescue the business entity from the financial warsand crisis faced by an entity. Financial resources are used by an entity in order to uplift theirexisting market position in relation to its competitors. Merlin entertainment services has beenselected for this project who provide theme parks services and amusement services in order toplease variety of customers. This project report is all about explain the importance of cost andthe volume play an integral role in enhancing the current financial management situations. Thisemphasises on defining various pricing patterns which needs to be adopted by this enterprise.The factors which is influencing the whole profit which are explained throughout the report. Thevariety of MIS Tools has focused and it is assessed on a criterion of decision making tool. Theinterpretation of ratios has explained which is based on the business of Restaurant group plc. Thearrangements of different sources of finance which will further used by an entity are explainedwith the help of preparing Poster.TASK 11.1Explain the importance of costs and volume in financial managementFinancial management is that concept which needs to be adopt by Merlin entertainmentin border to identify its current costs incurred by them in a particular year (Kaoutar andMohammed, 2016). The management of the financial resources in a unique concept which isrequired to be followed by this entity. The efficiency of the existing financial resources areimproved by nurturing their current skills in taking new business opportunities related to thefinancial aspects. There are two important concepts which helps in explaining the importance offinancial management which is given as below:Cost-The cost is the basic element incurred in an entity in order to grab new marketopportunities in order o gain competitive advantage over variety of rivals. The amount investedby the owner in this travel and tourism sectors is given as follows:Fixed cost-The cost which is not affected with the changes takes places in the total outputproduces by an entity as it incur even in zero units produced by the business. For instance, rent ofpremises, utility bills.3
Variable cost-the amount of this cost is parallel to the units produces by an entity as theexternal changes takes places in the unit will create significant changes in the variable cost. ForExample, Advertising cost and the commission is associated with the sales and the revenueincurred by Merlin entertainment services.Volume-The sales and the revenue earned by an entity in a financial year are dependent onseveral changes which will determines the actual position of an entity. The Break even analysiswill be used in order to explain the concept of Volume which is give as below:Break-even analysis-It is one of the important method used in accordance with standardcosting in which the relationship will be formed among the cost and the sales incurred in abusiness entity (Schmidt, Mason, Bruwer and Aspeling, 2016). The break even point is thatpoint at which an entity will earn no profit or loss as at this level the business is just meetingtheir cost applied by them in a business. This break even point will be shut down point for thebusiness users as this will not generate no profit or loss situation for the business enterprise. Thiswill determine the total sales in units or amount earned by an enterprise in the future. The salesunits in advance identified by an organization will be helpful for the business as the future salesgeneration will cover up- the total costs consisting fixed and variable cost.The break even point is used as forecasting tool which helps in assessing the current factsand figures in order to determine the future sales (Benson and Marks, 2016). The break evenpoint is the trap further analyzed by an entity to beat the current point in order to earn higheramount of profit. The value of break even point will not be taken as the permanent value as thisvalue ,ay vary according to the different nature of the business. The business complexities willvary the amount generated by an entity in a particular year. The sales and the contributionamount will be identified by an entity in a particular year to meet their fixed cost by paying offall the existing obligations.1.2 Analyse pricing methods used in travel and tourism sectorPrice is essential components used by an entity in order to attract price sensitivecustomers towards their business (Locatelli, Fedele, Fayolle and Baglee, 2016). The price of theproduct will reflect the actual performance of an entity as it showcases the efforts of anindividual in developing the products. The strategic analyst who designs price of a product willinclude all fixed and variable costs in a product along with the profit margin. The presentation of4
the products is different as it will steal the interest of wide number of customers. There arevarious pricing methods which can be used by an entity which is given as below:Cost plus pricing-This is commonly used technique in which fixed and the variable costs aretaken into consideration to count the efforts applied by the users in development of the productsor services. The better development of products will help in catering the needs and theexpectations of different individuals. The profit is to be included along with the total costincurred by an enterprise owner (Benson and Marks, 2016). The Merlin entertainment includesrental cost, flight lease cost, tickets cost, accommodation provided on airport, food cost,servicing cost and taxation costs. The specific profit margin will be included by the owneraccording to their convenience and aspiration to earn higher profit as compared to its rivalmember.Differentiation pricing-The increasing competition in the external market has raises the scopeof the current entity who provides amusement parks and them park services in order to cater theneeds of individuals. This attraction services are influenced kids which in turn attract the wholefamily to visit these places. The prices are set by an individual different for varied customers asthe variety of services are offered at different prices. The pricing strategies are crafted by anentity owner by analyzing the prices of its competitors. The prices are set by analyzing the pricesof all the competitors in order to produce unique strategies in front of all kinds of customers.Marginal costing-This is essential pricing pattern adopted by an individual by focusing only onvariables cost incurred by an entity in a particular year. The fixed cost are included in the pricingstrategies crafted by an entity (Ezeanata Walter and Parimoo, 2016). The marginal costing isapplied while designing pricing which focuses on that type of cost which induces the sales andthe revenue as these cost are highly affected by the units produces by an entity over differentperiod.Absorption costing-The current pricing strategy is taken as the best appropriate pricingstrategies in which both fixed and variable costing are taken into account while craftingstrategies. The costs are absorbed over the number of units produces by an owner in theirbusiness tenure. The higher and the lower production of unit is based on the ultimate goaladopted by an organization. The Merlin entertainment will develop its pricing according to theexternal market changes which will be included as a guiding factor. The flexibility will be5
included in the pricing in order to ensure all the business users to consider the changed prices bynot affecting the existing organizational structure. The structure will be protected by consideringthat kind of cost which will not affect an entity's performance.1.3 Analyse factors influencing profit for travel and tourism businessesThe basic obligation of an enterprise is to achieve profit by conducting their businessoperations in a proper format in order to cater the needs and the expectations of an individual(Finch, Goff and Houck, 2016). The profit is regarded as the final outcome generated by anentity after applying their hardest efforts by facing turbulent situations like financial crisis. Thereare various factors which affects the performance of an entity and the overall profit earned byMerlin entertainment are given as below:Seasonal variations-The Services offered by Merlin entertainment includes amusement parksand theme parks services which steals the interest of different kids and all other age groups. Theservices offered by this entity will only work in the weekend or during vacations. The businessof this entity is based on the seasons where school holidays are there. The amalgamation of thisentity will provide commission to this entity for giving wide number of customers to use theservices in the Toy land and attractive places.Political environment-The political party of the attraction places will affect the currentbusiness of Merlin entertainment as changes takes places in the political environment will furthercreate trouble for all the tourists who visit the places. The reliance of customers on Merlin willbe broken as this spoil their current image (Squires and Hutchison, 2016). The visa cost increaseswill affect the current profit level earned by an entity. The taxation burden on Merlin will,increases the prices of amusement parks tickets and the whole tour packages. This will affect theregular customers of this entity as no one will travel on the higher prices. This problem willrectify by offering additional facilities in the tour packages to attract customers to purchase thepackages even on the higher prices.Social environment-The tastes and the preferences are need to be taken into consideration aswithout which the tour packages designed by an entity will all goes in vain. The religious needsof all individuals will be fulfilled by providing these kinds of facilities at all the places. Thesuperstitious person will firstly focus on the pilgrimage centers before selecting a particulardestination. The lifestyle of an individual will not be compromised by offering non-vegetarian6
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