Financial Analysis: Travel and Tourism Sector - Carnival Corporation

This report provides a comprehensive analysis of finance and funding within the travel and tourism sector, using Carnival Corporation & plc as a case study. It begins by exploring the importance of cost and volume in financial management, including direct and indirect costs, fixed and variable costs, and the application of break-even analysis and economies of scale. The report then examines various pricing methods employed in the industry, such as cost-led and oriented pricing, and cost-plus pricing, assessing their impact on profitability. Furthermore, it investigates the factors influencing profit for travel and tourism businesses, including seasonal variations, political and economic environments, and social trends. The report also covers different types of management accounting information and their role in decision-making, as well as the interpretation of financial accounts and sources and distribution of funding for capital projects associated with tourism. The report aims to provide a detailed overview of the financial dynamics of the travel and tourism sector.

Finance and Funding in the
Travel and Tourism Sector

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
1.1 Importance of costs and volume in financial management of travel and tourism businesses
................................................................................................................................................1
1.2 Analysis the pricing methods used in the Carnival Corporation & plc............................2
1.3 Analysis the factors which influencing the profit for Carnival Corporation & plc..........3
LO2..................................................................................................................................................5
2.1 Different types of management accounting information..................................................5
2.2 Assessment the use of management accounting information as decision making tool....7
LO3..................................................................................................................................................8
3.1 Interpret travel and tourism financial accounts................................................................8
LO4..................................................................................................................................................9
4.1 Source and distribution of funding for the development of capital projects associated with
tourism....................................................................................................................................9
CONLCUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Finance is a sector that deals with the study of investment. It includes the dynamic of
assets and liabilities over time under condition of different degrees of uncertainty and risk. It is
also be dignified as the science of the money management. Funding is the act or providing
financial resources, usually in the form of money, or other values such as effort or time. Sources
of funding include credit, grants, venture capital, donations, subsidies, taxes and savings. This
present report is based on the Carnival Corporation & plc which is the biggest leisure travel and
tourism organisation in London. In the present report, importance of costs and volume in
financial management of the travel and tourism businesses and pricing methods are covered.
Along with this, different types of management accounting information and its decision making
tools are discussed. Moreover, in the report sources and distribution of funding are covered.
LO1
1.1 Importance of costs and volume in financial management of travel and tourism businesses
Importance of costs: - Each and every company need to manage their costs, and volume in
financial management. In order to manage the cost system in the organisation, they use the direct
costs, indirect costs, fixed costs, variable costs, allocation and apportionment in the cost analysis.
These entire costs plays the very important role in the financial management of the travel and
tourism business (Jacob, 2017). With the help of direct and indirect costs, organisation can
prepare the report of expenses and total costs, however financial management will be able to
know about the entire expenses and then they can prepare the plan for control the expenses and
costs. It is the main and important factor of the travel and tourism sector, because they need to
identify about the all expenses which is done by the financial management in the organisation.
Along with this, with the help of fixed costs, and variable costs, they can control some effective
expenses, however company can able to achieve more profitability from the business. On the
other hand, Carnival Corporation & plc can use some another effective costs analysis in their
organisation, then it will be beneficial for them. Through the costs analysis, travel and tourism
sector can identify the entire expense, so they can invest in accurate place, so they can able to
earn more revenues from the business. It is very important process of the company, because
trough it they can invest In different types areas of the business. Along with this, through this
analysis, they can invest or work according to priorities in the business (Source and distribution
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of funding, 2017). One of the biggest benefit of this activity is the large amount of market which
is achieved by the Carnival Corporation and plc company.
Importance of volume: - The break even analysis determine that what company need to sell,
monthly or annually, to cover their costs of doing business. Break even analysis is based on the
fixed costs and through it they can identify the areas of sell and ways to sell. Along with this, it is
the main and important analysis in the financial management, because through it, travel dn
tourism company can know about the products which should be sell in the market according t5o
time. This analysis show the entire products and services which can be soled in the market
according time (Becker, 2016). There are different types of season in the different places, so it is
very important to know about the environment of each and every place, so travel and tourism
company can manage their package which is provided to the customers. Other than that, this
analysis help the company in increasing their profitability, customers satisfaction and their
happiness during the travel. It is depend on the assumptions made for average per unit revenue,
per unit cost, and fixed costs. Carnival Corporation & plc should use the break even analysis in
their travel and tourism sector. On the other hand, they can use the economies of scale in their
financial management. It is the cost advantage that arises with increased output of the product. It
is depend of the quantity and per unit fixed costs, so it can be easy for the company to know
about the cost. Through this process, company can increase the exposure or helping to minimize
the entire risk of the travel and tourism sector.
1.2 Analysis the pricing methods used in the Carnival Corporation & plc
There are different types methods pricing which are using by the many organisation.
Each and every financial management should use some effective pricing method in order to
increase the profitability and revenues of the business. When travel and tourism sector set their
prices of the products and packages, the they should analysis first that their prices are according
to market or not (Pike, 2016). There are different types of business, and they are using various
types of methods for pricing, however with the help of analysis Carnival Corporation & plc
should use the following pricing method in the financial management:
Cost led and oriented pricing method: - In the cost led and oriented pricing method certain
margin is include to the cost that enable to derive the profitability from the business operation. It
is the very common and simple method to understand in the travel and tourism sector. Carnival
Corporation & plc is proving the different types of products and holiday package to their
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cst0mets. With the help of cost led and oriented pricing method, they can set their prices
according to cost, however it will be beneficial for them and customers too. It is the very
important process of the Carnival Corporation & plc, however they should use this method in
their financial management, so they can control the another cost which is not beneficial for the
organisation.
Cost plus pricing method: - One of the important method is cost plus pricing, because through
it company can increase their profitability of the business. Along with this, this method shows
the prices with plus cost (Buckley and Mossaz, 2018). Moreover, with the help of cost plus
method, they can set their prices according to cost but more then it, however financial
management can able to increase the profitability and revenues of the travel and tourism
organisation.
One of the biggest reason of the profit is that company want to expand their business in
different areas, so they will be bale to provide their valuable services to the people. They can
able to get the better services from the Carnival Corporation & plc. It is very popular travel and
tourism company in the industry, so they can able to provide their best services to customer.
Along with this, it is the travel industry and in this sector they should set their process of the
products according to market, environment and cost, however they will be able to earn more
profitably from the business (Jones, 2016). Moreover, they should analysis about the social
environment an current trends, so they can able to provide appropriate products and holiday
package to the customers. Identification of the business environment and social environment is
very important in the travel and tourism sector. Other than that, current trend is also the biggest
point of the profitability and revenues of the business, however they should follow the trends
then provide the products and holiday package to the customers.
1.3 Analysis the factors which influencing the profit for Carnival Corporation & plc
There are numbers of factors which can be influences the profit for travel and tourism
business. Some of the main factors are mentioned below which are influencing the profit of the
travel and tourism business:
Seasonal variations: - In the global, there are different types of season like winter, summer and
rain. This season can affect to the profit of the travel and tourism business. People want to visit
and travel according to season, however company should provide the package according season
so they can get the enjoy from the holiday package of the travel and tourism business. Along
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with this, one of the main influence is that company accomplish the deal with some fixed sources
but according to season they can not able to utilise the services of them. However, it is the total
loss of the business, because they are arranging that services in another place (Dwyer and
Pavluković, 2017). There are different types of benefits from the seasonable package but some
time they can not get the better result from it. However they should use and deal in effective
way, so they will not get the unnecessary influence on the profit of the travel and tourism
business.
Political environment: - Travel and tourism company us providing their effective holiday
package and another products to the people. They are providing the holiday package which can
be in country or another country. One of the biggest reason of the influences of the profit is
political environment. Each and every nation has some different political environment, so they
are facing some trouble from it. When they provide the holiday package for another country of
the global, they should deal with some hotels, restaurant, and their government. Along with this,
they should get the permission of their government for the travel and visit the place. It ca bad
impact on the profit of the travel and tourism business (Petrevska and Serafimova, 2016).
Economical environment: - Each and every country has different economy and it can be
influenced to the profit of the travel and tourism business. There are different types of rules and
regulation of the all countries, however , company can not follow the entire rules and regulations.
However, they use short term deal with the country for travelling and visiting, but it not more
beneficial for the organisation. Along with this, their almost revenues and profitability are
depend on the economical factor, because if the economy of any of the country will not be
effective and good, then they can not able to deal with the company. This environment is based
on the interest rate, foreign exchange rate, and share market rate. These all ates can be changes
according to time, and its most biggest effect can be on the profit of the travel and tourism
business. With the help of entire information and knowledge, they can make the accurate and
appropriate planning and strategies for reducing the negative impacts in the business profit.
Through it, company can increase their brand value in the marker and profitability of the
business (Tung and King, 2016).
Social environment: - There are number of people or population in the global, and they are
using different types of products or holiday package from the different companies. One of the
main influence is that when they purchase the holiday package, they analysis the entire
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information on the website or any other sources. So they can able to compare all the services and
prices of the entire travel and tourism businesses. Further, they choose the products and services
of any of the company. Influence is that when they will use the products and services of the
Carnival Corporation & plc, and they get effective services from the company, they they will
start the mouth marketing in the market in favour of the organisation, but when they not get the
better services according to their perception, they they will start telling the negativity about the
company and it can be very bad for the brand value of the organisation (John and Susan, 2015).
Current trend: - Each and every travel and tourism company should provide the holiday
package and another products according to trend. It is main and important factor of the business,
because people only purchase the products which is running in the current trend. However, travel
and tourism company should analysis about the current trend and then prepare the planning
according to it. With the help of current tend they can able to provide effective packages and
products to the customers. One of the main disadvantage of this trend is that, some time company
can not handle or manage the current trend, so they will not get the effective profitability from
the business.
LO2
2.1 Different types of management accounting information
Management accounting information assist the direction to collect and handle each and
every interior activities of the management time to time. So, on the time of problems or conflict,
it can be resolved without any failure. Management accounting information is focused at internal
managers and decision makers. Through it, manager can improve the management accounting
process in the organisation. Travel and tourism industry should use the management accounting
information in their business, however they can analysis management accounting and get the
accurate information from it. All enterprises must conduct strategic planning in order to stay
competitive (Tan and Tsui, 2017). It is the procedure of planning for future operations through
the use of forecasts. There are different types of management accounting, but travel and tourism
should use following management accounting information in their business:
Financial statements: - The statements of financial can be used by the Dalata hotel group plc. It
provides the appropriate and accurate information about the organisation's finance condition.
Along with this, with the help of financial statements, they can prepare the income statements of
the business and also prepare the profit and loss account of the enterprise. Through clinician
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statements, their financial management can make the planning for the future profitability of the
business. Moreover, by identifying the entire information, they can control the risk management
and reduce the cost of the business (Bressler and Silver, 2016). With the help of income
statements, company can able to invest in different areas and expand their business in many areas
of the global.
Budgets: - It is the another effective and important tool of the management accounting
information of the travel an tourism business. There are different types of budgets which can be
used in the financial management of the travel and tourism industry. Types of budget include the
inventory budget, cost budget, and job costing. With the help of inventory budget, company can
manage and keep the record of the sale, purchase, return and another information of the
company. Through it, they can prepare the report of total sale and purchase of the products.
Along with this, they can identify the outcomes of the reports. Another types are job costing and
costing budget. I these budget system, company can know the productivity of the employees,
departments and entire company. There are different types of department and employee in the
organisation. Some of the employees are able to provide their accurate performance to the
company, but some of the employee are not able to provide their effective performance to the
company (Daniele and Quezada, 2017). In that condition, with the help of job costing budget,
manager can increase the budget on the higher performance of the department or employees and
decrease their budget on the lower department or employees. Along with this, for lower
performance employees they can provide them some effective training or learning session and
development program, however they can increase their information, abilities, knowledge and
skills. Moreover, financial management has to power that, they can provide some incentive and
bonus to the higher performance of the employees in the travel and tourism business.
Variance analysis: - It is also the very important management accounting information which
can used by the organisation. With the help of this analysis, company can obtain the information
about the competitor in the market. Along with this, in this information, they can get the
information of prising methods, technologies and operation ask of the competitors. There are
different types of competitors In the market which is providing the travel and tourism services to
the company. However, it is necessary that management analysis ad examine the entire factors of
the another companies in the market (Gurtner, 2016).
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Job cost report: - One of the important and effective tool is job costing report of the
management accounting information. Through it, company can invest in the higher profitability
of the areas. Other than that, with the help of job costing report, they can set the priorities and
then it will help company in increasing the profit and revenues. Through it, they can increase
their budget on the different types of sector which is more beneficial for the travel and tourism
business.
2.2 Assessment the use of management accounting information as decision making tool
Business inverts their funds in the capital projects for the purpose of obtaining profit or
return it. However, the methods through which various capital project are analysed from which
profit can be earned are listed below:
Comparison with trends: - There are different trends of the travel and tourism sector and its
changes according to time and choice of the people. The travel company should follow the trend
and provide their holiday package and another products according to current trend. People want
to effective and very good services from the travel companies, however, they should make sure
that provide the best services to the customers. All competitors are doing analysing of the current
trend, however travel company should also become the part of it. So, they can know about the
present trend (Ndivo and Manyara, 2016).
Investment: - With the help of management accounting information, company can invest and
expand their business in the different types of areas. Investment is the very important factor of
the business. Through it, they can provide them more effective services. Along with this,
company is able to get the all information and knowledge out the market and financial condition
of the business. With the help of information about financial condition of the business, they can
make more effective planning and strategies for the packages and products or services of the
travel and tourism industry. Through management accounting information they can take the
effective and important decision in the business. Moreover, they can able to achieve the target
and goals of the enterprise. It is the more important and beneficial for the organisation. If they
are able to increase their profitability and revenues of the business, they will be able to provide
more effective services to the customers. One of the main benefit of the management accounting
information is that their management can satisfy the entire customers which are using the
services of the travel and tourist organisation (Plessis and Saayman, 2017).
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Raising capital: - One of the most important decision can be raising the capital for the business.
If they will earn more from the business, then they will invest more in the business. Along with
this, they can increase their budget, however people gets the better solution and services from the
travel and tourism industry. With the help of management accounting information, company can
raising the capital for the business and able to expand their business in more areas of the global.
According to the raising capital, they can beat the make my trip and I tour beat company which
are the main competitor of the organisation.
New products and services: - Management accounting information plays the very important
role in the travel and tourism industry. Through it, they can launch the new products and services
in the market. Other than that, with the help of marketing management they can promote their
products and services in the entire ,market. Marketing management has different types of tool for
promoting and increase ng the products sale in the market. Moreover, new products and services
attract to the people and they will want to purchase it from the travel and tourism organisation. It
is very useful tool of the decision making tool. According to decision tool, they can make more
beneficial decision for the business which can effect the entire business. With new products and
services, they can able to provide discount and cash back for it, so people will prefer the products
and services from the travel and tourism company (Mitchell and Ivanov, 2016.).
LO3
3.1 Interpret travel and tourism financial accounts
Financial accounts : -
Cash flow statement: - In financial accounting, a cash flow statements also known as statement
of cash flows. It is the financial statement that show how changes in balance sheet accounts and
income affect cash and and break the analysis down to operating, investing, and financing
activities. With the help of cash flow statements, company can prepare the balance sheet (Graci,
2016).
Trading account: - It is the most important report of the travel and tourism industry. Through it,
they can evaluation of the sale and purchase of the business. Along with this, in the trading
account, financial management can include the entire expenses, costs and another wages of the
business. It is the effective and useful report of the business, because it shows the appropriate
and accurate figure of the sales, purchases, and return.
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Profit and loss account: - Travel and tourist company's entire financial condition is based on the
profit and loss account of the business. In this report, they can examine about the total cost,
expenses and revenues (Management accounting information, 2018). Along with this, they can
identify the areas of the profit and loss, however they make the planning and strategies for
increasing the profitability in the business.
Measure financial performance: -
Current ratio: - It is based on the current liabilities and assets of the organisation. With the help
of current ratio financial management are able to know the capacity of the company to pay their
short as long term debt. Current ratio is one of the important and effective activity to determine
the company's aspects. With the help of this activity, financial management of the travel and
tourism industry can pay the outstanding amount to the creditors (Gupta and Rout, 2016).
Return on net assets: - This is the another valuable method of the measure financial performance
of the travel and tourism company. Through it, they identify the outcomes from the assets of the
organisation.
Liquidity ratios:
The liquidity ratio refers to the capability of organization to Settle off its debt obligations.
Margin of safety is also measured through this ratio. It includes current ratio and quick asset
ratio. It is required to pay short- term debts of the organisation. Current ratio means that
company has to pay off debts from current liabilities and current assets.
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2014-15 2015-16
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.28
0.36
Illustration 1: Current ratio
2014-15 2015-16
0
0.05
0.1
0.15
0.2
0.25
0.13
0.2
Illustration 2: Qucik asset ratio.
Analysis:
Liquidity ratio is every important for the organization which is capable to settle its debts its
obligations in very short span, Moreover, the ideal current ration 2:1 is considers to be the best
organization as it will pay off the borrowings. Illustration1 current ratio is good because assets
are more than liabilities. Ideal quick ratios1:1 is considered as effective for the restaurant groups
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