Finance and Funding in the Travel and Tourism Sector: A Report

This report provides a detailed analysis of finance and funding within the travel and tourism sector, focusing on cost, volume, and profit (CVP) analysis. It examines the financial aspects of Merlin Entertainment, including variable and fixed costs, and the application of CVP analysis to determine break-even points and margins of safety. The report also explores pricing strategies, such as cost-plus pricing and differentiated pricing, and the impact of external factors, including political, economic, social, and technological (PEST) factors, on the sector. Furthermore, it incorporates ratio analysis to assess the financial performance, including liquidity, profitability, and gearing ratios, providing insights into the financial health and decision-making processes within the travel and tourism industry. The report is a valuable resource for understanding the financial dynamics of the sector.

FINANCE AND FUNDING IN
THE TRAVEL TOURISM
SECTOR

Table of Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
1.1......................................................................................................................................................3
1.2......................................................................................................................................................4
1.3......................................................................................................................................................5
TASK 2..........................................................................................................................................................6
TASK 3........................................................................................................................................................10
3.1....................................................................................................................................................10
TASK 4........................................................................................................................................................14
4.1 Enclosed in Poster......................................................................................................................14
CONCLUSION.............................................................................................................................................14
REFERENCES..............................................................................................................................................16

INTRODUCTION
The finance is act as a magic wand for the new entrepreneur for whom new business is
like a fantasy world whose problems will remove from financial magic. The current entity will
be saved from the attack of devils of this fantasy world in form of competitors on internal control
system and its operations. Conducting this business is a tedious work as in this section parties
involving in operations like customers and suppliers changes their needs and requirements
frequently which has a crucial impact on entity. Merlin entertainment is selected for project, this
entity provides entertainment services like theme parks which attracts its customers including
kids and old persons which means its a place for family entertainment. It provides very exotic
and thrilling services, that strengthens an organization’s performance. This report contains the
information regarding the link between the three factors cost ,volume and profit analysis which
an entity is required to analyze. This will provide details about the current status of organization's
performance and its cost structure. Cost structure here refers to the evaluation of cost and other
factors related with it. This evaluation allows management to decide the price of its goods and
services, and to develop that price. Management plays a vital role in communicating internal
information with external parties.
TASK 1
1.1
The primary concern of the management owner is to determine the cost incurred in the
future which needs to be predicting in advance to cut down the costs. There are different type of
cost incurred in industry of travel and tourism sectors. These costs are mentioned as follows:
Variable cost – cost arises during the operational activities of business which keeps on changing
as per the quantity of product. It means if the production level increases then the variable cost
will also be increased and vice versa in case of Merlin Entertainment. This is one of the material
segments used in an entity such as commission given to travel agents for their services regarding
sale of travelling services. (Locatelli, Fedele, Fayolle and Baglee, 2016). The variable nature of
services rendered by the agents will be liable for payment of commission. The cost incurred in
marketing and advertising is cost which incurred by organization to take steps against its
competitors. This will allow Merlin Entertainment to attract a huge number of customers.
Fixed cost- Rigid cost incurred in the business that doesn’t affected with the sales units incurred
in the existing business. Expenses like rent paid for building or warehouse is termed as fixed
cost as this will not change due to change in the production level of business. Cost of licensing is
also an example of fixed cost. Cost volume profit (CVP) analysis is a very common technique to
analyze the cost incurred during production. It will help the entity which are opting for BEP and

Margin of safety. There are several factors which needs to be evaluated by Merlin entertainment
in order to opt for CVP analysis :
Duo combo of major cost like fixed cost and variable cost should equally and effectively taken
into consideration. Which allows them to maintain its financial position and business operations.
Standard sales mix should be improved to be assured about meeting all kinds of cost and other
factors related with them.
Break even analysis will be used by an entity owner which determines that specific point at
where there is no profit or loss earned by an enterprise owner. The break even units higher than
the existing sales level will result into loss on the contrary the lower breakeven point units will
result into the overall profit of an enterprise.
1.2
The role of travel and tourism sector has increases with the external difficulties arises in
the external business environment. It is also regarded as one of the integral parts of the overall
hospitality sector as the increasing global exposure of this sector will also raises the existing
levels of this particular travel and tourism sector. The organizations which are required to meet
different quality assurance techniques in order to deliver quality related services to its all kinds
of customers (Moran, M., Porter and Curth‐Bibb, 2016). The price sensitive can dominate the
overall market by influencing an entity to reduce their prices to take higher base of customers for
their offered products. The designing of different tour packages is essential in order to add
additional features in order to lure different variety of customers. Pricing is a segment which
proves that only manufacturing will not be effective until it will reach to the ultimate consumer.
Travel and tourism industry needs to develop their pricing model in under mentioned forms :
Cost Plus Profit Pricing- this method is used by various organization for its profit maximization
just by opting for several operational activities which are fair and fruitful (Schmidt, Mason,
Bruwer and Aspeling, 2016). This method considers a specific percentage for the consideration
of each and every cost element.
Differentiating pricing- The unique concept of differentiating pricing is related with the
external market rivals in order to keep prices lower than all the competitors. Prices of product are
used to kept lower as compared to the competitors of entity which allows it to grab a large share
of market revenue as compared to its competitors. Having control over the cost will allow a cited
entity to develop its share by reducing price of its product and services which they provides.
Result will be profit earned over a little cost. Merlin Entertainment provides services of
entertainment hence if its having control over its operational cost then it can provide its services
to customers at a price level below its competitors.
1.3
Dominating factor that rule on the overall market in beating different kinds of customers
who attracted towards the cost reduction activities of the entity. It helps in enhancing business

operations from its current level and allow it move towards the top position over the market. This
particular situation can be achieved by making some crucial changes in external market. This
step is basically a combination of several elements involving in external market which can
destroy the present performance and can adversely affects its operations. (Staniewski, Szopiński
& Awruk, 2016). An organization needs to consider some important factors which can directly
effects its operational activities. These are the external factors which can be studied through
PEST analysis :
Political- Management should consider legal factors related to cost structure. When government
frames any rule which are related to operational activities of Merlin entertainment like rule for
amusement park and its tax implications. Cost related with tax of amusement fees or tax related
with other bundled service provided therein. As taxation part plays an important role over price
of services rendered.
Economic- Rate of inflation plays a vital role in increasing the variable cost. That will reduces
sales and ultimately effects Merlin Entertainment's revenue. If revenue of Merlin Entertainment
gets reduced then that will adversely affects its overall profit percentage. If any change is there in
policy for foreign exchange, or if rate of foreign exchange is increased of decreased then interest
of foreign tourists will vary as per the changes.
Social- Interest and preferences of all customers are considered while framing any tour packages.
Like if customers are willing for adventures tours will be put in different package or customers
using services for business meeting and other get together have different packages (Deakins and
North, 2016). factors related with ethnicity should also be considered for framing any idea about
tour packages.
Technology- Technology is that factor which allows an entity to improve its present situation.
As well as it helps to control cost structure which will ultimately help Merlin Entertainment to
capture the market and to acquire the top position. An innovative and unique creation will attract
customers as its unique, updated and interesting. And if customers will gets attracted then this
will increase the over all revenue which increases profitability.

TASK 2

TASK 3
3.1
Ratio analysis is recognized as a comparative analysis technique which is used by an
entity owner in order to assess its existing business performance with its previous years (Benson
and Marks, 2016). The financial statements are prepared as a financial source by a cited
organization which are evaluated to find out financial potential which can be used against
existing and new entrant rivals of this conglomerate. This technique can be used as performance
controller, in assessing capabilities of a business entity in relation to the facts and figures of
earlier financial year. Ratio analysis can be classified as a tool to evaluate the performance of
cited organization. Ratio analysis includes internal and external. The financial condition of
Restaurant place can be ascertain through these ratios for making its future oriented decisions :
Financial Ratios Formulas 2015 2014
Liquidity Ratios
Current Ratio Current Asset / Current Liabilities 0.28 0.24
Acid test Ratio (Current asset – closing
inventory)/Current Liabilities
0.12 0.08
Profitability Ratios
Gross Profit Ratio (Gross Profit/ Net Sales)*100 18.51 17.93
Net Profit Ratio (Net Profit/ Net sales)*100 10.05 10.55
operational Profit Ratio (Operating profit/ Net sales)*100 12.97 13.75
Gearing Ratios
Debt to Equity Ratios Debt/ Equity 0.12 0.17
Asset Turnover ratio Net sales/ total assets 1.54 1.54
Inventory turnover ratio COGS/ inventory 93.71 98.22
Liquidity ratios
Liquidity ratios are always calculated to ascertain present value of organization and its
liquidity structure . The above mentioned figures has shown the business performance of a
particular organization. Quick ratio is better than current ratio in both the years.
Current ratio

The current ratio is regarded as a measurement to ascertain the capability to pay back the
debts. When total current assets are divided by total current liabilities then the resulting ratio
which we found is current ratio. Idle current ratio is 2:1. if we analyze the above table then we
can found that there is rise of 0.4 in year 2015 as compared to 2014. This increment will help
entity to repay its debts more efficiently and with less hurdles.
Acid test ratio
Quick ratio is regarded as one of a kind of measurement which can help an entity to find
the actual ability to pay debts in case the period to pay off is shorter. Quick ratio can be
ascertained through comparing quick assets with current liabilities. Quick assets are assets other
than closing stock, prepaid expenses and fixed assets. (Locatelli, Fedele, Fayolle and Baglee,
2016). The inventory is excluded from the available current assets of an organization as the
inventory factor cannot turns into cash easily.It has found that the results shown from the above
are in the favor of an entity.
Profitability Ratios
This trend has shows that an entity’s overall profitability will strong enough in order to
meet their existing business. This trend has shown that in order to increase its profit an entity
needs to increase its sales and its revenue as well. And also to achieve an over all market share. (
Deakins and North, 2016). The profit of an entity is used to lure various users of business or
stakeholders. These stakeholders are outsiders as well as the internals also who plays a
significant role to determine success and failure of it. The overall trend which is a combination
of all three ratios which are Gross profit, Net profit and Operating profit increases on a higher
position.
Gross profit ratio
The raw amount of profit before considering taxation will result into gross profit which
indicates the initial stage of earning profit. It is termed as important profit. Gross profit is a base
to find out actual profitability of a business. Gross profit is find out by deducting cost of sales out
of revenue earned. Its basically actual profit derived out of business operations. Gross profit ratio
can be derived by comparing amount of gross profit with net sales. Net sales is that sales from
which sales return, if any has been deducted and sales for which approval has been received.
Operating profit
Profit generated by an entity by deducting all kind of operating expenses such as sales,
administration and distribution expenses are deducted from the gross profit of the business. This
kind of profit can be ascertained in order to assess the external business entity.
Net profit ratio
The final outcome obtained by the business after deducting all kind of expenses out of
revenue and by including every other income from non operating activity is Net profit. (Ezeanata

Walter and Parimoo, 2016). If we compare the figure of 2015 with those of 2014 then it can be
ascertained that overall net profit has been declined, which is a negative position of this entity.
Debt to Equity ratio
Debt equity is one of the components used in designing the overall capital structure that
reflects an entity’s business performance. The combination of these two components in equal
proportion will be beneficial for an enterprise in making further business decisions. It is the part
of gearing ratio which determines the internal capability of an organization in relation to the
market pressure and risk components. The debt equity ratio compares and determine amount of
debt involved in it. It compares the debt with owners fund (Benson and Marks, 2016). All above
ratios are decreased from one period to another that means burden of debt has been imposed on
entity.
Efficiency ratios
The capabilities of an enterprise will be assessed by an enterprise in order to ensure their
future skills which helps in achieving all kinds of goals and the objectives. The ratios are used in
order to determine the ability off an enterprise by using business operations.
Asset turnover ratio
The efficiency of the asset will be assessed by an enterprise in relation to the external
market. The assets are used to contribute in generating high amount of sales and the revenue by
testing the internal business efficiency of an enterprise. it can be studied through above table that
at present the situation of firm is stable.
Inventory turnover ratio
Inventory of an entity will be used by the corporation which will be transformed in sales
and ultimately in revenue(Finch, Goff and Houck, 2016). The inventory will be used in an entity
that can be utilizes in achieving their goals and the objectives by using inventory management.
The inventory is used by an entity in order to achieve their goals and the objectives by using
different forms of existing level of inventory in different segments.

TASK 4
4.1 Enclosed in Poster
CONCLUSION
It can be concluded from above mentioned facts and other details in project that finance
and funding is regarded as one one of the important concept commonly used ion very enterprise.
The use of different funding options used by the travel operators in order to fund their business
requirements. The existing business conditions of Merlin entertainment has uplifted by using
financial requirements the business performance of this enterprise has meted by using ratio
analysis approach. This method emphasizes on the existing capabilities of an entity as compared
with the previous year figures. The current efficiency of the Merlin entertainment gets polished
by working upon its existing abilities that utilizes in covering up its current capabilities. The
cost elements are los considered which is the primary concern of every management which is
segmented into two different costs such as fixed and variable costs. The pricing policies are also
determined by an entity to attract wide number of customers towards their organization. The
price sensitive buyers are pleased with offering of several discounts and coupons. The market

trends and application of different techniques in conveying important communication related to
the costs are alos explained with the help of these methodologies by an organization.

REFERENCES
Finch, M. A., Goff, P. and Houck, E., 2016. Opting Out of the Bill: Voluntary Adequacy
Funding in Maryland. Journal of Education Finance. 42(1). pp.28-48.
Ezeanata Walter, C. and Parimoo, D., 2016. Leadership Development In The Nigerian Micro
Finance Banks And Its Effects On The Banks Performances.Leadership. 1(2), pp.15-24.
Wong, G., Angelsen, A., Brockhaus, M., Carmenta, R., Duchelle, A., Leonard, S., Luttrell, C.,
Martius, C. and Wunder, S., 2016. Results-based payments for REDD+: Lessons on
finance, performance, and non-carbon benefits (Vol. 138). CIFOR.
Khan, M. A., Sajid, M. A., Waseem, M. A. and Shehzad, M. W., 2016. Capital Structure
Composition Demeanour towards Corporate Financial Performance Potential.
International Journal of Innovation and Applied Studies. 14(1). p.210.
Benson, E. D. and Marks, B. R., 2016. Does the Level of Funding of City Government Pension
Liabilities Affect Tax-Exempt Bond Insurance Premiums and Credit Ratings?. Municipal
Finance Journal. 37(1).
Locatelli, B., Fedele, G., Fayolle, V. and Baglee, A., 2016. Synergies between adaptation and
mitigation in climate change finance. International Journal of Climate Change Strategies
and Management. 8(1), pp.112-128.
Staniewski, M.W., Szopiński, T. and Awruk, K., 2016. Setting up a business and funding
sources. Journal of Business Research. 69(6). pp.2108-2112.
Jimenez-Castellanos, O. and Martinez, D.G., 2016. Financing Education in a Climate of Change,
by Vern Brimley, Deborah A. Verstegen, and Rulon R. Garfield (review). journal of
education finance. 41(3). pp.382-386.
Kaoutar, B. O. U. S. H. I. B. and Mohammed, A. K. A. A. B. O. U. N. E., 2016. Finance and Tax
Policy in Morocco. Imperial Journal of Interdisciplinary Research.2(9).
Schmidt, H. J., Mason, R. B., Bruwer, J. P. and Aspeling, J., 2016. Exploratory Study of
Finance Accessibility for Small Retailers.
Moran, M., Porter, D. and Curth‐Bibb, J., 2016. The Impact of Funding Modalities on the
Performance of Indigenous Organisations. Australian Journal of Public Administration.
Deakins, D. and North, D., 2016. The Role of Finance in the Development of Technology-based
SMEs. Journal of Entrepreneurship, Business and Economics. 1(1/2). pp.82-100.