Assessing Finance and Funding for Travel and Tourism Businesses

This report delves into the crucial aspects of finance and funding within the travel and tourism industry. It begins by emphasizing the significance of cost and volume analysis, exploring various cost types, and explaining techniques like break-even and cost-volume-profit analysis. The report then examines different pricing methods, including discounted, cost-plus, value-adding, competition-oriented, and investment pricing, crucial for setting prices in the competitive tourism market. It further assesses factors affecting profitability, such as economic conditions, seasonal variations, terrorism, climate, government interventions, and business trends. The report also evaluates management accounting information systems, including financial statements, forecasting, budgets, and management information systems, and their role in decision-making. Finally, it interprets the financial data of Dalata plc, analyzing profit margin ratios, return on equity, current and quick ratios, and inventory turnover ratios to assess the company's financial health and performance, and explores the sources and distribution of funding for capital projects in tourism.

FINANCE AND FUNDING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Explaining the importance of cost and volume in financial management of travel and
tourism. .......................................................................................................................................1
1.2 Analysing the different pricing method................................................................................2
1.3 Assessing the various factors which are affecting profit for travel and tourism businesses.3
TASK 2............................................................................................................................................4
2.1 Assessing the various types of management accounting information system .....................4
2.2 Assessing the management accounting information as a decision tool. ..............................5
TASK 3 ...........................................................................................................................................5
3.1 Interpreting the financial data of the Dalata plc....................................................................5
TASK 4............................................................................................................................................9
4.1 Analyse sources and distribution of funding the development of capital projects
associated with tourism...............................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
The finance and funding are the important sources to raise funds in tour and travel
industries. The finance and funding in a travel and tourism sector will be discussed in present
report in order to understand different aspects of finances. This assignment will present the
importance of cost and volume in travel and tourism sectors. The report will also provide
different rating methods and the factors affecting the pricing decision of travel and tourism
sectors. Further, report will discuss the various management accounting information and their
uses as decision-making tools. Later, assignment will provide details of various sources of funds
required for the capital project in Dalata plc.
TASK 1
1.1 Explaining the importance of cost and volume in financial management of travel and tourism.
Costs- There are different types of cost like direct, variable, indirect and fixed cost.
Volume – break even analysis, cost volume profit analysis
Direct cost – This cost is directly accountable to a cost object. This cost is directly
distributed to projects. For production of specific goods or services, direct cost is completely
assigned to the project.
Indirect cost – This cost is not accountable for object. The indirect includes security
cost, personnel, and office expenses (Collier, 2015). This is not directly related with
expenditures. Indirect cost is basically of two types, fixed cost which includes all the fixed
expenditures and variable cost which includes recurring expenses.
Fixed cost – The fixed cost is which does not change with change in output. This is the
cost which is obtained from rigid expenses (Provost and Fawcett, 2013). The fixed price cannot
be avoided at any cost during production. It includes depreciation, rent, insurance amount.
Variable cost – This is the cost which changes with change in output. Change in variable
takes place with modification in sales volume. Variable expenditure consists of cost of material,
cost of traveling expenses etc.
Break even analysis- It is a tool which helps to identify the point of production of
Carnival Corporation to recover their all developed cost. Break even analysis is that point of
production where an organization do not have any profit or loss.
Cost profit volume analysis- Changes in cost and volume effect of Carnival
corporation's operating earnings and net income is determined by the cost volume profit analysis.
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For satisfaction of expectations of customers and their demands, business produces the
products and services which require sum total of various expenditures which is termed as cost.
For better functioning of the business every concern need to maintain cost of product and
services effectively (Otley, 2016). Cost is involvement of various types of costs which is
obtained for the execution of functions of organizations. Variable cost fixed cost direct
expenditure allocation expenditure and other overhead are different types of expenditure.
Carnival Corporation acquire costs because it provides services to customers. To make the better
decisions there are various tools and techniques.
These techniques consisted of CVP analysis, break even analysis and economies of scale
etc. In relation with the cost, volume and profit Carnival Corporation has used technique called
CVP analysis for purpose of taking decision (Nitzl, 2018). CVP analysis was very beneficial for
carnival corporation in understanding of level of sales which will later became beneficial to
generate profit.
CVP analysis is an impelling technique which aids in investigation of actual cost and
assist in reasoning of capability of Carnival Corporation (Jermias, 2017). There are lots of
advantages of utilizing CVP analysis by Carnival Corporation. And these advantages consist,
amended decision making, improved controlling, fixing prices of products and services.
1.2 Analysing the different pricing method.
Travel and tourism industries are one of the major industries which rapidly moving in
today's era. This is very essential sector which renders support to economy of country and also it
became crucial sources of generating of income. To set prices of product and services offered by
company, use of pricing method arises. There are various pricing methods which are available to
set the best price that includes profit led, value adding, market led, discounted, cost plus, return
on investment, and competition oriented to select the most appropriate method for best pricing
selections are carefully examined (Ismail and King, 2014).
Discounted pricing
To attract customers, the companies, offer discount in off season is called discounted
pricing. The Carnival corporation uses this technique at the time of off season for customers so
that they can attract the customers and earned profit.
Cost plus pricing method
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By analyzing various types of cost involved in services and adding profit margin to find
out price of services to attain short term and long term goal of business is the main purpose of
cost plus pricing method.
Value adding pricing method
On basis of market forces prices are determined in led pricing method. Company added
additional services in the old services' in order to get customer get attracted towards Carnival
Corporation is done in value adding pricing method.
Competition oriented pricing method
To analyze market strategy of competitors by doing market analysis prices of product and
services are set in competition oriented pricing method (Elwyn and et.al., 2012).
Investment pricing method
Prices of products and services are determined on basis of interest rate and return over
investments in return on investment pricing method.
1.3 Assessing the various factors which are affecting profit for travel and tourism businesses
Carnival corporation has lots of factors which are affecting the business in negative as
well as positive ways in systematic approach. Therefore, it has been identified that organization
have these factors which can effect profit of business are discussed under-
Economic condition: Economic factors includes the combination of micro and macro
factors. It is seen that profit of carnival corporation depends on purchasing power of customers,
conditions of markets, use of technology, social preferences etc.
Seasonal variations: This includes changes in seasons of business. It can be seen in that
profit of company are totally depended upon annual turnover of businesses. At time of peak
season, company earns profit. Carnival corporation would achieve great profit form their
business activities and are able to meet their expenses at time when tourism season is on a peak.
Terrorism: It is very worst factor which can affect working as well as Profit of
organization (Dekker, Kawai and Sakaguchi, 2018). It causes destruction as well as lots of lives
and can provide huge loss to the Carnival Corporation. It restricts the organization to meet their
expenses as well.
Climate: Another important factor which effect profit of Carnival Corporation is climate.
The pleasant and beautiful weather always attracts customers for traveling. To earn adequate
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pricing organization can set best pricing to attract customers. On the other hand, any natural
calamity can provide huge loses to organization.
Government interventions- When there is less involvement made by the governments,
either in domestic or international business than it can be observed that organization earns more
profit. This includes the various polices and regulations of government and framework regarding
tour and travel business.
Trend of businesses- It is one of major factor which can affect profit of Carnival
corporation. The business environment keeps on changing. Organization need to work and adopt
changes rapidly which hare happening inside organization.
TASK 2
2.1 Assessing the various types of management accounting information system
The main purpose of t management accounting information is in decision making. It is an
important criterion in business. The following are various management accounting information
which is beneficial for tour and travel business.
Financial statements: - these are statements of organization. Financial statements
include balance sheet, income statements, fund flow, cash flow statements of business. To obtain
data about finance department of Dalata group plc, very vital role is played by financial
statements (Collier, 2015). These statements help to ascertain financial position of business. To
find out profit and loss it is very crucial to identify the financial position of Dalata group plc.
Forecasting: - It is used as a source of management accounting information by Dalata
Group Plc. In market there resides cut throat competition and to handle this competitive
environment Dalata plc must go for forecasting. Therefore, it is technique of planning for future
(Clemen and Reilly, 2013). The primary aim of forecasting is to endeavor of anticipation for
result of forthcoming activities with assistance of trend analysis. With help of the past data
growth statistics forecasting is done.
Budgets: - Once forecasting is done budget takes place. Dalata plc uses this technique in
order to ascertain profit. Budget is process of making an estimation of future planning. The
process Budget assigns capital money for forthcoming operations of business. The computation
of upcoming cost and liabilities are done in budget estimation.
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Management information system: It is a computerized database used by the Dalata plc.
It is very essential for every organization. Its main purpose is to give feedback to employers for
their work.
2.2 Assessing the management accounting information as a decision tool.
Management accounting plays in important role in an organization due to the process of
decision making. To take day to day decisions of businesses managers uses management
accounting by analysis of financial statements. This data assist to do improvement in leverage
which aid betterment of judgment. Some factors are discussed below -
Comparison with trends
There are is various information which are beneficial in the business decision making. It
is the essential part of every business. Management accounting aids the reports of Dalata group
plc by this they are able to compare differences of the trends.
Forecasting
The decision making is the part of forecasting. While planning for the future lots of
decisions are made at every stages. It is other form of planning. Management accounting
information involves the help in decision of forecasting and then further work is done.
Raising capital
Another essential component of organization’s working, where managers makes
judgment (Cabral, Grilo and Cruz- Machado, 2012). Finance department is major part of
organization which needs sound decision making.
TASK 3
3.1 Interpreting the financial data of the Dalata plc.
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Interpretation
Profit margin ratios
The profitability of business is measured by using profit margin ratio. In 2016 profit
margin ratio is less than comparison with 2017 which has increased by .50%. The reason behind
fall in ratio is that performance and profitability has been decreased. The cause could be
decreasing difference between revenue and expenses of Dalata group.
Return on equity
This ratio illustrates ability of organization to generate profit by investment made by
shareholders. The return on equity has been decreased by 3.11% which shows inability of Dalata
plc in generating profit.
Current ratio
The current ratio of company depicts ability of businesses to meet payment for short term
liabilities of business. The ideal current ratio is 2:1. But here current ratio of Dalata plc is less
than 1 which says that company has faced very much problem in paying short term liability.
Quick ratio
These ratios show capability of company in paying short term liability. Here quick ratio
of Dalata plc has increased by 0.3% but it is less than one which depicts that Dalata is facing
problem in payment of liability.
Inventory turnover ratio
The inventory turnover ratio tells that for how many times organization has sold the
inventory. In year 2017 the inventory turnover ratio has been increased than in 2016.
Asset turnover ratio
The asset turnover ratio analyses ability of company to generate sales by use of assets.
The ratio has been decreased by .3% which shows ineffectiveness of Dalata plc in generating
sales.
Eps and Dps
In both the ratios it has been found that they were increased as comparison with previous
year which shows that price of stock of the Dalata Plc. Will rise. And divined provided on every
share has been increased.
Cash flow statements of the Dalata Plc
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The above statement is a cash flow statement in this it is observed that three activities
operating activity, investing activity and financing activity all are in positive. Hence, it shows
that Dalata plc is growing effectively.
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interpretation
The profit and loss statement shows profit of organization. Observing revenue of Dalata
group plc which has raised from 348,474 -290551 as comparing last year.
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The balance sheet determines financial position of business. Observing the balance sheet
it can be seen that Dalata plc is in profit of 1,010,88 – 985376 respectively. By this financial
statement it can be said that company has improved a lot and has made a good position.
TASK 4
4.1 Analyse sources and distribution of funding the development of capital projects associated
with tourism.
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CONCLUSION
The assignment has been done for aim of understanding and developing different facets
of finance which shows performance of business. The report is summation of various types of
cost and their uses, various management accounting information systems, and different pricing
methods. The report has also discussed various factors affecting pricing of Carnival Corporation
Plc. Report has also discussed the various sources of funding for capital projects of tourism and
travel sectors.
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REFERENCES
Books and Journals
Cabral, I., Grilo, A. and Cruz- Machado, V., 2012. A decision-making model for lean, agile,
resilient and green supply chain management. International Journal of Production
Research, 50(17). pp.4830- 4845.
Clemen, R. T. and Reilly, T., 2013. Making hard decisions with DecisionTools. Cengage
Learning.
Collier, P. M., 2015. Accounting for managers: Interpreting accounting information for decision
making. John Wiley & Sons.
Dekker, H. C., Kawai, T. and Sakaguchi, J., 2018. The Interfirm Contracting Value of
Management Accounting Information. Journal of Management Accounting Research.
Elwyn, G., and et.al., 2012. Shared decision making: a model for clinical practice. Journal of
general internal medicine. 27(10). pp.1361-1367.
Ismail, N. A. and King, M., 2014. Factors influencing the alignment of accounting information
systems in small and medium sized Malaysian manufacturing firms. Journal of
Information Systems and Small Business. 1(1-2). pp.1-20.
Jermias, J., 2017. Development of management accounting practices in Indonesia. In The
Routledge Handbook of Accounting in Asia (pp. 126-136). Routledge.
Nitzl, C., 2018. Management Accounting and Partial Least Squares-Structural Equation
Modelling (PLS-SEM): Some Illustrative Examples. In Partial Least Squares Structural
Schaltegger and Burritt, 2017. Equation Modeling (pp. 211-229). Springer, Cham.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–2014.
Management accounting research. 31. pp.45-62.
Provost, F. and Fawcett, T., 2013. Data science and its relationship to big data and data-driven
decision making. Big data. 1(1). pp.51-59.
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. Methods of Pricing. 2018. [Online]. Available through:
<http://www.yourarticlelibrary.com/marketing/pricing/methods-of-pricing-cost-oriented-method-
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Factors affecting the profit of travel and tourism .2014. [Online]. Available through:
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<https://yourbusiness.azcentral.com/factors-affecting-marketing-travel-tourism-10999.html>
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