EUROCARIB TOURS: Funding and Financial Planning Report

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Finance and Funding in the Travel and
Tourism Sector
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Table of Contents
Introduction....................................................................................................................................3
Task 1............................................................................................................................................4
A – Concept and implication of CVP analysis for the EUROCARIB TOURS.............................4
B – Pricing methods analysis for the EUROCARIB TOURS......................................................5
C – Analyse the factors which affect the revenue of EUROCARIB TOURS for its trip..............8
M1 – Effective approach of the pricing for the EUROCARIB TOURS.......................................9
Task 2..........................................................................................................................................10
A – Explain different types of management accounting information that could be used in
EUROCARIB:...........................................................................................................................10
M2 – Techniques for improving activities and performance of the EUROCARIB....................12
B – Use of investment appraisal method as a decision-making tool in EUROCARIB.............14
Task 3..........................................................................................................................................15
A – Use the financial statements of any travel and tourism company and interpret the financial
statement using appropriate ratios (M3)..................................................................................15
Task 4..........................................................................................................................................17
A – Analyse the source of internal and external distribution of funding of company
development of the new hotel..................................................................................................17
Conclusion...................................................................................................................................18
References..................................................................................................................................19
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Introduction
In this report, the importance of finance and funding will be discussed for the EUROCARIB
TOURS. The report discusses a case about the EUROCARIB TOURS business expansion, as
the company is operating in the London and planning a summer vacation trip for a month in the
Caribbean Holiday Resort. In this report various cases of EUROCARIB TOURS have been
given for various types of information has been concluded. The report shows the cost volume
profit analysis and how it affects the company. The report discusses different types of pricing
methods and the factors that affect the EUROCARIB TOURS revenue will be analysed. In
addition, the report discusses investment methods for making an adequate decision, and the
financial statement analysis will be shown. The resulting output will be shown in the report for
the EUROCARIB TOURS and at last the reason for funding requirement for the development of
the new hotel, the external and internal factors of funding will be studied.
3

Task 1
A – Concept and implication of CVP analysis for the EUROCARIB TOURS
The cost volume profit analysis is a method for calculating the influence of deviations in the
volume and cost of the operating revenue and net revenue of a firm. The management
department of an organisation considers it as a planning technique for making a forecast for the
future sales volume, cost expenditure, and revenue generation. The cost volume profit analysis
is a helpful technique for an organisation because of its simple calculation and of easy
accounting terms. It helps the management department of the firm analyse the output of the
required questions which is realistic and required in the analysis for the company's business,
but there is surety of accuracy from this technique.
For travel and tourism sector cost volume profit analysis is an important technique for various
areas. This analysis helps the EUROCARIB TOURS to analyse the success chances for the
summer vacation trip and evaluates the methods for proper utilisation of resources for
maximising the revenue from the business. The break-even level is can be calculated easily by
the EUROCARIB TOURS to achieve the targeted revenue. The travel and tourism sector mostly
incurs fixed expenses which are easy to compute from the CVP analysis and also helps in
calculating the risk related to the project.
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B – Pricing methods analysis for the EUROCARIB TOURS
There are various types of pricing techniques for EUROCARIB TOURS to calculate the required
price which will be charged from the customers.
 Mark-up pricing –
This technique is used to calculate to set the prices of the tours and activities for
guaranteeing the benefit on each unit sale. The identification of the considerable number
of expenses related to the tours requires for setting the mark-up price. This technique is
easy to calculate and requests least data.
 Dynamic pricing –
This method enables the organisations to set costs based on the current demand of the
market. It is the most effective method in the travel and tourism industry organisations
since high rates are charged on extraordinary occasions, ends of the week or holiday
periods. Besides providing adaptability, this methodology uses a calculation that thinks
of some as components including supply-demand and competitor pricing.
 Mark-down strategy –
This technique involves setting low prices so that the company can sustain in the market
and can give tough competition to the competitors by attracting more customers. This
pricing technique allows the firm to earn more revenue on every business transaction, as
it can help in generating a maximum number of booking without incurring extra
expenses.
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{(Expected revenue - Actual variable Cost) - Fixed cost} = Targeted profit
{(x*90)-(400*90)-120000}=30000
{(90*x)-(36000)}=30000+120000
90*x=150000+36000
90*x=186000
x=186000/90
2066.666667
The firm should charge approx. £2067 from its 90 customers to earn a targeted profit
of £30000
Following notes are –
 X – Sales price
 90 – Number of clients
 £30000 – Targeted profit
 £120000 – Fixed cost
 £400 – Variable cost per unit
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For authenticating the above-calculated method, financial statement of EUROCARIB TOURS
has been created.
Financial Statement of the EUROCARIB TOURS
Particulars Value
Revenue per customer £
2,067
Variable expenses per customer £
400
Contribution per customer £
1,667
Total contribution (Number of
clients*contribution)
£
150,000
Fixed cost £
120,000
Actual Net Profit £
30,000
The financial statement using the marginal method is practiced for calculating the targeted
actual net profit. The financial statement calculated above of EUROCARIB TOURS analyses
that if a firm wants to attain the targeted revenue of £30000, then it needs to charge approx.
£2067 from its clients.
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C – Analyse the factors which affect the revenue of EUROCARIB TOURS for its trip.
The financial statement of the EUROCARIB TOURS has been created for computing the
relevant information –
Financial Statement of the EUROCARIB TOURS
Particulars Amount
Revenue per customer £
1,600
Variable cost per customer £
400
Contribution per customer £
1,200
Total contribution (Number of
clients*contribution)
£
108,000
Fixed cost £
120,000
Net loss -£
12,000
The financial statement of the EUROCARIB TOURS displays a net loss of about £12000 if the
firm is running the business on its 90 clients. To solve this problem, the company is required to
convert its net loss into net profit company requires to achieve more clients.
{(Budgeted revenue - Expected variable cost) - Fixed cost}=Budgeted profit
{(1600*x)-(400*x)-120000}=30000
{(1600*x)-(400*x)}=30000+120000
{x*(1600-400)}=150000
{x*(1200)}=150000
x=150000/1200
125
To generate £30000 the firm should have a minimum footfall of 125 customers in their
business
Following notes are –
 £30000 – Budgeted profit
 £400 – Variable cost
 £1600 – Selling price per clients
 £120000 – Fixed cost
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 X – Number of clients
M1 – Effective approach of the pricing for the EUROCARIB TOURS
For EUROCARIB TOURS, it can be analysed that the mark-up pricing method can be a more
effective approach for this tours. This type of strategy, the firm can earn more revenue on every
sale activity by adding the cost of the product in the mark-up calculation. This technique does
not just help in calculating the cost but also reduces the cost of decision making in the firm.
Prices agreed on the basis of all the expenses keep an ethical defence that allows for the price
alteration if raw material and other prices changes. It is also an easy method of determining and
analysing the fair price.
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Task 2
A – Explain different types of management accounting information that could be used in
EUROCARIB:
Travel and tourism sector divine the various area that widely expands over globally. Travel and
tourism sector deliver different types of services like transportation, hotel, restrooms, catering
services, and travel packages etc. all over the world. In a sequence of accounting management
classify the approach that provides report accuracy. It facilitates to design a budget and
determinate the accounting difficulties that improve the travel and tourism exercise. In the travel
and tourism sector management report improvise the matter of controlling functional program. It
determines the area of improvement in a company investment plan. Types of management
accounting are the following:
Function management report – Operational management accounting makes possible with the
specific manufacturer and its correlated activity. The operation management report engages
accounting day to day production which improves the method and data accuracy in general
industry income.
Production accounting – EUROCARIB supply an essential part of construction different types
of goods and services in a market. It represents a variety of product in a specific part of
diversifying market. This contains budgeting schedules and supervises availability of resources.
Production accounting assists day to day operation accounting to prepare a business financial
report.
Budget accounting – Budget accounting propose a financial statement that identifies utilize the
use of resources. Accounting provides control over miss conducting in projects. It required
information regarding company stability to improve accounting report of the expense and liability
of the company.
Audit accounting report - Audit accounting provides a standard form of financial statement to
EUROCARIB. This accounting accepts financial inventories and other financial entries of
business. It includes debit and credit transaction of a business entity.
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Cost accounting – Cost accounting provides distribution of good quantity and quantity of
product and services. It defines a set of action required that improve the substantial cost of a
product. These create a nature of analysing the cost associated with the product design and
consider its various factor of controlling cost.
Pro Forma accounting report – Pro Forma accounting comprises the practices of providing a
business prediction of cash flow. This report format draws that complete scenario which creates
a new opportunity for business that anticipates accurate data of accounting management.
EUROCARIB develop the information of company performance to express the accounting
report.
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M2 – Techniques for improving activities and performance of the EUROCARIB
SWOT Analysis SWOT analysis increases business strength
and decreases business weakness to provide
the market opportunity. A SWOT analysis
identifies the tools and techniques that
improve the business project planning. These
practices increase the business foundation
strength which maintains its corporation
assessment of the working process.
Set benchmark Benchmarking helps to measure business
performance and find out the business size.
Benchmarking set the business standard that
helps to maintain the set desirable position of
the business growth. It corresponds to the
performance outcomes which includes
product and services delivery by a similar
participant in the market.
Market research Market research consists the searching for
the Market research helps to collect the data
information regarding target customer and
market. It defines the different strategies to
analyse the actual need of the market.
Market research analyses the business
component which provides awareness about
the market.
Company documentation It needs to improve in audit activity to help in
company statement and help to improve
customer relationships. A company requires
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