Tourism Finance: Management Accounting Information and Decision-Making

This report examines the role of management accounting information in finance and funding within the tourism industry, focusing on how businesses like Merlin Entertainment can leverage this information for decision-making. It discusses various types of management accounting information, including budgeting, variance analysis, and break-even analysis, and how each can be utilized as a decision-making tool. Budgeting helps in pre-determining cash flows and controlling expenses, while variance analysis identifies deviations from planned performance, enabling corrective actions. Break-even analysis aids in evaluating pricing strategies and sales targets. The report emphasizes that firms can use multiple methods to analyze their performance and prudently select the best approach for informed business decisions, with references to academic sources supporting these concepts.

FINANCE AND
FUNDING IN
TOURISM

Different types of management accounting information that can be
used in business
• There are different sort of management accounting information that can be used in the business for making business decisions. Some of the specific
type of management accounting information that are commonly used by firms including Merlin entertainment are given below.
• Budget: Budget is prepared by most of business firms because in same assumptions of cash inflow and outflow is made. There are different type of
budget that are prepared by the business firms like production, sales and marketing budget etc. All these budgets are used by the business firms for
making business decisions. It can be observed that in Merlin entertainment also cash budget and sales as well as marketing budget is prepared (Lins,
Servaes and Tufano, 2010).
• This is because under these budgets cash flows are pre-determined and firm try to receive and pay amount in line to determined values. By doing so
cash outflow is controlled to great extent by the business firms. In case it is identified that it is possible that over expenses can be made in the
business then in that case on time action is taken to control expenses and in this way budget assist in making business decisions.

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• Variance analysis: Variance analysis is another technique under which difference between determined value and actual performance is identified and on that basis it is
determined whether firm perform good or bad in its business (Ayyagari, Demirgüç-Kunt and Maksimovic, 2010). In case of any element it is identified that variance is
negative then in that case steps is taken to improve firm business performance. Hence, it can be said that variance analysis is the one of the most important method that
can be used to make business decision in right direction.
• Break even analysis: On the basis of breakeven analysis Merlin entertainment identify that up to what number of customers it need to create in its business at
determined price level so that fixed and variable expenses can be at least covered in the business. It can be said that break even analysis is the one of the most important
method that can be used to receive inputs that need to be taken in to consideration for making good business decisions (What is a break even analysis?, 2017).
• It depend on the firm that which of the method it used for making business decisions. Firms can use multiple methods to analyze their performance and to receive
inputs for making business decisions. There are multiple alternatives that are available to the business firms and they must prudently select one of the best approach to
make business decisions.

Use of management accounting information as decision making tool
• Management accounting information can be used as decision making tool by the business firms. This is because management accounting information
reflects the area or direction in which there is need to do work. Use of management accounting information as a decision making tool is explained
below.
• Budget: In the budget when comparison is made areas where firm performance is weak is identified. This acts as input about area where firm need to
do work in order to improve its business. Lack of control in context of Merlin entertainment can be observed in case of increase in variable expenses
or any other thing.
• Based on identified negative variance research can be carried out and it can be identified that what are the probable reasons due to which such kind of
negative variance comes in existence (Irwin and Scott, 2010). Thus, management accounting information that is received through budget act as
important tool that help managers in making prudent decisions.

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• Variance analysis: Variance analysis is another tool that is used to obtain management accounting
information for making business decision. It is also considered as one of the best way tha cann be used to
find out area where work must be done to improve business performance.
• Break even analysis: Break even analysis can be used to evaluate pricing strategy or evaluating sales
targets. If sales price is kept constant then it is possible that sales units that need to be sold may be high. In
case sales target is high then it is possible that management and employees may find themselves unable to
achieve target (Wong, Mistilis and Dwyer, 2011). Thus, it can be said that break even analysis acts as tool
on basis of which management accounting information is generated and used to make business decisions.

REFERENCES
• Gatti, S., 2013. Project finance in theory and practice: designing, structuring, and financing
private and public projects. Academic Press.
• Irwin, D. and Scott, J.M., 2010. Barriers faced by SMEs in raising bank finance. International
journal of entrepreneurial behavior & research. 16(3). pp.245-259.
• Lam, W., 2010. Funding gap, what funding gap? Financial bootstrapping: supply, demand and
creation of entrepreneurial finance. International Journal of Entrepreneurial Behavior &
Research. 16(4). pp.268-295.