Finance and Funding in Travel and Tourism - BTEC HND Assignment

This report delves into the financial aspects of the travel and tourism industry, focusing on cost management, pricing strategies, and factors influencing profitability. It begins by highlighting the significance of costs and volume in financial management, emphasizing the importance of controlling expenses and understanding cost structures, including fixed and variable costs. The report then explores various pricing methods used in the travel sector, such as value-added pricing, skimmed pricing, and cost-plus pricing, and analyzes how these strategies impact customer satisfaction and competitive advantage. Furthermore, it examines factors influencing profit, including economic conditions and internal business decisions. The report also addresses the use of management information tools for decision-making, interpreting financial accounts, and provides a poster summarizing key concepts. The analysis uses Merlin Entertainment as a case study, illustrating practical applications of financial principles within the industry.

FINANCE AND FUNDING
IN TRAVEL AND TOURISM

Table of Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
1.1Importance of costs and volume in financial management of travel and tourism business...............3
1.2 Pricing methods used in travel sector................................................................................................5
1.3 Factors influencing profit for travel and tourism business.................................................................6
TASK 2..........................................................................................................................................................7
2.1 Different types of management information tools............................................................................7
2.2 Assess the use of management information in decision-making.......................................................8
TASK 3..........................................................................................................................................................9
3.1 Interpret travel and tourism financial accounts.................................................................................9
TASK 4........................................................................................................................................................12
4.1 Enclosed in poster............................................................................................................................12
CONCLUSION.............................................................................................................................................12
REFERENCES..............................................................................................................................................14

INTRODUCTION
Finance is life line of every business enterprise as without which the existence of business is not
possible. Funding is that feature which involves in the business in which financial resources are
utilized by an enterprise that assists the entity in cost reduction. The efficiency of the business is
higher with the existence of stockholders and financiers who will give recognition to an entity by
uplifting their existing status. Merlin entertainment is that enterprise whose significance has been
showcase with the help of this report. The following report will give emphasis on the internal
business proceedings of this enterprise as it is related to travel and tourism operations. This
project report is all about describing various needs of the current organizations in order to collect
various kinds of financial resources as per their current business requirement. This report stresses
on different forms of investment taken up by an enterprise. The major objective of this report is
to analyse various skills, tools, knowledge that has been emerged with the help of different
management decision making tools in travel and tourism industry. It also involves various
pricing methods that can be used by the business throughout the report.
TASK 1
1.1Importance of costs and volume in financial management of travel and tourism business
Business is a combination of income and expenses which are incurred in daily routine business
as the owner needs to control their expenses in order to increase the amount of the sales and the
revenues (Ward and Peppard, 2016). Different expenses involved in the business enterprise such
as operating expenses includes material expenses, use of equipments, wages and salaries and
different other expenses which may be fall in the business at particular time interval. There are
different kinds of costs involved in an enterprise which needs to be maintained by preparing
budgets and using different monitoring tools and techniques (Stewart, 2014). The costs can be of
two major categories that is fixed costs and variable costs. The fixed costs is that kind of costs
which will be not be reduces as it is jointly connected with the opening of business such as rent
of the premises and utility bills.
On the other hand variable costs are that costs which may vary according to the changes in the
production level of the business. The nil production unit may doesn’t produce any variable costs

as it is increases or decreases with the changes takes place in the activity level of production of
an entity. Various costs involved in the business of Merlin Entertainment include preliminary
costs involved in arranging funds and financial resources from the external business environment
(Mulley and Walters, 2014). It also involves various costs such as expenses involved for
providing fun and leisure activities for visitors who visits different tourists destinations, ticket
booking services by opening travel centres to facilitate all its customers, booking
accommodation facility which requires costs as the owner will collaborate with different hotels
in order to provide this kind of feature to all their customers who books tickers for various
destinations.
The costs should be reviewed and revised periodically in order to attract wide number of
customers as the higher prices will de-motivated various customers and hence reduces the level
of sales and the revenue (Kaplan and Atkinson, 2015). Another perspective involve in revision
of costs is that all the changes are taken into considerations in the price of tickets which includes
increasing fares of flights, increase in the cost of visa services, higher taxation burden such as
service tax, excise duty and value added tax. It helps an enterprise in determining the financial
position by identifying the actual proportion among the income and expense ratio. This ratio
assists an entity in order to increase their overall profitability by collecting income from several
kinds of sources.
This enterprise will also use various techniques that are cost volume profit analysis technique
which is concerned with an entity in order to firm relationship between cost and sales of the firm.
The importance of CVP analysis which is beneficial for an entity for operating in this fast
growing and emerged industry that is travel and tourism sector which are given as below:
It helps Merlin enterprise in assessing their costs as the burden of fixed costs on the business will
suppress the existing business conditions (WisCombe, 2016). CVP used to forecast the future
sales and specific percentage of sales and also identify that amount of sales level at which the
entity will not earn profit nor loss just top cover their basic costs involved in the business entity.
It helps to provide different sales mix which facilities variety of customers as wide variety of
products or services. It also used to carry out analysis in which variety of activities are conducted
by Merlin entertainment PLC, such as recruitment of new staff, buying or selling of existing
assets, leasing new machines in order to reduce costs to a greater extent.

It assists management to consider all its potential expenses even in the form of small categories
to the higher range of expenses (Stewart, 2014). It includes various expenses such as
maintenance of premises, fuel costs and oiling of the machines to operate the machines without
any kind of stoppage which allows an entity to increase their overall productivity which in turn
increase the sales and revenue of the entity in order to earn higher amount of profit.
The basic thing involved in this technique is that it gives emphasis on the division of costs in tow
major categories such as fixed and variable costs (Ward and Peppard, 2016). This division of
cost is essential for the business as the future action of an entity will be totally based on the
division criteria utilized by the business enterprise.
1.2 Pricing methods used in travel sector
Integral part of every business is price element which is essential for Merlin entertainment plc
which is operating in the business which deals in different variety of services related to the travel
and tourism (Mulley and Walters, 2014). Price is that attribute of an organization which able to
attract wide number of customers by framing their prices as per the budget and income capability
of an entity. It plays crucial role in the current organization as it aids in determining the initial
costs that is the basic costs involved in the business of an entity which can be covered by
generating higher sales. Different pricing strategies adopted by an enterprise will help an
enterprise in order to gain competitive advantage over its rivals which creates several threats and
tough business situation in order to maintain the existence of an enterprise which are given as
below:
Value added pricing- It is that pricing strategy which is commonly used by an enterprise in
order to gain higher level of customer satisfaction as their main motive is to catch the interest of
several kinds of customers (Stewart, 2014). This form of pricing strategy in which states and
preferences of buyers given higher priority as they are rational action who make several
decisions regarding quality of services offered by the enterprise to various number of customers
with a clear cut approach to gain popularity among wide set of customers. This popularity among
customers will be able to generate higher amount of sales (WisCombe, 2016). Merlin
entertainment can utilize this efficient technique as selling travel related services require much
patience as the expensive services will not be purchased by the customers easily as it involves
various kinds of risks related to flights. Tourists attractions of the famous tourist destinations

such as LEGO-LAND and other theme parks based on the resort which provides refreshment
services to all the visitors is an attractive feature that can be adopted by this enterprise in order to
attract wide number of customers.
Skimmed pricing- In this particular sector that is travel and tourism where all the expensive
services will be not easily taken up by the business due to its expensiveness the initial business
owner will adopt this strategy. It is strategy which will catches interest of wide number of
peoples as there is less profit margin as the focus of the owner is attracting different set of
customers with less cost and various benefits in form of cash backs, free and complimentary
services (Stewart, 2014). It is also regarded as discounted pricing technique in which all the
services are offered to all the customers in discounted prices to lute different kinds of clients
towards he efficient quality of the business. The enterprise will able to create loyalty among
customers and all the existing customers will do mouth publicity that reduces marketing cost for
the business for greater extent.
Cost plus pricing- It is commonly used technique in used by an organization in which all the
costs are covered in the pricing of tour packages offered by tour operators with determined
percentage of profit included in the price (Mulley and Walters, 2014). It will cover two basic
kinds of costs such as all fixed and variable costs with specific percentage of profit as their main
motive is to earn profit. The owner helps responsible for uplifting their company with a clear
goals and objective is to maximize the wealth of all the shareholders for whom business held
responsible (Stewart, 2014). It is that strategy which is the best suitable strategy for an enterprise
which is the best suitable technique which can be used in this travel and tourism and the owner
can earn amount of profit by producing higher level of sales and the revenue.
1.3 Factors influencing profit for travel and tourism business
Profit is the final outcome after meeting all kind of expenses that involves in operating of
business from the revenue generated by the owner (Inderst, 2013). It is those things which every
business will make efforts in order to earn this much of amount as their main aim is o earn higher
profit by boosting their level of sales and revenue. Higher sales doesn’t mean to be in higher
profit as the expenses also play a significant role as higher the expenses lower will be its profit
and vice-versa. It can also be said that revenue generated by an enterprise by providing their
precious services with quality oriented approach used by the enterprise. The service is important

in travel and tourism industry by offering good quality services and earn high amount of profit.
The management is concern with reducing costs in order to increase the level of profit (Hanna,
2014). It also plays crucial role play in determination of selling price of goods and services as
their main aim is to identify all the factors that affect an entity in the different situations in order
to increase the profit level by providing wide range of services to facilitate all the customers.
There are various factors which help marlin entertainment in order to determine the price of
goods and services which are given as below:
Economic factors- Inflation and recession are the main dangerous things involved in economic
factors of the economy which may boost or reduces the standard of living or financial status of
the economy (Hanna, 2014). The stability of the economy will help an entity in inducing their
sales level which is far more important thing for an entity. The increasing business complexities
in the external business environment troubles the survival of an entity will get impossible which
creates depression and financial stress which increases the variable cost (Inderst, 2013). In this
sector people will spend less in different activities such as travel bookings, entertainment
services such as exploring theme parks such as LEGOLAND, luxurious products and many more
services as per the availability and dependability of customers as per their tastes and preferences.
Political factors- It also involves different political factors such as government and its
authorities which intervenes in the price determination as the taxation will be incorporated in the
prices which will increases the prices and by providing services at low prices the business will
required to decrease their profit as higher prices will not entertain different set of customers
quality and price are the main elements which every customer looks as primary component in the
determination of prices.

TASK 2

TASK 3
3.1 Interpret travel and tourism financial accounts
Ratio analysis is that technique which helps an enterprise in order to ascertain the financial
performance of the business as their main motive is to beat all the customers by strengthening
their financial conditions (Bhowmik and Saha, 2013). There are several ratios that reflect the
business in efficiency in two standard forms that is internal and external to assess the burden
created by other rivals exists in the business environment. The financial status of Restaurant
group plc has been evaluated and assessed by analysing their internal business operations which
are reflected with the help of various ratios which are given as below:
Financial Ratios Formulas 2015 2014
Liquidity Ratios
Current Ratio Current Asset / Current Liabilities 0.28 0.24

Quick 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
Operating Profit Ratio (Operating profit/ Net sales)*100 12.97 13.75
Gearing Ratios
Debt Equity Ratios Debt/ Equity 0.12 0.17
Total asset Turnover ratio Net sales/ total assets 1.54 1.54
Inventory turnover ratio COGS/ inventory 93.71 98.22
Liquidity ratios- It is one of the category used in ratio analysis as one of the tool used I the
business to evaluate their business efficiency by assessing current assets and current liabilities by
identifying their existing proportion in the entity. It helps to calculate the available balance held
by an enterprise in order to meet all the short term obligations occur in form of current liabilities
in the business (Figge and Hahn, 2013). There are certain sub parts of this main heading are also
helped an enterprise by assessing their own weakness or strengths in relation to the specific
factors are given as below:
Current ratio- It is that ratio which is essential part of the liquidity ratio in which the current
assets are evaluated that it is sufficient to meet all the current liabilities sands also contributes in
the business by maintaining available cash balance in the organization (Bhowmik and Saha,
2013). In the above table, the ratio has increases from 2014 to 2015 due to gather decease in the
amounts of current liabilities held by an enterprise.
Quick ratio- It is that ratio which assess the efficiency of an entity of the current assets without
involving closing stock in the amount of current assets. The efficiency of an entity has been

increased from previous year but doesn’t show significant efforts made by the business in order
to increase or decrease the ratio (Ahrendsen and Katchova, 2012). In the given case, the quick
ratio of the restaurant group PLC has increases its quick ratio that shows the efficient of current
asset without inclusion of closing stock.
Profitability- The main of every enterprise is to earn profit by generating more sales and the
revenue (Abbasi, 2014). There are two main ratios that helps an entity in order to ascertain there
profitability by analyzing two kinds of profit before tax and one is after tax, There are common
part of this kind of ratios which are given as below:
GP ratio- It is usually found in every enterprise as the GP I that raw profit generated by an
organization after deducting cost of sales from the sales figure. It is one of the components of
profit and loss statement (DRURY, 2013). The GP ratio has increases from previous which
shows firm’s ability in generating higher level of sales and the revenue and at the same time it
also depicts that the cost of goods sold also gets reduces.
Net profit – It is regarded as complete profit which is widely used every entity in ascertaining
their profitability of a particular year as it also states in the annual reports generated by the
enterprise and circulated to different shareholders in order to convey efficient and transparent
business conditions of the entity. It is commonly used ratio as it involves tax implications on the
profit generated by an enterprise (Inderst, 2013). Tax will be deducted from the gross profit
amount generated after excluding cost of sales from the net sales. This ratio has decreases from
its earlier years as this shows heavy tax burden on enterprise which reduces its overall net profit.
Operating profit- It is another most important element forms part of profit and loss statement as
it is that profit which is generated after deducting all kind of operating costs from the figure of
net sales. It has produced after deducting cost of sales from the sales and further excluding
selling and distribution and administration expenses from GP then operating profit arrived
(Hanna, 2014). Operating ratio has declined from previous year which totally denotes the
negligence of an enterprise in order to increase the burden on their overall business by increasing
their operating expenses in proportion to the sales generated by an entity.
Gearing ratios- It is that ratios which help to find out the relationships between capital and asset
held by an entity which is further discussed by the business.

Debt equity ratio- this ratio helps to find out the perfect alignment among these two
components which is widely used as alone or in combination (Kroenke and Boyle, 2015). This
ratio helps to find out the proportion among debt and equity held by an entity. The debt shows
burden and on the contrary to it equity shows ability of the firm by increasing their strength. The
financial performance of an entity has declining from previous years as the debt component in
form of debentures or bank loan is higher which dominates the firm’s ability in order to create a
larger impact on their overall performance.
Assert turnover- It shows the contribution of assets in generating higher amount of the sales and
revenue (Mulley and Walters, 2014). The proportion between the net sales in relation the total
number of sales produces by an entity will have significant importance or not has been explained
with the help of this kind of ratio. The constant ratio shows careless attitude adopted by the entity
in order creates significant positive changes in the ratios.
Inventory turnover- It is that kind of ratio which helps an entity in order to ascertain their
business efficiency by analysing the major part of the organization that is the inventory
(WisCombe, 2016). The declining ratio shows that cost of goods sold increases as compared to
the inventory held by an enterprise creates bi significant changes in uplifting and fostering their
current and existing working conditions.

TASK 4
CONCLUSION
It can be summarized from the above project report that financial resources and there is
funding is essential aspect of a enterprise as an enterprise’s current working conditions will be
improved by following various kinds of standards and measures. Merlin entertainment that
provides their extended services which includes entertainment services and major includes travel
and tourism services in these sectors will bring lots of opportunities whole using wide range of
sources in order to attract different kinds of customers. The above report also stresses on the cost
element in contrast with the impact on the profit component which helps to increase the
profitability of an enterprise. This report has also focused on various aspects which an enterprise
owner needs to give emphasize in order control its costs. The major concern of management
accountant is to maintain coordination among the enterprise by maintaining discipline and
peaceful working environment. Ratio analysis has also used as one of the comparative analysis
tool that helps an enterprise in order to assess it business efficiency by judging current ability in
comparison with the previous figures in the category of different aspects of the business such as

profitability, liquidity, financial health and gearing ratios that assess all the components of the
balance sheet.

REFERENCES
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