MC4F12 Finance and Funding - Level 4

TASK 1

1.1 Importance of costs and volume in financial management

For a business organisation it is required to analyse values of their products and services cost to make appropriate easily. Through this they can easily get higher profit and desirable success in future. In The Akaglo Tours Company, industries needs to manage their funds and reserve to offer quality and attractive services to their target customers. This is one of the fastest growing industry in world wide, so for this government of UK provide their own contribution to maximise its size easily. In this process, cost and volume of organisational services play their own role in front of tourist and visitors as-

Cost – This is known as an appropriate amount of values and things that has to be paid to get something easily. Cost is mandatory values that has been used to produce several things and services. In it, organisation can easily add their revenue and profits that they need to earn on the behalf of their services (Henderson, 2010).

• Direct cost – These type of cost are directly accountable as cost objective in which organisation includes operating cots, efforts and expenses that requires to cove through firm's services and products.
• Indirect cost – These type of costs are not directly calculated as organisational objectives and it can be either variable as well as fixed by its nature. It includes indirect expenses and values of organisational services as advertising, electricity bill and rent as well.
• Variable cost – These type of costs are variable by nature and it can be changes in several proportion easily. Variable costs are basically depends on companies production and services to make desirable changes. It can be rise and fall at any time as per company's demand and choice.
• Fixed cost – These type of costs are fixed by nature and organisation can not make any changes in its nature by their own choice. Through this firm can easily serve impressive and appropriate cost in front of their target customers.
• Semi variable cost – These kind of cost are consider as mixture of fixed and variable element.

Volume – It is used to analyse values and quantity of organisational products and services to analyse different components easily. In travel and tourism sector there are various tools and techniques are available to serve effective services to tourist. Volume is determine as -

• Break even analysis – This is an appropriate point in which organisation cover its overall cost thorough impactful strategy. This process is very beneficial in travel and tourism industry that helps to cover overall cost of its expenses (Heung, Kucukusta and Song, 2011).
• Economies of scale – In this process travel and tourism sector serve its own contribution in economy growth. In UK Tourist industry provide higher growth and income.
• Diseconomies of scale – In this procedure economy scale do not function so for this The Akaglo Tours Company require to perform properly in several situations that can not affect negatively in economy.

1.2 Pricing methods used in travel and tourism sector

The Akaglo Tours Company require to use effective pricing method to serve quality services to their customers in appropriate manner to pay their attention easily. These kind of things helps to capture customer's eyes toward different services packages. In this process organisation needs to use effective methods to solve issues and problems that are related to pricing methods of travel and tourism sectors. For this organisation van use several techniques as -

Seasonal pricing – In travel and tourism sector different organisation needs to make effective and appropriate changes according to different seasons. In this process The Akaglo Tours Company provide different kind of offer and discount packages to their tourist as per their demand and choice. Visitors and tourist are demand for several packages as they come in different seasons to visit different places. Through this firm can easily higher profit and income as well.

Rack Rates – In this process organisation serve different kind of prices to their tourist without including any discount and offer in it. These rate are based on their pre planning package and pricing methods. For this tourist require to avail their order in tourism organisation's to visit several places easily (Nielsen and Spenceley, 2011).

Last minute costing- These are known as different kind of cost methods that are uses by several organisation's at last time as per customer's demand and requirement. In this process firm provide different offer prices that tourist can afford easily. The Akaglo Tours Company make their pricing policy variable as they can make appropriate services in them at different times.

Package deals – These are uses as pricing strategy of several organisations in which they provide different kind of tourism facilities to their visitors as per their demand with several offers. For The Akaglo Tours Company it is require to use package deals for their customers to provide quality services top them easily.

Discounting – This is one most attractive method in which firm provide several discounts and offers to their visitors to attract them easily. These kind of ideas helps to capture customer's eyes toward different packages.

There are several methods can be used by The Akaglo Tours Company for different pricing methods as -

• Cost based method – This is a common way in which organisation ad their margin and further cost in organisation's prices to getting higher profit easily. It is uses as one of the simplest method that includes variable and fixed cost of firm. For The Akaglo Tours Company this method will be useful to getting future success. It is simply helps to earn to income and market place in several countries (Papatheodorou, Rosselló and Xiao, 2010).
• Demand based method – This is one of the most beneficial method in which The Akaglo Tours Company can easily make appropriate changes in their pricing method as per customer's demand and need. Through this they can easily earn their own market place and goodwill in front of target visitors.
• Market competition based method – In this process, The Akaglo Tours Company requires to analyse their market condition and rivalry firms to set their offer prices easily. Through this they can easily serve them affordable facilities and prices as per their requirement and demand as well.

1.3 Analysis of different factors which influence profitability of travel and tourism

Travel and tourism is one of the fastest growing industry that earn higher growth easily. For this, it is requires that management of these organisations manage their strategies and services in appropriate manner to getting desirable growth easily. The Akaglo Tours Company require to make proper planning to reduce negative impact of different factors that influence profitability of travel and tourism sector. There are various elements are determine below as -

Internal factors – These are inbound factors of organisation that are directly affect profitability of organisation. For this, The Akaglo Tours Company requires to make effective strategy ti reduce impact of internal factors easily (Pike, 2012). Through this firm can easily improve their organisational position in target market or in front of target audience. These factors are known as Visitors, organisational policy, management services, tourists demand and need as well.

External factors – These factors are related to external environmental factors that are directly influence in decision making and profitability of travel and tourism sector. These factors are beyond the control; of firm but they can make impactful strategy to reduce its negative impact easily. All these factors are directly or indirectly affecting on organisational policy and procedure as well. There are some factors are determine below that are related to external factors as -

• Political environment - The Akaglo Tours Company requires to manage their organisational terms and policy as per the governmental rule and regulation to making desirable profit easily. Political factors has direct impact on profitability and decision making procedure of firm. To making smooth functioning process in organisation, The Akaglo Tours Company requires to build political stability in their business procedure. Through this they can easily build attention of visitors toward political values of their country.
• Current trends – In travel and tourism sector, it is require that organisation manage their terms and policy as per current trends and requirement of visitors. Through this they can easily capture tourist's eyes toward their services and offers. These kind of things play a most important role to maximise organisational profitability and growth in target market.
• Environmental factors – In travel and tourism sector, environmental factors play a most important role that helps to incise or decrease customer's range at several places. For this, The Akaglo Tours Company require to mange their budget and package that helps to capture customer's attention toward these services easily. Choice and demand of visitors or tourists are changes as per environmental factor of specific country so for this tourism organisation require to make impactful stategy6 to earn higher profit in peak seasons (Pocock and Phua, 2011).
• Social and cultural values – Social and cultural values of an country helps to attract visitors and tourist easily. So for this government of a country requires to maintain their historical and cultural values to get attention of visitors easily toward this.

TASK 2

2.1 Different kind of management accounting information which used in tourism sector

For travel and tourism organisation, it is require to manage their management accounting sources in appropriate manner to getting desirable outcomes easily. Through this they can analyse information about their overall expenses that require to recover through various planning and strategies as well. The Akaglo Tours Company requires to use different kind of management accounting information to analyse each and every information properly. For this process, they can use such type of sources as -

Budget reports – These kind of reports is related to organisation's functional activities that require to be manage in appropriate manner to getting proper information of overall budget. This type of reports are uses to manage total expenses and cost of organisation to greeting desirable outcomes easily. Through this The Akaglo Tours Company can easily minimise its extra expenses that can affect profitability and future growth as well. Budget report always manage appropriate control in cash flow, reserve manage management and fund flow analyse that helps to attain future objective easily. There can be two type of budgeting methods such as -

• Zero based budgeting – In this process, budgets are prepared as fetching the base amount zero.
• Incremental budgeting – In this method budget of current year is prepared by making appropriate changes in past year budget report.

Financial statement – These are most important statement of organisation that require to be manage in appropriate manner to getting appropriate information of all financing transactions. Through this firm can easily get proper information of their income management sources, cash flow analysis, Profit and loss management as well as analysis of balance sheet. These kind of statement helps to manage organisational record in appropriate manner to getting desirable outcomes of their investment and funds as well (Ritchie and Frechtling, 2010).

Management information system – These kind of statement helps to manage organisation's financial resource in proper manner. This is known as effective techniques that uses to analyse firm's future performance as per their current trends and working procedures. The Akaglo Tours Company can easily get effective and desirable outcomes through such type of statements as well (Zapata and Hall, 2012).

Variance analysis – These are uses to calculate standard rate of organisation that they invest to getting proper information of their funds and investment in tourism development. In this process manager of organisation mange their organisational activities as per their future requirement and current position to making appropriate strategy easily.

2.2 Assess the use of investment appraisal management accounting information as decision making tool

The Akaglo Tours Company requires to analyse the use of investment appraisal management accounting information to getting appropriate outcomes of their decision making process. Through this organisation can easily analyse proper information of their investment that they made to getting desirable outcomes. These kind of packages are related to several packages that organisation serve to their tourist and visitors (Spenceley, 2012). There are different appraisal techniques are given below that affect decision making process of organisation such as -

The internal rate of return (IRR) – These kind of values are consider as discount rate of organisation that they want to offer top visitors. This values is calculated as zero for expected as equal present value techniques. Formula of internal rate of return is -

The accounting rate of return (ARR) – These kind of techniques are uses for considering return in investment and capital that they put in their business procedure. It is also known as target rate of organisation that fir require top recover easily.

Payback period method – This is exact time period of organization in which they require to recover their investment amount with specific profits and growth. In this decision are made as per minimum timing that consider to recover overall amount.

Net present value method (NPV) – This methods uses to getting appropriate outcomes that require to analyse future desirability and investment of firm ion several places (Tribe, 2015).

TASK 3

3.1 Interpretation of financial accounts to assist decision-making

Income statement of TUI of TUI travel and tourism company for the year ended 30^th September 2016 and 2017

Balance sheet of TUI travel and tourism company for the year ended 30^th September 2017

These ratio statement shows that firms has less liquidity in terms of debts. The current ratio of organisation is 0.66 that is less then 1 so for this firm needs to manage their organisational liquidity in appropriate manner to getting desirable benefits and incomes as well.

Profitability ratio

As per the above ratio analysis it has been analyse that Debt equity ration is .22 times which is calculated on the basis of total debts and equity.

TASK 4

4.1 Different sources and distribution of development of capital projects

For The Akaglo Tours Company it is essential to manage their capitals in appropriate manner to getting desirable outcomes easily. There are different kind of sources are available for The Akaglo Tours Company as -

Internal sources of finance - These are organisation's inbuild strategies and techniques that they uses to build effective growth in their business process (Vellas, 2011).

Share capital – These sources are related to value of common funds that can exchange share. It can be classify in two different factors as Equity and preference shares.

Sales of assets – In this procedure organisation sales their assets as per the market values. These activities re consider after making final accounts of firm. These requires to be evaluate as per the value of liabilities.

External sources of finance – There are various external factor of sources and distribution of development of capital projects are given below as -

Bank Loan – These kind of funds are provided by government agencies, financial institute and other banks for enhancing organisational services easily. Travel and tourism is one the fastest growing industry that provide their effective services in economy growth.

Equity – These are share capital sources of organisation that helps to make effective structure in travel and tourism sectors properly(Wong, Mistilis and Dwyer, 2011).

CONCLUSION

As per the above report it has been summarised that finance and funding is one most important factor in each and every industry that requires to be manage in appropriate manner. Travel and tourism is one of the fastest growing sector in UK that helps to provide effective growth in economy. This project reports is based on The Akaglo Tours Company which is planning to prepare holiday trip for Maldives. For them it is necessary top manage their funds and financial sources in appropriate manner to getting desirable outcomes easily.

REFERENCES

• Evans, N., Stonehouse, G. and Campbell, D., 2012. Strategic management for travel and tourism. Taylor & Francis.
• Henderson, J. C., 2010. Sharia-compliant hotels. Tourism and Hospitality Research. 10(3). pp.246-254.
• Heung, V. C., Kucukusta, D. and Song, H., 2011. Medical tourism development in Hong Kong: An assessment of the barriers. Tourism Management. 32(5). pp.995-1005.
• Nielsen, H. and Spenceley, A., 2011. The success of tourism in Rwanda: Gorillas and more. Yes Africa Can: Success Stories from a Dynamic Continent. pp.231-249.
• Papatheodorou, A., Rosselló, J. and Xiao, H., 2010. Global economic crisis and tourism: Consequences and perspectives. Journal of Travel Research. 49(1). pp.39-45.
• Pike, S., 2012. Destination marketing. Routledge.
• Pocock, N. S. and Phua, K. H., 2011. Medical tourism and policy implications for health systems: a conceptual framework from a comparative study of Thailand, Singapore and Malaysia. Globalization and health. 7(1). p.12.
• Ritchie, J. B., Amaya Molinar, C. M. and Frechtling, D. C., 2010. Impacts of the world recession and economic crisis on tourism: North America. Journal of Travel Research. 49(1). pp.5-15.
• Spenceley, A. ed., 2012. Responsible tourism: Critical issues for conservation and development. Routledge.

Read Also: Global Financial Crisis of 2008

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