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Unit 2 Finance and Funding, Travel and Tourism Sector - Higher National Diploma in Hospitality Management

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Introduction

Finance has a vital role in developing and establishing a businesses organization to operate its routine activities, its business will grow to earn profitability and attain its goals and objectives. People are seeking for pleasure while spending their holidays, so it needs high rate of investment to catch the attention of people in order to please them with ambience and amenities, development of sight scenes, etc. This report is completely focused on finance and funding of travel and tourism, funding structured to sanction the amount to establish a locations for tourist purpose, and sum of the cost and volume of the monitory policies refers to financial status of business, that of the past year(Buhalisand and Darcy, 2011).

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This is dependent on management accounting system and financial management to reach out its goals of benefit of travel and tourism sector. In this report, Carnival Corporation & plc is a largest leisure travel company in London, which is about to explain the significance of costs and volume, pricing methods, and profit through finance management. Dalata Hotel Group plc is another firm which is undertaking management accounting information to assist in decision making on the bases of its accounts report. At the last of the report, it includes a funding face in which gathers pecuniary resource to develop it capital projects.

Task 1

P1.1:

A cost is a sum of total expenditures that are spend in manufacturing of products and services, to produce a goods and services for the end user by which they can be satisfied. Cost needed to be controlled to accomplish all the functions effectively in a business, different kind of costs are combined to know the overall expenditure in every operation. There are several types of costs that includes direct costs which is directly related to the production. In case of indirect costs are those which are not directly related with production but can be define as depreciation and administration expenses, fixed costs that never changes, variable costs varies with the level of output, allocation comprises with the process of identifying, aggregating and assigning costs of objects, and apportionment cost(Choiand and Turk, 2011). Carnival Corporation & plc, offers services to the clients, which are known as incurred cost that need to by the customer after the consumption. There are so many techniques and tools which are used by the businesses to make decision, that involves break-even analysis which is a calculation of at an axes where revenues and expanses are almost equal economies of scale and diseconomies of scale refers to disadvantages of cost that firms and government results due to increase in firm size or output. The firm has used several cost volume profit analysis with a purpose of taking decisions which are related with the cost, volume and profit. The analysis is done to gain the understanding of sales level, that generate the information about the desired profit. Cost volume analysis is an effective tool that aid to analyse the actual cost and the capability of the firm to to provide lavish services to the customers, and there are some other benefits of using cost volume benefits including better controlling, decision-making, forecasting and price fixing(Evans, Stonehouse and Campbell, 2012).

P1.2:

As pricing is a important in every business so, travel and tourism industry is not untouched with that, it is one of the most giant industries, which is growing rapidly and never gone in break even point, this is one of the finest source of income for any individual who is pursuing in travel and tourism organization and for government of the country also, to generate maximum revenue to support economy. It has been determine that there are various types of pricing strategies considered in an organisation to set prices of the products and services which are offering by them, Carnival Corporation & plc also considering various aspects of pricing methods to decide the price of their offering comforts, they are offering some schemes like discounts on some specific services as well as competition pricing. The firm needs to be take a look on all of these kinds of prices before select one, as company can offer discount price in off season for example, this is cruise leisure travel firm, so it can increase the time of peak season to gain the profit, because at that time the travellers will not bother about prices, and in off season discount is best policy to sustain and maintain the operations. Cost plus is one of the effective objectives to achieve future aims and goals through using different kind of costing by including total earning of an organization based on actual cost of services (Gibson, Kaplanidou and Kang, 2012). In market led pricing the prices are generated through market force, according to the customer demand, by providing the things for what customers are seeking for. Carnival Corporation & plc, is using this price strategy to decide the price of assorted packages. In value adding pricing the firm is adding extra services with already existing to allure the customers whereas in comparative pricing method, prices are regulated according to the market analysis regarding the prices of rivals, this can lead to get the advantages in competitive scenario when others are increasing their prices to gain profit, then less prices can give a hike in profit because may prefer for the affordable prices and best facilities. In return on investment, the prices will will be shape according to the bases of interest rate of the products and services and the return on investment, the total expenditure on products and earned interest on that and then it will compare with the actual investment cost (Henderson, 2010).

P1.3 :

There are various section which influences income of travel and tourism, that are as follows-

Events – Events are holding a major place to attract tourist, as there are several events are organized by the industry to get the attention, when there is any kind of festival is flowers are about to bloom, at that time several events are organized by some may travel and tourism company, for example in Easter and Christmas time, there are many events and parties are taking place and that time prices are offers with a discount, which invites guests on affordable prices (Heung, Kucukustaand and Song, 2011).

Seasons – There are different seasons that causes the profit of the travel an tourism industry, that seasons are known as peak seasons and moderate seasons. Carnival Corporation & plc, evokes the customers with a view to increase profitability.

Currency rates – Every country has different currency rates, these differs from the profits according to the businesses, Carnival Corporation & plc has customers from across the borders and that impact on its business due to differentiation of currency rates.

Natural catastrophe – The natural disasters are a big destruction for the tourist because tourist avoids to go on certain location which have in danger state.

Terrorism – Terrorist attacks one of the most crucial factor that effects on the profits, there are so many countries which get in the drawbacks because of terrorism and also lose the chances to over come this fear in people's mind.

Travel trends – Travel is similar to another activity, and trends develops from one year to next year to determine what a kind of things can be do for marketing. Trends can offer the exotic destinations, like beaches, European tours, and so on. Trends have a certain niches, to make every year a new popularity among visitors.

Task 2

Cash flow statement – It seems to well known financial records prepare by an organisation. It is clearly state that variation in cash inflow and outflows are collected from companies final statements. This will provide systematic detail of cash flow incur in the businesses. It is mentioned under section 7 (IAS7) that gives proper plan for operating cash in an organisation. Along with this, it provide effective data just about the capital investment activities such as sales purchaser of fixed assets. It is one of the most essential part of cash flow that involves major activities which are related with providing long term banking loan system(Murphy, 2013). There are several miscellaneous activities such as shareholder and dividend that are involves in cash flow that are as under:

  • Trading account – Financial gain statements is separate into two equal parts such as profit and loss and balance sheet which is view in financial statements of the company that give full fact are affiliated with net loss and profit. It is having some information regarding services, credit sales and cost of product sold-out.
  • Profit and loss account – They are providing financial statement of net profit and losses of shareholder and capitalist. It includes legal expenditure, salary, office rent which comes under fixed accounting period.
  • Balance sheet - It is that statement which present financial position of an organisation for specific accounting period that includes all major records are related with asserts and liabilities of the management(Nielsenand and Spenceley, 2011).

Dalata's financial performance and measurement:

Current ratio – In such cause, the current ratio is around 1.44 for Dalata hotel which is having 2.89 times rotation in total assets in accordance with total debts in an accounting year 2015. With the help of this, it can analysed that current asset has reduces in respect to current liabilities. Along with this, actual asset is 162278 in 2015 which has been reduced to 98771 in 2016 so the debt are analyse as 68821 in 2016. It can helpful in short-term decision, rather than long term decisions(Pike, 2012).

Acid test ratio – It is that ratio which has been measured by omitting inventory from current asset and it will divided in rest of the current liabilities. It was calculated as 1.40 in 2016 of Dalata hotel and it is not a terrible status as analyse to past year project which was measured as 2.86 that is considerable.

Acid test ratio

2015

2016

2.86

1.41

Return on capital employed- This seems to be an effective aspect which is related with total operating profit a company after getting analysis of total capital employed during the time. It is a profitableness ratio which display how efficient Dalata hotels administration is.

Return on capital employed

2015

2016

5.82

4.98

Return on net assets

2015

2016

3.74

3.78

Return on net asset- It is the total percentage of ratio which is being calculated in order to analyse total return they are earning from total assets of the company. The ratio was around 3.78 in 2016 which was decrease by 0.04 times from last year. It is ascertained that they are using fixes assert and working capital to great outcome (Ritchie, Amayaand and Frechtling,2011).

Net profit ratio

2015

2016

9.58

12.02

 

Net profit ratio As per the above net profitability is more effective in comparison to last year. This mean the profit earn during the time is sufficient enough in accordance with the last year (Song and Lin,2011).

Stock turnover ratio

2015

2016

89.50

69.40

Stock turnover ratio- From the above ratios, it has been seen that stock turnover ratio of the company is indicating maximum percentage in last year with total of 89.50 time. It get reduce to 69.40 times in present time.

Conclusion

This report is about travel and tourism finance and funding that includes the information about management accounting information that includes the costing methods, volumes profit criteria and finance accounts that has the information about cash flow, trading account, profit and loss, balance sheet, performance ratios like acid test ratio, return on capital, and so on. It also contains the information about the sources that aid to raise the funds to invest in capital projects, that aid to decision making and it also contains poster and leaflets with it. This informed about the management account information considering with travel and tourism industry that has a lot scope to invest in projects and less scope the dropping, although there are such factors that impacts on its performance get fluctuate in its performance and activities as compare to the past years. It contains the performance of a hotel that shows the performance with balance sheets, that shows a travel and tourism industry business affects in economy.

References

  • Buhalis, D. and Darcy, S. eds., 2011. Accessible tourism: Concepts and issues. (Vol. 45). Channel View Publications.
  • Choi, H. C. and Turk, E. S., 2011. Sustainability indicators for managing community tourism. In Quality-of-life community indicators for parks, recreation and tourism management (pp. 115-140). Springer, Dordrecht.
  • Evans, N., Stonehouse, G. and Campbell, D., 2012.Strategic management for travel and tourism. Taylor & Francis.
  • Gibson, H. J., Kaplanidou, K. and Kang, S. J., 2012. Small-scale event sport tourism: A case study in sustainable tourism. Sport management review.15(2). pp.160-170.
  • Henderson, J.C., 2010. Sharia-compliant hotels. Tourism and Hospitality Research.10(3). pp.246-254.
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