Finance & Funding Sample

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FINANCE & FUNDING
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TABLE OF CONTENTS
INTRODUCTION..........................................................................................................................4
TASK 1...........................................................................................................................................4
1.1 Importance of cost and volume in financial management of travel and
tourism business.................................................................................................................. 4
1.2Analyzing pricing methods used in the travel and tourism sector............. 5
1.3 Factors influencing profit for Thomas Cook....................................................... 6
TASK 2...........................................................................................................................................7
2.1 Different types of management accounting information..............................7
2.2 Using management accounting information as decision-making tool.....8
TASK 3...........................................................................................................................................9
3.1Interpretating financial accounting of TUI Travel Plc.......................................9
TASK 4........................................................................................................................................ 11
4.1Analyses sources and distribution of funding for the development of
capital projects associated with tourism.................................................................. 11
CONCLUSION............................................................................................................................11
REFERENCES............................................................................................................................ 12
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INTRODUCTION
Finance and funding is an imperative way to manage resources and
enables
organization
to
expand
business
at
marketplace.
It
assists
management to manage cost and make effort in relation to increase overall

profitability. Present report is about Thomas Cook Group Plc that is based in
UK and provides wide range of services to different types of visitors. Further,
report focuses on pricing methods and uses of management accounting
information that contribute towards managing all business activities. It
facilitates to deliver good quality of services to large number of buyers. In
addition to this, ratio of organization is also analyzed that assists to provide
information regarding performance of firm for specified time span.
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TASK 1
1.1 Importance of cost and volume in financial management of travel and
tourism business
There are several types of costs associated with services of Thomas
Cook that affects overall profitability of firm to a great extent. It consists of
direct, indirect and fixed cost. Along with that, variable cost and allocation
cost are also included that increase price of services. For example, direct
cost includes labor cost who are directly associated with providing services
to buyers whereas indirect cost is administrative cost such as salaries of
managers, electricity charges and transportation cost (Acton, 2013). These
two costs vary as per the scale of production by which organization have to
add on extra margin in services so as to increase overall rate of return. Here,
fixed cost remains constant during the whole production life cycle whereas
variable costs vary as per the changes in the volume of production. It affects
profitability of Thomas Cook to a great extent. Owing to this, firm manages
its cost in an effective way that contribute towards lowering down of cost of
production and providing services to buyers on affordable prices (Elearn,
2013). It enables organization to increase number of customer and deliver
them good quality of services so as to expand business over the globe. For
accessing information of cost of different types of services that are being
provided by Thomas Cook, Cost Volume Profit analysis proved to be effective.
It is the most suitable method to keep record regarding profit as well as cost
of services by which organization can be able to reduce cost of production
and increase overall rate of return. It facilitates to create competitive edge of
the firm in the marketplace. It enables finance manager of firm to have
proper recording regarding different types of costs(Grieve, 2013). It aids to
anticipate future cost that can be occurred to management due to changes
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in the external as well as internal factors. It leads to manage all business

activities in an effectual manner.
Break-even analysis is an imperative way to give upward direction for
future businessmen activities. It helps management of Thomas Cook to
analyze overall production procedure and make changes in the same in
order to go beyond Break Even Point (BEP). It is the key position thereby
organization can come to know that they are getting neither profit nor loss.
After reaching at BEP, organization move towards higher volume of
production so as to increase profitability. It assists firm to deliver good
quality of services to large number of buyers and facilitates them to quick
access to affordable services (Healy and Palepu, 2007). BEP also comes
under Cost Volume Profit analysis that assists management of the cited
company to manage its business activities. It depicts detail about volume of
profit by deducting overall expenses that have been incurred due to
providing several types of services. Along with that, economies of scale is
considered that helps to decrease cost of production and increases overall
rate of return of the firm. It facilitates to create distinctive image at the
marketplace and achieve long as well as short term objectives of Thomas
Cook.
1.2Analyzing pricing methods used in the travel and tourism sector
Pricing is a vital way to ensure higher productivity as well as greater
profitability that facilitates organization to make effort in relation to
increasing overall rate of return. Following types of pricing methods are used
in by Thomas Cook-
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Discounted pricing- It is the most important pricing method by which

Thomas Cook can make an attempt in relation to increasing number of
customers (Joshi, Al-Mudhaki and Bremser, 2003). It is also effective in
order to create awareness among large number of visitors. In this
pricing, management of Thomas Cook offer services at lower price in
the off season. It facilitates to create distinctive image of firm in the
marketplace and deliver good quality of services to large number of
buyers.
Cost plus pricing- This pricing method is key to success for all kind of
businesses. Here, management of Thomas Cook add margin on the
cost of services so as to cover the cost and increase overall rate of
return. It facilitates to ensure smooth flow of production and creates
competitive edge of firm in the marketplace (Kierulff and Petersen,
2009). Further, it is suited in all type of situation by which corporation
can ensure about long run survival of business.
Market-led pricing- It is another important way to deliver good
quality of services to large number of visitors. Here, management of
Thomas Cook offer several types of discount and offers that leads to
address need of different types of customers. On the other hand,
discount are not offered during Christmas and other festival that aid to
cover losses of the firm. Here, prices are set on the basis of seasonality
and prevailing situation in the market that facilitate to cover increase
overall rate of return (Nga and Yien, 2013).
Value adding- It is the most common pricing method by which firm
can be able to deliver good quality of services to large number of
visitors. Here, prices of product increase with addition of extra features
in the product. It maximizes cost of production and that increase final
prices. It assist firm to add extra margin on the product that enhances
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overall rate of return of firm. It enables organization to cater need of

different types of visitors and create competitive edge of the same in
the marketplace. It is also imperative to improve quality of services by
which Thomas Cook can be able to cover large market potential.
1.3 Factors influencing profit for Thomas Cook
There are several factors which affect profitability of Thomas Cooks in many
ways. It has direct or indirect impact of both internal as well as external
environment. Here, internal environment consist of cost, policies, structure of
management. Due to changes in the internal environment, management
need to make changes in the present
state of affairs. Further, external
changes are those which are indirectly affect overall performance of Thomas
cook. These are as followsCurrent trend- It is the most important factor which has direct impact
on the sales turnover of Thomas cook. Here, firm need to make
changes on the basis of prevailing scenario so as to increase overall
profitability as well as productivity (Callahan, Stetz and Brooks, 2011).
In this, visitors may prefer different types of services due to changing
life style and changing preferences.
Social environment- It is the major areas that changes time to time
and affect performance of organization to a great extent. Here, cultural
values and assumption forces company to provide device accordingly.
For example, families like to visit cultural and heritage beauty of
country in order to enhance general knowledge (Atkinson, 2007).
Political environment- Political changes are those which affect
performance of Thomas Cook to a great extent. Due to changes in the
political parties, firm can bear losses because of changing rules and
regulation related to export and import.
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Bed debts- It is another factor which decreases profitability of Thomas

cook to great extent. It is happened because of providing services on
credit that create barrier in recovering the expenses. Increasing ratio
of bed debts create uncertainty for future business activities and has
negative impact on the performance of company (Yazdifar, 2004).
Poor
planning-
Planning
is
the
imperative
task
by
thereby
management execute new project and make effort in relation to

catering need of different types of buyers. Due to poor planning,firm
have to bear losses and affect overall rate of return of Thomas Cook.
For example, expansion of business in another geographical areas with
improper market research may lead to increased rate of deficit
(Macintosh and Quattrone, 2010). It does not aid to give competitive
edge to organization.
Economic
environment-
It
is
the
main
factor
that
hampers
profitability of firm to a great extent. Due to increase interest rate of

changing economic policies, buying power of visitors decreases. It has
direct impact on sales of the firm and lower down profitability of firm
(Schoute and Wiersma 2011). In such type of situation, organization
offers discount and several lucrative offer for visitors so they can
reduce the negative impact of inflation. However, sales turnover
decreases to a great extent and it becomes hard for organization to
survive in the market.
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TASK 2
2.1 Different types of management accounting information
For operating business of Thomas Cook management need to keep
record of different types of management accounting information. It facilitate
to manage all business activities in very efficient manner so as to increase
overall rate of return and deliver good quality of services to large number of
visitors. It consists of financial statements, budgets and variance analysis as
well as management information system. With the help of management
information system, management of Thomas Cook come to know about the
requirement of competent personnel and retaining them for long span of
time (Elmassri and Harris, 2011). It contribute towards increasing effective
management of personnel by which several types of need of visitors can be
addressed properly. It enables organization to cope up with changing
scenario and also make them able to achieve long as well as short term
objectives. Along with that, financial statements are the imperative source
by which firm access to different types of accounting information such as
profitability, liquidity, tax payment and solvency of firm. It enables
stakeholders to invest in the firm and increase their own rate of return so as
to increase competitive edge of firm in the marketplace. It also assist
Thomas Cook to adopt several types of strategies that aid to reduce cost of
production and ensure increased rate of return. Among the financial
statements, balance sheet is the most important way that depicts financial
position of firm over a specified time span. It facilitate to expand business
over the glove and increase number of visitors. It assist firm to cater need of
different types of stakeholders so as to create competitive edge of firm in the
marketplace
(Tauringana
and
Afrifa,
2013).
By
accessing
financial
statements, organization can be able to keep record of tax payment and per
unit cost and addition of margin on the sales turnover. It assist Thomas Cook
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to build trust with stakeholders and provide good quality of services to

different types of visitors. It is also imperative to analyze performance of
company related to specified time span. It leads to achieve long as well as
short term objectives of firm. On the other hand, budget is another way by
which management accounting information can be accessed. It facilitate to
plan for future business activities and accomplished set objectives in order to
reach at the aim of firm.
2.2 Using management accounting information as decision-making tool
Management accounting information plays significant role for decision
making that assist management of Thomas Cook to deliver good quality of
services to large number of buyers. With the help of management
accounting information, company make decision regarding implementing
new protect and expansion of business. It also assist firm to take decision for
reducing cost of production and advertising for new services in order to
attracting large number of visitors (Cesarotti,
Silvio
and Introna,
2009).
Here, budget is the imperative way to allocate financial resources that

facilitate to control expenses and addresses several types of need of visitors.
It is also helpful for acquiring qualified personnel and enables them to make
effort in relation to increasing overall rate of return of firm. It facilitate firm to
manage all business activities in an effectual way so as to archive long as
well as short term objectives of firm. On the basis of budget and
management information system, firm can be able to predict its future
performance that enables them to deliver good quality of services to large
number of visitors. On the basis of rate of return and taking advantage of
ratio analysis, management can come to know about the its performance
(Pavlatos and Paggios,
2009). It enables them to take decision regarding
launching new services and adopting effective strategy that aid to reduce
cost of production and increasing overall rate of return.
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TASK 3
3.1Interpretating financial accounting of TUI Travel Plc
Ratios
Formulas
2013
2012
3252
2348
5870
5085
0.55
0.46
Current Assets
3252
2348
Less: Inventory
-57
-61
Less:Liquid assets
1753
830
Current Liability
5870
5085
0.24
0.28
Debtors
collection
period
37.86 days
38.90 days
Creditors
payment period
70.05 days
69.85 days
Inventory
Turnover
COGS
13395
12965
Inventory
57
61
235
212.54
Liquidity Ratio
Current Assets
Current Liability
Current Ratio
Current
Assets/
Current
Liability
2013=(3252/5870)
2012=(2348/5058)
Quick Ratio
Quick Ratio
Current Assets Inventory/

Current Liability
2013=(3252-57-1753)/5870
2012=(2348-61-830)/5085
Inventory
Turnover Ratio
COGS/Inventory
2013=13395/57
2012=12965/61
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Profitability
Ratio
Gross Profit
1656
1495
Sales
15051
14460
0.11
0.1
Net
Profit
margin
Profit for the year
63
137
Sales
15051
14460
0.01
Return
on
Assets
Profit for the year
63
137
Total Assets
9529
8621
0.01
0.02
297
301
3659
3536
0.08
0.09
GP Ratio
GP/Sales
2013=1656/15051
2012=1495/14460
Profit margin
Profit for the year/ Sales

2013=63/15051
2012=137/14460
Return
Assets
on
Return
Capital
employed
of
Profit for the year/ Total Assets

2013=63/9529
2012=137/8621
Earnings
Before
Interest and Tax
(EBIT)
Capital Employed
ROCE
Earnings Before Interest and

Tax (EBIT) / Capital Employed
2013=297/3659
2012=301/3536
Liquidity ratio- From the analysis of annual report of firm, it is found

that liquidity position of firm has improved form the previous years
because in 2012 it was .46 and in 2013 it had .55 current ratio. It assist
management of firm to make effort in relation to ensuring smooth flow
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of production and deliver good quality of services to large number of

buyers. Further, quick ratio of firm was .28 in 2012 and the same in
2013 was .24 (Quick Ratio, 2015). It is showing that, organization may
face problem for meeting its short term obligation in order to providing
services to number of visitors. It has direct impact profitability.
Profitability ratio- Profit margin of TUI travel and plc is decreasing to
a great extent. It depicts that organization can face problem of high
deficit due to increasing expenses. It is because net profit for the year
2013 is going down in comparison to 2012. It creates problem
in
providing services to visitors and adverting for the same. On the other
hand, Gross profit in 2012 was 10% and the same increased in 2013
by 11%. Due to increased cost of finance firm , profitability is going
down because firm have to pay higher cost to outside parties
(Ledgerwood and White, 2006).
Return on capital employed- It is an important ratio that provides
detail about rate of return for shareholders who have invested money
in the organization. By revealing financial information, it is found that
in 2013 shareholders of TUI travel plc are getting less return. It depicts
that firm can face problem related to investment that affect its future
business activities. Further, inventory turnover ratio is also not
appropriate by which overall expenditure of ht firm is increasing (Allen
and Economy, 2011). It creates problem in the daily transaction and
prices of services may be increased to a great extent (Inventory
Turnover Ratio, 2014). On the other hand, firm is also not managing its
assets
efficiently
that
creates
additional
cost.
Owing
to
this,
management may not able to ensure about consistent flow of

production.
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TASK 4
4.1Analyses sources and distribution of funding for the development of
capital projects associated with tourism
Thomas Cook can can raise finance for the development of capital project by
the help of several types of public and non-public resources.
Regional development- In order to develop heritage sites and Cross
Railway project as well as Tourism information point, management of
Thomas Cook can easily access to public fund so as to develop integrity
bridge way (Bandyopadhyay and Saha, 2011). Also, this proves to be
effective in developing route cycle.
Equity financing- In case of Cross Railway project management of firm can
raise long term finance by issuing equity share. It enables organization to
ensure proper development of project so as to remove barriers that are
being faced by tourism. In addition to this, issue of share prove to be
effective to determine well being of tourism sector.
Bank loan and retained profit- On the other hand, retained profit is cost
effective sources of finance by which firm can cater its short term
requirement. In this, firm does not need to pay cost of finance to outside
party. It facilitate to implement project like footpath development and
improvement. However, at the initial stage firm have to incur huge cost but
gives long run benefit so that management can be able to achieve long as
well as short term objectives. On the other hand, sources of finance create
several types of cost for the firm that increases additional cost and may
decrease profitability of the firm at the initial stage.
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CONCLUSION
From the report, it can be said that, finance and funding is the
imperative way to manage all business activities. It assist firm to reduce cost
of production and make effort in relation attract large number of visitors by
providing services on affordable prices. It can also be said that, management
accounting information is way to expand business and achieve aim of
corporation within stipulated time span. Further, financial statement plays
significant role for taking decision regarding future expansion and growth of
firm.
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REFERENCES
Journals and Books
Acton, A., 2013. Issues in Accounting, Administration, and Corporate
Governance: 2013. Routledge.
Allen, K. and Economy, P., 2011. Complete MBA For Dummies. John Wiley
& Sons.
Atkinson, 2007. Management Accounting. Pearson Education India.
Bandyopadhyay, A. and Saha, A., 2011. Distinctive demand and risk
characteristics of residential housing loan market in India. Journal of
Economic Studies.
Callahan, K. R., Stetz, G. S. and Brooks, L. M., 2011. Project Management
Accounting: Budgeting, Tracking, and Reporting Costs and Profitability.
John Wiley & Sons.
Cesarotti, V., Silvio, B. D. and Introna, V., 2009. Energy budgeting and
control: a new approach for an industrial plant. International Journal of
Energy Sector Management.
Elearn, 2013. Financial Management Revised Edition. Routledge
publication.
Online
Inventory Turnover Ratio. 2014. [Online]. Available through:
<http://www.myaccountingcourse.com/financial-ratios/inventoryturnover-ratio>.
Quick Ratio. 2015. [Online]. Available through:
<http://www.myaccountingcourse.com/financial-ratios/inventoryturnover-ratio>.

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SAMPLE ON

FINANCE & FUNDING

Toll Free : +44 203 3555 345

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management to manage cost and make effort in relation to increase overall

Toll Free : +44 203 3555 345

Toll Free : +44 203 3555 345

in the external as well as internal factors. It leads to manage all business

Toll Free : +44 203 3555 345

Discounted pricing- It is the most important pricing method by which

overall rate of return of firm. It enables organization to cater need of

state of affairs. Further, external

Bed debts- It is another factor which decreases profitability of Thomas

management execute new project and make effort in relation to

profitability of firm to a great extent. Due to increase interest rate of

Toll Free : +44 203 3555 345

Toll Free : +44 203 3555 345

to build trust with stakeholders and provide good quality of services to

Here, budget is the imperative way to allocate financial resources that

2009). It enables them to take decision regarding

Toll Free : +44 203 3555 345

Current Assets Inventory/

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Profit for the year/ Sales

Profit for the year/ Total Assets

Earnings Before Interest and

Liquidity ratio- From the analysis of annual report of firm, it is found

of production and deliver good quality of services to large number of

management may not able to ensure about consistent flow of

Toll Free : +44 203 3555 345

Toll Free : +44 203 3555 345

Toll Free : +44 203 3555 345

Toll Free : +44 203 3555 345

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