Financial Management In The Travel And Tourism Company (Essay Sample)

TRAVEL AND TOURISM
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Introduction
Finance and funding is an essential and crucial concept that needs an appropriate amount of time and attention by the business for an overwhelming performance of the company. Financial Management in the Travel and Tourism sector is essential part of the economy. It is essential as finance and funding in this relation be focused on full capacity and potential. So I that context, a travel, and tourism company called Explore tours & Travel Company is expected to organize a trip in the United Kingdom.
Cost volume and profit analysis will be done along with appropriate pricing in this concern for the better performance all the factors that would constitute profits are also analyzed. Next is the management accounting and the investment appraisal report is also made so that no problems may arise in that regards in future. Its ratios cause interpretation of the travel and tourism company (Davies and Downward 2007).
Discussion.
Finance and Funding in Tourism and travel - Explore tours & Travel Company.
* Cost and volume in financial management.
Financial management is the art of managing the operations of the organization, in a manner that could be helpful in maximizing the benefits and the optimization of operational resources which could enable the cost minimization and enable the achievement of maximum profits (Drury 2012).
Management accounting is the science of the presentation of the financial information in a manner that could enable sound decision making for the organization. This needs to be noted that to serve this purpose it is fundamentally vital to ensure that the management of information has to be optimum and the knowledge should be sound and worth being evaluated. Management accounting facilitates preparation of detailed reports and records which facilitate derivation of meaningful information to enable an authority responsibility decision making. For instance, the sales reports and the inventory reports. This information is an evaluative basis for internal control and decision making.
* The Role of cost and volume of financial management and management accountancy.
Since we have already discussed the various avenues of the cost management and financial optimization. It becomes essential to understand the role of cost volume and profits thereof in the financial management of an organization. It needs to be understood that an organization bears different types of costs and their influence on the benefits also differs. The various types of expenses and their unusual behavior and their relationship with the volume of business are known as the cost volume relationship (Miller 2013). These variables are essential to understanding for the managers to enable a sound decision making.
* Cost-Volume-Profit analysis is the most tested and recommended technique of evaluation of the degree of influence upon the profits of the organization due to the change in costs, volumes and thus the overall prices. This helps in determining that how a modification of the expenses, quantities, and prices affects the overall profitability standing (Lucey 2008).
Cost and volume are the primary impetus for any economy and the industries in it and the organizations operating within the industry. Since it is a pervasive factor in all of the sectors hence, organizations working in tour and travel industry are no different. Speaking in the said regards, we have taken an explicit evaluation of one of the major players in the travel and tourism industry via Explore tours & Travel Company
Explore tours & Travel Company operates in the service industry and its performance is significantly impacted by the cost and the volumes of the operations. Explore tours & Travel Company has been actively concerned upon its value and benefits and the management has taken various initiatives to reduce the same to optimize the sales price on a reduced level and thus enable higher profits in sight of higher volumes. Explore tours & Travel Company, has been actively trying to reduce its costs in a manner that could facilitate reduction of sales price to a level that becomes cheaper than the competitors which fetch a competitive advantage to the organization and thus enable generation of higher revenue, i.e., volumes and profits conglomerate. The organization has taken numerous initiatives such as enhancements of the number of routes, making actions to sell package holidays, etc.
Thus, it is primarily necessary for the managers, the decision makers to focus their orientation towards a significant reduction in costs and thus to enable cheaper offerings to the customer bases in comparison to the competitors. Because that, in reality, shall be able to help Explore tours & Travel Company to reduce its cost and increase its volumes and thus assisting in achieving a higher level of overall benefits. Explore tours & Travel Company has been expediting in refocusing its orientation towards cost optimization and benefit maximization which has been showing global growth for the organization. Both the fixed and variable cost is essential to be ascertained as the fixed cost helps in determining the breakeven point, it is the point where the value is equal to the revenue, and there is no profit or loss.
Pricing methods used by the Travel and tourism industry
Explore tours & Travel Company offers various products under the trip and travel bouquet to serve its customers efficiently and adequately while ensuring value maximization for all (Zhang and Chow 2014). Explore tours & Travel Company uses multiple methodologies for pricing its trip and travel packages which are significant.
* Price skimming: In this strategy firstly the price of the product and services is marked the highest and then subsequent reductions are made to attract sales. This strategy is used by Explore tours & Travel Company in several products to offer them at a higher rate during peak seasons and lower them in fall seasons. It enables the organization to reduce the price in the market and to recover its sunk cost. The word skimming for this process is derived after removing successive layers of “cream” or consumer segments by lowering their price. For example, an organization increases the amount of a particular product due to the added advantage that it contains which is considerably higher than its cost.
* Cost plus Pricing: Explore tours & Travel Company is also found using this strategy in which the entities tend to add up the value and then add the mark up as the profit percentage. It is one of the most practiced methods by entities operating in the travel and tourism industry. This method is relatively simple to implement and Explore tours & Travel Company uses it in some of its most selling packages. For example, the cost of a holiday package is £ 1,000 and the profit percentage to be added is 10% hence the post plus price would be £ 1,100.
* Market-led pricing: This is another method of pricing used by Explore tours & Travel Company in which it prices its packages as same as the rates prevailing in the market generally or even chooses to price them a bit lower to achieve some market and customer advantage. For example, the price of a product prevailing in the market is £ 100 the amount of the product belonging to the company has been set as £ 100.
* Absorption pricing: Absorption pricing is another widely used practice of marking the prices of products by Explore tours & Travel Company, in this method the price of the product and the service includes all the variable cost and the fixed cost to some proportion to recover all the damage.
* Marginal costing: Marginal costing is regarded as a technique of costing that helps in ascertaining the minimal cost that arises due to a variation in the production level and it also helps in identifying the effect of the minimum price upon the profit generated by the organization.
Factors that influence the profits of explore tours & travel company in U.K
The benefit is regarded as the amount, which can be considered as the excess of the revenue over the expenditure. Maximization of profits continues to be the primary aim or the objective of any business organization, be it small, medium or the large scaled business. The advantage is in actuality the reward of financial returns achieved by an organization after continued efforts and after application of due business strategies fueled by the capital and costs (Bastakis and Buhalis 2014). The level of profitability in actuality defines the level of operational efficiency of the organization.
* The production capacity of the company: The production efficiency of an entity is derived by the number of units produced by the company during an hour or the quantum of services provided by the organization. In case of Explore tours & Travel Company, the production efficiency in actuality refers to the no. of packages sold by them during their operational period which is the profit determining a factor for the company.
* Losses: Another important factor influencing the profits of an organization is the level of damages made by the company as it tends to reduce the benefit. Any material reduction in any avenues of revenue is it sales, expenses, or failure in current assets is prone to cut the advantage and profit-making ability of the organization.
* Markup: Selecting an adequate increase is another major factor influencing the profits made by the organization. An entity may choose to fix its expansion two times or three times high or even more as it does cover not only the product but also the cost associated with the product. It directly affects the profit of the company as higher the markup higher will be the profi...