Finance and Funding in the Travel and Tourism (Essay Sample)

FINANCE AND FUNDING IN THE TRAVEL AND TOURISM
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Table of Contents TOC \o "1-3" \h \z \u Introduction………………………………………………………………………………………3Task 1……………………………………………………………………………………………...31.1Explain the importance of costs and volume in financial management of AHTC……………..41.2 Analyze pricing methods used in the travel and tourism sector…………………………………51.3 Analyze factors influencing profit for travel and tourism businesses…………………………..6Task 2………………………………………………………………………………………………72.1 Explain different types of management accounting information that could be used in travel and tourism businesses…………………………………………………………………………………..72.2 Assess the use of investment appraisal management accounting information as a decision-making tool………………………………………………………………………………………….8Task 3……………………………………………………………………………………………...93.1 Interpret travel and tourism financial accounts………………………………………………...10Task 4…………………………………………………………………………………………….114.1 Analyze sources and distribution of funding for the development of capital projects associated with tourism………………………………………………………………………………………..11Conclusion…………………………………………………………………………………………12References…………………………………………………………………………………………13
Introduction
Financial analysis assesses the performance of hotels and other tourism business with the use of ratio analysis. This report involves in the analysis of basic CVP models and other pricing methods which are commonly used by companies in travel and tourism industry. It also seeks to provide a vivid description of evaluation of management accounting information as a vital tool for decision making (Anil et al, 2004). It also highlights implication of different sources of finance that can be used by travel and tourism business. The analysis which has been provided by financial analysis is very important as it avails the opportunity for growth, expansion and profitability as it helps the stakeholders to develop strategies and initiatives that can support the success of their business (Christie and Crompton, 2001). The growth of hotel business is rapid in UK and for the business to expand quickly, the services of financial advisor is required. This is because they can assess the performance of the business organization by evaluating financial information in the financial statements using CVP. The financial advisor is useful for giving advice to the business organization regarding financial matters and also provides recommendation that can ensure that there is proper utilization of financial resources in the business. The analysis of this report is based on Angamah Happy Tours Company (AHTC) which has a plan to increase its sales revenues within the coming summer holiday trip to a Caribbean Holiday Resort lasting one month.
Task 1
1.1Explain the importance of costs and volume in financial management of AHTC
There are a number of importances of CVP analysis. This analysis involves the study of the way volume, cost, prices and profits are related to each other. This analytical tool form a very important part of marginal costing where cost is equated with revenues (Weygandt and Paul 2005). CVP analysis is responsible for providing financial overview of the planning process and also supports in the assessment of the purpose and the reasonability of the budget.CVP is very important and useful to the management as it ensure that there is interrelationship between different factors which has control of the company earnings in the form of profits. This is because it uses cost, volume and profits which form a reasonable structure of the business organization. However, it is useful in budgeting and forecasting (Weygandt and Paul 2005). With the helps of CVP, the management is able to estimate the maximum sales volume that it can produce or sale in order to make profits and also the sales volume which is able to make the business organization to achieve profit making objectives. Therefore, it ensures that the management is able to find best mix of cost and volume that can provide the most convenient profit (Anil et al, 2004). Finally a very complex management is also able to use CVP to project the implication of short run decisions concerning fixed cost, marginal costs and unit sales. Management accountants also use CVP is decision making. It is important in determining the break even point which is determined to know the point at which the business will start making profit (IFC, 2012). It ensures that the management accountants are able to know the level of sales volume which they can increase or decrease to maximize profits. This can be achieved by reducing contribution margin
1.2 Analyze pricing methods used in the travel and tourism sector
This business organization can set prices of its products and services using three different methods which include cost based pricing, customer based pricing and competitor based pricing (Christie and Crompton, 2001). Each of these methods has its on benefits and limitations which make it appropriate for this business organization.
Cost-based pricing
This is a pricing method where additional amount is added on cost as profit to determine the product or service price (IFC, 2012). This method is currently out of date and most people discredit it. The only benefit of this method is that the company is able to know t...