Introduction
Unit 2 Managing Finance Resource Assignment Help Online
TASK 1
1.1. Importance of cost and volume in financial management.
A business organisation is one that strives to establish goals and transform those goals into vision. Strategic operational activities, logical and well-thought-out financial actions, and strong financial management are the driving elements behind this conversion.
It is necessary to identify which forces are likely to fluctuate ahead and to make sure that none of the forces change in order to obtain the intended effects. Among them, financial management has the most important unique value, and a proper connection with it must be formed. Cost and volume, which are interdependent and directly related, are the two most crucial financial management variables (Drury, 2012).
What part do cost and volume play in accounting for management and finance?
In an effort to manage an organization’s financial structure, cost and volume play a crucial role. In the cited reference, it is important to note that an organisation must face a variety of costs, each of which has a different impact on revenues. The cost-volume relationship indicates the various cost kinds and their underlying relationship with volume (Dowd, 2002). These elements are essential for facilitating healthy financial planning and decision-making.
Given that we’ve just spoken about how important cost and volume are when creating an organization’s financial structure. Understanding the various cost structures and the various methods for analysing a sufficient volume becomes crucial in order to streamline the decision-making process. Thomas Cook PLC, one of the most well-known firms in the UK travel and tourist market, has been used as the basis for the analysis because we are experts in the travel and tourism sector.
Cost categories that Thomas Cook PLC will bear include:
Direct Cost: These are expenses that may be linked directly to business activities, i.e., they are a component of the core services provided by the organisation (Lucey, 2008). An illustration of a direct cost would be the cost of airfare included in a client package.
Costs that are not directly measurable but are crucial to shaping the final bouquet of the goods or services that Thomas Cook offers are known as indirect costs. For example, the cost of the salaries for the sales and customer service workers is a necessary component of the final offering but cannot be linked directly to the services provided.
Fixed Costs: Fixed costs are expenses that are fixed in nature, meaning their amount does not change depending on how many finished goods or services are being sold. As an illustration, consider the Variable Cost Cost: Costs that vary according to the calibre of services provided are called variable costs. For instance, the cost of office power, which varies depending on utilisation, or telephone costs.
1.2. Pricing methods used by the Travel and tourism industry:
One of the most sensible choices that the management must make is pricing. Fundamentally, a company must set the pricing of its products or services so that it can cover its costs, generate the maximum amount of profit margins, and avoid undercharging the market or charging above going rates. Pricing decisions are based on a careful examination of costs and volume, and a number of tools are already available to make pricing of goods or services easier.
As the dominant participant in the tour and travel industry, Thomas Cook PLC offers a vast choice of goods and services, yet cost is still a big concern. The different techniques that the management employs
Thomas Cook actively employs the cost plus pricing strategy, in which the management accountant first totals all costs before adding the targeted markup profits to the total costs. In fact, it is the most widely used and tested way of pricing by businesses globally (Adams, 2006). Because it is relatively easy to use and comprehend, Thomas Cook also uses it to price the services it offers.
Thomas Cook also use the well-known market-led pricing model when determining the cost of their service offerings.
In this process, a company selects a price that is comparable to the general market rates before deciding whether to keep it lower than the average in order to lose some market share (Lucey, 2008). Thomas Cook, a company with aggressive management, is known for utilising this pricing strategy.
Another common strategy utilised by Thomas Cook is absorption pricing, which involves setting the price of a commodity or service such that it incorporates all of the variable costs and some fraction of the fixed costs in order to cover all of the costs (Atrill, 2011).
1.3. Factors influencing profits of the travel and tourism industry:
The primary goal of a business’s operations is to maximise advantages by steadily raising its profits year after year. Profit in this context refers to the monetary compensation for wise financial management and strategic business activities. The organization’s operational efficiency is actually determined by its level of profitability.
Production capacity of the business: A company’s primary source of income is the volume of marketable goods and services it provides. Therefore, Thomas Cook must still decide whether to provide as many services to customers throughout the selling period. The more services an entity offers, the more money it will make.
Seasonal Factors: The tourism peak, when most people opt to travel, such as the new year, etc., and the fall seasons, when less people typically travel, continue to be key factors affecting Thomas Cook’s profitability. Profits are often highest during peak season and lowest during fall seasons (Owen, 1998).
Economic factors: Various economic issues, such as choosing an adequate markup and managing its terms with suppliers to get cheaper and better rates, efforts to reduce costs so that you can offer clients the packages at much lower rates and thus be able to snag a market share in peak seasons, remain a significant factor influencing the profits.
TASK 2
2.1. Different types of management accounting information used by the travel and tourism industry:
In order to assist the process of making wise decisions and to ensure that the sustainable growth of the organisation is not hindered by rushed or unreasonable decisions, management accounting aims to offer relevant information to the decision-making authorities. Since it continues to be a significant source of information, decision-makers frequently go to management accounting for information that is relevant to the execution of operational strategies and the formulation of plaintiffs for choosing how, when, and what to do. The nature and scale of corporate operations essentially determine the type of information that may be required. The many kinds of information and their sources for Thomas Cook Plc’s needs are as follows:
Financial statements: Financial statements are documents that show how business operations have affected a fiscal year. They are among the best information sources for any entity. They serve as the organization’s primary accounts and official records for the major cost and profit centres. The financial statements of any business organisation can provide a decision maker with a number of useful pieces of information. The balance sheet, which shows an organization’s real and fair financial situation as well as its current holdings of assets and liabilities, is included in the financial statements. A decision-maker can learn more about the entity’s assets and liabilities and analyse how they have changed over time.The profit and loss statement is the document that lists the sources of income and the expenses necessary to generate that income. This declaration is a crucial source of data for comprehending the organization’s cost and revenue structure. It also analyses the operation of various cost and profit centres within the institution.
Unit 2 Managing Finance Resource Assignment Help Online
Statement of Cash Flow – Because cash continues to be the most liquid asset among all asset classes, it is crucial for an organisation to make sure they have a sufficient supply of cash in their operations to prevent any liquidity problems. The cash flow statement makes it possible to derive useful information by analysing the movement of cash for an organisation during a fiscal period in the form of inflows and outlays.
Budgets: A budget is an estimation of the anticipated costs and income for the current period. In reality, budgets are the most tangible source of data for comprehending business strategies and analysing the success of the company through comparison.
Analysis of Variance: Analysis of Variance aids in evaluation of the discrepancy between actual and budgeted expenses. The decision-makers may receive assistance with a basis for decision-making regarding strategies for management of business operations by analysing the variety.
2.2. Use of management accounting information as a decision making tool in travel and tourism industry:
Information for making decisions, as previously noted, can be obtained from the many sources indicated above. When deciding how to manage organisational operations, management accounting assists in structuring the information of critical importance in a way that holds critical relevance.
The aforementioned management information can be collected from financial accounts, budgets, forecasts, and other sources. Thomas Cook PLC may utilise this data to inform future strategy or wise decisions about their monthly operations.
Financial Statements: The management can assess the entity’s cash flows, financial position, and revenue pattern based on the financial statements. These are clear sources of information regarding a number of crucial aspects of managing business operations. 2011 (Atrill).
Budgets and forecasts are another crucial foundation for obtaining information about how business activities will be managed in the future.
Variances – By doing a variance analysis, management can identify the major action areas that need to be restructured and the procedures for doing so, enabling effective management of the organisation.
TASK 3
3.1. Ratio based analysis of TUI Travels PLC
Unit 2 Managing Finance Resource Assignment Help Online
We must have arrived at a foundational understanding of how formal decision making is carried out in an organisation after doing a thorough investigation of the many imperatives of decision making and financial management of an organisation. However, it is important to note that decision-making in management and finance is not just done in the ways indicated above; there is also currently a process known as ratio-based analysis that acts as a litmus test. The most well-established way for evaluating the financial performance of any corporate organisation is ratio-based analysis.
Ratio-based analysis makes it possible to compare and better comprehend the numerous key components of a company organisation, such as liquidity and profitability. This makes it possible to analyse and evaluate the organisation much more precisely (Lacey, 2001).
The financial and operational performance of Tui Travel PLC, one of the leading companies in the UK travel and tourist business, is thoroughly analysed using ratios in this section of the study.
Current Ratio-The current statistic is a ratio that aids in understanding how an organisation manages its liquidity risk. It aids in the analysis of the organization’s ability to pay its debts when they are due.
The current ratio of TUI is seen to have increased from 1.15 in 2012 to 1.38 in 2013, which is a positive indicator of the organization’s effective management of liquidity risk. The ideal ratio, however, is anticipated to be 2.
TASK 4
4.1. Source and Distribution of Funding for Public and Non Public Tourism Development
We have examined the numerous factors that could affect decision-making in an organisation in the report’s aforementioned sections. Understanding that the aspect that most affects decision-making and resource management in the above example is the sources of producing funds for business operations and capital-intensive projects becomes crucial (Dowd, 2002).
Actually, finances serve as the foundation for developing and implementing corporate strategy. Any business activity need a financial strategy to support it in order for the tactics to be successful. In reality, all levels of operations and all sorts of businesses engage in some form of financial planning. Business ideas simply cannot be carried out in the intended manner in the lack of sufficient funding. Another structured sector with long-term growth prospects is travel and tourism. As a result, budgeting for future strategies and actions becomes crucial.Any organization’s GDP is significantly influenced by travel and tourism, so the government also has a role to play in the growth of this sector by providing amenities like information and management centres, excursion places, and proper maintenance and upkeep of tourist attractions. In order to ensure the general health of the travel and tourism business, the public and private sectors must collaborate (Owen, 1998).
Unit 2 Managing Finance Resource Assignment Help Online
Below is a discussion of the many funding options for both public and private tourism development.
Public Financing – The funding supplied by the state and the entities formed by it is one of the key sources of finance for the development of projects in the travel and tourism sectors. As has already been mentioned, tourism continues to be a significant contributor to GDP in all countries, therefore public sector finance is available for this industry from a variety of sources in the form of direct or indirect participation. The different organisations that the government bodies have founded are,
Non-Governmental Public Bodies – Since we already know that the tourist sector is still crucial for everyone, there are a number of non-governmental public bodies in place to support the sector. These organisations, which are primarily self-financed, were created with the intention of collaborating with both governmental and commercial tourism stakeholders to assist the expansion of the sector as a whole.
Non-Public Financing – Non-Public financing is the provision of funds from non-governmental organisations, primarily from body corporations and retail investors, for the development of the sector. The industry’s growth potential and the desire for capital appreciation while contributing to the development of the industry at large continue to be the primary drivers for the availability of funds in this sector. Usually, this method is used to finance capital-intensive projects. Both equity finance and debt financing are possible forms of this type of funding.
References
Adams D (2006), Management Accounting for the Hospitality, Tourism and Leisure Industries: A Strategic Approach, 2nd Edition: Cengage Learning EMEA,
Atrill, P. (2011), Financial Management for Decision Makers, 6th ed. Financial Times/Prentice Hall.
Drury, C. (2012), Management accounting and cost accounting, 8th Ed. Cengage Learning EMEA.
Horner P (1996),Travel Agency Practice, Harlow, Longman.
Kotas R (1999), Management Accounting for Hospitality and Tourism, 3rd edition, Thomson Learning, London
