Sample Assignment - Finance and Funding

1. FINANCE AND FUNDING TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

2. TABLE OF CONTENTS INTRODUCTION...........................................................................................................................3 TASK 1............................................................................................................................................3 1.1 Importance of cost and volume in financial management of travel and tourism.............3 1.2 Analysis of pricing methods used in travel and tourism...................................................4 1.3 Analysis of factors including profit for travel and tourism business................................5 TASK 2............................................................................................................................................6 2.1 Different type of management accounting information's that are used by the travel and tourism business.....................................................................................................................6 2.2 Use of management accounting information as a decision making tool..........................7 TASK 3............................................................................................................................................8 3.1 Interpretation of travel and tourism accounts...................................................................8 TASK 4............................................................................................................................................9 4.1 Sources of funds for the projects......................................................................................9 CONCLUSION..............................................................................................................................10 REFERENCES...............................................................................................................................11 Appendix........................................................................................................................................13 TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

3. INTRODUCTION Management accounting play very important role in taking cost related decisions. Thomas cook is a large travel and tourism company that have operations in the number of nations of the world. In the report various techniques like break even analysis are described in detail. After that factors that need to be keeping in mind while determining a price are also discussed in the report. Along with this, some of the factors that need to be analyzed in order to understand travel and tourism industry are discussed in detail. In the middle part of the report ratio analysis is done and its results are interpreted in relation to Thomas cook. At the end part of the report, sources of finance are proposed for the Thomas cook and their suitability to the mentioned firm is also discussed in detail. TASK 1 1.1 Importance of cost and volume in financial management of travel and tourism Cost and volume have a great importance in the financial management of Thomas cook. It is cost and volume that determine firm finance needs. Cost refers to the costs like fixed and variable. Whereas, volume refers to the quantity of goods that firm produce in a given year. Cost and volume both are interlinked to each other if volume gets increased then cost will certainly increase vice-verse. In order to pay cost funds are required and to produce specific quantity of product funds are required. Currently, economy is uncertain and due to this reason price of the commodities are increasing (DRURY, 2013). This trend is seen especially in case of base metals. Due to increase in price of the base metals firms production cost is elevated. Simultaneously, funds requirement of the firms also get increased. Thomas cook is operating in the travel and tourism industry and currently due to recession in an economy less people are taking interest in visiting any place. In some nations it is growing but at the low pace. Due to this reason companies like Thomas cook are facing lots of problems in their business. Staying cost and travel cost is increased all over the nations and due to this reason cost also gets increased. This increase package cost and firm need more finance to fund its requirements (Nandan, 2010). In TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

4. such a competitive business environment firm cannot pass burden of increase in cost on its customers. In this situation firm will need to generate economies of scale in its business. It refers to the measures that will be taken in order to reduce cost of packaging. If this cost will be reduced then funding requirements of the firm will also get declined. Hence, complexity related to finance management for the firm will reduce to some extent. So, it can be said that both cost and volume are closely related to the financial management of the firm. As mentioned above that if fund requirement is high then high amount of fund need to be raised from the banks and other financial institutions. If the raised amount is high then it becomes very difficult for the managers to allocate fund among different expenses. Managers have to consider lots of things in order to make this allocation in proper manner. If higher amount of funds are raised then complexity of funds also get increased. Hence, cost and volume are closely related to the financial management. 1.2 Analysis of pricing methods used in travel and tourism In order to determine price several factors are considered by the Thomas cook. Price of package is prepared on the basis of fixed and variable cost. Fixed cost refers to the cost that never gets changed during life time of the firm. This cost can be increased with purchase of machines and other equipment's but cannot get declined (van der Steen, 2011). On the other hand, there is a variable cost which refers to the cost that keeps on changing continuously. This cost includes the expenses like wages and electricity etc. By combining fixed and variable cost Thomas cook determine a total cost of the package. After determination of cost firm takes an average of the customers that normally visit through its agency. It divides cost of package by the average number of tourists in order to arrive at per unit cost that will be charged on the tourists. On this cost Thomas cook add a commission and by adding that commission final price of the package is determined. Apart from this, there are several other factors that are considered for determining a price. Some of these factors are as follows: 1. Competition- Thomas cook is operating in the highly competitive industry and in order to give stiff competition firm needs to consider price that is charged by its competitors. It cannot solely focus on the cost of its package. It is possible that cost of package of TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

5. Thomas cook may be higher than competitor package (Haiza Muhammad Zawawi and Hoque, 2010). If due attention will be given only on cost then firm will legged behind in competition. Hence, firm needs to determine price by keeping in mind competitor pricing strategy. 2. Demand- In particular session demand from tourist side gets increased. This is a time period in which there is a lot of opportunity that is available to the firm. In such time period Thomas cook must reduce price of its product in order to increase its customer base. 3. Target market- Thomas cook can also select its specific target market like London etc in order to increase its target base. Mentioned firm can prepare attractive tourist package in order to persuade people. Hence, this is also an important technique that can be employed by the Thomas cook. The other two important techniques that can be used by Thomas cook are as follows. 1. Break even analysis- In the above pointit was mentioned that firm must look at the price that is charged by the competitor firm. If their price is low then firm must also charge a low price on the people. But it is also necessary to make sure that at least cost get recovered even price is reduced (Lee, 2011). By doing break even analysis firm can determine a minimum level of profit that it need to earn to cover its entire cost. At this specific level there will be no profit and no loss situation. Following steps are follows in this calculation. Step 1- In the first step projected sales is determined. Step 2- In the second step expenses are classified in to fixed and variable cost. Step 3- In the third step contribution margin is calculated by the manager. In this regard following formula is used by the managers in an organization. Contribution margin- Sales – Variable cost Sales Step 4- This is the final stage in which break even analysis is done by applying a following formula. TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

6. Total fixed cost Contribution margin (%) 2. Preparation of cost sheet It is a statement in which estimates about the cost are prepared by the Thomas cook. Managers need to make accurate estimate in order to determine cost of the tourist package. 1.3 Analysis of factors including profit for travel and tourism business  Profit- Profit refers to the amount of profit that remains after deducting all expenses from the revenue that is earned by the firm. Thomas cook is in travel and tourism industry and it is highly competitive industry. Recession greatly affects travel and tourism industry of UK. Due to recession growth rate of the industry become slow in the UK. Hence, profitability of the firms operating in this industry get erodes (ter Bogt and van Helden, 2012). It is evident from the Thomas cook financial statement in which its profit is declining continuously. Thus, it can be said that there is a critical condition in the travel and tourism business in the UK.  Domestic tourism - If we analyze UK travel and tourism industry then it can be seen that there is a very high proportion of inbound tourism relative to outbound tourism. However, segments of outbound tourism like business people and students are growing rapidly. But till the date inbound tourism is a business segment that is contributed to large extent to revenue of the firms operating in this industry. Due to this reason, Thomas cook needs pay heavy attention on the inbound tourism relative to outbound tourism.  Growth rate of tourism industry in UK- in UK travel and tourism industry is growing at a moderate pace. But its growth rate is higher than the UK GDP growth rate. From this angel growth rate of the firm seems impressive. In future it is expected that this sector will certainly grow at a rapid pace (Burritt and Schaltegger, 2010). This is because this sector has a 10% share in the UK GDP and it is a main source of earning for the government. Moreover, it is providing employment to large number of people. Due to this reason UK government is paying special attention on this factor. Apart from this, UK TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

7. economy is coming on track and it is growing year by year. Hence, it can be said that economy is recovering from the recession in proper manner. If recession all over the globe get softens then there are good prospects of growth in the UK economy. This indicates that there are ample opportunities of growth in the UK travel and tourism industry. Hence, Thomas cook must remain prepared to grab these opportunities that may come in existence in future time period. TASK 2 2.1 Different type of management accounting information's that are used by the travel and tourism business Different type of information of management accounting that can be used in travel and tourism business is as follows.  Budget- It is a statement that is used by the business firms in order to project to their expected income and expenditures. In this statement there are two sections and one of these related to the revenue and other is related to the cost. In the budget these expenses are deducted from the revenue and cash balance is transferred to the next year opening balance. Hence, budget is a statement that indicates the expectations of the top management from the middle and lower level of management. Thomas cook regularly prepare budget in order to keep its expenses in control (Pitkänen and Lukka, 2011). For the specific time period these budgets are prepared by the business firms. These budgets also indicate the targets that a top management wants to achieve foe the specific time period.  Variance analysis- It is a management accounting information that is used by the business firms. Under this technique variance is calculated related to the material and labor. On the basis of variance firm identify that it gives good or worst performance. If performance is good then there is no problem. But if variance is negative then management takes a strong corrective action in order to make sure that same variance will not get repeated again in future. TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

8.  Break even analysis- It is a method that is used by the business managers to determine level of sales that Thomas cook actual need to make in order to cover its actual cost. If sales are made below this level then firm will incur loss (Sisaye and Birnberg, 2010). Hence, it is necessary to make sure that sales made by the Thomas cook surpass the level of sales that is indicated by the break even analysis of the firm. 2.2 Use of management accounting information as a decision making tool Following are the uses of the management accounting information as a decision making tool for the business.  Keeping expenses in control- By making use of the budget all expenses can be kept in control by the business managers. In order to determine estimated expense amount manager needs to make prediction. This predicted amount must be actual in nature. Business decisions are made on the basis of this predicted amount (Christ and Burritt, 2013). If such amount will be wrong then all business decisions made on the basis of budget will automatically get wrong. Hence, it is necessary for the managers to follow a cautious approach while preparing a budget.  Helps in taking price reduction decisions- By making use of break even analysis price related decisions can be made by the managers. This is because break even analysis indicates the minimum level of sales or units that a firm needs to sale in order to cover cost of production. If firm wants to reduce price of its product then it need to consider results of the break even analysis. This is because it is an analysis that is reflecting the level up to which Thomas cook can reduce price of its product. Hence, it can be said that this is an important management accounting information that is used by the decision makers.  Identification of areas of poor performance- By making use of management accounting information managers can identify areas of poor performance. This is done through the use of variance analysis (Albelda, 2011). If areas of poor performance will be identified then managers will formulate a strategy that will help in ensuring that such type of TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

9. variance must not come in existence again. This will finally helps in improving company performance. Hence, it can be said that variance analysis as a technique has a great importance to the firm. THIS IS A SAMPLE ASSIGNMENT BUY QUALITY ASSIGNMENT TO SCORE A+ GRADES CONTACT US TOLL-FREE NO: +61 879057034 WHATSAPP NO: +61 424715655 EMAIL: help@assignmentprime.com WEBSITE: http://www.assignmentprime.com/ TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

10. TASK 3 3.1 Interpretation of travel and tourism accounts Following are the interpretations of the Thomas cook accounts.  Gross profit ratio- Gross profit ratio indicates the proportion of the sales that is covered by the gross profit. This ratio also indicates the firm cost control capacity. If gross profit ratio of the firm is increasing then it means that either firms sales is increased or direct expenses are in control of the firm (Gross profit ratio. 2016). In case of Thomas cook this ratio is increased and both elevation in sales and control on direct expenses may be reason behind same. In FY 2014 this ratio is 21.75% and in next financial year it becomes 24%. Hence, it can be said that Thomas cook give a good performance on this front.  Net profit ratio- The net profit ratio indicates part of sales that is covered by the net profit. The net profit ratio of the firm in FY 2014 was -1.34% and that in FY 2015 become 0.26%. Means that in last financial year this ratio increased by some percentage. This indicates that firm is making heavy amount of indirect expenses in its business. This trend continues in both years. If we compare both ratios then it can be concluded that firm is making small amount of direct expenses relative to indirect expenses. Hence, on this ratio Thomas cooks need to do lots of work.  Current ratio- This ratio indicate the liquidity position of the Thomas cook (Current ratio. 2015). Standard current ratio is 2:1 and it means that for every one pound of current liability there must be two pound of current assets. In the FY 2014 current ratio is 0.47 and same in the FY 2015 is 0.55. But in both years value of this ratio is below one. This indicates that firm is not in position to pay its current liabilities on time using current assets. Thus, this is another point where Thomas cooks needs to work.  Quick ratio- This ratio gives a clear picture of the firm liquidity position. Quick ratio of the firm is below standard ratio 1:1 which means that for every one pound of current liability there must be one pound of quick assets. Here also ratio values are below standard. On comparison of current and quick ratio values it can easily be seen that there TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

11. is a negligible proportion of prepaid expenses in the current assets of the firms. Hence, Thomas cooks needs to take some steps in order to increase proportion of current assets in the balance sheet.  Debt equity ratio- This ratio indicate the capital structure of the firm (Debt equity ratio. 2016). In case of Thomas cook the ratio value is 2.89 which increased to 3.05 in FY 2015. This indicates that in FY 2014 debt was just double of equity. But in FY 2015 situation get worst and debt become three times larger than equity. This will create problems for the firm in future because profit is very low and finance cost is increasing. Hence, in upcoming year Thomas cook may face huge problem in paying its finance cost on time. TASK 4 4.1 Sources of funds for the projects Following are the sources of finance for Thomas cook.  Shares- Firm can issue shares and can raise huge amount of capital from general public. For this it will need to fulfill certain criteria (Bowen, Call and Rajgopal, 2010). There is large imbalance in the Thomas cook capital structure. This limitation can be removed by issuing shares in the primary market. Hence, it is an appropriate source of finance for Thomas cook.  Private equity- Thomas cook can use private equity which is a variant of equity in order to finance its operations. Due to low profitability there is high probability of under subscription of issue. In order to prevent this situation firm can resort to private equity in order to finance its business operations.  Debt- This is a last option that is available to the Thomas cook because there is already higher weight-age of debt in the firm capital structure (Malmi, 2010). By selecting any of the above mentioned alternative firm to some extent can control its finance cost. TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

12. CONCLUSION On the basis of report it is concluded that management accounting helps firm in determining price of the products. It also helps managers in taking cost curtail decisions. It is also concluded that price of the product must not determine only on the basis of cost of production. Other factors must also be considered while determining price of the product. Firms must time to time conduct ratio analysis in order to identify their current position and to take corrective actions on time. By doing this firm can remain on growth track. TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

13. REFERENCES Books & journals Albelda, E., 2011. The role of management accounting practices as facilitators of the environmental management: Evidence from EMAS organisations. Sustainability Accounting, Management and Policy Journal. 2(1). pp.76-100. Bowen, R.M., Call, A.C. and Rajgopal, S., 2010. Whistle-blowing: Target firm characteristics and economic consequences. The Accounting Review. 85(4). pp.1239-1271. Burritt, R.L. and Schaltegger, S., 2010. Sustainability accounting and reporting: fad or trend?. Accounting, Auditing & Accountability Journal. 23(7). pp.829-846. Christ, K.L. and Burritt, R.L., 2013. Environmental management accounting: the significance of contingent variables for adoption. Journal of Cleaner Production. 41. pp.163-173. Drury, C.M., 2013. Management and cost accounting. Springer. Haiza Muhammad Zawawi, N. and Hoque, Z., 2010. Research in management accounting innovations: An overview of its recent development. Qualitative Research in Accounting & Management. 7(4). pp.505-568. Lee, K.H., 2011. Motivations, barriers, and incentives for adopting environmental management (cost) accounting and related guidelines: a study of the Republic of Korea. Corporate Social Responsibility and Environmental Management. 18(1). pp.39-49. Malmi, T., 2010. Reflections on paradigms in action in accounting research. Management Accounting Research. 21(2). pp.121-123. Nandan, R., 2010. Management accounting needs of SMEs and the role of professional accountants: A renewed research agenda. Journal of applied management accounting research. 8(1). p.65. Pitkänen, H. and Lukka, K., 2011. Three dimensions of formal and informal feedback in management accounting. Management Accounting Research. 22(2). pp.125-137. Sisaye, S. and Birnberg, J., 2010. Extent and scope of diffusion and adoption of process innovations in management accounting systems. International Journal of Accounting & Information Management. 18(2). pp.118-139. TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

14. ter Bogt, H. and van Helden, J., 2012. The practical relevance of management accounting research and the role of qualitative methods therein: the debate continues. Qualitative Research in Accounting & Management. 9(3). pp.265-273. van der Steen, M., 2011. The emergence and change of management accounting routines. Accounting, Auditing & Accountability Journal. 24(4). pp.502-547. Online Current ratio. 2015. [Online]. Available through: < http://www.myaccountingcourse.com/financial-ratios/current-ratio>.[Accessed on 3rd February 2016]. Debt equity ratio. 2016. [Online]. Available through: < http://www.accountingtools.com/debt-to- equity-ratio>. [Accessed on 3rd February 2016]. Gross profit ratio. 2016. [Online]. Available through: < http://www.accountingtools.com/gross- profit-ratio>. [Accessed on 3rd February 2016]. TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA

15. Appendix Table 1: Ratio analysis 2014 1868 8588 21.75% 2015 1772 7384 24.00% Gross profit Net sales Gross profit ratio Net profit Net sales Net profit ratio -115 8588 -1.34% 19 7384 0.26% Current assets Current liability Current ratio 1829 3894 0.47 2035 3702 0.55 Quick assets Current liability Quick ratio 1795 3894 0.46 2003 3702 0.54 Debt Equity 715 247 2.89 1038 340 3.05 Debt equity ratio TOLL-FREE NO: +61 879057034 EMAIL: help@assignmentprime.com WHATSAPP NO: +61 424715655 WEBSITE: http://www.assignmentprime.com/ ASSIGNMENT HELP & WRITING SERVICE AUSTRALIA