Finance and Funding
Importance of Finance and Funding in a Company
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.
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. 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. 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. It aids to anticipate future cost that can be occurred to management due to changes 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. 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. 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.
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-
It is the most important pricing method by which Thomas Cook can make an attempt in relation to increasing number of customers. 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.
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. Further, it is suited in all type of situation by which corporation can ensure about long run survival of business.
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.
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 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.
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 follows-
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. In this, visitors may prefer different types of services due to changing life style and changing preferences.
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.
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.
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.
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. It does not aid to give competitive edge to organization.
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. 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.
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. 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. 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 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.
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. 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. 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.
Thomas Cook can can raise finance for the development of capital project by the help of several types of public and non-public resources.
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. Also, this proves to be effective in developing route cycle.
On the other hand, issue of equity share and taking loan as well as leasing companies proves to be effective. The reason behind selecting this source is to access cost effective long term source of finance.
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.
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.
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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