Financial Information Analysis of Dalata Hotel Groups and Carnival Corporation

TASK 1

P 1.1 Significance of Cost and Volume

Carnival Corporation & Plc is world's leading cruise line and largest cruise holiday company in the world, Carnival Corporation & Plc is experiencing a dynamic growth in the business despite of facing challenges as global crisis, marketing changes, different consumer behaviour. The cost and volume profit are tool for financial analysis to find the better understanding of cost and net revenue, it describes the relationship between cost, revenue, profit and volume that helps for further decision making of financial management of Carnival Corporation & Plc. To find the cost and volume of the business certain assumption are taken into consideration like all units are sold and the fixed variable cost will remain same (Otley, 2016) . The cost and volume analysis help to find how the cost of the company is used and how it relates to the volume of activities of Carnival Corporation & Plc. In relation to our company the cost and volume analysis plays an important role to control and make plan for financial matter of the company.

The cost and volume tools are also important to analyse the breakeven point, in a business a breakeven point is the level of activity where the revenue and the total cost is at the same level which means there is no profit or loss in the business. With the help of cost and volume technique all the financial data can be re considered so that the management of the company can make better future plan and helps to minimize the loss. Our Case study focuses on the importance of cost and volume analysis tool for the financial management of Carnival Corporation & Plc.

Importance of cost-volume – profit to Carnival Corporation & plc. :

• cost-column-profit analysis will help the company to plan and analyses the future need on an effective manner.
• The break even will help in ascertained the amount of sells of packages required to reach a point where fixed and variable cost can be covered.
• It will help the management to make effective decisions regarding the cost and volume of the packages offered to the tourist. 

P 1.2 Pricing Methods

A good mix of marketing strategy and financial analysis can help in setting the pricing method for tourism sector. As there is no such pricing method for traveling sector because of its rarely identical location, people and the components for the travelers. The tourism business is developing its brand and market share, it’s difficult for travelers to get the general pricing from the star rating accommodation company, so the pricing strategies are important for the tourism sector as well (Renz, 2016). The pricing strategies of the traveling market is based on information like the operating cost, type of market, uniqueness of your business, pricing of competitors etc. the pricing methods of tour ant traveling sectors are:

Rack Rates: The official rates before any discount applied can be termed as rack rates, which is being provided to the wholesalers and distributed on the brochures. During the peak holiday season, the rack rates for operation remain same without day to day discounting. For example: Seaborne cruises is ultra-luxury cruising in smaller ships, rack rates method is applicable for small cruise ships.

Seasonal Pricing: this method is important as there are different periods of holidays each year like school holidays, public holidays. Different price level can be covered throughout the year to cover low and high seasons.

Discounting: To attract more travelers discounting is an important method of pricing. Discounts are generally given during the off season, but the implementation of discount can reduce your profitability. Tourists can become habitual of discount

tickets which will make it difficult to charge normal rates or will devalue your

Product. Aida cruises is a premium quality cruises which applying discounting

Method of pricing.

Packages: Nowadays going on tours by taking packages are very much in trends, tourists are more focused on packages to meet all their needs of holidays in one price. Packages can be a good pricing method to attract the tourists without any discounts (Chiwamit, Modell and Scapens, 2017). For example, Carnival Cruise Line is providing best packages from around three to eight days, a year-round basis and on a seasonal basis as well. 

P 1.3 Factor influencing profit of travel and tour business

Tourism is one of the main sources of revenue and economy for the country. Every country wants to be the first preference of the tourist to visit. The tour and travel are one the biggest industry not only for the country but for the global economic development, there are number of factors which influencing the profit from tour and travel business. Some of these factors are:

1)Weather condition: Human has no control over the product of nature, the weather become a factor that affect the tourist to travel in particular country which influence the revenue of business (Suomala, Lyly-Yrjänäinen and Lukka, 2014). Country with the bad weather such as snowfall, blizzard no tourist will want to go. During rainy season heavy rainfall hinders tourist for sightseeing and shopping and there will be threat of flood.

2)Natural Disaster: sometimes a small natural disaster can cause a major impact on the tour and travel industry. It becomes a major threat for the industry's revenue. Earthquake and Tsunami are the major natural disasters which can cause loss of lives, serious damage to properties and infrastructure in the country. For example, the recent fit of tsunami in Japan causes loss of lives of tourist, prior booking of tourist has canceled or opted different destination which causes loss to the tour and travel companies. Another example is of Hurricane Maria which causes huge damage to Carnival Cruise Line ships on the coast of Eastern Caribbean.

3)Terrorism: With increasing threat of terrorism in Asian, European countries, the tour and travel industries are having huge loss of revenue as tourist will never want to go to war-torn country. Terrorist attack not only reduce the popularity of the destination but the business of the industry also gets affected. The recent terrorist attack on the European country like France, Belgium, turkey has affect the ocean and river cruise reservation. For example, Carnivals Cruise line's new Carnival Vista was originally planned to call on Izmir, turkey but the port has been replaced with Kusadasi, Turkey instead.

4) Decline in sales: At the time of recession the country suffers an overall decline in GDP, which results in the fall of tour and travel industry of the country. For example: the Carnival is facing the share market reduction ad bad image on tourist because of the recent accidents, like sinking of Costa Concardia last year which causes loss of 32 people and a fire in the engine room of Carnival Triumph which leads around 3000 passengers stranded in middle of ocean for four days without electricity. These accidents lead the company to cut down its fare affecting the profit.

TASK 2

P 2.1 Various management accounting information

In the context of Dalata hotel group plc, there are several types of management accounting information which can be used for decision making such as:

Financial statements: Profitability, cash flow statement and balance sheet are the main financial statements which are prepared by the company at the end of an accounting year. Hence, by drafting financial statement concerned hotel group can assess the position of profit, cash, assets and liabilities.

Cost allocation reports: The primary function of the management accounting is a cost allocation. The cost allocation word consists of two words cost and allocation, which itself telling the clear meaning that is allocation of cost. The management accountants make a systematic report reflecting the allocation of capital in various economic resources (Bromwich and Scapens, 2016).

Ratio analysis: It may be served as the most effectual tool which in turn provides high level of assistance in gauging financial performance of the company from several perspectives such as liquidity, profitability and efficiency. Hence, using such tool manager of hotel group can assess the extent to which financial position is good.

Budgeting or variance analysis: This is another most effectual tool which assists company in identifying differences take place in the actual and planned figures. It enables the manager of Dalata hotel group to get information about the causes due to which business unit failed to meet desired level of output.

In order to make sound decision Dalata hotel group plc has to take support of profit and loss account, cash flow statement, balance sheet, etc. All these reports are helpful in identifying issues in business and making necessary changes in system. As company is planning to offer new travel packages to tourists, for that it has to ensure whether it has sufficient finance or not. They have to look upon their financial position this can help the company in making sound decision and offering cost effective products to consumers.

P 2.2 Use of management accounting information

This information is necessary for business Dalata hotel groups to ascertain the business efficiency and it further aids in earning profit by utilising assets accordingly (Department of Tourism, 2017). Information related to accounting supports manager in review the past activity and accordingly makes the decision for future through which high profit can be attained. Information of this nature are in terms of budget forecasting, cost accounting, financial ratios and variance analysis. If manager doesn’t review the information of this nature, then decisions made be them can be considered as gambling or assumption.

Management accounting information is helpful for Dalata hotel group plc in making sound decision. By looking at income statement, managers can compare profitability ratio of the company of this and previous year. This helps in making necessary changes in cost allocation so that its revenues can be increased. Relevant cost analysis is the benefit of management accounting system in order to make sound judgement. Managerial accounting information is used by company management for the purpose of identifying the price of product to be sole by considering sufficient profit margin.. It is very important decision to take by the Dalata hotels groups in order to minimize their cost and maximize their profit.

Furthermore, balance sheet and ratio analysis helps in measuring the gap between expected and actual cost. By looking at sales in cash flow statement, managers can find out satisfaction level of consumers. Once the Dalata group determines what services they have to give to their customers, the company need to serve. Through activity-based costing, decision related to most profitable customer can be made and hence they will be serve.

Information of managerial accounting supports in making decision pertaining to make or buy particular component. Through this, cost is ascertain accordingly and profit margin can be determined (Paramati, Apergis and Ummalla, 2016).

TASK 3

P 3.1 Interpretation of financial accounts of Dalata Groups of Hotel and Plc

Interpretation:

Profitability ratios: the gross profit of Dalata has reached 348 from 181 which shoes that there is an increase in the sales revenues of the firm and reduction or controlling of cost. The gross profit margin has increased from 62.2% to 63.22%. this resulted in increment of both operating and net profit margin by approximately 6 % (Annual report, 2017). Return on equity have increased from 5.65% to 9.23%, which is a result of increment in net profit by 33 and total equity by 117. the return on capital employed have also enhanced from 10.81% to 11.80%.

With an increment in the sales revenue there is an increment in administrator cost also the admin cost for 2016 was 126 and this increased to 134 in 2017, but the percentage change shows a reduction from was 43.30% to 38.51%. this reflects situation of cost controlling by the Dalata groups of Hotel and Plc. although there is an increment in the administration cost but the cost has been controlled with the percentage increase in the sales (Tolkach, and King, 2015). The proportion of administration cost with increased sales revenue have been reduced.

Liquidity ratios: there is a sudden drop in current assets from 99 to 38, which reduced the liquidity position of Dalata in term of current ration from 1.43 to .045. There is no major change in prepaid expenses and inventory and will affect the immediate liquidity position of firm which is measured through acid test ratio. The ratio has fallen down to 0.34 from 1.33.

Efficiency ratio: as reflected in balance sheet the average inventory has remained unchanged and as per income statement the cost of sales has increased to 128 from 110, which shows an increment in stock turnover ratio. An increase in total asset of 16 changed the asset turnover ratio to 0.31 from 0.29. There is increase in both trade receivables and payables of 5 and 12 respectively (Uechi and et.al., 2015). This resulted in increment in both debtors' collection and creditors payment period.

Dalata have earned good profits in 2017 and is in a better financial position but it does not stand in a good liquidity position. With an increase in time limit of 12 days to pay creditors, the debtor collection period has also increased by 2 days.

Conclusion: From overall evaluation, it has assessed that profitability position of Dalata Plc was good and increased in the year of 2017 over 2016. Further, efficiency aspect of the company was also improved in 2017. However, business unit needs to take initiatives for making improvement in liquidity position. Hence, from the investment perspective financial position and performance of Dalata Plc can said be good.

Task 4Personal and Professional Development Plan at Workplace

P 4.1 Sources and distribution of Fund

CONCLUSION

The report concludes Carnival Corporation and Plc being in travel and tourism industry have a major effect of cost and profit volumes on its business. With the use of various pricing methods, it is suggested that how it can cut the cost and enhance profit by keeping a pace with changes in the industry. The Dalata Groups of Hotel is in a good financial position for the year ended 31^st march 2018, with a net profit of £10 million. The company also enjoys a good liquidity position. Dalata group of Hotel and Plc is in a profitable position but it does not enjoy a stable liquidity position which can be a problem in near future. For the development of tourism in nation various capital projects are undertaken and they are funded with governmental and non governmental sources.

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