• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Edexcel Applied Business A2 unit 11 finance task A

Extracts from this document...


Unit 11 Task A - Impact of Finance on Business decisions Produce a report analysing the financing needs of a chosen existing business to include sources of both short-term and long-term finance and an analysis of the finance used. Introduction In this assignment I will be looking at the finance of Thomas Cook plc and analysing the financing needs by including both short-term and long-term sources. Thomas Cook is a public limited company and is known as one of the world's leading travel groups. The company was a German company until recently in 2007 when it merged with MyTravel Group plc and Thomas Cook AG then became Thomas Cook Group plc. Thomas Cook Group plc have over 31,000 employees that operate in 21 countries; UK, Ireland, India, The Middle East, Europe, North America and Germany. As well as operating as Thomas Cook they own around fourteen different brands, the brands change in each country depending on their target markets. In the UK and Ireland one main brand used is Direct Holidays which offers a wide range of Holidays on the internet and is quick and direct which represents a market for the convenience of finding a holiday quickly and directly. Another main UK brand is Club 1830 which targets people between the age of 18 and 30 and is aimed at group holidays for friends. A main brand used in Germany and Europe in Condor which is a detailed booking site targeted and a large market looking for a specific holidays as their thousands of search methods. In order to analyse the financing needs and tactics of Thomas Cook plc, the UK head of Reporting and Recording gave us the accounts for Thomas Cook Group plc. Available sources of finance Finance is needed in a business in order for the business to spend. Businesses use the finance to invest in capital expenditure which is items that are fixed assets for they can be used over again. ...read more.


However Thomas Cook has a role to provide customers with pre-booked flights and hotels, therefore they are bound to have a large trade credit. This figure comes from October the 31st and it is likely to change as it is a seasonal business and their trade credit may be higher or lower in different seasons and months. However trade credit can have drawbacks as Thomas Cook may be unable to secure customers for the hotels and flights. This will mean that they will lose money as they still have to pay the hotels later on. Therefore although having trade credit is beneficial as the company gains assets when paying them back may cause difficulties if there is no income from customers and this can cause problems for the cash flow of the business. Revenue received in advance Thomas Cook receives revenue in advance from customers in the form of deposits and sometimes full payments made. This is revenue in advance as the company receives cash before the customer has been on holiday. Also if a customer is book a long time in advance then Thomas Cook may not have booked the hotels or flights yet, however it will be their obligation to do so. Thomas Cook will want the deposit to be as big as possible as this acts as a safeguard for the company and covers things that are already paid for. If Thomas Cook books hotels for a customer, and then the customer cancels the holiday Thomas cook will still need the cash to pay for the hotels if they cannot gain another customer for it. Therefore receiving a deposit from the customer is very important. This method of finance can be a drawback as they need to ensure that they can offer the holiday to the customer and this can be risky if the hotel or flight is not pre-booked. This means Thomas Cook needs to keep control of this type of finance. ...read more.


On the other hand, Thomas Cook has to ensure that they can receive these customers otherwise the source of finance will be difficult to pay off. Although Short-term finance is used more for Thomas Cook, the majority of long-term finance is Finance Leasing, which is �515.3million. Finance Leasing is mostly used in travel companies as it suits this industry well. Although this is not as large as the trade credit finance it could still be risky for Thomas Cook. It is a long-Term source of finance as Thomas Cook is always going to lease aircraft this could be more expensive for Thomas Cook and it also means that they will have fewer fixed assets. On the other hand leasing large amounts of aircraft is very advantageous as it would be more expensive for Thomas Cook if they had to purchase these assets and keep purchasing new up to date assets and having no use for old assets. Thomas Cook may want to consider what type of finance they will use in the future as discussed above; china and India are both growing countries in the travel industries. Thomas Cook may want to expand into these different areas and they may need some new sources of finance. One opportunity that Thomas Cook has is to sell more shares in the company as they have only issued just under half of their allowed amount. This would create a lot more finance in the business and with the benefit of no interest, however they may lose more control if they issue too many shares. Finance could also be gained by selling assets and leasing them back; Thomas Cook already lease many of their assets and by selling their fixed assets may give them even more benefits. Assets such as buildings and some aircraft will create large amounts of finance for Thomas Cook and they will be able to become even more asset light and would suit to the seasonal demand of Thomas Cook. ?? ?? ?? ?? Caroline Noades ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Accounting & Financial Management section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Accounting & Financial Management essays

  1. P1- The role of internet marketing

    involved in the business and share their own ideas and opinions and customise their own products depending on their own preferences. For example Dell.com gives a chance to customers to design their own products and have the features they want on the products they are interested in.

  2. Advantages and Disadvantages of the various sources of finance available to businesses.

    in the event it is no longer needed, and you cannot upgrade to a newer or better product without either paying off the remaining contract, or paying a large fee to cancel the contract. You also need to carry on paying a smaller lease cost, even after the cost of the equipment has been fully covered.

  1. A2 Business CourseWork

    in town centres with the introduction of Tesco express. As you can see from the chart on the right Tesco are clearly dominant in the supermarket market. They are the biggest power buy quite some distance keeping clearly ahead of their rivals.

  2. Sources Of Finance

    Partnership is two individuals setting up a business and having equal share of how it will be run and the profit that is made, this is usually summed up in a partner's agreement which is a legal document stating the rights of each partner.

  1. Btec Business Level 3 Year 1 - Introduction to Accounting

    explain the basis of valuation of assets as follows: o fixed assets at cost less accumulated depreciation o stock in trade at cost or net realisable value, whichever is lower o trade debtors at expected collectible amount i.e. after deduction of provisions for doubtful debts * distinguish between, and show

  2. Sources of Finance

    This offers the finest hotels in the most luxury holiday destinations such as Spain and America.

  1. In this assignment I will be explaining in detail the importance of cash flow, ...

    -1996.0 -1853.0 Net assets 3286.0 3183.0 Share Capital 1722.0 1727.0 Profit and loss account 1564.0 1456.0 Total capital employed 3286.0 3183.0 Weighted average number of shares in issue in the period 2057000000 2047000000 Merit 1 For merit 1 I will list the advantages and limitations of Cash flow, budgets and break even.

  2. Explain the difference between capital and revenue items of expenditure and income for a ...

    is the money FF will spend on their employees, FF must pay all their employees for the work that they do. FF must pay Salaries, Wages, Insurance, Pensions and for any Training required. * Selling and distribution costs ? If FF is to survive it must make enough sales to cover all its costs.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work