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Sources of Finance

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Sources of Finance Task A Introduction Thomas Cook plc is a German owned company, who merged with MyTravel Group in June 2007. Every year, over 19 million people selected to travel with Thomas Cook plc from one of their 3,000 stores for making a holiday destination decision. The company employs over 33,000 people, with 97 aircrafts in operation. Being a plc, Thomas Cook must ensure that they are registered with the companies' house, and their shareholders attend to at least one meeting annually. Thomas Cook plc was introduced within the travel market in 1841, which began as a train company, and now has grown into a comprehensive travel business. It is now one of the top 4 travel companies, with the help of merging with 'My Travel'. Thomas Cook plc operates within a very competitive travel market due to the amount of consumers booking holidays increasing. ...read more.


Thomas Cook plc's packages are seasonally related, such as towards the summer the hotels will be located towards the beach, and during the winter season, hotels will be more closely to ski resort attractions. However, Thomas Cook plc's main competitor, Thomson (TUI) also provides their customers with luxurious and different holiday range packages, such as 18:30 club which attracts a large response from their customers. Why do businesses need finance? All businesses need finance to operate their daily activities. There are two main reasons for why all businesses need finance. One is for revenue expenditure, which are short term and help to keep the business functioning from day to day, such as paying the bills and staffs wages. The second is capital expenditure which is spending on those items which will help generate profits over the longer term, such as spending on fixed assets, and help with improvements to the business in ways such as the expansion of the premises, and research and development costs. ...read more.


When given a loan, Thomas Cook plc are guaranteed the finance, however loans come along with strict terms and conditions, such as the time they have to be paid back, which is usually at the end of each month, in instalments. Loans are usually tied in with assets of Thomas Cook plc's, such as their premises, or their aircrafts, which would mean these are at risk if any repayments are missed. The balance sheet in Source 1 illustrates that �4,126.8 million is spent towards intangible assets such as hotel. This large sum of finance borrowed for the assets was most likely to be through a long term loan, in which Thomas Cook would have a larger term to repay the debt they owe to the bank. A loan is appropriate for Thomas Cook plc as it offers them a larger amount of period to balance out the cashflow, and provide them with opportunities in order to come across techniques for speeding up cashflow coming into the business. ...read more.

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