Thomas Cook plc provides its customers a service which most of our competitors does not offer; they have certain brands which target a variety of different customers. Some are for the most ‘well off’ consumers who are searching for the most luxurious holiday, whilst others are booking holidays in a family package to receive the best deal. We also have a variety of divisions which are located across different regions around the world; this extends the number of customers we target.
One of the top brands which Thomas Cook plc offers its customers is ‘Signature’ which is one of the top luxurious brands. This offers the finest hotels in the most luxury holiday destinations such as Spain and America. 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.
What sources of finance are available?
There are a variety of sources of finance which businesses can receive in order to help their running of the business. Being a plc, Thomas Cook can raise finance through a variety of ways. After a talk with the financial controller of Thomas Cook (Michelle MarMahon), the sources of finance which Thomas Cook uses are explained in the sections below.
Long Term
Long term sources of finance are mainly used in Thomas Cook plc to generate further wealth. These sources are usually to invest into the most important company changes. The varieties of long term sources of finance available to Thomas Cook plc are explained below.
Loan
This is when a lender agrees to give the borrower a certain amount of capital, with a total repayment, along with additional interest paid. 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.
