Table of Contents

Acknowledgement I

Firm Profile 1

Title 2

Aims 3

Methodology 4-5

Presentation of Data 6-17

Interpretation of Data 18-19

Findings 20

Recommendations 21

Bibliography 22
 Acknowledgements

I would like to express my gratitude to my teacher, Sir C. Jackson for his

assistance with this SBA, my parents for their endless understanding and
support and the staff of Frandec Travel Service for their time and cooperation.

I
 FIRM PROFILE

Frandec Travel Service was founded in the year 1960. This firm is one of
Guyanas top travel management companies. They provide services such as;
travel planning for corporate and individual needs, emergency 24 hours
emergency service, travelers insurance, hotel and auto reservations.

This firm is located at 126 Carmichael and Quamina Streets, Georgetown

Guyana. The team of Frandec Travel Service is: 1. Mrs. Jem Eytle Chairman

2. Mrs. Kathlyn Eytle McLean Chief Executive Officer

3. Mrs. Christine King General Manager

4. Mrs. Karen Whitehead Travel Service Manager

5. Ms. Nathalie Persaud Health Insurance Manager

6. Ms. Nicole Hutson-Griffith Business Centre Manager

This firms legal structure is a private company and they have one office
which is located at the above location.

1
TITLE

A study of the trend in revenues for Frandec Travel Service from June 2014 to
July 2014; the impact this trend has on Frandec Travel Services profit; the
extent to which Frandec Travel Services operations are influenced by the state.

2
AIMS

To identify the trend in revenues for Frandec Travel Service over the
study period.

To determine the main factors responsible for this trend.

To assess the impact of this trend on Frandec Travel Services profit.

To state the uses of profits for Frandec Travel Service

To outline the externalities of production associated with the provision

of service.

To ascertain the extent to which Frandec Travel Service operations are

influenced by the state.

3
METHODOLOGY/RESEARCH DESIGN

Primary market research/Primary date is first-hand research, undertaken by a

firm or agency for the productivity of the business. Primary data has both
advantages and disadvantages.

Advantages

Addresses Specific Research Issues

Carrying out their own research allows the marketing organization to
address issues that more relates to the firm.

Efficient Spending for Information

Providing that primary data addresses issues that relate to the firm,
funds can be saved instead of being spent on irrelevant research.

Disadvantages
Time Consuming
To correctly acquire primary data a research plan must be properly
developed and executed.
Cost
Primary data research may be very expensive since there is an abundance
of marketer involvement.

For primary data of Frandec Travel Service, both interviews and observations
were used. Assisting me with the collection of this data was the Travel Service
Manager, Ms. Karen Whitehead. Mrs. Whitehead was chosen because she has
great authority I the agency and therefore provided me with some in-depth
information.

The place of interview was at Frandec Travel Services head office at 126
Carmichael and Quamina Streets, Georgetown, Guyana. Approximately ten (10)
questions were asked.

4
Secondary market research/Secondary data is second-hand research gathered
for another user but in way is beneficial to the firm or agency. Just like primary
data however, there are both advantages and disadvantages.

Advantages

Time Saving
Precise information may be obtained from one source such as a search
engine
Accessibility
Since data can be gathered from the comfort of the home or office, there
is no need to go out into the public to use facilities such as a library
which is not always available for use.

Disadvantages
Validity of Data
Data collected using this method may provide you with a vast amount of
data but some of it may be invalid due to the time that the article was
published.
Quality of Data
Although it may be easier to obtain, some of the data may be redundant
and irrelevant.

Secondary Data gathered on Frandec Travel Service was achieved from their
website at Frandec.travel2networksgy.com, brochures offered by the firm, an
interview with Rajesh Didnauth (accounting executive) and handouts supplied
by my economics teacher Sir Coen Jackson.

LIMITATIONS TO STUDY

This study was hindered due to a few limitations. The lack of proper resources
such as stationery proved to make the completion of this study extremely
difficult.

My interview with Mrs. Karen Whitehead was delayed on multiple occasions

until it was unfortunately cancelled due to an injury. Instead, an interview was
held with Frandec Travel Services accounting executive, Rajesh Didnauth.

5
Presentation of Data

Criterion #1: To identify the trend in revenue for Frandec Travel Service

Revenue refers to the money received from the sales of a good or service. Some
companies receive revenue from interest, royalties or other fees. Revenue may
be referring to business income in general or it may be refer to the amount in a
monetary unit received during a period of time. Sales revenue is income
received from selling goods or services over a period of time. Tax revenue is
income that a government receives from tax payers.

Revenue should also be related to a time period or to a definite quantity sold.

Total revenue is the total money received from the sale of all units. The
formula for total revenue is as follows:

Total revenue = selling price x quantity

Here is an example of total revenue with an illustration:

- If Mr. Hood will buy two hundred (200) CDs each being $20.00, how much
would be the total revenue that Auntie Pearlie CD Shop receive?

Formula Method: 200 x $20.00 =$ 4000.00

A trend is a general direction in which something is developing or changing.

Trending analysis however helps you to find out if you are meeting your goals
and how you compare to other businesses.

6
In the determination of the trend in revenues for Frandec Travel Service, it is
important to remember that the firm doesnt offer just one good/service.

In total, over the study period (June 1 2014-July 31 2014) Frandec Travel
Services revenue was $24,260,000. Travel Planning for Corporate and
Individual Needs in June, earned $4,400,000 and their Emergency 24 hour
Service earned $3,030,000 in said month. In July however, revenue generated
from Travel Planning for Corporate and Individual Needs amounted to
$13,800,000 while revenue from their Emergency 24 hour Service remained
constant at $3,030,000. This table shows that there was a fluctuation
$9,400,000 in revenue from June 1, 2014 to July 31, 2014.

Month Travel Planning Emergency 24 hour

service
June $4,400,000 $3,030,000
July $13,800,000 $3,030,000
Total Difference $9,400,000 $0

$18,000,000
$16,000,000
$14,000,000
$12,000,000
$10,000,000
Emergency 24 hour
$8,000,000
Travel Planning
$6,000,000
$4,000,000
$2,000,000
$0
June July

7
Criterion #2: To determine the factors responsible for this trend

Three main factors that influence the revenue of a firm are:

-sales capacity

-marketing capacity

-innovation

Revenue can also be influenced by the price of the good or service, the income
of the consumer and another good or service. These factors are:

Price Elasticity of Demand (PED) is a measure used in economics to show

the responsiveness of the quantity demanded of a good or service to a
change in its price, ceteris paribus.
-The formula of PED is as follows: % quantity demanded % price

Cross elasticity of demand (XED) measures the responsiveness of demand

for one good to a change in price of another good. The formula is as
follows:
XED = % quantity demanded of good A % price of good B

Income elasticity of demand (YED) measures the responsiveness of

quantity demanded of a good/service to a change in income. The formula
for (YED) is as follows: % quantity demanded % income

8
The typical consumers of the services offered by Frandec Travel Service are
business men and women. The fluctuation in the revenue is greatly due to time.
In June, people are engrossed in work, school etc. but in July, demand increases
greatly because the months of July and August are known to be vocational
months. At this time tourists are interested in taking a trip and need assistance
in planning for their vacation.

This is the calculation of Frandec Travel Services price elasticity of demand

(PED). This shows the relationship price and quantity demanded.

(PED) = % quantity demand % price

0.18 0

Therefore PED = 0.18: 1

This (PED) result shows that (PED) is inelastic.

Sales

Consumer Loyalty
Time

9
Criteria #3: To assess the impact of this trend on the profits of Frandec
Travel Service

Profit is a financial benefit that is realized when the amount of revenue gain
from a business activity exceeds the expenses, costs and taxes needed to
sustain the activity. Any profit hat is gained goes to the business owners who
may or may not decide to spend it on the business. There are two types of
profit:

Subnormal profit refers to an economic profit below zero (0)

Normal profit refers to zero (0) economic profit
Abnormal profits exceed the amount a firm must receive to carry on
production

10
With more people showing interest in their services, they are able to sell more
plane tickets. The airline offers the firm 6% on the sale of each ticket.

After covering their overhead cost for the month of June which amounts to
$371,500, Frandec Travel Service is left with $7,058,500. Of this amount,
$3,176,325 is taken as tax therefore making Frandec Travel Services profit for
June $3,882,175.

After covering their overhead costs for July which amounts to $841,500,
Frandec Travel Service is left with $15,988,500. Of this amount, $7,194,825 is
taken as tax therefore, making Frandec Travel Services profit for July,
$8,793,675.

Trend in Profit
$10,000,000
$9,000,000
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
June July

11
Criteria #4 To state the uses 0f profits for Frandec Travel Service

Profits can be used for many things such as expansion of business and to give
feedback on how well or how badly the firm is being managed. Once the profit
has been made, business owners can choose to improve the business or keep it
as a financial asset. Profits:

Act as an incentive to start and run a business

Is a source of finance measure
Provides greater tax revenues
Support social causes
Allows investments in research and development (R&D)

Profits are important to a business for:

Survival
Motivation
Reputational gain

12
According to the worker interviewed, the profits gained from the services
offered by the firm are used for the expansion of the firm, advertising and
general betterment of services provided to customers.

With their profits, Frandec Travel Service invests in private shares of other
companies. By investing in a share or bond, more money enters the firm so that
it does not only have one source of income.

They invest in research and development to scope out potential tourist

destinations.

Profit Use

expansion
advertising
investment in shares and bonds
equipment
savings

13
Criteria #5: To outline the externalities of production associated with
provision of service

An externality is a consequence of an industrial of commercial activity which

affects other parties without this being reflected in the market prices. There
are four (4) types of externalities:

Positive externality of production this is a benefit that is enjoyed by a

third party as a result of economic production of a good or service.
-e.g.: a companys production attracting other firms and investors

Positive externality of consumption this is a benefit this is enjoyed by a

third party as a result of an individual consuming a good or a service
-e.g.: buying and using an outdoor lamp would help to keep the vicinity
well lighted at night thus preventing some vehicular accidents

Negative externality of production - this is a cost that is suffered by third

parties as a result of economic production of a good or service
-e.g.: having an increased level of pollution due to the reckless disposal of
factory waste

Negative externality of consumption- this is a cost suffered by third

parties as a result of an individual consuming a good or a service
-e.g.: having an individual being intoxicated due to the consumption of
alcohol and becoming a nuisance to others

14
Frandec Travel Service offers travel planning services, there are not many
externalities involved in their production. Most of their externalities however,
are positive. They offer training to their new employees which help them to be
more productive. This could be considered as a positive externality since by
providing them with education you are able to indirectly able to educate the
people of the community.

In providing their travel planning services, they encourage more tourists to visit
the country which result in an increase in foreign currency which could lead to
the achievement of some macroeconomic goals. This is considered to be a
positive externality of consumption since the tourist needs to have local
currency to purchase anything during his or her stay.

In the production of their travel services, many pamphlets, brochures, business

cards and magazines are produced but sometimes, errors are made and those
means of information are reprinted hence the wastage of paper. Most of the
time, the paper is not disposed of correctly. Some ways of the disposal of the
wasted paper, such as burning, are harmful to the environment and to the
people and animals that occupy it. This could therefore be classified as a
negative externality of production.

Since this firm deals greatly in tourism and travel planning, it can be stated that
Frandec Travel Service can be a promoter of a serious social issue, namely the
brain drain. Not only does Frandec Travel Service encourage the inflow of
tourists but they also promote the outflow of the countrys most important
resource, humans. These people who possessed skills that could have helped
their mother country, instead was used elsewhere. This is a negative externality
of consumption.

15
Criterion #6: To ascertain the extent to which Frandec Travel Services
operations are influenced by the state

Government intervention is an action taken by a government or international

institution in attempt to impact the economy. The main reasons for
government intervention are to:

correct for market failure

achieve a more equitable distribution of income and wealth
improve the performance of the economy

The types of government intervention are:

price floor
price ceiling
subsidies
indirect taxes
tradable permits
taxes

16
 Taxes support national defense programs, roadway construction, social service
programs, public health and education. Without taxpayer support, many of
these programs cannot exist. The government imposes a 45% tax on the
revenues of Frandec Travel Service after all expenses such as electric, internet,
telephone and water expenses and the wages and salaries of their workers. This
tax is directly linked to their profits and not their cost of production. It is
beneficial that the airline offers Frandec Travel Service 6% on the sale of each
ticket.

17
Interpretation/Analyses of Data

Over the study period, there was an upward trend in revenues. There being an
upward trend in revenue entertains the notion that there was an increase in
profits.

Frandec Travel Service intends to keep their existing staff as it is as long as they
work efficiently.

Travel services are extremely scarce in this geographical region (country).

However, across the street from Frandec Travel Service is Wonderland Tours.
This tourism is generally more well-known but they specialize only in inland
tours.

Time contributed greatly to the upward trend in revenues. The study period
chosen was mainly to highlight this point. June-July was chosen to illustrate
how revenue was affected by occupational transition.

Consumer loyalty can also be considered as a minimum factor of the trend in

the revenues but it is important none the less. Consumer loyalty is the factor
that keeps a certain amount of the figure (revenue) constant.

As explained earlier, the profit in June was smaller compared to the profits
gained in July. This was due to the outward shift in revenue. Since there was a
rather large increase in profit the average cost decreased.

With their profit Frandec Travel Service:

Acquired new equipment

Improved the building
Bought/invested in shares and bonds
Advertising
Research and development (R&D)

18
Frandec Travel Services externalities were mostly positive. They trained their
employees in many areas so that they have more knowledge and skills to
provide better customer service.

Since they trained their employees in accounting, information technology and

sociology, it helped in the development of the community. Due to the attention
of their clients (tourists) local cafs and other such establishments in the area
started to gain more customers.

By taxing Frandec Travel Service an ad valorem tax of 45% after all costs had
been covered, the government raised funds for projects such as building roads,
developing public schools, constructing public hospitals etc. However, to a
businessman/businesswoman, a tax means a chunk out of their profits so they
try pushing the tax unto the consumer.

19
Findings

Over the study period (June 1, 2014-July 31, 2014) there was an upward
trend in the revenues of Frandec Travel Service.

The factors responsible for this trend are time and consumer loyalty.

Due to the upward shift in revenues, the profits of the firm increased.

Frandec Travel Service used their profits to expand the firm, purchase
better equipment and advertise

Frandec Travel Services externalities of production include the training

of employees and their excessive use of paper (a result of deforestation)
which results in environmental harm.

The government imposed a tax of 45% on their profit after all costs had
been covered.

20
Recommendations

Dear Sir/Madam,

During my study of your firm, it has been noticed that there are still a few
flaws in your operation.

More of your profit should have gone towards advertising your services.
This would have attracted more customers.

To gain more profit after being taxed, you should strive to be more
productively and allocatively efficient by employing the use of new
machinery.

You should also try to waste less paper to reduce your negative
externalities. This can be done by checking for accuracy before printing.

Please take my suggestions into consideration.

Yours truly,

Cliffia Rollox.

21
Bibliography

The information in this study was gathered from:

Brochures offered by the firm

An interview with Rajesh Didnauth, Accounting Executive on Friday July
10, 2015
http://beta.tutor2u.net/economics/reference/government-intervention-
in-markets
http://www.frandecadventuretours.com/8-2/
http://www.economicsonline.co.uk/Business_economics

22