Beruflich Dokumente
Kultur Dokumente
Hassan Zaryab
L1f15BCMH0005
2016
University of Central Punjab
History
Sir Stelios Haji-Ioannou, owner of the Easy group of brands - which includes Easyjet,
has contacted the board of African budget airline Fastjet over a number of licence
breaches. EasyGroup is the brand owner and licensor of Fastjet.
Introduction
In any contemporary operating organisation, progress that the company is
making is recorded as basis for, among a host of other essential things, decisionmaking and as a benchmark for measuring the firms performance for the period
under scrutiny. A financial situation analysis is one such yardstick that
documents current and future financial situation in an attempt to determine a
financial strategy to help achieve organisational goals. As formally defined by
Riahi-Belkaoui in 1998, financial analysis is an information processing system
used to provide relevant information for decision making (p. 1). The main
sources of information for such analyses are published financial statements of
the concerned company. Various accounts from published financial statements
are evaluated in relation to each other to form performance indicators, which are
then compared to established standards. These performance indicators are
better known as ratios, and constitute the main tools of conventional financial
analysis. For the last several years, businesses have seen the rapid growth of the
number of firms offering financial situation analysis services. This serves as a
proof that more and more organisations are realising the importance of the
analysis of their financial situations in order to keep up with the demands of the
business world nowadays.
This paper is an analysis of financial situation of easyJet plc, one of the
leading low-cost civil aviation companies in existence, operating in a very tough
and highly competitive industry. The main purpose of this paper is to examine
the financial statements of the company for the last twelve months by using
tools such as Ratio Analysis to see how much growth easyJet has been able to
achieve and also to see what might be the other factors that can influence the
companys growth and its decision making and than to see the limitations of the
financial analysis. These performance indicators are better known as ratios and
constitute the main tools of conventional financial analysis. For the last several
years, businesses have seen the rapid growth of the number of firms offering
financial situation analysis services. This serves as a proof that more and more
organisations are realising the importance the analysis of their financial
situation in order to keep up with the demands of the business world.
OUR VALUES
Safety:
Simplicity:
One team:
Integrity:
Passion:
Pioneering:
Current Ratio
Liquidity
Ratio
Quick Ratio
Networking Ratio
Activity
Ratio
Ratio
Analysi
s
Leverage
Ratio
Profitability
Ratio
Receivable
Turnover Ratio
Inventory
Turnover Ratio
Total Asset
Turnover Ratio
Fixed Asset
Turnover Ratio
Debt To
Shareholder
Equity Ratio
Interst Coverage
Ratio
Gross Profit
Margin Ratio
Net Operating
Income
Net Profit Margin
Return To Equity
Ratio
Earning Per Share
Brake Up Value
Per Share
Liquidity Ratio:
Liquidity tells about the ability of a company to efficiently and
economically accommodate its deposits and increase in asset.
Current ratio:It tells us about the companys current asset relation with current
laibilties.
Current ratio= Current Asset /current liability
Current Ratio
Years
Current Asset
Current Liabilities
Current Ratio
2014
1261
1420
0.89
2015
2611
3904
0.67
Current Ratio
1
Current Ratio
0.5
0
2014
2015
Interpretation
Current ratio we mean at which level a business is able to pay off its
debts using current assets.
It is evident in the computations that easyJet was always in better position to
meet its short-term debt as compared to those of rivals in a peruse of the rivals
current ratios. This means that easyJet is always bale to meet their current
liabilities using their current assets (cash, inventory, receivables).
This analysis clarifies that the ability of APL about its payment of its current
liabilities using current assets, has been fluctuating upward and downward trend
which is in 2015 at 0.67 and in 2014 it was 0.89.
Quick ratio
It measures those assets which are quickly converted into cash and then
compared with current liability.
Quick ratio= Quick asset/ current Liabilities
Years
current asset
Inventory
Current Liabilities
Quick ratio
2014
1261
--1420
0.89
Quick Ratio
2015
2611
--3904
0.67
Quick Ratio
1
0.8
0.6
0.4
0.2
0
2014
Quick Ratio
2015
Interpretations:
Since quick ratios are perceived as a sign of the companys financial
strength or weakness. A higher number would indicate stronger financial
performance, and a lower one means weaker performance.
Quick ratio is a ratio that tells the power of a business to pay off its debts,
the graph trend shows that its company pay off capacity is fluctuating at closely
certain point and the trend is in 2014 was upward while in 2015 is downward.
Total Asset Turnover Ratio
Total Asset turnover= Seles/total assets
Years
Sales
Average Total Assets
Asset Turnover Ratio
2014
2825
6107
1
2015
4686
2872
0.77
1
0.5
0
2014
Interpretations
2015
This ratio helps us to find that how much an organization using its
resources to manage the profit.
As in APL graph shows that they are using their resources very efficiently
that the asset turnover ratio is decreasing from 2014 to 2015.
Leverage ratio
This ratios shows those activities of a firm are supported by creditors,
funds as opposed to owners.
The following ratios can be used to identify the financial strength and risk
of the business.
Debt to Equity Ratio
Total debt / equity
Year
Total Debts
2014
563
2015
1064
Total Equity
debt to Equity Ratio
2172
0.26
3988
27
2000.00%
1000.00%
0.00%
2014
2015
Interpretations:
This ratio measure under which financing source of business can be
determined.
In the debt equity ratio of EASYJET has not a great fluctuation in its
equity. In 2014 to 2015 increasing 0.26 to 27.
2014
491
2825
0.17
2015
548
4686
0.12
12.00%
10.00%
5.00%
0.00%
2014
Interpretations:
2015
The ratio of the net profit to the amount of sales is witnessed to decrease
over time, as larger costs are experienced by the company, especially for
easyJet who belongs to the aviation industry, where overhead costs are
said to go skyrocket high, mainly resulted from increase in oil prices
worldwide,
In the gross profit margin ratio company has a continuous downfall trend
since last 2 years.
Return on Equity
This ratio shows the profit attributable to the amount invested by the owners
of the business
Net profit / equity
Years
Net Profit Taxes
Equity
Return on Equity
2014
491
4482
0.109
2015
548
9602
0.057
Return on Equity
15.00%
10.00%
10.90%
5.00%
0.00%
2014
Interpretations:
Return on Equity
5.70%
2015
2014
491
397
1.23
2015
548
794
0.69
1.23
0.5
0
2014
2015
Interpretations:
In this graph it is shown that APL earning per share is increasing as
compare to the 2014 in 2015 while in there is a slight change occurred
towards downfall.
2014
1525
1110
1.37
2015
2634
2046
1.28
1.37
1.3
1.28
1.25
1.2
2014
2015
Years
Net Cash Flow
Annual Intrest Expense
2014
616
0
2015
589
2
295
200
100
0
2014
2015
This coverage ratio compares a company's operating cash flow to its total debt,
which, for purposes of this ratio, is defined as the sum of short-term borrowings,
the current portion of long-term debt and long-term debt.
Years
Average Accounts Receiveable
Total Sales/365
Average Colletion
2014
200
7.73
25.87
2015
405
12.83
31.56
20
10
0
2014
2015
The average collection period is the approximate amount of time that it takes for
a business to receive payments owed, in terms of receivables, from its
customers and clients. In 2014 25.87 days are required for collection while 2015
31.56 days are required from collection which is not satisfactory for company
that the average collection period is increasing.
Working Capital
Working Capital = Current Assets - Current Liabilities
years
Current Assets
Current Laibilites
Waorking Capital
2014
1261
1420
-159
2015
2611
3904
-1293
Working capital
12
10
8
6
4
2
0
Working capital is a measure of both a company's efficiency and its shortterm financial health.
Balance Sheet
Amount in millions$
Current Assets
horizonta
2015 l
2014
1261
Cash
1915
Percentage
2014
-654
#VALUE!
-1040
-51.86%
#VALUE!
-245.28%
110
-205
19.61%
-102.50%
verticle
0.73343546
5
#VALUE!
0.560704711
0.17273075
5
0.155112984
-205
#VALUE!
#VALUE!
-102.50%
#VALUE!
#VALUE!
0.155112984
#VALUE!
#VALUE!
424
1464
561
451
200
405
200
405
Total Inventory
Prepaid Expenses
Other Current Assets,
76
291
1261
2611
-215
-1350
-282.89%
-107.06%
0.111451551
1
2542
5597
-3055
-120.18%
0.58289939
6
Total
total current assets
Fixed assets
Property/Plant/Equipment,
Total - Net
Property/Plant/Equip
ment, Total - Gross
#VALUE!
#VALUE!
Accumulated
Depreciation, Total
Goodwill, Net
365
Intangibles, Net
Long Term Investments
Note Receivable - Long
_
730
-365
-100.00%
238
-125
-110.62%
#VALUE!
4 _
0.00%
113
_
Term
#VALUE!
197
Other Assets, Total
Total Fixed Assets
426
-229
9602
-5120
-116.24%
#VALUE!
-114.23%
_
4482
#VALUE!
0.07602582
8
0.02478650
3
#VALUE!
#VALUE!
0.04436575
7
#VALUE!
1
Verticle
analysis
Income
statement
years
Revenue
CGS
Gross Profit
total operating expense
Operating Income
2014 %age
2825
100%
1525
54%
1300
46%
2192
78%
634
22%
Liabilities
2014
2015 %age
4686
2634
2052
3998
688
2015 Change
Accounts payable
134
101
33
Accrued expenses
329
326
104
194
-90
853
1,147
-294
1,420
1,768
-348
472
322
150
Total debt
576
516
60
186
176
10
Notes payable/short-term
debt
Current portion long-term
debt/capital leases
Other current liabilities, total
Total current liabilities
Minority interest
Other liabilities, total
Total liabilities
100%
56%
44%
85%
15%
--
--
#VALUE!
232
313
-81
2,310
2,579
-269
Vertical
0.03916246
25%
6
0.12640558
1%
4
#DIV/0!
-87%
-34%
-25%
32%
10%
5%
#VALUE!
-35%
-12%
0
0.07522295
5
0.44474602
6
0.68553703
0.12485459
5
0.20007754
9
0.06824350
5
#VALUE!
0.12136487
1
CONCLUSION
As a concluding note, annual impairment tests for sizeable fixed assets
should lead to a better valuation of the business, which would result to a better
view of the financial situation of the civil aviation company. Generally, the
accounting policies of easyJet meet the IFRS and the aviation industry standards
as well. Notwithstanding several critical but otherwise minor entries, it can be
sufficiently agreed upon that easyJets accounts give a true and fair view of the
state of affairs and consequently have been properly prepared (easyJet). The
results for the financial statements audit of easyJet done by
PricewaterhouseCoopers LLP were evidently well-planned and performed the
audit so as to obtain all the information and explanations which were considered
necessary in order to provide the auditors with sufficient evidence to give
reasonable assurance that the financial statements and the part of the Directors
remuneration report to be audited are free from material misstatement, whether
caused by fraud or other irregularity or error. In forming the opinion in this
paper, the overall adequacy of the presentation of information in the financial
statements and the part of the Directors remuneration report to be audited are
also evaluated.