Download - EasyJet Company
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Project of Advance Financial Management
Hassan Zaryab
L1f15BCMH0005
01!
"niversity of Central P#njab
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tools s#c( as -atio Analysis to see (o m#c( grot( easy6et (as been able to
ac(ieve and also to see (at mig(t be t(e ot(er factors t(at can infl#ence t(e
com&any+s grot( and its decision ma)ing and t(an to see t(e limitations of t(e
financial analysis, 3(ese &erformance indicators are better )non as ratios andconstit#te t(e main tools of conventional financial analysis, For t(e last several
years' b#sinesses (ave seen t(e ra&id grot( of t(e n#mber of firms offering
financial sit#ation analysis services, 3(is serves as a &roof t(at more and more
organisations are realising t(e im&ortance t(e analysis of t(eir financial
sit#ation in order to )ee& #& it( t(e demands of t(e b#siness orld,
$ EasyJet mission and vision statementEvery company has its mission to obtain certain objective and goals It"s a guiding
principle of what the company is today and what it will be in future Easy#et has its
own mission$ to provide their customer with safe, good value and point to point air
services
$ OUR VALUES
Safety: We never compromise on safety
Simplicity:
We cut out the things that don’t matter to keep us lean
and make it easy
One team: Together we’ll always nd a way
Integrity: We stand by our word and do what we say
Passion:
We have a passion for our customers, our people and the
work we do
Pioneering:
We challenge to nd new ways to make travel easy and
aordable
Easy#et %&' (E)#*
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E)# Income Statement
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$ Liquidity Ratio:
Li8#idity tells abo#t t(e ability of a com&any to efficiently and
economically accommodate its de&osits and increase in asset,
$ Current ratio:-
%t tells #s abo#t t(e com&any+s c#rrent asset relation it( c#rrent
laibilties,
Current ratio= Current Asset current !ia"i!ity
C#rrent -atio
#ears $%&' $%&(
C#rrent Asset 1!1 !11
C#rrent Liabilities 190 :.09
Current Ratio 0,/. 0,!;
!"#$ !"#%
"
"&%
#
Current Ratio
'urrent (atio
Interpretation
C#rrent ratio e mean at (ic( level a b#siness is able to &ay off its
debts #sing c#rrent assets,
%t is evident in t(e comtations t(at easy6et as alays in better &osition to
meet its s(ort*term debt as com&ared to t(ose of rivals in a &er#se of t(e rivals+
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c#rrent ratios, 3(is means t(at easy6et is alays bale to meet t(eir c#rrent
liabilities #sing t(eir c#rrent assets cas(' inventory' receivables2,
3(is analysis clarifies t(at t(e ability of APL abo#t its &ayment of its c#rrent
liabilities #sing c#rrent assets' (as been fl#ct#ating #&ard and donard trend
(ic( is in 015 at 0,!; and in 019 it as 0,/.,
)uic* ratio
%t meas#res t(ose assets (ic( are 8#ic)ly converted into cas( and t(en
com&ared it( c#rrent liability,
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%nter&retations>
?ince 8#ic) ratios are &erceived as a sign of t(e com&any+s financial
strengt( or ea)ness,
A (ig(er n#mber o#ld indicate stronger financial
&erformance' and a loer one means ea)er &erformance,
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3(is ratio (el&s #s to find t(at (o m#c( an organi@ation #sing its
reso#rces to manage t(e &rofit,
As in APL gra&( s(os t(at t(ey are #sing t(eir reso#rces very efficiently
t(at t(e asset t#rnover ratio is decreasing from 019 to 015,
Levera,e ratio3(is ratios s(os t(ose activities of a firm are s#&&orted by creditors'
f#nds as o&&osed to oners,
3(e folloing ratios can be #sed to identify t(e financial strengt( and ris)
of t(e b#siness,
e"t to Equity Ratio
3otal debt e8#ity
#ear $%&' $%&(
3otal ebts 5!: 10!9
3otal 8#ity 1; :.//de"t to Equity Ratio 0,! ;
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!"#$ !"#%
"&""-
#"""&""-
!"""&""-
."""&""-
#ebt to &quity Ratio
/ebt to 01uity (atio
%nter&retations>
3(is ratio meas#re #nder (ic( financing so#rce of b#siness can be
determined,
%n t(e debt e8#ity ratio of A?D63 (as not a great fl#ct#ation in its
e8#ity, %n 019 to 015 increasing 0,! to ;,
.et /ro0it 1ar,in+he net profit margin ratio relates the net profit for the period to the sales
during that period
Profit After 3a7es ?ales2
#ears $%&' $%&(
Profit After ta7 9.1 59/
?ales /5 9!/!
Eross &rofit Margin -atio 0,1; 0,1
!"#$ !"#%
"&""-
%&""-
#"&""-
#%&""-
!"&""-#2&""-
#!&""-
Net *ro't )argin
3et prot 4argin
%nter&retations>
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3(e ratio of t(e net &rofit to t(e amo#nt of sales is itnessed to decrease
over time' as larger costs are e7&erienced by t(e com&any' es&ecially for
easy6et (o belongs to t(e aviation ind#stry' (ere over(ead costs are
said to go s)yroc)et (ig(' mainly res#lted from increase in oil &rices
orldide'
%n t(e gross &rofit margin ratio com&any (as a contin#o#s donfall trend
since last years,
Return on &quity
3(is ratio s(os t(e &rofit attrib#table to t(e amo#nt invested by t(e oners
of t(e b#siness
.et 2ro0it equity
#ears $%&' $%&(
et Profit 3a7es 9.1 59/
8#ity 99/ .!0
-et#rn on 8#ity 0,10. 0,05;
!"#$ !"#%
"&""-
%&""-
#"&""-
#%&""-
#"&5"-
%&2"-
Return on &quity
(eturn on 01uity
%nter&retations>
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%n t(is inter&retations of ret#rn on e8#ity e may concl#de t(at com&any
is don falling in its e8#ity ret#rn trend,
Earnin, /er S3are
.et 2ro0it a0ter ta4 no5 o0 s3ares outstandin,
Dears 019 015
net &rofit after ta7 9.1 59/
no of o#tstanding s(ares :.; ;.9
arnings &er s(are 1,: 0,!.
!"#$ !"#%
"
"&%
#
#&%#&!.
"&)5
&arnings *er s%are
0arnings per share
%nter&retations>
%n t(is gra&( it is s(on t(at APL earning &er s(are is increasing as
com&are to t(e 019 in 015 (ile in t(ere is a slig(t c(ange occ#rred
toards donfall,
$ Account 2aya"!e turnover:-
#ears $%&' $%&(
Cost of goods sold 155 !:9
Acco#nt Payable 1110 09!
Acco#ntPayable 3o#rover 1,:; 1,/
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!"#$ !"#%
#&!
#&!%
#&.
#&.%
#&$#&.2
#&!*
Account Payable Tourover
ccount 6ayable Tourover
3(e acco#nts &ayable t#rnover ratio is a s(ort*term li8#idity meas#re #sed to
8#antify t(e rate at (ic( a com&any &ays off its s#&&liers, %n 019 com&any
&ay 1,:; times and in 015 com&any &ays 1,/ times to s#&&liers,
$ Cas3 6!o7 Covera,e
Cas( flo coverage = et Cas( Flo Ann#al %nterest 7&ense
#ears $%&' $%&(
et Cas( Flo !1! 5/.
Ann#al %ntrest 7&ense 0
Cas3 0!o7 covera,e 0 .5
!"#$ !"#%
"
#""
!""
.""
$""
Cas% !low Coverage
'ash 7low 'overage
http://www.investopedia.com/terms/l/liquidity.asphttp://www.investopedia.com/terms/l/liquidity.asp
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3(is coverage ratio com&ares a com&anyGs o&erating cas( flo to its total debt'
(ic(' for r&oses of t(is ratio' is defined as t(e s#m of s(ort*term borroings'
t(e c#rrent &ortion of long*term debt and long*term debt,
$ Avera,e Co!!ection /eriod
#ears $%&' $%&(
Average Acco#nts -eceiveable 00 905
3otal ?ales:!5 ;,;: 1,/:
Avera,e Co!!etion 5,/; :1,5!
!"#$ !"#%
"
#"
!"
."
$"
Average Collection Period
verage 'ollection 6eriod
3(e average collection &eriod is t(e a&&ro7imate amo#nt of time t(at it ta)es for
a b#siness to receive &ayments oed' in terms of receivables' from its
c#stomers and clients, %n 019 5,/; days are re8#ired for collection (ile 015:1,5! days are re8#ired from collection (ic( is not satisfactory for com&any
t(at t(e average collection &eriod is increasing,
$ 8or*in, Ca2ita!
Working Capital = Current Assets - Current Liabilities
http://www.investopedia.com/terms/c/coverageratio.asphttp://www.investopedia.com/terms/c/cashflow.asphttp://www.investopedia.com/terms/c/coverageratio.asphttp://www.investopedia.com/terms/c/cashflow.asp
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years $%&' $%&(
C#rrent Assets 1!1 !11
C#rrent Laibilites 190 :.09
aor)ing Ca&ital *15. *1.:
"
!
$
)
*
#"
#!
.orking ca*ital
or)ing ca&ital is a meas#re of bot( a com&anyGs efficiency and its s(ort*
term financial (ealt(,
$ Hori9onta! And Vertica! Ana!ysis
a!ance S3eetmount in millions8
'urrent ssets !"#$ !"#%hori9ontal
6ercentage!"#$ verticle
'ash and Short +ermInvestments
. /0-.01 -02.3
45661601.0
'ash - - 78A&9E: 78A&9E: 78A&9E:
'ash ; Eet 44 140 -40 -4043 400/21 Accounts =eceivables
- +rade, >et 44 140 -40 -4043 400/21+otal Inventory - - 78A&9E: 78A&9E: 78A&9E:
%repaid E?penses - - 78A&9E: 78A&9E: 78A&9E:@ther 'urrent Assets,
+otal5. / -0 -22/3 41000
total current assets . . -604 -454.3
Fi?ed assets
%roperty%lantEet 01 00/5 -6400 -423
4022//6/.
%roperty%lantE
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AccumulatedCepreciation, +otal B B 78A&9E: 78A&9E:
!oodwill, >et6.0 564 -6.0 -44443
445.4022
Intangibles, >et6 62 -0 -4.3
44152.046
&ong +erm Investments B B 78A&9E: 78A&9E:>ote =eceivable - &ong
+erm 1 B 4443 78A&9E:
@ther &ong +erm Assets,+otal /5 1. -/ -.13
44116.0505
@ther Assets, +otal B B 78A&9E: 78A&9E:
+otal Fi?ed Assets 112 /.4 -04 -163
$ Vertic!e
ana!ysis
Income
statementyears 41 3age 40 3age
=evenue 20 443 1.2. 443
'!S 00 013 .61 0.3
!ross %rofit 644 1.3 40 113
total operating e?pense / 523 6//2 203
@perating Income .61 3 .22 03
&iabilities 41 40 'hange 3 8ertical
Accounts payable 61 4 6603
446/.1..
Accrued e?penses 6/ 6. 63
4.140021
>otes payableshort-termdebt
4 4 4 7CI84: 4
'urrent portion long-termdebtcapital leases
41 /1 -/4
-253
4450/0
0@ther current liabilities, total 206 ,15 -/1
-613411151.4
.
Total current liabilities 1,420 1,768 -612 -03 4.2006546
+otal long term debt 15 6 0463
412010/0
+otal debt 05. 0. .443
44445501/
Deferred income tax 186 176 403
44.216040
Dinority interest -- -- 78A&9E: 78A&9E: 78A&9E:
@ther liabilities, total 6 66 -2 -603 46.125Total liabilities 2,310 2,579 -./ -3
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$ Uses o0 Ratio Ana!ysis1, 3o eval#ate &erformance to com&are to &ervio#s year and to com&etitor and
t(e ind#stry,
, 3o set benc(mar)s or standards for &erformance,
:, 3o (ig(lig(t areas t(at need to be im&roved' or areas t(at offer t(e most
&romising f#t#re &otential,
9, 3o enable e7ternal &arties' s#c( as investors or lenders' to assess t(e
creditort(iness and &rofitability of t(e firm,
; Limitations o0 6inancia! Ratios
3(ere are some im&ortant limitations of financial ratios t(at analysts s(o#ld be
conscio#s of>
• Many large firms o&erate different divisions in different ind#stries, For
t(ese com&anies it is diffic#lt to find a meaningf#l set of ind#stry*average
ratios,
• %nflation may (ave badly distorted a com&anyGs balance s(eet, %n t(is
case' &rofits ill also be affected, 3(#s a ratio analysis of one com&any
over time or a com&arative analysis of com&anies of different ages m#st
be inter&reted it( j#dgment,
• ?easonal factors can also distort ratio analysis, "nderstanding seasonal
factors t(at affect a b#siness can red#ce t(e c(ance of misinter&retation,
For e7am&le' a retailerGs inventory may be (ig( in t(e s#mmer in
&re&aration for t(e bac)*to*sc(ool season, As a res#lt' t(e com&anyGs
acco#nts &ayable ill be (ig( and its -IA lo,
• ifferent acco#nting &ractices can distort com&arisons even it(in t(e
same com&any leasing vers#s b#ying e8#i&ment' L%FI vers#s F%FI'etc,2,
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• %t is diffic#lt to generali@e abo#t (et(er a ratio is good or not, A (ig(
cas( ratio in a (istorically classified grot( com&any may be inter&reted
as a good sign' b#t co#ld also be seen as a sign t(at t(e com&any is no
longer a grot( com&any and s(o#ld command loer val#ations,
• A com&any may (ave some good and some bad ratios' ma)ing it diffic#lt
to tell if itGs a good or ea) com&any,
%n general' ratio analysis cond#cted in a mec(anical' #nt(in)ing manner is
dangero#s, In t(e ot(er (and' if #sed intelligently' ratio analysis can &rovide
insig(tf#l information,
$ CO.CLUSIO.
As a concl#ding note' ann#al im&airment tests for si@eable fi7ed assets
s(o#ld lead to a better val#ation of t(e b#siness' (ic( o#ld res#lt to a better
vie of t(e financial sit#ation of t(e civil aviation com&any, Eenerally' t(e
acco#nting &olicies of easy6et meet t(e %F-? and t(e aviation ind#stry standards
as ell, otit(standing several critical b#t ot(erise minor entries' it can bes#fficiently agreed #&on t(at easy6et+s acco#nts Jgive a tr#e and fair vie of t(e
state of affairsK and conse8#ently K(ave been &ro&erly &re&aredK easy6et2, 3(e
res#lts for t(e financial statements a#dit of easy6et done by
Priceater(o#seCoo&ers LLP ere evidently ell*&lanned and &erformed t(e
a#dit so as to obtain all t(e information and e7&lanations (ic( ere considered
necessary in order to &rovide t(e a#ditors it( s#fficient evidence to give
reasonable ass#rance t(at t(e financial statements and t(e &art of t(e irectors+
rem#neration re&ort to be a#dited are free from material misstatement' (et(er
ca#sed by fra#d or ot(er irreg#larity or error, %n forming t(e o&inion in t(is
&a&er' t(e overall ade8#acy of t(e &resentation of information in t(e financial
statements and t(e &art of t(e irectors+ rem#neration re&ort to be a#dited are
also eval#ated