easyjet company

8/17/2019 EasyJet Company

1/21

Project of Advance Financial Management

Hassan Zaryab

L1f15BCMH0005

01!

"niversity of Central P#njab


2/21


3/21

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)#*


4/21

E)# Income Statement


5/21


6/21


7/21


8/21


9/21

$ 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+


10/21

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,


11/21

%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,


12/21

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,! ;


13/21

!"#$ !"#%

"&""-

#"""&""-

!"""&""-

."""&""-

#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>


14/21

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>


15/21

%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,/


16/21

!"#$ !"#%

#&!

#&!%

#&.

#&.%

#&$#&.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


17/21

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


18/21

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


19/21

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


20/21

$ 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,


21/21

• %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

easyjet company

Documents