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Accounting and Finance Contents

   

Added on  2021-02-20

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Accounting and Finance for Managers 1

ContentsINTRODUCTION...........................................................................................................................................3TASK 1..........................................................................................................................................................3TASK 2 .......................................................................................................................................................9REFERENCES..............................................................................................................................................132

INTRODUCTIONFinance management is considered as most important function of a company thatmanages the capital requirements in terms of investment, budget planning, future planning,borrowing, lending and many more. It is also considered as wide term which consist of analysingas well as processing stages related to money such as investment or any other stage (AntrasandFoley, 2015). It is generally bifurcate into three types’ i.e. public finance, personal finance andcorporate finance. The respective assignment is based on three companies i.e. Flybe group plc,Ryanair holding public limited and EasyJet Plc. They are planning to calculate ratio of threeyears which will help in analysing their performance in order to determine which is good forinvestment and which is not. This will also help them in identifying which company is effectivein a particular marketplace. Then in second task they will develop a memo which is based oninvestment appraisal in respect of procedure related to decision. TASK 1Ratio Analysis This term can be defined as quantitative method used to gain insight of a company asoperational efficiency, liquidity and profitability and more. It provides details of financial ratiosthat can be classified as – ratios of solvency, liquidity, efficiency, market prospect, coverage,profitability. Strength – The strengths of the ratio analysis - It helps in comparing the line-item data from financial statement of company to gaininsight of financial ratios. It also helps in revealing the current financial state of company as well. Weakness – There are some disadvantages of ratio analysis also as- It ignores the price level due to fluctuation in rate of inflation. It fails to give detail about financial issues as well. Current Ratio – Current ratio shows how much company can pay off debts related toits short terms(Porter, 2016).Through ratio analysis, the company can depict that from last twoyearsi.e. 2016 to 2018, the present company Ryanair is continuously some problems and3

fluctuation in its current ratio. Decrease in the ratio means that FLYBE isn’t in good position inliquidity. Current ratio is a liquidity ratios that is used mainly to pay dues or short termobligations of current year. Ryanair Holdings Plc – The ideal current ratio of this firm is 2:1, that reflects it has efficientresources to pay off its loans. In context with last two years i.e. from 2018 to 2016, the ability ofcompany for paying its debts is continuously decreasing. Flybe Group of PLC – From the ratio analysis, it is analyzed that current ratio of this firm from2016, 2017 and 2018 are obtaining as 1.06, 0.96 and 0.71 respectively. In 2016 company cantouch ideal ratio but after some time it goes down. Easy jet plc – The liquidity ratio of this firm has failed to achieve its ideal ratio. Shareholders liquidity Ratio – It is describing about ratio which can be develop by dividingwhole equity of stakeholder by firm’s total assets (Philippon, 2015). They are generallyindicating the amount of assets on which stakeholder has its ownership. The respective ratio isgenerally selected by an organization because through it an individual can evaluate total assetswhich are funded by the equity shares.Ryanair holdings Plc – This will indicate about ratio that the respective company has enoughamount to pay off their shareholder in effective manner. The ratio of respective company is0.85, 0.97 and 0.1 which is from 2016 to 2018. Flybe group plc – The respective company ratio is decreasing on continuous basis due to whichthey are not able to pay their shareholders properly. According to data ratio of this companyis 1.03 in 2016, 0.47 in 2017 and 0.38 in 2018. Easyjet plc – The ratio of respective firm is also decreasing day by day which shows that it willnot able to pay amount to its debt. Gearing Ratio – This ratio refers to tool which is used by a company in order to determinefinancial leverage as well as performance of a company (Cournède, Denkand Hoeller,2015). It is mostly used method by a company in order to identify its financial fitness. 4

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