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Analysis of Financial Performance of Easy Jet

   

Added on  2020-02-03

13 Pages3936 Words757 Views
INTERNATIONAL FINANCE1
Analysis of Financial Performance of Easy Jet_1
TABLE OF CONTENTSINTRODUCTION ...............................................................................................................................3TASK 1.................................................................................................................................................3Financial Ratio Analysis of EasyJet Plc:.........................................................................................3Explanation of ratios calculated and analysis of the results:...........................................................4TASK 2.................................................................................................................................................5A) Advantages and disadvantages of the three valuation methods..................................................5B) Calculations using the 3 methods to determine valuations.........................................................6C).....................................................................................................................................................8D) Identifying the various risk exposures to FTSE 100 company indexes.....................................9E)......................................................................................................................................................9TASK 3.................................................................................................................................................9CONCLUSION..................................................................................................................................10REFERENCES...................................................................................................................................112
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INTRODUCTION International or global finance regards to the process of monetary or financial transactionthat took place between two or more countries of the world. Looking at the present times, numbersof companies are engaged in cross-border transactions, henceforth, need to examine and analyse theperformance of companies to make solid decisions. EasyJet is a UK-based low-cost airline situatedat London Luton Airport and run scheduled airlines at both the domestic and international level.Present project report lay emphasizes on analysis of financial performance of EasyJet via ratioanalysis model. Moreover, its stock price will be valued using different methods comprising netassets, price to earning multiplier and dividend valuation method. On the basis of this, Barclaysbank’s board of directors will be suggested that whether they should acquire EasyJet or not to meettheir targets. TASK 1EasyJet is the airline company and it is a British low-cost airline carries based at LondonLuton Airport. The airline company operates domestic and international scheduled services on over820 routes in more than 30 countries (Okawa and Van Wincoop, 2012). EasyJet plc is listed on theLondon Stock Exchange and is a constituent of the FTSE 100 Indices.Financial Ratio Analysis of EasyJet Plc:ItemsFormulas2014 (GBP million) 2015 (GBP million)Profitability ratiosrevenues45274686gross profit 16901860Net profit 450548Gross margin Gross profit/total revenue*10037.33%39.69%Net margin Net profit/total revenue*1009.94%11.69%Liquidity ratiosCurrent assets12611279Current liabilities 14201768Closing inventory 00prepaid expenses 9086Current ratioCurrent assets-current liabilities0.890.72Acid test ratio(Current assets-stock-prepaid expense)/Current liabilities 0.820.67Efficiency ratios Total assets44824828Assets turnover ratio (Turnover/total assets)1.010.97Total debtors 200.00206.00debtors turnover Net credit sales/Debtors22.6322.753
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ratioreceivable days 365/Debtors turnover ratio 16.1316.05Creditors523495Cost of sale 28372826Creditors turnover ratioNet credit purchase/Creditors 5.425.71Payable days 365/Creditors turnover ratio67.2963.93Solvency ratios Debt 472322Shareholders’ equity 21722249debt to equity ratio Long-term debt/Total shareholder's equity0.220.14Explanation of ratios calculated and analysis of the results:1.Gross Profit Ratio: Gross profit shows the total revenue minus the cost of goods sold in thebusiness. It is a profit where company deduct all the cost which are associated with makingand selling the products. In this case the EasyJet company is having gross profit 37.33% inthe year 2014 and the profit increases in year 2015 i.e. 39.69% which shows that thecompany is performing well in the industry in comparison to the previous year.2.Net Profit Ratio: Net profit is regarded as a final output of the business entity. It is theprofit where all the operating expenses, taxes, interests and depreciation are deducted(Ferguson and Schularick, 2011). In this company the net profit is increases from 9.94% to11.69% in the financial year 2014 to 2015. It shows that the company is performing verywell in the market as well as performing high from the previous year, from this the investorswill beneficial after make an investment.3.Current Ratio: Current ratio shows that the company is how much able to pay short termobligations. Calculation of current ratio considers the current assets and current liabilities ofthe company. EasyJet company is having less current assets compare to the ideal ratio i.e.2:1. The ratio is decreases from 0.89 to 0.72 in year 2014 to 2015.4.Acid Test Ratio: Acid test ratio is measures that the company is how much able to pay itscurrent liabilities when they come due with only quick assets. The quick ratio or acid testratio of the EasyJet company is declining in year 2014 to 2015 from 0.82 to 0.67, which isnot good for the company.5.Assets Turnover Ratio: This a financial ratio that measures the efficiency of a company'suse of its assets in generating sales revenue or sales income to the company (Prasad, 2011).The asset turnover ratio of the airline company is decreases from the previous year whichshows that company is not generating sales from existing assets of company.6.Debtors Turnover Ratio: Ratio of net credit sales to average trade debtors is called debtors4
Analysis of Financial Performance of Easy Jet_4

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