Financial Statement Analysis Assignment: Management & Enterprise
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Added on 2020-06-06
Financial Statement Analysis Assignment: Management & Enterprise
Added on 2020-06-06
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Financial Analysis Management & Enterprise
TABLE OF CONTENTSINTRODUCTION......................................................................................................................31. Critically comparing and contrasting financial performance of Turkish and Lufthansa...32. Critically analyzing annual cash flow statements of Emirates over the five year periodfrom 2012 to 2016................................................................................................................12CONCLUSION........................................................................................................................15REFERENCES.........................................................................................................................16
INTRODUCTIONFinancial analysis refers to the process that business entity and monetary analystsundertake for making evaluation of company’s performance as well as suitability.Management of financial resources is the key that contributes in the growth and success ofbusiness organization to a great extent. In this regard, financial statement analysis provideshigh level of assistance in evaluating business performance from several perspectives such asprofitability, liquidity, solvency and efficiency. On the basis of cited case situation smallinvestment bank in UK is willing to assess financial position and performance of thecompanies operating in airline sector namely Turkish and Lufthansa. In this, report willhighlight financial position and performance of such airline companies through ratio analysis.Besides this, report will also provide deeper insight about the extent to which cash flowposition of Emirates was good during the period of five years from 2012 to 2016. 1. Critically comparing and contrasting financial performance of Turkish and LufthansaRatio analysis of two LSE listed organizations namely Turkish and Lufthansa for the periodof 4 years from 2013 to 2017 are enumerated below: Profitability ratiosTurkish AirlinesLufthansa20132014201520162013201420152016Profitability ratio Gross profit 1,8232,0022,1021,13612,51812,72814,41614,551Net profit3578451,069-77313551,6981776Net sales 9,82611,07010,522979230,02830,01132,05631,660GP ratio 18.6%18.1%20%11.6%41.69%42.41%44.97%45.96%NP ratio 3.6%7.6%10.2%-0.8%1.0%0.2%5.3%5.6%Interpretation: The above depicted table presents that from 2013 to 2015 GP marginof Turkish Airlines increased but at the end of 2016 it accounted for only 10.8% (Annualreport of Turkish Airlines (2016), n.d.). Income statement of Turkish Airlines presentdecreasing trend in sales revenue from 10522 to 9792 million. On the other side, cost of salesor direct expenses of such airline firm inclined from 8420 to 8656 million. Hence, this is
recognized as one of the main reasons due to which GP margin of the firm was lower in theperiod of 2016. On the other side, Lufthansa GP margin inclined from 41.69% to 45.96% atthe end of 2017. Hence, such increasing sales pattern and GOP margin can clearly besupported with the strength such as high market share and brand image. By taking intoaccount all such aspects it can be stated that Lufthansa had exerted effectual control overdirect expenses. Further, outcome of ratio analysis presents that NP ratio of Turkish Airlinesaccounted for -0.7% significantly. Due to the high level of indirect expenses and taxobligations negative NP margin was generated by Turkish Airlines. Swot analysis of thecompany presents that Turkish Airlines charges higher prices in comparison to thecompetitors. In addition to this, customers had experienced bad experience from company’swebsite (Swot analysis of Turkish Airlines, 2018). Thus, both such aspects caused of negativemargin generated in the 2016. From the period of 2013 to 2016, Lufthansa NP marginincreased to the significant level as such firm has maintained high brand image and coveragein Europe. In comparison to the rival firm and other low cost airlines present in the marketLufthansa has attained high net profit by making control on indirect expenses. Liquidity ratio analysis Turkish AirlinesLufthansa20132014201520162013201420152016Liquidity ratio current assets 2,1252,8313,1463,6019,6638,2478,93610,193Current liabilities 3,1173,6673,8714,49710,94710,97412,43711,009Stock 160195216217641700761816Prepaid expenses 42607498Current ratio0.680.770.810.800.880.750.720.93Quick ratio 0.620.700.740.730.820.690.660.85Outcome of ratio analysis presents that current ratio of Turkish Airlines fallswithin .68 to .81 during the four consecutive years. In addition to this, fluctuating trend hasfound in the current ratio of Lufthansa. It presents that for meeting 1obligation both thecompanies have approximately one current asset. This is not good as compared to ideal ratiosuch as 2:1 respectively. Thus, referring the current position and benchmark it can bedepicted that liquidity position of Turkish Airlines is good but not sound.
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