Financial Analysis Management & Enterprise Assignment

Added on - 21 Jul 2020

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Financial Analysis Management & Enterprise1
TABLE OF CONTENTSINTRODUCTION......................................................................................................................1MAIN BODY.............................................................................................................................11. Assessing financial position of listed companies such as Turkish Airlines and Lufthansa................................................................................................................................................12. Evaluating cash flow statement of Emirates......................................................................8CONCLUSION........................................................................................................................11REFERENCES.........................................................................................................................122
INTRODUCTIONIn the current times, companies operating in airlines sector are facing stiff competitivesituation. All the units are placing high level of emphasis on providing customers withquality services at lower prices. This in turn closely influences profit margin generated by theorganizations and overall success. Moreover, for gaining competitive edge over othersbusiness unit needs to offer innovative and luxurious services to the passengers. Hence, forthis purpose effective management of funds highly needed. In this, study is carried out onthree airlines firms such as Turkish Airlines, Lufthansa and Emirates. As per the case, Headof Equity Research seeks to identify the extent to which company or business unitsperforming better in monetary terms. Hence, report will present financial statementevaluation of Turkish Airlines and Lufthansa, pertaining to four years period, via ratioanalysis.MAIN BODY1. Assessing financial position of listed companies such as Turkish Airlines and LufthansaRatio analysis refers to the quantitative assessment or evaluation of informationcontained in financial statements of business unit. Such technique is highly significant whichprovides high level of assistance in analyzing financial performance from severalperspectives such as profitability, liquidity, solvency and efficiency. This technique givesclear indication about company’s financial performance over the years and in against to thecompetitors.Comparison and critique of financial position of the companies such as TA andLufthansaRatio analysis of Turkish Airlines andLufthansa from the period of 2013 to 2016 is asfollows:Profitability ratiosTurkish AirlinesLufthansaGP ratioNP ratioGP ratioNP ratio201318.60%3.60%41.69%1.00%201418.10%7.60%42.41%0.20%1
201520.00%10.20%44.97%5.30%201611.60%-0.80%45.96%5.60%Interpretation: GP margin of TA was 18.60% and 18.10% in the period of 2013 and2014. On the other side, in 2015 and 2016, it was 20% & 11.60% respectively. Fromassessment, it has found that sales revenue of TA was declined over the years due to itsnetwork penetration of Asia Pacific is relatively weak. Along with this, due to the intensecompetitive situation TA failed to maintain limited market share. Further, internal analysispresents that initiative of business unit’s in CSR projects is limited (Swot analysis of TurkishAirlines, 2018). TA provides customers or passengers with limited varieties pertaining tobeverages. Hence, due to the high cost of goods sold firm failed to generate high margin. Onthe other side, as compared to TA,Lufthansa generated margin with the increasing rate. Overthe time period, GP margin of the company inclined from 41.69% & 45.96% respectively.Thus, it can be depicted that TA exerted effectual control on the direct expenses of Lufthansa.Profitability ratio analysis presents that, at the end of 2016, NP margin of TA wasincreased over the years from 3.60% to 10.20% significantly. In 2016, NP ratio of thecompany was negative such as -.80%. The reason behind the attainment of negative marginwas decrease in financial income from 532 million to 300 million. In addition to this,financial expenditure of TA increased from 201 to 229 million. Hence, due to the increasinglevel of indirect expenditure negative margin was assessed in the period of 2016. In contrastto this, NP margin of Lufthansa was 5.3% and 5.6% significantly. Comparatively, suchincreasing trend can be supported with the strength of Lufthansa such as multiple passengerbrand positioning and leading aviation services (Swot analysis ofLufthansa, 2018). In thecontext of Lufthansa, it can be stated that firm made effectual control on indirect expenses inthe period of 2016.Liquidity ratiosTurkish AirlinesLufthansaCurrent ratioQuick ratioCurrent ratioQuick ratio20130.680.620.880.8220140.770.70.750.6920150.810.740.720.6620160.80.730.930.852
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