Finance Introduction 1 TASK 11 TASK 212 CONCLUSION 15 REFERENCES 16 INTRODUCTION Finance

FINANCE

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
TASK 2 .......................................................................................................................................12
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Finance is defined as the management of money and it consist of different business
activities such as investing, borrowing, budgeting, lending, saving and forecasting (Antras and
Foley, 2015) . It is a broadly term which is defined the study and system of money, investments
and other financial instruments. It can categorise in three part such as personal finance, public
finance and corporate finance. The basic concepts of finance come from micro and macro
economic theories. It includes the over sight, creation and study of money, assets and liabilities,
investment, credit after that prepare financial statements. In the report consist of 3 companies
which are Ryanair holdings public limited company, Flybe group plc and Easyjet plc. There are
calculating ratios of 3 years and show which company performance is good as investment
perspective and which one has poor. In section second, prepare a memo on investment appraisal
in the context of decision making process.
TASK 1
Ratio Analysis
Ratio Analysis is a form of financial statement analysis which can use to show quick
indication in reference to performance of firm in various key areas. The ration will be divided as
per short term solvency, efficiency ratio and investments ratio. Most of the companies apply ratio
analysis instead of absolute figures because it can provide performance of a company.
Strength – There are mentioned strength of the ratio analysis -
 It can help to validate the operating, financing and investing decision of the company. With the help of ratio analysis company identify all problems and carry out attention of
the management in specific areas.
Weakness – If ratio analysis have strength so there are is weakness which are -
 The ratio analysis can ignore the price level due to changes in inflation and over look in
price level between periods.
 Financial ratio can not sort out any problem related to financial problems and they have
mean to the end, not the actual solution.
Current Ratio – Current ratio is part of financial ratio which can show how much
liquidity in the company to pay out their debts regarding to short terms. From the financial report
it has been analysed that from 2016 to 2018 Ryanair has facing problems and up down coming in
1

current ratio. There are mainly considering decreasing in the ratio it means Flybe have not good
position in liquidity. They have not position to pay short term loans easily. Current ratio is a
comparison of current assets to current liabilities. Expected creditors can use the current ratio for
measure the ability of the company regarding to liquidity and ability to pay short term debts.
There are getting that the company ability is not good and easily not pay off loans.
Ryanair holdings public limited company – The current ratio of the particular company near by
of their ideal ratio which is 2:1, it is company have good ability to pay off their loans. In the year
of 2018 to 2016 continue decrease which is not good for the company.
Flybe group plc – From the financial ratio has been analysed that current ratio of the company in
2016 to 2018, 1.06, 0.96 and 0.71 respectively. In 2016 company can touch ideal ratio but after
some time it goes down and ability will be down.
Easyjet plc – The liquidity ratio of the company can not reach to their ideal ratio.
FLYBE Group Plc
Ryanair holdings public limited company
Easy jet plc
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
1.06
1.43
1.04
0.96
1.56
0.92
0.71
1.23
0.72
2016
2017
2018
Shareholders liquidity Ratio – The particular ratio can present as percentage because
there are dividing total shareholders' equity by total assets of the firm. There are presenting the
amount of assets on which shareholders have a substance claim (Porter, 2016). The particular
ratio can selected by company because it presents how much of the company's assets are funded
2

by equity shares. After the calculation it is getting that result in lower amount so company has
used their assets for pay off.
Ryanair holdings public limited company – This ratio indicates that their ability increase to pay
off their shareholders and company have sufficient amount to pay those company. The ratio of
the company from 2016 to 2018, 0.85, 0.97 and 0.1.
Flybe group plc – Company has not ability to pay amount to their share holders because the ratio
of the company continuously decreasing. There are figure of the ratio in 2016, 1.03, in 2017,
0.47 and in 2018, 0.38.
Easyjet plc – It is continue decreasing it means company have not ability to pay off amounts of
debt. The particular company have good efficiency regarding to shareholders which is 2.77, 2.21
and 1.87 from 2016 to 2018.
FLYBE Group Plc
Ryanair holdings public limited company
Easy jet plc
0
0.5
1
1.5
2
2.5
3
1.03
0.85
2.77
0.47
0.97
2.21
0.38
1
1.87
2016
2017
2018
Gearing Ratio – The particular ratio has been measured financial performance and
leverage of company. It is most popular method to determine the financial fitness of a company.
With the help of this ratio know about how much a company is funded the best debt versus how
much is financed by equity.
3

Ryanair holdings public limited company – It is continue decreasing because they have not good
financial leverage. It is continue decreasing from 2016 to 2018 due to changes in business
activities.
Flybe group plc – It is most popular method but company ratio continuous increasing which can
show great deal of leverage and company has been used debt to pay for continuous operations.
Easyjet plc – It is hight it means they have good ability to pay regarding to their debts which is
from 2016 to 2018, 39.97, 48.44 and 53.50 respectively.
FLYBE Group Plc
Ryanair holdings public limited company
Easy jet plc
0
50
100
150
200
250
300
106.62
130.73
39.97
228.66
113.29
48.44
281.2
109.97
53.5
2016
2017
2018
Net assets turn over ratio – With the help of this ratio, analysis the efficiency of a
company's assets for earn more sales and revenues. The asset turn over ratio can use as indicator
to show and measure efficiency of the company in the reference of value of their assets. There
are higher asset turn over ratio can present good efficiency of the company and if company have
low asset turn over ratio it means they have not efficient to using their assets regarding to
generate sales.
4