Balance Sheet Analysis

This assignment presents a set of balance sheet data for multiple periods. The task is to analyze this data, identifying trends in assets, liabilities, and stockholders' equity. This involves comparing figures across different time points and understanding the implications for the company's financial position and performance.

Running head: FINANCIAL ANALYSIS FOR MANAGERS
Financial Analysis for Managers
Name of the Student:
Name of the University
Author’ Note:
Course ID:

1FINANCIAL ANALYSIS FOR MANAGERS
Table of Contents
Terms of reference:..........................................................................................................................2
Executive Summary:........................................................................................................................4
Ratio analysis:..................................................................................................................................5
Analysis of Jet2:..............................................................................................................................8
Analysis of Ryanair:......................................................................................................................14
Comparison between Jet2 and Ryanair:........................................................................................21
Conclusion and recommendations:................................................................................................26
References and Bibliographies:.....................................................................................................27
Appendices:...................................................................................................................................31

2FINANCIAL ANALYSIS FOR MANAGERS
Terms of reference:
In this report, a financial comparison has been carried out between two airlines, one is the
British low-cost airline, Jet2 and another is an Irish low-cost airline, Ryanair. Both had been
European carriers before the Brexit effect and these two airlines have benefitted and suffered
being members of the Euro zone, particularly during the declining stock market.
Ryanair is a low-cost airline in Ireland established in 1984 and it’s headquarter is located
in Swords, Dublin, Ireland. The primary operational bases of the airline are at London Stansted
and Dublin airports. It is the largest European airline in terms of scheduled passengers flown and
it has carried most global passengers in contrast to any other airline in 2016 (Ryanair.com
2017). The rapid expansion helps in characterising the airline, which is due to the deregulation of
the aviation industry in Europe in 1997 along with the success of its low-cost business model.
The route network of Ryanair serves 34 nations in Europe, the Middle East (Israel) and Africa
(Morocco).
Jet2 is a British low-cost airline based at Leeds Bradford Airport, England. It is the fourth
biggest scheduled airline in UK. In addition, the airline holds a “UK Civil Aviation Authority
Type A Operating Licence” for carrying passengers, cargo and mail aircrafts having 20 or
additional seats (Jet2.com 2017). The route network of Jet2 serves 47 sun destinations and its
employee base is around 4,000 in April 2015.
The financial analysis would be made for assessing the non-financial measures including
breakdown by various divisions and measures of corporate social responsibility, efficiency,
liquidity, profitability and gearing constituting of both time series and cross-sectional analyses
for both the airlines. Along with this, the similarities and dissimilarities of both the airlines

3FINANCIAL ANALYSIS FOR MANAGERS
would be computed, after which a summary of the results would be drawn and suggestions
would be made for improving the financial performance of both the airlines.

4FINANCIAL ANALYSIS FOR MANAGERS
Executive Summary:
In this report, a financial comparison has been carried out between two airlines, one is the
British low-cost airline, Jet2 and another is an Irish low-cost airline, Ryanair. Both had been
European carriers before the Brexit effect and these two airlines have benefitted and suffered
being members of the Euro zone, particularly during the declining stock market. The primary
aim of ratio analysis is to compute and interpret the financial ratios for monitoring and
evaluating the financial position and performance of the organisations. The shareholders,
management and creditors of the concerned organisations would be interested in this analysis.
By comparing the profitability position, it could be inferred that Ryanair is leading in
terms of profit, while in terms of generating and providing returns, Jet2 is in a better position
compared to the former. Ryanair is enjoying a stable liquidity position in the UK aviation
industry compared to Jet2. Since the debt burden of Jet2 is greater in contrast to Ryanair, it could
be inferred that the former is more risky to become bankrupt in future. Although both the airlines
are struggling to maintain a competitive position in the market, Jet2 is in a better position
compared to Ryanair. Thus, it could be inferred that both the airlines are struggling to maintain
their solvency positions; however, if compared, Ryanair is in a favourable position in contrast to
Jet2.
To conclude, it could be observed that both the airlines being parts of the Euro zone, have
suffered as well as benefitted. Both the airlines depend on tax benefits for gains and in order to
restrict them from going into debt, they need to declare bankruptcy.

5FINANCIAL ANALYSIS FOR MANAGERS

6FINANCIAL ANALYSIS FOR MANAGERS
Ratio analysis:
The primary aim of ratio analysis is to compute and interpret the financial ratios for
monitoring and evaluating the financial position and performance of the organisations. The
shareholders, management and creditors of the concerned organisations would be interested in
this analysis (Arrozio, Gonzales and Da Silva 2016). The following are the types of ratios that
would be computed:
Profitability ratios
Liquidity ratios
Debt ratios
Activity ratios
Gearing ratios
Profitability ratios:
In the words of Barnard et al. (2014), profitability ratios gauge the profit-generating
capability of an organisation in relation to assets, sales and equity. These ratios provide an
effective platform to judge the individual performance of an organisation and they are beneficial
to contrast a firm with its rivals in relation to the industrial benchmark. The profitability ratios
that would be considered in this report include the following:
Operating margin = Operating profit/ Sales revenue
Net margin = Net profit/ Sales revenue
Return on equity = Net profit/ Average shareholders’ equity

7FINANCIAL ANALYSIS FOR MANAGERS
Return on total assets = Net profit/ Total assets
Liquidity ratios:
Liquidity explains the extent to which a security or an asset could be purchased quickly
or it could be sold in the market without having any impact on the price of the security or asset.
In this context, Attig and Cleary (2014) remarked that accounting liquidity gauges the ease
through which an individual or organisation could clear the financial obligations with liquid
assets available to them. The two liquidity ratios that would be applied in this report constitute of
the following:
Current ratio = Current assets/ Current liabilities
Quick ratio = (Current assets – Inventories – Prepaid expenses)/ Current liabilities
Debt ratios:
Debt ratios gauge the degree of leverage of an individual or a firm, which depicts the
portion of the assets owned on the part of the organisation and the amount financed through debt
(Bekaert and Hodrick 2017). The following debt ratio is taken into account in the form of
gearing, which is described later on in the report:
Debt ratio = Total liabilities/ Total assets
Activity ratios:
As pointed out by Bodie (2013), activity ratios gauge the ability of an organisation to
convert various accounts within the balance sheet statements into sales or cash. These ratios
gauge the relative efficacy of an organisation depending on asset utilisation, leverage and other

8FINANCIAL ANALYSIS FOR MANAGERS
items of balance sheet and they are significant in ascertaining whether the management of an
organisation is capable of generating cash and revenues from the available ratios. In this report,
the activity ratio that has been considered is the total asset turnover ratio, which would depict the
efficacy of an organisation in terms of asset utilisation for generating sales.
Total asset turnover ratio = Sales revenue/ Total assets
Gearing ratios:
Gearing ratio is a common term explaining a financial ratio, which contrasts some kind of
owner’s equity to borrowed funds. In this context, Brigham and Daves (2014) cited that gearing
is a measure related to financial leverage describing the extent to which the activities of an
organisation are financed on the part of the owner’s funds in contrast to the funds of the
creditors. The greater the degree of leverage of an organisation, the greater is the risk for the
organisation. For majority of the ratios, an acceptable level is ascertained by the comparison to
ratios of firms in the identical industry. The following gearing ratios have been taken into
consideration for this report:
Debt-to-equity ratio = Total debt/ Total equity
Times interest earned ratio = Operating profit/ Interest expense
Equity ratio = Total equity/ Total assets

9FINANCIAL ANALYSIS FOR MANAGERS
Analysis of Jet2:
The following section would depict the financial performance and position of Jet2 based
on its annual reports of 2013, 2014 and 2015.
Profitability analysis:
The four ratios that have been considered for carrying out the profitability analysis of Jet2
include operating margin, net margin, return on equity and return on total assets. The values of
these ratios are depicted in the form of a table as follows:
Particulars Details 2013 2014 2015
Sales revenue A 869.2 1120.2 1253.2
Operating profit B 37.9 49.2 33.6
Net profit C 31.2 35.9 32.8
Opening shareholders'
equity D 158.9 186.6 181.6
Closing shareholders'
equity E 186.6 181.6 157.2
Average shareholders'
equity
F=(D+E)/
2 172.75 184.1 169.4
Total assets G 747.5 852.9 1001
Operating margin B/A 4.36% 4.39% 2.68%
Net margin C/A 3.59% 3.20% 2.62%
Return on equity C/F 18.06 19.50 19.36

10FINANCIAL ANALYSIS FOR MANAGERS
% % %
Return on total assets C/G 4.17% 4.21% 3.28%
According to the above table, it could be stated that the operating margin of the airline
has increased from 4.36% in 2013 to 4.39% in 2014; however, it has declined considerably to
2.68% in 2015. The excessive increase in net operating expenses due to rise in jet fuel and oil has
been the primary reason behind the decline in operating margin (Brigham 2014). In case of net
margin, the ratio has fallen from 3.59% in 2013 to 3.20% in 2014 and the decline is inherent
further to 2.62% in 2015. This is due to the negative values in relation to revaluations of
derivative hedges and foreign currency balances coupled with fall in finance income.
On the other hand, the return on equity for Jet2 has increased from 18.06% in 2013 to
19.50% in 2014; however, it has decreased to 19.36% in 2015. This denotes that the airline has
experienced a slight decline in the amount of money generated from the investments of the
shareholders due to the fall in net income (Eckerd 2015). The trend is declining in case of return
on total assets in 2015, since the net income of the airline has fallen in contrast to the increase in
total assets.
Thus, in terms of profitability analysis, Jet2 is not in a stable position in the UK aviation
industry, since the profit margin has shown a declining trend.
Liquidity analysis:
The two ratios that have been considered for carrying out the liquidity analysis of Jet2
include current ratio and quick ratio. The values of these ratios are depicted in the form of a table
as follows:
Particulars Details 2013 2014 2015

11FINANCIAL ANALYSIS FOR MANAGERS
Current assets A 470.6 554.1 697.4
Inventories B 1.3 3.1 2
Current liabilities C 506.2 629.7 798.6
Current ratio A/C 0.93 0.88 0.87
Quick ratio (A-B)/C 0.93 0.88 0.87
According to the above table, it could be stated that the current ratio of the airline has
decreased from 0.93 in 2013 to 0.88 in 2014 and it has declined marginally to 0.87 in 2015. This
is because of the significant increase in the current liability base, particularly the increase in
derivative financial instruments. As commented by Brigham and Ehrhardt (2013), the ideal
current ratio in the UK aviation industry is considered as 2. In this case, the ratio is well below
the industrial standard, which depicts the struggling position of the airline in relation to clearing
its short-term obligations and dues.
On the other hand, it could be observed that the quick ratio of the airline has decreased
from 0.93 in 2013 to 0.88 in 2014 and it has declined marginally to 0.87 in 2015. In this context,
Delen, Kuzey and Uyar (2013) cited that the ideal quick ratio in the UK aviation industry is
considered as 1. In this case, the ratio is close; however, below the industrial standard, which
depicts the struggling position of the airline in relation to clearing its short-term obligations and
dues.
Hence, Jet2 has an average liquidity position in the aviation industry of UK, since the
short-term obligations are more compared to the short-term asset base available.

12FINANCIAL ANALYSIS FOR MANAGERS
Debt position analysis:
The only ratio that has been considered for carrying out the debt position analysis of Jet2
includes debt ratio. The value of this ratio is depicted in the form of a table as follows:
Particulars Details 2013 2014 2015
Total liabilities A 560.9 671.3 843.8
Total assets B 747.5 852.9 1001
Debt ratio A/B 0.75 0.79 0.84
According to the above table, it could be stated that the debt ratio of the airline has
increased from 0.75 in 2013 to 0.79 in 2014 and it has increased marginally to 0.84 in 2015. This
clearly inherits that the airline has relied heavily on debt financing for acquiring funds from the
market (Erdogan 2014). However, greater reliance on debt might increase the burden of
liabilities on Jet2, which might reduce its working capital as well as compulsion to clear the
long-term obligations by disposal of fixed assets. Thus, in terms of debt position, it could be
inferred that Ryanair is not in a favourable position in the UK aviation industry.
Activity ratio analysis:
The only ratio that has been considered for carrying out the activity ratio analysis of Jet2
includes total asset turnover ratio. The value of this ratio is depicted in the form of a table as
follows:
Particulars Details 2013 2014 2015
Sales revenue A 869.2 1120.2 1253.2

13FINANCIAL ANALYSIS FOR MANAGERS
Total assets B 747.5 852.9 1001
Total asset turnover ratio A/B 1.16 1.31 1.25
According to the above table, it could be observed that the total asset turnover ratio of the
airline has been 1.16 in 2013, which has slightly increased to 1.31 in 2014; however, it has fallen
considerably to 1.25 in 2015. This is because the sales revenue of the organisation has not
increased in tandem with the increase in total assets. Hence, in terms of activity ratio analysis,
Jet2 is struggling to maintain its competitive position in the market.
Gearing analysis:
The three ratios that have been considered for carrying out the gearing analysis of Jet2
include debt-to-equity ratio, times interest earned ratio and equity ratio. The values of these
ratios are depicted in the form of a table as follows:
Particulars Details 2013 2014 2015
Total debt A 560.9 671.3 843.8
Total equity B 186.6 181.6 157.2
Operating profit C 37.9 49.2 33.6
Interest expense D 1 1.4 1.1
Total assets E 747.5 852.9 1001
Debt-to-equity ratio A/B 3.01 3.70 5.37
Times interest
earned ratio C/D 37.90 35.14 30.55
Equity ratio B/E 0.25 0.21 0.16

14FINANCIAL ANALYSIS FOR MANAGERS
Based on the above table, it could be observed that the debt-to-equity ratio of the
organisation has increased from 3.01 in 2013 to 3.70 in 2014 and the increase is massive to 5.37
in 2015. This is because of the increase in short-term deferred revenue and long-term derivative
financial instruments. On the other hand, the rising burden of overall liabilities has resulted in
loss of trust for the investors and hence, the airline has focused on raising additional funds
through debt. On the other hand, the times interest earned ratio has fallen from 37.90 times in
2013 to 35.14 times in 2014 and the fall is inherent further to 30.55 in 2015. The standard times
interest earned ratio in the UK aviation industry is considered as 2 (Erdogan, Erdogan and
Ömürbek 2015). Although the trend is declining, it is well above the ideal standard, which
denotes the efficiency of the airline in clearing its interest expense with the operating income.
In the words of Finkle et al. (2016), equity ratio is a solvency ratio or investment
leverage, which gauges the amount of assets funded on the part of owner’s investments by
contrasting the overall equity in the organisation to the overall assets. In case of Jet2, the equity
ratio has decreased from 0.25 in 2013 to 0.21 in 2014 and the trend is inherent further to 0.16 in
2015. A higher ratio is always favourable for an organisation, since the overall risks are
minimised and the organisation could be adjudged sustainable. In this case, the trend is
declining, which denotes that higher debt level has increased the overall risks of Jet2. This has
resulted in fall in trust of the investors and hence, it has not been successful in raising funds
through debt.
Henceforth, from the gearing analysis, Jet2 has been struggling to maintain competitive
position in the UK aviation industry.

15FINANCIAL ANALYSIS FOR MANAGERS

16FINANCIAL ANALYSIS FOR MANAGERS
Analysis of Ryanair:
The following section would depict the financial performance and position of Jet2 based
on its annual reports of 2013, 2014 and 2015.
Profitability analysis:
The four ratios that have been considered for carrying out the profitability analysis of
Ryanair include operating margin, net margin, return on equity and return on total assets. The
values of these ratios are depicted in the form of a table as follows:
Particulars Details 2013 2014 2015
Sales revenue A 100.00 100.00 100.00
Operating profit B 14.70 13.10 18.50
Net profit C 11.70 10.40 15.40
Opening shareholders'
equity D 3,306.70 3,273.00 3,286.00
Closing shareholders'
equity E 3,273.00 3,286.00 4,035.00
Average shareholders'
equity
F=(D+E)/
2 3,289.85 3,279.50 3,660.50
Total assets G

17FINANCIAL ANALYSIS FOR MANAGERS
8,943.00 8,812.00 12,185.00
Operating margin B/A 14.70% 13.10% 18.50%
Net margin C/A 11.70% 10.40% 15.40%
Return on equity C/F 0.36% 0.32% 0.42%
Return on total assets C/G 0.13% 0.12% 0.13%
According to the above table, it could be stated that the operating margin of the airline
has decreased from 14.70% in 2013 to 13.10% in 2014; however, it has increased considerably to
18.50% in 2015. The fall in net operating expenses due to less purchase of jet fuel and oil has
been the primary reason behind the rise in operating margin (Fitó, Moya and Orgaz 2013). In
case of net margin, the ratio has fallen from 11.70% in 2013 to 10.40% in 2014; however, it has
increased further to 15.40% in 2015. This is due to the fall in overall operating expenses of
Ryanair coupled with fall in finance costs.
On the other hand, the return on equity for Jet2 has decreased from 0.36% in 2013 to
0.32% in 2014; however, it has increased to 0.42% in 2015. This denotes that the airline has
experienced a slight increase for money generated from the investments of the shareholders due
to the rise in net income (Francis, Hasan and Wu 2015). The trend is constant in case of return on
total assets in 2015, since the net income of the airline has remained almost identical in contrast
to the increase in total assets.
Thus, in terms of profitability analysis, Jet2 is in an average position in the UK aviation
industry, since the profit margin has shown a rising trend.
Liquidity analysis:

18FINANCIAL ANALYSIS FOR MANAGERS
The two ratios that have been considered for carrying out the liquidity analysis of Ryanair
include current ratio and quick ratio. The values of these ratios are depicted in the form of a table
as follows:
Particulars Details 2013 2014 2015
Current assets A
3,764.0
0
3,444.0
0
5,742.0
0
Inventories B
3.0
0
2.0
0
2.0
0
Current liabilities C
1,912.0
0
2,274.0
0
3,346.0
0
Current ratio A/C 1.97 1.51 1.72
Quick ratio
(A-
B)/C
1.9
7
1.5
1
1.7
2
According to the above table, it could be stated that the current ratio of the airline has
decreased from 1.97 in 2013 to 1.51 in 2014 and it has increased marginally to 1.72 in 2015. This
is because of the significant fall in the current liability base, particularly the fall in derivative
financial instruments. As commented by Hill et al. (2013), the ideal current ratio in the UK
aviation industry is considered as 2. In this case, the ratio is close to the industrial standard,
which depicts the favourable position of the airline in relation to clearing its short-term
obligations and dues.

19FINANCIAL ANALYSIS FOR MANAGERS
On the other hand, it could be observed that the quick ratio of the airline has decreased
from 1.97 in 2013 to 1.51 in 2014 and it has increased marginally to 1.72 in 2015. In this context,
Ibrahim, Arif and Paino (2017) cited that the ideal quick ratio in the UK aviation industry is
considered as 1. In this case, the ratio is well above the industrial standard, which depicts the
favourable position of the airline in relation to clearing its short-term obligations and dues.
Hence, Ryanair has a stable liquidity position in the aviation industry of UK, since the
short-term obligations are more compared to the short-term asset base available.
Debt position analysis:
The only ratio that has been considered for carrying out the debt position analysis of
Ryanair includes current ratio and quick ratio. The value of this ratio is depicted in the form of a
table as follows:
Particulars Details 2013 2014 2015
Total liabilities A
5,670.0
0
5,526.0
0
8,150.0
0
Total assets B
8,943.0
0
8,812.0
0
12,185.0
0
Debt ratio A/B 0.63 0.63 0.67
According to the above table, it could be stated that the debt ratio of the airline has
remained same at 0.63 in 2013 and 2014 and it has increased to 0.67 in 2015. This clearly
inherits that the airline has relied heavily on debt financing for acquiring funds from the market
(Erdogan 2014). However, greater reliance on debt might increase the burden of liabilities on

20FINANCIAL ANALYSIS FOR MANAGERS
Ryanair, which might reduce its working capital as well as compulsion to clear the long-term
obligations by disposal of fixed assets. Thus, in terms of debt position, it could be inferred that
Ryanair is not in a favourable position in the UK aviation industry.
Activity ratio analysis:
The only ratio that has been considered for carrying out the activity ratio analysis of
Ryanair includes total asset turnover ratio. The value of this ratio is depicted in the form of a
table as follows:
Particulars Details 2013 2014 2015
Sales revenue A
100.0
0
100.0
0
100.0
0
Total assets B
8,943.0
0
8,812.0
0
12,185.0
0
Total asset turnover ratio A/B 0.0112 0.0113 0.0082
According to the above table, it could be observed that the total asset turnover ratio of the
airline has been 0.0112 in 2013, which has slightly increased to 0.0113 in 2014; however, it has
fallen considerably to 0.0082 in 2015. This is because the sales revenue of the organisation has
remained constant with the rise or fall in total assets. Hence, in terms of activity ratio analysis,
Ryanair is struggling to maintain its competitive position in the market.
Gearing analysis:

21FINANCIAL ANALYSIS FOR MANAGERS
The three ratios that have been considered for carrying out the gearing analysis of
Ryanair include debt-to-equity ratio, times interest earned ratio and equity ratio. The values of
these ratios are depicted in the form of a table as follows:
Particulars Details 2013 2014 2015
Total debt A
5,670.0
0
5,526.0
0
8,150.0
0
Total equity B
3,273.0
0
3,286.0
0
4,035.0
0
Operating profit C
14.7
0
13.1
0
18.5
0
Interest expense D
1.5
0
1.3
0
1.0
0
Total assets E
8,943.0
0
8,812.0
0
12,185.0
0
Debt-to-equity ratio A/B 1.73 1.68 2.02
Times interest
earned ratio C/D 9.80 10.08 18.50
Equity ratio B/E 0.37 0.37 0.33
Based on the above table, it could be observed that the debt-to-equity ratio of the
organisation has increased from 1.73 in 2013 to 1.68 in 2014 and the increase is massive to 2.02
in 2015. This is because of the increase in short-term deferred revenue and long-term debt. On
the other hand, the rising burden of overall liabilities has resulted in loss of trust for the investors

22FINANCIAL ANALYSIS FOR MANAGERS
and hence, the airline has focused on raising additional funds through debt. On the other hand,
the times interest earned ratio has increased from 9.80 times in 2013 to 10.08 times in 2014 and
the increase is inherent further to 18.50 in 2015. The standard times interest earned ratio in the
UK aviation industry is considered as 2 (Jiraporn et al. 2014). As the ratio is well above the ideal
standard, it denotes the efficiency of the airline in clearing its interest expense with the operating
income.
In the words of Le et al. (2015), equity ratio is a solvency ratio or investment leverage,
which gauges the amount of assets funded on the part of owner’s investments by contrasting the
overall equity in the organisation to the overall assets. In case of Ryanair, the equity ratio has
remained identical at 0.37 in 2013 and 2014 and the trend is inherent further to 0.33 in 2015. A
higher ratio is always favourable for an organisation, since the overall risks are minimised and
the organisation could be adjudged sustainable. In this case, the trend is declining, which denotes
that higher debt level has increased the overall risks of Ryanair. This has resulted in fall in trust
of the investors and hence, it has not been successful in raising funds through debt.
Henceforth, from the gearing analysis, Ryanair has been struggling to maintain
competitive position in the UK aviation industry.

23FINANCIAL ANALYSIS FOR MANAGERS
Comparison between Jet2 and Ryanair:
Comparison in terms of profitability:
2013 2014 2015 2013 2014 2015
Jet2 Ryanair
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Profitability analysis comparison
Operating margin
Net margin
Return on equity
Return on total assets
From the above figure, it could be found that the operating margin of Jet2 has increased
from 4.36% in 2013 to 4.39% in 2014; however, it has declined considerably to 2.68% in 2015.
On the other hand, the operating margin of Ryanair has decreased from 14.70% in 2013 to
13.10% in 2014; however, it has increased considerably to 18.50% in 2015. For net margin, the
ratio for Jet2 has fallen from 3.59% in 2013 to 3.20% in 2014 and the decline is inherent further
to 2.62% in 2015. This is due to the negative values in relation to revaluations of derivative
hedges and foreign currency balances coupled with fall in finance income. In case of Ryanair,
the ratio has fallen from 11.70% in 2013 to 10.40% in 2014; however, it has increased to 15.40%
in 2015. The trend is just the opposite in case of return on equity and return on total assets for the
two airlines. Hence, by comparing the profitability position, it could be inferred that Ryanair is
leading in terms of profit, while in terms of generating and providing returns, Jet2 is in a better
position compared to the former.

24FINANCIAL ANALYSIS FOR MANAGERS
Comparison in terms of liquidity:
2013 2014 2015 2013 2014 2015
Jet2 Ryanair
0.00
0.50
1.00
1.50
2.00
2.50
Liquidity analysis comparison
Current ratio
Quick ratio
According to the above figure, it could be stated that the current ratio of Jet2 has
decreased from 0.93 in 2013 to 0.88 in 2014 and it has declined marginally to 0.87 in 2015. This
is because of the significant increase in the current liability base, particularly the increase in
derivative financial instruments. On the other hand, it could be observed that the quick ratio of
the airline has decreased from 0.93 in 2013 to 0.88 in 2014 and it has declined marginally to 0.87
in 2015. In case of Ryanair, the current ratio of the airline has decreased from 1.97 in 2013 to
1.51 in 2014 and it has increased marginally to 1.72 in 2015. This is because of the significant
fall in the current liability base, particularly the fall in derivative financial instruments. On the
other hand, it could be observed that the quick ratio of the airline has decreased from 1.97 in
2013 to 1.51 in 2014 and it has increased marginally to 1.72 in 2015. Hence, it could be inferred
that Ryanair is enjoying a stable liquidity position in the UK aviation industry compared to Jet2.
Comparison in terms of debt position:

25FINANCIAL ANALYSIS FOR MANAGERS
2013 2014 2015 2013 2014 2015
Jet2 Ryanair
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
Debt position comparison
According to the above figure, it could be stated that the debt ratio of Jet2 has increased
from 0.75 in 2013 to 0.79 in 2014 and it has increased marginally to 0.84 in 2015. This clearly
inherits that the airline has relied heavily on debt financing for acquiring funds from the market.
On the other hand, the debt ratio of Ryanair has remained same at 0.63 in 2013 and 2014 and it
has increased to 0.67 in 2015. However, greater reliance on debt might increase the burden of
liabilities on Ryanair, which might reduce its working capital as well as compulsion to clear the
long-term obligations by disposal of fixed assets. Since the debt burden of Jet2 is greater in
contrast to Ryanair, it could be inferred that the former is more risky to become bankrupt in
future.
Comparison in terms of activity ratio analysis:

26FINANCIAL ANALYSIS FOR MANAGERS
2013 2014 2015 2013 2014 2015
Jet2 Ryanair
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
Activity analysis comparison
According to the above figure, it could be observed that the total asset turnover ratio of
Jet2 has been 1.16 in 2013, which has slightly increased to 1.31 in 2014; however, it has fallen
considerably to 1.25 in 2015. On the contrary, it could be observed that the total asset turnover
ratio of Ryanair has been 0.0112 in 2013, which has slightly increased to 0.0113 in 2014;
however, it has fallen considerably to 0.0082 in 2015. Although both the airlines are struggling
to maintain a competitive position in the market, Jet2 is in a better position compared to Ryanair.
Comparison in terms of gearing analysis:

27FINANCIAL ANALYSIS FOR MANAGERS
2013 2014 2015 2013 2014 2015
Jet2 Ryanair
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
Gearing analysis comparison
Debt-to-equity
Times interest earned
Equity ratio
Based on the figure, it could be observed that the debt-to-equity ratio of Jet2 has
increased from 3.01 in 2013 to 3.70 in 2014 and the increase is massive to 5.37 in 2015. The
times interest earned ratio has fallen from 37.90 times in 2013 to 35.14 times in 2014 and the fall
is inherent further to 30.55 in 2015. The equity ratio has decreased from 0.25 in 2013 to 0.21 in
2014 and the trend is inherent further to 0.16 in 2015. On the other hand, the debt-to-equity ratio
of Ryanair has increased from 1.73 in 2013 to 1.68 in 2014 and the increase is massive to 2.02 in
2015. The times interest earned ratio has increased from 9.80 times in 2013 to 10.08 times in
2014 and the increase is inherent further to 18.50 in 2015. The equity ratio has remained
identical at 0.37 in 2013 and 2014 and the trend is inherent further to 0.33 in 2015. Thus, it could
be inferred that both the airlines are struggling to maintain their solvency positions; however, if
compared, Ryanair is in a favourable position in contrast to Jet2.

28FINANCIAL ANALYSIS FOR MANAGERS
Conclusion and recommendations:
To conclude, it could be observed that both the airlines being parts of the Euro zone, have
suffered as well as benefitted. Both the airlines depend on tax benefits for gains and in order to
restrict them from going into debt, they need to declare bankruptcy. The following are the points
that would enable each airline to raise profit levels along with recovering losses.
Recommendations to Jet2:
Rise in revenue due to more benefits compared to financial means
Reduction in operating costs
Revision of investments, since the current investments fail to fetch any profit
Involving in partnerships with other global alliances for diversifying the network; thus,
making incomes on new routes
Retaining the assets of higher values to maintain favourable liquidity position
Recommendations to Ryanair:
Continuing to increase profit levels
Revision of investments
Increase in revenue
Minimisation of operational costs
Rise in utilisation of assets with more assets for improving the liquidity position further
Expansion of the business into new nations for targeting new customers

29FINANCIAL ANALYSIS FOR MANAGERS
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33FINANCIAL ANALYSIS FOR MANAGERS
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34FINANCIAL ANALYSIS FOR MANAGERS
Appendices:
Appendix 1: Income statement of Jet2 for the years 2013-2015
Particulars
2013
(£m)
2014
(£m)
2015
(£m)
Turnover 869.20 1,120.20 1,253.20
Net operating expenses (831.30)
(1,071.00
)
(1,219.60
)
Operating income 37.90 49.20 33.60
Share of loss in joint ventures - - (0.40)
Finance income 3.60 1.40 1.70
Finance costs (1.00) (1.40) (1.10)
Revaluation of derivative hedges - (3.30) 1.60
Revaluation of foreign currency
balances - (3.80) 4.80
Net financing income/costs

35FINANCIAL ANALYSIS FOR MANAGERS
2.60 (7.10) 7.00
Profit before taxation 40.50 42.10 40.20
Taxation (9.30) (6.20) (7.40)
Profit for the year 31.20 35.90 32.80
Earnings per share:
Basic 0.2173 0.2468 0.2242
Diluted 0.2144 0.2428 0.2220

36FINANCIAL ANALYSIS FOR MANAGERS
Appendix 2: Balance sheet statement of Jet2 for the years 2013-2015
Particulars
2012
(£m)
2013
(£m)
2014
(£m)
2015
(£m)
Non-current assets:
Goodwill 6.80 6.80 6.80 6.80
Property, plant and equipment 234.90 269.10 291.60 295.30
Derivative financial
instruments 3.60 1.00 0.40 1.50
Total non-current assets 245.30 276.90 298.80 303.60
Current assets:
Inventories 1.40 1.30 3.10 2.00
Trade and other receivables 117.40 226.20 285.90 365.60
Derivative financial
instruments 25.80 22.20 1.40 27.00
Money market deposits 77.00 30.00 52.50 65.50
Cash and cash equivalents

37FINANCIAL ANALYSIS FOR MANAGERS
75.00 190.90 211.20 237.30
Total current assets 296.60 470.60 554.10 697.40
Total assets 541.90 747.50 852.90 1,001.00
Current liabilities:
Trade and other payables 61.20 92.00 107.00 85.30
Deferred revenue 256.80 407.10 484.50 579.60
Borrowings 0.80 0.80 0.80 0.80
Interest in joint ventures - - - 0.40
Provisions 1.70 2.10 2.40 28.70
Derivative financial
instruments 7.80 4.20 35.00 103.80
Total current liabilities 328.30 506.20 629.70 798.60
Non-current liabilities:
Other non-current liabilities 11.90 11.40 10.30 0.50

38FINANCIAL ANALYSIS FOR MANAGERS
Deferred revenue - - 0.40 0.70
Borrowings 8.50 7.7 9.00 8.20
Derivative financial
instruments 1.40 0.30 2.20 25.10
Deferred tax liabilities 32.90 35.30 19.70 10.70
Total non-current liabilities 54.70 54.70 41.60 45.20
Total liabilities 383.00 560.90 671.30 843.80
Net assets 158.90 186.60 181.60 157.20
Shareholders' equity:
Share capital 1.80 1.80 1.80 1.80
Share premium 9.80 10.70 11.40 11.90
Cash flow hedging reserve 15.10 12.40 (26.80) (80.40)
Retained earnings 132.20 161.70 195.20 223.90

39FINANCIAL ANALYSIS FOR MANAGERS
Total shareholders' equity 158.90 186.60 181.60 157.20

40FINANCIAL ANALYSIS FOR MANAGERS
Appendix 3: Income statement of Ryanair for the years 2013-2015
Particulars
2013
(£m)
2014
(£m)
2015
(£m)
Revenues:
Scheduled revenues 78.20 75.20 75.40
Ancillary revenues 21.80 24.80 24.60
Total revenues 100.00 100.00 100.00
Operating expenses:
Fuel and oil 38.60 40.00 35.20
Airport and handling charges 12.50 12.20 12.60
Route charges 10.00 10.40 9.70
Staff costs 8.90 9.20 8.90
Depreciation 6.70 7.00 6.70
Marketing, distribution and other

41FINANCIAL ANALYSIS FOR MANAGERS
4.10 3.80 4.10
Maintenance, materials and
repairs 2.50 2.30 2.40
Aircraft rentals 2.00 2.00 1.90
Total operating expenses 85.30 86.90 81.50
Operating income 14.70 13.10 18.50
Net interest expense (1.50) (1.30) (1.00)
Other income 0.10 - (0.10)
Profit before taxation 13.30 11.80 17.40
Taxation (1.60) (1.40) (2.00)
Profit after taxation 11.70 10.40 15.40

42FINANCIAL ANALYSIS FOR MANAGERS
Appendix 4: Balance sheet statement of Ryanair for the years 2013-2015
Particulars
2012
(£m)
2013
(£m)
2014
(£m) 2015 (£m)
Assets
Current assets
Cash
Cash and cash equivalents 1,093.30 1,241.00 1,730.00 1,185.00
Short-term investments 1,615.00 2,293.00 1,498.00 3,605.00
Total cash 2,708.30 3,534.00 3,228.00 4,789.00
Restricted cash 35.10 25.00 13.00 7.00
Receivables 51.50 56.00 59.00 61.00
Inventories 2.80 3.00 2.00 2.00
Prepaid expenses
Other current assets 1,078.30 146.00 141.00 883.00
Total current assets