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Financial Analysis for Ryanair and Easyjet

   

Added on  2019-12-17

17 Pages3238 Words316 Views
FINANCIAL REPORTING

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3Profitability analysis of Ryan air and Easy jet.............................................................................3Investor performance indicator for Ryanair and Easyjet.............................................................8Comparison and contrast of profitability between two companies...........................................12Compare and contrast investor performnace ratio of Ryanair and Easyjet...............................14CONCLUSION..............................................................................................................................16Recommendation...........................................................................................................................16REFERNECES..............................................................................................................................17Figure 1Gross profit ratio of Ryanair..............................................................................................4Figure 2 Net profit ratio of Ryanair.................................................................................................4Figure 3Operating ratio of Ryanair..................................................................................................5Figure 4Gross profit ratio of Easyjet...............................................................................................6Figure 5 Net profit ratio of Easyjet..................................................................................................7Figure 6 Operating profit ratio of Easyjet........................................................................................7Figure 7Debt equity ratio of Ryanair...............................................................................................9Figure 8 EPS of Ryanair..................................................................................................................9Figure 9 Price earnings ratio of Ryanair........................................................................................10Figure 10Debt equity ratio of Easyjet............................................................................................11Figure 11Price earnings ratio of Easyjet........................................................................................12Figure 12Comparison of Ryanair and Easyjet...............................................................................12Figure 13 Comparison of net profit of Ryanair and Easyjet..........................................................13Figure 14Comparison chart of debt equity ratio for both firms.....................................................14Figure 15Comparison chart on EPS..............................................................................................14Figure 16Comparison chart on PE ratio of firms...........................................................................15Table 1Profitability of Ryanair........................................................................................................4Table 2 Profitability analysis of Easyjet..........................................................................................6Table 3Investor performance indicator for Ryanair........................................................................9

Table 4Investor performance indicator of Easy jet........................................................................11INTRODUCTIONInvestment is made by the business firms in order to earn extra income in the business and tomake effective use of idle cash that is available in the business. It is very difficult task todetermine the avenues where investment must be made. It can be said that it is very tough task tochoose specific firms in which corpus must be spend to purchase shares. In the report, twoairlines are selected which are Ryanair and Easyjet. Both these firms are low cost carriers in theUK and entire Europe. In order to select best firm out of both ratios are computed which arerelated to profitability and investment. Results of these ratios are interpreted and on this basisspecific firm is selected for making investment.Profitability analysis of Ryan air and Easy jetTable 1Profitability of Ryanair2012201320142015Gross profit1587168117682267Net sales4390488450375654Gross profit ratio0.360.340.350.40Net profit560569523867Net sales4390488450375654Net profit ratio0.130.120.100.15Operating profit6837186591043Net sales4390488450375654Operating profit ratio0.160.150.130.18InterpretationGross profit ratio: Gross profit ratio reflects the extent to which firm is controlling expensesin its business (Damodaran, 2012). It can be seen that gross profit ratio of the firm isincreasing consistently. This reflects the firm have strong control on its direct expenses. Thisratio also reflect the proportion of sales that is covered by the gross profit. Table given aboveindicated that Ryanair is earning 35% to 40% gross profit in its business. This reflects thatmentioned firm have stiff control on its direct cost.

Figure 1Gross profit ratio of RyanairIt can be said that firm give excellent performance in its business. Net profit ratio: Net profit ratio is another ratio which reflects the firm capability to controlindirect expenses (Arrow and Kruz, 2013). Indirect expenses are those expenses that are notdirectly related to the production of goods and services. It can be seen from the table givenabove that net profit ratio of Ryanair is fluctuating consistently. This reflects that firm havevery less control on its expenditures. On comparison of gross and net profit ratio of theRyanair it can be seen that there is huge difference between both. It can be said that firmhave very less control on its indirect expenses due to which it earn net profit of 13% to 15%in its business in the last four years.Figure 2 Net profit ratio of Ryanair

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