Financial Performance Analysis of Aviation Companies: A Report

This report provides a detailed financial analysis of three aviation companies: EASYJET PLC, FLYBE GROUP PLC, and RYANAIR HOLDING COMPANY. The analysis, conducted for an Accounting for Managers assignment, focuses on key financial ratios such as current ratio, shareholder liquidity ratio, solvency ratios (asset and liability), gearing ratio, net asset turnover ratio, interest coverage ratio, collection period, profit margin, and EBIT margin. The report also considers non-financial ratios like profit per employee and average cost of employee. The student evaluates the companies' financial performance based on these ratios, concluding that Ryanair demonstrates the strongest financial position and offers the most favorable investment potential. The report includes calculations, interpretations, and comparisons of the companies' financial health, providing a comprehensive overview of their operational and financial strategies.

Running head: Accounting For Managers
Accounting for Managers
Name of the Student
Name of the University
Author Note

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Accounting for Managers
Table of Contents
Question No 1............................................................................................................................2
1A)..........................................................................................................................................2
1B)..........................................................................................................................................7
1C)..........................................................................................................................................8
Question No 2............................................................................................................................8
A)............................................................................................................................................8
B)............................................................................................................................................9
Reference and Bibliography.....................................................................................................10

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Introduction
The company analysis is been done so that the shareholder can know the performance
of the business. The report shows the analysis of aviation industry by taking three companies
from the industry. Aviation industry is the industry in which aircraft industry takes place and
the company are EASYJET PLC, FLYBE GROUP PLC and RYANAIR HOLDING
COMPANY.
Question No 1
1A)
Financial ratio is been concern it represent the financial performance of the business
as it represent different aspects of the company financial information so that the user of the
financial statement can know the performance of business in the market (Abor 2017). It show
the liquidity aspect of the company as how much liquidity the company is having in payment
of the short term liability, that guide the user in regards of the liquidity position of company.
It also show about the profitability aspects of the company as it show different level of profit
which the company is earning so this help the user to know about how much the company is
able to earn from the business (Almamy, Aston and Ngwa 2016). It also shows about other
aspects of the company so that the user can get all the details which are required by the user
to know the performance of the company. The below discussion show about the different
financial ratio of 3 aviation company and also say which company is better in respect of
performance (Al-Mutairi, Naser and Saeid 2018). The company which are been taken are
EASYJET PLC, FLYBE GROUP PLC and RYANAIR HOLDING COMPANY.
Current ratio – It show the company liquidity in regards of the payment of short term liability
with respect to the current asset (Corporate.easyjet.com 2019). Current ratio state that
the Ryan Air is having good current ratio in regards of other company as Ryan is having 1.56

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as current ratio whereas Flybe is having 0.96 and EasyJet is having 1.04 so this signify that
the Ryan is able to have more amount of ratio in compare of other two which clear that
RyanAir is having good position in regards of finance so this will help the user to take
decision more properly and they should select RyanAir as it is having better current ratio in
contrast to other company.
Shareholder Liquidity Ratio – It show about the ratio as how much the company asset are
been funded with the help of the equity share (Flybe.com 2019). If the ratio is lower than
it signifies about the debt usage of the company as it signify that the company is using high
debt in the business. This help the individual to have the knowledge of debt in the company
and how solvent the company is in regards of the usage of debt. So as per the ratio is been
concern EasyJet is able to have more good performance in regards of other companies as it is
having 2.21 so this show the company is having a better ratio as it is able to have finance in
regards of the equity share as other companies are having low ratio as Flybe is having 0.47
which is a very low ratio and also Ryan Air is having 0.97 so this show that the company is
not having ideal ratio which should be there in regards of shareholders equity ratio.

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Accounting for Managers
Solvency Ratio (Asset) – It show how much the business is having their fixed asset with
regards of total debt of the company. So this ratio helps the user to know how much the
company is financially strong or not. As per the solvency ratio of the companies is been
consider Flybe is having better solvency ratio as it is having 19.04 ratio whereas EasyJet is
having and RyanAir is having 36.89 so this signify that EasyJet is having far better ratio
which signify that it will able to give proper amount of return to the user so it can be consider
as a strength to the company while taking the investment decision (Investor.ryanair.com
2019).
Solvency Ratio (Liability) – This ratio show the debt to equity ratio of the company as how
debt is been financed by the equity of the company as per the company is been concern Flybe
is having the most appropriate ratio in compare to other company as it is having ratio of 23.52
where as EasyJet is having 88.42 and RyanAir is having 58.45 so after seeing all the three
company ratio it can be said it is good for the investors to invest in Flybe as it is having
proper ratio that will help them to give desired return to investors.
Gearing Ratio – It show the company Long term liability with capital employed as it help the
user to know leverage of the company as if the company is having high ratio than it is high
leverage fund and as a result it can also go in bankruptcy so the more low ratio the more good
for the company. As per the companies is been concern EasyJet is having better percentage in
the ratio as it is having 53.50% which is still can be consider good in compare to other
company as Flybe is giving 228.66% and RyanAir is having 113.29% so it can be said that as
per the investor viewpoint the best option for investment is EasyJet as it is having the less
percentage in regards of other companies (Corporate.easyjet.com 2019).

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2017 2016 2015
53.5 48.44 39.97
228.66
106.62
125.79
113.29 130.73 128.97
Gearing Margin
EasyJet Flybe RyanAir
Net Asset Turnover Ratio - It help the user to know how much the business is generating
sales by the usage of thier asset as it take into consideration of the sale and asset of the
business (Flybe.com 2019). As per the given company Flybe is having 1.86 so this show it
is having proper ratio as the more high ratio the more favourable for business as this show
that the company is fulfilling the utilization of their asset for generating revenue in the
company as other company is been concern it can be see EasyJet 1.17 and RyanAir is having
0.74 so it is better to invest in Flybe as it is having most appropriate ratio in all the three
companies which signify that the company is able to meet the needs of the investors in
regards of return from the compnay.

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Accounting for Managers
2017 2016 2015
1.17 1.19
1.53
1.86
2.08
2.28
0.740000000000
001 0.83 0.640000000000
001
Net Asset Turnover
EasyJet Flybe RyanAir
Interest Coverage Ratio – This ratio denotes about how the company is able to manage the
finance cost by the profit which they are earning in the business so if the ratio is good that
indicate the company is easily able to give proper amount of return from the profit
(Investor.ryanair.com 2019). As per the company is been consider RyanAir is having
good amount of ratio as it is having 22.83 whereas EasyJet is having 14.07 and Flybe is
having -10.78 so this show that only RyanAir is having proper ratio so investors should invest
on the same as it able to pay more amount of interest to the company.
2017 2016 2015
14.07
39.46
62.55
-10.78
1.73
9.33
22.83 20.54
14.06
Interest Coverage Ratio
EasyJet Flybe RyanAir

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Collection Period – This ratio show how the company is able to collect the amount of cash
from the customers so less the collection period the more it will able to have more working
capital rotation in the company. As per the company is been concern RyanAir is having
lowest of the collection period as it is having 3 whereas Flybe is having 25 and EasyJet is
having 6 so this show that only RyanAir is having lowest times so the investors should invest
the same as it will able to convert cash more easily in regards of other company.
Profit Margin- This show how much the company is able to earn by carrying the business
operation in the market. It show the basic amount of profit which the company has earn by
the sale of the services and product of the company. As per the given companies it can be
seen that RyanAir is having more profit in compare to other company as RyanAir is having
22.12% whereas EasyJet is having 7.63 and Flybe -6.68 so this show RyanAir is having
better amount of gross profit which denotes it able to get the customer in the market and able
to convert them into sales so the investors should invest in RyanAir.
2017 2016 2015
7.63
10.86
14.62
-6.68
0.42
-5.22
22.12
26.35
17.38
Profit Margin
EasyJet Flybe RyanAir
EBIT Margin – This show how much the company is able to earn after deducting the
operating expenses from the profit. So as per the company is been consider it can be seen
RyanAir is having good percentage as it is having 23.08% whereas EasyJet is having 8.08

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and Flybe is having -7.42 so this show that RyanAir is only having proper amount of profit
and able to give proper amount of return to the investors.
Non financial Ratio are the ratio which does not take into consideration of the financial part
of the company where as it take into consideration the non-financial part of business. The
non-financial ratio of business is been given below:
Profit per Employees – This show how much the company is able to earn in respect of each
employees of the company. As per the given company it can be seen RyanAir is having good
amount of return of profit in regards of the employee as it is having 97 so this signify that per
each employee it able to earn good amount where as Flybe is having -23 and EasyJet is
having 33 so this denote business is having good ratio so investor should invest in RyanAir as
it able to earn a good amount of profit in regards of the employee of the company.
Average Cost of Employee – This ratio signify the business is paying how much to each
employee by taking the average of the same. So this ratio should be less than only the
company will have good position in the market. As per the company is been consider
RyanAir is having the lowest of the cost as it is having 42 whereas Flybe is having 56 and
EasyJet is having 62 so this show that only RyanAir is only having proper cost and able to
save the cost which will increase the profit of business.
Ranking Table
Name of the
Company
Profit Aspects Performance
EasyJet Good amount of profit as the profit percentage is 7.63% Good
Flybe Bad as it is only having loss in the business as the loss margin is
6.68%
Bad
RyanAir Great amount of profit is earning by the company as the gross Best

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profit is 22.12%
1B)
As per the above discussion it can be seen that RyanAir is the best company where the
user can able to get more amount of return from the company. As it is having good financial
position which can be seen from the financial statement as well from the financial and non-
financial ratio of the company. As per the other company is been consider they are not able to
have high amount of profit margin which RyanAir is having as it is having good margin in
profit as well as EBIT Margin so this show that it is able to earn proper amount of return
from the business so this show it can earn good revenue and to meet the requirement of the
customers.
So the company is able to have proper amount of revenue so it will be good to invest
in the same as it is having good margin of profit which show that it able to carry the business
easily and effectively in the market which will able to give the required return to the investors
who are investing in the company business.
1C)
The above discussion it can be said that Flybe is having poor performance in compare
to other company. As per the financial statement of the company it is clear that the business is
not able to have proper financial ratio so this denote the business is not properly financed as it
does not have sufficient resources from which it can able to have good current ratio. It can
also be seen that the business is not able to earn profit in the company as it having loss
margin which denote that there is less amount of revenue in the business. So the investors
should not able to invest in the same.

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As per the Recommendation is been consider company should evaluate their service
and should able to the changes as per the customer demand and preference so that it able to
generate more sales in the business. It should do different marketing of the product so that it
able to create market value in the company that will help them to get more return from the
customers. It should change its pricing strategies so that it will able to have more number of
customers in the company. It should include many additional services as by providing more
additional services to the client it help them to gain additional revenue in the business
Question No 2
A)
Memorandum
To: Employer
From: Employee
Date: 19-06-2019
Subject: Investment Appraisal
The key stages in Capital Investment Decision Making Process are:
1. Opportunity – Primarily it should check the different opportunity which is there in
the market. As it should analysis all the plan which are there so that it can able to have
more amount of return from the investment. It should check different intermediaries
so that it can able to have proper amount of return from the project.
2. Capital Investment – Secondly it should check the capital investment required in the
project as if the project is been evaluate than it will able to know how the company is
able to invest as it should able to see the amount of investment which is been required
by the company in the project

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3. Cash Inflow of the Project – Company should check the inflow of the cash as when
it able to get return of the cash in the company. As if it is not able to satisfy from the
return than it will not able to take the investment so it should take into consideration
the cash inflow of the company.
4. Different Appraisal Method – It should analysis the project by different method so
that it will able to know how much the company is able to earn from the project and
also how much return it will able to get form the same.
B)
The main method of Investment Appraisal is:
1. NPV – The difference of the present of cash inflow and cash out flow, so this show
how much the company is been earning form the project. The positive NPV denote
that the project is able to give positive return but if the project is having negative NPV
than it is not a good position to invest so if there is an negative NPV than the
company should not invest in the project (Shivaani, Jain and Yadav 2017).
2. IRR - It is the method in which the estimate return is been calculated of the project as
this help the user to know how much the rate of return the company is able to earn
from the capital which is been invested in the company. This rate help the company to
discount the inflow at different time so that the company will able to know the actual
value of the inflow and it will help the company to know the inflow and help them to
judge the project more effectively (Regehr and Sengupta 2016).
3. Non-Payback Period – This show in how many years the company is able to get the
return from the investment. It help the user to know how early the company is able to
recover the initial capital investment which is been done by the company. This
technique help to know actual timing of return which the company will able to get the
return of the project, this help the company to know how early the company will able