EasyJet's Financial Performance: An Analysis of Risk & Developments

This report provides an analysis of EasyJet's financial performance, focusing on recent developments in the international financial market and their impact on the company's operations. It examines elements of EasyJet's international financial and risk management strategy, including risk appetite, culture, governance, sources of finance, dividend policy, and business objectives. The report also includes an analysis of EasyJet's financial performance through ratio calculations such as return on capital employed, earnings per share, current ratio, asset turnover ratio, and profitability ratio. The analysis considers the impact of factors like foreign exchange markets, derivative markets, and Brexit on EasyJet's financial health and future development. This report provides insights into the financial strategies and performance indicators relevant to EasyJet, offering a comprehensive overview of its financial standing.

FINANCE
Table of Contents
INTRODUCTION...........................................................................................................................2
MAIN BODY...................................................................................................................................3

Recent developments in the international financial market which is impacting Easy jet
performance and development.....................................................................................................3
Elements of MNE international financial and risk management strategy...................................4
Analysis of financial performance...............................................................................................6
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10
INTRODUCTION
Finance is the wide concept. It can be said that every company revolve around this
concept. Good financial position of the company is helpful in increasing their reputation in the
market. Financial position of the company can be find out by reviewing their financial statements
which are income statements, profit and loss account, balance sheet etc. investors and financial
institutions are interested in financial statements of company because before investing investors
will see that company is making profit or loss (Akan and Tevfik, 2020). In loss making company
no investor will invest. Easy jet is the airline company. Company is famous for its cheap tickets
as compare to its rival company easy jet is providing tickets in less price. This report will discuss
latest developments in global financial environment which influence perform of company.

Further will discuss risk management strategy and accounting ratios so that financial
performance of company can be analysed.
MAIN BODY
Recent developments in the international financial market which is impacting Easy jet
performance and development.
International financial environment:
It denotes the condition which is their in the economy and financial market worldwide.
There are many factors which can influence them like government corporations, credit
worthiness and investors who are present in different countries and purchasing other nations debt
by giving them profit opportunities. Effective international financial environment is said to be
one where economic growth and investment is happening. Growing economy will show high
infrastructure development and also more jobs are available.
Two recent development are:
Foreign exchange markets:
This market which is also called as currencies market is the over the counter market
which decides the currencies Exchange rate in the worldwide. Investors in these market can sell,
exchange, buy or speculate on the exchange rates of different currencies (Meech and Bayliss,
2021). Foreign exchange market includes companies, banks, investment management firms,
retail forex dealers and other investors etc. if the exchange rate Of currency is high in those
countries in which easy jet is operating then company can chance to make more profits. It is
considered as one of the largest financial market globally so more investors will trade in this
market and that will definitely increases the performance of company in the future (Akan and
Tevfik, 2020). As here the trading of currency is done in pairs. So in the pair currency value of
one will relate to currency value of other. As per the bank of international settlements the trading
which is done in the foreign exchange markets is calculated at $ 6.6 trillion per day on April
2019. it is also helpful in increasing the liquidity in the various financial markets. This will
contribute in the stability of Easy jet. Stability will also help the company to receive growth in
the future. It is observed that US dollar is observed as appreciating when compared with different
currencies so the US investors often liquidate their positions in the global equity market and

taking all money back to the country. Easy jet airline is affected by covid 19. Due to covid 19
company has face major loss because of lockdown no one has travelled. At covid crisis company
is even not able to survive at break even point.
Derivative market:
Derivative can be called as the financial asset whose value is derived from underlying asset.
Derivative can called as the contract which is done between two or more parties. Prices of
derivative are not fix and it changes with the changing in underlying asset. Underlying assets are
market indexes, currencies, stocks, commodities etc. derivative are said to as leveraged
instruments which enhances risks and rewards for the company (Edjossan-Sossou and et.al.,
2020). It contributes in increasing financial market efficiency. If the financial market is efficient
then it will definitely contribute in improving Easy jet performance and development. As it will
become easy for company to take loans from financial institution at low interest rate. When
company gets funds than that will definitely help them in doing future growth. Easy jet can
invest in various stocks or can purchase equipments can can help company in bringing
innovation in the market.
Derivative also helps company in getting access to those assets which is not available. Through
interest rate swaps, organization can get favourable interest rate as compare to those interest rate
which are easily available through direct borrowing. As value of derivative is connected with
underlying asset value then through these contracts risks can be hedged. Derivatives which is the
financial instrument is the recent financial instrument. It can help Easy jet to bring development
in the company. It is observed that this instrument has growth in future also. So this will
definitely contribute in the growth of company as well. Brexit has also affected Easy jet because
from EU cheap worker company is getting but after Brexit, on free movement of workers
government has put restrictions.
Elements of MNE international financial and risk management strategy
Risk appetite:
Risk appetite is the rate of risk which an organisation can take to get more returns. Risk appetite
statement consists of business plans, strategy and capital risk (Outlook, I.R.E., 2017). It also
shows risk management of the company which is impacted by style and culture of the company.
While designing risk appetite it is important that Easy jet should consider risk capacity,
behaviour towards risk, risk profile etc. taking risk is very important because it will only help

company to improve their performance. Risk appetite is made by the management of the
company. Company went through various kinds of risks like financial risk which involves market
liquidity, credit risk etc and non financial risks also which involves reputation risk, cyber risk,
fraud, compliance risk etc. These risks are completely dependent on the operating environment
and financial disclosures of the company. Easy jet has made precise risk appetite statement so
that it can help company in their decision making.
Culture, governance and taxonomy:
the risk statement should be communicated by the company to its stakeholders. Easy jet should
have make strong risk culture. Company should have provide training to their workforce should
have develop effective risk culture. Risk is the part of organisational function. So if company
have to improve their performance by taking risk then should have build such culture in which
everyone get ready to take risk. Risk should not be considered as fear but it is the opportunities.
Sources of finance:
there are various sources from which company can take in order to grow or in order to meet their
needs. Easy jet should have been very carefully choose its source of fianance. They can go for
long term loans if they are planning for expansion (Korableva, Gorelov and Shulha, 2017). But
company should choose such financial institution which can provide loan to them at low interest
rate. Easy jet can also issue equity shares although it increase onwres for the company but if
company is facing loss then their is no need to pay divident to equity shareholders. In this covid
crisis where airline industry is facing losses and it also include Easy jet. If company will take
loans from bank than they have to pay loan installments but there is no need to pay equity
shareholders in the situation of loss.
Divident policy:
dividemnt policy is made by the company in which they decide the structure of giving payment
to their shareholders (Zopounidis, Doumpos and Niklis, 2018). Divident policy can be
considered as company's strategy part because it is cannot separte from company. Although
divident cannot be considered as regular income because company will pay divident to their
equity shareholder only at the time when they occur profit. So it can be said that divident is not
stable income but still investors puchase shares because if more risk is invpolved in this then it
also gives more return to the investors when company will incur profits.
Business objectives and strategy:

risk management is connected with business strategy. So it is important for the organisation to
look for its objectives and goals. Strategic objectives of the company may involve investors
return, market share, market value target, earning stability etc. While making strategy Easy jet
should take care of risk factors. Such strategy should be make which heklps company to handle
risk. Good business strategy will help company in enhancing its financial performance.
Risk data and delivery:
data plays very important role in the organisation (Benamraoui and Aljandali, 2020). So it should
be collected, evaluated and distributed properly. Risk data and delivery are robust to the
company so information which is collected and evaluated can be converted into cohesive reports.
Ratio calculations

Analysis of financial performance
Teacher performance plays vital role in the overall development of any company. By analysing
the financial performance company can know how much effort you have to put more so that in
future they can generate high profitability and revenue by providing accurate services to their
customers (Walmsley and et.al 2018). Easy Jet always tries to provide better quality services to
their customers so that they can generate high revenue. This company is continuously focusing
on their stakeholders such as their customers employees and suppliers so that when company
provides high-quality services then that even you can get increased. There are certain ratios
which states about the profitability and revenue of this company.
Return on capital employed
Easy Jet always focuses on improvising the efficiency of producing more customer solutions so
that they can generate maximum return. Return on capital employed ratio measures the operating
profit after tax and divided it by the average capital employed ratio provides detailed information
about the capital used by the company to generate revenue. Return on capital employed ratio has
been decreased to 11.4% in the year 2018. Earlier this ratio was 14.6% for this company. But this
company believes that customer satisfaction is one of the primary feature and this company
knows that customer text patients is continuously increasing and therefore they want to provide
wide variety of choices to their customers.
Earnings per share ratio
Earnings per share ratio of the company are being calculated by dividing companies profit to
outstanding share. Earnings per share ratio states that how much money is being owned by the
company from each of their shares. Earnings per share ratio 118.3 in the year 2018 but it has
been decreased in the year 2019 and becomes 88.7. Which shows that the overall performance of
the company is getting decreased?
Current ratio

Current ratio states that our company is using their current assets so that they can easily repair
the short-term applications and loans. The overall current ratio of this company in 2019 is 1.12 %
in the year 2018 it was 1% so current ratio has been increased it means company is able to repay
their long and liabilities by using their assets accurately.
Asset turnover ratio
Asset turnover ratio used to measure the value of overall sales of the company which is related to
the assets. In short asset turnover ratio of states that how frequently company is able to generate
return by converting their assets into revenue (Choi and et.al 2018). The Asset turnover ratio was
0.37 in the year 2019 and in the year 2018 it was0.22 asset turnover ratio is showing positive site
for the company because it is increasing it means company is able to generate revenue from their
assets. The Asset turnover ratio will be used as an indicator so that the overall efficiency of the
company can be analysed. Asset turnover ratio is high then it shows the high efficiency of the
company to generate revenue.
Profitability ratio
Profitability ratio is a part of financial ratio which used to assess the overall ability of business to
generate earnings and revenues. This ratio also uses operating cost and assets along with your
holder equity to provide accurate result. The main objective of using profitability ratios to
analyse that how efficiently a company can generate profit? The year 2019 company was making
loss as their profitability is was showing negative return that is -27.39 % in the year 2018 that
written Boss 30% of the overall profit of the company is decreasing. It shows that company need
to make certain changes in their strategies.
Net profit margin
Net profit margin ratio also shows the attributable profit in the form of percentage of the entire
turnover for the last recorded of it and this ratio is being calculated by the dividing attributable
profit to turnover which is further multiplied by hundred (Zolfani and et.al 2018). But this ratio is
also not working in the favour of the company is also saying that this company is facing loss.
The net profit margin ratio was -35.6 % in the year 2019 earlier it was – 32%. So this ratio
clearly states that companies not able to generate profit it can be happened due to the pandemic
as this company has to stop their working for 3 to 4 months and therefore their profitability ratio
is continuously decreasing.
Fixed asset turnover

Fixed asset turnover issue states that how company is using their fixed asset to generate revenue.
Fixed asset turnover ratio is being calculated by dividing turnover to average fixed asset. Fixed
asset turnover ratio of this company is 0.5 in the year 2019 it was 0.2 so please ratio is showing
positive sign for the company that company is accurately using their fixed assets to generate
profit. But other ratios are showing negative sign so I need to focus on purchasing more
resources and assets so that they can utilise them and provide High Quality Services to their
customers so that the overall revenue can be generated.
Net gearing ratio
Net gearing ratio States about the total that and cash equivalent in the form of percentage by
considering shareholders equity. This ratio is calculated by dividing net liabilities and assets from
the equity so that the overall net gearing of the company can be find out. Net gearing ratio of this
company was 50.4 1% in the 2019 but it was 52% which shows that this ratio is also falling
down. So by checking the overall net bearing ratio it can be stated that this company needs to
work hard on their Strategies and policies so that in future they can overcome all the losses
which they are currently facing.
After analysing the entire ratios of this company it can be stated that this company is facing loss
because some of the ratios are showing negative impact. This can be possible due to the
pandemic because of log downs and other reasons this company has to shut their business for
many times and therefore their overall revenue has been impacted.
Financial statement of 2020
Particulars 2020 2019 2018
Sales 3,009 6385 5898
Sales growth -52.87%3 8.26% 16.86%
COGS 3276 5335 4674
Depreciation 485 484 199
COGS growth -38.59% 14.14% 13.12
Gross income (267) 1050 1224
SGA growth -12.89% -14.22% 29.82
EBIT (778) 466 584
Income tax (194) 81 87

Total 584 385 497
CONCLUSION
Through this report it can be concluded that derivatives market and foreign exchange are
the latest development of global finance market. They are growing financial assets so by using
this company can increase its profits. Report has also analysed factors of risk management
strategy. So company should have make their strategy carefully so they can even grow in risky
situation. Through risk management strategy company can improve their financial performance.
This report has also calculated various ratios which include efficiency, profitability,investment
and liquidity so to check financial performance of the company. It is found that company has
incur huge loss last year because of covid 19 due to lock-down sales of company drastically went
down. So that is why company has faced net loss at the end of financial year.

REFERENCES
Book and Journal
Akan, M. and Tevfik, A.T., 2020. Fundamentals of finance. In Fundamentals of Finance. De
Gruyter.
Benamraoui, A. and Aljandali, A., 2020. FinTech Innovations: A Review of the Recent
Developments and Prospects. Bancaria. 12. pp.85-95.
Choi, K.B., Lee, J.J., Kim, G.H., Lim, H.J. and Kwon, S.G., 2018. Amplification ratio analysis of
a bridge-type mechanical amplification mechanism based on a fully compliant
model. Mechanism and Machine Theory.121. pp.355-372.
Edjossan-Sossou, A.M. and et.al., 2020. Sustainable risk management strategy selection using a
fuzzy multi-criteria decision approach. International Journal of Disaster Risk
Reduction. 45. p.101474.
Korableva, O.N., Gorelov, N.A. and Shulha, M.V., 2017, September. Risk component of
innovation management strategy. In European Conference on Innovation and
Entrepreneurship (pp. 837-843). Academic Conferences International Limited.
Meech, D. and Bayliss, T., 2021. International developments in sustainability reporting.
Outlook, I.R.E., A. 2017 Background and Recent Developments Macroeconomic stability has
improved, but a fragile environment continues to discourage.
Walmsley, T.G., Walmsley, M.R., Varbanov, P.S. and Klemeš, J.J., 2018. Energy Ratio analysis
and accounting for renewable and non-renewable electricity generation: A
review. Renewable and Sustainable Energy Reviews. 98.pp.328-345.
Zolfani, S.H., Yazdani, M. and Zavadskas, E.K., 2018. An extended stepwise weight assessment
ratio analysis (SWARA) method for improving criteria prioritization process. Soft
Computing. 22(22).pp.7399-7405.
Zopounidis, C., Doumpos, M. and Niklis, D., 2018. Financial decision support: an overview of
developments and recent trends. EURO Journal on Decision Processes. 6(1). pp.63-76.

13