Analysis of Ryanair's Management Accounting and Financial Strategies

This report provides a comprehensive analysis of Ryanair's management accounting practices and financial performance. It begins with an introduction to management accounting and its significance within Ryanair, focusing on the vital role of various accounting systems in the airline's operations. The report explores different management accounting reporting methods and evaluates the benefits of implementing these systems, followed by a critical evaluation of the accounting systems and reporting strategies employed. Task 2 delves into the calculation of net profit using various costing methods, evaluating accounting tools and interpreting financial data. The report further examines planning tools for budgetary control, including their benefits and disadvantages, and evaluates their application. Task 4 compares Ryanair with EasyJet in terms of financial issues, offering a critical evaluation of the financial problems faced by Ryanair. The conclusion summarizes the key findings and insights from the analysis.

Management Accounting

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1:Vital significance of various accounting system use in Ryanair management .....................3
P2: Different method of management accounting reporting.......................................................5
M1: Benefits of using management accounting system..............................................................6
D1: Critical evaluation of Accounting systems and reporting....................................................7
TASK 2............................................................................................................................................7
P3: Calculation of net profit by using various costing methods.................................................7
M2: Evaluation of accounting tools............................................................................................8
D2: Interpretation of financial data.............................................................................................9
TASK 3............................................................................................................................................9
P4: Benefits and disadvantage of planning tools which would be useful in budgetary control .9
M3: Evaluation of using various planning tools.......................................................................10
D3; Critical evaluation of planning tools..................................................................................10
TASK 4..........................................................................................................................................11
P5: Comparison of Ryanair with Easy Jet in accordance with financial issues........................11
M4: Critical evaluation of financial problems..........................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Management accounting is an effective system that assists management to manage and
operate various operations that are being done during an accounting year. By this help, managers
would easily make understanding of various systems and reports those are helpful in taking vital
decision. The primary objective of this project report is to present and demonstrate various types
of accounting systems and reports those are useful for Ryanair company. With this, they can
attain their long and short term aims and objectives (Abrahamsson, Englund and Gerdin, 2011).
This project provide crucial information about various systems and costing methods those
are helpful in analysing overall net profit of the company. Further, this report guide as about
various planning tools that are associated with budgetary control. Examination of financial issues
and their effective measure are discuss under this project.
TASK 1
P1:Vital significance of various accounting system use in Ryanair management
As mentioned in the case study about Ryanair airlines services which is operating two
most beautiful nation such as UK and Ireland. It is originated in 1985 by Ryan family. The
primary objective of this airline company is to provide better and safe services to the passengers
in order to attain sustainability in their business operations. In current time, Ryanair company is
related with delivery entire services conventional airlines which has two different class of setting
facilities. At present they are associated with leasing of three types of attractive aircraft's. It has
been found that because of application of various approaches there is positive growth in total
number of passengers quantity but after sometimes, they need face losses in their business
operations in 1990. such kind of issues where faced by company in turbulence of their operations
and firing of five best chief executives officers. After that management has decided to appoint
new team member those are having the ability to overcome there losses. The objective of new
management team is to accomplish their set target by using better management systems and by
following appropriate rule and regulation (Becker, Ulrich and Staffel, 2011).
Management accounting is an effective concept through which the valuable information
and financial transaction of an organisation can be manage by using appropriate system. The role
of managers is to collect all necessary information which is would crucial for the company
performance and their overall growth. The day-to-day operations of Ryanair airline can be
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manage and recorded in daily basis this will leads to overcome their future losses. The various
reports and accounting systems which could be followed is consists of cash, sales income,
account payable and other outstanding liabilities. Various management accounting which will
increase or boost the decision-making of managers are needed to be utilised in more effective
and efficient manner. There are various types of accounting system that can be helpful to an
organisation. There essential requirement is to manage all three areas of organization such as
strategic, performance risk operation and operational department. Michael O' Leary is held
responsible for new administration department and to make use of best accounting systems that
would delivery more effective results to an organisation. Some of them are discuss underneath:
Price optimisation system: It is one of the most effective accounting system which
would assists in analysing overall perception of various customers. The basis elements of
measurement is related with the price which would be charges by the airline company from the
passengers. By the help of this system, Michael O' Leary can easily identify customer reaction
about their responses regarding setting of price for their various services. It also determine that
prices which is more suitable for the company in order to attain their goal as well as increase
operating profitability during the time (Abdel-Kader, 2011).
Cost accounting system: According to this system which is also determine as product
and services costing system. It is used by the management of Ryanair airline to estimate about
total cost and expenses they are going to incur during delivery their services. In order to do so
they need to analyse their normal , standard and actual cost which would be more reliable in near
future.
Inventory management system: It is taken in accounts as one of more significant
software which can easily track stock levels, orders , sales quantities and their delivery time. By
the systems manager can manage and control their extra flow of stock those are happen to be the
major cause of losses. This software provide major solution to various challenges which would
be faced by the team while effective operation of stocks.
Job costing system: As per this accounting system, management of Ryanair airline can
easily allot cost to each individual services which are going to be delivery during the initial phase
of operations. It is more effective in case of more than one services is being provided which is
relatively different from one another.
Importance of using management accounting system:
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There are various crucial significance of using management accounting systems which
would be more profitable for Ryanair company. Such as:
 Reduction and control of various costs: By implementing various accounting system it
would assist in reducing plenty of expense in different manner that would be increase the
profit for the company (Suomala and Lyly-Yrjänäinen, 2012).
 Aircraft's assets costs: The management of organisation need to adopt latest strategies
regarding control of various cost which would be generated on purchasing of new assets
for the making of an individual aircraft's.
 Customer services costs: These types of cost are mainly helpful to provide effective and
appropriate services to there passengers. The contract must be provided to the third party
contractors which would helps in betterment of their present services.
P2: Different method of management accounting reporting
In every business organization whether working as manufacturing or services industry
they need to follow best reporting standards that would protect their operations to go into losses.
Reporting is said to be a detail record of various financial transaction which would be done by
the company in an accounting year. It is mostly useful for the managements to make valuable
decision regarding increase their productivity and to take competitive advantages over other
competitors. It is said to be the primary aim of managers is to maintain regular record of
companies transaction in more effective manner in order to determine actual financial position of
the business. These needed to be followed by using appropriate policies and rule of accounting
so that changes of mistakes can be control or remove (Mistry, Sharma and Low, 2014).
There are various types of methods which is would be helpful for the purpose of
reporting of various types of accounts. Such kind of reports are required to be prepared by
Ryanair company. It consists of budget, account receivable, job cost report and stock
management. These reports can provide maximum opportunities to gain more reliable outcomes
to the company an on that basis future decisions can be taken. These reports are more crucial for
Ryanair because external stakeholder and investors would required to analyse the performance of
he company before making any vital decision about their capital investments. Henceforth, it
would be vital essential for generating more effective results to an organisation by delivery them
appropriate financial data which would associated to make control of business operation of an
organization. By this managers can easily be able to monitor the performance of the company or
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any kind of movement that are affecting profitability of Ryanair. They need to make reports on
quarterly, monthly as well as yearly basis. Some of them are mentioned underneath:
Operational budget report: As per this reporting system which is prepared after making
full analysis of their overall expenses those are being done by the company during an accounting
year. Formulating budget report would guide employees to perform their task in appropriate
manner so that desire target can be attain in more quick time. It would restrict the employees
those are associated in business operations in order utilise their resources in more effective ways.
Account receivable report: For these kind of reports managers are held responsible for
preparing such kind of reports in order to manage and record of credit amount details. This is
mainly associated with all those payment which are remain unpaid or credit outstanding are
needed to be identify easily. It would protect company from any kind of condition mainly in
financial crises hence, it is necessary to prepare such kind of reports.
Job cost report: By this report, managers can provide total amount of expense which
would be incur during the time of implementation of particular project in near future time.
Henceforth, it is vital to prepare these accounting reports. It is responsibility of managers to
determine crucial areas where they can gain maximum profits so that they can allocate overall
capital during the time of execution of projects (Sisaye and Birnberg, 2012).
Performance reports: Such kind of reports are more effective because they are
responsible for attaining more actual results during the time. The main purpose of determining
the actual performance of the company by the help of making corrective action. These are based
on past and current year performance. Henceforth, this report would assists company in attaining
desire aims within allocated time duration.
Inventory management reports: As per this report which would assists Ryanair
company to retaining loyal passengers throughout the year. This reports indicate the sufficiency
of spare aspects which is useful during any critical emergency arises in air plan. This would help
customers to make use of their services without facing any kind of deviations. Moreover, it is
vital for the managers in order to prepare such kind of reports by which they can easily be able to
manager their stock related with aircraft's equipments.
M1: Benefits of using management accounting system
According or the mentioned case of Ryanair company, by using above discuss systems
they can easily be able to manager and control their daily financial conditions. It can provide
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sufficient data which are more helpful in making valuable decision. There are some useful
benefits are mentioned underneath:
Reduce costs: By the help of appropriate accounting systems managers can easy be able
to manage Ryanair airline operations. This would provide right direction to staffs in order to
delivery vital ways to make use of company's resources.
For making future decision: According to this particular reports which is made up by
the help of financial and non-capitalized data. It would assist managers to make crucial decision
regarding attainment of desire goals (Chiarini, 2012).
D1: Critical evaluation of Accounting systems and reporting
In accordance with increasing profitability of the company they need to make use of both
system and reporting in more appropriate manner so that future benefits can easily be attain.
Both of these are contributing in the betterment of Ryanair airlines in this competitive markets.
This would assists in monitoring business operations which are related with overall performance
of the company.
TASK 2
P3: Calculation of net profit by using various costing methods
Ryanair airlines are using two of the most effective costing techniques such as marginal
and absorption costs. In order to determine various costs company need to make use of costing
techniques. By the helps of this, income and expenses can easily be manage. This would create
more advantages to the company in many ways such as for future forecasting and financial
management. Cost is said to be value of money which is being paid for getting something. These
are directly of indirectly related with the production process of any products and services. There
are various types of costs which are associated with the production (Callahan, Stetz and Brooks,
2011). Some of them are discuss underneath:
Marginal costing: These are said to this be that costs which is incur with an additional
units of production. This types of costs included only variable expense an ignore fixed costs. As
this is considering only variable costs so it is said to be period cost. This is more beneficial for
effective allocation of resources that are further helpful in attaining optimum outcomes. The
major advantages of using this costing method is that maximum investors uses to consider this
costs more reliable for decision-making.
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Absorption costing: Under this methods, cost is evaluated on direct or indirect
expenses. Ryanair uses this costing method to evaluate total cost which is incurred on production
process. It is applicable to all manufacturing costs such as variable of fixed cost. Because of this,
it is said to be full costing method. It is not taken in into consideration as more reliable for
making future decision-making.
Calculation of net profit by using various costing methods
Cost of Production (6*910) 5460
closing stock (10*6) 60
variable cost 5400
Contribution 3600
less:
variable sales overheads (600*1) 100
fixed overheads 300
400
NET INCOME AS PER MARGINAL COST 3200
NET INCOME AS PER ABSORPTION
COSTING:
Sales (10*900) 9000
less:
Cost of Production 5760
Gross Profit 3240
LESS:
Fixed and variable cost:
variable non manufacturing overheads 100
NET INCOME AS PER ABSORPTION
COSTING: 3140
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M2: Evaluation of accounting tools
It has been found that by adopting an effective accounting techniques, it would assists in
attaining maximum benefits to Ryanair company. This would help in recording entry of every
transaction into financial statements. It would guide managers to forecast current situation in
order to deal with every critical situations. Some of them standard costing, historical and
marginal costing.
D2: Interpretation of financial data
According to the mentioned calculation which is being done by using both marginal and
absorption costing. It has been found that, if company is using marginal costs they are getting a
healthy profit of 3200. while with using absorption costing they used to gain a total of 3140.
TASK 3
P4: Benefits and disadvantage of planning tools which would be useful in budgetary control
Planning is an effective aspects for every business organisation. In order to generate more
accurate and reliable outcomes they need to make use of budgets that are vital for the betterment
of an organization. Budget is an estimation of total expenses and costs those are being incurred
by Ryanair during a particular period of time. It is being re-evaluated on regular basis to make
estimation of actual and budget outcomes during an accounting period of time. It is internal
techniques which is helpful in order to control overall risk which are originated in an
organisation. There are various factors which are mentioned under this product reports. Such as
quantity, cost and expenses or cash flows (Herzig and et. al., 2012). The essential aspects which
are required to have in every budget. Such as:
 Controlling of resources.
 Communication of effective plan and centre managers.
 Motivation of manager about accomplishment of estimated goals.
There are various planning tools those are helpful in budget controlling. Some of them
discuss underneath:
Forecasting tools: This tools are helpful in order to make future forecasting that is based
on past and present data or trends. The more accurately this needs to make internal and external
factors affecting operations of Ryanair company (Forecasting methods, 2018).
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Advantages: The primary aims is to collect valuable information regarding the business
operations. This method is more useful for an organisation to assess best possible results for
Ryanair company.
Disadvantage: It is not possible to make more reliable and accurate estimation for future.
Scenario tools: This tools is providing more effective methods to generate best possible
outcomes that are based on plausible situations. It strategies planning techniques that are more
crucial for making flexible long term plans.
Advantage: It would provide more effective results become this plans are made prior any
occurrence. It would protect
Disadvantage: It is not possible to make accurate forecast for the future. This is done
because of qualitative nature.
Contingency tools: It is known as effective plan which devised for a reliable outcomes than in
an usual plan. It is more often used for analysing risk management when an unconditional risk
affect the performance of an organisation (Kotas, 2014).
Advantages: It is more used for the purpose of comparing non-contingency budgets
techniques. It does not have plan for potential unknowns.
Disadvantage: It to difficult for making early plan for controlling risk. This is more
reliable and effective.
Particulars January February March Quarter
Cash sale (40%) 140000 146000 152000 438000
Credit sales from last
month (80%)
172800 168000 175200 516000
Credit sale from two
month ago (20%)
35400 43200 42000 120600
Total cash collected 348200 357200 369200 1074600
Add: GST @ 10% 34820 35720 36920 107460
Total amount 383020 392920 406120 1182060
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M3: Evaluation of using various planning tools
In order to deal with various critical situation, there are various planning tools which are
more helpful for the company in order to attain future aims and objectives. Some of the
forecasting tools which are helpful for future forecasting and controlling all those risk those are
directly affect the performance of Ryanair.
D3; Critical evaluation of planning tools
With the use of appropriate planning tools an organisation need to attain maximum
growth for the company. There are various financial issues those are affecting performance of an
organisation which can affect the performance of Ryanair operations. To remove all those
financial problems they need to make use of various techniques such as Key financial indicators
and financial governance.
TASK 4
P5: Comparison of Ryanair with Easy Jet in accordance with financial issues
There are various aspects which are helpful in order to determine current performance of
an organisation. For this purpose, two of the same airline company Ryanair and Easy jet are
working in order to analyse performance of the company. There are various financial issues such
as:
 Profit level; This can be arises because of not having appropriate finance to manage their
business operations. If they are not able to sell products in effective manner they cannot
be able to earn maximum gains (Schaltegger and Burritt, 2017).
 Productivity level: It is mostly associated with the growth and overall of financial
stability of the company. In the absence of finance they are not able to organise valuable
resources to generate maximum productivity.
To deal with such kind of issues they need to use various types of financial techniques.
Some of them are discuss underneath:
 KPI(Key performances indicators): This an effective techniques which is helpful to
manage and operate current financial position with past one.
 Financial governance: This can be associated with government rule and regulation that
are being set for the purpose of smooth of business operations.
Comparison
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Ryanair Easy Jet
They are facing certain issues related with
wide number of expenses. For this purpose,
they are decided to adopt KPI to deal with
them (Renz and Herman, 2016).
This company is delivery their operation in
large number of nation. This can be done by
effective control of their operations.
M4: Critical evaluation of financial problems
In accordance with this, various financial issues those are related with various aspects
such as cost accounting and stock management. These can be done by using various techniques
such as KPI, benchmarking and financial governance.
CONCLUSION
From the above project reports, it has been concluded that management accounting is key
aspects for the company. This can be done to manage and control various operations of the
department. For this purpose, various accounting and reporting system that can assists in
delivering best outcomes for Ryanair company. Various costing methods is being used to gain
net profitability of the company. All those financial issues which are related with the airlines is
need to be resolve by using various financial techniques. These are mentioned under this project
reports.
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REFERENCES
Books and Journals:
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Becker, W., Ulrich, P. and Staffel, M., 2011. Management accounting and controlling in German
SMEs–do company size and family influence matter?. International Journal of
Entrepreneurial Venturing. 3(3). pp.281-300.
Callahan, K. R., Stetz, G.S. and Brooks, L.M., 2011. Project Management Accounting, with
Website: Budgeting, Tracking, and Reporting Costs and Profitability (Vol. 565). John
Wiley & Sons.
Chiarini, A., 2012. Lean production: mistakes and limitations of accounting systems inside the
SME sector. Journal of Manufacturing Technology Management. 23(5). pp.681-700.
Herzig, C and et. al., 2012. Environmental management accounting: case studies of South-East
Asian companies. Routledge.
Kotas, R., 2014. Management accounting for hotels and restaurants. Routledge.
Mistry, V., Sharma, U. and Low, M., 2014. Management accountants' perception of their role in
accounting for sustainable development: An exploratory study. Pacific Accounting
Review. 26(1/2). pp.112-133.
Renz, D. O. and Herman, R. D. Eds., 2016. The Jossey-Bass handbook of nonprofit leadership
and management. John Wiley & Sons.
Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts
and practice. Routledge.
Sisaye, S. and Birnberg, J. G. Eds., 2012. An organizational learning approach to process
innovations: the extent and scope of diffusion and adoption in management accounting
systems. Emerald Group Publishing Limited.
Suomala, P. and Lyly-Yrjänäinen, J., 2012. Management accounting research in practice:
Lessons learned from an interventionist approach. Routledge.
Online
Forecasting methods. 2018.[Online]. Available through:
<http://www.oecd.org/eco/outlook/forecastingmethodsandanalyticaltools.htm>.
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