The emirates airline
Part 2-Information gathering and Accounting Business Techniques:
The information gathered mainly includes the annual report of the Emirates airline. The annual report contains detailed information such as auditors report (both dnata and emirates), Chairman and Coe's report and consolidated financial statements. The annual report was downloaded through the internet through Emirates airlines website. As with all the information downloaded through internet this information is subject to a number of limitations. The information in the annual accounts of a company are detailed and well designed. It is much easier to get access to financial statements of an organization online thus providing greater ease and flexibility of use.
Ratio analysis is a vital and basic technique of financial analysis. Ratio analysis is applied to the financial data given in the annual accounts. It is a study undertaken in order to asses the financial viability and performance of an organisation over a specific period of time. Advantage of Ratio Analysis include:
- Simplification of financial statements: The most obvious advantage of ratio analysis is that it simplifies the understanding of financial statements. It highlights the whole scenario of an organization's financial condition.
- Helps in inter firm comparison
- Aids decision making: Planning and forecasting becomes easier.
- Investment decisions are made in a more informed manner.
Limitations of ratio analysis include:
- Inherent limitation of financial statements: Ratios are based on the information present in the financial statements. Financial statements are themselves subject to a number of limitations. For instance, financial statements do not contain non financial changes brought about in the organization which are quite important for the business. Financial statements are basically based on accounting concepts and conventions.
- Usefulness limited to availability of past performance: Ratios are useful in assessing the performance of an organization when they are compared with past results of an organization. However, such a comparison may not be useful in forecasting future performance of an organization as future activities may be affected by numerous factors such as market conditions, political upheaval, economic conditions etc.
- Ratios alone are not enough to judge an organization's performance. Other factors may also have to be seen.
- Changes in price levels alter the validity of ratios calculated. Therefore financial statements must be adjusted keeping in view the changes in price levels in order to make a meaningful comparison.
- Lack of a standard form of ratios which makes interpretation of ratio s quite difficult
- Inclusion of personal bias means different people interpret the same ratio and in a different manner.
- Firms differ in terms of their size, nature and accounting procedures etc. Thus making comparison of ratios difficult and misleading.
Another technique that will be used includes SWOT analysis. SWOT (Strengths, weakness, opportunities and threats) analysis is a critical assessment of the strengths and weaknesses, opportunities and threats affecting an organisation to establish its condition before the long-term plan is prepared. Strengths and weaknesses analysis is an internal appraisal and involves looking at the organization itself and its productive/service range. Opportunities and threats analysis is an external appraisal and is concerned with profit making opportunities in an organisation's business environment along with identifiable threats(). By undertaking a SWOT analysis major strengths and opportunities can be exploited especially if strengths and opportunities are matched with each other. Moreover major weaknesses and threats can be countered or a corrective plan can be developed.
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