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Ryanair Company Financial Analysis Report

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Ryanair is an Irish airline company which was launched in 1985 by Ryan family in Dublin. It is the first low-fare airline in European nations. Also it is considered as most successful airline in terms of profit. In addition, it is also famous for number of flights and passengers flown. Moreover its business is expanded to 44 bases, more than 1200 routes, 160 airports and 27 countries.

Ryanair Holding Private limited company is leading plan airline in Europe. The aim of this report is to use economic managing formula to give a general idea of Ryanair Holding Plc. It has well financial position in direct to help another company to provide. In this report, given many information of different companies guide to improve the financial position and grooving of managing power of the organization. Also it can useful to give forecast development and future danger difficulty.

In recent time, there was a big events happened in the company. Which is effecting on company's profit and loss account that given in the report. So ratio analysis is very important to improve company's financial situation. After the ratio analysis given some recommendations can help to improve organization's strength and growth and also to make batter financial position of the company.

BACKGROUND:

Europe's biggest financial budget airline is mane of Ryanair Holding plc. It has gone a very high distance in space journey a service in the UK. It is follow to operate on the basis of Southwest Airlines system. These airlines always create travel to twice or triple on the way it comes. In this airline, 7m passengers used to fly in a year. Uses of internet which helped mover slice expenses of the sharing part.

In the starting, Decan, Cathal and Shane Ryan established Ryanair with £1m from their father, Dr. Tony Ryan, chairman & CEO of Guinness Peat Aviation, the aeroplane letting huge. Ryanair made routes between Ireland and United Kingdom at starting of flying in June 1985. Entering in Dublin-London area the after that spring, finishing with British Airways and Dan Air moreover Aer Lingus. (www.fundinguniverse.com).

In 2009 Ryan air's common cost per traveller was EUR 36 as compared as to EUR 68 for its curve rival Easyiet. From the years of 2007 to 2009 Ryanair arranged low cast to passengers by 13%. Ryanair has raised its numbers of passengers by 14% in 2010 and made more routes. This growth will continue next year's. (www.ryanair.com).

ANALYSIS:

INTRODUCTION OF RATIOS AND IMPORTANCES:

Ratios are mostly used as a part in understanding of financial statements. The selected ratios and finding data which are depend on the requirement of the data which are using. When the share price is reach on its higher level, at that situation want to do and choose the very good condition to sell shares. Due to this, the investors will control the performance of organization.

Mostly the ratios could be designed from the data given by the financial statements. It is used in evaluate trend. Also it is used to make balance of the financial condition to select of other condition. The ratio analysis may be used in some case of future bankruptcy. (www.netmba.com).

RATIOS ANALYSIS:

Firstly, in the ratios analysis classified different types which depend on given information. Most important types are given below,

Financial ratios

Profitability ratios

Financial ratios:

Current Ratio:

The current ratio is defined as the ratio of current assets to current liabilities:

Current Ratio = Current Assets / Current Liabilities

Years

2010

2009

2008

Current Assets

2,725,515

2,360,059

1,898,175

Current Liabilities

1,378,683

1,279,935

1,238,204

Current ratio

1.98

1.84

1.53

Analysis:

The relation between current assets and current liabilities is given in this ratio analysis.

Assets is only transformed interested in cash for little period and cash are included in current assets. The ratio was 1.53 in 2008 but after that 1.84 and 1.98 in 2009 and 2010 respectively. It is useful for quality as well as quantity in financial analysis.

Liquidity Ratio:

Liquidity ratios give the data about an organization's capability to gather it's the short term requirements of finance. To the organization, they are take part in interest of that extends small period acknowledgment to the organization.

It is defined as the ratio of current assets to current liabilities:

Liquidity ratio = Current Assets / Current Liabilities

Also in some case,

Liquidity Ratio = (Current Assets-Inventory) / Current Liabilities

Years

2010

2009

2008

Current Assets

2,725,515

2,360,059

1,898,175

Current Liabilities

1,378,683

1,279,935

1,238,204

Liquidity Ratio

1.98

1.84

1.53

Analysis:

It is helpful to known for relationship between current assets and current liabilities. In the comparison of last three, the ratios of the organization were 1.53, 1.84 and 1.98 in 2008, 2009 and 2010 respectively. So ratios were increased when passed the years.

Shareholders Liquidity Ratio:

It shows the relation between shareholder funds and long term debt.

It is the defined as the ratio of shareholder funds to long term liabilities:

Shareholders Liability Ratio = shareholders funds / shareholders liabilities

Years

2010

2009

2008

Shareholders' Funds

2,534,407

2,250,537

1,989,677

Long Term Liabilities

2,816,087

2,388,249

1,803,617

Shareholders Liabilities Ratio

0.90

0.94

1.10

Analysis:

In this analysis, ratios were decreased when passing the years. Those ratios were 1.10, 0.94 and 0.90 in 2008, 2009 and 2010 respectively.

Gearing :

Gearing is defined as the long term liabilities plus overdraft to shareholders funds in percentage. It shows organizations permanents assets shareholders money and fully loan of it. The higher gearing means good borrowed money to self.

It is calculated by following formula:

Gearing (%) = (Long Term Liabilities + Overdraft) Ã- 100 / Shareholders Funds

Years

2010

2009

2008

Long term liabilities + Overdraft

2,816,087+236,216

2,388,249+188,336

1,803,617+291,670

Shareholders' funds

2,534,407

2,250,537

1,989,677

Gearing

120.43

114.49

105.31

Analysis:

In the gearing ratio analysis, ratios were increase when passing the years. Those ratios were 105.31, 114.49, and 120.43 in 2008, 2009 and 2010 respectively.

Working Capital Per Employee(Unit):

It is defined as the ratio of working capital to number of employees and it is calculated by given formula in bellow,

Working capital per employee = working capital / number of employees

Years

2010

2009

2008

Working capital

95,367

82,414

74,042

Employee

7032

6369

5262

Proportion

-13,563

-12,940

- 14,071

Analysis:

In this analysis, ratios decreased between 2008 and 2009 and then increased between 2009 and 2010. Those ratios were -14.071, -12,940 and -13,563 in 2008, 2009 and 2010 respectively.

Profitability Ratios:

Profitability ratios give many different method of the achievement of the organization at make profits.

Profit Margin:

It is defined as the ratio of profit before tax to turnover in percentage. Throughout the year scope in success on sells will differ since business to business. The reasonably change of the proportion in investigate and sometime may be stable. Purpose for vary could be bargain sells worth or growing in the sales rate.

It is calculated by formula which is given bellow:

Profit Margin = (Profit before tax) Ã- 100 / Turnover

Years

2010

2009

2008

Profit before tax

303,389

-167,498

349,023

Turnover

2,658,521

2,730,241

2,157,958

Profit margin

11.41

-6.13

16.17

Analysis:

In this analysis shows company failed in loss after 2008. Those ratios were 16.17, -6.41 and 11.41 in 2008, 2009 and 2010 respectively.

Return on shareholders' funds:

It is defined as the ratio of profit before tax to shareholders' fund and it is given by following formula:

Return on shareholders' funds (%) = (Profit or Loss before Tax) Ã- 100/ Shareholders' Funds

Years

2010

2009

2008

Profit or loss before tax

303,389

167,498

349,023

Shareholders' funds

2,534,407

2,250,537

1,989,677

Return on shareholders' funds (%)

11.97

-7.44

17.54

Analysis:

In this analysis shows, company faced loss in 2009 financial year. Those ratios were 17.54, -7.44 and 11.97 in 2008, 2009 and 2010 respectively.

Return on total assets (%):

It is defined as the ratio of profit or loss before tax to total assets in percentage. Also it is calculated by following formula:

Return on total assets (%) = (profit or loss before tax) Ã- 100 / total assets

Years

2010

2009

2008

Profit or loss before tax

303,389

167,498

349,023

Total assets

6,729,178

5,928,14,147

5,031,497

Return on total assets

4.51

-2.83

6.94

Analysis:

Company faced loss in 2009 financial year in this analysis. Those ratios were 6.94, -2.83 and 4.51 in 2008, 2009 and 2010 respectively.

Interest cover:

Interest cover is the ratio of profit or loss before interest to interest paid. Calculation is given by following formula:

Interest cover = profit or loss before interest / - interest paid

Years

2010

2009

2008

Profit or loss before interest

36,536

46,349

426,225

Interest paid

64,148

121,149

77,202

Interest cover

5.73

-0.38

5.52

Analysis:

In interest cover ratio analysis shows loss in 2009. Those ratios were 5.52, -0.38 and 5.73 in 2008, 2009 and 2010 respectively.

Debtors Turnover:

Debtors' turnover is defined as the ratio of turnover to trade debtors. Its calculation is given below:

Debtors turnover = turnover / trade debtors

Years

2010

2009

2008

Turnover

2,658,521

2,7157,958

2,157,958

Trade debtors

39,414

38,783

27,177

Debtors turnover

67.45

70.40

79.40

Analysis:

In this analysis, ratios were 79.40, 70.40 and 67.45 in 2008, 2009 and 2010 respectively.

Ratios decreased when passing after the years.

Net assets turnover:

Net assets turnover is defined as the ratio of turnover to total assets less current liabilities. Also it is calculated by following formula:

Net assets turnover = turnover / total assets less current liabilities

Years

2010

2009

2008

Turnover

2,658,521

2,7157,958

2,157,958

Total assets less current liabilities

5,350,494

4,648,212

3,793,294

Net assets less current liabilities

0.50

0.59

0.57

Analysis:

In this analysis indicates ratios decreased in 2010. Those ratios were 0.57, 0.59 and 0.50 in 2008, 2009 and 2010 respectively.

Fixed assets turnover:

Fixed assets turnover is defined as the ratio of turnover to fixed assets. It is calculated by following formula:

Fixed assets turnover = turnover / fixed assets

Years

2010

2009

2008

Turnover

2,6558,521

2,730,241

2,157,958

Fixed assets

4,003,662

3,568,087

3,133,322

Fixed assets turnover

0.66

0.77

0.69

Analysis:

In this analysis shows ratios increased in 2009 and then decreased in 2010. Those ratios were 0.69, 0.77 and 0.66 in 2008, 2009 and 2010 respectively.

The impact of events:

The events of the company were flight cancellations by volcanic ashes during18 days in between April & May in 2010 and ATC (Air Traffic Controller) strike during the year of 2010.

During April & May, cancellation of 9400 flights, so cost of company was €32m and deletion of 1400 flights and more than 12000 flights late, so the loss may be € 32m

Those two events had main impact of €100m loss in six months.

Conclusions:

In conclusion, Ryanair Holding plc is low fare and biggest financial budget airline in the world. It has 160 airports, 44 bases business to expanded, more than 1200 routes and 27 countries. It is known as most successful airline in terms of profits, flights numbers and flown of passengers. During the ratio analysis, this company has good financial position in terms of profit, but in 2010 events occurred by volcanic ashes and ATC strike. Due to evens, cancellation of 9400 flights mare than 12000 flights delayed. So events had an major impact of €100m loss in that 6 months. Also those are affected on company's profit and loss account and net profit of Ryanair Holding plc.

Recommendations:

Ryanair holding plc has hard period in last year, as the organization was making loss. Now Ryanair is reverse to good position by building profit in the starting of this year. in the analysis their revenues are well financial position in last year but the events were create some effects. It is one of biggest Irish airline in the UK as well as in the world. After making some change in tickets and facilities, it can become more low fare airline and improve its financial position batter than past. It is the recommended part to be Ryanair airline so its future opportunity is bright batter than past situation.


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