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Finance and the Global Economy

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1. Introduction Belobaba (2009) explains that the Aviation Industry has played an integral role in creating a global economy with providing its service to every country in the world. However, the Events of 11 September 2001, the outbreak of the deadly virus SARS, the increased oil prices and the Recession made it difficult for the businesses in the airline Industry to stay successful (Los Angeles Times, 2011). Additionally with increasing competition in this industry, managing operating costs and developing productivity have become top priority for management (Belobaba, 2009). Effectively, it is crucial to analyse the financial prospective of the business to maintain sustainability and profit makings. 1.1 Aims and Objective The Author decided to chose Ryanair and Easyjet as representative companies of the Aviation Industry and use primarily their Annual Reports to obtain relevant financial information for each of the chosen companies for the analysis of their financial situation for a period of 5 years – from 2007 to 2011. This work contains the following financial ratios to critically examine the performance of the two companies: i. Profitability Ratios ii. Liquidity Ratios iii. Gearing Ratios iv. Investment Ratios 1.2 Easyjet and Ryanair See Appendix for both Airlines’ Profile. 2. Ratio Analysis Ratio Analysis is identified as one of the methods to analyse the performance of a certain business (Siddiqui, 2006). Analysing the profitability and efficiency of Ryanair and Easyjet is the purpose of the following section. 2.1 Profitability Ratios 2.1.1 Return on capital employed (ROCE) The Return on capital employed (ROCE) defines the amount of profit that will be gained from the shareholders’ investment (Peterson and Fa... ... middle of paper ... ...anair.com/doc/investor/2009/Annual_report_2009_web.pdf. Last accessed 1st January 2014. Ryanair. (2011). Annual Report 2010. Available: http://www.ryanair.com/doc/investor/2010/Annual_report_2010_web.pdf. Last accessed 1st January 2014. Ryanair. (2012). Annual Report 2011. Available: http://www.ryanair.com/doc/investor/2011/Annual_Report_2011_Final.pdf. Last accessed 1st January 2014. Siddiqui, A (2006). Managerial Economics And Financial Analysis. New Delhi: New Age International. p42. Weil, R. (2012). Financial Accounting: An Introduction to Concepts, Methods and Uses. 14th ed. Chicago: Cengage Learning. p215. Weil, R. (2012). Financial Accounting: An Introduction to Concepts, Methods and Uses. 14th ed. London: Cengage Learning. p84. Weygandt,J., Kimmel,P., Kieso, D. (2009). Managerial Accounting: Tools for Business Decision Making. London: John Wiley & Sons. p49.
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