Flybe Company Case Solution

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Profitability: According to the income statement, the profit margin ratio decreases as well with 2.5%. However, the sale revenue has a rise in this period actually and it means the company spends more money on operating expense. Therefore this increase on operating expense indicates a worse control of expense. On the positive side, the ROCE of 2014 and 2015 maintains approximately 30%, it exceeds the industry average (25%). The high ROCE can be caused by the high asset turnover. Obviously, the rate of return on capital employed is much higher than the rate at which the company borrows. While there has been a slight decrease (0.44%) from 2014 to 2015 in return on shareholder’s fund. The primary factors of leading this decrease are the declining …show more content…

It has seen a slight decrease in structure of capital from 74.87% in 2014 to 72.72% in 2015, and long-term liability equal about almost triple of equity. Total liability make up about 83% of total asset and this percent exceeds the industry norm (60%). Furthermore, if the gearing ratio continues to increase means the risk of insolvency will be higher. Financial leverage ratio has dropped from 3.66:1 in 2014 to 3.98:1 in 2015, which leads to a lower inherent risk in a change in return on equity. While a lower financial leverage ratio reduces the return on equity. According to the interest cover ratio shows, the interest payable is much less than earning that the company acquires through borrowing, the excess return goes to the benefit of equity investors. These strong ratios provide the project to Flybe plc 's creditors. As a result, the Flybe plc has the strength to take on additional debt. A risky structure of capital might be able to be regarded as an opportunity by …show more content…

Earnings per share figures for 2014 and 2015 are adjusted to exclude the effect of acquisition, restructuring and unusual charges while earning per share decreases from 60.7p in 2014 to 55.4p in 2015. There has been an increase in terms of dividend per share over the same period due to increasing dividends that the company should pay to investors. Therefore, it leads to a rise of dividend payout ratio with 11.02%. The point that investors should pay more attention is the dividend payout ratio exceeds 50% in 2015. However, the dividend yield ratio drops in the same time might by an increase of dividend tax. These ratios reflect the market 's appreciation and confidence in Flybe plc 's prior and expected performance. Investors can make a divination of stock price through these

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