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Identify and critically appraise the different components of a financial report, and assess the adequacy of current international financial reporting requirements for a greater understanding of company performance

Accounting for Managers (ACFI5020)

Assignment 2018/2019

 

As you will recall at the beginning of the course, we discussed the important role that the capital market plays in matching investors with companies.  Investors are attracted to companies that are able to generate healthy returns that are commensurate with the risks that the investment entails.  Once an investment has been made, investors and financial analysts monitor the performance of the company in many different ways – one of which is through the use of ratio analysis.

Imagine that you were a recent investor in the budget airline, EasyJet.  The below illustration shows how EasyJet shares have performed over the past 6 months

 

The fortunes of EasyJet have been somewhat contradictory over the past 6 months.  Whilst passenger numbers continue to increase, EasyJet’s share price has tumbled from almost £18 per share to nearer £11 per share.  Indeed, September was another encouraging month with over 8m passengers using the airline.  However, the share price has remained stubbornly low which raises the question, why are shareholders concerned?  Are investor concerns justified or do the key performance indicators of the company suggest otherwise?  As a financial analyst, you have been tasked to investigate further. 

Task One

Using the Annual Report and Accounts of EasyJet for the period 2013 to 2017, you are required to evaluate the performance of the company.

You are required to :

(a)    Evaluate the performance of EasyJet in the following areas, using ratio analysis:

 

-          Profitability

-          Liquidity/Solvency

-          Working capital efficiency

-          Long term financial structure

 

Task Two

Considering your response to Task One and any further reading, you are required to provide advice, accompanied by a rationale, as to whether you would recommend a buy, sell or hold (if they are already owned) policy for investors and potential investors EasyJet plc.

(10%)

Task Three  

You are required to follow the link below and to read the material concerning the Supply Chain Management processes at EasyJet.

-          Investors’ perspective

 

You may also use earlier years’ financial accounts to supplement your analysis if you wish to be specific with certain trends that you have identified (see below for specific instructions).

In addition you could also consider the performance of EasyJet in comparison with its peer group of competitors – for example, Ryanair.

You should summarise your findings and make particular reference to the interests of the different stakeholders of the company.

When undertaking any calculations use the ‘Total’ figures from the financial statements.

Required:                

You must critically discuss the philosophies and approaches of EasyJet in terms of its supply-chain management and contrast its approach with alternative theories of supply chain management.  For example, does the lean model utilised by EasyJet work for other industries?  What are the risks of applying such models and what are the downsides in the turbulent airline industry?

Appropriate credible academic and practitioner literature sources must be used to support your critical analysis and the Harvard style of referencing must be adopted.

Learning Outcomes specifically assessed:

Subject Specific Knowledge and Skills

  1. Identify and critically appraise the different components of a financial report, and assess the adequacy of current international financial reporting requirements for a greater understanding of company performance
  2. Analyse and interpret financial data and information, evaluate their relevance and validity, and synthesise a range of information in the context of business situations
  3. Demonstrate the ability to use conventional management accounting and financial management techniques to produce appropriate information for management to aid  planning, control and decision making
  4. Evaluate the usefulness of contemporary management accounting techniques in measuring business performance
  5. Critically appraise management accounting techniques with respect to their effectiveness and identify any weaknesses inherent in their use

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