Comparative ratios analysis 2011 Emirates Airline and Air Arabia

Comparative ratios analysis 2011 Emirates Airline and Air Arabia

Order Description
please do a comparative ratio analysis between two airline companies (Emirates airline and Air Arabia), please note the analysis should be for 2011. please include the below:

• Executive Summary
• Proper introduction
• Body of the Project
• Conclusions
• Recommendations

please follow the above guidelines, and include any excel sheet if used for calculations

Comparative ratios analysis 2011 Emirates Airline and Air Arabia

Executive summary

The main objective of this research is to compare the financial performance of the two airline companies (Emirates airline and Air Arabia) for the financial year 2011. Comparative ratios shall be drawing COMPARISON of the companies. The ratios that shall be used are liquidity ratios, leverage ratios, profitability ratios and activity ratios. The performance will be gauged on the using ratios interpretation criteria , example a company that is performing well should have current ratio that is more than one and the higher the ratio the better the performance of the company in question. After analyzing the ratios the conclusion shall be drawn based on their comparison. This research will reveal between the two companies the one that did well the information that is vital for investors, analysts or stakeholders of the companies so as to know how well the management has been running the firms.

Introduction

This research shall touch on the analysis of the Emirates airline and Air Arabia based on their annual financial performance in year 2011.  By the end of this year, Emirates airline which is a subsidiary of the emirate group was the largest airline in the Middle East in terms of passengers carried, fleet size and revenue. During this financial year the Emirate group recorded a consolidated profit of AED 5.9 billion (US $ 1.6 billion)

On the other hand air Arabia one of the low fare airline in the Middle East region. The airline offers many flight connections for the low income people its base in Sharja. In the financial year 2011 this air line recorded an annual net profit of AED 2.73 billion. 

Ratio analysis of the two companies

According to the financial reports of air Arabia (Thani. & Ali.2011 ) and that of air Arabia and emirates air line ( Clark & Chapman 2011)

Liquidity ratios

Liquidity ration: this ratio shows the firm’s ability to finance its short time liabilities. The ratios that are used are the current ratio and liquidity ratio. A current ratio of more than one shows that a company is sound in terms of servicing its short term financial needs.  Quick ratio of more than one shows that the firm can be able to meet its short term obligation using its most liquid asset (Oluwa 2007)

Quick ratio = (current asset-inventory)/current liability

Current ratio=current asset / current liability

company name Total current asset total current liability total inventory current ratio c1/c2 quick ratio (c1-c3)/c2
Emirates airline 1872512 887915 9092 2.108886549 2.09864683
 Air Arabia 21867000 20498000 1290000 1.066787004 1.003854035

Both companies can service their short term financial requirement efficiently as their ratio is more than one. This indicates that they liquidity is stable. Using both current and quick ratio Emirates airline seems to be performing better than air Arabia as it has a current ratio of 2.1 compared to 1.06 of air Arabia and a quick ratio of 2.09 compared to 1.00 of air Arabia.

Profitability Ratios

This ratios offer different success measures of the firms that operate on profit. The ratios under consideration are: gross profit margin ratio, return on asset ratio and return on equity.

Goss profit margin ratio= Gross profit margin ratio= (sales –cost of goods sold)/sales

Return on asset ratio=net income / net asset

Return on equity= net income/ shareholders equity………………

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