However, the company intangible assets declined by 1.2% between 2010 and 2011. The company loan notes also declined by 18.2% between 2010 and 2011.
Apart from the non-current asset, other aspect within the company balance sheet is the current asset. From the Table below. The trade and other receivable declined by 17.6%. However, the company was able to increase restricted cash by 317% and money market by 15.3%. The company also increased the derivable financial instrument by 57%.
£Million
2011
2010
Changes
Percentages
Current Asset
Asset held 4 sale
73
Trade & other Receivables
(29)
(17.6%)
Derivable Financial Instrument
83
53
30
57%
Restricted Cash
90
23
73
Money Market Deposit
40
15.3%
Cash & cash equivalents
1,100
21%
The other aspect in the company balance sheet is the total liabilities that consist of current liabilities and non-current liabilities. At the end of the fiscal year 2011, the total liabilities were £2764 Million (Current liabilities £1,177 Million plus Non-current liabilities £1,587 Million). However, the company total equity was £1,705. Based on the company financial position, the total liabilities is greater that the total equity. Total liabilities £2764 Million minus Total equity £1,705 Million=£1509 Million. The data show that the company source of fund is from the total liabilities. The data also reveals that the company is aggressively using the bank loan and other borrowing to finance its business operations.
More importantly, the report uses gearing ratio to measure the total amount funds raised from the total borrowing. The gearing ratio is a financial analysis that compares borrowed fund from the total equities. The gearing ratio also measures the degree by which company business activities are funded by the creditor's funds vs. company fund. (Bull, 2008). A company with high gearing ratio is more vulnerable to economic downturn because the company must service its debt regardless of the level of sales. On the other hand, higher equity proportion shows that a company is in good financial strength. (Spencer and Stradling 2005).
Gearing Ratio=Net Borrowing/Equity x100
2011=1364 / 1,705x100 =80%
2010=1590 / 1,501x100=105%
2011
2010
Change
Non-Current Borrowing
1,587
1,437
10.4%
Current Borrowing
1,177
1,065
10.5%
Total Borrowing
2,764
2,502
20.9%
Less Cash & cash equivalents
1,100
21%
Net Borrowing
1,364
(74)
(5.4)%
Based on the findings from the calculation, the company declined its Gearing ratio between 2010 and 2011.The decline was due to the decline in the total borrowing between 2010 and 2011. Typically, easyJet declined the total borrowing from £1,590 Million at the end of the 2010 to £1,364 Million at the end of 2011 fiscal year revealing 5.4% decline in the total borrowing. Despite the decline in the total borrowing, the company gearing ratio is still high revealing 80% at the end of the 2011 fiscal year. The figure reveals that the company is still aggressively financing its business operation from borrowing.
The paper provides the Current Ratio to measure the extent the company has been able to meet its short-term business liabilities.
Formula to calculate the Current ratio is as follows:
Current Ratio= Current assets / current liabilities.
2011= 1,738/1,177=1.5
2010= / 1,065= 1,515=0.7
Based on the data provided, easyJet current ratio was 0.7 in 2010 revealing that the company faced challenges to settle its short-term obligations. However, the company current ratio improved and increased to 1.5 revealing that the company was more capable of settling its short-term obligation.
The paper also examines the company total asset to enhance the greater understanding on the extent the company has been able to manage its total asset. The total assets comprise of the non-current plus current asset. The company was able to increase its total asset by 11.6% between 2010 and 2011. The current asset and non-current assets also increased by 14.7% and 9.8% respectively.
2011
2010
Change
Non-current asset
2,731
2,488
9.8%
Current Asset
1,738
1,515
14.7%
Total Asset
4,469
11.6%
From shareholder's perspective, the report provides the return on shareholders revealing the extent the company has been able to generate returns from shareholder's fund.
Return on Shareholder's Fund: Net Profits/Shareholder Fundx100
2011=225/1,705x100=13.2%
2010=121/1,501=8.1%
Changes=5.1%
Based on the ratio calculation, the company was able to increase the shareholder's return by 5.1%. The ratio reveals that the group was able to increase the shareholder return by 5.1% between 2010 and 2011. Major factor leading to the increase in the shareholder's return was attributed to the increase in the company net profits between 2010 and 2011.
This section reviews the easyJet consolidated financial position and based on the ratios provided, the company was able to increase the net profits, total assets and total equity. The overall results reveal that the company improve sale performances between FY2010 and FY 2011.
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