Financial Analysis

Emirates Airlines Is one of the large airlines of the world. It is also considered most luxurious airlines. It serves almost 2400 flights per week. All these figures clearly depict its glory. (Emirates Airline, 2010). Financial analysis of a firm tells about the current situation or position of the organization. In financial analysis different Ratios are calculated to find out the organizations progress and its financial credibility.

Liquidity Ratio

These ratios determine the capability of a firm to meet its short term obligations.

Current ratio

Ability to meet short term liabilities with short term assets. Amounts are in AED bn

=Current Assets/Current Liabilities

2014= 27354/32428= 0.84

2015= 27735/34481= 0.80

Current assets of the Emirates increased marginally over the last year. There is increase in the current liablilities due to the expansion projects started by the Emirates. Current ratio decreased as compared to the previous year.

Quick ratio

It eliminates those assets that may be difficult to convert into cash like inventory etc.

=Cash +Short term Securities+ Account receivables)/Current liabilities

2014= 16562/32428 =0.51

2015= 17227/34481 =0.50

Emirates Quick ratio is stronger in 2015.

Cash Ratio

It measures the capability of a firms cash along with other investment that can be easily converted into cash in order to pay its sort term liabilities.

= (Cash+ Short term)/Current liabilities

2014= 16561/32428 =0.51

2015= 16885/34481 =0.49

Profitability ratio

Measures that how well a firm is performing in terms of its ability to generate profit.

Gross margin

Operating margin

=Operating income or loss/Sales

2014 => 78376/80717=0.97

2015 => 86728/82926=1.05

Operating Margin in 2015 is more than the 2014 this is supporting the fact that Emiratess profit has been increased or supporting the fact of Emirates profitability.

Net margin

=Net Income or loss/Sales

2014 => 3417/80717=0.04

2015 => 4728/86728=0.05

Net profit margin is considered as accurate to calculate the companys profitability margin because it does not include the expenses. The companys Net profit margin increased from .04 to .05 it means that company is moving towards profits the operations of company are generating profits for the Emirates.

ROAStands for Return on Assets and calculated as follows

= (Net income+ after tax interest expense)/ Average total Assets

2014 => (3417+1179)/101604= 0.05

2015 => (4728+1449)/111362= 0.06

Return on assets shows any organizations total return over their assets which tells that how good organization is utilizing its assets. Companys increased from 0.05 to 0.06. But is not so significant as the change is smaller.

ROEStands for Return on Equity and calculated as

Net income/Average Share holders

2014=> 3417/25471=0.134

2015=> 4728/28286=0.167

Increase in the ROE shows that the Emirates has created more worth for its share holders.

Turnover ratio

Receivable turnover

Is calculated as

=Total Sales/Average receivables

2014=> 80717/9086=8.88

2015=> 82926/8589=9.65

Turnover ratio has increased from 8.88 to 9.65 shows that total sales have increased over the credit sales significantly. It means Emirates cash has increased and it in result increased the Cash Ratio of Emirates.

Collection periodIs calculated as

=365/Receivable Turnover ratio

2014=> 365/8.88=41.10

2015=> 365/9.65=37.82

It shows in how many days the cash for Emirates had been collected and this collection period had been reduced from 41 days to 37 days approximately.