British Airways Financial Analysis :: Case Study Analysis, solution

British Airways Financial AnalysisThe chase pages comprise of a financial analysis of British Airways for the financial family ending March 31, 1999.British Airways is a well- seted caller-up and has enjoyed high shekels for the majority of its existence. However, the most recent accounts that have been published tell a different story of how the year has been.British Airways produced a pre-tax profit of 225 cardinal. This is 355 million less than in 1998 which illustrates the come down in demand for British Airways services. Although this decline in profits of 61% seems unacceptable it was caused by a mannequin of abnormal expenses. For example the company spent 35 million on computer systems to ensure that they are year 2000 compliant. British Airways in like manner entered the low cost air travel market during the year with the show of Go, which is running at a loss as it tries to establish itself in a highly competitive business concern environment.Lower sack prices a nd the strength of the Pound benefited British Airways, and as a result the company stocked up on 45% of its fuel requirement for the conterminous financial year. This also contributed to the fall in profits for the year.Operating earnings Fell from 504 million in 1998 to 442 million in 1999. The return on capital employed or primary ratio was just 17.06%. This is a great deal smaller than the 1998 figure of 61.2%. These figures both show that the business is achieving a return higher than that which could be achieved in a non-risk investment funds such as a high interest no nark bank account which would only give a return of 7 to 9%. British Airways has a working capital of 5.1, which shows that it has high solvency. Overall, although the squiffy has incurred a loss of 355 million in the financial year it is politic a healthy business that shows promise of high profits in future years.