The research and financial analysis of this report are based on the information provided by the Ryanair Financial Report, relevant internet and library.
The purpose of this research paper is using financial management techniques to provide an overview of Ryanair Holding Plc. After analyzing the information from different resources, this research paper will supply other companies with a guide to make many decisions required to effectively manage of their business and to develop their future financial plans for the future requires reliable and pertinent information on the financial performance and financial position of the firm although if the analysis forecasts serious financial problems.
Financial management techniques in today’s business
The main objective of financial management is maximizing shareholders’ wealth. Company needs money to acquire resources to operate. Money for investment is referred to as finance, financial management is concerned with managing a company’s finances. When company decides to use their expertise, time and money in a particular way, they have an objective in mind. The objective governs the decisions to be made. A company’s major objective is maximizing the wealth of its shareholders, but other objectives should be satisfied at the same time, like managerial objective, short-term objective, other parties’ objective, non-financial objective. The company needs machine, staff, and working capital to exist and grow in the market, which is the reason why we have to invest. First, we should have strategic management and analysis. Like current environment, capacity for change. Where are we now? Where are we going? P.E.S.T and SWOT analysis can help you analysis the company’s situations. The rule of thumb is that long-term assets should be financed by long-term funds and short-tem assets by short-term funds. Short-term finance is usually cheaper than long-term finance. This is largely due to the risks taken by creditors. There are some financial management techniques that we could apply in the chosen company Ryanair Holding PLC.
The Irish company Ryanair is the famous low-fares airline company in Europe. It started in 1985 and had IPO in 1997 when it floated Ryanair Holdings plc on Dublin and New York (NASDAQ) Stock exchanges. Company goal is to be the Europe’s largest airline in the next 8 years. Ryanair operates 45 routes across 11 European countries. They have daily services from most of these routes. In 1995, Ryanair had become the biggest passenger carrier on the Dublin-London route. But compare with other large airlines, Ryanair only operates European continental routes. It lacks the link with other continents. However, in addition to route availability, the actual flight schedule is also important to maximize the available flying time of the airlines most significant tangible asset, its aircraft. Ryanair has a fleet of 31 Boeing 737’s, orders for up to a further 25 new 737-800’s which will be delivered over the next 2 years. Over the past ten years it has increased its annual traffic from under 700,000 to over 15 million passengers. Along the way it changed the face of air travel, broke hire fare cartels, rocked airport monopolies and made it possible for millions to travel.
Ryanair provide unique services with low price. If their seats are not booked, customers can seat wherever they like. However, their in-flight services are limited. For example, customers have to pay if they want any drinks or food. There are always some complains about seats overbooking from customers.
Ryanair has committed itself to safe operations and has put in place extensive safety training programs to ensure the recruitment of suitably qualified pilots and maintenance personnel. In addition, the company is also committed to the operation and maintenance of its aircraft in accordance with the highest European Aviation Industry Standards, which are closely monitored by the Irish Aviation Authority.
In year 2000, Ryanair launched Europe’s largest travel website at WWW.RYANAIR.COM, which within three months of its launch was taking over 50,000 bookings per week, by offering unbelievably low airfares. The passenger acceptance of this website enabled Ryanair to reduce travel agent commission.
Ryanair is well positioned in European market to implement its low cost strategy. After the full EU air transport deregulation in 1997, Ryanair was free to set up new routes to Continental Europe. The airline entering these market offered air fares which were more than 50% lower than the cheapest fares then provided by the flag carrier airlines. The European airline sector is dominated by high cost; long haul national carriers like British Airway, Lufthansa and KLM. These airlines control 50-60% of market share, but are beginning to lose the bottom end of the market to low cost carrier like Ryanair.
The major revenues of Ryanair gain from the tickets that they sold during the year. Therefore, we can regard the tickets as a kind of the stock of the airlines’ company. But they don’t have any value before they are sold. That is the only different with the tangible stock value. Once the tickets are sold, the company gets the revenues from the operation. They have amount of cash and debt. The company uses cash to pay the relevant cost, like staff wages, fuel and oil cost, marketing and distribution cost and so on. The rest of the revenues are kept in retained profit as the capital of company. If the profit grows, the company share price will increase accordingly. Once the share price increased, the shareholders will enjoy the prior return on their investment, more and more investors will have more interest in the company. Therefore, the company achieves the source of finance. After that, they should consider about where they should invest to growth in the market and expand their company.
Last year, Ryanair company’s operation revenues are 298149 in 2002 (Increase 64413 than 2001). It includes net cash inflow from operating activities: 125417. This should thank for the contribution of the sales team. Ryanair insists to offer lower airfares in European countries and try to increase sales continuously. Increased revenue is one of the major sources of finance.
The strength of the performance is highlighted by the fact that the groups’ cash on hand is equivalent to 53.6% of annual turnover. This figure is a little bit high according to their sale growth. They should invest the cash flow to generate more return. But there is a special reason that they have to maintain a deposit US$500,000 with the guarantor bank for as long as the bank gave its guarantee.
The operating expenses during the year are Ђ 229740; Net cash inflow from operating activities is 12304; profit and loss account is 112758. As the growth of the profit during the year, EPS increased by 17% to 35.16 and is based on 164,759,808 shares which represent the weighted average number of ordinary shares outstanding during the year. We can see the profit is increasing; the capital of the company is increasing. Because the market is growing, Ryanair should think about where they should invest and how. i.e. Invest new aircraft, improve quality of service or setup new routes.
Ryanair announced a new investment program with a US$2billion order for up to 45 new Boeing 737-800 series aircraft. Continued strong cash flows generated from trading operations combined with the proceeds of the London offering and the receipt of debt financing for the first of the Boeing 737-800 next generation aircraft, has allowed the group to increase its cash on hand by 74m. Before Ryanair makes decision about buying what type of aircraft, the two alternatives would be mutually exclusive, in that the choice of one will exclude the other. The company may use NPV and IRR to calculate which one may give more return.
Net Profit Ratio:
Return On capital Employed:
Current Assets Ratio:
Ratios are quiet common method of analyzing financial management. It refers to the use of simple ratios which are calculated from the figures of financial statements in order to measure certain aspects of a firm’s financial condition.
Ratios make comparisons with:
The performance of the business in previous years
The budgeted or planned performance in the current years
The performance of similar business
The ratios make easier to make better decision. However, there are some limitations in ratio analysis. For instance, since ratios are constructed from accounting data, if we do comparison within two different firms, their accounting policies (i.e. depreciation charge, the accounting years) could lead to the inaccurate illustration.
The Net Profit Ratio was dramatically increased by 15% during the year 2001 and 2002. Even though their expenses cost had increased by a certain percentages in different items and because of their low fares system. They still gained a high return in net profit when compared to 2001. The reason of this was because the rise of sales and the interest received. These revenues gave the company a good return that could cover the expenses and other additional costs. The increase in profitability reflects the positive impact of the growth in passenger’s volume because of the increase in seat capacity on exiting routes and the launch of new 7 European routes during the year.
In the Return On Capital Employed Ratio the amount of money that the investors can get back after investing in the company, the ratio decreased to 28% in that year. The explanation of this figure was because their company needed to consider the contract that with Boeing worth US$2 billion by ordering for up to 45 aircraft in the coming years, in order to succeed the expansion of our company.
Asset Turnover Ratio is a measure of productivity as much as profitability. Within 2001 and 2002, the ratio dropped from 1.56 to 1.04, it meant that more assets were to be used to generate every unit of sales .The reason was because their introduction on new fleet of 22 aircraft on our network of 27 routes in request to increase the level of passengers and the low fares system.
According to the Current Asset Ratio, The company had a well cover of their current liabilities under current assets. Even though in Acid ЁC Test Ratio, which we examined that by excluding the inventories, their current assets also covered the liabilities by 1.14 in 2001, and 1.60 in 2002. It increased by 46%. From the current assets, cash was the major inflows to their company in the past two years. Especially in 2002, there was an increase in cash from 892160 TO 12742400.
Move to the cash flows statement. Cash is King. Company fail, not because of their insufficient profits, but because they have run out of cash to pay their liabilities. Cash and bank balances should be kept to a minimum, as they earn nothing for the company, but make sure you have enough cash to pay employees and creditors. Cash generated from operating activities grew up for 25.6 million. This increase was due to the increase of sales and profits and the add back of the non-cash items primarily depreciation charge since they had a new aircraft during the year. The cash flows was from trading operations combined with the proceeds of the London offering and the receipt of debt financing for the first Boeing 737-800 next generation aircraft, has allowed the group to increase the cash on hands despite having to pay advance deposits to Boeing. The performance is highlighted by the fact that the cash on hand is equivalent to 53.6%of annual turnover.
The next ratio is Gearing which means how reliable of the company on the financial institutions when raising the finance. Even though their ratio was slightly increased by2%, they were still in a low-geared situation in these two years. The interest cover were good since Ryanair only needs to pay interest once a year and they could pay 4.4 times in 2001 and 6.6times in 2002.
The Earning Per Share considers the profits that could be paid to each ordinary shareholder. The increase in profit resulted in the increase in EPS. This also stated that the increase in the value of shareholders as the company’s profit and traffic has grown.
After finishing the ratio analysis, we can see that Ryanair is healthy. Here is the comparison ratio with other major airline companies and industrial average. After seeing this you will more agree that Ryanair’s performance is good.
Other non-financial consideration
Ryanair has a bad reputation for over booking and early check-in time. On the other way, every company has limitation. For airline companies, these problems are normal. Ryanair changed their booking system last Christmas and the new system is more accurate and working well. Company said that they will not only improve the hardware but also the staff. There are a group of new staffs now is trained by American Airline.
After reading the research paper, hopefully you have an understanding of airline finance. Ryanair is a new member of airline companies (started from 1985). It is young and healthy. Based on Europe and has a strong relationship with America, there are lots of areas that it can improve and expand to. Ryanair’s developing speed like a flying superman, going up and away. It is the kind of company we should put money in.
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If a Google search brings you to the page which you are currently reading — this page — then it means you are either having some difficulties coming up with finance research topics in the real estate industry for your academic or corporate project. And if that is definitely the case, then you have just found a gold mine for this was written just for you.
Today’s article is the second part in the series of articles discussing finance in the real estate sector and the important role having some financial backing plays for both parties who take part in making the sector grow. In the article preceding this, some important facts covering the subject of finance and real estate were outlined to help project writers discuss intelligently on the topic. This follow-up will not only provide 20 topics but will also include a sample research project that expatriates on one of the provided topics to serve as a sample for anyone confused on how to proceed with his or her project.
Lastly, a set of guidelines on understanding time management and its importance when writing or handling a research project will be provided to help you efficiently create something brilliant that will guarantee you earn top marks. So shall we begin?
- The Importance of Finance to the Real Estate Industry
- The Impact of a Fluctuating Economy on the Real Estate Industry
- The 2007 Economic Recession and Its Effect on Real Estate
- Sources of Real Estate Finance and Their Impact on Society
- Real Estate Investment and the Role of Commercial Banks
- Real Estate Investment and the Impact of Credit Unions
- Problems of Financing Real Estate in the United States
- Corporate Loans and Commercial Real Estate Financing
- Analysing the Challenges and Prospects in Real Estate Investing
- Fundamentals of Real Estate Financing Models
- Disentangling the Geography of Finance and Real Estate
- Real Estate Finance and Investment Fundamentals
- How the Mortgage Constant Works in Real Estate Finance
- Real Estate Finance Investments Risks and Opportunities
- Real Estate Equity and Debt Financing
- The Role of Banks, Equity Markets, and Institutional Investors in Developing Real Estate
- Policy Framework for Building Sustainable Real Estate Markets
- Real Estate Market Developments the Financial Sector
- Protecting Value in Real Estate: Managing Investment Risks
- The Language of Commercial Real Estate Finance
Choosing a finance research project topic in real estate has never been made easier than this for here are 20 excellent topics you can consider using or modifying for your own project. These topics are quite easy to work on due to the large amount of research materials out there covering each and every outlined topic.
As stated earlier, more help is on the way in getting you started on writing your own project and this will be in the form of a sample research project which takes its direction from one of the topics provided on the list.
Sample Essay: The Impact of a Fluctuating Economy on the Real Estate Industry
The real estate sector is one that plays an important role in the quality of life experienced in a country and this is why governments all around the world ensure that policies are put in place to help its citizens secure real estate for both commercial and residential buildings within legal frameworks. My research paper will focus on exploring the impact of a nation’s economy on its real estate sector, using facts and figures to show that fluctuations in any economy will affect the pricing and cost of owning a home in the affected society.
The real estate sector has always been responsible for a considerable amount of a nation’s GDP and in China, statistics show that an increase in the pricing of real estate structures and lands led to an increase in the reported GDP in that time period. These studies which were conducted in 2009, showed that due to a growth in China’s economy, expenditure from its real estate sector accounted for 7.5% of its GDP—up from 3.5% in 1997—which inevitably led to an increase in the pricing of its real estate assets by approximately 16% between the years 1997 to 2009.
Also, in the United States, the great recession which occurred between the year 2007 to 2009 saw a 5% drop of the US GDP and this led to a corresponding loss in the value of real estate assets in the US by approximately 20 to 50% across board. The great recession not only led to a loss of real estate value but massive foreclosures due to inability to re-pay loans occurred across the country. And by 2009, the foreclosure problem was so bad that the US witnessed more foreclosures than marriages through the year.
The banking sector—which is the financial backbone of the real estate sector—also follows the fluctuation trend outlined above. Studies show that during a time of economic growth, commercial banks look favourably on extending loan facilities to aid real estate purchases while in times of recession, the opposite occurs. An apt example was the availability of 100% loan facilities made available for buyers during the economic boom of the 90’s and the gloom that followed after during the 2007 recession.
This trend is the one that continued for generations and does not look like it’s going to stop anytime soon. Thereby proving that the status of a nation’s economy influences its real estate industry in direct proportion and a strong economy will give birth to a solid real estate sector just as a weak economy will negatively affect the value of real estate assets during the same duration. Due to the fact that the primary lenders — banks — of money to the real estate industry as well as unemployment rates and job cuts reflect negatively on a nation’s GDP and this trickles down across all industries including the real estate sector.
Here we come to the end of the 2nd article in our series on research project topics on the subject of finance in real estate. We hope this article provided some answers to your questions and for more clarification on writing a project, do not hesitate to read the third article in the proposed series as well as our initial piece 10 facts on finance research.
Baker, H & Peter, C. (2012). Public Real Estate Markets and Investments, 170-175.
Tracey, S. (2007). Introduction to Real Estate Finance and Investment.
Wang, K. (2007). The Interaction between Real Estate and National Economy.
Coulson, E. & Kim, S. (2000). Residential investment, non-residential investment and GDP. Real
Estate Economics, 28(2).
Geng, X. & Xie, C. (2006). Research of relationship between China’s real estate investment and the
National Bureau of Statistics. (2006). China’s fixed asset investment statistics Code. Beijing: China
Emoh, I. & Nwachukwu, C. (2011). Critical Issues In Real Estate Finance as an Index in Building Construction Project Management Success in Nigeria
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