Financial Analysis

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Financial Analysis of

Word Count:4408 (Excluding Contents, Appendix, Referencing) Purpose:MB461 – Assignment
Note:All figures are taken from the relevant year’s financial statement and not from restated figures from following year’s financial statements

Contents Page
1.0Introduction 3

2.0Strategic Analysis(Task 1)4

2.1Analytical Objectives4
2.2Value Driver Analysis5

3.0Strategic Pre-Evaluation (Task 1)5

3.1Current Economy6
3.2SWOT Analysis7
3.3PEST Analysis 8

4.0Analytical Questions (Task 1) 9

5.0Financial Analysis(Task 2) 9

5.1Margin Analysis9
5.2Ratio Analysis 10

6.0Evaluation of the Organisations Performance (Task 3) 16

7.0Forecasted Financial Statements (Task 4) 24 7.1Income Statement 24
7.2Balance Sheet 25
7.3Cash Flow Statement 26

8.0Conclusion 27

Appendix 28

Referencing / Bibliography 31

1.0Introduction

SriLankan Airlines in the national carrier of Sri Lanka. Currently SriLankan Airlines operates to fifty one destinations in twenty eight countries in four main regions, namely Europe, Middle East, Asia and the Indian sub-continent using Colombo (Sri Lanka) as its operating hub.

Started operations in 1979 under the name ‘Air Ceylon’ and later named ‘Air Lanka. •Entered in to a strategic partnership with Emirates in 1998 and was re-branded as ‘SriLankan Airlines. •Under the agreement signed for 10 years, all management is handled by Emirates. •The Sri Lankan Government is the majority stakeholder, holding 51.05% of the stake. •Other stakeholders are Emirates with a 43.63% stake and the Employees with 5.32% stake. •The management agreement is set to expire in 2008 and negotiations are currently underway for a possible extension •Revenue of recent years have been deeply affected by the 9/11 terrorist attacks and the 2004 Asian tsunami to hit Sri Lanka •Four aircrafts were destroyed and two damaged by a terrorist attack in 2001 on the BIA Airport in Sri Lanka, reducing the airlines assets significantly.

2.0Strategic Analysis

Strategic analysis is the first step in undertaking a financial analysis of an organisations performance. This can be broken down in to two areas such as,

2.1 Analytical Objectives

This sub-chapter answers the question, for whom are we carrying out this financial analysis? It takes in to consideration a range of point of views from various stakeholders of the organisation and thus looks at the analytical benefit for each of these stakeholders. Below table look at various stakeholders objectives of this financial analysis in terms of SriLankan Airlines.

Stakeholder Type

Apparent Objectives
Likely Decisions
Analytical Info
Shareholders
(Government, Emirates, Employees)Measure profitability of the organisation and to make strategic decisionsFor future decisions, strategies and planningAll aspects of financial analysis

Employees
Increased earnings on salary and benefitsCareer decisions and contract bargainsCash in hand, profits and growth of organisation

Board of Directors
Management decisions for futureStrategic plans to enhance or compensate current standAll aspects of financial analysis

Financial Institutes
Minimise risk of lending and recoveryDebt recovery methodsProfit , gearing and liquidity Suppliers
(Aircraft suppliers and fuel providers)Risk reduction and measure of settlement periodsTo continue or discontinue supplyLiquidity and Efficiency

Competitors
(Other Airlines)Measure of competition strengthFuture strategic decisions and alterationsRevenue, profit and market capitalisation

Inland Revenue
Tax collection
Organisations...
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