Financial Statement Analysis of Kingfisher Airlines and Other Major Players in the Industry

Topics: Financial ratios, Generally Accepted Accounting Principles, Financial ratio Pages: 17 (5643 words) Published: January 30, 2013
Indian Aviation Industry|
Financial Statement Analysis of Kingfisher Airlines and other Major Players in the Industry | -------------------------------------------------
Towards Partial Fulfilment of Project work (Part 3 of 3),------------------------------------------------- Report Submitted By------------------------------------------------- Abhinav Rastogi (WMP08003)------------------------------------------------- Kaustubh Sohoni (WMP08019)------------------------------------------------- Vaibhav Goel (WMP08043)------------------------------------------------- Vidit Kumar (WMP08044)------------------------------------------------- Vivek Mishra (WMP08047)|


Sr. No| Heading| Page No.|
1| Financial Statement Analysis| 2|
2| Vertical Analysis for KFA| 4|
3| Horizontal Analysis for KFA| 5|
4| Financial Ratios for KFA| 6|
5| Vertical Analysis for Air India| 8|
6| Horizontal Analysis for Air India| 9|
7| Financial Ratios for Air India| 10|
8| Vertical Analysis for Spicejet | 12|
9| Horizontal Analysis for Spicejet| 13|
10| Financial Ratios for Spicejet| 14|
11| Vertical Analysis for Jet | 16|
12| Horizontal Analysis for Jet| 17|
13| Horizontal Analysis for Jet| 18|
14| Comparative Study of KFA and Competitors| 21|
15| Performance of Kingfisher Airlines| 24|

The overall objective of the business is to create value for its shareholders while maintaining a sound financial position. In a given year the performance and financial position (at a particular date) of the company is stated in the financial reports, viz. Balance sheet, Income Statement and cash flow statement. However the financial analysis is required to be carried out to decide whether an entity is stable, liquid and profitable enough to invest in it. It is also helpful in measuring the performance of the company chronologically. Ways of financial statement analysis are as follows.

Vertical Analysis and a Horizontal Analysis.
Vertical Analysis: Computing the balance sheet and income statement amounts against total assets and net sales respectively. The amounts for the various accounts in balance sheet are represented as % of total assets. The amounts in the income statement are presented as % of the net sales. Horizontal Analysis

The % change in the amounts of the balance sheet accounts compared to previous year is calculated. Horizontal analysis helps to assess the trend and compare performance of the firm to previous year. Financial Ratios: Financial ratios prove to be effective tools for comparison between competitors and decide (i.e. asking right questions) the criteria to investigate in case something has gone wrong or any abnormality is observed. The ratios can be categorized according to what they measure. The ratios in the each category are listed below.

Overall Performance measures:
* Price/Earnings Ratio
* Return on Assets
* Return on invested capital
* Return on shareholders’ equity
Profitability Measures
* Gross margin percentage
* Profit Margin
* Earnings per share
* Cash Realization
Tests on Investment Utilization
* Asset turnover
* Invested capital turnover
* Equity Turnover
* Capital Turnover
* Day’s Cash
* Days Receivable
* Day’s Inventory
* Inventory Turnover
* Working Capital Turnover
* Current ratio
* Acid- test ratio
Tests of Financial Condition
* Financial Leverage ratio
* Debt/equity ratio
* Debt/capitalization
* Times interest earned
* Cash flow/debt
Tests on dividend policy
* Dividend Yield
* DividendPay-out
* The airlines for which financial statement analysis is carried out are viz. Kingfisher airlines, Spicejet, Jet Airways and Air India. The horizontal and vertical analysis and the various ratios are calculated and shown in the following table. *

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