Ratio Analysis of Kenya Airways
Ratio Analysis
Activity Ratios
This ratios show how efficient Kenya Airways has been in managing its working capital. Being a service industry this ratio is a key indicator possible area to reduce inefficiency in future.
KQ Activity Ratios Years | 2012 | 2011 | 2010 | 2009 | 2008 | Average Collection Period (Debtors ratio) | 48.6 | 58.8 | 46.7 | 51.0 | 43.6 | Inventory Day (Inventory Conversion Period) | 9.19 | 8.70 | 8.17 | 7.94 | 8.52 | Creditor's Period | 50.93 | 65.31 | 75.27 | 67.63 | 36.19 | Cash Conversion Cycle | 6.85 | 2.14 | -20.43 | -8.65 | 15.91 | Debtors turnover Credit sales/ debtors | 7.51 | 6.21 | 7.82 | 7.15 | 8.37 | Creditor's Turnover | 7.17 | 5.59 | 4.85 | 5.40 | 10.08 | Stock /Inventory Turnover | 39.73 | 41.96 | 44.66 | 45.99 | 42.84 |
Average Collection Period
Thorough out the period the company has maintained a higher debtor’s ratio compared to the creditor’s period, this indicates that the company has an efficient credit management policy. However the company can adopt better policies to reduce this period to an average of 30 days which is the industry average for emerging market companies.
Inventory Conversion Period
The company has oil as the main component of inventory; this oil is used on a daily basis thus and through hedging the company does not need to have high oil reserves in stock since the price of its purchase is predetermined at a future date. The company has managed to maintain this period below 10, showing the stock levels are managed well however the company exposes itself to a high risk in case the oil supplying company have political instability.
Creditor’s period
The company takes an average of 60 days to repay the debtors, however the company can try to increase this period to 70 days so that it can increase its working capital and commit it in other ways.
Cash conversion cycle
This ratio shows the period of time for which the working capital is needed by the company. The company
Activity Ratios
This ratios show how efficient Kenya Airways has been in managing its working capital. Being a service industry this ratio is a key indicator possible area to reduce inefficiency in future.
KQ Activity Ratios Years | 2012 | 2011 | 2010 | 2009 | 2008 | Average Collection Period (Debtors ratio) | 48.6 | 58.8 | 46.7 | 51.0 | 43.6 | Inventory Day (Inventory Conversion Period) | 9.19 | 8.70 | 8.17 | 7.94 | 8.52 | Creditor's Period | 50.93 | 65.31 | 75.27 | 67.63 | 36.19 | Cash Conversion Cycle | 6.85 | 2.14 | -20.43 | -8.65 | 15.91 | Debtors turnover Credit sales/ debtors | 7.51 | 6.21 | 7.82 | 7.15 | 8.37 | Creditor's Turnover | 7.17 | 5.59 | 4.85 | 5.40 | 10.08 | Stock /Inventory Turnover | 39.73 | 41.96 | 44.66 | 45.99 | 42.84 |
Average Collection Period
Thorough out the period the company has maintained a higher debtor’s ratio compared to the creditor’s period, this indicates that the company has an efficient credit management policy. However the company can adopt better policies to reduce this period to an average of 30 days which is the industry average for emerging market companies.
Inventory Conversion Period
The company has oil as the main component of inventory; this oil is used on a daily basis thus and through hedging the company does not need to have high oil reserves in stock since the price of its purchase is predetermined at a future date. The company has managed to maintain this period below 10, showing the stock levels are managed well however the company exposes itself to a high risk in case the oil supplying company have political instability.
Creditor’s period
The company takes an average of 60 days to repay the debtors, however the company can try to increase this period to 70 days so that it can increase its working capital and commit it in other ways.
Cash conversion cycle
This ratio shows the period of time for which the working capital is needed by the company. The company