AirAsia Berhad barely needs any debut. Launched in 2002 by its laminitis and CEO Datuk Sri Tony Fernandes, it is Malaysia ‘s first low cost bearer. Initially, investors and the Malayan populace were convinced that the air hose was doomed to neglect but shortly after its origin, the company registered a net income. With its celebrated tagline, “ Now Everybody Can Fly ” , it democratized air travel and made it accessible for the multitudes. The company has moved from strength to strength despite some reverses and it is presently one of Malaysia ‘s most celebrated trade name. This study analyzes the fiscal public presentation from 2005 to 2009 to measure merely how successful the company is. It besides aims to bring out countries of failings and provides recommendations on how the jobs can be solved.
The fiscal public presentation of AirAsia is analyzed through ratio analysis. Ratios are utile as they allow users to compare a house ‘s public presentation over a long clip skyline to place tendencies and forms. It besides permits comparings to be made with other companies. From 2002 to 2006, the fiscal twelvemonth terminal for AirAsia was 30 June. In 2007, it was shifted to 31 December following a calendar twelvemonth footing. Hence, the fiscal statements for 2007 had to be adjusted to reflect these alterations. For the intent of this ratio analysis, the fiscal statements for the twelvemonth ended of 30 were used for 2005 and 2006 while the fiscal statements for the twelvemonth ended 31 December were used to cipher the ratios for 2007 to 2009.
Net net income ( % )
ROCE ( % )
ROE ( % )
Profitability ratios measure the ability of a house in bring forthing net incomes. Higher profitableness ratios are more desirable. There are a figure of profitableness ratios, some of which are calculated here. Though it is common to province the gross net income ratio, the fiscal statements did non incorporate sufficient informations for it to be calculated for each of the five old ages. The one-year study in 2005 showed the gross net income but in subsequent old ages, the presentation of the fiscal statements was altered and did non include information sing the cost of goods sold and gross net income. Hence, the gross net income ratio is omitted here. The net net income ratio measures the sum of net net income generated for every ringgit of gross. The net net income ratio of AirAsia increased from 16.8 % in 2005 to 31.1 % in 2007. However, due to the economic downswing, the company registered a loss in 2008, doing the net net income ratio to worsen to -17.5 % . Nevertheless, the company bounced back in 2009 to enter a net net income ratio that is around its 2005 figures.
The return on capital employed ( ROCE ) measures the per centum of returns for every ringgit of capital employed. The ROCE of AirAsia is slightly inconsistent. It declined from 22.8 % in 2005 to 3.8 % in 2006 before increasing to 7.1 % in 2007. The undermentioned twelvemonth saw the ROCE diminution to -4.6 % before increasing to 9.4 % in 2009.
The return on equity ( ROE ) measures the per centum of returns for every ringgit of equity. By and large, the ROE of AirAsia has been good. In 2005 it was 11.7 % and it increased to 17.5 % and 23.7 % in 2006 and 2007 severally. However, 2008 was a bad twelvemonth for the company so the ROE plummeted to -30.9 % . In 2008, it was 19.3 % .
Efficiency ratios mensurate how effectual a company is in pull offing its assets. The efficiency ratios for AirAsia from 2005 to 2009 are as follows:
Debtor aggregation period
Net working capital
The plus turnover ratio measures the effectivity of a house in actioning its assets. This ratio enables a opinion to be made on the extent to which the house has generated gross revenues. The plus turnover of AirAsia Berhad declined during the five twelvemonth period from 0.7 times in 2005 to 0.3 times in 2009. This indicates that the house is bit by bit going less efficient in using its assets which is contrary to the perceptual experience that the house is adept at using its assets.
The debitor aggregation period refers to the mean length of clip debitors take in paying off their debts. In 2005, the debitor aggregation period was a astonishing 153 yearss but in 2006, it declined to 94 yearss before increasing to 124 yearss in 2007. Due to concerted attempts by the direction, the debitor aggregation period was drastically reduced in 2008 to 88 yearss and it was lowered to 84 yearss in 2009.
The net working capital ratio shows the per centum of gross generated for every dollar of net working capital. The net working capital ratio increased from 0.9 times in 2005 to an amazing 17.5 times in 2008 before worsening to 6.1 times in 2009.
Liquidity ratios demonstrate the effectivity of a company in pull offing its working capital. The liquidness ratios of AirAsia from 2005 to 2009 are as follows:
The current ratio shows the sum of current assets for every ringgit of current liability. The current ratio of AirAsia declined from 5.6 in 2005 to 1.8 in 2006 and it hovered around that degree thenceforth. If we use the general norm of 2, so AirAsia ‘s current ratio is below norm. However, industrial norms vary so this might be an acceptable degree for an air hose.
The acerb trial takes the current ratio one measure farther. It does non include stock lists in the calculation of current assets because stock lists can non be realized into hard currency within a short period. AirAsia ‘s acerb trial ratios are about the same as its current ratios. This is because as a non-manufacturing entity, it does non keep big volumes of stock list.
The hard currency ratio shows the sum of hard currency and hard currency equivalents the house has relative to its current liabilities. It is of import for a company to hold sufficient hard currency to run into its short term fiscal duties. The hard currency ratio of AirAsia has declined from 2.1 times in 2005 to 0.09 times in 2009, bespeaking that the house has worsening degrees of free hard currency. This may be knowing as the company may desire to reinvest its excess alternatively of allowing it remain as idle hard currency.
Fiscal Gearing Ratios
Fiscal geartrain is concerned with the comparative sizes of the financess provided by stockholders on the one manus, and by loan creditors in the other. The fiscal pitching ratios of AirAsia Berhad from 2005 to 2009 are as follows:
Debt to equity
Long term debt to equity
The debt to equity ratio measures the degree of short and long term debt to equity. In 2005, AirAsia had no debts so its debt to equity ratio was nil. In 2006, its debt to equity ratio was 0.9 and this increased to 1.6 in 2007 and so 4.1 in 2008. In 2009, this declined to 2.9. This demonstrates that the company has made some effort at take downing its debts.
The long term debt to equity ratio examines specifically long term debt to equity. In 2005, this ratio was nil for AirAsia but in 2006, it was 0.7 and this increased until 3.8 in 2008. In 2009, the figure declined to 2.7. When we compare the above two ratios, we find that most of AirAsia ‘s debts consist of long term debts.
The involvement screen shows the sum of net income the company has for every ringgit of involvement disbursal. In 2005, this ratio was 2.5 times but it was nil in 2006 and 2007 because the company did non hold any involvement disbursal. In 2008, the company made a net loss, doing its involvement screen to be -0.6 but in 2004, this ratio was 2.4.
The investing ratios are concerned with looking at the company from the stockholder ‘s point of view. The investing ratios of AirAsia from 2005 to 2009 are as follows:
Net Tangible Assetss
AirAsia is alone in the sense that so far, it has non paid any dividends to stockholders. The principle behind this is that it is a turning company so it needs to reinvest its net incomes. However, it intends to give out dividends one time the house is more secure. The net incomes per portion ( EPS ) of the company increased from 5 sen in 2005 to 21 sen in 2007. Due to losingss, there was negative EPS in 2008 but the EPS was 21 sen in 2009.
The P/E ratio represents the net incomes potency of the house. A higher P/E ratio indicates higher investor assurance in the house ‘s ability to bring forth long term net incomes. The P/E ratio of AirAsia Berhad declined from 30 times in 2005 to 4.2 times in 2009. On the flipside, its cyberspace touchable assets ratio increased from 0.4 in 2005 to 0.9 in 2009
Tendencies in Gross saless Gross
AirAsia ‘s grosss have grown steadily from 2005 to 2009. Growth rate was sharpest from 2007 to 2008.
Net income Margins
Operating net income
Net net income
As mentioned earlier, AirAsia ‘s fiscal statements are presented in such a mode that the gross net income is unknown. However, the operating and net net incomes are shown here. One of the major causes of differences in operating and net net income ratios over the old ages is the disbursal for fuel which has been capable to fluctuations in monetary value. Attempts at fudging proved to be unsuccessful in 2008 when fuel monetary values dropped out of the blue ensuing in monolithic hedge losingss.
Cash Flow Statements
The chief beginning of gross for the company is through its operating activities. Over the old ages, there is no existent tendency in the motions of hard currency flow points. In some old ages, the company experiences more outflow from its puting activities while it may see more influx from funding activities.
Stakeholders may be interested to cognize more about the company ‘s corporate societal duty ( CSR ) activities. Environmentalists would wish to what stairss AirAsia has made to cut down air pollution, to cut emanations and to run a more environmentally friendly organisation. On the other manus, stockholders would wish to cognize more about the company ‘s non-financial ends and how they contribute to going better corporate citizens. Passengers would desire to cognize the stairss taken to cut down waiting clip and lost luggage, and to guarantee flight safety.
The air hoses industry is highly competitory. Operating costs are really high and there are many challengers for limited riders. Most air travel is discretional, intending that terrorist menaces and pandemics will maintain many tourists grounded. All these negatively impact the air hose industry and adversely impact the bottom line. Low cost bearers like AirAsia have a competitory cost advantage. Yet it seems that AirAsia ‘s distinction is under menace from challengers like SIA ‘s Tiger Airways. Detecting the 2005 to 2009 one-year studies reveal that AirAsia has strong basicss like airy leading, a dedicated work force and a scrupulous attending to keep low costs. However, the house must ever stay argus-eyed and research new flight paths and come up with more schemes to maintain people winging if it wants to last and boom in the long term.