Question No.

02

Year 2008 2009

Sales Turnover 8758 8992

Operating Cost 4581 5531

Gross Profit 4177 3461
S/D/A 3299 3681
Net Profit before Taxes 922 -401
Net Profit after Interest and Taxes 726 -358

Question No. 06

6.1. Liquidity Position Ratios:

Liquidity Ratio 2008 2009

 1. Current Ratio 0.457 0.246

2. Quick Ratio 0.434 0.222

Liquidity ratio measures a company's ability to pay its bills. The denominator of a liquidity
ratio is the company's current liabilities, i.e., Responsibilities to be completed by the
company soon usually within one year. The numerator of a liquidity ratio is part or all of
current assets. Probably the most frequent liquidity ratio is the current ratio, or current
assets/current liabilities. Because current assets are expected to be converted to cash within
one year, this liquidity ratio has assets and liabilities of equal duration. Quick ratio is also
part of Liquidity Position ratio.

We have studies Liquidity position ratio on British Airways. We have seen that
Current and Quick ratios have decreased in 2009 as compare to 2008. Company’s ability to
pay for expenses, bills and liabilities is less than it was before. This really effect company’s
reputation.

6.2. Profitability Position Ratios:

Profitability Ratio 2008 2009

1. Gross Profit Ratio 52.30% 38.48%

2. Net Profit Ratio 10.02% -2.44%

A series of financial metrics that help investors to calculate a business's ability to

generate earnings compared with its expenses and other relevant costs incurred during a
specific period. Profitability ratio measures effectiveness of an organisation’s profit earning
abilities. Profitability Position depends on Gross profit ratio and Net profit ratio. When these
ratios are higher than a competitor's ratio or than the company's ratio from a previous period,
this is a sign that the company is doing well and if ratio is less than previous and less than
other competitors it means company is going in loss. (As discussed in thefreedictionary.com)

The Profitability Position ratio of British Airways mentioned above for the year
2008/2009. It’s clearly mentioned in the table that Gross Profit ratio is decreased in 2008 it
was 52.30% whereas in 2008 it remained 38.48%.

On the other hand Net Profit ratio also decreased dramatically in 2009. It was fallen
down from 10.02% to -2.44% in 2009.
 As we discussed above Profitability Position of British Airways. This company is
presently going in loss as compare to previous year.

Bibliography:

http://financial-dictionary.thefreedictionary.com/Profitability+Ratios