Running head: BRITISH AIRWAYS ANALYSIS

BRITISH AIRWAYS ANALYSIS

Name of the Student

Name of the University

Author Note
 Table of Contents
Introduction......................................................................................................................................2

Discussion........................................................................................................................................2

Financial statements and reporting mechanisms for the organizations in the travel and tourism

industry............................................................................................................................................2

Importance and value of budgets in controlling businesses and variance in reference to the

British Airways................................................................................................................................3

Evaluation of performance and analysis......................................................................................7

Conclusion.......................................................................................................................................7

References........................................................................................................................................8

1 BRITISH AIRWAYS ANALYSIS

 Introduction

The British Airlines can be understood to be one of the most competitive firms as present

in the British industries which are present in the United Kingdom. In consideration of this, it is

integral to note that the competitiveness and success of the enterprise can be measured

accordingly with the assistance of the different financial tools and analysis which help in

presenting an accurate picture of the current status of the firm (Iairgroup.com 2020). Hence, this

report tends to follow a structured format whereby the appropriate financial statements which

can be applied by the firm along with the importance of the budgets will be discussed

accordingly. In association with this, the financial statements for the British Airways and Iberia

will be discussed which are then followed by the complete evaluation of the performance and its

related analysis.
2 BRITISH AIRWAYS ANALYSIS

Discussion

Financial statements and reporting mechanisms for the organizations in the travel and

tourism industry

The financial statements can be rightfully described as the formal records of the various

financial activities which are undertaken by the business or the individuals. In consideration of

this, it can be mentioned that the financial statements tends to comprise of the aspect being

related to the Balance sheet, the income statement, the statement of changes in equity and the

cash flow statements (Schaltegger and Burritt 2017).

The balance sheet can be essentially described as the statement of financial position

which focuses on the assets of the company, its liabilities, the owner equity and the other long
 term obligations as well. The Balance sheet of the enterprise helps in attaining a clear picture of

the manner in which the organization will perform and what its standing is after a designated

time period. In line with this, another crucial statement which is prepared by the author can be

mentioned to be the income statement (Iairgroup.com 2020). The income statement comprises of

the profit and loss report, the statement of the comprehensive income and the statement of the

revenue as well as the expenses which are stated over a particular period of time. The profit and

loss statement focuses on the operations of the enterprise as a whole and also highlights the sales

as well as the expenses which are incurred at a particular organization at a particular period of

time.

In association with this, it becomes effective to learn that another critical statement which

has to be prepared can be described as the equity statement. In consideration with this, it has to

3 beBRITISH
mentioned that, the statement
AIRWAYS ANALYSIS of equity tends to provide an overall analysis of the manner in

which the firm is currently standing. According to Kieso, Weygandt and Warfield (2019),

another critical statement which is prepared by the organization can be mentioned to be the cash

flow statements. This tends to focus on the overall cash flow activities of the enterprise

accordingly.

Notes to financial statements: The notes to the financial statements can be understood to

be another critical financial requirement which is generally prepared by the enterprise in order to

ensure that, all the clarifications regarding the financial statements are made accordingly and in

association with this, the firm is being able to engage in effective completion of evaluation

(Shapiro and Hanouna 2019).

 Importance and value of budgets in controlling businesses and variance in reference to the

British Airways

The Budgeting can be rightfully defined as the manner in which the enterprise tends to

plan accordingly in order to ensure that it is successfully being able to balance the expenses of

the enterprise with the income received. In consideration of this, it is effective to understand and

verify that the budgeting allows the business to allocate effectively and prioritize accordingly as

per the expenses of the enterprises. In consideration of this, it becomes critical to understand

that, the firm would effectively be required to consider the different resources and income

revenues in order to ensure that it is being able to plan its resources accordingly. In line with this,

it becomes effective to ensure that the business is being able to manage the operations

accordingly (Kieso, Weygandt and Warfield 2019). The reason why the budget is critical to

form and regulate is to monitor the finances of the firm accordingly and to be able to see to it
4 BRITISH AIRWAYS ANALYSIS
that, the enterprise can understand the sources of income which it will be earning and also the

areas where its expenses will take place. The British Airways tends to follow the Zero Based

Budgeting method based on which it tends to ensure that it will be successfully able to lay down

the different costs of the business and determine the sales and revenue accordingly (Yahoo.com

2020).

Interpretation of financial statements and reports for International Airlines Group

Businesses of British Airways and Iberia

The given figure provides a snapshot of the various Ratio analysis and the important

aspects of the financial performance of the enterprise. From the analysis, it can be rightfully

understood that, the firm has been performing considerably well. The PQ ratio of the enterprise
 can be mentioned to be 8.38 which present a sound figure. In association with this, Current Ratio

and the Quick ratio of the enterprise can also be mentioned to be at a good rate at 0.71 which

helps in understanding the manner in which the firm is managing its overall expenses and in

association with this, it is integral to gain an understanding of the fact that, the firm has not

earned any profit and is maintaining negative ratio currently (Yahoo.com 2020).

British Airways

5 BRITISH AIRWAYS ANALYSIS

Figure 1: The financial data of British Airways

(Source: Advfn.com 2020).

 Iberia

6 BRITISH AIRWAYS ANALYSIS

Figure 2: The financial data of Iberia

(Source: Advfn.com 2020).

 The given graphs and figures give an idea about the overall manner in which the

company is being able to earn a considerate amount of revenue and funds. In association with

this, it becomes relative to understand that these financials belong to the Group and hence,

analysis of the Iberia Analysis as a separate unit is difficult (Hoyle, Schaefer and Doupnik 2015).

However, as per the financials of the group, it can be rightfully mentioned that, the current ratio

is higher than that of British Airlines and in association with this the Net profit margin of the

group can be stated to be quite high. Hence, in consideration of this, it can be essentially

mentioned that, the Iberia Airlines is performing much better than British Airlines.

Evaluation of performance and analysis

Therefore, as per the competition and related standards, it can be mentioned that although
7 BRITISH AIRWAYS ANALYSIS
the British Airways can be mentioned to be performing well as compared to the overall Solvency

ratio which relates to the calculation of the Quick ratio and the current ratio (Bekaert and

Hodrick 2017). However, in terms of profitability, the firm has not been performing well and

initiatives need to be taken by the company in order to improve its performance in this domain.

In line with this, the IAG group which manages the Iberia Airlines has been performing very

well with a high and positive Net profit ratio and a considerate current ratio and solvency rate as

well.

Conclusion

Hence, the report followed a systematic format whereby the analyses of the manner in

which the financial statements and the financial reports are prepared have been identified. The

crucial financial statements of the British airways and Iberia were assessed and this was then
 followed by the assessment of the Budget methods of the firm. The latter half of the report tends

to analyze the financial performance of the firm from the statements and evaluates the same.

8 BRITISH AIRWAYS ANALYSIS

 References

Advfn.com 2020. Financials [online]. Available at: https://uk.advfn.com/p.php?

pid=financials&symbol=LSE%3AIAG (Retrieved on: 03 Feb. 2020).

Advfn.com 2020. Financials [online]. Available at: https://www.advfn.com/stock-

market/london/BAY/financials (Retrieved on: 03 Feb. 2020).

Bekaert, G. and Hodrick, R., 2017. International financial management. Cambridge University

Press.

Hoyle, J.B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.

Iairgroup.com 2020. Financials [online]. Available at:

9 https://www.iairgroup.com/~/media/Files/I/IAG/documents/annual-report-and-accounts-2018-
BRITISH AIRWAYS ANALYSIS
interactive.pdf (Retrieved on: 03 Feb. 2020).

Kieso, D.E., Weygandt, J.J. and Warfield, T.D., 2019. Intermediate accounting. John Wiley &

Sons.

Schaltegger, S. and Burritt, R., 2017. Contemporary environmental accounting: issues, concepts

and practice. Routledge.

Shapiro, A.C. and Hanouna, P., 2019. Multinational financial management. Wiley.

Yahoo.com 2020. Financials [online]. Available at:

https://finance.yahoo.com/company/british-airways?

h=eyJlIjoiYnJpdGlzaC1haXJ3YXlzIiwibiI6IkJyaXRpc2ggQWlyd2F5cyJ9&.tsrc=fin-srch

(Retrieved on: 03 Feb. 2020).