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Accounting and Finance 1 Essay Example

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Accounting and Finance 1

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There is a favorable amount of increase in net profit margin of British airways this is because company may able to control its operating expenses as compare to past year for example British airways depreciation and amortization expense has decrease to 714m from 715m.Debtor’s turnover ratio provides the days in which cash are received from the customers or sales are realized. The ratio is helpful in indications of credit policy adopted by the company. The turnover period will provide the detail to what extend companies credit customers will able to pay their dues.British airways again have shown efficiency in creditor turnover period. Company period is shorter then pervious year period there is at least four days difference between them. Shorter period indicate that company does not have a going concern or any liquidity problems. its also indicate company credit rating is good and company consider and give importance to maintain its credit rating so it can obtain supplies from different suppliers.The current asset ratio measures the adequacy of current assets to meet short-term liabilities. It reflects whether the company is in the position to meet these liabilities as they fall due. Traditionally, a current ratio of 2:1 or higher was regarded as appropriate for most of business to maintain there creditworthiness; however, more recently a figure of 1.5:1 is regard as normal. Company vary in there size complexity and activities so it might be different for same business organization but having different size.Here the British airways show weakness in meeting its current liabilities. Current asset ratio has fallen from past year. This indicates that company currents assets are not enough to meet is upcoming liabilities. This will result in loosing reputation in market. Company credit limit will be increase. Company will have to use their cash convertible to finance there liabilities.The gearing ratios are calculated to see what proportion of total asset is financed by equity ratio and what by loans. Gearing ratios also help the investor to see how much a company is drowned in loans. Company having high gearing might lead to its liquidation or it may cause going concern problems.Earning per share is one of the most popular ratios among investor. This shows how much return or the investor will earn on its investment. EPS is also use in the

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preview essay on Accounting and Finance 1
  • Pages: 4 (1000 words)
  • Document Type: Essay
  • Subject: Unsorted
  • Level: Undergraduate
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