Running head: COMPANY ANALYSIS AND REPORT ANALYSIS 1
COMPANY ANALYSIS AND REPORT ANALYSIS 2
Company Analysis and Report Analysis: Jetset and Flight Center Companies
Interpretation of Profitability Ratios
The return on equity for Jet set decreased from 5.78 in 2011 to 1.27 in the year 2012. This was also witnessed for Flightcentre as the ratio decreased from 192.6 to 25. This means that the profit after tax of the stakeholders investment per one dollar of revenue has decreased promptly. This can be attributed to less customer attraction that might have been caused by poor promotional strategies and under-pricing of the companies products.
The return on assets ratio for Jetset also decreased from 5.62 to 2.28. This is an indication that the after-tax revenue per one dollar of every sale has decreased in terms of the assets. This means that the assets were not optimally used in the income-generating activities of the company. This might have resulted out of machine breakdowns. On the other hand, the ROA for Flight Center increased from 12.39 in the year 2011 to 15.86 in the year 2012. This can be attributed to most favorable utilization of the company assets.
The gross profit margin ratio decreased from 10.40 to 5.07 from the years 2011 to 2012 respectively for Jetset. This means that the available total margin to cover the existing operating expenses and still yield a profit that decreased tremendously. This can be attributed to lesser amount of sales resulting from poor promotional and advertising campaigns. This was the case in the Flightcentre as the ratio decreased from 10.10 to 70.05.
The net profit margin for Jetset decreased from 10.40 in the year 2011 to 5.07 in the year 2012. This means that the after-profit of sales per one dollar of sale decreased. This decrease is a result of less advertising and promotional strategies. The net profit margin for Flightcentre increased from 13.07 in 2011 to 15.80 in 2012. This can be attributed to expansion in the customer base, good pricing strategies and increased sensitization to the public on the availability of the company products.
Asset Efficiency Ratios
The asset turnover ratio for Jetset decreased from 54.07 to 44.85. This means that for the size of the firms assets, the volume of business generated is less. This can be attributed to machine breakdowns. The asset turnover ratio for the Flightcentre increased from 93.38 to 100.29 in 2012 indicating more business from the optimal utilization of the companys assets.
For Jetset the inventory turnover days increased from 4 to 5 days. This means that the firm holds stocks in excess and it takes more days in order to make sales. On the other hand, the number of days for Flight centre decreases from 2 days in 2011 to 1 in 2012. This can be attributed to good stock management and good selling strategies.
The debtors turnover days for Jet set increased from 113 to 129 while those of Flight centre increased from 73 to 78. The increase in the debtors turnover days means that both companies take more time to collect the credit sales. This can be attributed to poor negotiation skills and credit collection methods.
The current ratio for Jetset decreased from 1.02 to 0.64 in 2012. This means that the ability of a firm to meet its short-term obligations has declined. This can be attributed to lesser income depletion of the company reserves. On the other hand, the current ratio for Flightcentre increased from 1.28 to 1.35. This means that the company is at a good position to meet its short-term obligations without encountering too many problems.
The quick asset ratio of Jetset decreased from 1.02 in 2011 to 0.64. This means that Jetset cannot meet its obligations without having to sell its assets. It means that the company has exhausted its reserves. On the other hand, Flightcentre had its quick asset ratio increase to 1.35 in 2012 from 1.28 in 2011. This means that the company can meet its short-term obligations without having to rely on its sales.
The Capital Structure Ratios
The capital structure ratios for Jetset showcases a positive trend that might be associated with the assumption that the company is able to manage a favorable balance in money provided as capital to the company by both the creditors and shareholders. This is good capital budgeting balance feature that is used to relieve the company from unnecessary long-term obligations like interest payments. On the other hand, Flightcentre ratios indicate a downward trend that might be taken to mean the existence of a lot of debts mismanagement and inability to strike a balance between funds provided by either the shareholders and creditors in that matter.
Market Performance Ratios
On a general platform, the market performance ratios for Jetset are showcasing a downward trend. This is a negative indication of the companys stock performance. This has an effect of reducing the number of potential investors to the company. For instance, the earnings per share ratio decrease from $25.8 in 2011 to $10.2 in 2012. However, on the other hand, the marketing performance ratios for Flightcentre indicate an insignificant downward trend that might affect the overall capacity of the firm in attracting potential investors.
In conclusion, it can be postulated that Flightcentre holds a better bargain of the deal in respect to potential investment, as opposed to Jetset. This can be largely attributed by the rather positive trend in the performance of the firm over the two-year period. There is a fair chance that investing in Flightcentre can increase ones level of expected return.