Accounting for Managers (ACFI5020)

Assignment 2018/2019

As you will recall at the beginning of the course, we discussed the important role that the capital
market plays in matching investors with companies. Investors are attracted to companies that are
able to generate healthy returns that are commensurate with the risks that the investment entails.
Once an investment has been made, investors and financial analysts monitor the performance of the
company in many different ways – one of which is through the use of ratio analysis.

Imagine that you were a recent investor in the budget airline, EasyJet. The below illustration shows
how EasyJet shares have performed over the past 6 months.

(Source https://www.hl.co.uk/shares/shares-search-results/e/easyjet-plc-ordinary-27-27p)

The fortunes of EasyJet have been somewhat contradictory over the past 6 months. Whilst
passenger numbers continue to increase, EasyJet’s share price has tumbled from almost £18 per
share to nearer £11 per share. Indeed, September was another encouraging month with over 8m
passengers using the airline. However, the share price has remained stubbornly low which raises the
question, why are shareholders concerned? Are investor concerns justified or do the key
performance indicators of the company suggest otherwise? As a financial analyst, you have been
tasked to investigate further.

Task One

Using the Annual Report and Accounts of EasyJet for the period 2013 to 2017, you are required to
evaluate the performance of the company. The reports and accounts for these years are available at
the following link:

http://corporate.easyjet.com/investors/reports-and-presentations/

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You are required to :

(a) Evaluate the performance of EasyJet in the following areas, using ratio analysis:

- Profitability
- Liquidity/Solvency
- Working capital efficiency
- Long term financial structure
- Investors’ perspective

You may also use earlier years’ financial accounts to supplement your analysis if you wish
to be specific with certain trends that you have identified (see below for specific
instructions).

In addition you could also consider the performance of EasyJet in comparison with its
peer group of competitors – for example, Ryanair.

You should summarise your findings and make particular reference to the interests of
the different stakeholders of the company.

When undertaking any calculations use the ‘Total’ figures from the financial statements.

Note: Any accounting ratios for Easyjet must be calculated (and workings shown) and
not extracted from external databases, although, further analysis may be supported by
downloading ratios from external databases for competitor companies.

(40%)

(15% will be awarded with regard to the relevance and accuracy of the ratios and 25%
will be rewarded according to the quality of your written analysis)

When completing Part (a) take the following into account:

1. 5 years of analysis would be worthwhile.

2. Benchmarking to at least one competitor

3. Make sure that you explain why the ratios are changing and what the

implications or conclusions of this are.

4. Don't forget to comment on the views of specific stakeholders.

5. Contemplate your presentation. This work lends itself to the use of graphs,

charts, tables and so on.

Task Two

Considering your response to Task One and any further reading, you are required to provide advice,
accompanied by a rationale, as to whether you would recommend a buy, sell or hold (if they are
already owned) policy for investors and potential investors EasyJet plc.

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 (10%)

Task Three

You are required to follow the link below and to read the material concerning the Supply Chain
Management processes at EasyJet.

https://www.supplychaindigital.com/company/inside-easyjets-industry-leading-supply-chain-team#

Required:

You must critically discuss the philosophies and approaches of EasyJet in terms of its supply-chain
management and contrast its approach with alternative theories of supply chain management. For
example, does the lean model utilised by EasyJet work for other industries? What are the risks of
applying such models and what are the downsides in the turbulent airline industry?

Appropriate credible academic and practitioner literature sources must be used to support your
critical analysis and the Harvard style of referencing must be adopted.

(50%)

(Total 100%)

Further Information:

You are required to present well structured answers of no more than 2500 words (excluding
calculations) in total. The words should be allotted according to the percentage marks awarded for
each task.

Learning Outcomes specifically assessed:

Subject Specific Knowledge and Skills

1. Identify and critically appraise the different components of a financial report, and assess the
adequacy of current international financial reporting requirements for a greater understanding
of company performance
2. Analyse and interpret financial data and information, evaluate their relevance and validity, and
synthesise a range of information in the context of business situations
3. Demonstrate the ability to use conventional management accounting and financial management
techniques to produce appropriate information for management to aid planning, control and
decision making
4. Evaluate the usefulness of contemporary management accounting techniques in measuring
business performance
5. Critically appraise management accounting techniques with respect to their effectiveness and
identify any weaknesses inherent in their use

Non Subject Specific and Cognitive Skills

1. Manage own learning, using the available range of resources, and ability to conduct research into
business and management issues
2. Ability to collect relevant information relating to a given situation, analyse that information and
synthesise it into an appropriate form in order to evaluate decision alternatives

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3. Demonstrate a practical and integrative approach to a problem area or issue
4. Demonstrate rigour of academic arguments as well as the application of theory
Assignments will be graded according to the general postgraduate assessment criteria and you
should also bear the following in mind:
 Evidence of critical judgement in selecting, ordering and analysing content in order to present
a sound argument
 The demonstration and understanding of relevant concepts and models
 The demonstration of insight and originality in responding to the assignment
 The provision of well-referenced evidence

Students are required to achieve an average of 50% in order to pass this module. All of the usual
University regulations will apply with regard to the late submission of work and plagiarism.