EASYJET TAKES OFF TO 342P SHARE PRICE

Review Assessment
Grade 12 B

EasyJet, Europe’s second largest low-cost airline, saw its share price rise
strongly on its first day of trading as a public limited company, rising 10% to
£3.42. The offering was priced at £3.10 a share with the issue of 63 million
shares raising £195 million. The issue, solely to institutional investors,
represented about 25% of the enlarged share capital. The stake held by
Georgiana HajiIoannou, founder and chairwoman of the company, was valued
at about £328 million. Mrs. Haji-Ioanno and her brother and sister still control
about 75% of easyJet. Investment bankers said the issue attracted strong
interest. The performance of the shares had been helped by the strong rise of
Ryanair, the leading European low-cost airline, which has been used by
investors as a yardstick for the easyJet offering.
EasyJet shares have also proved attractive because the company has seen its
passenger numbers rise markedly over previous years. Capital raised from the
share issue is earmarked to support the purchase of new aircraft as part of the
group’s plans for a rapid expansion during the next few years, which includes
the addition of 32 new Boeing 737-700s, more than doubling the size of the
fleet.
Assessment 25 MARKS, 45 MINUTES
1.Define the terms:
i. Public limited company

it’s a company that sells their shares for the general public.( EasyJet is a
public limited company )
ii. Share price [4 marks]

is the value of one share

Too short response , your answers should relate to the case study
3 /4MARKS
2. Outline two possible sources of long-term finance available to easyJet.
Long term finance is any finance that extends to 5 years and more. Two possible long term
finance that are available to EasyJet is long term loans, A form of loan that is paid off over
an extended period of time greater than 5 years is termed as a long-term loan. This
time period can be anywhere between 3-30 years. The second type of long term
finance that is available for EasyJet is debentures,
A debenture is a medium- to long-term debt instrument used by large
companies to borrow money, at a fixed rate of interest.
Refer to the notes provided and add more information .
Also provide information keeping in mind the marks

[6 marks] 4/6 MARKS LITTLE MORE DETAILS ON DEBENTURES

3. Differentiate between capital and revenue expenditure.

Capital expenditure is the money spent by a firm to acquire assets or to improve the

quality of existing ones. Revenue expenditure is the money spent by business
entities to maintain their everyday operations

3 MARKS ( MORE DETAILS SAIF)

4..Evaluate the view that easyJet’s decision to raise long-term finance by

selling shares is preferable to raising it through borrowing. [9 marks)

Incomplete ???
Please work on this answer and send it to me

10/25
Some answers have been attempted well ! Try to include more details , some
are lacking important details.