ABC is a private popular low cost airline in Pakistan and provides cheap 'no-frills' flights to a wide range of Pakistani and international Customers

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ABC is a private popular low cost airline in Pakistan and provides cheap 'no-frills' flights to a wide range of Pakistani and international Customers. Since the company was launched in 1995 it has grown from strength to strength. Some of the key business highlights for 2012 were as follows:

Ø Record profit before tax of 129 million, up 56 per cent from 83 million in 2011.

Ø  Passenger numbers rose by 11.5 per cent to 33 million.

Ø  Passenger revenues increased by 5.9 per cent or 2.13 per seat, driven by strong summer trading.

Ø  Additional revenues improved significantly in all areas, rising by 34 per cent or 0.86 per seat.

Ø Unit costs excluding fuel fell by 1.5 per cent or 0.42 per seat from 28.78 to 28.36.

Ø Unit fuel costs increased by 33 per cent to 2.48 per seat.

Ø  58 new routes and 11 new destinations were launched, expanding the network to 262 routes and 74 airports in 21 countries.

Ø  The fleet grew to 122 aircraft with an average of 2.2 year, making it one of the most modern and environmentally friendly fleets in Asia.

Ø  The balance sheet remains strong with cash of 861 million and gearing at 31 per cent. The table below shows some financial information for ABC extracted from the income statement and balance sheet in in 2012.

 

Years

2012

2011

Revenue

1619.70

1314.40

Profit *

117.8

66.2

Capital employed†

1614.60

1215.30

Net assets

982.90

863.40

Current assets

1087.20

890.90

Current liabilities

509

414.50

* earnings before interest and tax

† Long-term capital employed (equity + non-current liabilities)

 

 

 

 

Required:

1.     Explain how ratio analysis can be used to interpret accounts from the perspective of two stakeholders.

2.     According to the key business highlights, gearing for ABC was 31 per cent in 2012. Interpret this figure.

3.     Calculate the following financial ratios for 2012 and 2011:

a.      Net profit margin

b.     Current ratio

c.      Return on capital employed (ROCE)

4.     To what extent do the results in Question 3 support the view that ABC has "grown from strength to strength"?