Financial Performance Management (Other (Not Listed) Sample)

Financial Performance Management Student Number: Table of Contents TOC \o "1-3" \h \z \u Introduction PAGEREF _Toc99200169 \h 3Answer to Question 1 PAGEREF _Toc99200170 \h 3Financial Performance Comparison of Virgin Atlantic and British Airways through Ratio Analysis PAGEREF _Toc99200171 \h 3Answer to Question 2 PAGEREF _Toc99200172 \h 6Application of Kaplan and Norton’s Balanced Scorecard to Manage Virgin Atlantic’s Performance PAGEREF _Toc99200173 \h 6Answer to Question 3 PAGEREF _Toc99200174 \h 9Application of <IR> Integrated Reporting Framework in Virgin Atlantic’s Improvement PAGEREF _Toc99200175 \h 9Conclusion PAGEREF _Toc99200176 \h 12References PAGEREF _Toc99200177 \h 14Appendix PAGEREF _Toc99200178 \h 16 Introduction Financial performance is a comprehensive review of a company's entire position in areas such as assets, liabilities, equity, costs, revenue, and overall profitability (Busco et al., 2019). Assets, liabilities, and equity are all measured separately. It may be calculated using a variety of business formulae that provide users with precise information about a company's potential efficacy. In the case of internal users, financial performance is used as a benchmark to gauge the health and position of their specific organisations (Galant and Cadez, 2017). The financial performance of a firm is scrutinised by other parties in order to decide whether or not it is a worthwhile investment. Financial statements must be analysed before any financial indicators can be used to determine overall performance. A financial performance study uses precise financial formulae and ratios, which, when contrasted to historical and industry indicators, give insight into a company's financial health and performance (Rodriguez-Fernandez, 2016). Financial performance is measured using seven important ratios that are widely utilised in the business sector to aid and assess the overall performance of a firm. This report has focused on identifying which company, between Virgin Atlantic and British Airways, is a better performer in terms of Financials. The comparison will be achieved by conducting a ratio analysis between the companies, taking their financial data of 2019 and 2020. The poor Performer company will be advised strategies through discussing the application of Balanced Scorecard and Integrating Reporting. The Kaplan and Norton’s Balanced Scorecard Framework will be considered while discussing the application. And, the <IR> Framework of integrated reporting will be considered to suggest its benefits and limitation to the poor performer company. Answer to Question 1 Financial Performance Comparison of Virgin Atlantic and British Airways through Ratio Analysis Liquidity Ratio is a financial tool which is used to identify the capability of an organisation to cover it short term obligations or current liabilities. There are three types of liquidity ratio which are commonly used, “Current Ratio, Quick Ratio or Acid Test Ratio, Cash Ratio” (Atrill and McLaney, 2018). Current Ratio is a liquid ratio and this ratio indicated whether a firm has short term function. This ratio is used to compare its current assets to its current liabilities (Berk and DeMarzo, 2017). In terms of Current Ratio of Virgin Atlantic in the year 2020, the value was 0.50 simultaneously in the year 2019 it was 0.59 It shows that company has more current liabilities than its current assets; it means company is not at a good liquid position. In case of British Airways, it was 0.36 in the year 2020 but in the year 2019 it was valued 0.74. In comparison of these companies Virgin Atlantic performed well in the year 2020, but in the year 2019, British Airways performed better than Virgin Atlantic. Again, Quick Ratio is a financial ratio which is indicates company’s capacity to pay its current liabilities without needing to sells (Musallam, 2018). It shows a company’s liquid position means it helps to identify a firm’s ability to cover its short-term obligations or current liabilities. Quick Ratio of Virgin Atlantic in the year of 2020 the value was 0.46 and in 2019 it was 0.56. It means company is not at standard condition, it indicates that company is facing trouble to cover its short-term obligation. In comparison with “British Airways” its quick ratio in the year 2020 valued 0.36 and in 2019 it was 0.71. It means in the year 2019 “British Airways” quick ratio is good as compared to “Virgin Atlantic” but in 2020 Virgin Atlantic’s quick ratio is better than “British Airways” Cash Ratio is a financial instrument which is used to measure firm’s liquid condition, it’s also a type of liquidity ratio, which shows how much cash is available to cover its current liabilities (Atrill and McLaney, 2018). Cash Ratio of “Virgin Atlantic” in the year 2019 was 0.26 but in the year 2020 it was 0.15 but in case of “British Airways” in the year 2020 it was 0.22 and in the year 2019 it was 0.20. In comparison of these companies “British Airways” cash ratio is more stable than “Virgin Atlantic”. In terms of “Profitability Ratio”, it is a financial instrument which is used by analysts and investors to identify a company’s ability to get profit or income (Berk and DeMarzo, 2017). The components require to identify this ratio- “Gross Profit, Operating Income”, Income Before Tax, “Net Income, Sales, Total Equity, Total Assets” etc. There are few types of profitability ratio – “Gross Margin, Operating Margin, Pre-tax Margin, Net Profit Margin, Return on Equity (ROE), Return on Assets (ROA)” etc. In term of Profitability Gross Margin of “Virgin Atlantic” in the year 2020 was 0.53 but in the year 2019 was 0.66. But in case of “British Airways,” Gross Margin was valued 0.73 in the year 2019 but in 2020 it was 0.54. So, in the comparison of these companies British Airways is better than Virgin Atlantic in term of Gross Margin. In terms of Operating Margin of Virgin Atlantic, it was 0.02 in the year 2019 but in the year 2020 it was -0.62, In case of British Airways its operating margin in the year 2019 was 0.10 and in the year 2020 it was -0.97. In the year 2019 British Airways was better than Virgin Atlantic but in 2020 Virgin Atlantic was better. * Pre-Tax Margin was better in case of “British Airways” compared to “Virgin Atlantic”. * In case of Net Profit Margin here also “British Airways” performed better than “Virgin Atlantic”. * Return on Equity (ROE) of “Virgin Atlantic” is better than “British Airways”. * In case of Return on Assets (ROA) “British Airways” was performed better than “Virgin Atlantic”. Leverage Ratio is one type of financial instrument which used to identify how a company financed its assets and business operations by using debt or equity. There are few leverage ratios which are normally used- Debt Equity Ratio, Debt Capital Ratio and Equity Multiplier. Leverage Ratio is another financial tool which is used by financial experts and investors to identify the ability of an organisation of doing business operations by using their DEBT and EQUITY. Types of Leverage Ratio like, Debt Equity Ratio, Debt Capital Ratio, Equity Multiplier, Interest Coverage Ratio etc. In case of Debt Equity Ratio, the value of “Virgin Atlantic” in the year 2019 was -18.01 but in the year 2020 was -5.89 but in term of “British Airways” its value was 2.22 in the year 2019 but in 2020 it was 9.26. In the comparison of these companies British Airways performed well as compared to Virgin Atlantic. In case of Debt Capital Ratio Virgin Atlantic’s value in 2019 was 1.06 but in 2020, it was valued 1.20 but of British Airways it was 0.69 in the year 2019 but in 2020 it was 0.90, in case of Debt Capital Ratio Virgin Atlantic performed better as compare to British Airways. In case of Equity Multiplier British Airways has been performed better as compared to Virgin Atlantic. Working Capital Ratio is a financial instrument which indicates a firm’s ability to operate daily operations and activities (Musallam, 2018). There are few types of Working Capital Ratio like, “Inventory Days, Account Receivable Days, Account Payable Days, Duration Working Capital Cycle”. In Working Capital Ratio, in term of Inventory Days “Virgin Atlantic’s” was valued 24.62 in the year 2019 but in 2020 it was valued 124.10. Again, for British Airways it was valued 35.75 in the year 2019 but in 2020 it was valued 27.66. In comparison of these companies Virgin Atlantic’s Inventory Days was better than British Airways. For Account Receivable Days Virgin Atlantic’s value was 35.46 in the year 2019 but in the year 2020 it was valued 67.19. Similarly for British Airways Account Receivable Days was 32.56 in the year 2019 but in 2020 was 32.03. In case of Account Receivable Days Virgin Atlantic has been performed better as compared to British Airways. In term of Account Payable Days Virgin Atlantic has been performed well as compared to British Airways. Duration of Working Capital Cycle was valued -1227.42 in the year 2020 of Virgin Atlantic and in 2019 it was 57.79. Similarly, for British Airways it was valued -413.83 in 2019 but in 2020 it was valued -411.34. Answer to Question 2 Application of Kaplan and Norton’s Balanced Scorecard to Manage Virgin Atlantic’s Performance Virgin Atlantic is a British airline company group, present in names of Virgin Atlantic Airways Limited and Virgin Atlantic International Limited. Their head centre in Crawley, England. Virgin Atlantic Limited this company is 51% owned by virgin group and 49% by Delta Air Lines. Overall, the total amount is £400m investment is split £204m virgin group (Obadina, 2019). Vision: It is the vision of Virgin Atlantic to become “the most loved travel company.” For this organisation, the best customer experience system serves as a source of inspiration. As a result of th...