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Financial Analysis

1987 words - 8 pages

Background of Cathay Pacific
Cathay Pacific is a multinational aviation enterprise. Its partner company is Swire Pacific. Cathay Pacific headquarter is located in Hong Kong which contains the major advantage of geography. Cathay Pacific has been managing the numeric fleet. It lead the Company becomes the youngest fleet in the world.
In the early years, the airline manly concentrates in Hong Kong, Manila, Singapore, Sydney, Shanghai and Canton. During the extension between 1960 and 1980, the routes expanded to North America. After the procurement of new aircraft, leading the Cathay Pacific becomes a renowned industry.
Nowadays, Cathay Pacific services include 181 destinations in 41 ...view middle of the document...

95 2011: (9,859+19,597)/37,007 = 0.8
Normally, ratio 1:1 is better but this two years the ratio still lower than that. It cannot achieve to the standard value. Cathay Pacific will suffer a larger risk in debt-paying ability in next year.
Account receivable turnover
2012: 99,376 ÷ (9,922+9,859)/2 = 10.1 2011: 98,406 ÷ (9,859+11,065)/2 = 9.41
Between 2011 and 2012 the account receivable turnover increases 0.69 values. In Cathay Pacific, does not have many dead working capitals affect the transaction of capital.
Average collection period
2012: 365/10.1 = 36.3 days 2011: 365/9.41 = 38.8 days
The ratio is decreasing, creditor pay in their credit before the due date faster. A shorter collection period mean the company has better management of receivables
Inventory turnover
2012: 4,017 ÷ (911+746)/2 = 4.85 2011: 3,794 ÷ (746+368)/2 = 6.81
The ratio is decreasing, the inventory mobility become lower and it occupied the space. Furthermore, most inventories consist with the depreciation which affects capital usage. If the circs consistently happen, overstocked products will affect the short term of debt-paying ability.
Besides, inventory cannot convert into sale so the revenue decrease. It indicated Cathay Pacific acquire an inefficient planning in the marketing and distribution of resource.
Average sale period
2012: 365/4.85 = 75.3 days 2011: 365/53.6 = 53.6 days
The ratio is increasing which demonstrates the ability to achieve its obligations and cash flow is unhealthy. The selling mechanism is existed a bug. Cathay Pacific is lack of measure and proper usage.
Time interest earned
21012: 1,788/1,629 = 1.10 2011: 5,500/1,726 = 3.19
Since the ratio has been decreased, their ability to repays its debt and interest become more difficulties.
It just a little bit higher than 1.00 ratio which may not easy to afford the next year interest expenses. As the difficulties rise in funding, investor may lack of confident of running operation strategy.
Debt-to-equity ratio (All number in thousands)
2012: 97,704,000/ (17,082,000+38,363,000+1,741,000+31,180,000) = 1.11
2011: 81,189,000/ (17,082,000+38,785,000-(58,000)+21,915,000) = 1.04
The ratio has a slight increase, Cathay Pacific become more rely on the external lenders and insufficient of generation of cash to pay the obligations. The interest of investors and lenders protection becomes worse which affect the investment and capital flow. Also, the internal decision may go wrong because the retained earnings decrease. Therefore, if the company is consistently increasing in this ratio, additional capital from investor will loss and influence the future planning.
Earnings per Share
2012: $0.233 2013: $1.398
This is a dramatically decrease of EPS. The financial position is weakened and the programme cannot carry a continuous improvement. As net income decrease, the profitability of...

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