British Airways Performance Analysis Assignment - 1

British Airways Performance Analysis - Assignment ExampleThe above ratios reveal the comparative degree performance of BA for the two years under consideration. Profitability- wise operating profit ratio has registered a commendable performance in 2008 as compared to 2007. In occurrence the operating profit margin measures the helping of each sales dollar remaining after all cost other than interest, taxes, and preferred channel dividend are deducted. It represents pure profits earned on each dollar.(Lawrence J Gitman, page 67) The performance of BA has been excellent raising its operating profit ratio from 7.09% in 2007 to 10% in 2008 despite the fact that the rise in revenue is merely 3%. In the year 2007 total revenue was 8492m and that has lift only to 8753m. The extremely good profitability performance is again corroborated by the fact that return on equity has gone up from a mere 8.39% to 21.74%. Such a large increase in return on equity is remarkable when the total equit y has risen from 2411m in 2007 to 3233m. Overall BA has performed extremely well on profitability front. liquidity has been a problem for BA in twain years. Liquidity reflects the curtly term solvency situation of a ships partnership. Liquidity position provides an idea about whether the company is in a position to meet its short term obligations when those become due. Liquidity of a company is aptly reflected by its current ratio. The current ratio of 21 is considered optimum for any industry, exclusively this standard again differs from industry to industry. BA has a current ratio of 0.95 1 in 2007 and 0.971 in 2008. By any standard, the current ratio is much lower than the required standard. BA is liner a fluidityity crunch and if it continues like this BA might face difficulties in meeting its short term obligations. Current ratio change in 2008 when compared to 2007 is not even noticeable. The contributing major factors to the deteriorating the liquid position of BA a re current interest-bearing deposits that have depleted from 1642m in 2007 to 1181m in 2008. Liquidity is certainly a cause of concern for BA.