Financial Analysis

Financial Analysis of

Word Count : 4408 (Excluding Contents, Appendix, Referencing)

Purpose : MB461 – Assignment

Note : All figures are taken from the relevant year’s financial statement and

not from restated figures from following year’s financial statements

Contents Page

1.0 Introduction 3

2.0 Strategic Analysis (Task 1) 4

2.1 Analytical Objectives 4

2.2 Value Driver Analysis 5

3.0 Strategic Pre-Evaluation (Task 1) 5

3.1 Current Economy 6

3.2 SWOT Analysis 7

3.3 PEST Analysis 8

4.0 Analytical Questions (Task 1) 9

5.0 Financial Analysis (Task 2) 9

5.1 Margin Analysis 9

5.2 Ratio Analysis 10

6.0 Evaluation of the Organisations Performance (Task 3) 16

7.0 Forecasted Financial Statements (Task 4) 24

7.1 Income Statement 24

7.2 Balance Sheet 25

7.3 Cash Flow Statement 26

8.0 Conclusion 27

Appendix 28

Referencing / Bibliography 31

1.0 Introduction

SriLankan Airlines in the national carrier of Sri Lanka. Currently SriLankan Airlines operates to fifty one destinations in twenty eight countries in four main regions, namely Europe, Middle East, Asia and the Indian sub-continent using Colombo (Sri Lanka) as its operating hub.

• Started operations in 1979 under the name �Air Ceylon’ and later named �Air Lanka.

• Entered in to a strategic partnership with Emirates in 1998 and was re-branded as �SriLankan Airlines.

• Under the agreement signed for 10 years, all management is handled by Emirates.

• The Sri Lankan Government is the majority stakeholder, holding 51.05% of the stake.

• Other stakeholders are Emirates with a 43.63% stake and the Employees with 5.32% stake.

• The management agreement is set to expire in 2008 and negotiations are currently underway for a possible extension

• Revenue of recent years have been deeply affected by the 9/11 terrorist attacks and the 2004 Asian tsunami to hit Sri Lanka

• Four aircrafts were destroyed and two damaged by a terrorist attack in 2001 on the BIA Airport in Sri Lanka, reducing the airlines assets significantly.

2.0 Strategic Analysis

Strategic analysis is the first step in undertaking a financial analysis of an organisations performance. This can be broken down in to two areas such as,

2.1 Analytical Objectives

This sub-chapter answers the question, for whom are we carrying out this financial analysis? It takes in to consideration a range of point of views from various stakeholders of the organisation and thus looks at the analytical benefit for each of these stakeholders. Below table look at various stakeholders objectives of this financial analysis in terms of SriLankan Airlines.

Stakeholder Type

Apparent Objectives

Likely Decisions