JETBLUE AIRWAYS CORPORATION – 2014 Annual Report Student`s

JETBLUEAIRWAYS CORPORATION – 2014Annual Report

FinancialAnalysis

Introduction

Financialanalysis at JetBlue Airways Corporation will help to assess andmanage the financial risk that the firm may be exposed into. Byanalysing financial statements, the company will be able to assessthe performance of the business. It will be basically conducted toweigh the profitability of the business and any other finance-related entities. One of the most common way of analysing financialdata is by use of ration analysis. Financial analysis is categorizedinto two broad categories that is, quantitative analysis andqualitative analysis. Quantitative analysis is a business analysisthat seeks to understand the performance using mathematicalmodelling, research and measurements, this is the best way ofevaluating the profitability of a business as it provides realisttechniques of evaluating the financial instruments (Douglass, 2014).

Quantitativeand qualitative issues

Quantitativeissues: Ratio analysis

Ratioanalysis is based on the elements in financial statements such as theincome statement, the balance sheet and the cash flow statement. Theratios provide an early warning to the users as it reveal thefinancial situation and performance of the business (Douglass, 2014).The ratios are an index simulations relating to two financial data.It is used to summarize large quantities of financial data and canalso be used for comparison purposes.

JetBlueAirways Corporation- 2014 financial statements summary

Currentassets $1,200,000,000

Currentliabilities $1,936,000,000

Non-currentassets $6,639,000,000

Accountreceivables $310,000,000

Longterm debt $1,968,000

Longterm liabilities $3,374,000,000

Sales/revenues$6,120,000,000

Inventories$46,000,000

Grossprofit $4,726,000,000

Networth $2,529,000,000

Ratios

($ million)

Current ratio

0.620

Quick ratio

0.596

Debt ratio

0.251

Total liabilities to net worth ratio

2.100

Fixed assets to net worth ratio

2.625

Collection Period Ratio

18.489 days

Asset to sales ratio

1.281

Fromthe above ratio analysis, the company is more likely to facefinancial distress. The company will not be capable of meeting itscurrent obligations as they become due. This is as evident in thecurrent ratio which is much lower than the desired for a stableentity. Most of the other ratios have also proved that thecorporation is poorly performing and therefore more has to be done soas to improve the performance of the business. The company canacquire more long term funds to finance other profitable projects inorder to improve the performance of the business. The debt ratio isalso lower which would enable the firm to acquire more long term debtas capital to better the performance of the company. The analysis hasshown that more has to be done or else the company is at a highchances of facing financial risk.

Eventhough Quantitative analysis is a powerful tool in measuring theperformance of a business, it is not most sufficient since some ofthe factors affecting the profitability of a business cannot beexpressed numerically. It is therefore my advice to the management ofJetBlue to consider both quantitative and qualitative issues whileassessing the health of the company. This is because even qualitativefactors may impose either negative or positive impact to the businessperformance. Thequalitative issues which can be identified in this case includecustomer base, competitive advantage, market share, business growthopportunity, regulations among others. Maintaininga competitive advantage is more vital to the health of our companysince this will add value to the company. However, the company willhave to consent the competitive cost for it to remain where we are orattain more in this transport industry. Byanalysing these issues, the management will be able to evaluate thefinancial health of the business. This will play a major role inhelping management in making investment decision and more especiallywhen they need to acquire capital from external sources.

References

Form10k-JETBLUE AIRWAYS CORPORATION – 2014Annual Report RetrievedApril 19, 2015 fromhttp://investor.jetblue.com/investor-relations/financial-information/reports/annual-reports.aspx

Dun, B. (2001). Fourteen Key Business Ratios Used by D&ampB. Retrieved April 18, 2015, from https://www.dnb.com/product/contract/ratiosP.htm

Miller, S. (2011). The Seven Key Ratios Used in Key Ratio Analysis. Retrieved April 18, 2015, from http://ezinearticles.com/?The-Seven-Key-Ratios-Used-in-Key-Ratio-Analysis&ampid=5873597

Douglass G. (2014). Corporate financial management 4th edition. Britain: Pearson Education.

Radcliffe, B. (2015). Ratio Analysis. Retrieved March 30, 2015, from Investopedia: http://www.investopedia.com/video/play/ratio-analysis/