Financial Accounting - Investment Opportunities

Chapter 1: Executive Summary
The cornerstone for investing in fact is through carrying out a financial analysis of the potential investment companies. This paper will be making financial analysis of EasyJet and Marks and Spencer using a circumspective comparative analysis on the financial statements of these two. Then based on the findings, a way forward will be given in form of practicable and realistic recommendation.
Having outlined the above, the financial analysis of EasyJet and Marks and Spencer will be done basing the argumentations on: profitability and liquidity, their capital Structure and gearing ratios, their relationship with investors as well as their trend of price per share and finally, their reporting of social responsibility methods. An intrinsic and expansive evaluation of these companies will be concurrently done to compare the similarities and difference accounting methods deployed as we later progress into their analysis to ascertain their worth and investment value. Finally, recommendations will be made to ascertain which investment will be most financially rewarding and practical. Chapter 2: Empirical Analysis of Retail & Airline Industries
Liquidity and profitability
For investor seeking financial vitality of a company, the liquidity and profitability indicators presage the most information of the financial capability of a potential investment company. According to Gitman and McDanie (2009), ratios are used to evaluate a company’s liquidity and profitability, also, important indicators that are used in identification of danger signals. Liquidity refers to the ability of a company quick access to cash to keep the operations going and meet its commitment on short-term basis. High liquidity instigated to an entity or an investor in a low-risk situation, but it also tends to diminish profitability.
The current ratio for the Airline industry in the current financial period was reported at 2:1. This is in accordance with the industrial regulation for the current ratio requirement and therefore its ease in the payment of its debts using the available cash. Its quick ratio was reported at 0.8:1 which was below the industrial requirement of 1:1. The reason for such lag was the increase in the accounts receivables for the Airline industry as most of its sales was based on credit. There is a close relation between the current liabilities and current assets of a firm. The current obligations should be paid with funds generated by proficient use of assets or internal cash. Meeting current obligations by acquiring long-term loans complicates further.
On the case of its profitability ratio implications, the Airline Industry’s profit margin had been increasing tremendously and this has been boosted by the increased market share in the economy. In the initial stages, the industrial profit margin of 35.7% was achieved and this showed the success it is experiencing. The return on capital for the firm was valued at 1...