International Developments of Accounting - Essay Example

After the incident of 9/11, there were many things which got changed. One of the major changes that the companies have seen is the Airline industry falling from the Sky to earth. This was because the airplanes were used for terrorism purposes. People avoided traveling by Air instead they use other means of getting from one place to other.  Further to increase the problem recent recession gives all the businesses in the world a tough time. The airline industry was given a further tough time and got a financial crunch. To get our purpose, we have selected British Airways as one of the companies and another airline selected is Emirates (A UAE-based airliner). The Financial Data was compared using the Ratio Analysis.

The flag carrier of Britain is known as British Airways. The headquarters of the airline is based in Waterside which is near the hub of the Airline at London Heathrow Airport. This is the largest airline in the United Kingdom in terms of Fleet size, international flight, and international destination.

Emirates airline is the national airline of Dubai, United Arab Emirates. Emirates is the largest airline in Middle East. It carries around 2,400 passengers per week. The headquarters of the airline is based in Dubai (British Airways).

In the case of British Airways, the return on equity their percentage of return to an equity holder is on a declining trend. The return on equity in 2009 was in the negative zone at 19% and the losses further increase in 2010 which makes the return on equity to further negative zone by 1%, i.e. 20% in total. (Emirates) Whereas, in the case of Emirates Airlines is stated at 5% in 2009 and 21% in 2010 (Emirates). As the profit is increasing so the airline is giving its equity holders more and more returns. This also increases the market value of the Company. Therefore in terms return to Equity holders Emirates Airlines is better compared to British Airways which is reducing the shareholder’s equity.

The return on assets of British Airways is in the negative zone in 2009 it was at -3% and in 2010, it further decreased by 1% which makes it at -4%. Whereas in the case of emirates airlines, the return on assets, stood at 2% in 2009 which subsequently increased by 5% to make it at 7% in 2010. Therefore we can conclude that the management of Emirates Airlines is using its assets efficiently and effectively whereas the management of British Airways has to rethink its policies and redesign its procedures to get the Company to a profitable operation.

The story of British Airways' return on sales is that the management did get the expenses under control but the turnover also significantly decreased by 11.10%, therefore the Company got into a negative zone and the problems increased. The return on sales for British Airways in 2009 was -3% and it decreased by 1% more in 2010 making it a total -4% (Ratio analysis explained to investors). The return on sales of Emirates was at 2% in 2009 and it significantly increased by 6% to make it stand at 8% in 2010 (Ratio analysis explained to investors). This shows the efficiency of the management of Emirates to increase its revenue while Revenue for the year has increased by only 0.44% and they have increased their profit by 6% (Ratio Analysis study). It also indicates that the management of Emirates has decreased their expenses significantly for getting more profit for the year.

The asset turnover ratio of British Airways was at 86% in 2009 and it decreased by 11% to make it stand at 75% in 2010. In 2009, the ratio of Emirates was at 91% and it decreased by 16% to make it 78% in 2010 (Ratio Analysis study). In 2009, both the companies were utilizing their assets to generate more revenue but in 2010, both companies' asset turnover decreased so both the companies have a decreasing trend in term of utilizing their assets to generate more sales.

British Airways is in a loss they have negative Return on Equity, return on assets and return on sales. Further, the asset turnover ratio is in the positive zone as the company is earning revenue but the revenue is decreasing and the assets are increasing this makes the assets turnover ratio decrease from 2009 to 2010 (Ratio Analysis study).