JetBlue - Case Study - Coursework Example

To analyze the strength and stability of the sales revenue earned by the company over the years, ratio analysis will be useful. Thus in this case study ratio analysis is applied for evaluating the increase in net revenue in relation to increased operating expenses. “Profitability reflects the final result of business operations.” (Chandra, 77). In order to identify the profitability of a company, gross profit ratio analysis and net profit ratio analysis have to be undertaken. The trend in the gross profit ratio of the company over the years shows that there is an increase in its gross profit.

From a loss of about $21188000 in the starting year of 2000, JetBlue earned a gross profit rate of 8.366 % in the next year itself. This shows that the company has a high potential to overcome its financial challenges. In the year 2002, the gross profit ratio had increased to 16.528%. The half year performance of JetBlue shows a gross profit ratio of 18.07%. But after that in the next half year there occurred a slight decline in gross profit ratio can be seen. It is 17.32 %. The gross profit rate graph of the company shows signs of significant increase.

Net profit ratio analysis of JetBlue further shows that the operating performance is considerably improving. In the initial year, the company has incurred operating loss of $ 21330000. In the next year, company earned net profit of $ 38537000. The net profit ratio in the year2001 is 12.027%. In 2002, it decreased to 8.64%. During the first half of 2003, it again increased to 9.76 % and in the next half year it further increased to 11.977%. Thus, the net profit ratio of JetBlue is not found to be stable in nature.

The ratio analysis on sales revenue shows that there is fluctuation in the net profit of the company over the past three years. This is due to higher operating costs resulting from increased interest expenses and increased taxation charges. “Financial risk can be measured from operating