BMG704(86968) Assignment Sample – Department of Global Business and Enterprise 2022

1. Introduction

The international financial environment has improved the marketing prospects of international companies. The report helps in presenting recent development issues and its impacts on financial performances and development of Ryanair in 2019 and 2020 years. Brexit and COVID-19 have impacted on several businesses and their financial performances throughout the year. In this context the dividend policy and capital structure with MM approach the tax brought a reduction in weighted average cost of capital.

The financial analysis of Ryanair is going to be measured in this report to show their financial position in the market. Brexit and COVID-19 has affected a company and their financial statement for both years. During this pandemic Ryanair has affected their financial performances and their stability in ratios.

These issues have affected gross profit, liquidity ratio, efficiency ratio and investment ratio throughout the year. Based on this report there are profitability ratio, liquidity ratio, efficiency ratio and investment ratio. The report is going to be measured and define two ratios of each ratio and understand their financial statement for both years.

Ryanair was the cleanest and greenest major airline group in UK where they have improved their digital platform to mitigate issues of Brexit and COVID-19. Brexit and COVID-19 has affected stakeholders and productivity of employees of a company. Ryanair has been affected by these issues where it has affected on their financial performances.

Therefore, productivity of employees influences the performance of the finances of a company and their income statement throughout the year. The financial analysis shows the ability of a company to gain a huge profit and loss. It states the fluctuation of operating data from its sales and operating expenses for a company to calculate profitability and liquidity ratio

2. Issues that have affected the company

Impact of Brexit

Brexit has negatively impacted Ryanair airlines, this organization has faced several threats about suspending flights in European regional airports. This organization has lost permission for several months in 2019 and withdrawn flights between the UK and EU (, 2021). Moreover, airline strikes have deteriorated the economic situation of Ryanair airlines.

Since UK has been ruled out by EU organizations, border control in airlines has severely developed. As opined by Brezonakova, Badanik and Davies (2021), after the Brexit situation, the airline industry of the UK has to pay more charges to cross the UK border and import goods from other countries.

After Brexit circumstances, Ryanair airlines have to pay more border charges to cross the UK border and to land their aeroplanes in European regional airports. Additionally, Ryanair airlines have faced a huge number of tariffs to import goods from other countries of Europe.

Impact of COVID-19

Due to travel restrictions, Ryanair airlines can schedule 1%, on their general flights and maintain social distance they have lost a huge number of passengers. This organization has recorded only 0.04 million passengers after the pandemic situation internationally, compared with the month of April in 2019, the passenger count was 13.5 million (, 2021).

Ryanair has to refund almost 80-85% of airfare to their consumers and face a huge loss in the import market (Restu, Warsito and Harahap, 2020). Additionally, these airlines have to pay 300 million Euros as per the expenses of fuel to suppliers, due to late payment suppliers’ relationship has become distorted.

2.1. Impact on future performance

Conducting a discussion about the impact of Brexit on the future performance of Ryanair airlines is a tough task. However, due to lower airline charges, this organization can easily complete their schedule in proper time. According to Heffer-Flaata, Voltes-Dorta and Suau-Sanchez (2021), a bilateral agreement between UK and EU, will be beneficial for Ryanair in order to provide flexible and consistent customer services.

COVID-19 global pandemic situation has abruptly deteriorated the financial and economic situation of Ryanair airlines. Due to the pandemic situation, the price will be raised to deliver a huge amount of taxes to the UK government. Technical advancement will be conducted in Ryanair airlines to supply effective consumer services in the following future.

As opined by Dube, Nhamo and Chikodzi (2021), it will be a tough task for Ryanair and other airlines organizations to redevelop pre-pandemic economic conditions in a few months. Leisure trips of higher-class passengers will play an effective role in order to fuel up around 80% annual revenue in 2024 (, 2021). The distorted economic situation will take another few years to improve and again maintain similar alignment compared with the pre-pandemic situation.

3. Dividend policy

Dividend irrelevance theory

Dividend irrelevance theory believes that it has no impact on a company’s stock price where it is based on cash payment. Irrelevance theory with MM approach suggests that there is no taxes and bankruptcy cost. As cited by Murtaza et al. (2018), the dividend irrelevance theory can decrease the ability of a company to be competitive in a long run.

It suggested that the money would be beneficial for reinvesting in a company to generate their meanings throughout years.

There are several assumptions of the irrelevance theory with MM model of dividend to increase the company’s earnings which are as follows:

(1) Taxation does not exist where it includes personal taxes and corporate income taxes

(2) There are no flotation costs and transaction costs when a company faces issues about stock price in a market.

(3) Dividend theory has no impact on capital budgeting

(4) leverage has zero effect on the capital cost of a company where the theory has zero impact on it.

Dividend relevance theory

The relevance theory argues that the decision has been made by an organisation that affects market value and dividend matters. As cited by Raza et al. (2018), the relevance theory believes that investors are risk averse and follows “bird-in-the-hand”. The relevance theory has an effect on stock price where theory ensures the maximisation of their shareholder’s wealth throughout the year.

Ryanair dividend policy

 Ryanair intended to pay a special dividend of €581 million in 2020 and €561 million in 2019 and the total number of shares was 47 in 2020 and 38 in 2019. Hence, Ryanair follows “bird-in-the-hand” where they pay their share to a special dividend in both years. The company has special dividends on both ordinary shares and ADRS (, 2020).

4. Capital structure

Relevant theory

Capital structure is a combination of different sources of finance for the company which includes the equity share capital, preference share capital, loan and other long-term sources of finance. Capital structure refers to a degree of debts in capital of a company and their financial strategy.

BMG704(86968) Assignment Sample - Department of Global Business and Enterprise

Figure 1: Relevant theory

(Source: MS Word)

Irrelevance theory- MM’s

The irrelevant theory of Modigliani and Miller approach assumes there are no taxes, however in real world taxes benefit and reduce weighted average cost of capital. As argued by Dierkes et al. (2017), the interest paid on borrowing funds from another organisation where their tax is deductible. The actual cost is lower than the nominal cost due to benefits of taxation.

The increase in debt would add value to a company until a given value of threshold. This approach with taxes does admit tax savings and change in debt to equity ratio has an impact on WACC. It has stated that a higher debt the lower WACC where this irrelevance theory is a modern approach of Capital structure theory. The trade-off theory of this approach promotes that a company can take advantage of its requirements with debts in a long run.

Ryanair’s capital structure

  • Gearing ratio

Gearing ratio refers to a company’s financial leverage where the level of bearing liabilities from its capital structure. As cited by Nieszporek et al. (2017), the gearing ratio is calculated by dividing the total current liabilities to shareholder’s equity that has stated if debt increases the level of risk factor increases.

The total non-current liabilities were €4325 million in 2020 and €3939 million in 2019 and total share capital and non-current liabilities was €5142 million in 2020 and €4961 million in 2019. The gearing ratio for this company was stable as in 2020 the ratio was 0.84 in 2020 and 0.79 in 2019 which was lower as compared to 2020.

  • Trend analysis of share price

BMG704(86968) Assignment Sample - Department of Global Business and Enterprise

Figure 2: trend analysis of share price

(Source:, 2021)

Trend analysis refers to a method of technical analysis that shows a prediction of a future movement and shows fluctuating share prices. The trend analysis in this report has shown that Ryanair has faced fluctuating share prices throughout the years. It helps the investor to get an idea of what happened in share prices in past and in the future. The investors are concerned about the fluctuating share prices and its future estimation.

5. Financial analysis

Profitability ratio

  • Gross Profit Margin

Gross profit margin refers to a fraction of sales and measures the ability of a company to gain a huge profit from its sales. The gross profit measures as a percentage of revenue that exceeds the cost of goods sold. The gross profit margin can be measured when the direct cost has been deducted.

The revenue of Ryanair was €5,566 million in 2020 and €5,261 million in 2019 which was lower in 2019. Ryanair has a stable gross profit margin as a result of financial analysis. The gross profit was €3,774 million in 2020 and €3,160 million in 2019 which was lower as compared to 2020. A suitable gross profit margin varies above 20% that has stated a company controlled their cost efficiently (Refer to appendix 1).

  • ROCE

Return on capital employed is a good measure of a company’s performance that shows the financial ratio of a company’s profit from its capital. The company’s various sources of finances that they use these resources to build their business and grow their performances. The EPS of Ryanair was €671 million in 2020 and €948 million in 2019 which was greater as compared to 2020.

The capital employed of Ryanair €9,239 million in 2020 and €9154 million in 2019 that has stated the ability of a company to generate their income from its equity. The ROCE was 7.26% in 2020 and 10.36% in 2019 which was greater as compared to 2020 (, 2020) (Refer to appendix 1).

Liquidity ratio

  • Current ratio

The current ratio refers to comparison between the current asset to its current liabilities. The current ratio shows the ability of a company to meet their short-term debt in a short-term period. A suitable current ratio should vary from 1.2 to 2 that shows a company pays their short-term debt in a shorter period. The current asset of Ryanair was €4,494million in 2020 and €3804million in 2019 and current liabilities was €5508 million in 2020 and €4097 million in 2019.

The current ratio is measured as dividing by current asset to current liabilities to measure their ability of payment in a shorter time. The current ratio for Ryanair was unstable for both the years and the value was 0.82 in 2020 and 0.93 in 2019. It has stated that Ryanair does not have enough liquid cash to pay their current liabilities and debt for both the years (Refer to appendix 2).

  • Quick ratio

The quick ratio refers to the ability of the company to pay their debt in a shorter time. In this context there are two ratios that have been measured as a liquidity ratio to show the ability of payment of a company. The current liabilities was €5508 million in 2020 and €4097 million in 2019. Therefore, Ryanair’s quick ratio was 0.82 in 2020 and 0.93 in 2019 which was greater as compared to 2020 (, 2020). (Refer to appendix 2).

Efficiency ratio

  • Accounts Payable days

Account payable days refers to the ability of a company to pay its supplier in a shorter period. The account payable days was €1368 million in 2020 and €574 million in 2019 which was lower in 2020. Account payable days are measured as dividing by payable days to the cost of goods sold. The cost of goods sold can be measured as a difference between revenue and gross profit. The account payable turnover days was 278 in 2020 and 100 days in 2019 (Refer to appendix 3).

  • Accounts receivable days

Account receivable days measure the period that a company takes to pay their current liabilities in a shorter period. It has stated that a company with a lesser day of receivable they have capacity to pay their liquid cash to their suppliers. The account receivable days was 68 in 2020 and 60 in 2019 which was lesser as compared to 2020. The account receivable days was 4 for both 2020 and 2019 years (Refer to appendix 3).

Investment ratio

  • Earnings per share

Earnings per share measures the monetary value of earnings per share of the stock market where it is calculated by dividing earnings after taxation to the number of ordinary shares that Ryanair holds. The number of ordinary shares were 1.23 in 2020 and 2.04 in 2019 and earning after taxation was 0.773 in 2019 and 0.58 in 2020 which was lower as compared to 2019. The EPS of Ryanair was unstable as inventors could not get a huge profit for investing in a market (Refer to appendix 4).

  • Dividend per share

Dividend per share is essential for calculating financial performance to show financial health in a long run. A steady and growing dividend per share can be measured as stability and growth for a company throughout the year. The total equity per share was 47 in 2020 and 38 in 2019 and the total dividend paid by Ryanair was €581 million in 2020 and €561 million in 2019.

The dividend per share of Ryanair was 12.31 in 2020 and 14.84 in 2019 which was greater as compared to 2020. It has stated that from the view point of dividend per share the shareholder can be expected not to invest in a market as their return on investment is considered to be greater (Refer to appendix 4).

6. Conclusion and recommendation


As per the result of financial performance for Ryanair it has concluded that the company faced a lower earning as an impact of Brexit and COVID-19 situation. These two recent issues have affected the company with a higher amount where they faced unstable profitability, unstable liquidity. Therefore, Brexit has impacted their business steadily as they could not operate their business globally as a higher amount of taxation.


Based on this context Ryanair has been faced with a higher amount of debt to be paid during the pandemic situation. Hence, the company should focus on return on capital employed where they should improve their sales and reduce their operating cost to mitigate the issues in recent days. The company should focus on digital platforms to mitigate their cost and make a huge profit. The company has faced an unstable liquidity ratio where they should focus on selling their current liabilities to get a stable liquidity in a shorter period in future.


Brezonakova, A., Badanik, B. and Davies, R., 2021. Brexit in Air Transport after 2020. In SHS Web of Conferences (Vol. 92, p. 09001). EDP Sciences.Available at:

Dierkes, S. and Schäfer, U., 2017. Corporate taxes, capital structure, and valuation: Combining Modigliani/Miller and Miles/Ezzell. Review of Quantitative Finance and Accounting48(2), pp.363-383. Available at:

Dube, K., Nhamo, G. and Chikodzi, D., 2021. COVID-19 pandemic and prospects for recovery of the global aviation industry. Journal of Air Transport Management92, p.102022.Available at:

Heffer-Flaata, H., Voltes-Dorta, A. and Suau-Sanchez, P., 2021. The impact of accommodation taxes on outbound travel demand from the United Kingdom to European destinations. Journal of Travel Research60(4), pp.749-760.Available at:, 2021,  Annual Report 2020 – Ryanair, Available at:, [Accessed on: 07.07.2021], 2021, Back to the future? Airline sector poised for change post-COVID-19, Available at: [Accessed on: 07.07.2021]

Murtaza, M., Iqbal, M.M., Ullah, Z., Rasheed, H. and Basit, A., 2018. An analytical review of dividend policy theories. Journal of Advanced Research in Business and Management Studies11(1), pp.62-76. Available at:

Nieszporek, T., Boral, P. and Gołębski, R., 2017. An analysis of gearing. In MATEC Web of Conferences (Vol. 94, p. 07006). EDP Sciences. Available at:, 2021, How will Brexit impact the airline industry?,Available at:, [Accessed on: 07.07.2021]

Raza, H., Ramakrishnan, S., Gillani, S.M.A.H. and Ahmad, H., 2018. The effect of dividend policy on share price: A conceptual review. International Journal of Engineering & Technology7(4.28), pp.34-39. Available at:

Restu, D., Warsito, T. and Harahap, V.N., 2020. AN ANALYSIS OF THE IMPACTS OF COVID-19 PANDEMIC TO AIRLINE BUSINESS CASE STUDY: PT. GARUDA INDONESIA. Advances in Transportation and Logistics Research3, pp.524-534.Available at:, 2021, Financial statement for Ryanair, Available at:[Accessed on- 07.07.2021]


Appendix 1: Profitability ratio of Ryanair

Profitability Ratios  2020 2019
Revenue 5,566 5,261
Gross Profit 3,774 3,160
Gross profit margin (%) 67.80% 60.06%
Formula: Gross profit/Revenue*100
Profitability Ratios  2020 2019
Earning before tax 671 948
Capital employed 9,239 9,154
ROCE (%) 7.26% 10.36%
Formula: Earnings before tax/Capital employed*100

(Source: MS Excel)

Appendix 2: Liquidity ratio of Ryanair

Liquidity Ratios  2020 2019
Current Assets 4,494 3,804
Current Liabilities 5,508 4,097
Current Ratio 0.82 0.93
Formula: Current Assets/Current Liabilities
Liquidity Ratios  2020 2019
Current Assets 4,494 3,804
Stock 3 3
Current Assets – Stock 4,491 3,801
Current Liabilities 5,508 4,097
Quick Ratio 0.82 0.93
Formula: Current Assets- Stock/Current Liabilities

(Source: MS Excel)

Appendix 3: Efficiency ratio of Ryanair

Efficiency Ratios 2020 2019
Trade payable days 1,368 574
Cost of Goods Sold 1,792 2,101
Accounts Payable Days 279 100
Formula: Trade payable/Cost of goods sold*365
Efficiency Ratios 2020 2021
Accounts Receivable 68 60
Revenue 5,566 5,261
Accounts Receivable Days 4 4
Formula: Trade receivable/Revenue*365

(Source: MS Excel)

Appendix 4: Investment ratio of Ryanair

Investment ratio 2020 2019
Earnings after tax and preference dividends 1 0.773
Number of ordinary shares 47 38
Earnings Per Share (EPS) 1.23 2.04
Formula: Earnings after tax and dividends/Number of ordinary shares*100
Investment ratio 2020 2019
Total equity dividend paid 581 561
No. of equity shares 47 38
Dividend per Ordinary Share (DPS) 12.31 14.84
Formula: total equity dividend paid/number of equity share*100
Investment ratio 2020 2019
Non-current liabilities 4,325 3,939
Share capital, reserves & non-current liabilities 5,142 4,961
Gearing ratio 0.84 0.79
Formula: Non-current liabilities /Share capital, reserves & non-current liabilities*100

(Source: MS Excel)

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