Managers believe that finance promotes a better understanding among departments and assist them to achieve corporate strategy (Shim & Siegel, 2008, p.5-7).
There are different tools through which the management analyses the efficiency of their financial management strategy. Few of the commonly used tools are ratio analysis, budget forecasting and analysing, net future cash flow though NPV. Management also uses certain specific tools to determine the profitability and the rate of return through tools like IRR, ROI and profitability index. Any problem existing in the financial policy followed by the company can lead to a major problem in future. Therefore the financial department should analyse the efficiency of these policies on a periodic basis and should update them to cope up with changing market scenario.
British Airways is a full service providing global airline that offers low fare routes throughout the year. The airline has an extensive network almost all over the world and connects all the vital destinations. The huge fleet size, large number of international flights and dense networking makes British Airways the largest airline in UK. At present the company has it’s headquarter at London Gatwick Airport as well as London Heathrow Airport. The airline service provided by the company connects more than 150 destinations through 248 aircrafts. However increased competition in airline industry, fluctuation in crude oil prices and collapse of the world economy has lead to the lowering of its passenger base. This downfall is also affecting the revenue as well as market image of the company. To have a better understanding of the efficiency with which BA manages its finance, an in-depth analysis of the company’s financials was done. On basis of this analysis certain vital factors related to the company are discussed below.
After analysing the annual cash flow statement of the