Critically analyse the relative importance of the management

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Reference no: EM131304578 , Length: 3450 Words

May Airlines is a leading business in travelling industry and has experienced turbulent times during the past 10 years due to stiff competition and as a result of global slowdown in the world economy. It has now emerged from the recession to earn revenue of $15.121 million for the year 20X6 through many initiatives such as better managing costs while ensuring customers benefits with more choice. A new scheme of pricing strategy was implemented with a view to maintain market share and to position the airlines for future growth within the next seven years.

"The following table below contains figures extracted from the MAS (Malaysian airlines) financial report 2013 and preceding years"

  2016 2015 Change in %

Route Revenue ($ Million)

 

   

Home county

1,906.7

2,015.2

(5)

Asian

2,001.3

1,576.2

30

Europe and Middle East

2,286.6

1,962.8

17

Australia and New Zealand

1,514.5

1,517.3

(0.2)

Africa and South America

Nil

18.1

(100)

Orient and North America

1,690.3

1,635.0

3

Group Financial Performance 2016 
2015   2014 2013
  2012

Total Revenue -$000

15,121,204

13.756,411

13,901,421

13,585,559

11,605,511

Total Expenses-$000

(16,314,775)

(14,167,738)

(16,485,693)

(13,485,355)

(12,288,452)

Taxation -$000

(16,051)

(5,937)

(8,441)

(44,690)

31,116

Profit/(Loss) after tax-$000

(1,168,839)

(430,738)

(2,521,325)

237,346

522,948

Shareholders' funds-$000

4,033,923

2,123,144

1,042,508

3,524,166

699,693

Net profit margin %

(7.7)

(3.1)

(18.1)

1.7

4.5

Returns on Shareholder's fund

(29.0)

(20.3)

(241.9)

6.7

74.7

EPS

(8.7)

(6.1)

(75.5)

7.2

25.3

Net tangible asset per Share

0.2

0.6

0.3

1.0

0.4

PRODUCTION

Network Size-KM

 

 

302,884

 

 

359,632

 

 

372,966

 

 

418,866

 

 

366,908

Time Flown-Hours

461,912

404,509

427,024

386,853

355,641

Distance Flown-000 KM

264,979

244,769

261,209

237,618

219,961

Available Capacity-000 TKM

8,214,384

7,292,377

7,872,485

7,893,689

7,366,845

Available passenger capacity 000 Seat KM

59,931,781

51,223,973

55,873,707

50,817,898

48,761,794

The assignment requires knowledge and the application of capital investment decisions (capital budgeting), gearing, contribution, financial ratios and budgetary controls.

Required:

You are asked to prepare a report to address the following matters that have been raised by the non executive director of the company.

(a) As a going concern, he wishes to evaluate the six revenue earning routes starting from the home country and the five others in light of stiff competition posed by the emerging in the Asia Pacific region. He has asked you to identify and assess:

- the routes that are producing of low level of profit and incurring huge working capital investment, and
- the implications of low profit yielding routes for adequate financial returns and profitability.

(b) He wishes to make a strategic decision about the long term viability of the three revenue losing routes of home country, Australia & New Zealand and South American divisions that face stiff competition from Singapore and Phillipines low cost carriers. As these divisions require considerable amount of capital expenditure and management cost information to improve efficiency and to make more competitive, he plans to dispose of the services to these three regions.

Critically evaluate the decisions to discontinue operations in these regions, even though the revenue from them still runs into many million dollars.

(c) Delays related to the Air Traffic Control let to heavy congestion in the skies over its own airports and this has been a major cause for concern. The CEO wants a close cooperation among its own team to improve various operational issues of the airport operations. The airline is required to identify the key areas for allocating finance resources to achieve a high return for the shareholders.

(i) Identify and analyse the factors which influence capital budgeting decisions that required efficient investment decisions over competing concerns

(ii) Critically analyse the relative importance of the management intention to reduce too much of borrowing through long term bank loan and other external lenders to continue with modernization programmes

(d) The Chairman advises on decentralization programme in which the decision making would be handed over to a new CEO to be appointed soon. It involves in online communication improvement and decision making techniques that would eventually cuts off staff up to 6 000 of them gradually over a three period. Effective use of regular reporting system using financial ratios and actual performance monitoring against budget is expected to spear headed.

(i) Advise the managing director on the reliance of using financial ratio analysis and budgetary controls for co-ordination and control of the group and the possible risks that the company may face.

(ii) Critically analyse how you would expect the management accounting function and ethical issues to be re-organized if the company expands its operations to number of different countries that affected by the ‘Brexit' decision of UK

(All relevant assumptions, fictitious statistics and calculations should be included in the report ( or as an appendix to it)

Verified Expert

Executive summary Malaysian Airlines is a leading business in travelling industry and has experienced a lot during the past 10 years due to stiff competition and as a result of global slowdown in the world economy. The Asian financial crisis in 1997 resulted in company registering losses for 5 years since 1997.The objective of the company is to build into a strong and respected business entity and effectiveness of one of three initiatives of Quality control circle programme. The report lays down the matters that have been raised by the non executive director of the company. The first chapter will be introduction which will provide a brief detail about the background of the organization, and introduction of the topic .In the second chapter

Reference no: EM131304578

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Reviews

len1304578

12/7/2016 8:01:53 AM

Distinction 70-100 As for “60-69 marks” band plus the following: Shows clear evidence of wide and relevant reading and an engagement with the conceptual issues. Develops a sophisticated and intelligent argument. Shows a rigorous use and a sophisticated understanding of relevant source materials, balancing appropriately between factual detail and key theoretical issues. Materials are evaluated directly and their assumptions and arguments challenged and/or appraised. Shows original thinking and a willingness to take risks.

len1304578

12/7/2016 8:01:42 AM

Critical analysis of the company’s management accounting function and ethical issues in the face of “Brexit” decisions by UK Further Instructions • Font Style: Times New Roman & Font Size: 12 • Line Spacing: 1.5 • Page Layout/Orientation: Portrait • All the margins should be set about 25mm on both sides (i.e. left & right) of each page. • Numerical Systems (e.g 1.0, 1.1 and 1.1.1) should be used for each section and sub- section. • Word count must be indicated on the cover page of the assignment.

len1304578

12/7/2016 8:01:37 AM

(a) [max 20] service routes producing low returns in terms of revenue and requiring huge working capital investments implications of low revenue routes to overall financial returns and profitability (b) [max 15] critical evaluation of the decision to dispose of the three routes (c) [max 20] identification and analysis of factors that influence capital budgeting decision and for ranking of projects that competing for scarce financial resources critical analysis for reducing dependent on too much of borrowing of external funds for modernization programmes (d) [max 25] Advice on the reliance of financial ratios analysis and budgetary controls for co-ordination and control of the group performance

len1304578

12/7/2016 8:00:28 AM

Instructions for the presentation: • Font style, Gill Sans • 1.5 line spacing • The page orientation should be portrait • Margins on both sides of the page should be no less than2.5 cm • Pages should be numbered • Your student name and number should be included on every page • You should provide your word count at the end of your report Instructions for Report 1. Executive summary (200-300 words, not to be included in the word count 2 Table of contents 3 Introduction 4 Main body 5 Conclusion 6 References

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