... been used in this report are mostly came from FAME (Financial Analysis Made Easy) and business annual report. Part (a): Financial health of easyJet 2000 2001 2002 (i) Liquidity: Current Ratio 0.65 2.57 2.01 CFFO to Current Liabilities Ratio 0.72 0.74 0.32 (ii) Solvency: Debt to Equity Ratio 0.78 1.49 0.07 Debt to Total Capitalization Ratio 0.44 0.194 0.063 Interest Coverage Ratio 3.68 5.9 14.69 CFFO to Interest Charges Ratio 7.35 10.17 16.11 Table 1: Liquidity and Solvency Ratios (Source: easyJet Annual Report) CFFO=Cash Flow from Operation (i) Liquidity The liquidity ratios have been used is aimed to indicate the ability of a set of current assets or cash flows to satisfy the easyJet's current liabilities. Historically, some rules of thumb have been used in the United Kingdom to judge the adequacy of these ratios (e.g., 2:1 for the current ratio) (Haskins, Ferris, Selling, 1996). To illustrate these liquidity measures, consider the easyJet data presented in Table 1. These ratios revel that, in 2002, for every pound of current liabilities, easyJet had 2.01 pounds of current assets. The trend of this ratio has been increased from ...

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