Westjet free essay sample

A main measurement of a companys solvency is their debt- to-asset ratio. This ratio indicates the proportion of total assets that are financed by debt. (text) If this ratio is high it indicates a greater financing risk. In 2007 WestJets debt-to-asset ratio was 68. 2%, it decreased in 2008 to 66. 9%. This means they are financing more of the assets with equity in 2008 compared to 2007. When we compare this ratio to Air Canada we see a telling story. In 2007 Air Canadas debt-to-asset ratio was 77. 8%, but in 2008 it rose to 91. 6% mainly due to a rise in current liabilities. This shows that Air Canada is relying greatly on debt to finance their assets. When comparing the two, it is obvious that WestJets financing strategy is less risky as well that WestJets ratio was more consistent in 2007 and 2008. In order to get a complete look at WestJets financial performance we need to break from the main four financial statements and look at a few industry specific indicators. We will write a custom essay sample on Westjet or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The first indicator is Revenue per Available Seat Mile (RASM). This is the total revenue divided by total guest capacity. WestJets RASM for 2008 is 14. 88 cents up from 14. cents in 2007. It has grown year after year since 2004. Air Canadas RASM for 2008 is 17. 9 cents up from 16. 9 cents in 2007. This makes sense based on WestJets low cost strategy. The second key indicator is the Cost per Available Seat Mile (CASM). This is simply the operating expense divided by total guest capacity. In 2008 WestJets CASM was 13. 17 cents up from 12. 34 cents in 2007. These numbers are quite low compared to Air Canadas CASM of 17. 9 cents in 2008 and 16. 3 cents in 2007. This indicates that WestJet does a better Job of controlling expenses than Air Canada.