Allegiant Report Essay Example | Topics and Well Written Essays - 500 words

Allegiant Report - Essay Example In 2007 the net margin (net income / sales) of the company was 8.74%. Based on the company yearly growth prediction of an above 10% the company was not able to meet its profitability targets, but it still perform better than the industry average of about 2% (Bachman). One of the weaknesses of the company’s growth strategy is that it does hedge adequately against the risk of higher fuel costs. In the article the readers of the material learned that the company utilized a fleet that was on the average 18 years old. The utilization of old inefficient planes hurt the company’s operating efficiency. A company that takes great pride in its ability of lower costs has an inherent and systematic deficiency in its cost structure. Gasoline represents the second largest costs for a typical airline after only the cost labor of the airplanes crews and administrative personnel. Another business risk of the company is its dependence on middle class as its primary business prospect. The firm is forgetting about the virtues of targeting business travelers. A higher retention rate of business clients could help the company create value over time. Ratio analysis is a financial diagnostic tool that can help an business analyst determine the financial performance of a particular common stock or privately owned business. In fiscal year 2007 the debt to equity ration of Allegiant was 0.93. The metric is good because the company has more total equity than total debt. In comparison with the industry standard of 1.48, the company has a more flexible capital structure that can be utilized in the future to acquire capital and spur further growth (Dun & Bradstreet). The firm’s quick ratio (current assets / current obligations) is even better at 1.75. A low current ratio decreases the business risk for an investor because it provides assurances that the company can meet its current obligations. The company most likely issue corporate paper at such as