The previous chapter explained in some detail the individual items in an airline’s profit and loss account, balance sheet, and cash flow statement. Some idea can be gained of the airline’s size, capital structure, profitability, and the financing of its investments from an examination of these figures and the notes attached to them. However, performance ratios will need to be calculated in order to assess past trends of a particular airline or to compare different airlines. These could be helpful in evaluating a shareholder’s investment in an airline or in an assessment by banks or lessors before entering into a loan or lease agreement. The ratios can be categorised under the following headings:


Risk or solvency


Market valuation or investment