(12 marks) Assess whether the change in price of jet fuel between November 2015 and July 2018 may have affected easyJet plc’s management of its working capital.

Question 1

Working capital

Answer 1

the amount of money a business has left over in order to pay for the day to day running of the business

Question 2

Application needed - what application are you gonna use ( don’t memorise just remember)
- Price of jet fuel rose

Answer 2

Price of jet fuel rose from $36 per barrel in NOV 2015 -> now reached $96 per barrel in july 2018

Question 3

1 NEGATIVE EFFECT OF PRICE OF JET FUEL RISING
- linked to cash flow

Answer 3

price of jet fuel rising means there is now an increased cash outflow

Question 4

why is this bad? application(don’t memorise app) why does it affect WC of easyjet?

Answer 4

Easyjet has largest 7th airline in WRLD with 342 aircrafts -> have to buy fuel

affects WC as it means there is a decrease in WC

Question 5

Counterbalance - essentially one way improving working capital - linked to easyjet negotiating

Answer 5

easyjet can negotiate lower jet fuel prices (especially since largest 7th airline in wrld) which reduces cash outflow meaning they can manage their working capital effectively

Question 6

Overall judgement - will change in jet fuel prices effect easyjet working capital ? yes/no (read note)

Answer 6

Yes