Question:
1. An analysis of the information contained in the latest Annual Report and Financial Statements of the company, commenting on the strengths and weaknesses of the company over two years by applying ratio analysis in the categories listed above;
2. Suggestions or recommendations for improving the business, based on the analysis;
3. Full referencing of your sources of information, which may include any external sources such as the financial press, commentators and the internet that you may have used to strengthen your analysis.
Financial statement helps to provide a clear and precise idea about the company financial position in the market. The report helps to throw light on the financial aspect of the company with the help of the ratio analysis which are calculate don he basis of the financial statement produced at the end of the each fiscal year of the company (Erickson, 1989). The company Qantas airways limited is considered to be one of the most leading airline service providers in Australia.
Financial health of the company is determine by the profitability, efficiency, solvency ( short term and long term) and other key aspect such a market based ratio of the company which are analyse thoroughly over the period of two year. The paper helps to provide an in depth analysis of the company financial health of the Australian airlines services, Qantas Airways Ltd. With the help of the critical analysis of the financial statement of the company from 2012 and 2013 help to provide a clear a idea about the research study (Fridson & Alvarez, 2002). Established in the year 1920, Queensland and Northern territory Air Services (QANTAS), from a domestic airline service provider the company grows rapidly and become one of the most global airline services across the world providing more than 150 destinations in more than 50 countries.
Financial statement consist of the three key element which are balance sheet, income statement and cash flow statement which help to provide key business activities which are carried by the company over the given fiscal year which help to provide the financial prison of the company in the market (Gibson & Frishkoff, 1979). Balance sheet helps to provide a clear and precise idea about the company financial aspect which consists of the asset and liabilities of the company which eventfully help the user to determine the financial stability of the company regarding the utilisation of the company resource (Golbe & Schachter, 1985). Income statement help to provide a clear idea on the revenue generated by the company over the given fiscal year which eventually help the company to determine the net profit or loss the company suffered during the given year which help to provide as platform to forecast or predict the company future profit figure with proper strategic procedure (Hacioğlu & Dinçer, n.d.). Cash flow statement of the company help to [provide a clear and precise idea about the company three basic activities which involves financing activities, operating activities and investing activities. Financial statement provide the platform for the ratio calculation such as from balance sheet company provide a clear idea on the several business risk with the help of the current ratio, quick ratio, debt ratio, financial leverage and short term and long term debt. Income statement helps to throw light on the company profitability aspect (Helfert, 1987). The financial analyses on the basis of their financial statement are as follows,
The profitability aspect of the Qantas has been analysed and determined with the help of the net profit margin (Hickman, Lester & Hickman, 1996). Tax rate, asset turnover, return on asset, financial leverage, return on equity, return on invested capital and interest coverage. From the analysis of the profitability ratio of the company it is evident that the company net margin of profit increase as in the year 2012 the net profit margin of the company was negative which increased in the year 2013 to 0.03. Profitability ratio of the company help to identify and reveal the company current state of generating profit, it is significant to analyse and determine the current potential fro investment of a company as it is directly related to the increased earnings per share (Horrigan, 1967). It is considered to be one of the most critical and vital criteria for QAN investor to take effective decision. Asset turnover ratio of the company remains stable on the consecutive two year 2012 and 2013. The asset turnover ratio implies that the company is effectively managing its resource higher the value of the asset turnover ratio is favourable. Return on asset also helps to throw light on the profitability aspect of the company (Langsen, 1988). Higher value of ROA is considered to be favourable which signifies that the company is making money with the investment on the asset, however from the financial data it is evident that the company Qantas was making loss in the year 2012 on the investment which is increase in the year 2013. Return on equity is considered to be primary factor of the profitability of the company. Higher value of the ROE is considered to be one of the most crucial and significant as it indicates that the firm is able to generate income from the new investment. Return on equity seems to be improving for the Qantas Airways ltd as the company in the year 2012 was making huge loss from the investment as the figure are in negative while the company in the year 2013 making money from the investment which is evident from the ratio analysis of the company. From the profitability ratio analysis it is evident that the company is making profit in the year 2013 when compared with the year 2012 (Lien & Shrestha, 2010).
Efficiency ratio help to provide a clear and precise idea about the company overall capability manage its resource which eventually help the company to earn profit for the given fiscal year. Efficiency ratio is determined and analysed with the help of the days sale outstanding, days inventory, payable period , receivable turnover, inventory turnover, fixed asset turnover and asset turnover ratio which help to provide clear and precise idea about the perfect utilization of resource of the company (Miller, 1972). Days sales outstanding is considered to be one of the most basic measure of the efficiency of the company, as it is evident that it is easy to convert the sales into cash easily. Therefore it is recommended that the lower value of sales outstanding is recommended for the organization whereas the higher value of the sales outstanding is unfavourable for the organization. The day’s sale outstanding for the company is increasing which is not favourable of the company as it signifies that the company is inefficient in credit sales collection.
Inventory day’s value must be lower which helps to provide the business to decrease the level of investment in the inventory. The inventory days of the company must be lower, it is evident from the analysis of the Qantas company it is lower which is favourable for the company (Myer, 1969). Payable period is considered to be one of the most significant measures which help to provide a clear idea on the company short term liquidity aspect. Higher value of the payable period indicates that the company is making their dues cleared to their supplier quickly. Qantas payable period indicate higher value of the payable period which signifies that the company is clearing the due related to their supplier quickly. Account receivable helps to provide a clear and precise idea on the efficiency of the business in collecting and generating the credit sales. The receivable turnover ratio of the company Qantas is decreasing which indicate that the company is not able to collect its credit properly which result in the poor credit sales generation from the company end (Oxenbridge, Wallace, White, Tiernan & Lansbury, 2010). Fixed asset turnover is also considered to be one of the significant measure which helps to provide a clear and precise idea on the company efficiency ratio. Fixed asset turnover helps the company to determine whether the fixed asset is generating revenue or not. From the figure of the fixed asset turnover of the company Qantas it is evident that the fixed asset is generating revenue for the company as the fixed asset turnover increase over the year.
Solvency of the company is related with the debt and liabilities that the company have incurred during the given fiscally year and ability to meet its short term obligation and long term obligation which eventually helps to determine and identify whether the company is susceptible to solvency risk.
Short term solvency includes several key aspects which are current ratio, quick ratio, long term debt and other long term liabilities. Current ratio helps to provide a clear and precise idea about company ability to meet its current obligation. Current ratio of the Qantas airways is increasing which indicate that the company current liabilities exceed the current asset. The company which have current ratio below 1 indicates that the company is not able to meet its current obligation as the value of the current ratio for the Qantas Company is less than one. Similarly quick ratio is also considered to be one of the significant measures of the short term solvency which help to determine the ability of the company to meets its short term obligation (Palmer, 1983). Quick ratio helps to determine the liquidity aspect of the business as it provide a clear and precise idea about the ability of the firm to pay all of its debt with the help of the available liquid asset. Quick ratio of the Qantas airways is below one which indicates that the company is not able to repay all its debt with the help of available liquid asset. Quick ratio of the company should be above one which indicates that the company have sufficient liquid asset to repay its debt. The other key aspect of the short tem solvency is short term debt and short term liabilities which indicate that the Qantas Company have consistent short term debt which provide a clear picture that the company debt remains constant for two consecutive years which is a negative indication for the company liquidity aspect (Pettit, 2007).
Long term solvency of the company is considered to be one of the significant measures to determine the ability of the company regarding the solvency risk related to its business operation. Long term debt, long term liabilities, financial leverage and debt/equity are considered to be one of most important element to determine the long term debt of the company (Robinson, 2009). Lower the value of the long term debt is considered to be favourable for the company which indicate that they are less susceptible to the risk of solvency. Lower value are favourable where as higher value of the long term solvency are not favourable as the business primarily depend on the external lenders thus it increase the risk related to the overall business operation which is more susceptible to solvency risk specifically at higher interest rate. A debt/ equity ratio is the percentage of the asset of the business finance by debt and by shareholders.
Financial leverage is also determined as the trading on equity where there is a utilization of debt to acquire the new asset. Financial leverage of the company is decreasing which is not favourable as the chance to utilise the debt is less if the leverage decreases. Therefore the company should focus to increase the financial leverage which helps the company to utilise the debt to purchase new asset which will help to decrease the risk related to long term solvency of the company.
Leverage is also referred as gearing, leverage is considered to be one of the most key measurements for a firm to determine the long term financial solvency. It is considered to be one of the most important measures to assess the risk related to the company which is finance by external sources (RIEDL & SRINIVASAN, 2010). In the year 2013 QAN laid down a key strategy which decreases the debt to octal asset ratio indicating that the company QAN is less dependent on their creditors and they can clear the due to their customer and stakeholder without any financial burden.
|
Market based ratio |
2013 |
Services industry (Industrials sector) |
|
P/E ratio |
12.4 |
14.6% |
|
Dividend yield |
0 |
Price earnings ratio is considered to be one of the most critical and significant measure o evaluate how much the market current value for $1 of profit a company earn for the given share which eventually help to indicate that the expectation for a company growth which will be analysed in the given report to provide a clear and precise idea about the company market based ratios (Steffy, Zearley & Strunk, 1974). With the help of the industrial sector analysis the company can utilised the rate of the proper service sector as a standard or a benchmark. With the help of the industrial sector analysis with the QAN P/E makes it clear that the QAN shares are undervalued relative to the overall industry average. The indicator with the help of comparison lead to a proper measure which provide that the investor have less expectation regarding the QAN growth and thus greater loss since the 2012 fiscal year (Wild, Bernstein & Subramanyam, 2001).
|
|
QAN |
Major airlines industry |
|
2013 Dividend yield |
0.00% |
27% |
Dividend yield provide a clear measure that eh return the shareholder receive for each share in each period. The average repayment rate distributed by the airline industry is 27% for the year 2013 however the Qantas airline are only pay 0%.
Conclusion and Recommendation
From the analysis of the financial statement which eventually helps to calculate financial ratio force the flying kangaroo to focus for a increased market share primarily in the competitive environment. The analysis helps to provide clear and precise idea on the weakness and strength of QAN, along with external threats and opportunities (Velez-Pareja & Davila, n.d.).
With the help of the SWOT analysis it is evident that the company Qantas is struggling to overcome the issue related to the business operation. QAN has been continuously lagging behind which is clearly indicated in the overall efficient and profitability two primary indicator of long term adversity. Proper strategy should be implement which help to improve the profitability and efficiency of the company which eventually help the company to incur more revenue for the given fiscal year.
References
Erickson, K. (1989). The balance sheet. Washington, DC.
Fridson, M., & Alvarez, F. (2002). Financial statement analysis. New York: John Wiley & Sons.
Gibson, C., & Frishkoff, P. (1979). Financial statement analysis. Boston: CBI Pub. Co.
Golbe, D., & Schachter, B. (1985). The Net Present Value Rule and an Algorithm for Maintaining a Constant Debt-Equity Ratio. Financial Management, 14(2), 53. doi:10.2307/3665157
Hacioğlu, U., & Dinçer, H. Managerial issues in finance and banking.
Helfert, E. (1987). Techniques of financial analysis. Homewood, Ill.: Irwin.
Hickman, J., Lester, E., & Hickman, J. (1996). Financial ratio analyst. New York: Warren, Gorham & Lamont.
Horrigan, J. (1967). An evaluation of financial ratio analysis. Chicago: University of Chicago.
Horrigan, J. (1978). Financial ratio analysis. New York: Arno Press.
Langsen, A. (1988). Dividend Payout Policy Related to Tobin’s Q-Ratio. Financial Management, 17(4), 11. doi:10.2307/3665761
Lien, D., & Luo, X. (1993). A Note on the Relationship between Exchange Exposure and Hedge Ratio.Financial Management, 22(1), 20. doi:10.2307/3665961
Lien, D., & Shrestha, K. (2010). Estimating optimal hedge ratio: a multivariate skew-normal distribution approach. Applied Financial Economics, 20(8), 627-636. doi:10.1080/09603100903459907
Miller, D. (1972). The meaningful interpretation of financial statements. [New York]: American Management Association.
Myer, J. (1969). Financial statement analysis. Englewood Cliffs, N.J.: Prentice-Hall.
Oxenbridge, S., Wallace, J., White, L., Tiernan, S., & Lansbury, R. (2010). A comparative analysis of restructuring employment relationships in Qantas and Aer Lingus: different routes, similar destinations. The International Journal Of Human Resource Management, 21(2), 180-196. doi:10.1080/09585190903509472
Palmer, J. (1983). Financial ratio analysis. New York, N.Y.: American Institute of Certified Public Accountants.
Pettit, J. (2007). Strategic corporate finance. Hoboken, N.J.: John Wiley & Sons.
Pyke, E. (1930). The balance sheet. [Australia: s.n.].
RIEDL, E., & SRINIVASAN, S. (2010). Signaling Firm Performance Through Financial Statement Presentation: An Analysis Using Special Items*. Contemporary Accounting Research, 27(1), 289-332. doi:10.1111/j.1911-3846.2010.01009.x
Robinson, T. (2009). International financial statement analysis. Hoboken, N.J.: John Wiley & Sons.
Safi, A. Analysis of Luxury Airlines Emirates Airways and Competitors. SSRN Journal. doi:10.2139/ssrn.2045661.
Brealey, R., & Myers, S. (1984). Principles of corporate finance. New York: McGraw-Hill.
Ross, S., Westerfield, R., & Jaffe, J. (2005). Corporate finance. Boston: McGraw-Hill/Irwin.
Steffy, W., Zearley, T., & Strunk, J. (1974). Financial ratio analysis. Ann Arbor: Industrial Development Division, Institute of Science and Technology, University of Michigan.
Velez-Pareja, I., & Davila, M. Financial Analysis and Control – Financial Ratio Analysis (In Spanish).SSRN Journal. doi:10.2139/ssrn.1366523
Velez-Pareja, I. Financial Analysis and Control – Financial Ratio Analysis (Slides). SSRN Journal. doi:10.2139/ssrn.1638279
Velez-Pareja, I. Financial Analysis and Control – Financial Ratio Analysis (Slides in Spanish). SSRN Journal. doi:10.2139/ssrn.1366728
Ward, K. (1994). Strategic issues in finance. Oxford: Butterworth-Heinnemann.
Wild, J., Bernstein, L., & Subramanyam, K. (2001). Financial statement analysis. Boston, Mass.: McGraw-Hill.
Yagil, J. (1983). AN EXCHANGE-RATIO DETERMINATION MODEL FOR MERGERS: AN EXTENSION. Financial Review, 18(3), 87-87. doi:10.1111/j.1540-6288.1983.tb01923.x
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download
