Financial Analysis and Management

Running head: FINANCIAL ANALYSIS AND MANAGEMENT
Financial Analysis and Management
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1FINANCIAL ANALYSIS AND MANAGEMENT
Table of Contents
Introduction:..................................................................................................................... 2
Background to Qantas Airways:.......................................................................................2
Capital structure and dividend policy:...............................................................................3
Investment appraisal tools:.............................................................................................. 7
Conclusion:...................................................................................................................... 8
References:....................................................................................................................10

2FINANCIAL ANALYSIS AND MANAGEMENT
Introduction:
The current assignment would focus on providing a brief overview of a leading
retail organisation operating in the UK aviation industry, which is Qantas Airways. The
overview of the organisation would be provided in order to identify its key corporate
objectives, which would assist in revealing the type of problems confronted by the
organisation in the recent times. The second section would elaborate the capital
structure policy and dividend policy of Qantas Airways and the ways through which such
policies have affected the performance of the organisation in the past three years.
Finally, the paper would shed light on the tools of investment appraisal used by the
managers for undertaking investment decisions so that assurance could be provided
regarding the fulfilment of the key corporate objectives of the organisation.
Background to Qantas Airways:
Qantas Airways is a leading airline organisation operating in the aviation industry
of Australia. It is mainly engaged in providing passenger services and services related
to freight air transportation in Australia and in other global nations. It provides express
freight and air cargo services to its passengers along with programs related to customer
loyalty. Currently, it has a fleet of 313 aircrafts. The organisation has been established
in 1920 and the headquarter of the airline is located in Mascot, Australia (Qantas.com
2019).
The finance function of Qantas Airways is ascertained as the activities, which
include cash management existing through business. The finance function of the
organisation includes some primary functions, which could support management. Such
finance functions include financial management, financing, capital budgeting and
dividend policy. Firstly, the financing option of Qantas Plc includes raising capital to help
in its operation and investment schemes (Al-Najjar and Kilincarslan 2016). It is termed
as the capital structure, which includes the combination of debt and equity securities for

3FINANCIAL ANALYSIS AND MANAGEMENT
maximising the market value of the organisation. Thus, Qantas needs to maintain
healthy relationship with its shareholders for raising funds through equity.
Secondly, the financial management of Qantas is to assure that the organisation
has adequate funds on hand for assisting in regular operations. This includes supplier
payments, receiving seasonal funding, collections from customers and investment of
surplus cash (Barr and McClellan 2018). The financial activities need technical,
analytical and individual skills. The individual skills assist in maintaining, developing
relationships with the lenders and suppliers.
Thirdly, capital budgeting of Qantas, which is termed as investment function as
well, includes selecting suitable projects so that funds could be invested depending on
expected risk. Owing to the huge capital investment for prospering in a competitive
market, it is a very critical function for Qantas Plc. Therefore, the main issue that the
organisation might encounter is in dividing the level of investment in small scale for
better management. In opposition, the effect would be adverse on the growth and
development of the organisation (Bekaert and Hodrick 2017).
Finally, it is necessary to maintain sustainable dividend cover in future. This is
because if it is too low, there is a chance that the organisation would not be able to pay
out to its shareholders (Baker and Weigand 2015). Therefore, Qantas needs to maintain
high dividend cover for ensuring the interest of its investors.
Capital structure and dividend policy:
In order to analyse the capital structure and dividend policy of Qantas Airways,
the following table is prepared to determine their implications on the performance of the
organisation over the past three years:
Particulars 2016 (in £m) 2017 (in £m) 2018 (in £m)
EBIT 1,643 1,370 1,573
Net Profit 1,029 853
98
0