Financial Analysis of Qantas Airways: A Comparative Study with Virgin Australia

Running Head: Accounting for managers
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Project Report: Accounting for managers

Accounting for managers
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Contents
Introduction................................................................................................................................3
Company overview....................................................................................................................3
Financial analysis.......................................................................................................................3
Profitability analysis...............................................................................................................4
Return on capital employed................................................................................................4
Net profit margin................................................................................................................5
Liquidity analysis...................................................................................................................6
Current Ratio.......................................................................................................................6
Quick Ratio.........................................................................................................................7
Capital structure analysis........................................................................................................8
Debt to equity ratio.............................................................................................................8
Interest coverage ratio.........................................................................................................9
Asset efficiency analysis......................................................................................................10
Trade payable payment period ratio.................................................................................10
Receivables Turnover (days)............................................................................................11
Market performance analysis...............................................................................................11
Earnings per share.............................................................................................................12
Dividend coverage ratio....................................................................................................13
Recommendation and conclusion............................................................................................13
References................................................................................................................................15
Appendix..................................................................................................................................17

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Introduction:
Financial analysis is an approach which is used by the financial managers and the
external stakeholders such as suppliers, financial institution, stakeholders etc to identify the
performance and the overall position of the business. The financial analysis study makes it
easy for the business to evaluate the business, project, budgets, financial information and
other financial entities in order to make better strategies and policies to meet the common
goal of the business (Brigham & Ehrhardt, 2013). In this report, the financial analysis study
has been performed on the Qantas airways to identify the overall performance of the
company and the changes in the company from that last year. Along with that, the financial
performance of the company has been compared with the peer competitor, virgin Australia to
measure the industry performance of the business. In order to identify the financial
performance of the business, ratio analysis, one of the financial analysis method, has been
applied on Qantas limited and Virgin Australia limited.
Company overview:
Qantas airways in an Australian company which is operating in the Australian
aviation industry. The company has been founded on 16th November 1920. The business has
been commenced in the month of March in 1921. Headquarter of the company is in
Queensland, Australia. Currently, the company has almost 127 fleet sizes which are largest in
the Australian market and it is offering its services on 85 destinations (Home, 2018). The
Qantas is the oldest aviation company in the Australian market and third oldest at
international market. Around 95% of market share of Australian aviation industry is held by
the Qantas limited. The company manages its operations and activities through its subsidiary
companies.
Financial analysis:
Financial analysis is an analytical process which involves various methods to collect
the financial information and evaluates them in order to identify the financial process and
make decision about the company’s performance. In the report, the ratio analysis method has
been taken into the concern to identify the financial performance and make decision about the
company’s investment level. Ratio analysis study ensures that whether the entity is stable,
liquid, solvency or profitable enough to manage the monetary investment of the company
(Moyer, McGuigan, Rao & Kretlow, 2011). The ratio analysis study of Qantas limited is as
follows:

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Profitability analysis:
Profitability ratio analysis is a metrics which evaluates the financial statement of the
company to identify the total earnings generated by the company against the relative
expenses and the available resources of the business. Normally, it is measurement basis
which evaluates the profitability position of the business. It simply identifies the capability of
the business to generate the profitability. The ratio is important for the internal as well as
external stakeholders of the business to identify that how much profit has been generated by
the business and through which alterations, the profitability position of the business could be
improved more (Vogrl, 2014). In the report, the return on capital employed and the net
profitability ratios have been calculated and compared with the profitability ratios of Virgin
Australia limited to measure the changes and performance of the company in the aviation
industry of Australia. The profitability analysis study of Qantas airways is as follows:
Return on capital employed:
Return on capital employed is a profitability ratio which measures the total earnings
before interest and tax against the capital employed of the business. It identifies that how
much earnings could be generated before deducting the interest and tax expenses against the
capital employed of the business (Baker & English, 2011). The ROCE study has been
perform on Qantas limited and Virgin Australia to identify the performance of Qantas limited
in the industry:
Figure 1: Return on capital employed
(Annual report, 2018)