Financial Ratio Analysis

This assignment provides a comprehensive financial ratio analysis for a company spanning the years 2013 to 2016. The analysis covers various key ratios across different categories, including profitability (Return on Total Assets), solvency (Debt-Equity Ratio, Interest Coverage Ratio), and efficiency (Receivable Turnover Ratio, Creditor Turnover Ratio, Inventory Turnover Ratio, Asset Turnover Ratio). Additionally, the document includes a calculation of Return on Capital Invested (ROCI) for each year.

Running head: BUSINESS VALUATION AND ANALYSIS
Business Valuation and Analysis
Name of the Student:
Name of the University:
Author Note:

2BUSINESS VALUATION AND ANALYSIS
Table of Contents
Porter’s Five Forces Model of Qantas Airways Limited.................................................................2
SWOT Analysis of Qantas Airways Limited..................................................................................3
Corporate strategy of Qantas Airways Limited...............................................................................3
Accounting Policy...........................................................................................................................4
Financial Performance of Qantas Airways Limited at the end of 2013..........................................5
Financial Performance of Qantas Airways Limited for 2015 and 2016..........................................7
Analysis the data of 2013, 2015 and 2016.......................................................................................7
Recommendations and conclusion..................................................................................................8
Reference List..................................................................................................................................9
Appendix........................................................................................................................................10

3BUSINESS VALUATION AND ANALYSIS
Porter’s Five Forces Model of Qantas Airways Limited
Rivalry from competitors- From the case study of Qantas Airways Limited, it is noted
that there is fewer firms in the Australian aviation industry and none of them can equalize
Qantas Airways Limited in terms of performance, profitability as well as market share
(Qantas.com 2017).
Threats from new entrants- From the case study of Qantas Airways Limited, it is noted
that different firms are trying to enter in the market to give a high level of competition to
the airline industry. Furthermore, threat from new entrants is quite less for Qantas
Airways Limited (Trugman 2016).
Threats of substitute products- From the case study of Qantas Airways Limited, it is
noted that different substitutes are available in the current marketplace. Threat from
substitute products is quite less to Qantas Airways Limited.
Bargaining power of suppliers- From the case study of Qantas Airways Limited, it is
noted that different war materials are needed, where fuel and aircrafts is the essential
element. Qantas Airways Limited is taking the product from one of the biggest supplier
in the marketplace that act as main strength of the company.
Bargaining power of buyers- The bargaining power of buyers shows about the buyer
power for influencing the price as well as other factors. From the case study of Qantas
Airways Limited, clients are available in the market and firms for serving them so that
buyers have the power to influence the price as well as operations of the company.

4BUSINESS VALUATION AND ANALYSIS
SWOT Analysis of Qantas Airways Limited
Strengths Weakness
Oldest airline in Australia
High market share in Australia
20 domestic and global destinations
Monopoly in airline sector
Huge Sponsorship
Advertising campaign
Strong backing of Australian Government
Issue with employee or human resources
Too much concentration around Australasia
Opportunities Threats
Investors attractiveness
Advancement of technology
Asian different tourist destination
Joint venture with international brands
High fuel prices
Intense competition in the market because of new
entrants
High labor cost
Corporate strategy of Qantas Airways Limited
From the case study of Qantas Airways Limited, it is noted that the company need to
investigate over the corporate strategy of the business. There are different factors that relates to
the corporate strategy of Qantas Airways Limited. Qantas Airways Limited has come into
existence in the year 1920 and plans for opting strategies for managing the business as well as
enhancing the growth (Sheth and Sisodia 2015).

5BUSINESS VALUATION AND ANALYSIS
After 1992, Qantas Airways Limited has made many changes into its strategy,
functioning, operations as well as technology and sources for managing and enhancing the
performance and profitability of the business. It is noted that the company has adopted two
strategies for managing the performance as well as profitability of the business. The company
has used international expansion strategy as well as diversification strategy for the business
enterprise (Armstrong et al. 2015).
Till now, Qantas Airways Limited had already operated its business into 42 countries
with 173 offices and 35000 employees. Most of the business operations had started to
management the performance like budget airlines, Jetstar, Qantas holidays and Qantas catering
for evaluating the situation of the business firm (Sekaran and Bougie 2016).
Accounting Policy
From the case study of Qantas Airways Limited, it had been analyzed that the company is
peppering the final financial data at the time of analyzing the different point of view in relation
to the company for managing the reports based on accounting policies.
Revenue and expenses recognition
The rules of IFRS and US GAAP explain that an association needs to be identified in the
income and expenses based on market value in the income statement. In addition, revenue is
identified of an association that could be understood by the Business Corporation of trading of
products or services such as sales, interest income, long-term gains and short-term profits where
expense is calculated as loss of an association that can be paid by the Business Corporation at the
time of trading products and services such as labor, operational expenses and cost of goods sold

6BUSINESS VALUATION AND ANALYSIS
(Peñaloza, Toulouse and Visconti 2013). Therefore, the accounting rules show that the expenses
should be recorded in the debit column and income needs to be recorded in the credit column in
the income statement.
Asset and liability recording
The rule of IFRS and US GAAP show that an association should identify overall asset as
well as liabilities based on market value in the balance sheet, where assets is recognized as
economical profit of business that need to be converted by the Business Corporation based on
nature of assets (Meffert 2013). The short-term asset is that asset that can be converted in a year
and long-term asset need some time like plants and debtors. On the other hand, liability is
recorded as debt of an association can be converted by the Business Corporation based on the
nature of liability. Therefore, double entry accounting system is helpful where total asset equals
liability and capital of business enterprise.
Financial Performance of Qantas Airways Limited at the end of 2013
Liquidity ratio 2013
Current ratio 0.823390895
Quick ratio 0.709105181
Working capital -1,125.0
Profitability Ratios 2013
Operating Profit Margin 0.002182705
Net Profit Margin 0.000320986
Return on Capital Employed 0.0
Return on Equity 0.000841184
Return on Total assets 0.000247525
Capital structure ratio 2013

7BUSINESS VALUATION AND ANALYSIS
Debt- equity 2.398384926
Interest coverage ratio 0.057432432
Efficiency ratio 2013
Receivable turnover ratio
Creditor turnover ratio
Inventory turnover ratio
Assets turnover ratio
Particular 2013
ROCI
-
100.3846154
The financial data of the company for the year 2013 depict ways for identifying the level
of performance of the company based on finance. Most of the ratio had been calculated for
identifying liquidity, efficiency, profitability and solvency position of Qantas Airways Limited.
On analysis, it is noted that current ratio of Qantas Airways Limited depict a bad liquidity
position for the company that reveals the fact where company cannot repay their short-term debt
obligations for specified time. In addition, the quick ratio of Qantas Airways Limited shows a
bad position in the year 2013. Overall, the working capital of Qantas Airways Limited is
negative that show that company need to make some changes so that they can sustain in the long-
run (Keller and Kotler 2016).
Profitability ratio help in predicting the profitability position of any business enterprise.
On analysis, it is noted that Qantas Airways Limited is earning very less profit from the market
that restrict the company to work smoothly in the near future.

8BUSINESS VALUATION AND ANALYSIS
Capital structure ratio reveals that debts of Qantas Airways Limited are quite higher than
the assets of the company that need changes. Efficiency ratio of Qantas Airways Limited shows
bad efficiency and it is suggested that the company should make some changes during the
recovery days for maintaining the working capital at accepted level (Hollensen 2015).
Financial Performance of Qantas Airways Limited for 2015 and 2016
Liquidity ratio 2016 2015
Current ratio 0.492031873 0.675903614
Quick ratio 0.396414343 0.589692102
Working capital -3,570.0 -2,421.0
Profitability Ratios 2016 2015
Operating Profit Margin 0.180435884 0.101596704
Net Profit Margin 0.0651926 0.035861447
Return on Capital Employed 0.3 0.2
Return on Equity 0.316615385 0.162059936
Return on Total assets 0.061598324 0.031774102
Capital structure ratio 2016 2015
Debt- equity 4.14 4.100378237
Interest coverage ratio 5.014084507 2.260744986
Efficiency ratio 2016 2015
Receivable turnover ratio 17.9977195 14.41484919
Creditor turnover ratio 5.214511041 12.28374893
Inventory turnover ratio 20.09726444 22.35680751
Assets turnover ratio 0.922097269 0.891414141
Computation of return on capital invested
Particular 2016 2015
ROCI
-
268.0327869
-
47.05372617

9BUSINESS VALUATION AND ANALYSIS
The financial data of Qantas Airways Limited for the year 2015 and 2016 had been
analyzed for identifying the performance of the company based on finance (Foxall 2014).
Analysis the data of 2013, 2015 and 2016
By conducting the study of Qantas Airways Limited for the three years (2013, 2015 and
2016), it is noted that Qantas Airways Limited faced many issues in the last two years because of
internal and external factors. In addition, it is analyzed that different strategies have been adopted
by Qantas Airways Limited for enhancing the level of performance. The study shows that the
performance of Qantas Airways Limited is similar to that for year 2013 and 2015, 2016. It is
noted that the liquidity position of Qantas Airways Limited is even similar over the years. The
company is facing issue in meeting the short-term debt obligations. It is noted that Qantas
Airways Limited is still not able to enjoy high profits (Goworek and McGoldrick 2015).
Recommendations and conclusion
At the end of the case study, it is concluded that Qantas Airways Limited is required to
make some changes into the financial as well as non-financial figures for enhancing the level of
performance. Qantas Airways Limited operates in aviation industry but faces external and
internal issue that reveals that the performance of the company has been lowered. It is suggested
to Qantas Airways Limited to make some changes into the operations for enhancing the level of
performance.

10BUSINESS VALUATION AND ANALYSIS
Reference List
Armstrong, G., Kotler, P., Harker, M. and Brennan, R., 2015. Marketing: an introduction.
Pearson Education.
Foxall, G., 2014. Strategic Marketing Management (RLE Marketing) (Vol. 3). Routledge.
Goworek, H. and McGoldrick, P., 2015. Retail marketing management: Principles and practice.
Pearson Higher Ed.
Hollensen, S., 2015. Marketing management: A relationship approach. Pearson Education
Keller, K.L. and Kotler, P., 2016. Marketing management. Pearson.
Meffert, H., 2013. Marketing-Management: Analyse—Strategie—Implementierung. Springer-
Verlag.
Peñaloza, L., Toulouse, N. and Visconti, L.M. eds., 2013. Marketing management: A cultural
perspective. Routledge.
Qantas.com. 2017. Flights to Australia, New Zealand and Dubai | Qantas UK. [online] Available
at: http://www.qantas.com [Accessed 25 Aug. 2017].
Sekaran, U. and Bougie, R., 2016. Research methods for business: A skill building approach.
John Wiley & Sons.
Sheth, J.N. and Sisodia, R.S., 2015. Does marketing need reform?: Fresh perspectives on the
future. Routledge.

11BUSINESS VALUATION AND ANALYSIS
Trugman, 2016. Understanding business valuation: A practical guide to valuing small to medium
sized businesses. John Wiley & Sons.

12BUSINESS VALUATION AND ANALYSIS
Appendix
Financial Data of Qantas limited
Particulars Amount Amount Amount 2 Amount 3
AUD$ '000 AUD$ '000 AUD$ '000 AUD$ '000
Total Revenue 15,784 15,532 15,155 15,577
COGS 13,224 14,286 15,206 14,440
Operating Profit/(Loss) 976.0 617.0 -7299.0 -338.0
EBIT 2848.0 1578.0 -7952.0 34.0
Finance cost 568.0 698.0 572.0 592.0
Net profit 1029 557 -2843 5
Current Assets 3458 5049 4932 5245
Quick Asests 2786 4405 4298 4517
Inventory 672 644 634 728
Average inventory 658.0 639.0 681.0
Trade receivables/Debtors 795.0 959.0 1196.0 1436.0
Average Debtors 877.0 1077.5 1316.0

13BUSINESS VALUATION AND ANALYSIS
Total Assets 16705 17530 17318 20200
Average assets 17117.5 17424 18759
Dividend Paid 0 -4 -1 0
Current Liabilities 7028.0 7470.0 7525.0 6370.0
Trade Payables/Creditors 3972 1100 1226 1310
Average creditors 2536 1163 1268
Total Liabilities 13455 14093 14460 14256
Capital Employed 9677.0 10060.0 9793.0 13830.0
Long term loans 6,427 6,623 6,935 7,886
Shareholders' Equity 3250 3437 2858 5944
Dividend per Share (DPS) 0.98 0.54 -2.74 0
Earnings per Share (EPS) 0.98 0.54 -2.74 0
Price per Share 10 11 12 13
Dividend per Share (DPS) 0.98 0.54 -2.74 0
Earnings per Share (EPS) 0.98 0.54 -2.74 0
Price per Share 10 11 12 13

14BUSINESS VALUATION AND ANALYSIS
Computation of ratio analyis
Liquidity ratio 2016 2015 2014 2013
Current ratio 0.492031873 0.675903614 0.655415282 0.823390895
Quick ratio 0.396414343 0.589692102 0.571162791 0.709105181
Working capital -3,570.0 -2,421.0 -2,593.0 -1,125.0
Profitability Ratios 2016 2015 2014 2013
Operating Profit Margin 0.180435884 0.101596704 -0.524711316 0.002182705
Net Profit Margin 0.0651926 0.035861447 -0.187594853 0.000320986
Return on Capital
Employed 0.3 0.2 -0.8 0.0
Return on Equity 0.316615385 0.162059936 -0.994751575 0.000841184
Return on Total assets 0.061598324 0.031774102 -0.164164453 0.000247525
Debt equity ratio
Capital structure ratio 2016 2015 2014 2013
Debt- equity 4.14 4.100378237 5.059482155 2.398384926