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Financial statement analysis - Qantas Airlines Limited
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Added on 2019-11-25
Financial statement analysis - Qantas Airlines Limited
Added on 2019-11-25
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ACCOUNTING FOR MANAGERSQantas Airways Limited, 20161
Executive SummaryThis report is based on Qantas Airlines Limited and includes analysis of financial statements. Inthis report, income statement and statement of financial position has been analysed with the helpof financial statement analysis techniques. Horizontal analysis, vertical analysis and ratioanalysis techniques has been applied and analysis has been made on the financial performanceand financial position of Qantas Airlines Limited. From the horizontal analysis of QantasAirlines Limited, it is analysed that many significant activities has been taken place in last 4years in business operations or activities of Qantas Airlines Limited. Fuel consumption,impairment of specific assets depreciation and amortisation finance income and finance incomeare some items that have impacted during the analysis period. Manpower and staff related,aircraft operating variable and fuel are three major items that has maximum contribution inoverall expenditure of the Qantas Airlines Limited. From ratio analysis technique, it isdemonstrated that profitability and liquidity position of Qantas Airlines Limited is at adverseside. Only efficiency in business operations has shown positive sign or positive results forQantas Airlines Limited in last two years i.e. 2015 and 2016. 2
ContentsIntroduction......................................................................................................................................4Horizontal Analysis of Financial Statements..................................................................................5Income Statement........................................................................................................................5Statement of Financial Position...................................................................................................6Horizontal Analysis of Financial Statements..................................................................................7Income Statement........................................................................................................................7Statement of Financial position...................................................................................................7Ratio Analysis..................................................................................................................................9Profitability ratio..........................................................................................................................9Solvency ratio............................................................................................................................10Liquidity ratio............................................................................................................................11Efficiency ratio..........................................................................................................................12Conclusion.....................................................................................................................................13References......................................................................................................................................14Appendix........................................................................................................................................163
IntroductionFinancial statement analysis of any business organisation can reap various useful and decisionmaking information. Financial statement of the business organisation is those statements containsfinancial information i.e. financial performance and financial position during the reportingperiod. For many stakeholders, especially for investors, financial statement analysis is required,so as to get insight of the business organisation. Information generated from financial statementanalysis can be used in decision making process. Financial statements include income statement,statement of financial position, cash flow statement and statement of change in equity. In thisreport, financial statement analysis of Qantas Airlines Limited has been performed and relevantresults have been drawn. In this report, analysis of financial statements has been conducted usinghorizontal analysis, vertical analysis and ratio analysis techniques. While using horizontalanalysis and vertical analysis of financial statement techniques, financial statement of last 4 yearsi.e. from 2013 to 2016 has been used. On the other hand, for the purpose of ratio analysis,financial statements of last two years i.e. 2015 and 2016 has been used. From these techniques,liquidity, profitability, solvency and efficiency of Qantas Airlines Limited or in businessoperations has been analysis 4
Horizontal Analysis of Financial Statements Income StatementPlease find appendix(Entwistle, 2015)AnalysisFrom the above table it can be analysed that sales revenue in all the four years is static or havenot varied much. In all the four years, there is less than 4 5 variation in revenues of QantasAirlines Limited. Fuel consumption has been increased in 2016 as compared to other periods,because of increase in operational capacity. There is significant change in Depreciation andamortisation expenses during 2015 and 2016 and this is the significant reason for decline inprofitability (Alhabeeb, 2014). Other expense of Qantas Limited has fluctuated at large scale.Another significant change that can be observed from the horizontal analysis of incomestatement is related to earnings per share that Qantas Airlines Limited has earned for equityshareholders. There are huge ups and downs in earnings per share in the undertaken period(Babackov, et. al, 2014). Therefore this makes Qantas Airlines Limited less attractive forinvestors. 5
Statement of Financial PositionPlease find appendix(Berislav, et. al, 2012)ANALYSISFrom the horizontal analysis of statement of financial statements, it can be observed that currentassets of Qantas Airlines Limited are fluctuating at higher level. In 2016, cash and cashequivalents balance has been decreased by 31.91 % as compared to 2015 balance. Anothersignificant reduction in current assets is related to assets held for sale i.e. in 2016 it is reduced by87.50 % as compared to 2015. Therefore these are some issues that lead to liquidity problem inbusiness operations of Qantas Airlines Limited. There is overall reduction in total current assetsduring 2016. In case of non-current assets, Qantas Limited has deployed financial resources inhuge investments during 2015-2016 financial year. Investment through equity method has beenincreased by 47.01 % in 2016 as compared to 2015. In other years, there is no significant changein investments (Govindaraj, 2011). On the other hand, current liabilities interest-bearingliabilities and other financial liabilities have been reduced by huge margin. This has, managedthe liquidity level in business operations. At last, it can be analysed that there is huge fluctuationin equity capital i.e. treasury shares, retained earnings and reserves. Overall analysis suggeststhat Qantas Limited’s financial position has been fluctuating and will not attract stakeholders(Riordan & Riordan, 2009). 6
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