HI5002: Finance for Business - Analysis of Quantas Limited's Financial Performance

HI5002: FINANCE FOR BUSINESS
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Contents
Question 3..................................................................................................................................3
Question 4..................................................................................................................................6
Question 7..................................................................................................................................8
Question 8................................................................................................................................10
Question 9................................................................................................................................11
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Question 3
Calculate the following Fundamental Ratios for your selected company for the past 2 years.
Short-term solvency (Liquidity ratios)
Particular Year 2017 ($ Million) Year 2016 ($ Million)
Current Asset 3119.00 3458.00
Current liability 7095.00 7028.00
Inventory 351.00 336.00
Quick Assets 6744.00 6692.00
Short-term Solvency ratios
2017 2016
Current Ratio = Current Asset/ Current Liability 0.44 0.49
Quick Ratio = Quick Asset/ Current Liability 0.95 0.95
Working note:
Quick assets = Current asset- Inventory
2017 = 3119.00-351.00 = $2768
2016 = 3458.00-336.0 = $3122
Short-term solvency ratio indicates liquidity level of the organisation for its operations. short-
term solvency ratios cover current ratio and liquid ratios. It has been noticed from the
previous two years performance of the company i.e 2017 and 2016 that the company fails to
maintain the sufficient level of liquidity. Current ratio of the company in the year 2016 was
0.49 and in the year 2016 was 0.44; while quick ratio of the company in the year 2016 was
0.95 and 2017 it was 0.95 means there was no change in the level working capital of the
company.
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Long-term solvency (Financial Leverage ratios)
Particular Year 2017 ($ Million) Year 2016 ($ Million)
Debt 4405 4421
Equity 3540 3260
Long-term solvency
2017 2016
Debt Equity ratio = Debt/ Equity 1.24 1.36
Debt equity ratio used to evaluate and analyse the capital structure of the company which is
built on share capital and debt capital. Both channels are funded by external stakeholders of
the company. The standard level of debt and equity ratio must be 2 but the company fails to
achieve the same but it is still in good conditions.
Asset utilization (efficiency or turnover ratios)
Particular Year 2017 ($ Million) Year 2016 ($ Million)
Inventory 351 336
Net Sales 14665 14811
Fixed Asset 12253 11670
Total Asset 17221 16705
Net Profit after tax 853 1029
Name of ratios Formula 2017 2016
Inventory Turnover
Ratio
Sales/Inventory 41.78 44.08
Fixed Asset turnover
Ratio
Sales/ Fixed Asset 1.20 1.27
ROA Net Income/ Total Asset 0.05 0.06
Asset utilisation or efficiency ratios provides the information regarding the utilisation of
asset and inventory in the operational activities. Higher the turnover ratio higher will be the
efficiency ratio and this will indicate good sales revenue of the company.
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