Management Accounting Assignment | FCTG

RUNNING HEAD: MANAGEMENT ACCOUNTING
Financial statement analysis

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Executive summary
Flight Centre Travel Group is one of the largest retail travel outlet operating in Australia. The
company functions in travel industry and has its headquarters situated in Brisbane and
Queensland. The report contains a whole financial analysis of the company of the past three
years. The first and second part of the report deals with horizontal and vertical analysis of the
FCTG’s financial statements. It reflects the percentage change occurred in each and every
item of the statement. The third part contains a ratio analysis of the company which includes
calculation of liquidity, profitability, efficiency and capital structure ratios. All these ratios
shows the position and performance of the company over the period of three years. The report
ended with a conclusion showing the findings of the analysis performed, along with
appendices.

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Contents
Introduction............................................................................................................... 3
Analysis of financial statements...................................................................................... 3
Horizontal analysis................................................................................................... 3
Vertical analysis...................................................................................................... 6
Ratio Analysis......................................................................................................... 7
Conclusion.............................................................................................................. 10
Bibliography............................................................................................................ 12
Appendices............................................................................................................. 13
Appendix 1.......................................................................................................... 13
Appendix 2.......................................................................................................... 15
Appendix 3.......................................................................................................... 18
Appendix 4.......................................................................................................... 18

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Introduction
Flight Centre is a leading travel agency group in Australia. The company started its business
in 1980s and has earned a remarkable growth to become a $20 billion business. It has more
than 40 brands and operates in 23 countries along with a travel management network which is
spread across more than 90 countries. The group is listed on Australian Securities Exchange
with a ticker ASX: FLT. FCTG has approx. 2800 shops, more than 20000 employees,
operates under various retail and corporate brands and has fully owned operations in
countries like Australia, New Zealand, Singapore, Hong Kong and many more. The vision
and mission of the group is to create a specialized brand that facilitates the company to
capture and grow ley market segments. The current market price of its share is AUD$ 54.32
(Flight Centre Travel Group 2018).
Analysis of financial statements
Horizontal analysis
It is one of the tool used for measuring the changes in the items of final accounts over past
years. It computes year to year change in the items and represent it in form of dollars and
percentage. The calculation is performed by taking one year as a base and then the change is
been estimated for the corresponding year. In other words, analysis reflect the increase or
decrease in the items of the statement (Weygandt, Kimmel and Kieso, 2009).

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2015 2016 2017
2,15,000
2,20,000
2,25,000
2,30,000
2,35,000
2,40,000
2,45,000
2,50,000
2,55,000
2,60,000
Net Profit
Years
values
Appendix 1 contains a horizontal analysis of FCTG’s income statement and balance sheet of
the past three years which are 2015, 2016 and 2017. The analysis reflects the trend in the net
profit of FCTG. It can be seen that in 2016, the profit has been reduced by 5% and the same
continues to fall in 2017, by 10%. The maximum profit was earned in 2015 amount to
$256,533 million.
$'000 $'000 $'000
2015 2016 2017
22,50,000
23,00,000
23,50,000
24,00,000
24,50,000
25,00,000
25,50,000
26,00,000
26,50,000
27,00,000
Total Revenue
Years
Values

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Ideally, in order to run a business, % increase in sales should be more than % increase in the
expenses. A positive trend was there in the company’s total revenue. The analysis shows that
there was an increase in the total revenue by 1%. In 2016, revenue increased by 11% and in
2017, the same rises by 12% as compare to the revenue of 2015. Another item reported in the
income statement was ‘other income’, which was highest in 2016 amounted to $12,691 and
shown an increase of 102%. The same was reduced by 68% in 2017 (Appendix 1).
Talking about the expenses of the company, its sales and marketing expenses has reduced in
2017 by 11%, when compare to 2015. The same figure was rose by 24% in year 2016.
Employee benefits and rental expenses shows a minor increase whereas a 17% and 10%
increase was notice in depreciation and other expenses respectively. Along with this, income
tax expenditure of the company has also risen by 14% in 2017 as compare to that of in 2015.
Due to such upsurge in the expenses, company has reducing trend in its net profits.
Referring to Appendix 1, the horizontal analysis of FCTG’s balance sheet shows percentage
increase or decrease in each of its items.
$'000 $'000 $'000
2015 2016 2017
0
5,00,000
10,00,000
15,00,000
20,00,000
25,00,000
30,00,000
35,00,000
Total Assets, liabilities, and equities
TOTAL ASSETS TOTAL LIABILITIES TOTAL EQUITY
Years
$'000
It is observed that, company’s total assets has increased by 8% and 15% in year 2016 and
2017 respectively. The reason behind such rise is the huge upsurge in FCTG’s property plant