Financial Analysis of Airlines

This assignment requires a comparative financial analysis of two major airlines: Qantas and Emirates. Students must examine their respective financial statements (balance sheet, income statement, cash flow statement) to assess key performance indicators such as profitability, liquidity, solvency, and efficiency ratios. The goal is to identify trends, strengths, weaknesses, and potential areas for improvement in each airline's financial health.

Financial Analysis Report

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
INTRODUCTION...........................................................................................................................2
TASK...............................................................................................................................................2
A. Profitability ratios...................................................................................................................2
B. Efficiency ratios......................................................................................................................6
C. Liquidity ratios.....................................................................................................................10
D. Gearing ratios.......................................................................................................................12
E. Horizontal common size analysis.........................................................................................14
F. Vertical common size analysis..............................................................................................19
G. Comparative analysis...........................................................................................................22
H. Evaluation of performance of business................................................................................25
CONCLUSION AND RECOMMENDATIONS..........................................................................26
REFERENCES..............................................................................................................................27
APPENDIX....................................................................................................................................28

EXECUTIVE SUMMARY
In this report there is the analysis carried out in context of financial position of Qantas
and emirates. There will be various aspects which are present in business which are related to
finance and for them analysis will have to be carried out. Under this certain tools are there that
are used. They involve ratio analysis in which various sectors such as profitability, liquidity,
efficiency and gearing are measured. It is identified that whether company is able to meet all the
requirements and standards in proper manner. Another part of the report shows horizontal and
vertical analysis that is carried out. In that performance of various years is compared so that
growth level can be determined and it can be known that how much development has taken
place. In addition to them comparative analysis is also done where the working of both the
companies are compared with one another so that it can be known that which one is better among
them. There are various measures that are used for performance evaluation and it includes both
financial and non financial methods. In this report a evaluation segment is made in which
performance of Qantas is taken into consideration and various aspects such as its structure,
performance measures and other factors are taken into consideration. In the analysis it is
identified that performance of which is growing at faster speed and which is in loss. All of these
are very important to carry on the business in most successful manner as by this all shortcomings
are identified and then measures are taken to remove them. This way it will be possible to make
the development process even better and fast.
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INTRODUCTION
In the global economy, there are various sectors which are present and one of the most
important among them is aviation industry. By the help of airline services, people are able to
travel from one place to another in an easy and convenient manner. In order to survive in this
sector, it is needed that proper analysis shall be carried out so that all the shortcomings and faults
in system can be identified (Almazari, 2012). It is necessary that services shall be provided at the
lowest possible cost as then only, it will be able to deal with high level of competition that is
existing in market. There are various expenses which are to be incurred and in order to carry out
this business, license will have to be obtained from government so that it can travel to other
countries.
There are many airlines which are providing these services and in this report, two of them
are taken into consideration which are Qantas and Emirates. Qantas is one of the largest airlines
that is established in Australia which provides the best facilities by using advanced technologies.
Whereas, emirates is a Dubai based airline which is also providing such services. In this report,
analysis will be carried out in order to evaluate the position of both companies. For this purpose,
several ratios will be calculated and also, vertical and horizontal analysis will be performed
(David, 2011). This helps in knowing the working in respect of certain years that is done by both
of them. On the basis of them, comparison will be made among both the organisations. Financial
and non-financial measures will also be used to evaluate the performance of any one company.
TASK
A. Profitability ratios
In business, it is important that profitability shall be examined as by this, company's
performance will be reflected. All investors and analysts will be able to gain knowledge about its
position and on that basis, they can take required decisions for the making of investments. There
are various metrics which are used in finance and they are all classified with the help of these
ratios (Carfì and Musolino, 2011). By the help of them, ability of business in terms of making
good earnings will be evaluated and all the expenditures which are made during that particular
period will be compared. For the assessment of this, several tools are there which can be taken
into use. Some of the main ratios which are included in this are net profit margin, gross profit
margin, return on investment as well as return on assets and equity. They are to be calculated as
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various conclusions can be drawn on the basis of them and for that, proper understanding is
required to be obtained. For the same, explanation in relation to them is provided as below:
Net profit margin: This is the ratio which is calculated to know the amount of net
earnings which is made by business in comparison to the sales present. For this, net profit will
have to be determined which is obtained by deducting all the expenses which are made related to
all sectors and also, finance cost and taxes will have to be deducted from the total amount of
revenues (Carroll, Otsuka and Slacalek, 2011). Then, they are to be divided by sales in order to
achieve the ratio. By this, it is determined that whether company is able to make good profits
from all revenues that will be present are to be provided to shareholders or not. By the help of
this, trend can be determined and decisions can be taken on basis of findings.
Net profit Margin = Net profit / Net sales
For Qantas:
Particulars 2014 2015 2016
Net profit -2843 560 1029
Sales 15352 15816 16200
Net profit Ratio -18.52% 3.54% 6.35%
From the above calculation, it can be noted that there is increasing trend that is taking
place in company as its profits and sales; both are increasing on continuous basis. In 2014,
business was incurring losses which became profits in 2015 and that further rose in 2016. Due to
all this, overall profit percentage is also rising from -18.52% in 2014 to 6.35% in 2016.
For Emirates:
Particulars 2014 2015 2016
Net profit 3417 4728 7318
Sales 80717 86728 83500
Net profit Ratio 4.23% 5.45% 8.76%
In this company, net profits are increasing at a rapid rate but the amount of sales which is
made is increasing in 2015 and then it declined in 2016. It can be noted that despite of decrease
in sales, profits are still rising which shows that company is capable enough to maintain profits
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even in the adverse situations. Profits are earned at the rate of 4.23% in 2014 and that increased
constantly as well as reached till 8.76% in 2016.
Operating profit margin: Under this, operating profit is taken into consideration and then
it is compared with the sales amount. In this, the earnings which are made by deducting cost of
goods sold and other expenses which are related to operations from the revenue is taken. This
helps in knowing that whether company is able to earn appropriate amount of profits from the
provided revenues and what is the figure that is remaining after all the cost that are incurred for
making such sales have been deducted (Engelberg and Parsons, 2011). It can be identified that
whether excessive costs are made in respect of provided sales and if such situation exist then
measures shall be taken to reduce the expenditures so that profits can be enhanced.
Operating profit margin = Operating profit / Total sales
For Qantas
Particulars 2014 2015 2016
Operating profit -3772 1048 1643
Sales 15352 15816 16200
Operating profit
Ratio -24.57% 6.63% 10.14%
It can be seen that in the data provided above, there is increase which is taking place in
amount of sales and operating profit and this shows overall company is incurring an appropriate
figure of cost by which profits are experiencing continuous enhancement. This results in
obtaining good ratios which shows that there is strong profitability which is maintained by
company. The ratios was determined at -24.57% and it rose to 10.14% in period of three years.
For Emirates
Particulars 2014 2015 2016
Operating
profit 4260 5893 8330
Sales 80717 86728 83500
Operating
profit Ratio 5.28% 6.79% 9.98%
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In this also it can be noted that there are changes which can be seen and they show that
operating profit is rising and sales is increasing and then decreasing. Company is efficiency
using its resources as then only profit can be maintained at lower level of revenue also which is
taking place in current situation. Rate of operating profits are 5.28%, 6.79% and 9.98% in 2014,
2015 and 2016.
Return on equity ratio: By the use of this ratio earnings made by company in comparison to
equity will be determined. For this net earnings will have to be identified and then they are to be
divided by amount of equity which is present with the company. By this the ability of business to
use its capital will be evaluated (Grant, 2016). If this is higher then it is considered as good
because company is able to make proper use of its capital that is available. By this shareholders
will also know that what is the amount that will be provided to them by company on the
investment that is made by them.
Return on equity = Profit / Equity
For Qantas
Particulars 2014 2015 2016
Net profit -2843 560 1029
Equity 2866 3447 3260
Return on equity -99.20% 16.25% 31.56%
In this company it can be seen that in 2014 there are losses so that means it is not able to
use its capital in proper manner. After this started increasing and then continued this growth in
future period. Equity increased in 2015 which shows that there is good investment but then it
declined. The return that is made is 16.25% in 2015 and in 2016 it reached till 31.56%.
For Emirates
Particulars 2014 2015 2016
Net profit 3417 4728 7318
Equity 25471 28286 32405
Return on equity 13.42% 16.71% 22.58%
5

There is an increase which is noted in both the aspects which are profit and equity and
due to this rate is also rising. There is constant increment which is noted in the rates of earnings
which are derived in terms of equity. They were at 13.42% in 2014 and in 2016 it is found at
22.58%.
Return on total assets: The profit that is earned by the company will be evaluated in this ratio on
the basis of total assets which are present with it. Total assets will be including all the aspects
that are current as well as non current (Kundakchyan and Zulfakarova, 2014). They all will be
added and then return will be compared by it. This defines the amount which is earned. By this it
is identified that whether company is using its assets in most efficient manner or not. If it is
doing so then it is good for the business as company is not wasting its resources and by this
development will be attained.
For Qantas
Particulars 2014 2015 2016
Net profit -2843 560 1029
Total assets 17318 17530 16705
Return on
total assets -16.42% 3.19% 6.16%
It can be noted that the assets are increasing in 2015 and then they are again declining.
But due to this there is no decrease in the rate of return. This shows that company is maintain
good position and is working with full effectiveness and efficiency.
For Emirates
Particulars 2014 2015 2016
Net profit 3417 4728 7318
Total assets 101604 111362 119179
Return on
total assets 3.36% 4.25% 6.14%
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Under this case the assets are rising on continuous basis and so is the return. So it can be
determined that all the assets which are introduced are used appropriately. By this company will
be able to maintain its position and this will be beneficial for it in the long run.
Above are presented various profitability ratios in respect of two companies and it can be
noted that both are carrying out work in proper manner as increase in ratios has been noted. So it
can be said that good position is maintained by them in terms of profitability. This will be
advantageous for them as they can use the amount that is earned for making further
improvements that will lead to overall development of company.
B. Efficiency ratios
In all the sectors it is necessary that all the objectives which have been defined are
attained and for that it shall be ensured that efficiency is maintained by the organisations and for
that work is to be performed in best possible manner (Kara, 2012). For this it is needed that
evaluation shall be made in respect of all the resources so that it can be determined that proper
utilisation of them is being carried out or not. There are various tools that can be used for this
purpose and one of them is ratios and they are called as efficiency ratios. There are many ratios
which can be calculated under this and some of them are receivable turnover, fixed asset
turnover, inventory turnover and many others. By the use of them it is possible to make
evaluation in respect of company's performance. Some of the calculation and details in relation
to them has been provided below:
Sales revenue to capital employed: This is the ratio in which it is determined that how much of
the sales has been made with the use of capital that is employed in business (Ruppert, 2011). For
the calculation of this capital employed and sales will have to be known and then they will be
divided. This helps the company to know that whether efficient utilisation of capital is made or
not. On the basis of findings, further decisions will be made.
Sales to capital employed = Total sales / capital employed
For Qantas
Particulars 2014 2015 2016
Sales 15352 15816 16200
Capital employed 9793 10060 9677
Sales to capital
employed 156.77% 157.22% 167.41%
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The calculations are made and from that it can be found that capital employed is
increasing in 2015 and then it is again declining. But in spite of this the sales that is made by it is
constantly rising. This shows that all the amount is utilised in proper manner and no wastage of
resources is committed.
For Emirates
Particulars 2014 2015 2016
Sales 80717 86728 83500
Capital
employed 69176 76881 80655
Sales to capital
employed 116.68% 112.81% 103.53%
The amount which is employed is rising but the sales figure is declining even with high
capital. The ratio is also reducing continuously and so it can be concluded that emirates is not
able to make proper use of its capital. So efficiency level of business is not satisfactory.
Sales revenue per employee: This ratio is calculated as by the help of it performance of
employees is evaluated. This is because it is identified that what is the efficiency of employees
and how much does each employee contributes to revenue (López and Llopis, 2010). For the
calculation of it total revenue that is made will have to be divided by total number of employees.
After the identification it will be possible for company to know that whether employees are
working with full potential or not. They are presented below:
For Qantas
Particulars 2014 2015 2016
Sales 15352 15816 16200
No. of
employees 30751 28622 29205
Revenue per
employee
0.499 0.552 0.554
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From the above data it can be identified that the number of employees in business are
fluctuating and revenue is increasing at constant rate. As both are changing so the earnings made
by each staff member is also deviating. It can be seen that it is increasing which shows that they
are working in efficient manner.
For Emirates
Particulars 2014 2015 2016
Sales 80717 86728 83500
No. of
employees 75496 84153 95322
Revenue per
employee 1.069 1.0305 0.8759
It can be noted that there is continuous increase in number of employees who are working
with the company. But the revenue that is generated by each of them is declining. It has reached
from 1.069 in 2014 to 0.8759 in 2016. this shows that employees are not using their skills in
appropriate manner and therefore less efficiency is there.
Accounts receivable turnover ratio: There are several such policies which are used in respect of
credits and so it is necessary that they shall be evaluated on timely basis. By this it is determined
whether they are efficient or not. It will be known that customers are getting easy credits from
the company or not. If it is at lower level then considered as liberal policies are there otherwise
not (Ogiela, 2013). By this efficiency of business in respect of making collection from customers
is measured.
Debtors turnover ratio = Total revenue / Average receivables
For Qantas
Particulars 2014 2015 2016
Sales 15352 15816 16200
Receivables 1354 1093 929
Debtors
turnover ratio 11.338 14.470 17.438
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It is to be noted that by the help if this ratio the efficiency of all policies and also the
period in which collection is made from debtors is determined. It can be seen that there is rise in
this ratio which shows the most efficient policies are used and also company is capable of
collecting its debtors in timely manner.
For Emirates
Particulars 2014 2015 2016
Sales 80717 86728 83500
Receivables 9086 8589 9321
Debtors
turnover ratio 8.883 10.097 8.958
There is rise in ratio in 2015 which shows that at this time good policies were there but
after that decline is noted so there was no efficient system at that period. The company is not
able to maintain its debtors in proper manner and this shows its inefficiency. So business is not
able to make proper strategies by which it can be made possible.
From all the ratios which are calculated above it can be concluded that the efficiency
level in Qantas is maintained appropriately and this determines that most effective utilisation of
its resources is taking place. But in case of Emirates the ratios depicts that no efficiency is
maintained and also its employees are not working with full potential. In addition to this proper
use of capital that is employed has also not been made. So the overall efficiency of this company
is not upto mark.
C. Liquidity ratios
Under this category the main aim is to identify that whether company is capable in
meeting with its financial obligations whenever they arise and are required to be paid. By this the
ability in respect of short term liabilities will be determined (Swayne, Duncan and Ginter, 2012).
There are various ratios which ca n be calculated under this but most importantly there are three
which includes current, acid and cash ratio. In order to know the overall liquidity of business
they are used in combined manner as by the help of them proper conclusions can be drawn and
measurement can be made in respect of overall liquidity in exact manner.
10

Current ratio: Under this it is determined that whether company is having sufficient amount of
current assets which can be used for the payment of all current liabilities. Ability of business in
this aspect can be evaluated by the help of this. Current assets are those which can be converted
into cash within a period of one year and current liabilities are those that are to be paid in coming
one year. For the calculation of this total current assets will have to be divided by total current
liabilities.
Current ratio = Current assets / current liabilities
For Qantas
Particulars 2014 2015 2016
Current assets 4932 5049 3458
Current
liabilities 7525 7470 7028
Current ratio 0.655 0.675 0.492
The current ratio is to be identified in proper manner and for the purpose of making of
conclusion standard ratio that is set shall also be taken into consideration. It has been set at 2:1.
in the given case the ratio is very less than this and so it shows that company is not having good
liquidity. It will not be able to meet its all liabilities in proper manner and so will have to face
various hurdles. The ratio first increased slightly in 2015 but then it again declined in 2016.
For Emirates
Particulars 2014 2015 2016
Current assets 27354 27735 31427
Current
liabilities 32428 34481 38524
Current ratio 0.843 0.804 0.815
From the calculations that are made above it can be interpreted that the position of
company in terms of liquidity is not good as the ratio is not in balance with what is required. The
amount of assets that are available will not be able to meet all obligations which are arising. The
ratio is fluctuating as it firstly decreased and then gained some growth.
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Acid ratio: Under this in place of current assets, quick assets will be taken into consideration and
then they are to be used for the meeting of current liabilities (Vogel, 2014). The assets that are
capable to be converted within a time span of 90 days into cash will be covered under this and it
includes debtors, current investments and cash. The other name that is used for this asset is quick
ratio. This helps the company in knowing the amount which is present with it in short run and
whether there is any risk related to it present.
Acid ratio = Quick assets / current liabilities.
For Qantas
Particulars 2014 2015 2016
Quick assets 4197 3867 2775
Current
liabilities 7525 7470 7028
Acid ratio 0.557 0.517 0.394
The standard ratio that has been set in this regard is 1:1 and that shall be maintained to
ensure business success. In the given situation ratio is declining in continuous manner and by this
it can be said that company is not maintaining its assets in appropriate manner and due to this
will not be able to fulfil its immediate needs in efficient manner.
For Emirates
Particulars 2014 2015 2016
Quick assets 25647 25474 29309
Current
liabilities 32428 34481 38524
Acid ratio 0.790 0.738 0.760
In the given case ratio is changing and it is near to standard set but not up to mark. It can
be said that company will be able to manage its resources but all the liabilities will not be met by
them. There will be some or other default that will arise in business.
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D. Gearing ratios
Under this category the capital of owner is to be compared with the amount that is
borrowed and that is used by company for many purposes. There are many ratios which are to
be calculated under it and some of them are debt equity, equity ratio, interest coverage and return
on capital employed. It will be possible to know the proportion in which debt and equity is
maintained (Healy and Palepu, 2012). By this it is determined that how much of the expense will
have to borne due to debts and is company capable to bear that. If there will be excessive debts
then risk is also high which is to be taken into consideration so that no adverse impact will have
to be faced. The calculation in respect of certain ratios is provided here under.
Debt-Equity ratio: Under this all the borrowings which are made will have to be divided with
equity. It helps in determining the debts that are present in comparison to equity. It is to ensure
that appropriate amount of debts are maintained which will not affect business in negative
manner (Burca and Batrinca, 2014). For making of decisions it is considered that if there will be
more ratio then it is not good as there are higher debts which will be increasing the burden of
interest payment. So when the ratio will be lower the it is good sign and considered that proper
balance is maintained by company.
Debt-Equity ratio = Debt / equity
For Qantas
Particulars 2014 2015 2016
Debt 6483 5562 4862
Equity 2866 3447 3260
Debt to
equity 2.262 1.613 1.491
From the calculations that are made it can be identified that there is high amount of debt
which is present in the company in comparison to total equity. It can be noted that although there
is decline in the ratio in continuous manner but then also the ratio is much higher and this is not
good. The ratio has declined from 2.262 in 2014 to 1.491 in 2016.
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For Emirates
Particulars 2014 2015 2016
Debt 42431 47808 50105
Equity 25471 28286 32405
Debt to
equity 1.665 1.690 1.546
The calculations that are made above represents that the ratio is fluctuating and there is
increase in 2015 and then it has decreased in 2016. It can be seen that standard ratio is 1 but in all
the cases this is more than that and this shows that the expenses which are to be met by company
due to interest will also be high amount. This will increase the overall burden on the company.
Return on capital employed: This includes the factor that what is the overall earning that is
earned on capital employed (Higgins, 2012). By this it is identified that proper return is earned or
not and effective utilisation of resources is taking place. This helps the company to know that
there is need to make the returns grow so that future development can be made. So all of them
will be identified by the use of it.
For Qantas
Particulars 2014 2015 2016
Net profit -2843 560 1029
Capital employed 9793 10060 9677
Return on capital
employed -29.03% 5.57% 10.63%
It is to be noted that there is increasing trend in the amount of profits and the ratio is also
rising from 2014 to 2016. by this it can be interpreted that the earnings which are made on
capital is rising continuously and this will act as an advantage for the company and it can further
introduce this amount in business for achievement of more growth.
For Emirates
Particulars 2014 2015 2016
Net profit 3417 4728 7318
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Capital employed 69176 76881 80655
Return on capital
employed 4.94% 6.15% 9.07%
Under this case the capital employed and return both are increasing and so there is no
issue as by the rising income, chances of making additional profits will also be increasing. This
all will lead to achievement of success by company in long term.
From all the ratios that are calculated under this category it can be said that debt is in
higher proportion to the amount of equity and this is not in the interest of business. But the return
that is earned on capital is appropriate and this will act as an advantage for the organisation.
E. Horizontal common size analysis
In making the analysis for many years it can be noted that there are various changes
which takes place from one year to another and so it is necessary to make proper evaluation of
this. By the help of horizontal analysis it is possible to identify the trend that is being followed
and all the adverse and positive modifications will be determined (Babalola and Abiola, 2013).
Under this one year will be taken as base and change in all other years will be determined on
basis of that. By this comparison will be made possible and evaluation of performance can be
done. Company can know that improvements are being made in business in comparison to past
or not. By taking findings in consideration it will be possible to take appropriate steps and make
such policies which are in overall interest of organisation. Yearly growth can be determined and
on that basis the factors that are not contributing to it will have to be eliminated.
For Qantas
Horizontal analysis Income statements:
Particulars 2014 2015
%
change 2016
%
change
Revenue and other income 15352 100.00% 15816 103.02% 16200 105.52%
Expenditures:
Manpower and staff related 3770 100.00% 3604 95.60% 3849 102.10%
Fuel 4461 100.00% 3937 88.25% 3250 72.85%
Aircraft operating variable 3303 100.00% 3206 97.06% 3362 101.79%
Depreciation and amortisation 1422 100.00% 1096 77.07% 1224 86.08%
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Impairment of cash generating
unit 2560 100.00% 0 0.00% 0 0.00%
Impairment of specific assets 387 100.00% 28 7.24% 0 0.00%
Non-cancellable aircraft
operating lease rentals 520 100.00% 495 95.19% 461 88.65%
Share of net loss of
investments accounted for
under the equity method 66 100.00% 40 60.61% 0 0.00%
Other 2635 100.00% 2362 89.64% 2411 91.50%
Expenditure 19124 100.00% 14768 77.22% 14557 76.12%
Statutory profit/(loss) before
income tax expense and net
finance costs -3772 100.00% 1048 27.78% 1643 43.56%
Finance income 82 100.00% 90 109.76% 65 79.27%
Finance costs -286 100.00% -349 122.03% -284 99.30%
Net finance costs -204 100.00% -259 126.96% -219 107.35%
Statutory profit/(loss) before
income tax expense -3976 100.00% 789 19.84% 1424 35.81%
Income tax (expense)/benefit 1133 100.00% -229 20.21% -395 34.86%
Statutory profit/(loss) for the
year -2843 100.00% 560 19.70% 1029 36.19%
From the above analysis it can be ascertained that net profit of the company is increasing
at rapid rate in comparison to 2014. there is 19.70% and 36.19% increase in years 2015 and 2016
respectively. This is due to elimination of total impairment expense that has been incurred in
2014. it can be noted that there is no significant change in terms of sales as it is almost similar.
Horizontal analysis balance sheet
Particulars 2014 2015 % change 2016 % change
CURRENT ASSETS
Cash and cash equivalents 3001 100.00% 2908 96.90% 1980 65.98%
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Receivables 1196 100.00% 959 80.18% 795 66.47%
Other financial assets 172 100.00% 613 356.40% 229 133.14%
Inventories 317 100.00% 322 101.58% 336 105.99%
Assets classified as held for
sale 134 100.00% 136 101.49% 17 12.69%
Other 112 100.00% 111 99.11% 101 90.18%
Total current assets 4932 100.00% 5049 102.37% 3458 70.11%
NON-CURRENT ASSETS
Receivables 158 100.00% 134 84.81% 134 84.81%
Other financial assets 34 100.00% 49 144.12% 46 135.29%
Investments accounted for
under the equity method 143 100.00% 134 93.71% 197 137.76%
Property, plant and
equipment 10500 100.00% 10715 102.05% 11670 111.14%
Intangible assets 741 100.00% 803 108.37% 909 122.67%
Deferred tax assets 548 100.00% 333 60.77% 39 7.12%
Other 262 100.00% 313 119.47% 252 96.18%
Total non-current assets 12386 100.00% 12481 100.77% 13247 106.95%
Total assets 17318 100.00% 17530 101.22% 16705 96.46%
CURRENT LIABILITIES
Payables 1851 100.00% 1881 101.62% 1986 107.29%
Revenue received in advance 3406 100.00% 3584 105.23% 3525 103.49%
Interest-bearing liabilities 1210 100.00% 771 63.72% 441 36.45%
Other financial liabilities 182 100.00% 416 228.57% 203 111.54%
Provisions 876 100.00% 818 93.38% 873 99.66%
Total current liabilities 7525 100.00% 7470 99.27% 7028 93.40%
NON-CURRENT
LIABILITIES
17

Revenue received in advance 1183 100.00% 1359 114.88% 1521 128.57%
Interest-bearing liabilities 5273 100.00% 4791 90.86% 4421 83.84%
Other financial liabilities 66 100.00% 68 103.03% 61 92.42%
Provisions 405 100.00% 395 97.53% 414 102.22%
Total non-current liabilities 6927 100.00% 6613 95.47% 6417 92.64%
Total liabilities 14452 100.00% 14083 97.45% 13445 93.03%
Net assets 2866 100.00% 3447 120.27% 3260 113.75%
EQUITY
Issued capital 4630 100.00% 4630 100.00% 3625 78.29%
Treasury shares -16 100.00% -7 43.75% -50 312.50%
Reserves -81 100.00% -66 81.48% -220 271.60%
Retained earnings -1671 100.00% -1115 66.73% -100 5.98%
Equity attributable to the
members of Qantas 2862 100.00% 3442 120.27% 3255 113.73%
Non-controlling interests 4 100.00% 5 125.00% 5 125.00%
Total equity 2866 100.00% 3447 120.27% 3260 113.75%
In this analysis various aspects are evaluated and on that basis findings are made. It can
be noted that total current assets are not changing much in 2015 but in 2016 there is decline by
30 percent which is big amount. So it can be said that company is not maintaining its assets on
appropriate manner. In total non current assets there is no major change which has taken place
and are almost same. Then fluctuation in current liability is also in 2016 and in non current
liabilities there is decline which can be identified. Equity of business is deviating in vast manner
as there is increase of 20 percent in 2015 and 13.75 in 2016.
For Emirates:
Horizontal analysis of income statements
Particulars 2014 2015 % change 2016 % change
Revenue 80717 100.00% 86728 107.45% 83500 103.45%
Other operating income 1919 100.00% 2091 108.96% 1544 80.46%
Operating costs -78376 100.00% - 105.81% -76714 97.88%
18

82926
Operating profit 4260 100.00% 5893 138.33% 8330 195.54%
Finance income 247 100.00% 175 70.85% 220 89.07%
Finance costs -1179 100.00% -1449 122.90% -1329 112.72%
Share of results of
investments accounted for
using the equity method 136 100.00% 152 111.76% 142 104.41%
Profit before income tax 3464 100.00% 4771 137.73% 7363 212.56%
Income tax expense -47 100.00% -43 91.49% -45 95.74%
Profit for the year 3417 100.00% 4728 138.37% 7318 214.16%
Profit attributable to non-
controlling interests 163 100.00% 173 106.13% 193 118.40%
Profit attributable to
Emirates' Owner 3254 100.00% 4555 139.98% 7125 218.96%
The profits of the business are increasing and that too at very fast pace. There is
increment of around 40 percent in 2015 and in 2016 the profits were even more then double of
what was earned in 2014. sales is not changing much but high level of deviation is noted in
financial incomes and expenses. So as profits are rising rapidly the company is operating in
perfect manner and there will be development which will be attained by company.
Horizontal analysis of balance sheet:
Particulars 2014 2015 % change 2016 % change
ASSETS
Non-current assets
Property, plant and
equipment 71582 100.00% 80544 112.52% 82836 115.72%
Intangible assets 928 100.00% 975 105.06% 1317 141.92%
Investments accounted for
using the equity 495 100.00% 544 109.90% 522 105.45%
Advance lease rentals 812 100.00% 920 113.30% 2580 317.73%
19

Loans and other receivables 428 100.00% 619 144.63% 494 115.42%
Derivative financial
instruments 5 100.00% 21 420.00% 0 0.00%
Deferred income tax asset 0 4 3
Total non current assets 74250 100.00% 83627 112.63% 87752 118.18%
Current assets
Inventories 1706 100.00% 1919 112.49% 2106 123.45%
Trade and other receivables 9086 100.00% 8589 94.53% 9321 102.59%
Derivative financial
instruments 1 100.00% 342
34200.00
% 12 1200.00%
Short term bank deposits 8754 100.00% 8488 96.96% 7823 89.36%
Cash and cash equivalents 7807 100.00% 8397 107.56% 12165 155.82%
Total current assets 27354 100.00% 27735 101.39% 31427 114.89%
Total assets 101604 100.00% 111362 109.60% 119179 117.30%
EQUITY AND
LIABILITIES
Capital and reserves
Capital 801 100.00% 801 100.00% 801 100.00%
Other reserves -634 100.00% -168 26.50% -1179 185.96%
Retained earnings 25009 100.00% 27253 108.97% 32287 129.10%
Attributable to Emirates'
Owner 25176 100.00% 27886 110.76% 31909 126.74%
Non-controlling interests 295 100.00% 400 135.59% 496 168.14%
Total equity 25471 100.00% 28286 111.05% 32405 127.22%
Non-current liabilities
Trade and other payables 287 100.00% 202 70.38% 513 178.75%
Borrowings and lease
liabilities 38500 100.00% 42426 110.20% 40845 106.09%
Deferred revenue 1440 100.00% 1650 114.58% 1596 110.83%
20

Deferred credits 234 100.00% 207 88.46% 1090 465.81%
Derivative financial
instruments 599 100.00% 521 86.98% 440 73.46%
Provisions 2643 100.00% 3589 135.79% 3762 142.34%
Deferred income tax liability 2 100.00% 0 0.00% 4 200.00%
43705 100.00% 48595 111.19% 48250 110.40%
Current liabilities
Trade and other payables 27079 100.00% 27770 102.55% 27037 99.84%
Income tax liabilities 30 100.00% 34 113.33% 35 116.67%
Borrowings and lease
liabilities 3931 100.00% 5382 136.91% 9260 235.56%
Deferred revenue 1227 100.00% 1244 101.39% 1316 107.25%
Deferred credits 66 100.00% 49 74.24% 139 210.61%
Derivative financial
instruments 95 100.00% 2 2.11% 737 775.79%
32428 100.00% 34481 106.33% 38524 118.80%
Total liabilities 76133 100.00% 83076 109.12% 86774 113.98%
Total equity and liabilities 101604 100.00% 111362 109.60% 119179 117.30%
In this the amount of non current assets is increasing which shows that company is
making investment in equipments that will be contributing to productivity enhancement. Current
assets are rising in 2016 and by that liquidity of firm will also be enhancing. Total equity is
rising due to increase in retained earnings and this is good as they can be used by business in
situation of emergency. Current liabilities are rising continuously which will have to be met by
company.
F. Vertical common size analysis
In this analysis all the items of balance sheet will be compared with one variable and then
decision is made accordingly. By this comparison within same year can be made and also with
other years. Under this one particular item is considered as base and all other calculations will be
based on it.
For Qatsan
21

Vertical analysis of balance sheet
Particulars 2014 % change 2015 % change 2016 % change
CURRENT ASSETS
Cash and cash
equivalents 3001 17.33% 2908 16.59% 1980 11.85%
Receivables 1196 6.91% 959 5.47% 795 4.76%
Other financial assets 172 0.99% 613 3.50% 229 1.37%
Inventories 317 1.83% 322 1.84% 336 2.01%
Assets classified as held
for sale 134 0.77% 136 0.78% 17 0.10%
Other 112 0.65% 111 0.63% 101 0.60%
Total current assets 4932 28.48% 5049 28.80% 3458 20.70%
NON-CURRENT
ASSETS
Receivables 158 0.91% 134 0.76% 134 0.80%
Other financial assets 34 0.20% 49 0.28% 46 0.28%
Investments accounted
for under the equity
method 143 0.83% 134 0.76% 197 1.18%
Property, plant and
equipment 10500 60.63% 10715 61.12% 11670 69.86%
Intangible assets 741 4.28% 803 4.58% 909 5.44%
Deferred tax assets 548 3.16% 333 1.90% 39 0.23%
Other 262 1.51% 313 1.79% 252 1.51%
Total non-current assets 12386 71.52% 12481 71.20% 13247 79.30%
Total assets 17318 100.00% 17530 100.00% 16705 100.00%
CURRENT
LIABILITIES
Payables 1851 10.69% 1881 10.73% 1986 11.89%
22

Revenue received in
advance 3406 19.67% 3584 20.44% 3525 21.10%
Interest-bearing
liabilities 1210 6.99% 771 4.40% 441 2.64%
Other financial liabilities 182 1.05% 416 2.37% 203 1.22%
Provisions 876 5.06% 818 4.67% 873 5.23%
Total current liabilities 7525 43.45% 7470 42.61% 7028 42.07%
NON-CURRENT
LIABILITIES
Revenue received in
advance 1183 6.83% 1359 7.75% 1521 9.11%
Interest-bearing
liabilities 5273 30.45% 4791 27.33% 4421 26.47%
Other financial liabilities 66 0.38% 68 0.39% 61 0.37%
Provisions 405 2.34% 395 2.25% 414 2.48%
Total non-current
liabilities 6927 40.00% 6613 37.72% 6417 38.41%
Total liabilities 14452 83.45% 14083 80.34% 13445 80.48%
Net assets 2866 16.55% 3447 19.66% 3260 19.52%
EQUITY
Issued capital 4630 26.74% 4630 26.41% 3625 21.70%
Treasury shares -16 -0.09% -7 -0.04% -50 -0.30%
Reserves -81 -0.47% -66 -0.38% -220 -1.32%
Retained earnings -1671 -9.65% -1115 -6.36% -100 -0.60%
Equity attributable to the
members of Qantas 2862 16.53% 3442 19.63% 3255 19.49%
Non-controlling
interests 4 0.02% 5 0.03% 5 0.03%
Total equity 2866 16.55% 3447 19.66% 3260 19.52%
23

Out of the total assets most of the portion is held by non current assets and remaining by
current assets. The amount which is held in non current liabilities and current liabilities is almost
similar. They are fluctuating to some extent. Equity of the business is increasing in comparison
to total assets. Which shows share contributed by it is rising in total.
For Emirates
vertical analysis for balance sheet
Particulars 2014 % change 2015 % change 2016
%
change
ASSETS
Non-current assets
Property, plant and
equipment 71582 70.45% 80544 72.33% 82836 69.51%
Intangible assets 928 0.91% 975 0.88% 1317 1.11%
Investments accounted for
using the equity 495 0.49% 544 0.49% 522 0.44%
Advance lease rentals 812 0.80% 920 0.83% 2580 2.16%
Loans and other
receivables 428 0.42% 619 0.56% 494 0.41%
Derivative financial
instruments 5 0.00% 21 0.02% 0 0.00%
Deferred income tax asset 0 0.00% 4 0.00% 3 0.00%
Total non current assets 74250 73.08% 83627 75.09% 87752 73.63%
Current assets
Inventories 1706 1.68% 1919 1.72% 2106 1.77%
Trade and other receivables 9086 8.94% 8589 7.71% 9321 7.82%
Derivative financial
instruments 1 0.00% 342 0.31% 12 0.01%
Short term bank deposits 8754 8.62% 8488 7.62% 7823 6.56%
Cash and cash equivalents 7807 7.68% 8397 7.54% 12165 10.21%
24

Total current assets 27354 26.92% 27735 24.91% 31427 26.37%
Total assets 101604 100.00% 111362 100.00% 119179 100.00%
EQUITY AND
LIABILITIES
Capital and reserves
Capital 801 0.79% 801 0.72% 801 0.67%
Other reserves -634 -0.62% -168 -0.15% -1179 -0.99%
Retained earnings 25009 24.61% 27253 24.47% 32287 27.09%
Attributable to Emirates'
Owner 25176 24.78% 27886 25.04% 31909 26.77%
Non-controlling interests 295 0.29% 400 0.36% 496 0.42%
Total equity 25471 25.07% 28286 25.40% 32405 27.19%
Non-current liabilities
Trade and other payables 287 0.28% 202 0.18% 513 0.43%
Borrowings and lease
liabilities 38500 37.89% 42426 38.10% 40845 34.27%
Deferred revenue 1440 1.42% 1650 1.48% 1596 1.34%
Deferred credits 234 0.23% 207 0.19% 1090 0.91%
Derivative financial
instruments 599 0.59% 521 0.47% 440 0.37%
Provisions 2643 2.60% 3589 3.22% 3762 3.16%
Deferred income tax
liability 2 0.00% 0 0.00% 4 0.00%
43705 43.02% 48595 43.64% 48250 40.49%
Current liabilities
Trade and other payables 27079 26.65% 27770 24.94% 27037 22.69%
Income tax liabilities 30 0.03% 34 0.03% 35 0.03%
Borrowings and lease
liabilities 3931 3.87% 5382 4.83% 9260 7.77%
25

Deferred revenue 1227 1.21% 1244 1.12% 1316 1.10%
Deferred credits 66 0.06% 49 0.04% 139 0.12%
Derivative financial
instruments 95 0.09% 2 0.00% 737 0.62%
32428 31.92% 34481 30.96% 38524 32.32%
Total liabilities 76133 74.93% 83076 74.60% 86774 72.81%
Total equity and
liabilities 101604 100.00% 111362 100.00% 119179 100.00%
The share which is held by non current and current assets is almost similar in all years
and there is no vast deviation which has taken place in them. The contribution that is made by
liabilities and equity remains same in all years with a very less amount of deviation and due to
this it can be said that balance is maintained among business.
G. Comparative analysis
For the purpose of comparison among both the businesses which are Qatsan and Emirates
there is the need that ratios shall be identified. It shall then be determined that which of them is
performing in better manner and has the further opportunities of growth. Comparative analysis of
them is presented below:
26

Net profit margin:
Particulars 2014 2015 2016
For Qantas -18.52% 3.54% 6.35%
For Emirates 4.23% 5.45% 8.76%
It can be seen that net profits of emirates are better then that of the Qatsan. So it can be
said that it is making good earnings.
Operating profit margin:
Particulars 2014 2015 2016
For Qantas -24.57% 6.63% 10.14%
For Emirates 5.28% 6.79% 9.98%
In 2014 position of emirates was better and in 2015 both were at almost similar level and
after this more earnings are made by Qatsan.
Return on equity ratio:
Particulars 2014 2015 2016
For Qantas -99.20% 16.25% 31.56%
For Emirates 13.42% 16.71% 22.58%
In first two years more return was made by Emirates but in last year Qatsan grown. It can
be said that emirates is growing constantly whereas in Qatsan high speed development is noted
in 2016.
Return on total assets:
Particulars 2014 2015 2016
For Qantas -16.42% 3.19% 6.16%
For Emirates 3.36% 4.25% 6.14%
27

In this also same situation is there and by this it can be noted that there is loss which is
made by Qatsan in 2014 and then took steps by which improvement is made and development is
attained.
By all the profitability ratios it can be said that profitability of Emirates is better in 2014
and 2015 and after that in 2016 Qatsan made its position by increased profits.
Sales revenue to capital employed:
Particulars 2014 2015 2016
For Qantas 156.77% 157.22% 167.41%
For Emirates 116.68% 112.81% 103.53%
Under this Qatsan is stronger than emirates as it is utilising its capital in more effective
manner and by this higher returns are earned.
Sales revenue per employee:
Particulars 2014 2015 2016
For Qantas 0.499 0.552 0.554
For Emirates 1.069 1.0305 0.8759
Efficiency in terms of employees is better in Emirates as in this higher sales is generated
by each of the employee who is hired in company. And this shows that they are trained in proper
manner and are highly skilled.
Accounts receivable turnover ratio:
Particulars 2014 2015 2016
For Qantas 11.338 14.470 17.438
For Emirates 8.883 10.097 8.958
The ratio is better for Qantas and it can be seen that they are increasing continuously
from 2014 to 2016. it shows that all the payments are collected on timely basis by the company.
28

Current ratio:
Particulars 2014 2015 2016
For Qantas 0.655 0.675 0.492
For Emirates 0.843 0.804 0.815
Current ratios are better for Emirates which signifies that it is having better liquidity in
comparison to Qantas. The ratios are weak but if compare both of them the emirates has upper
position.
Acid ratio:
Particulars 2014 2015 2016
For Qantas 0.557 0.517 0.394
For Emirates 0.790 0.738 0.760
This is also better in case of emirates as it maintains higher liquid value than Qantas.
Debt-Equity ratio:
Particulars 2014 2015 2016
For Qantas 2.262 1.613 1.491
For Emirates 1.665 1.690 1.546
Return on capital employed:
Particulars 2014 2015 2016
For Qantas -29.03% 5.57% 10.63%
For Emirates 4.94% 6.15% 9.07%
From both the ratios it can be identified that Qantas has better position as it is having
lower debts and earns more returns in comparison to emirates in 2016.
From all the ratios that are presented above it can be said that in earlier two years which
are 2014 and 2015 emirates is having better financial position but in last years 2016 status of
Qantas is much better than the other one. It has made tremendous growth in this years and has
29

made a different image in market. So if current position is noted the Qantas is much better than
emirates.
H. Evaluation of performance of business
Under this performance of qantas is to be evaluated to know its position and make
conclusion on basis of that. The success of the business s to be measured and for that its profits
can be noted which have increased to great level. It has converted itself from a loss making
company to profitable entity and that too in short span of time (Financial Analysis for Non-
Financial Leaders, 2017). It used a decentralized structure as all the responsibilities which are
required to be done are allocated among various authorities. They are needed to perform them in
manner by which best results will be obtained by company and overall improvements will be
made. This is followed as by this work is done by those who are highly skilled and also timely
completion of activities is made possible. The evaluation of performance is done by it and for
that it is using balance score card approach also. There are several targets which are set by it in
respect of various factors and then all the authorities are required to work in manner by which
they can be attained. This helps in knowing that whether operations are carried out in proper
manner or not. The performance can also be measured by the help of responsibility reports. In
them cost profit and other factors will be taken into consideration. Various parameters are set and
on the basis of them reports are made in which performance is mentioned.
There are various financial as well as non financial measures which are used by the
company by which performance of business can be measured. One of them is balance scorecard
which is highly efficient for company. Individual performance indicators are set by the use of
which individuals performance is measured. Then STPI is also taken under consideration by
Qantas for the same purpose.
CONCLUSION AND RECOMMENDATIONS
From the above report it can be concluded that it is very important to carry out an
analysis so that all the aspects that are involved can be evaluated. There are many such factors by
which financial position of company is affected and for this it becomes all the more necessary
that it is performed in best manner. It has been identified that ratios shall be calculated to know
that proper balance is maintained or not. Then in order to compare the working of one year with
that of other horizontal analysis is done as by this trend that is being followed in company is
30

determined. In this one year is taken as base and all other years are examined on that basis. If
identification is to be made within one year by taking some factor as base, then vertical analysis
is to be performed.
All of this is done in report for emirates and Qantas and it has been found that
performance keeps on fluctuating and on that basis in current situation the company that is
having better value is qantas.
There are various aspects in which improvements can be made. The first and foremost is
that proper balance shall be maintained in equity and debt. The amount that is borrowed should
be reduced so that expense made in form of interest is reduced. The dependence shall be on own
funds and not on borrowed amount. By this overall saving and profits will increase which is the
main objective of any business. Best technology should be undertaken so that additional facilities
are provided and by that more passengers are attracted and also price shall be kept at affordable
level.
31

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<http://www.fuqua.duke.edu/programs/other_programs/executiveeducation/programs/
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32

APPENDIX
Financial statements of Qantas Airlines:
33

34

35

36