Virgin Australia's Financial Analysis

This assignment analyzes the financial performance of Virgin Australia. It examines key financial ratios such as profitability, liquidity, and solvency to assess the company's position. The analysis includes a discussion on potential funding options for Virgin Australia, considering the implications of issuing shares versus taking on debt.

RUNNING HEAD: Financial analysis of company 1

Financial analysis of company 2
Name of the student-
Topic-Financial analysis of company
University name-

Financial analysis of company 3
With the increasing ramified economic changes and complex business structure, each
and every investor needs to implement proper level of investment analysis by implementing
financial analysis on the selected stocks. This report reflects the key financial factors on the
Virgin Australia company has its financial growth since last five years. It also reflects how
well Virgin Australia has been performing in the market as compared to its other rivals such
as Qantas Airline, Hello world Travel, Corporate Travel Management, and Webjet Ltd.

Financial analysis of company 4
Task-1.A
Annual growth of earning per share- It is the amount of earning which is available for
equity shareholders of company. However, Virgin Australia has been showing loss in its
business since last five years. Therefore, there is negative earning throughout the time to
shareholders and resulted to negative value creation to shareholders on their investment
(Annual report, 2017).
Earnings per share of Virgin Australian since last five years
Year EPS
2012 -0.03
2013 -0.04
2014 -0.011
2015 -0.033
2016 -0.07
2017 -0.03

Financial analysis of company 5
EPS = (net income – dividends on preferred stock) / average outstanding common
shares (Annual report, 2015).
Annual growth earning per share= (EPS 5th year/ EPS 1st year) ^1/5-1

Financial analysis of company 6
Task-1.B
Computation of ratio analysis of Virgin Australia
Ratio analysis reflects the relation between two financial factors of business. It
reflects, liquidity ratio, debt to equity structure, efficiency of company profitability ratio and
dividend pay-out ratio (Annual report, 2017).
Net profit margin ratio of Virgin Australia
Particular 2012 2013 2014 2015 2016 2017
Net profit -96 -98 -356 -111 -261 -220
Net Profit Margin
Ratio
-
0.0295748
6
-
0.02831551
6
-
0.098806
6
-
0.023586
9
-
0.052
3
-
0.043
6
Throughout the time company has shown negative net profit. However, in 2012 it has
-.29 net loss margin which increased to -.043 in 2017. This level of increment in net loss of
company has shown its inefficiency to run its business. Nonetheless, other external factors of
sluggish market has impacted organization at large (Annual report, 2012).
Assets turnover ratio
Efficiency ratio analysis

Financial analysis of company 7
Particular 2012 2013 2014 2015 2016 2017
Assets turnover
0.730916
46
0.7819701
76
0.7700363
33
0.8141868
51
0.8253
6
0.7931
09
This has shown that company has increased its overall turnover and maintained stable total
assets in its business.
Leverage ratio
This ratio reflects the company’s ability to maintain effective debt to equity ratio
Debt equity ratio
Interest coverage ratio
-
11.1607142
9
-
10.0606060
6
-
9.00833333
3
-
0.8496240
6
-
1.6132
6
-
0.6973
Company is not able to cover up all of its interest cost expenses through its earnings before
interest and tax. It may result to winding up of company soon (Annual report, 2017)
Capital structure 2012 2013 2014 2015 2016 2017

Financial analysis of company 8
ratio
Debt- equity
3.05570776
3
3.2557692
31
3.46469465
6
4.3667595
17
5.62390
4
3.05357
1
Company has maintained stable debt to equity ratio due to sluggish market conditions.
In addition to this, due to less amount of profit earning, it has posed high amount of threat on
its business sustainability (Annual report, 2012).
Return on equity for company
Profitability Ratios 2012 2013 2014 2015 2016 2017
Return on Equity
-
0.0842105
3
-
0.09423076
9
-
0.339694
7
-
0.103064
1
-
0.286
2
-
0.140
3
It is evaluated that due to loss making condition, shareholders have to face negative
return on equity. They all are facing decrease in their overall value of investment in
organization.

Financial analysis of company 9
Task-2
Amount of AUD $ 500 million raise through Bank loan
In this part the impact on return on equity and debt to equity ratio of Virgin Australia has
been computed as below.
Debt equity ratio
Capital structure ratio
2017(
before
)
2017(Afte
r issues of
share
Debt- equity 3.05 3.37
It is evaluated that if company raises AUD $ 500 million amount from the bank then it will
increase its debt to equity ratio. In addition to this it will result to higher financial leverage
which is bad for its business sustainability. Company should not go for this option when it
has high amount of loss and not able to cover up its interest payment amount.
Profitability Ratios
2017(
before
)
2017(Afte
r issues of
share
Return on Equity - -0.1403

Financial analysis of company 10
0.1403
There will be no impact on the return on equity. However, if company would have
paid or any detail about interest payment has been given then return on equity would have
changed accordingly. In notes there is clear given that there is no impact of raising funds
from bank on profit and revenue of company.

Financial analysis of company 11
Task-3
Amount of AUD $ 500 million raise through sales of new shares
In this part the impact on return on equity and debt to equity ratio of Virgin Australia has
been computed as below (Rideau, 2014).
Debt equity ratio
Capital structure ratio
2017(
before
)
2017(Afte
r issues of
share
Debt- equity 3.05 2.31
It is evaluated that if company raises AUD $ 500 million amount through sales of new shares
then it will reduce its debt to equity ratio. In addition to this it will result to lower financial
leverage which would increase the business sustainability. Company should opt this option to
expand its business and rejuvenates its business conditions in market (Brigham & Ehrhardt,
(2013).
Profitability Ratios
2017(
before
)
2017(Afte
r issues of
share
Return on Equity - -0.106

Financial analysis of company 12
0.1403
If company raise funds by selling shares in market then it would reduce the overall
loss to equity shareholders. It is easy to see that company has been incurring loss since very
long time. However, in this situation, company may find hard to find buyers in market who
could invest their money in Virgin Australia (Delen, Kuzey & Uyar, 2013).

Financial analysis of company 13
References
Annual report, 2012, Virgin Australia, retrieved on 21st September, 2017 from
https://www.google.co.in/search?
q=annual+report+of+virgin+australia&oq=annual+report+of+virgin+australia&aqs=chrome..
69i57j0j35i39l2j0l2.5604j0j7&sourceid=chrome&ie=UTF-8
Annual report, 2013, Virgin Australia, retrieved on 21st September, 2017 from
https://www.google.co.in/search?
q=annual+report+of+virgin+australia&oq=annual+report+of+virgin+australia&aqs=chrome..
69i57j0j35i39l2j0l2.5604j0j7&sourceid=chrome&ie=UTF-8
Annual report, 2015, Virgin Australia, retrieved on 21st September, 2017 from
https://www.google.co.in/search?
q=annual+report+of+virgin+australia&oq=annual+report+of+virgin+australia&aqs=chrome..
69i57j0j35i39l2j0l2.5604j0j7&sourceid=chrome&ie=UTF-8
Annual report, 2017, Virgin Australia, retrieved on 21st September, 2017 from
https://www.google.co.in/search?
q=annual+report+of+virgin+australia&oq=annual+report+of+virgin+australia&aqs=chrome..
69i57j0j35i39l2j0l2.5604j0j7&sourceid=chrome&ie=UTF-8
Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory & practice.
Cengage Learning.
Delen, D., Kuzey, C., & Uyar, A. (2013). Measuring firm performance using financial ratios:
A decision tree approach. Expert Systems with Applications, 40(10), 3970-3983.
Prideaux, B. (2014). The need to use disaster planning frameworks to respond to major
tourism disasters: Analysis of Australia's response to tourism disasters in 2001. Journal of
Travel & Tourism Marketing, 15(4), 281-298.