Current Financing Options for Virgin Australia

The current financing options in case of the Virgin Australia are the combination of the debt as well as the equity. The core focus of the company has been on the debt as the financing from the debt is higher as it can be observed from the table. The ratio indicates that the fluctuation was due to the decrease in the equity factor of the company. The current debt is again the combination of the current as well as the non-current liabilities. The company is in a mood to use the Australian market as one of the major sources of the finance. The debt to total assets has been within the same range over the period of the five years and the valuation of equity was again in the range of 0.19 to 0.25 over the period of 4 years (Virgin Australia, 2018).

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Current Financing Options
Current Financing
Particulars 2015 2016 2017 2018
Debt to Equity
Debt 2295 2099 2152 2273
Equity 1077 912 1568 1091
2.13 2.30 1.37 2.08
Debt to Assets
Debt 2295 2099 2152 2273
Total Assets 5780 6041 6356 6188
0.40 0.35 0.34 0.37
Equity to Assets
Equity 1077 912 1568 1091
Assets 5780 6041 6356 6188
0.19 0.15 0.25 0.18
The current financing options in case of the Virgin Australia are the combination of the debt as
well as the equity. The core focus of the company has been on the debt as the financing from the
debt is higher as it can be observed from the table. The ratio indicates that the fluctuation was
due to the decrease in the equity factor of the company. The current debt is again the
combination of the current as well as the non-current liabilities. The company is in a mood to use
the Australian market as one of the major sources of the finance. The debt to total assets has been
within the same range over the period of the five years and the valuation of equity was again in
the range of 0.19 to 0.25 over the period of 4 years (Virgin Australia, 2018).
Particulars 2015 2016 2017 2018
Current Ratio
Current Assets 1586 1714 1788 1980
Current Liabilities 2300 2780 2348 2524
0.69 0.62 0.76 0.78
Quick Ratio

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Quick Assets 1545 1672 1742 1932
Current Liabilities 5780 6041 6356 6188
0.27 0.28 0.27 0.31
Operating cash flow ratio
Cash 1096 1156 1421 1416
Operating cash from activities 1468 1645 1598 1338
0.75 0.70 0.89 1.06
Financing cost of debt
Virgin Australia has managed to reach the current ratio at 0.78, which is close to 1 yet still far
away. This ratio basically determines the liquidity of the company. The ability of the company to
cater the service of the debt can be analyzed with the assistance of the cash flow from the
operations. In the year 2016 there was a reduction in the debt from $2295 to $2099, whereas in
case of the operating cash flow it is increasing and the same could have been the positive
scenario in case of the in case of the reduction in debt. The operating cash flow increased from
0.75 to 1.06 and this has been a positive outlook (Lohmann and Trischler, 2017).
Dividend Policy
From the history the dividend policy of the Virgin Australia is crystal clear, that the company
declares the dividend on the semiannually basis.
Year
Share
Price Dividend NPAT FCF Dividend yield
Payout
Ratio
2015 0.2 3 94 420 6.7% 3.19%
2016 0.23 5 225 562 4.6% 2.22%
2017 0.26 8 186 200 3.3% 4.30%
2018 0.18 10 653 21 0 0

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The dividend policy of the Virgin Australia has been closed recently, however in the earlier years
as well; the dividends of the company were not much. The company declared the dividend of 3
cents against the net profit after taxation of 94. The company is also having the free cash flow of
for the extra expenses incurred by the business. The issue of the dividend has been an interim
dividend in the fast half of the year 2018. After the year of the great depression 2008, the
company faced the challenges that were so crucial that it had to cease the payment of the
dividend (Arsov, 2015). There were several other impacts as well which have triggered the
factors that could lead in the collapse of the deal outside the country. From the above evaluation
it can be stated that the performance of the company increased in terms of the net profit after tax
from 94 to 653, however the free cash flows saw a subsequent reduction in the opposite
direction. Since, there are less free cash flow and the surprising net profit ratios the, company
decided to suspend the concept of giving the dividends (Virgin Australia, 2018).
Hence from the overall scenario it can be concluded that the financing of the VIRGIN
AUSTRALIA has been the combination of debt and equity and the dividends are suspended.

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References
Arsov, D., 2015. The Cheap Charlie Logistics & Transportation. Available at SSRN 2615569.
Lohmann, G. and Trischler, J., 2017. Licence to build, licence to charge? Market power, pricing
and the financing of airport infrastructure development in Australia. Transport Policy, 59, pp.28-
37.
Virgin Australia, (2018) Annual Report [Online] Available from
https://www.virginaustralia.com/cs/groups/internetcontent/@wc/documents/webcontent/~edisp/
fy18-annual-report.pdf [Accessed on 26th May 2019]
Virgin Australia, (2018) Historical Data [Online] Available from
https://au.finance.yahoo.com/quote/VAH.AX/ [Accessed on 26th May 2019]