Executive Summary: Business Valuation and Analysis of Qantas Limited

This report provides a comprehensive business valuation and analysis of Qantas Limited. It begins with an introduction to business valuation and its importance, followed by an overview of Qantas Limited, the flag carrier of Australia. The analysis employs Porter's Five Forces model to evaluate the competitive landscape, examining industry rivalry, threats from new entrants and substitute products, and the bargaining power of suppliers and buyers. A SWOT analysis is presented to assess the company's internal strengths and weaknesses, as well as external opportunities and threats. The report then delves into Qantas's corporate strategy and accounting policies, focusing on asset and liability recording and depreciation policies. Financial performance is evaluated by comparing the years 2013 and 2017, including ratio analysis and key financial metrics. The report concludes with recommendations and a summary of findings, offering insights into Qantas's market position and overall value.

RUNNING HEAD: Business valuation and analysis
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Business Valuation and Analysis

Business valuation and analysis
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Executive Summary
This report briefs the user about the position and the performance of Qantas limited in
the market. Further, this report evaluated the exact value of the comapny in the market. For
analyzing the performance of the comapny, SWOT analysis, corporate strategy analysis,
financial performance analysis etc has been done. For this report, Qantas limited’s case study
has been evaluated. According to the given case, business valuation could be analyzed
through calculating the performance of Qantas limited in the market place. For analyzing the
valuation of Qantas limited in superior manner, 5 forced model of porter, SWOT analysis,
accounting policies, corporate strategies, financial performance etc. of the comapny has been
analyzed.

Business valuation and analysis
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Contents
Introduction.......................................................................................................................4
Qantas limited...................................................................................................................4
Porter’s five forces model.................................................................................................4
Competition in industry................................................................................................5
New entrants’ threat......................................................................................................5
Substitute product’s threat............................................................................................5
Supplier’s bargaining power.........................................................................................5
Buyer’s bargaining power.............................................................................................6
SWOT analysis.................................................................................................................6
Corporate strategy of the company...................................................................................7
Accounting policies..........................................................................................................8
Financial performance of Qantas in 2013.........................................................................8
Financial performance of Qantas in 2017.........................................................................9
Differences in financial performance...............................................................................9
Similarities in financial performance..............................................................................10
Recommendation and Conclusion..................................................................................10
References.......................................................................................................................11
Appendix.........................................................................................................................13

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Introduction:
Business analysis and valuation of an organization is a procedure which is basically
used by the administration of business to calculate the economic value of an organization in
context of the owner of the company. Business valuation and analysis is used by the financial
markets to evaluate the price which is willing to pay by a business to affect the sales, market
position and economic position of the company (Higgins, 2012). Various tools could be used
by the businesses to analyze the main value of the business. The value of the business could
be evaluated through analyzing and investigating over the competitors of the company, new
entry into the market, supplier’s power, buyer’s power, strength, opportunities, threat,
weakness, financial performance etc of the company.
For this report, Qantas limited’s case study has been evaluated. According to the
given case, business valuation could be analyzed through calculating the performance of
Qantas limited in the market place. For analyzing the valuation of Qantas limited in superior
manner, 5 forced model of porter, SWOT analysis, accounting policies, corporate strategies,
financial performance etc. of the comapny has been analyzed.
Qantas limited:
Qantas limited is flag Carrier Company of Australia. It is recognized as the largest
airline in the Australia according to the fleet size, international destinations and the number
of international flights. The company came into existence in 1920 and from that, various
changes have occurred into the performance, profit and position etc of the company. In May,
1935, first international flight of the company has begun. The company has various
subsidiary companies which are performing various operations related to airlines such as
catering. Jetstar airways segment of the company has assisted the comapny to enhance the
revenue level a lot (Qantas, 2018). Currently, 35000 people are working for this comapny in
around 43 countries. All the airways of this comapny have a logo of red kangaroo.
Porter’s five forces model:
Five forces model has been presented by Porter. This model is a basic framework to
evaluate the competition of the company in marketplace. This model expresses about the

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competition and the attractiveness of the company. Porter’s five forces model has been
evaluated on Qantas limited. Following is the framework of Qantas Limited:
Competition in industry:
Industry rivalry is an important element for every company as it briefs the comapny
about the companies which could affect their business. It is requisite for every organization to
evaluate the industry position and firms in the market. According to evaluation on Qantas, it
has been evaluated that various companies are there which could affect the business and the
performance of the comapny (Madhura, 2011). In domestic market, two companies are the
main rival of the comapny which are Tiger plc and Virgin Airways whereas in global market,
British airways could be a big rival of the company.
New entrants’ threat:
Threat from new companies in the industry is an important element for every
company as it briefs the management and the stakeholders about the companies which could
affect their business. It is requisite for every organization to evaluate the impacts of the
business due to a new company in the industry. According to evaluation on Qantas, it has
been evaluated that Qantas limited is not required to have any threat from new entrants as
enter into the airline industry requires huge investment and thus companies do not enter into
the airline industry.
Substitute product’s threat:
Threat from substitute products is an important element for every company as it briefs
the comapny about the products which could affect their business and the products of the
company. It is requisite for every organization to evaluate the impacts of the business due to
substitute products in the industry. According to evaluation on Qantas, it has been evaluated
that the threat from substitute products is quite lower for the company. The main substitute
products of the company is trains and the ships which is mostly used by the companies for a
fewer distance (Gillen and Gados, 2008).
Supplier’s bargaining power:

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Bargaining power of suppliers is an important element for every company as it briefs
the comapny about the supplier which supplies raw material to the company. It is requisite for
every organization to evaluate the impacts of the supplier and their bargaining power on the
cost of the company. According to evaluation on Qantas, it has been evaluated that the
bargaining power of the suppliers is quite higher as few suppliers are available in the industry
and the buyers are quite higher.
Buyer’s bargaining power:
Lastly, bargaining power of suppliers has been evaluated. It is an important element
for every company as it briefs the comapny about the buyers which buys products and avail
services of the company. It is requisite for every organization to evaluate the impacts of the
buyers and their bargaining power on the selling price of the company (Kaplan and Atkinson,
2015). According to evaluation on Qantas, it has been evaluated that the bargaining power of
the buyers are quite higher as various companies are offering the services and that is why
buyers could manipulate the selling price of the comapny.
Through the above analysis, it has been found that the porter’s 5 forces ode explains
about the marketing factor of the comapny.
SWOT analysis:
Further, the internal performance of the company has been analyzed through
calculating the internal changes of the company:
Strength Weakness
 Qantas limited is enjoying the
monopoly market in Australian
marketplace.
 Qantas limited’s promotional
policies are quite strong
 Australian government has a back
of Qantas limited
 The main weakness of the comapny is
high rate labours and weak
relationship with the employees.
 The company mainly focuses over the
business class people.
.

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 Qantas limited is the largest and
oldest aviation comapny in
Australian market.
 Largest international destinations
have been covered by the company.
 Company has various string
relationships in the market (Fu,
Oum and Zhang, 2010).
Opportunity Threat
 Technology could be used by the
company to enhance the market
 This comapny is the main
attractiveness of the investors
 Various strong relationships have
been managed by the company with
international companies.
 Huge market share is hold by the
company.
 Main tourist destinations have been
covered by the company.
 Fuel prices are quite higher.
 Labour cost of the Australian market
and the industry is quite higher.
 Huge competition is there in the
aviation market (Campbell, Goold
and Alexander, 1995).
Corporate strategy of the company:
Further, the corporate strategy of the company has also been evaluated. Corporate
strategy of an organization express about the scope and the direction of the company. It
expresses that how an organization performs its operations to accomplish the mission. The
Qantas case study explains that the numerous alterations have been occurred into the policies
and the strategies of the comapny from 1992 to current year. The alterations have mainly

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occurred to accomplish the task and the mission of the business. Even the Australian flagship
has changed its policies and due to which the strategies of the comapny has also been altered.
The company have managed the new policies and the plans to enhance the performance in the
market (Frazer, 2015).
Qantas limited has adopted the innovations, technologies, operations, sources,
functioning etc to manage the performance of the operations (Barney, 1992). Further, the
changes into the main operations and the subsidiary companies have also been done to grab
the market. More, the company has diversified its operations and the marketplace to
recognize on international level. In 1992, the comapny was not recognized by the
international market but now it has adopted the international expansion strategies and it is
known by 45 countries for its longer route and the coverage of tourist destination (Hogarth,
and Makridakis, 2011).
This comapny has launched various new operations through establishing various
subsidiary companies such as Qantas catering for catering operations, Jetstar airways for
lower income people, Qantas holidays for tourist destinations etc. these changes have done by
the administration to enhance the performance of the company.
Accounting policies:
Accounting policies are the set of regulations, policies, rules, process etc that assists
the business and the auditors to record the financial data and analyze the financial data of the
comapny. These policies are mainly set by the accounting institutions of the country and
compulsorily used by the companies while recording the data into the financial reports.
Auditors are learnt to look over these policies and evaluate the financial reports of a
particular company. Mainly following policies should be analyzed by the auditors while
evaluating the financial reports of airline firms:
Asset and liability recording:
Asset and liabilities should be recorded by an organization after evaluating the
accounting standards, accounting rules and the GAAP principles. The valuation of the assets
and liabilities of a business depends on the accounting policies. So, it is expected from an
auditor to analyze the financial figures and asset and liabilities of the comapny according to
accounting policies and the accounting standards (Dean and Yunus, 2001).

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Depreciation policies:
Further, charge of depreciation is done by every company to analyze the exact worth
of the assets of the company. Depreciation is charged by the companies to less the tax burden
or sometimes for enhancing the worth of the comapny, mainly less depreciation are charged
by the companies. Thus an auditor should analyze the depreciation amount of the comapny
according to accounting policies and the accounting standards.
Financial performance of Qantas in 2013:
Further, for evaluating the total value of the Qantas limited, financial performance and
the position of the business have been evaluated. Through the study over the financial
performance of the company, financial reports of the comapny have been evaluated. Financial
reports include income statement, cash flow statement and the balance sheet of an
organization. Through conducting the study of ratio analysis, financial performance of the
company has been calculated. Ratio analysis briefs about various position of the comapny.
Firstly , liquidity ratios have been analyzed and it has been found that the current ratios and
the quick ratio of the comapny is quite good (Datamonitor, 2009).
More, the profitability position of the comapny express about a bad performance of
the company. More, the capital structure ratio and the efficiency ratios have been calculated
and it has been found that the comapny has maintained a good performance in the market to
manage the performance of the company.
Financial performance of Qantas in 2017:
In addition, the business valuation of the comapny has been analyzed on the basis of
financial figures of the company of 2017. For it, financial performance and the position of the
business have been evaluated. Through the study over the financial performance of the
company in 2017, financial reports of the comapny have been evaluated. Through conducting
the study of ratio analysis, financial performance of the company has been calculated. Firstly,
liquidity ratios have been analyzed and it has been found that the current ratio and the quick
ratio of the company is quite lower and company should enhance the level of current asset to
manage the performance of the company (Besley and Brigham, 2008).

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More, the profitability position of the comapny express about a good performance of
the company. It explains that the profitability position of the comapny has been better. More,
the capital structure ratio and the efficiency ratios have been calculated and through the
capital structure of the company, it has been found that the comapny has maintained optimal
capital structure in the market to manage the performance of the company as well the
working capital is also managed by the comapny.
Differences in financial performance:
More, the differences of the comapny have also been evaluated and following
differences have been found:
 Increment in the revenues
 Policies of FlagShip is same
 Performance has been increased (Craigie and Bekiaris, 2010).
Similarities in financial performance:
More, the similarities of the comapny have also been evaluated and following
similarities have been found:
 Liabilities in both the years are quite similar
 Asset performance is same
 International polices have been changed.
Recommendation and Conclusion:
Thus, the above study briefs that position of the comapny has become competitive and
the changes are quite optimistic. Through the study and the analysis on company, it is
recommended to the investors of the comapny to invest into the comapny to enhance the
investment amount of the company.

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References:
Barney, J. 1992. ‘Firm Resources and Sustained Competitive Advantage’. Journal of
Management, vol. 17, no. 1, p. 99.
Campbell, A, Goold, M and Alexander, M. 1995. Corporate Strategy: The Quest for
Parenting Advantage. Harvard Business Review, viewed 9th Jan 2018,
<https://hbr.org/1995/03/corporate-strategy-the-quest-for-parenting-advantageandgt.
Higgins, R. C., 2012. Analysis for financial management. McGraw-Hill/Irwin.
Craigie, J. Bekiaris, M. 2010. Money. Qantas gets cosy with AirAsia, 2120, 16-16.
Besley, S. and Brigham, E.F., 2008. Essentials of managerial finance. Thomson South-
Western.
Datamonitor. 2009. Airline Industry Profile: Asia-Pacific. Airline Industry Profile: Asia-
Pacific, 1-32.
Dean, E. and Yunus, K. 2001. ”An overview of strategic alliances”. Management Decision,
Vol. 39 Iss 3 pp. 205 – 218.
Hogarth, R.M. and Makridakis, S., 2011. Forecasting and planning: An
evaluation. Management science, 27(2), pp.115-138.
Frazer, S 2015. Jetstar expansion stalled by Hong Kong authorities, Text, ABC News, viewed
9 Jan 2018. http://www.abc.net.au/news/2015-06-26/jetstar-expansion-stalled-by-hong-kong-
authorities/6576346andgt.
Fu, X., Oum, T.H. and Zhang, A. 2010. “Air Transport Liberalization and Its Impacts on
Airline Competition and Air Passenger Traffic”. Transportation Journal, vol. 49, no. 4, pp.
24-41.
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Gillen, D and Gados, A 2008. ‘Airlines within airlines: Assessing the vulnerabilities of
mixing business models’. Research in Transportation Economics, vol. 24, The Economics of
Low Cost Airlines, no. 1, pp. 25–35.
Madura, J., 2011. International financial management. Cengage Learning.

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Qantas. 2018. Qantas Fact file. [Online] Viewed on 9th Jan 2018:
http://www.qantas.com.au/infodetail/about/FactFiles.pdf.

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Appendix:
QANTAS AIRWAYS LTD (QAN) CashFlowFlag INCOME STATEMENT
Fiscal year ends in June. AUD in millions except per
share data.
2017-
06
2016-
06
2015-
06
2014-
06
2013-
06
Revenue 15680 15784 15532 15155 15577
Cost of revenue 6475 6612 7143 7603 7220
Gross profit 9205 9172 8389 7552 8357
Operating expenses
Sales, General and administrative 5281 5255 4779 4929 5216
Other operating expenses 2931 2690 2846 6592 3262
Total operating expenses 8212 7945 7625 11521 8478
Operating income 993 1227 764 -3969 -121
Interest Expense 235 284 349 286 296
Other income (expense) 423 481 374 279 434
Income before income taxes 1181 1424 789 -3976 17
Provision for income taxes 328 395 229 -1133 11
Net income from continuing ops 853 1029 560 -2843 6
Other -1 -3 -1
Net income 852 1029 557 -2843 5
Net income available to common shareholders 852 1029 557 -2843 5
Earnings per share
Basic 0.46 0.49 0.27 -1.37 0
Diluted 0.46 0.49 0.27 -1.37 0
Weighted average shares outstanding
Basic 1853 2083 2062 2077 2112
Diluted 1853 2083 2062 2077 2112
EBITDA 2798 2932 2234 -2268 1763
QANTAS AIRWAYS LTD (QAN) CashFlowFlag BALANCE SHEET
Fiscal year ends in June. AUD in millions except per
share data.
2017-
06
2016-
06
2015-
06
2014-
06
2013-
06
Assets
Current assets
Cash
Cash and cash equivalents 1775 1980 2908 3001 2829
Short-term investments 100 229 613 172 180
Total cash 1875 2209 3521 3173 3009
Receivables 784 795 959 1196 1436
Inventories 351 336 322 317 364

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Prepaid expenses 109 102
Other current assets 109 118 138 246 334
Total current assets 3119 3458 5049 4932 5245
Non-current assets
Property, plant and equipment
Gross property, plant and equipment 25940 24457 22464 21926 23944
Accumulated Depreciation
-
13687
-
12787
-
11749
-
11426
-
10117
Net property, plant and equipment 12253 11670 10715 10500 13827
Equity and other investments 257 243 183 177 217
Goodwill 207 208 206 195 197
Intangible assets 818 701 597 546 517
Deferred income taxes 39 333 548
Other long-term assets 567 386 447 420 197
Total non-current assets 14102 13247 12481 12386 14955
Total assets 17221 16705 17530 17318 20200
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt 330 338 678 978 592
Capital leases 103 103 93 232 243
Accounts payable 2067 1986 550 613 655
Deferred revenues 3685 3525 3584 3406 3032
Other current liabilities 910 1076 2565 2296 1848
Total current liabilities 7095 7028 7470 7525 6370
Non-current liabilities
Long-term debt 3144 3055 3386 4195 4612
Capital leases 1261 1366 1405 1078 633
Deferred taxes liabilities 353 673
Other long-term liabilities 1831 2001 1827 1658 1963
Total non-current liabilities 6589 6422 6618 6931 7881
Total liabilities 13684 13450 14088 14456 14251
Stockholders' equity
Common stock 3053 3575 4623 4614 4650
Retained earnings 472 -100 -1115 -1671 1171
Accumulated other comprehensive income 12 -220 -66 -81 128
Total stockholders' equity 3537 3255 3442 2862 5949
Total liabilities and stockholders' equity 17221 16705 17530 17318 20200
QANTAS AIRWAYS LTD (QAN) Statement of CASH FLOW

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Fiscal year ends in June. AUD in millions except per
share data.
2017-
06
2016-
06
2015-
06
2014-
06
2013-
06
Cash Flows From Operating Activities
Other non-cash items 2704 2819 2048 1069 1417
Net cash provided by operating activities 2704 2819 2048 1069 1417
Cash Flows From Investing Activities
Investments in property, plant, and equipment -1368 -1618 -1359 -1161 -1247
Property, plant, and equipment reductions 34 509 194 141 32
Acquisitions, net 21 70 -24
Purchases of investments -16 -39 -49 -93 -85
Sales/Maturities of investments 27 266 8 322
Sales of intangibles 18
Other investing activities -696 -802 -17 -34 -61
Net cash used for investing activities -2046 -1923 -944 -1069 -1045
Cash Flows From Financing Activities
Debt issued 419 -807 796 717 846
Debt repayment -453 -2276 -1027 -1494
Repurchases of treasury stock -564 -1080 -1 -63 -52
Cash dividends paid -264 -4 -1
Other financing activities 8 62 267 547 -253
Net cash provided by (used for) financing activities -854 -1825 -1218 173 -953
Effect of exchange rate changes -9 1 21 -1 12
Net change in cash -205 -928 -93 172 -569
Cash at beginning of period 1980 2908 3001 2829 3398
Cash at end of period 1775 1980 2908 3001 2829
Free Cash Flow
Operating cash flow 2704 2819 2048 1069 1417
Capital expenditure -1368 -1618 -1359 -1161 -1247
Free cash flow 1336 1201 689 -92 170
Supplemental schedule of cash flow data
Cash paid for income taxes -4 -2 -2 -2 -3
Cash paid for interest -164 -227 -281 -254 -229