Accounting in Organisations and Society: Qantas and OZ Spirit Analysis

This report provides a comprehensive financial analysis comparing Qantas Airways Limited and OZ Spirit Ltd., focusing on key aspects such as corporate governance, environmental sustainability, and financial ratios. The analysis defines corporate governance, identifies responsible parties, and outlines their roles within a corporation. It then examines Qantas's environmental sustainability initiatives, including targets for 2020 and specific programs like sustainable aviation fuel and carbon offsetting. The report also explains the rationale for rounding numbers in financial reports and explores sources of short-term financing. A key part of the report involves a detailed examination of financial ratios for both companies, including profitability, asset efficiency, capital structure, market performance, working capital, and liquidity ratios. The report concludes with a recommendation for investment based on the comparative analysis, highlighting Qantas's stronger financial position. Overall, the report aims to provide actionable insights into the financial health and potential of both companies, assisting in making informed investment decisions.

Running Head: ACCOUNTING FINANCIAL ANALYSIS REPORT
ACCOUNTING FINANCIAL ANALYSIS REPORT
Name of the Student
Name of the University
Author Note

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Executive Summary
The financial analysis of firm is referred as the examination of the financial information for
reaching at the business decisions. It includes examining both the historical as well as the
projected risk, cash flows and profitability. The analysis results into reallocations of the
resources to or from the business or the specific internal operations. Hence, this report
includes discussion on corporate governance, sustainability of Qantas, rounding of numbers
in financial reports, short-term finance sources and financial ratio analysis. Hence, it can be
said that client should invest in Qantas Airways Limited.

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Table of Contents
Introduction................................................................................................................................3
Background of Company.......................................................................................................3
Discussion..................................................................................................................................3
Corporate Governance...........................................................................................................3
Sustainability Report Analysis of Qantas..............................................................................4
Rounding of Numbers............................................................................................................6
Sources of Short-Term Finances............................................................................................6
Examination of Financial Ratios............................................................................................6
Recommendations....................................................................................................................10
Conclusion................................................................................................................................10
Reference..................................................................................................................................11

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Introduction
Analyzing the financial statement is process of evaluating projects, business, budgets
as well as other finance related firms for determining their performances and their suitability.
The financial analysis helps for analyzing stability, liquidity, solvency or profitability of the
company for warranting the monetary investments (Kundakchyan and Zulfakarova 2014).
Hence, under this assignment, discussion will be on corporate governance and its role in
corporation. Further, elements of environment sustainability of Qantas will be discussed.
Moreover, reasons for rounding of the financial reports numbers will be discussed. Further,
sources of the short-term finances as well as the benefits of offering the goods and services
on credit will be discussed. Lastly, ratio analysis will be done on Qantas Airways Ltd. and Oz
Spirit Ltd.
Background of Company
Qantas Airways Limited is Australian based largest airline in terms of its size of fleet,
international destinations as well as international flights. This company is the third oldest
airline after the airlines KLM as well as Avianca. Qantas was founded in year 1920 and it has
begun its international passenger flights in 1935.
Discussion
Corporate Governance
Corporate governance is collection of the processes, mechanisms as well as relations,
with the help of which corporations is controlled as well as directed. It helps in incorporating
internal and external factors, which affects interest of the stakeholders of the company
including management, government regulators, customers, shareholders and suppliers.
Corporate governance provides the framework of the practices as well as rules by which
board of the directors of the company ensures highest level of transparency, fairness as well

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as accountability in the company’s relationship with their stakeholders (Tricker and Tricker
2015).
The board of the directors plays vital role in corporate governance. They oversee the
management as well as the business strategies of the business for achieving long-term
creation. The effective directors are considered as diligent monitors of the business
operations. The board exercises vigorous as well as diligent oversights of the company
including the key areas such as risks and strategy. Moreover, the management of the
company is responsible for managing, setting as well as executing the strategies for the
operations of the company, under the board oversights and keeping board informed regarding
operations status of the company. Their role in corporate governance includes strategic
planning, financial reporting as well as risk management (Investor.qantas.com. 2019).
Sustainability Report Analysis of Qantas
The environmental sustainability at Qantas is the guiding principle. They aim for
leading their airlines for commitment towards environmental sustainability. It is recognized
by the company that cost of its inaction outweighs the cost of action. The environmental
performance of the company drives the commercial benefit as well as helps in ensuring their
continued success. Further, the company has reset their targets for the year 2020 (Hughen,
Lulseged and Upton 2014). The major target of the company for 2020 includes saving
electricity, saving energy as well as reducing wastage. The company can save electricity by
improving efficiency of fuel; energy is saved by the neutral growth of carbon from year 2020
as well as reducing wastages by cutting net emissions (Qantas.com.au. 2019). Following are
elements of the environment sustainable core elements program off Qantas that shows
progress of reducing environmental impacts:

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Sustainable Aviation Fuel- The Qantas becomes first airline of Australia that
operates the commercial flight by using sustainable aviation fuel. The results
estimated that 12,000 clean energy jobs creation, reduction of $2billion in reliance
towards reliance on fuel imports and cut of 17% in emissions (Kerr, Rouse and de
Villiers 2015).
Fly Carbon Neutral- Qantas invest more in the fuel-efficient fleet by weight
reduction methods such as replacing the hard copy of operational manuals with the
iPad as well as lightweight pantry equipment.
Fuel Efficiency Program- The Qantas is partnered with the leading business of
Australia for reducing their environmental footprint as well as supporting the verified
offset projects.
Inflight- The company becomes first airline of Australia, who have introduced
inflight recycling with the help of their sustainable procurement policy as well as
Australian Covent obligations as they pushes the suppliers for providing more
sustainable products as well as less packaging (Qantas.com.au. 2019).
Aircraft Noise- The Qantas purchase the new generation aircraft that has the feature
of lower noise. It is leading promoter of the GPS based Smart Tracking that is used at
the Canberra Airport for redesigning flights path for moving noise away from the
residents.
Moreover, environmental and the social performance plays important role for the
investors to analyze the company for making the money from their decisions of the
investment. The investors want to know the environmental performance of the company for
improving their returns. The sustainability information is perceived for providing the
information primarily about the risk in comparison to the competitive positioning of the
company.

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Rounding of Numbers
Qantas is the company of kind referred to in the ASIC Instrument 2016/191.
Moreover, according to this instrument, the amounts in financial report as well as director’s
report are rounded to nearest million dollars until and unless otherwise stated.
Sources of Short-Term Finances
The short-term finance is referred to the financing needs for smaller period that is less
than a year. The business requires the additional money for doing the business for the short-
term period. The short-term finance helps the business for continuing the operations at the
time of economic downturns. The sources of the short term finance includes trade credit,
customers advances, loans from the cooperative banks, overdrafts and discounting of the bills
and bank credit that includes loans and the advances (Tracy and Tracy 2014).
Benefits of Offering Goods and Services on Credit
The offering of the trade credit helps in providing competitive edge over the rivals of
the business. These incentives are provided by the business for staying competitive.
One of the most important benefit of offering goods and services on credit is increase
the sales. The customers will continue to buy the products without disrupting their
cash flows.
The company demonstrates trust by offering credit to the customers.
The extension of credit by the company can help the business for enhancing their
reputations as it shows that company is financially healthy with the cash as well as
working capital (Gitman, Juchau and Flanagan 2015).
Examination of Financial Ratios
Ratios 2018 2017
Profitability Analysis

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Profit Margin 9% 9%
Return on Assets (ROA) 5% 5%
Return on Equity 25% 25%
Asset Efficiency
Asset Turnover 1.03 times 1.00 times
Capital Structure
Debt ratio 79% 79%
Market Performance
Earnings per share 56 cents 46 cents
Dividend per share 14 cents 14 cents
Working capital
Debtors Days 18.10 days 17.95 days
Liquidity 0.49 times 0.44 times
Table 1: Ratio Calculation of Qantas
Ratios 2018 2017
Profit Margin 8.10 % 7.45%
Return on Assets (ROA) 7.50% 7.33%
Return on Equity 21.50% 22.70%
Asset Efficiency
Asset Turnover 0.70 times 0.67 times
Capital Structure
Debt ratio 83.50% 85.60%

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Market Performance
Earnings per share 0.45 cents 0.41 cents
Dividend per share 6 cents 5 cents
Working capital
Debtors Days (full days) 9 days 12 days
Liquidity 0.91 times 1.10 times
Table 2: Ratio Calculation of OZ Spirit Ltd.
Profitability Ratios
The profit margin of Qantas Ltd. for the year 2017 and 2018 is 9% whereas the profit
margin ratio of Oz spirit Ltd. for 2017 is 7.45% and for 2018 is 8.10%. This means that
Qantas Ltd. is earning more profits from the percentage of their sales, which is better in
comparison to OZ Spirit Ltd. Moreover, the ROA of Qantas Ltd. for 2017 and 2018 is 5%
whereas ROA of OZ Spirit Ltd. for 2017 is 7.33% and for 2018 is 7.50%. This means that OZ
Spirit Ltd. is able to generate more profits from their assets in comparison to the Qantas Ltd.
Lastly, the ROE of Qantas Ltd. for 2017 and 2018 is same that is 25% whereas ROE of OZ
Spirit Ltd. for 2017 was 22.70% and for 2018 was 21.50%. This means that the ability of
Qantas Ltd. is more for generating profits from their shareholders investments as compare to
OZ Spirit Ltd (Robinson et al. 2015).
Asset Efficiency Ratios
The asset turnover ratio of Qantas Limited for 2017 was 1.00 times and for 2018 was
1.03 times whereas for OZ Spirit Limited, the asset turnover ratio for 2017 was 0.67 times

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and for 2018 was 0.70 times. This means that the ability of Qantas Ltd. has increased over the
previous year for generating sales from their assets in comparison to OZ Spirit Limited.
Capital Structure Ratios
The debt ratio of Qantas Limited for 2017 and 2018 was 79% whereas for OZ
Spirit Limited, the debt ratio for 2017 was 85.60% and for 2018 was 83.50%. This means that
OZ Spirit Limited has more ability for paying of their liabilities from their assets in
comparison to Qantas Limited (Riantani and Nurzamzam 2015).
Market Performance Ratios
The EPS of Qantas Ltd. for 2017 was 46 cents and for 2018 was 56 cents whereas in
case of OZ Spirit Limited, the DPS for 2017 was 0.41 cents and for 2018 was 0.45 cents. This
means that Qantas Limited is making more money from each single stock of its shares in
comparison to OZ Spirit Limited. Moreover, DPS of Qantas Ltd. for 2017 and 2018 was 14
cents whereas for OZ Spirit Limited, the DPS for 2017 was 5 cents and for 2018 was 6 cents.
This means that Qantas Ltd. is financially strong company as it offers stability in paying
dividends payments each year as compare to OZ Spirit Limited (Qantas.com.au. 2019).
Working Capital Ratios
The debtors’ days of Qantas Ltd. for 2017 were 17.95 days and for 2018 was 18.10
days whereas in case of OZ Spirit Ltd, the debtors’ days for 2017 were 12 days and for 2018
was 9 days. This means that Qantas Ltd. is taking more days in receiving the payments from
their debtors in comparison to OZ Spirit Ltd, which is taking less days (Guenther and Hoppe
2014). Moreover, the liquidity ratio of Qantas Ltd. for 2017 was 0.44 times and for 2018 was
0.49 times whereas in case of OZ Spirit Ltd, the liquidity ratio for 2017 was 1.10 times and
for 2018 was 0.91 times. This means that the liquidity position of OZ Spirit Ltd. is better than
Qantas Ltd. for meeting short-term liabilities (Edwards 2014).

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Recommendations
The investor is recommended to invest in Qantas Ltd. as compare to OZ Spirit Ltd.
because the profitability, assets efficiencies, capital structure as well as market position of
Qantas is much better than the later company.
Conclusion
Therefore, it is concluded that financial analysis is the critical aspects of all the
commercial activity as it helps in providing the actionable insights into health as well as
potential of organization. Further, it is analyzed that corporate governance provides system of
the policies, principles, procedures as well as clearly defines the accountabilities and
responsibilities used by the stakeholders for overcoming conflicts of interest that is inherent
in corporate forms. Moreover, it has been analyzed that sustainability practices by the
company impacts the investment decision of the investors because sustainability plays
important role in determining better future financial performance of the company. In addition,
short-term sources of finance include trade credit, secured loans, commercial papers and
commercial bank loans. These sources helps in establishing trust with the customers,
increasing customer loyalty, enhancing reputations as well as gaining the competitive edge.
Lastly, it can be said that in comparison Oz spirit Limited, Qantas is performing good. Hence,
investor can take decision to invest in Qantas Limited.

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Reference
Edwards, D., 2014. The link between company environmental and financial performance
(Routledge Revivals). Routledge.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.
Guenther, E.M. and Hoppe, H., 2014. Merging limited perspectives: A synopsis of
measurement approaches and theories of the relationship between corporate environmental
and financial performance. Journal of Industrial Ecology, 18(5), pp.689-707.
Hughen, L., Lulseged, A. and Upton, D.R., 2014. Improving stakeholder value through
sustainability and integrated reporting. The CPA journal, 84(3), p.57.
Investor.qantas.com. 2019. [online] Available at:
https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/
file/annual-reports/2018-Annual-Report-ASX.pdf [Accessed 29 Sep. 2019].
Kerr, J., Rouse, P. and de Villiers, C., 2015. Sustainability reporting integrated into
management control systems. Pacific Accounting Review, 27(2), pp.189-207.
Kundakchyan, R.M. and Zulfakarova, L.F., 2014. Current issues of optimal capital structure
based on forecasting financial performance of the company. Life Science Journal, 11(6s),
pp.368-371.
Qantas.com.au. 2019. [online] Available at:
https://www.qantas.com.au/infodetail/about/environment/our-commitment-to-environmental-
sustainability.pdf [Accessed 29 Sep. 2019]. Qantas.com.au. (2019). [online] Available at:
https://www.qantas.com.au/infodetail/about/environment/our-commitment-to-environmental-
sustainability.pdf [Accessed 29 Sep. 2019].

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Riantani, S. and Nurzamzam, H., 2015. Analysis of Company Size, Financial Leverage, and
Profitability and It’s Effect to CSR Disclosure. Jurnal Dinamika Manajemen, 6(2).
Robinson, T.R., Henry, E., Pirie, W.L. and Broihahn, M.A., 2015. International financial
statement analysis. John Wiley & Sons.
Tracy, J.A. and Tracy, T., 2014. How to read a financial report: wringing vital signs out of
the numbers. John Wiley & Sons.
Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and
practices. Oxford University Press, USA.