Qantas Airways Limited. . Author:. . Course/Class:. Institution:.

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QANTAS AIRWAYS LIMITED Author: Course/Class: Institution: Date: Qantas Airways Limited Performance Analysis In the analysis of earning and cash flow, the accounting return is very important. It is the average accounting profit divided by the project’s initial investment. The average annual profit is 694 million while the average annual investment is 13,968.5 million. Therefore the accounting return is 4.96%. The company has a cost of debt of 1.4% while the Cost of equity is 4.75%. Therefore the accounting return is higher than the cost of debt by a considerable margin but has a small difference with the cost of equity. The economic value added or economic profit, can also apply to measure financial performance on the…show more content…
There was an increase in operating margin from 4.92 to 7.77 in 2016 and is mainly attributable to the decline in operating expenditures leading to a higher EBIT in 2016. On efficiency, Qantas return on assets has also increased from 3.20 times to 6.01 times in 2016. The increase in ROA is due to a higher rise in profitability compared to the change in total assets and indicates efficiency in use of total assets to create income profits. Similarly, the ROE rose from 17.67 to 30.73 in 2016. As the total equity for Qantas had declined from 3441 million to 3181 million, they still managed to increase their net profits attributable to its shareholders. A notable deficiency in performance was the decline in inventory turnover from 22.36 to 20.10 in 2016. As shown in the balance sheet, inventories at the end of the year rose from 322 million to 336 million. It means fewer inventories were converted into cash sales in 2016. The receivables were however better collected as shown by an increasing receivables turnover. It implies Qantas has increased their frequency of debtor’s collection as shown by lower receivables of 993 million compared to 1234 million previously. Lastly, the firm increased its efficiency in use of total assets to generate higher revenues in 2016. Looking at the capital structure, the Debt/Equity ratio has moved in a favorable direction from 1.39 to 1.36

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