Qantas Financial Analysis Case Study Example | Topics and Well Written Essays - 1000 words

Qantas Financial Analysis - Case Study ExampleAn analysis of Qantas financial position and business adventure has been done with different make headwayability, liquidity and gearing dimensions. Belkaoui (1998, p11) illuminates that the profitability dimensions portray ability of the firm to efficiently use the capital committed by sourceholders and lenders to gene deem revenues in excess of expenses. The following profitability symmetrys provide an insight into the profit generating capacity and performance of the company over the last two financial yearsThe rate of return on total assets ratio expounds the ability of a firm in utilizing its various assets towards profit generation. Qantas rate of return on total assets ratio has declined by virtually 25% in the year 2006 as compared to 2005. It suggests that the companys profitability has tumbled down significantly over the last two financial years. The net profit ratio evaluates a companys profitability position after consid ering all the operating costs and interest expense etc (Mcmenamin Jim, 1999). The net profit margin of Qantas again indicates a serious decline in the companys ability to generate profit out of its sales revenue. This ratio has also decreased by about 25% in the year 2006. The expense noting point is that the companys sales revenue, as suggested by its financial statements for the year 2006, has increased by about 8% in 2006. ... The companys short edge financial position and business risks can be analyzed with the help of the following liquidity ratiosLiquidity Ratios20052006Current Ratio0.740.93Quick Ratio (Acid Test)0.670.87 total Receivables Collection Period25.6925.24The current ratio measures a companys ability to liquidate its short-term liabilities out of its various current assets (Meigs & Meigs, 1993). The above table shows that Qantas current ratio has increased by about 20% in the year 2006 as compared to 2005. It suggests and improvement in the companys ability to pay of its short term liabilities. The quick ratio examines the short-term solvency of a company after deducting its stock from the current assets (Mcmenamin Jim, 1999). The quick ratio for Qantas for the year 2006 further shows an increasing trend. This ratio has risen by about 23% in the year 2006 as compared to 2005. It illuminates that the company has acquired more capacity to pay off its short term debt after keeping aside its stock from the current assets. However, the company bears significant short term solvency risks, because it still possesses about $0.93 worth of current assets and $0.87 worth of quick current assets to pay of its $1 worth of current liabilities. The average receivables collection ratio suggests that it takes the company about 25 days to collect cash from its debtors. This ratio shows a sign of stability in the companys collection policies. Qantas long term financial position and business risk have been analyzed with the help of the following gearing ratios which illustrate the companys capital twist and its ability to meet its interest