M3 Topic 3 Processes of Finance - Qantas Case study

Question 1

what has Qantas’s income statement performance looked like (4)

Answer 1

in 2014:

• negative profit $284 million.
• Expenditure raised $4 billion due to capacity hire costs
• Profits consistently rising since 2014
• Rise in training and development costs indicating increase worker satisfaction

Question 2

what has Qantas’s cash flow statement performance looked like (3)

Answer 2

• Consistent decrease of cash at the end of the financial year since 2013
• Indicates lower priority of liquidity objectives
• Increased focus on investing activities to increase solvency

Question 3

what is Qantas’s Net profit ratio show (2)

Answer 3

Net Profit 🡓 from 9.5% in 2016 to 8.7% in 2017.

• Rate of return on owners’ equity 🡓 from 47% in 2016 to 40% in 2017

Question 4

what does Qantas’s (Liquidity) current ratio show (2)

Answer 4

Liquidity ratio decreased in 2017 to 0.44:1 from 0.49:1 in 2016
Meaning Qantas is less able to meet its short-term obligations.

Question 5

what does Qantas’s (Gearing) Debt to Equity ratio show (2)

Answer 5

Gearing ratio has decreased from 136% in 2016 to 125% in 2017
Meaning Qantas is becoming more financially stable

Question 6

what does Qantas’s (Efficiency) expense ratio show (3)

Answer 6

🡓 from 125% in 2014 to 91% in 2017
Shows that its financial strategies have been successful, and are using its assets more effectively.
Due to the introduction of new and more efficient aircraft,faster more efficient maintenance turnaround times.