HES5380 Engineering Management 2

Case Study: Financial Analysis and Interpretation

Instruction: On the basis of the three financial reports presented for the years 2003 and 2004 for
the Qantas Group, provide an assessment of Qantas in relation to the followings:Part I: Analysis of Qantas Group Statement of Financial Performance
1. What should the statement of financial performance be called more commonly?
2. Earnings before interest and taxes increased significantly for the year while overall
revenues fell. How this was made possible?
3. What is the difference between depreciation' and 'amortization'?
4. Borrowing costs are shown separately from the other expenses. Why do you think this
separation is made?
Part II: Analysis of Qantas Group Statements of Financial Position
1. While the statement is labeled Statements of Financial Position, what should it be
called more commonly?
2. Figures are provided for both 'Qantas' and the 'Qantas Group'. What is the difference
between these two entities?
3. The assets are classified as 'current and non-current'.
a) What is the difference between these two categories?
b) How else could the assets be categorized?
4. What would the liability account Deferred lease benefits/income represent?
5. Why would an airline have such a high balance in the current liability labeled Revenue
received in advance?
6. Why would property, plant and equipment of the Qantas Group'be greater than property,
plant and equipment of 'Qantas'?
Part III: Analysis of Qantas Group Statement of Cash Flows
1. Interest received and Dividend received are both classified as operating activities in this
statement of cash flow for financial year 2004. How should the classification of these
cash flows change from 2005? (Refer to your lecture notes in the class).
2. What will the Statement of Cash Flows be labeled from 2005?
3. Choose the correct cash flow activity section (operating, investing & financing) to the
followings:a) Activity that will normally yield a positive cash flow
b) Activity that will normally yield a negative cash flow
c) Activity that will vary between positive and negative cash flows. Give explanations to
your choices.
is most likely to vary from year to year in terms of either providing or using cash?
4. Which three cash flow line items have changed by the greatest dollar amount over the
year?
5. Which three cash flow line items have changed by the greatest relative amount (as
compared to previous financial year) over the year?
Part IV: Ratios Analysis and Interpretation
1. Calculate ratios to analyze the profitability, efficiency, liquidity, gearing and investment of
the Qantass financial report over the period of two years (2003 & 2004).
2. Discuss how the analysis results enhance users (i.e. suppliers, investors, company
management, etc) decision makings (i.e. reduce uncertainty and increase confidence in
business decisions).
3. Discuss the limitations of using ratio analysis as a tool of financial analysis. Provide
suitable examples to support your points.
4. Conclude your case study by discussing the credibility of the Qantas as an investment
choice.