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Group Income Statements of Qantas Airlines Ltd - Case Study Example

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This paper contains horizontal common- size analysis of group income statements of Qantas Airlines Ltd for the years 2007 and 2008 with 2006 as its base year. An analysis of the group balance sheets of the company has also been carried vertically for the years 2006, 2007, and 2008…
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Group Income Statements of Qantas Airlines Ltd
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Download file to see previous pages Liquidity refers to short term solvency of any entity. Keeping this in view an in-depth liquidity analysis has also been undertaken in order to evaluate whether the company is able to meet its short term obligations when those become due. The write up also evaluates the Qantas’s ability to meet fixed finance costs and principal repayments of its long term debts. Finally, the profitability trends of the company have been analyzed using ratio analysis method. Sales and other income have shown a rising trend, though the increase in 2008 is comparatively less than the increase in 2007. As compared to the base year 2006 the increase in 2007 was by 10.25 points (i.e., 110.25-100), which increase reduced to 8.28 points (i.e., 118.53-110.25) in the year 2008. The basic reason appears to be comparative less increase in net passenger revenue in 2008. The rise in expenditure in the year 2007 is of 108.24 points over the base year of 2006 giving a rise of 8.24 points. This rise in expenditure has effectively dwindled in the year 2008 when the index figure is 114.31 giving rise of 6.07 points. With such improved performance on expenditure front, the operating profits have been increased by 49.29 points in the year 2008 as compared to the rise of operational profitability of 47.44 points in 2007. The comparative better performance of operating profits in the year 2008 is basically the result of improvement in expenditure despite the fact that the rise in passenger revenue rise in 2008 was less than the rise in 2007. This performance is remarkable during the periods of the credit crunch. The company has shown remarkable restraint on expenditures during 2008. This trend of increasing operational profitability is really appreciable looking at the trends of the downfall of most firms in the airline industry. Profits before taxes and finance costs i.e. EBIT has shown a rise of 53.2 points in 2008 when this rise was only 34.46 in 2007. This remarkable increase is due to the farsightedness of the company in dealing with derivatives that have given a boost to the financial cover of losses due to oil and other expenditures are undertaken by the company. This is further appreciable as a fall in oil price will have a major effect on the income statement of 2009 as compared 2008. ...Download file to see next pagesRead More
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