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Instructions All assignment must be submitted by 1 Group member through TurnitIn. Students to show calculations of relevant ratios Length: 2,000 to 2,500 words Student Name ...

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Instructions

All assignment must be submitted by 1 Group

member through TurnitIn.

Students to show calculations of relevant ratios

Length: 2,000 to 2,500 words

Student Name

Student Number

*

Marking*Sheet*

*

Your*mark

Question*1*(40 marks)*

*

Question*2*(10 marks)*

Question*3*(15 marks)*

*

Question*4*(15 marks)*

*

Question*5*(20 marks)*

*

/*100*

!




&

&

Listed&Company&

Stock&Code&

Name&

Corporate!Travel!

CTD

Management!Ltd

Flight!Centre!Travel!Group!

FTL

Ltd

Helloworld!Travel!Ltd

HLO

Qantas!Airways!Ltd

QAN

Virgin!Australia!Holdings!

VAH

Ltd

Webjet!Ltd

WEB

&

&

& &


Student&Name&

Student&ID&


Initial&to&confirm&that&you&

contributed&a&fair&share&to&

this&assignment&and&agree&

with&all&answers&provided.&


Page 3 of 4


FACT&SET&

• Go to the website for your allocated company and obtain the Income Statement and Balance Sheet for the company for the 2014/15 (Year 1) and 2016/17 (year 3) financial years. You will find this information in the relevant Annual Reports. I have provided links to some of these Reports.&

&

TASKS&

1. Based on the information contained in these statements calculate for each company for the relevant financial years. You must show the formula used and your calculations.

&

a. The Net Profit MarginO

b. Current RatioO

c. Capitalization ratioO

d. Asset Turnover RatioO

e. Leverage RatioO

f. Return on EquityO

g. Return on Total AssetsO

h. Earnings per share (EPS)O

i. Net Debt to Equity RatioO and

j.& Total Return to Shareholders. [40&Marks]&

2. Demonstrate and explain what would happen to the 2017 Return on Equity and the Net Debt to Equity Ratios if your allocated company just prior to the end of the 2017 financial year raised an additional $50 million loan from the bank, which it invested entirely in new plant and equipment. Assume that the immediate effect on sales and net profit was zero. [10&marks]

3. Using the ratios calculated in Task 1 of this case study, compare and contrast the financial performance of the companies over the period of your analysis. [Provide a single agreed answer per team.]&[15&marks]

4. Use your analysis of the financial performance of the companies over the past 3 years to explain any differences in the Total Return to Shareholder between the companies over the past 3 years. [Provide a single agreed answer per team.] [15&marks]

5. Compare and contrast the current market value of each company. Use the ratios you have collected, other information from the media to provide observations about the value of these companies (i.e. cheap or expensive?)![Provide a single agreed answer per team.] [20&marks]

TOTAL&MARKS&

100&marks

!


Page 4 of 4

Answered Same Day May 23, 2020

Solution

Pulkit answered on May 25 2020
151 Votes
TASK 1
(a) Net profit margin ratio is calculated by dividing the net revenue earned by the company by sale of the items transacted in by the company. The net profit margin is calculated to find out the total earnings of the business of the company. A high net profit margin is an indicator of co
ectly pricing the products in the market and having a good cost of control. It is useful for comparing the results of businesses of the company’s belonging to the same industry as the same business environment and customers exists.
(b) Cu
ent ratio measures the ability of an organization to pay its obligations in the future. It is used to measure the short term liquidity of the company. It is calculated by dividing the total of all cu
ent assets by the total of all cu
ent liabilities.
(c) Capitalization ratios are found out to find about the effect of leverage on the company. It is calculated by comparing the debt and equity of a business in order to determine the extent to which a firm may be over-leveraged or under-leveraged. It cannot be said that the capitalization ratio indicates that debt levels are too high or too low but the outcomes must be compared to check about the stability of a company.
(d) Asset turnover ratios are calculated to compare the amount of revenue earned from sales of a business to the assets belonging to the company. It is used to measure how efficiently assets of the company are used to produce sales revenue. A high ratio means that the company uses a its working capital as well as the fixed assets efficiently. To calculate the asset turnover ratio sales is divided by the total closing assets. 
(e) Leverage ratio is determined by finding the debt ratio which is the proportion of total debts by the total assets. Solvency of the company can be judged by the leverage ratio. A high ratio means risky financial structure as the company would not be able to pay the amount of principal and the interest thereon. Whereas a low debt ratio shows that there is only use of equity to pay for assets.
(f) Return on equity is used to compare the net income earned during the year of a business to its shareholders' equity. It is used to determine the amount of return generated in proportion of the amount invested by the individuals. A business that generates a high return on equity is considered to be a good investment.
(g) Return on total assets compares the earnings of a business to the total assets invested in it. The calculation of the return on total assets is earnings before interest and taxes (EBIT), divided by the total assets figure listed on the balance sheet. The EBIT figure is used instead of net profits. The formula is: Earnings before interest and taxes ÷ Total assets
(h) Earnings per share represent that portion of company’s income that is available to the equity shareholders of the company. The formula for earnings per share is a company's net income minus any dividends on prefe
ed shares, divided by the number of equity shares outstanding. The number of shares outstanding is taken as the weighted average number of shares outstanding The formula is: (Net income - Prefe
ed stock dividends) ÷ Number of common shares outstanding
(i) Net debt to equity ratio measures the riskiness involved in the company's financial structure. It is calculated as a proportion of debt and equity. It can provide information about the company that the debts are so much that it is unable to meet its obligations to pay. In case of high debt to equity ratio the company is forming a large portion of interest expenses. Thus more sales would be required to earn a profit in order to pay all the debts.
(j) Total returns to shareholders are the amount of profit generated by a combination of the change in the share price over the period of time plus any amount of dividend which is paid by the company. It is a measure to determine the gains generated by the share holdings of the individuals. Because of the non-availability of the stock prices of the shares the return on equity is taken under consideration of the total returns available to the shareholders.
Corporate Travel Management Ltd            
                         2017 2015
    (a) Net profit margin ratio
    0.18
    0.15
    (b) Cu
ent ratio
    1.04
    1.20
    (c ) Capitalization ratio
    0.11
    0.00
    (d) Asset turnover ratio
    0.44
    0.45
    (e) Leverage ratio
    0.06
    0.00
    (f) Return on equity
    0.14
    0.12
    (g) Return on total assets
    0.08
    0.07
    (h) Earnings per share
    53.5
    28.10
    (i) Net debt to equity
    0.84
    0.87
    (j) Total returns to shareholders
    0.14
    0.12
Flight Centre Travel Group Ltd                    
2017 2015
    (a) Net profit margin ratio
    0.09
    0.11
    (b) Cu
ent ratio
    1.43
    1.48
    (c ) Capitalisation ratio
    0.04
    0.03
    (d) Asset turnover ratio
    0.83
    0.85
    (e) Leverage ratio
    0.02
    0.01
    (f) Return on equity
    0.16
    0.20
    (g) Return on total assets
    0.07
    0.09
    (h) Earnings per share
    228.50
    254.70
    (i) Net debt to equity
    0.04
    0.03
    (j) Total returns to shareholders
    0.16
    0.20
Hello world Travel Ltd
    
    2017
    2015
    (a) Net profit margin ratio
    0.07
    -0.72
    (b) Cu
ent ratio
    1.09
    1.06
    (c ) Capitalisation ratio
    0.07
    0.13
    (d) Asset turnover ratio
    0.51
    0.59
    (e) Leverage ratio
    0.03
    0.05
    (f) Return on equity
    0.08
    -1.13
    (g) Return on total assets
    0.03
    -0.43
    (h) Earnings per share
    18.80
    -45.66
    (i) Net debt to equity
    0.07
    0.13
    (j) Total returns to shareholders
    0.08
    -1.13
Qantas Airways Ltd
    
    2017
    2015
    (a) Net profit margin ratio
    0.062
    0.041
    (b) Cu
ent ratio
    0.44
    0.676
    (c ) Capitalisation ratio
    1.402
    1.754
    (d) Asset turnover ratio
    0.805
    0.78
    (e) Leverage ratio
    0.288
    0.345
    (f) Return on equity
    0.241
    0.162
    (g) Return on total assets
    0.05
    0.032
    (h) Earnings per share
    46
    25.4
    (i) Net debt to equity
    1.402
    1.754
    (j) Total returns to shareholders
    0.241
    0.162
Virgin Australia Holdings Ltd
    
    2017
    2015
    (a) Net profit margin ratio
    -0.04
    -0.02
    (b) Cu
ent ratio
    0.76
    0.69
    (c ) Capitalisation ratio
    1.55
    2.71
    (d) Asset turnover...
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