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Note: The Assignment is divided into 2 Parts1)Ratio Analysis XXXXXXXXXXWords)2)Reflective Practice (700 words)Part 2 should be in reference with Part 1 Ratio Analysis Format:1300 word response...

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Note: The Assignment is divided into 2 Parts1)Ratio Analysis XXXXXXXXXXWords)2)Reflective Practice (700 words)Part 2 should be in reference with Part 1
  • Ratio Analysis

    Format:1300 word response

    Background

    In preparation for this assignment, read the following article:

    ‘The imperial CFO’, 2016,The Economist, June 18.

    Financial managers are, arguably, vital to the survival of any corporation. Indeed, Chief Finance Officers (CFOs) are becoming as prominent as the CEOs of the companies they belong to (‘The imperial CFO’ 2016), mostly because they have a say on decisions that directly impact the performance and value of businesses. These decisions are, invariably, related to which projects to pursue (capital budgeting), how to raise funds (capital structure), and how to safeguard the business’ daily operations (working capital management).

    In this context, knowing how to interpret financial statements has the same importance to a manager as the ability to understand medical results has to a physician. One of the most important tools in this regard is the so-called financial ratio analysis, whereby information is combined in a way that portrays the status of the company in terms of important aspects (e.g., liquidity, profitability, efficiency, etc.). Not only that, the methodology is very appealing since it allows companies to be benchmarked against its peers or, else, the industry they are part of.

    Discussion questions

    To get a good grasp of financial ratio analysis, this assessment task asks you to identify a company whosecapital structure ratios(debt ratio and interest coverage ratio) andprofitability ratios(return on assets and return on equity) are either readily available (i.e. throughIBISWorldorMarketLine) or, else, can be calculated through its financial statements. Then, upon collecting observations from the last 3–5 years and industry aggregates, answer the following:

    1. Based on atrend analysis, elaborate on whether the company you have chosen is improving or deteriorating in terms of its capital structure and profitability ratios, highlighting any areas (and appropriate actions) for improvement.

    2. How does the company compare to its peers, i.e. are its ratios similar to theindustry- average financial ratios(or else, to those from its main competitor)? Would there be any issues of concern and, if so, how to address them?

    3. Is it possible to identify any relationship between capital structure and profitability ratios? (Hint: frame your discussion in terms of risk vs return).
  • Assessment Requirements

    • The required word length for this assessment is 1300 words (plus or minus 10%).

    • Your report will be marked according to the criteria outlined in the assessment grading criteria outlined in the Subject Outline.

    • In terms of structure, presentation, and style you are required to use:
      • AIB standard report format
      • AIB preferred Microsoft Word settings
      • author-date style referencing (which includes in-text citations plus a reference list).
        These requirements are detailed in theAIB Style Guide.

    • Acknowledge the sources of facts appropriately. Use a minimum of four (4) references.

    • All references must be from credible sources such as books, industry-related journals, magazines, company documents and recent academic articles.

    • Your grade will be adversely affected if your report contains no/poor citations and/or reference list and if the word length is beyond the allowed tolerance level (seeAssessment Policyavailable on AIB website).

    • Useful resources when working on your report include:
      • AIB Assignment Guide
      • AIB Style Guide
      • AIB Online Library

  • Reflective Practice

    Format:700-word reflection

    Background

    In preparation for this assignment, read the following article:

    Farrell, CJ 2006, ‘Personal financial ratios: an elegant roadmap to financial health and retirementOpen this document with ReadSpeaker docReader’,Journal of Financial Planning, vol. 19, pp. 56–63.

    Financial ratio analysis can also be useful in the management of our own personal finances. If, on the one hand, it is used by financial managers to assess corporations’ financial health, while on the other it can indicate to us whether our current financial status is in accordance with our future financial goals (e.g., those associated with our retirement). Farrell XXXXXXXXXXpresents an analysis whereby financial ratios are calculated based on household financial statements and benchmarked against specific metrics related to the age profile and other characteristics of the household.

    Reflection questions

    In light of having completed theratio analysisin your previous assessment task, and reading the Farrell XXXXXXXXXXarticle, in this task we ask you to reflect on the benefits that financial ratio analysis could bring to your personal wealth management.

    In particular, address the following:

    1. How would your personal financial ratios compare to those proposed in the article? (there is no need to disclose any personal information).

    2. Are the ratios proposed reasonable to you? Explain your reasoning.

    3. In your view, what are the main limitations of financial ratio analysis?
  • Reflective Practice Requirements

    • The required word length for this assessment is 700 words (plus or minus 10%).

    • Your report will be marked according to the criteria outlined in the assessment grading criteria outlined in the Subject Outline.

    • In terms of structure, presentation, and style you are required to use:
      • AIB standard report format
      • Also, refer to theGuide to Reflective Practicefor further information and guidance on writing for critical reflection.
      • AIB preferred Microsoft Word settings
      • author-date style referencing (which includes in-text citations plus a reference list).
        These requirements are detailed in theAIB Style Guide.

    • Acknowledge the sources of facts appropriately. Use a minimum of two (2) references.

    • All references must be from credible sources such as books, industry-related journals, magazines, company documents and recent academic articles.

    • Your grade will be adversely affected if your report contains no/poor citations and/or reference list and if the word length is beyond the allowed tolerance level (seeAssessment Policyavailable on AIB website).

    • Useful resources when working on your report include:
      • AIB Style Guide
      • AIB Online Library
Answered Same Day May 16, 2020

Solution

Aarti J answered on May 20 2020
123 Votes
Ratio Analysis
Course Name
Course Date
Student’s Name
RATIO ANALYSIS        1
Ratio Analysis
Part A:
Introduction
Ratio analysis are the financial analysis tools which helps in analysing different aspects of the company which includes the analysis of the profitability of the firm, liquidity of the firm, the company’s solvency ratios, efficiency ratios and market value ratios. With the help of ratio analysis, the company is able to compare its performance from the past as well as its competitors. In this project we have analysed different aspects of ratios of Qantas Airlines. (Brigham, E., & Houston, J, 2009)
Qantas is one of the biggest and the second oldest airlines of Australia which has emphasized on positioning for sustainability and growth. The company was founded in the year 1920 and since then the company has been growing and has expanded its reach to the domestic as well as international markets. It is one of the strongest
ands of Australia and is the world’s leading long distance airlines. The company has successfully built its reputation by emphasizing on safety, customer service, operational reliability, maintenance and engineering.
Trend Analysis
    Qantas Airlines
    Ratios
    
    2014
    2015
    2016
    2017
    Return on assets
    -15.16%
    3.20%
    6.01%
    5.02%
    Return on equity
    -64.53%
    17.67%
    30.73%
    25.09%
    Return on invested capital
    -25.24%
    8.07%
    13.87%
    12.05%
    Gross margin
    49.83%
    54.01%
    58.11%
    58.71%
    Operating margin
    -3.93%
    9.32%
    10.39%
    9.94%
    Net margin
    -18.76%
    3.59%
    6.52%
    5.43%
    Interest coverage
    -12.70
    3.26
    6.01
    6.03
    Cu
ent ratio
    0.66
    0.68
    0.49
    0.44
    Quick ratio
    0.58
    0.52
    0.39
    0.36
    Financial leverage
    6.05
    5.09
    5.13
    4.87
    Debt / Equity
    1.84
    1.39
    1.36
    1.25
    Debt / Asset
    83.47%
    80.36%
    80.51%
    79.46%
    Trend Analysis
    
    2015
    2016
    2017
    Return on assets
    121.11%
    0.87813
    -0.1647
    Return on equity
    127.38%
    0.73911
    -0.1835
    Return on invested capital
    131.97%
    0.71871
    -0.1312
    Gross margin
    -8.39%
    0.07591
    0.01033
    Operating margin
    337.15%
    0.11481
    -0.0433
    Net margin
    119.14%
    0.81616
    -0.1672
    
    
    
    
    Interest coverage
    125.67%
    84.36%
    0.33%
    
    
    
    
    Quick ratio
    -10.34%
    -25.00%
    -7.69%
    Financial leverage
    -15.87%
    0.79%
    -5.07%
    Debt / Equity
    -24.46%
    -2.16%
    -8.09%
    Debt / Asset
    -3.73%
    0.19%
    -1.30%
For the analysis, we can see that the company’s profitability has improved over the years, the company reported the net profit margin of 5.43% in the most recent years. (Learning. Drake, P , 2010) The company witnessed losses in the year 2014 and has the net profit margin of -18.76%.The company also has negative return on assets and return on equity because of the losses that the company incu
ed during the year. After 2014, the company emphasized on improving on its performances by emphasizing on its operations and improving its sales. With this the operations and the profitability of the company improved. The company had the net profit margin of -18.76%, 3.59%, 6.52% and 5.43% in the year 2014, 2015, 2016 and 2017 respectively. It shows that the company was able to improve on its profitability in 2015 by 119.14%, and 81.61% in 2016 while the net profit margin decreased by 16.72% in 2017. Over the years, the company’s return on equity has also improved. The company reported the return on equity at-64.53%, 17.67%, 30.73% and 25.09% over the years. The company’s return on equity increased in the year 2015 by 127.38%, while the company’s return on equity increased by 73.91% in the year 2016 and it decreased by 18.35% in the year 2017.
Looking at the capital structure ratios, we can see that over the years, the company has tried to improve its capital structure ratios. The company’s debt to asset ratios over the years 83.47%,...
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