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External and internal analysis of qantas
Qantas airlines introduction
External and internal analysis of qantas
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Recommended: External and internal analysis of qantas
MEMORANDUM
TO: The board of directors
FROM: THL Group
DATE: 15 September 2017
SUBJECT: Technical aspects of consolidation
After analyzing the annual report of Qantas Group, technical aspects of consolidation are represented and we need specific details to explain the intricacies of consolidation. Firstly, the composition and main business operation of Qantas will be shown. The next part will include consolidated financial statements, funding and corporate governance of the company. Finally, the memo will consist of details about non-controlling interest, goodwill on acquisition and foreign currency transactions. That will help the board of directors have a specific point of view about the consolidation of Qantas Group.
The composition of
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Although the subsidiary is a separate legal entity, the parent entity has to prepare consolidated financial statements. The consolidated financial statement shall include all subsidiaries of the parent (Paragraph 12 AASB 127). In Paragraph 19 AASB 127, it states that ‘the subsidiary is not excluded from consolidation because the investor is a venture capital organization, mutual fund, unit trust or similar entity’. The second reason is that the business activities of an entity are different from those of others within a group. The relevant information is provided by consolidating such subsidiaries and disclosing other information about the dissimilar business activities of subsidiaries (Paragraph 20 AASB …show more content…
Qantas Group maintains strong short-term liquidity, which is cash and cash equivalent ($2 billion as at 30 June 2016), cash inflow from operations and undrawn credit facilities ($1.04 billion as at 30 June 2016) (Qantas Group 2017). The Qantas Group uses some methods to meet liquidity needs. The aircraft provides the Group with an additional source of liquidity and funding flexibility. Nearly 55% of the Qantas Group’s fleet is debt-free with a fair value of about US$3.9 billion (Qantas Group 2017). More than half of the aircraft are the marketable narrow body.
The Qantas Group targets to have an optimal capital structure with debt ranging from $4.8 to $6 billion (Qantas Group 2017). Average invested capital is about $9 billion as at 30 June 2016. Therefore, its capital structure is consistent with investment metrics. Net debt, which has aircraft operating lease liabilities, was $5.6 billion (Qantas Group 2017). The Qantas Group tries to manage its on and off-balance sheet debt mix including cost of funding, fleet and maintenance flexibility and residual value risk. To be consistent with the Financial Framework, the Qantas Group has a various range of funding resources and has no financial covenants in financing. The Qantas Group expects to fund future capital expenditure from cash flow from operations, short-term liquidity sources and incremental funding (Qantas Group
Net working capital represents organization’s operating liquidity. In order to compute the net working capital, total current assets are divided from total current liabilities. When there is sufficient excess of current assets over current liabilities, an organization might be considered sufficiently liquid. Another ratio that helps in assessing the operating liquidity of as company is a current ratio. The ratio is calculated by dividing the total current assets over total current liabilities. When the current ratio is high, the organization has enough of current assets to pay for the liabilities. Yet, another mean of calculating the organization’s debt-paying ability is the debt ratio. To calculate the ratio, total liabilities are divided by total assets. The computation gives information on what proportion of organization’s assets is financed by a debt, and what is the entity’s ability to pay for current and long term liabilities. Lower debt ratio is better, because the low liabilities require low debt payments. To be able to lend money, an organization’s current ratio has to fall above a certain level, also the debt ratio cannot rise above a certain threshold. Otherwise, the entity will not be able to lend money or will have to pay high penalties. The following steps can be undertaken by a company to keep the debt ratio within normal
...ring GFC. Qantas is the world second oldest airlines so they can always boast about it. The company operates internationally and also domestic air way services. Qantas approximately employs 33,000 employees. During the global financial crisis it was not that good for Qantas. However they improved in manufacturing, improvement in additional business in aviation, the travel in plane was cheaper. They were considered for best airways in servicing the customer.
• Qantas had to make an increased profit and pay a dividend to its shareholders which increased over the years of management
...onclude, the strategies used by Qantas in dealing with these influences have all been relatively effective. The use of technology has been the most effective in providing the business with a competitive advantage and has very little downsides when compared to other strategies. Operations management has dealt with globalisation effectively and greatly reduced costs and provided the business with a competitive advantage at the expense of the business reputation and individuality. Strategies which involve product differentiation have been used very effectively and are beneficial to Qantas. However the more cost leadership strategies that Qantas uses, the more likely that the business will lose it’s own individuality as the “Red Kangaroo”. In general, Qantas has been able to keep it’s business running relatively successfully and has dealt with it’s influences very well.
Qantas is the oldest airline in the English speaking world. It was founded by the three aviation pioneers Hudson Fysh, Paul McGinness and Fergus McMaster as the Queensland and Northern Territory Aerial Service in 1920 and has grown from one aircraft which offered air taxi services and joyrides to a vast, complex fleet operating all over the world. By 1930 Qantas’ air routes had expanded to reach up to North Eastern Australia and was later purchased in 1947 by the Australian Federal Government.
Cost cutting, discontinuation of product or services ,technological changes, and consolidation due to mergers and acquisitions are commonly legal ac...
Qantas is the 11th largest airline as of 2014 and ranked 1st in Australia, whose prime function is the quality transportation of passengers and airfreight across domestic and international routes. Qantas has been successful due to its innovative cost controlling of the business in expense minimisation. However as a result of this, the business has undergone capital-labour substitution and the casualisation of the workforce. This developed workers’ concerns of their remuneration, employment conditions and job security which caused the engineers and ground workers disputes in 2011. Qantas has responded to these workplace disputes with the strategies of negotiation, grievance procedures and tribunals within its contractual and legislative grounds.
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
Despite the growth in the market, Qantas International’s market share has been falling over the past 10years, from 34% in FY02 to 16% in FY13. The entry of Virgin Australia in 2000 in part explains this, however Virgin’s growth also coincided with the demise of Ansett in 2001 “… Virgin Blue will initially increase capacity on existing routes while evaluating what c...
No matter how a business operates, change is inevitable and affects all businesses. CAMERON SMITH investigates the changes Qantas have had to undergo in order to keep up with their competitors, whilst navigating the challenges of low cost of fares.
First of all, the power of suppliers under the Qantas Airways Limited is stable, which their supplier is a world’s fuel price for their airlines, self-supply fuel and large in their economy of scale. Then for power of customers, is also stable because the Qantas Airways Limited has already built a reputation for excellence in their safety, operational reliability, engineering and maintenance, and customer service. With that strength can opportunities for them to increase the power of customer, automatically it can be a comfort and the first choice for the customers to the services that given, especially when Qantas Airways Limited can put or offer a better price than other competitors that similar like
When Woolly Ltd and Jumper Ltd conduct intragroup transactions, as separate legal entities these transactions are recorded as normal however, from the point of the group these transactions are internal and therefore are not recognized by external users, thus the transactions must be eliminated. Finally, non-controlling interest occurs when the parent owns less than 100% of the subsidiary, however this is not relevant to Woolly Ltd as ownership of Jumper Ltd is 100%. These steps are imperative in the consolidation worksheet, as they enable the proper addition of assets and liabilities and the determination of profit or loss and net tax effects. Directors need to be able to view the financial performance of the group in order to make relevant and informed decisions. In order to obtain this information, the correct procedures, as mentioned, must be followed to ensure that assets are not overstated and liabilities understated.
The horizontal analysis shows that Woqod’s total current assets increased by 69% and its total current liabilities increased by 102% during 2005. This is largely explained by the increase in receivables, the increase in inventory, the increase in loans, and the increase in payables. The higher increase in total current liabilities than in total current assets explains why the current and acid-test ratios decreased from 1.82 to 1.53 and from 1.74 to 1.48, respectively. The values of the mentioned ratios indicate that Woqod is not highly liquid and that its liquidity is dropping.
The Quick Ratio shows that the company’s cash and cash equivalents are the highest t...
The first two do not require the acquired business unit to be connected with the existing units; the second two depend on connection. Although the concepts are not always mutually exclusive, the way in which they generate value for the corporation is different for each. The portfolio management balances current business activities with new industry acquisitions. Its success is undervalued acquisition meets attractiveness and COE test. The challenges are: increased capital market competition, need for industry specific knowledge, and growth of the company and diversity. The restructuring seeks underdeveloped or sick companies and industries. Its successes are: utilize and pass the three tests and ability to find undervalued companies with growth potential. Its challenges are: restructurer exposed to more risk, time limit for success, hold onto a restructured company, and growing depletion of restructuring pool with increased competition. The transfer of skills involves activities important to competitive advantage. With transferring skills, business activities are similar enough that sharing knowledge would be meaningful. However, skills must be useful to key business activities and must be beyond competitors’ capabilities. The ability to share activities has been a potent basis for corporate strategy because sharing often enhances