Financial Assessment Of Qantas Airways And Seek Limited Through Ratio Analysis

Company Overview

Financial assessment of an organization can be done in appropriate manner through ratio analysis assessment as well as analyzing the performance of shares. Both of this information is considered by an investor while making investment decision relating to any organization. Present report revolves around assessment of Qantas Airways and Seek Limited in detail. Further ratio analysis of same has been done in order to assess liquidity, profitability and stability of both the companies.

Assessment of price movements

Qantas Airways

It can be analyzed from above graph that Qantas Airways Ltd has been performing in more appropriate manner to ensure stability in value. Due to same reason continue enhancement in price of same can be accessed i.e. the price have been increased from 6.01 AUD to 6.33 AUD. From the data of table it can be accessed that no major fluctuation have been analyzed in last one year and the same represents the sustainability of company (Hopkin, 2017). 

Seek Ltd

In case of Seek Ltd it could be accessed from above data that company was performing in immense way. But there has been slight fluctuations in decreases in share price of Seek Ltd have been assessed. However, the company has attained the position back till the month of May. The changes in above share price represent that company is not performing in sustainable manner, thus it pertains to higher risk as well as return. As per the report provided by Macquarie Australia Conference presentation it has been assessed that enhancement in profit is not the main objective as it is focusing on capitalizing on substantial marketing opportunities (Brigham and Ehrhardt, 2013). Further revenue of company has been increased to 48% and an enhancement of 36% has been accessed in EBIT.

It is recommended in order to take appropriate investment decision, it is necessary that historical data as well the recent analysis provided by various economists should be considered. As in present case even though financial performance of Seek Ltd. is more appropriate in comparison to Qantas Ltd; but the fact cannot be denied that more fluctuation in share price have been assessed in case of same. Thus, in case investor is ready to bear higher risk in order to attain higher return Qantas Ltd. will be preferred over Seek Ltd. Further in case substantial return will average risk is the choice of investor than Qantas Ltd can be chosen.

Products and Services

($ millions)

Ratio Analysis can be referred as a methodology of assessing financial statement in order to ascertain quick indication relating to organization financial performance in main areas. The ratios are bifurcated in following categories:

• Short term Solvency Ratio
• Asset Management Ratio
• Market Valuation Ratio
• Profitability Ratio

Ratio analysis is significantly dependent on the availability of accounting information relating to the organization. Further the same are being applied in order to compare the performance of two or more organization. In present case same is being done in order to compare the performance of Qantas Airways and Seek Ltd. The area on which further assessment is to be done is ascertained by analyst through assessment of ratio analysis.

($ millions)

Liquidity ratio assesses the capability of an organization to pay off its current as well as long term liabilities when they become due. The ratio specifies the efficiency of company to convert other assets into cash in order to pay off its liabilities and other current obligation (Heizer, 2016). Cash ratio is believed to be the most significant ratio as it evaluates the ability of company to pay off its short term liabilities with cash and cash equivalents. In present case it can be assessed that Seek Ltd is prominent in managing payment of current liabilities as the same is having comparatively higher cash ratio. Working capital ratio is also referred as current ratio and it evaluates the capability of an organization to pay off its current liabilities with current assets. The faster the assets are converted into cash the more the company will be efficient in paying off its debt (Grant, 2016). In present case it can be assessed that Seek Ltd is efficient in same as it has higher ratio in comparison to Qantas Airways. Overall in all the above liquidity ratio, it can be accessed that they are higher in case of Seek Ltd, the same represents that company is more efficient comparatively in paying off its current liabilities with current assets.

 ($ millions)

Profitability ratios reflect company’s overall effectiveness and performance. There are two types of profitability ratios: first are margins and second are returns. Ratios which demonstrate margins symbolize capability of firm towards transformation of sales dollars in profits on different points of measurement (Jones, 2014). In the same way ratios which reflects returns signifies capability of firm to access overall competence of firm into creating returns in favor of their investors. Profit margin ration assess the percentage of profit generated from certain level of sales. Further, it also indicates the efficiency of company in managing its expenses relating to sales. The higher the ratio, the more the ratio is preferable. The same can be done by company through generating more sales and lowering the expenses. It can be accessed from above analysis that Qantas Airways is able to maintain the same in more appropriate manner in comparison to Seek Ltd. Return on asset ratio evaluates the net income produced by total asset through comparing the net income with its average total assets (McKinney, 2015). As the main motive of company assets is to generate profits, thus the company as well as investor assess that whether the investment in assets have turned into profits or not. It can be analyzed form above assessment that Seek Ltd has appropriately converted its assets into profits. Overall Seek Ltd has attained higher ratios in comparison to Qantas Airways Ltd, but Qantas Airways is having higher return of equity comparatively. The same might significantly affect the decision  of investor.

Chief Executive Officer

($ millions)

Stability evaluate examine how much debt a firm is able to sustain and whether debt and equity are stable or not.  It is believed as long term counter part of liquidity. Further financial stability of an organization is necessarily to be ascertained in order to assess the step to be taken relating to investment in that company. Debt to Equity ratio assesses the proportion of debt which is being held by company in comparison to its equity (Petty et al. 2015). Increase in debt to equity ratio represent that company is accomplishing its operations through assistance of finance and which is not a positive variant from point of view of investor decision. In present case it could be assessed from above figures that Qantas Airways is significantly dependent on finance in order to accomplish its operations. As the ratio is higher than 2.0 which is believed as risk for investor, thus the same should be considered while taking decision relating to same. Interest coverage ratio represents the times company operating profits covers the interest expense relating to borrowing (Said, 2016). The higher the ratio, the more assurance relating to same is attained. In present case as Seek Ltd is having higher ratio which could provide relief to the investors that even though the company has been financed from outside sources in significant manner it is performing well, hence they should not be worried about their investment.

Assessment of price of shares is one of the significant variant which is being analyzed by the investors prior to investing in any organization. The above study depicts that the higher the fluctuation exists in share price movements the higher the percentile of risk is related to that organization. Further, it can be depicted from the assessment of ratio analysis assessment that Seek Ltd is comparatively efficient in managing liquidity as it has higher liquidity ratio in comparison to Qantas Ltd. Further, as Seek Ltd is having lower debt to equity ratio is could be asserted that it is able to manage funds for its operations through in-house management only which represent the efficiency of an organization.

References

Hopkin, P., 2017. Fundamentals of risk management: understanding, evaluating and implementing effective risk management. Kogan Page Publishers.

Brigham, E.F. & Ehrhardt, M.C, 2013, Financial management: Theory & practice. Cengage Learning.

Grant, R. M. 2016, Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Heizer, J. 2016, Operations Management, 11/e. Pearson Education India.

Jones, M., 2014, Sustainable event management: A practical guide. Routledge.

McKinney, J.B., 2015, Effective financial management in public and nonprofit agencies. ABC-CLIO.

Petty, J.W., Titman, S., Keown, and et.al. 2015. Financial management: Principles and applications. Pearson Higher Education AU.

Said, H.A., 2016. Using Different Probability Distributions for Managerial Accounting Technique: The Cost-Volume-Profit Analysis. Journal of Business and Accounting, 9(1), p.3.

Annual Report of Seek Ltd. 2017. (Online). Available through <https://member.afraccess.com/media?id=CMN://3A481116&filename=20171030/SEK_01914393.pdf>. [Accessed on 19^th May 2018]

Annual Report of Qantas Airways. 2017. (Online). Available through <https://investor.qantas.com/FormBuilder/_Resource/_module/doLLG5ufYkCyEPjF1tpgyw/file/annual-reports/2017AnnualReport.pdf>. [Accessed on 19^th May 2018]

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