Qantas Airways Limited is the world’s third oldest carrier. Incorporated in 1920, the airline is Australia’s biggest local and global carrier and is considered to be one of the world’s main long-distance airlines, having initiated travel routes from Australia to Europe. The airline currently engages roughly 31,400 people and provides services across an arrangement ranging from 183 destinations in 42 nations in Australia, Europe and Africa (Qantas: the spirit of Australia n.d.).
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Efficiency measures are utilised with a view of analysing how well companies use their assets and liabilities locally. Based on the ratio examination, Qantas Airways was fairly efficient in using its assets to create revenue. In general, the greater an organisation’s asset turnover, the more efficient its asset has been utilised, hence the airline turnover duration decreased from 2009 to 2011 after an increase in the year 2008, which shows that Qantas experienced low turnover in using its resources to generate income. The return on assets (ROA) ratios in addition gradually decrease from the year 2009 to 2011, this shows the airline’s efficiency in utilising the investment in fixed assets to generate returns decreases at these periods (Atrill et al. 2012).
The net profit margin measure shows a firm’s financial status; this shows shareholders how much net income every dollar of income an organisation is receiving. Compared with the industry ratio, there was an insignificant decline in the year 2009, then a critical fall in the net income in 2010 though it attempted to increase in 2011. The fall that commenced in 2008 can be attributed to a decline in income which was caused by higher fuel costs, escalating prices and declining demand as the worldwide economy falls. Yet, Qantas was still capable of realising profit (Qantas: spirit of Australia n.d.).
The return on investment (ROI) utilising both return on equity and return on asset it is evident that the earnings declined significantly in 2010 from net income of 7.5 million of the previous years to 1.5 million against 5.8 billion of money invested expected the return on equity to increase by 2.5% at 2011 which indicates improved performance since greater the ratio indicated in the year 2011, the more efficient Qantas is at cost control. Compared with industry control in 2008, 2009 and 2010, it shows investors how well the management of the company is working to increase their income and return on investment (Brewster 2003).
From the analysis, it is evident that the company sales have started to increase from the 2009 fiscal year and development has been seen in the gross income and net income in the 2009 and 2010 fiscal period. Based on the new five years action plans launched by the company in 2011, the approaches are based on reducing cost in certain areas with a view of cutting the company costs and growing its sales, more development in sales and returns is going to be realised in the future which would certainly increase ROI and decreases more of the short-term liabilities. Return on equity is anticipated to increase. The market share price is anticipated to increase as well.
In conclusion, based on the future forecast, the recent action plan by the company, and the new growth and development witnessed in the previous four years, the current investors are recommended to hold on to their shares since returns are anticipated to increase in the future fiscal periods. Prospective investors are advised to invest in the company shares now that the prices are comparatively low as more return on investment is anticipated.
Atrill, P, Harvey, D, Jenner, M, & McLaney, E. 2012. Accounting: an Introduction, 5th edn, Pearson Education Australia, Sydney.
Brewster, M 2003, Unaccountable: how the accounting profession forfeited a public trust, Wiley, New York.
Qantas: spirit of Australia, n.d. Web.