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1. VERTICAL ANALYSIS 8 Marks
For both companies, prepare a Vertical Analysis of the following reports covering the
years 2013, 2014 and 2015 (Refer to the Birt Text page 341 for guidance on how to
prepare a Vertical Analysis).
(a) Balance Sheet
(b) Income Statement
2. TREND ANALYSIS 8 marks
For both companies, prepare a Trend Analysis of the following reports covering the
years 2013, 2014 and 2015 (Refer to the Birt Text page 340 for guidance on how to
prepare a Trend Analysis).
(a) Statement of Cash Flows
(b) Income Statement
3. RATIO ANALYSIS*
Identify ONE key financial ratio in each of the areas of (a) Profitability, (b) Liquidity, and (c) Capital Structure (ie 3 ratios in total) to be calculated and analysed for both companies, and show:
• The name of the ratio (eg Current ratio)
• The mathematical formula for the ratio (eg Current Assets/Current Liabilities)
• A definition of the ratio (ie. This ratio represents…………)
3 Marks
Now calculate the ratios you selected above for each company for the years 2013, 2014 and 2015 (remember – use the same three key ratios in each area for both companies). Show details of your calculations.
9 Marks
Summary of Important issues from your data analysis
VERTICAL ANALYSIS 12 Marks
From your Vertical Analysis; identify and comment on any significant trends you can identify between 2013 and 2015 for EACH COMPANY SEPARATELY. For example – in your opinion, has any item in the Balance Sheet or Income Statement changed significantly over the period or is maybe inconsistent with other trends? If so:
o Describe the change;
o Explain why you think this has happened, and/or describe what you think is happening to the company?
o Do you think this trend is good or bad? Say why.
Based on the vertical information – comment on which company is better and why.
TREND ANALYSIS 12 Marks
From your Trend Analysis; identify and comment on any significant trends you can identify between 2013 and 2015 for EACH COMPANY SEPARATELY. (For example – has any item in the Income Statement of a company shown an upward or downward trend? Why have balances or certain types of inflows or outflows in the Cash Flow Statement been increasing or decreasing?). For the changes you identify:
o Describe the change;
o Explain why you think this has happened, and/or describe what you think is happening to the company?
o Do you think this trend is good or bad? Say why.
RATIO ANALYSIS 11 Marks
Based on your calculations of the ratios above for both companies: Comment on the trends between 2013 and 2015 for EACH Ratio for:
• VIRGIN AUSTRALIA, and then
• QANTAS
Based on the trends – comment on which company is better and why.
For this part you are required to examine the financial reports and any other financial information relevant to Virgin Australia and Qantas for the time period since their 2015 annual reports were prepared (ie since September 2015). You will need to use your research skills to find information that represents the financial performance of both companies since 2015 (eg Share price movements; business press reports, information available from share analysts; performance graphs etc), and answer the following question:
In no more than 500 words for this part, comment on which company you believe has performed better since 2015, stating clearly why you have formed that conclusion.**
**PLEASE NOTE: You must use Internet research to support and supplement your conclusions. In-text referencing is critical to the assignment. Good use of Internet research is encouraged and will be rewarded. At least three references are expected.
Conclusion: make your recommendations to potential investors
Using the Vertical, Trend and Ratio Analyses, and the companies’ performance since 2015, prepare a strong argument for a potential investor recommending that they invest in EITHER Virgin Australia OR Qantas. Ensure you clearly support your recommendation with facts from your analyses above.
Finally - ensure the quality of the presentation of your report
Marks will be awarded for presentation and structure; in-text-referencing (Harvard referencing system MUST be used – particularly in Part 2); spelling; grammar; and a reference list.
