Comparing The Financial Performance Of Qantas And Woolworths. Discuss The Aspects Of The Financial Information That May Be Insufficient Or Misleading.

1509 words - 6 pages

I have chosen Qantas Airways Limited & Woolworths Limited to be examined in this literature. Qantas is Australia's leading domestic carrier and one of the world's premier long haul airlines. Qantas is also one of Australia's most recognized brand names, with a reputation for excellence in safety, operational reliability, engineering and maintenance, and customer service. Woolworths' Supermarket is Australia's leading food retailer which provides customers with the best-priced and widest range of fresh produce, dry groceries and other merchandise, underpinned by its quality assurance commitment.However, from January 2003 onwards, due to the tumultuous events of 9/11, the bombings in Bali, the war in Iraq and the devastating outbreak of Severe Acute Respiratory Syndrome, all areas of Qantas were affected, including the profitability of the company throughout the year. Qantas recorded an EBIT of $567 million, down from $112.3 million last year after being severely impacted by the effects of the SARS virus on international air travel. (www.qantas.com.au) Contrasting with Woolworths, it achieved an EBIT with increase of 13.7% to $945.7 million, reflecting the excellent sales and profit growth accomplished in the market with further reductions in the operation costs. (www.woolworthslimited.com.au)In comparing the financial performance of both the companies, Qantas and Woolworths generated a return of 2% and 8.15% on total assets respectively and a return of 6.5% and 49.34% on owners' equity respectively. This shows that Woolworths performs better in terms of both the return on total assets and return on owners' equity than Qantas, allowing us to say that Woolworths appears to be performing significantly better in the efficiency of the use of assets and in making returns for the shareholders.There is a large contrast between the financial performance of Qantas and Woolworths. According to the annual report, all key performance measures, such as EPS before goodwill, dividend and free cash flow of Woolworths improved substantially. Their strong performance in the year was supported by excellent progress in managing the key variables of their balance sheet. A significant reduction in inventory of 3.2 days compared with last year was a key factor which contributed $170 million to free cash flow. (www.woolworthslimited.com.au) In opposite, Qantas's performance was affected negatively and led to deterioration in all the key performance measures for this year. This is due to the fact that its international operations met a serious decline in demand and incurred an EBIT loss of $54.5 million. Domestic performance was also hit particularly badly by the effects of global events on the inbound market and increasing competition. (www.qantas.com.au)The gearing ratio for Qantas and Woolworths are 56.89% and 31.02% respectively. The excessive borrowing of Qantas was principally a result of the significant capital investment in product and fleet, partially offset...

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