Table of Contents
Analysis of financial health based on the five-year financial statements.
Cash flow analysis.
The individual project summaries the annalistic views on finance performance of Flight Centre Travel Group, during past five years from 2015 to 2019. The report present the detail performance of selected company and highlight the specified area, which indicate the company has done well or the area where the company face challenge due to internal weakness or the inability to exploit the available opportunity in most productive and profitable area, the project is mainly divided into the three parts where the initial part of the report state about the financial performance of company based on the financial statement, where as the second part of the project discussed the key ratios and . Identify and discuss three significant expense items that have caused major changes in profit margin as well as the major asset and liabilities whose turnover ratio have contributed to the overall change in the efficiency of the company, finally the last part of this project coverall all aspect which are related to liquidity condition of company and shows the company solvency condition, further this part also covers analysis the financial risk and our selected company ability to manager the cash cycle.
Every company operates under the specified business environment, where this business environment Is formulated with number of controllable and uncontrollable factors, some of them are the needs and expectation of investors, the government policy to meet the requirement of accountability, transparency and good corporate governance, as part of this requirement every business prepare a financial statement and the books to account , with objective to meet the expectation of stakeholder, specifically regulatory and the investors. it Is stated by number of business experts that the preparation and presentation of financial data is both Art as well as science, the financial statements and the ratios show the movement and the financial performance of company, it help the uses of document in formulating their decision, whether to get engaged with the company or not to engaged with the company, as well as the financial documents and other books of account help the other interested party, how far the stakeholder shall continue their engagement with corporation.
Flight centre travail Group is one the largest retail travel agency in Australia, the company was found in the year of 1982, the major source of inform of the company Is from the sale of travel booking services over a period of time company had expended its operated and as on today company has more than 2800 store from where company offers the service through, Australian and other states.
Sales: looking toward the financial performance of our selected company during last 5 years, the sales of the company is between the $ 1700 million to $ 2300 million during 2015 to 2019. During 2015 the actual sale was nearly $ 1700 million and this rate was increased by almost 20 percentage during 2016, and continence in sale at the average rate of 15 to 17 percentage was continues, but during 2017 minor correction and downfall in the sale of company was noted and this was due to continues increase in competition and other external business environment factors, however the in the year of 2018 the company had again secured its original position and reached at the highest sales level during last five year and company had secure the total sale of at $ 3000 million. In nutshell the sale of the company was on continues growth stage and indicate the long term financially healthy position, while on another hand with the increase in the sales rate of company the operating and administrative expenses were also increase at the average rate of 10 percentage during selected five years. (Finance.yahoo.com. 2020. )
The major portion of operating expenses covers the expenses related to selling and administration of company, from the total expenses of the company, nearly more than 40 percentage expenses are related to sale and administrative activities. The operating expense mainly covers the expenses related to benefit to employees , marketing and sale promoting activities, rent for operating lease, cost of sales such as tour operator expenses.
Whereas the other expenses are related to financial cost, interest expenses and the government duties and tax, the non-operating expenses cover nearly, 10 percentage of the total expenses, the tax liabilities and other corporate tax are directly linked with the sales of the company. from the financial statements of the flight central travel group we can conclude that both sales and the operating expense are continues increase over a period of 5 years, while the net income available for the shareholder or the earning after interest and tax are positive and nearly stable with nearly 5 percentage variation, in the year of 2015 company had reported the net income $ 1500 million and in the year of 2016 it reached to nearly$ 2000 million and then after the growth in the net income was maintain with average 5.04 % growth rate, such consistence in the earning and constant positive growth rate in sale of company indicates that the company was doing well during last five year and has sufficiently distributed a profit among the interested stakeholder. (Fctgl.com. 2020)
While analysing the performance of balance sheet, we have noted that the overall capital and non-capital assets are more liquid than the current and non-current liabilities. The liquid assets such as cash and cash equivalent are near to $ 1.1 billion throughout the selected five year, with minor downfall from 2015 to 2019, whereas the other liquid assets such as investment and the receivable are $ 1.2 million , but the negative thing in the investments point of view the overall investment in various asset are comparatively lower from 2015 level. While analysing the non-current assets, investment in plan, property and equipment were made during 2019, along with this the value of intangible assets are appreciated from 2015 to 2019, during 2015 the value of intangible assets was $ 80657 thousand, but at end of 2019, the value of intangible assets was more then 2 times than the value decided in the year of 2015. (Green, J., 2013.)
While in case of liabilities, total current liability was increase at average rate of 5 % during five year and the major change was noted in case of account payable obligation , whereas similar growth rate Is found in case of non-current liability and major change is found due to increase in the long-term debt. The share capital was on an average at near amount, growth in case of retain earning is found, due to continues favourable earning position of company.
Another way to analysis the financial health of the body corporate Is to check the performance by analysing the key ratios. In order to determine the profitability, efficiency and the company ability to created wealth for all stakeholder, ROE, RNOA, PM, ATO, ELEV and NBC are the key ratios which can assist the professional financial experts and other expert to analysis the financial performance of company.
Return on equity : The ratio of return on equity indicates firm ability to generate a profit for the shareholders who had invested their hard earn money into the body corporates. Here in current case the ROE is near to between 17 to 19 % which is comparatively higher than the return available from the risk-free market securities. The Rate for return on equity is comparatively higher than the competitor and the other player in the retail service industry. The 18 % ROE indicate that if you invest $ 1 in company, then it will be $ 1.18 at end of the income year the 0.18 indicate the appreciation over the invested amounts.
Return on net operating Assets : higher the net operating assets, more and better are the chance for the profit performance of company, a higher RONA means the company is using its assets and working capital efficiently and effectively, although no single calculation tells the whole story of a company's performance. Here in our case the RONA during 2017 to 2019 was at 15 % and this rate was constrain throughout the three year, but before it during 2015 the rate was 19 % and during 2016 the RONA was 17 % which indicate the negative trend in the company ability to usage asset and the working capital to generate the profitability, if this situation continues for upcoming years than it will create a question over firm performance and ability to meet the definition of going concern assumption.
Return on Assets ROA shows how efficiently a company can convert the money used to purchase assets into net income or profits, the current rate in case of our selected company is near to 80 percentage which is comparatively high and sound than the company which operate in the industry, here the ROA indicate that company has an ability as well as potentiality to maximize the wealth of stakeholder within the shorter period of time. During the selected period of time the ROA Is between 80 to 87 percentage which is really good singe in term of firm efficiency to convert the money used to bought the assets into net income and profitability. During all the five year our company has a positive ROA which indicate the upward trend in profitability. (My Accounting Course. 2020.
Debt to equity ratio: the ratio indicate the financial risk and the company dependability over the debt finance, high debt over the equity capital is really critical financial condition of company, hence it is always advisable for the all company to have a low debt to equity ratio, the low debt to equity ratio indicates the more financial stability of company as again the company having high debt to capital here in current case debt to equity ratio is on and average between 1.39 to 1.20 which mean the debt capital is comparatively higher than the equity share capital, 1. 30 mean again 1 equity share capital the debt capital is 1.3 times. Moreover, over a period of time the ratio is growing from 1.20 to 1.39 which is not in favour of company and indicate high portion of financial risk. (Investopedia. 2020. )
To manage high level of financial liquidity Is most challenging task and critical task for financial manager, the high liquidity is essential for smooth running and to discharge the obligation created within the period of 1 year of less.
There are few ratios and the cash flow statement which can help us in predicting and in measuring the liquidity condition of company. some of the key ratios are the current, quick and solvency ratios.( Ltd, F., 2020)
The current ratio and quick ratio are to some extend are connected and interlined to each other in term of measuring the company liquidity position, the current ratio formulate state that the company has a current ratio in excess or equal to 1 indicate the company has a sound liquidity position, as again the company having a current ratio less than 1. Here in current case the current and the quick ratio of our selected company is in excess of 1, such as 1.48, the ratio of 1.48 indicates that a again the liability of $1 company has a $ 1.48 time assets to meet the obligation, in nutshell a sound and efficiency liquidity position of company both for short term as well a for long term. Only one weakness exist in case of liquidity ratio, that is continues moving down from 1.48 to 1.31 from 2015 to 2019. (Togo, D., 2007.)
Moreover, from the cash flow statement and from the company ability to convert the outstanding dent in to the cash is comparatively strong and is doing well throughout the past five year, which ultimately indicates that company has sufficiently minimise the financial risk and maximise the wealth of stakeholder by reducing the buffering time for working capital requirements.
Fctgl.com. 2020. [online] Available at: <https://www.fctgl.com/wp-content/uploads/2017/09/Flight-Centre-Travel-Group-Annual-Report-2017.pdf> [Accessed 22 April 2020].
Fctgl.com. 2020. [online] Available at: <https://www.fctgl.com/wp-content/uploads/2017/08/2015-Annual-Report.pdf> [Accessed 22 April 2020].
Finance.yahoo.com. 2020. Yahoo Is Now A Part Of Verizon Media. [online] Available at: <https://finance.yahoo.com/quote/FLT.AX/balance-sheet?p=FLT.AX> [Accessed 22 April 2020].
Green, J., 2013. Financial Statement Analysis and Equity Valuation. SSRN Electronic Journal,.
Investopedia. 2020. Debt-To-Equity Ratio – D/E. [online] Available at: <https://www.investopedia.com/terms/d/debtequityratio.asp> [Accessed 22 April 2020].
Ltd, F., 2020. Flight Centre Travel Group Ltd (FLT) Financials | Morningstar. [online] Morningstar.com. Available at: <https://www.morningstar.com/stocks/xasx/flt/financials> [Accessed 22 April 2020].
My Accounting Course. 2020. Debt To Equity Ratio | Formula | Analysis | Example. [online] Available at: <https://www.myaccountingcourse.com/financial-ratios/debt-to-equity-ratio> [Accessed 22 April 2020].
Pdfs.semanticscholar.org. 2020. [online] Available at: <https://pdfs.semanticscholar.org/972a/616ab21c0d5b8c86e9c50784f1077e1091b0.pdf> [Accessed 22 April 2020].
Togo, D., 2007. Stochastic Risk Analysis Of Budgeted Financial Statements. Journal of Business Case Studies (JBCS), 3(1), pp.75-82.
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