Financial Analysis & Business Valuation-Free-Samples for Students

Questions: 1.Recast the Financial Statements in Standardised format. 2.What accounting policies of Qantas are likely to be closely monitored by analysts? Why? 3.Note 22(b) details Operating Lease Commitments entered into by Qantas. Following the process outlined in Chapter 4, prepare a worksheet identifying Accounting adjustments on the assumption that these lease commitments are to be capitalised Answers: 1.Standardized Balance Sheet: Standard classification Typical line items Amount $M Standard classification Typical line items Amount $M Assets Liabilities and equity Cash and Marketable Securities Cash 1,980 Current debt Trade receivables Accounts receivables 795 Trade payables Accounts payables 1,986 Inventory Inventory 336 Other current liabilities Revenue received in advance 3,525 Interest-bearing liabilities 441 Other current assets Other financial assets 229 Other financial liabilities 203 Others 101 Provisions 873 Assets classified as held for sale 17 Non-current debt Non-current tangible assets Plant, property and equipment Land 11,670 Deferred tax liability Non - current intangible assets Non - current intangible assets 909 Other non-current liabilities Revenue received in advance 1,521 Deferred tax asset 39 Interest-bearing liabilities 4,421 Other financial liabilities 61 Other non-current assets Investments 197 Provisions 414 Other financial assets 46 Minority interest 5 Receivables 134 Other 252 Shareholders' equity Issued capital 3,625 Treasury shares (50) Retained earnings (100) Reserves (220) TOTAL 16,705 TOTAL 16,705 Standardized Income Statement: Standard Classification Typical Line Items Amount Sales Revenues 16,200 Cost of Sales Manpower and staff related (3,849) Fuel (3,250) Selling, general and administrative (SGA) expenses Other operating expense Amortisation of intangibles (1,224) Aircraft operating variable (3,362) Non-cancellable aircraft operating lease rentals (461) Other (2,411) Net interest expense (income) Finance costs (284) Interest income 65 Investment income Other income Transfer of hedge reserve to the Consolidated Income Statement, net of tax 198 Net changes in hedge reserve for time value of options, net of tax 35 Foreign currency translation of controlled entities 2 Foreign currency translation of investments accounted for under the equity method 24 Other expense Effective portion of changes in fair value of cash flow hedges, net of tax (187) Recognition of effective cash flow hedges on capitalised assets, net of tax (40) Share of other comprehensive income of investments accounted for under the equity method (2) Defined benefit actuarial (losses)/gains, net of tax (209) Tax expense Income tax expense (395) Net comprehensive income for the period 850 Standardized Cash Flow Statement: Standard classification Typical line items Amount Operating cash flows (other than net finance costs) Under the direct method: Cash from customers 17,723 Payments to suppliers (14,600) Cash payments to employees for redundancies and related costs (90) Cash payments to employees for wage freeze bonus (53) Dividends received from investments accounted for under the equity method 4 Income taxes paid (2) Investing cash flows Payments for property, plant and equipment and intangible assets (1,618) Payments for investments accounted for under the equity method (39) Proceeds from disposal of property, plant and equipment 509 Net loan repayment from investments accounted for under the equity method 27 Aircraft operating lease refinancing (778) Interest paid and capitalised on qualifying assets (24) Net interest cost Interest received 64 Interest paid (227) Net debt issuance(net of repayments) Repayments of borrowings (807) Net receipts/(payments) for aircraft security deposits and hedges related to debt 62 Dividends Cash dividends paid on ordinary shares Net issuance of shares (net of repurchases) Payments for capital return (505) Payments for share buy-back (500) Payments for treasury shares (75) Net Increase/(Decrease) in Cash Flow (929) Cash Cash Equivalent at the beginning of the year 2,908 Effects of Exchange rate changes on cash Equivalent 1 Cash Cash Equivalent at the end of the year 1,980 2.The following accounting policies of Qantas should be monitored very closely: a) Dividend Policy, b) Risk Management Policy, c) Inventory Policy, d) Foreign Exchange Policy 3. Adjustment Worksheet: Assets = Liabilities + Equity Adjustments Current Assets Non-Current Assets Current Liabilities Non-Current Liabilities Net Income OCI Retained Earnings Other Equity 1 2,245 = 2,245 2 (427) = (427) 3 = 523 (523) 0 1,819 = 523 1,722 0 0 (427) 0 4 = (554) 554 5 = 163 (163) 6 = 165 (165) 0 1,819 = 523 1,722 (226) 0 (200) 0 7 63 = 63 0 Total 0 1,882 = 523 1,722 (163) 0 (200) 0 Reported 3,458 13,247 = 7,028 6,417 1,029 (179) (950) 3,360 Adjusted 3,458 15,129 = 7,551 8,139 866 (179) (1,150) 3,360 Workings: Computation of Discount Rate: Particulars Amount Amount Interest Expense 284 Interest Bearing Liabilities: Current 441 Non-Current 4421 4862 Discount Rate 5.84% Determination of Total Operating Lease: Particulars Aircraft Engines Non-Aircraft Total Spread Not Later than one year 366 188 554 554 Later than 1-5 years 952 503 1455 291 Later Than Five Years 187 187 Later than 5-10 years 320 320 64 Later than 10 years 367 64 TOTAL LEASE OBLIGATIONS 1505 1011 2883 973 Period Lease Payments Discount Rate Present Value 1 554 5.84% 523.4256 2 291 5.84% 259.7666 3 291 5.84% 245.4305 4 291 5.84% 231.8855 5 291 5.84% 219.0881 6 419 5.84% 298.0472 7 315 5.84% 211.7029 8 128 5.84% 81.27769 9 128 5.84% 76.7921 10 128 5.84% 72.55406 11 47 5.84% 25.17067 Total Lease Payments 2883 2245.141 Asset-to-Liabilities Ratio 81% Leased Asset 1818.564 Bibliography: Damodaran, A. (2016).Damodaran on valuation: security analysis for investment and corporate finance(Vol. 324). John Wiley Sons Masari, M., Gianfrate, G., Zanetti, L. (2014).The Valuation of Financial Companies: Tools and Techniques to Value Banks, Insurance Companies, and Other Financial Institutions. John Wiley Sons Mohammad, A. N. (2016). Valuation Tools for Determining the Value of Assets: A Literature Review.International Journal of Academic Research in Accounting, Finance and Management Sciences,6(4), 63-72 Sadler, A., Daghestani, A., Payne, B. C. (2016). A Risk Return Profile and Ranking of the Determinants of the Enterprise Multiple.Academy of Accounting and Financial Studies Journal,20(1), 93. Van Deventer, D. R., Imai, K., Mesler, M. (2013).Advanced financial risk management: tools and techniques for integrated credit risk and interest rate risk management. John Wiley Sons