Finance Company Financials

Question: Discuss about theFinancefor Company Financials. Answer: Company Financials Return on investment increases when the company effectively implement the strategy and manage its resource efficiently which eventually reflected on the profit margin or the earnings before interest and tax figure. Qantas Domestic, Qantas International, Jets star group and Qantas Loyalty all are profit margin are reported to be staggering record results. Return on capital invested is a calculated risk which the company takes on the basis of the historical facts and figure (Airways, 2016) . The past financial figures help provide the platform for the company to develop a strategy to overcome the loopholes and issues hampering the profit margin and rectify and thus help to incur maximum profit for the given current fiscal year. The underlying profit EBIT in the domestic market for Qantas and Jet start recorded was around $820 million which is increase by up to $191 million whereas on the other hand the international division recorded a hike of around $374 million EBIT (earnings before interest and tax). Increase in the return on investment for Qantas group was considered to be one of the measure successes over the last few decades. The reason behind the exponential hike in the ROI is the transformation program which help to restructure the group on the cost part and the thus help to increase the overall revenue generation improved (Financials.morningstar.com, 2016). Qantas reformation program restructured the overall cost system of the Qantas which helps to unlocked around $1.66 billion in permanent cost and revenue benefit from the year 2014 till the year 2016 which include the exponential profit margin of around $557 million for the fiscal year 2016. Effective fuel hedging is also one of the major strategies taken by the management of Qantas group which help to improve and secure of around $664 million benefit from the bottom global fuel prices which is when compared with the financial year annual report 2015which is saved via air fares which are compared as 40 percent decline than a decade ago in the Australian market. Effective fuel prices hedging help to minimize the risk of increase in the fuel in the global market which eventually reflected in the air fare for the customer which helps to increase the customer base on return due to the decrease in the air fares (Iata.org, 2016). The strategy of hedging help to improve the ROI for the Qantas group for the year 2015 and 2016 and recorded exponential increase in the facts and figure related to the company profit margin. The major reason for the increase in the return on invested capital for the Qantas group is the transformation program which helps to make the business of the Qantas more agile and thus help t crate or generate more values for the shareholder and the investor and thus help to provide the platform for the investor to invest in the company which eventually help the company to grow more faster compared to the last fiscal year (Qantasnewsroom.com.au, 2016). Average interest bearing debt level Debt to equity ratio for the year 2015 and 2016 of Qantas group is recorded 1.39 and 1.36 respectively (Financials.morningstar.com, 2016). Therefore on the basis of the calculation the average interest bearing debt level will be, 1.39 + 1.36 / 2 = 1.375 Average total equity Total equity for the year 2015 and 2016 recorded 19.63 and 19.49 respectively (Financials.morningstar.com, 2016). Therefore on the basis of the calculation the average interest bearing debt level will be, 19.63 + 19.49 / 2 = 19.56 Cost of debt Sell bond for $1000 ( Vb = $1000) Floatation cost = 3% ( Fd = 3% ) N= 30 ( annual coupon payment) Rd = cost of debt Rd= Fd/Vb (1-Fd) Cost of debt 10.32 % On the basis of the calculation the average interest debt level indicate the debt equity ratio fo the company which help to provide the capital structuring idea of the company. On the other hand the average total equity represent the shareholder equity for the year 2015 and 2016 which help the shareholder to forecast on the future profit margin and several other option of rate investment purpose. Cost of debt help to throw light on the ability of the company for obtaining on to fund asset purchase and thus help to estimate the ability of the project to earn profit in the coming year. References Airways, Q. (2016). [online] Available at: https://www.qantas.com.au/infodetail/about/investors/2015AnnualReport.pdf [Accessed 25 Sep. 2016]. Financials.morningstar.com. (2016).Growth, Profitability, and Financial Ratios for Qantas Airways Ltd (QUBSF) from Morningstar.com. [online] Available at: https://financials.morningstar.com/ratios/r.html?t=QUBSF [Accessed 25 Sep. 2016]. Iata.org. (2016).IATA - Price Analysis. [online] Available at: https://www.iata.org/publications/economics/fuel-monitor/Pages/price-analysis.aspx [Accessed 25 Sep. 2016]. Qantasnewsroom.com.au. (2016).Qantas Group Full Year Result 2016 - Qantas News Room. [online] Available at: https://www.qantasnewsroom.com.au/media-releases/qantas-group-full-year-result-2016/ [Accessed 25 Sep. 2016].