Essays on Financial Statement Analysis of Virgin Australia Holdings Limited Case Study

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The paper 'Financial Statement Analysis of Virgin Australia Holdings Limited" is a good example of a finance and accounting case study. This report is an analysis of the financial reports of Virgin Australia Holding Limited for 2014, 2015 and 2016. The report performs a trend analysis of the income statement, the statement of Financial Position and cash flow statements. The report also carries out a ratio analysis of the financial statements using liquidity, efficiency, market performance and profitability ratios. The report also uses non-financial items such as corporate governance to analysis the financial reports. INTRODUCTION Virgin Australia Holding Limited is a company that deals with Airline operations in Australia.

It was founded in 2000 and has its headquarters in Bowen Hills Australia. Virgin Australia Holding aims to achieve its mission by providing a consistent experience across all domestic markets and international (Bloomberg, 2017). ’ The company operates through Virgin Australia International, Virgin Australia Domestic, Tiger Air, and Velocity. Virgin Australia’ s aircraft fly to destinations within Australia, cargo operations and also regional networks. It also operates international routes which include Pacific Islands, Abu Dhabi, South East Asia, Transpacific, and Trans-Tasman.

Virgin Australia Holding’ s fleet comprises of Airbus A320 and A330, Boeing 737 and B777, ATR, Fokker F50, F100 and Embraer E190 aircraft (Bloomberg, 2017). The company has corporate, leisure, low cost, government, cargo and regional markets. Virgin Australia Holdings, has strategic Alliances with Delta Airline's inc, Etihad Airways, Singapore Airlines and Air New Zealand Limited. Trend Analysis Income statements Financial Year 2016 AUD (Millions) 2015 AUD (Millions) 2014 AUD (Millions) Sales 5004 4,723 4,303 Sales Growth 5.94% 9.76% - Gross income 741 519 118 Gross income Growth 42.77% 338.72 % - Gross profit margin 14.81% - - Earnings before Interest Tax & Amortization (EBIDTA) 506 415 386 EBIDT Growth 22.12% 7.49% - Balance sheet Financial year 2016 AUD (Millions) 2015 AUD (Millions) 2014 AUD (Millions) Cash and Short term Investments 1,180 1,106 808 Cash and Short-term Investments growth 6.6% 36.89% - Total accounts receivables 232 233 226 Accounts receivables growth -0.47% 2.87% - Total Assets 6,475 6,224 - Total Assets Growth 4.04% 23.77% - Accounts Payable 697 688 609 Accounts payable growth 1.23% 12.98%   Total Liabilities 5,576 5,203 3,980 Total Assets/ Total Liabilities 86.12% 83.60% - Common Stock 1,309 1,153 1,167 Common Stock/ Total Assets 14.08% 17.03% - Cash flow statement Financial year 2016 AUD (Thousands ) 2015 AUD (Thousands ) 2014 AUD (Thousands ) Operating activities       Net income Before Depreciation Interest Tax and Amortization (224,700) (93,800) (353,800) Net income Growth -139.55% 73.49% - Net Operating Cashflow 198,500 218,100 (7,700) Net Operating cash flow -8.99% 2932.47% - Investing Activities       Capital Expenditures (76,200) (637,600) (432,600) Capital expenditure growth -19.23% -47.39 - Net investing Cash flows (387,900) (245,700) (174,700) Net Investing Cash flow growth -57.88% -40.64% - Net financing Cash flows 262,100 253,700 380,300 Net financing cash flow growth -3.31% -33.29% - Free cash flow (514,900) (359,200) (367,900) Free cash flow Growth -43.35% 2.36% - There was an increase in Net profit from 2014 to 2015 from -353,800 to -93,800 a percentage increase of 73.49% (Virgin Australia, 2017). This is attributed to the consolidation of Tiger Air Australia which contributed to an increase in revenue by $284.l million. Intangible assets increased from 2014 to 2015 by $202 million due to an increase of $161millon due to the acquisition of Tiger Air Australia. Trade payables and other payables increased from the year 2015 to 2015 by $80.1 million due to the acquisition of Tiger Air. The total equity reduced by $27.3 million from 2014 to 2015 mainly due to the % 93.8 million loss and a decrease in the foreign currency translation reserve. No dividends were declared by Virgin Australia Holding limited group during the financial year ended 2014 hence no dividends were paid during the financial year 2015. During 2016 the group reported a loss after tax of $224.7 million which was a decrease of $130.9 a fall of 139.55%. The revenue went up from $4,749 million in 2015 to $5,021 million in 2016. Net operating expenditure increased from $4802.7 million in 2015 to $5278.7 million in 2016. The net operating expenditure entailed $440.5 million that was used for restructuring during the year 2016. The year 2016 was a challenging year especially the operating environment that was affected by low customer demand.

This was also affected by uncertainty in the economy and political events. During the second half of 2016, the company executed its strategy to increase revenue and profits. No dividends were declared or paid during the financial year ended 30th June 2016. The equity distributed of $41.9 million was paid for noncontrolling interest during the year ended June 2016. Ratio Analysis Profitability ratios Profitability ratios are used to show a company’ s ability to foster revenue from its operations.

The company’ s Investors and creditors use these ratios to ascertain if the company is making enough profits from its assets. Profitability ratios are also important in the concepts of a company’ s solvency and going concerned. They include profit margin, gross margin ratio, return on assets and return on equity.

References

Virgin Australia. (2017). Virgin Australia. Retrieved 21 March 2017, from https://www.virginaustralia.com/uk/en/about-us/

Bloomberg, V. (2017). Virgin Australia Holdings Limited: Private Company Information - Bloomberg. Bloomberg.com. Retrieved 21 March 2017, from http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=8424628

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