ACCT 5910assignment

ACCT 5910assignment - Table of Contents Executive summary.3...

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Table of Contents Executive summary………………………………………………………………….3 1.Introduction to the industry and the company. ..................................................... 4 1.2 companies’ position within the industry…………………………. .. ………….4 2. Accounting and Financial Analysis 2.1Potential risk results from accounting choice…………………………………. .5 2.2 Financial Analysis……………………………………………………………. .5 3. Forecast and Valuation 3.1Forecast 3.1.1 Sales growth rate………………………………………………………. .8 3.1.2 NOPAT margin…………………………………………………………9 3.1.3 Net Working Capital to Sales…………………………………………. .10 3.1.4 Net Operating Long-term Assets to Sales…………………………… 11 3.2 Valuation 3.2.1 Cost of Capital ………………………………………………………. ..11 3.2.2 Valuation Summary – Equity Valuation……………………………….12
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4. Conclusion and Recommendation………………………………………………12 5. Reference List………. .…………………………………………………………. .14 6. Appendix………. .………………………………………………………………. .15 Executive Summary Air travel has changed the way people live and experience the world today. The airline industry is a strategic sector that plays a fundamental role in the globalization of other industries since it promotes tourism, world trade, and foreign investment, leads to economic growth. The following report analyses the airline industry environment and the local airlines we chosen to analyze are Qantas and Virgin Australia. In the industry where airlines can face severe financial distress due to oil crisis, recessions and terrorist attacks. Qantas is holding the leader position among the Australian Airlines. However, Virgin Australia continues to grow and prosper. The main attraction of Virgin Australia is their cheap tickets. This “budget” airline provides ‘no frills’ affordable travel. This report will conclude accounting and financial analysis for each company referring to their financial performance, strengths and inherent risks. The report will also incorporate appropriate discussion of key financial elements, forecasting of each company for 8 years and beyond based on
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four key assumptions and the firms’ valuations in related to our forecasting. According to our analysis, we can find that Virgin Australia is quite sensitive to the macro environment. The profitability fluctuated sharply to market condition whereas its main competitor Qantas has steady capability to deal with the dynamic market. Based on our forecasts and long-run aspect trade-off, we have a Holding and Buying recommendation for Qantas and Virgin Australia shares respectively.
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1. Introduction to the industry and the company Although Australian domestic airline industry has continued to recover from the global
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ACCT 5910assignment - Table of Contents Executive summary.3...

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