Question

ASSIGNMENT Refer to the 30 June 2014 financial reports of Flight Centre Ltd on their web site http://www.flightcentrelimited.com/investor-and-media/annual-reports and answer the following questions using the consolidated financial reports and the notes to the consolidated financial reports. Calculate: The Earnings before interest and tax (you must show all workings and indicate where in the report your figures come from), and The Earnings before interest, tax, depreciation and amortization show all workings and indicate where in the report your figures come from). Explain why a user of accounts (and which type of user) would be interested in each of these earnings figures compared to net profits after tax. Compare the net profit after tax with the cash flow from operating activities. Why is there a difference? Explain this difference using the figures from the Flight Centre Ltd Report. (Hint: Look at the reconciliation.) Is there anything of concern in this comparison?

Answer immediately in table

Answer 1

Ans. A interest & tax 5'000 323,780 Calculation of earnings before Profit before income tax expenses Add: Kinance cost apg - 4o) ETT cla -29) 32,907 356,767 Calculation depreciation of earnings before interest, tax and amortization (EBITDA). EBIT las computed above Add: Amortisation & deprecation (Pg 29) EBITDA 356,767 53,777 10 syy Users of financial statement such has shareholders, debentureholders, bankers 6 private financers are concer-1 ned with these earnings figure because they see the company's ability to repay interest lie, finance west) and Depreciation and amortization depicts. whether company needs to replace. old assets or is using new assets in it's production which in turn decide the long term profitability of company

Reason for difference between net profit aftur tax & cash flow from operating activities is that cash flows takes only cash deceipts & payment into accounts where as net profit takes non - Cash items also into account. Reconuliation of propt after tax with cash flows from operating activities (Pg -45) Cash flows exclude depreciation & amortisation. cash flows do not take impairment into Consideration. cash flows only take operating revenues a So gain on ceisposal of non-current asset is excluded from cash flows. Cash How cloes not takes into wnsideration, profits / closses) from joint venture and associate Cash flow takes into consideration increase 7 decrease in current assets & liabilities where as net profit do not take these items into consideration o Cash flows do not take into consideration net exchange considesation. Note: - Page number is front of every item taken from Annual reference purpose, mentioned in which has been report for

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