Introduction:

• The leverage ratio of Woolworths is less than that of Qantas. The dependency of Woolworths on debt and borrowings is less and the group is more dependent on equity. The capital structure of Qantas has less proportion of equity as compared to debt and this indicates that it has high leverage ratio. On other hand, Woolworths capital structure has less proportion of debt compared to equity.
• The share price of both the organization
  
  depicted the reverse trend. Share price of Qantas airline witnessed a significant increase in year 2015 and has been in rising trend since then. On the other hand, Woolworths share price has been in downward trend since year 2015 and it has experienced lowest price in year 2016.
• Woolworths has experienced a declining operating margin and this indicates that company is earning less dollar per sales. The profitability from sales is falling for this particular organization. On other hand, Woolworths has experienced an increasing operating margin in year 2016 compared to 2015. Higher operating margin is favorable for Qantas and this indicates that organization is converting more proportion of revenue into operating income. They are more efficient than Woolworths in generating profits from their operations.
• Woolworths has a declining return on equity in contrast to Qantas having increasing return on equity. Qantas has been efficient in utilizing the funds of investors and generating profits and thereby contributing to the growth of company. Contrary to this, Woolworths has not been efficient in utilizing funds contributed by its investors and thereby experiencing lower growth rate.

Recommendation or forecast:

Some of the recommendation is mostly made to Woolworth group, as they have not been efficient in utilizing the contributed funds. Woolworths should make efficient utilization of its available funds contributed by way of equity holders or investors. It is also recommended to the company that the volume of sales needs to be increased so that higher revenue is generated from meeting the expenditures. Furthermore, Woolworths needs to increase the proportion of debt in their capital structure and the reason is attributable to the fact that higher proportion of debt in the capital structure will provide them with the advantage of tax shield. However, there needs to be appropriate balance between equity and debt in the capital structure.

Since both the organization have experience falling value of its net assets, therefore, it is required to maintain an appropriate balance of total assets, as they are help in generating income and revenue. When looking at various performance indicators of Qantas as indicated by ratios, it can be seen that Qantas has outperformed Woolworths in respect of earning and revenue generation. The price of share of Qantas is on rising trend compared to Woolworths, therefore investors are optimistic and bullish about making investment in Qantas share. Qantas has higher leverage ratio as compared to Woolworths and this indicates that majority of assets are held by creditors. Therefore, it is recommended to Qantas to lower their proportion of debt in their capital structure.

Conclusion:

The financial information relevant for judging the performance of both the companies have been appropriately reported in their respective financial statements. Users of the financial statements have been able to identify the relevant strength and weakness of the organizations that is helpful in making economic decisions.

From the discussion and analysis of various ratios of both the organization, the financial stability of Qantas is weak as compared to Woolworths. Nevertheless, Qantas has been experiencing a rising share price.  The financial reporting framework for both the organizations are clear and it comprise of reporting of various facts and facets of the group along with the several factors that will assist the investors and shareholders in making economic or investment decisions. The data and information for analyzing of the performance of the two selected organizations have been accessed from their website by downloading their annual report. Calculation of various financial ratios of both the organization has helped in analyzing their performance and making comparison.

After conducting the analysis, in nutshell it can be said that Qantas has outperformed Woolworths in every aspect. However, the leverage degree of Qantas is much higher, this is not suitable for future prosperity of company, and hence debt proportion in capital structure should be reduced.