garuda indonesia financial analysis

8/11/2019 Garuda Indonesia Financial Analysis

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F I N A L PA P E RI n t r o d u c t o r y A c c o u n t i n g I I

PT. Garuda Indonesia

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Prepared for: Ibu Desti Fitriani S.E., Ak., M.A., CPMA

Course:Introductory Accounting II (ACCT 11103)

Date of Submission: Thursday, June 12, 2014

Prepared by:

Abdul Robby Nabi (1306387286)

Filip Ferdi (1306438785)

Melvin Hade (1306388364)


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TABLE OF CONTENT

Statement of Authorship 3

Executive Summary 4

Chapter 1: Company Profile 5

Chapter 2: Financial Analysis 6

2A. Horizontal Analysis 7

2B. Vertical Analysis 9

2C. Ratio Analysis 11

Chapter 3: Conclusion 14

Chapter 4: Appendix 15

4A. Horizontal Analysis Calculation 16

4B. Vertical Analysis Calculation 20

4C. Ratio Analysis Calculation 24

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STATEMENT OF AUTHORSHIP

We, the signatories signing under this statement, states that the work

that is attached to this Statement of Authorship is purely my own work

without any other contribution from other parties, unless it is clearly

cited and stated in this work.

This work has also never been published or used for any other purposes

or classes and that the materials presented on this paper has not been

presented at any other occasion.

We are also aware that this paper could be multiplied for the sake of

identifying the chance of plagiarism.

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EXECUTIVE SUMMARY

This paper was prepared to fulfill the requirement of the course

Introductory Accounting II with Ibu Desti Fitriani S.E., Ak., M.A., CPMA.

Garuda Indonesia is a national airline service provider in Indonesia that

offers full-service airline. This paper will assess Garuda Indonesias

financial performance for the year 2011 and 2012 and different

analytical tool will be used to analyze Garuda Indonesias performance

such as Horizonta l Analysis, Vertical Analysis and Ratio Analysis.

Garuda Indonesia has performed tremendously well in both years,

especially in 2012 because it has successfully managed to improve

various financial indicators as well as boosting sales and net income.

They also have better liquidity position as well as solvency and

profitability level. However, one hinderance that prevents Garuda

Indonesia from getting a st ra ight A performance is that the market

expects Garuda Indonesia to be associated with higher risk in the future

due to a decrease in their Price-Earning ratio. Other than that, Garuda

Indonesia has performed exceptionally well.

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CHAPTER 1: COMPANY PROFILE

PT. Garuda Indonesia (Persero) Tbk, (formerly known as Garuda Indonesian

Airways) is a state-owned airline based in Jakarta that was launched in 1949. It

offers more than 42 domestic flights and 24 international flights in first class,

business class and economy class. Garuda Indonesia provides is a full-service

airline, but they also have a low-cost subsidiary called PT. Citilink Indonesia to

serve domestic routes in Indonesia. As of 2012, the company has a total of 106

fleets, ranging from Boeing 747-400, Airbus 330-300, Boeing 737 Classic, etc. In

2012, the Garuda Indonesia group carried a total of more than 20 million

passengers. The airline has complied with international safety standards given by

international institution such as the IATA (International Air Transport Association).

Garuda Indonesia was awarded Worlds Most Improved Airline by Skytrax World

Airline Awards in 2010. And in 2012, based on Roy Morgan research company,

Garuda Indonesia has been recognized as the Best International Airline among allmajor airline in the world with 91 percent of the respondents being very satisfied.

Last but not least, in 2013 Garuda Indonesia was awarded the Worlds Best

Economy Class for its service and products by Skytrax.

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CHAPTER 2: FINANCIAL ANALYSIS

A. Horizontal Analysis

B. Vertical Analysis

C. Ratio Analysis

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of Property and Equipment by 360.6%. This drives the net increase of Total Other

Comprehensive Income by 307.9%. This situation brings Garuda Indonesia to

record a 100% net increase in Total Comprehensive Income between 2011 and

2012, resulting a $14.5 million in 2012.

Next, we could turn our heads to the Comparative Balance Sheet. In 2012, Garuda

Indonesia financed its operation mainly through Long-Term Loans as much as

$300 million. However, they have managed to reduce the amount of Bank Loans

in 2012 by 83.96%, while Long-Term Loans has increased between 2011 and 2012

by 63.91%. This data shows that Garuda Indonesia has shifted its financing

scheme by having less Bank Loans and increase Long-term Loans in 2012. Total

Asset for Garuda Indonesia also increased by 55.28% in 2012, in comparison to

2011 and this was mainly driven by the increase in Cash as much as 148.78%.

By now, we should get a picture of how Garuda Indonesia has performed in both

2011 and 2012 and how they have shifted their financing sources proportion. We

also understand that they have performed extensively well in terms of sales and in

order to give a more detailed understanding of Garuda Indonesias performance

in 2011 and 2012, we will now take a look at the Vertical Analysis.

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2B. VERTICAL ANALYSIS

Under Vertical Analysis, 2011 will be the base year where the base amount of 100

will be set to both Total Asset as well as Total Liabilities plus Equity. The Vertical

Analysis is useful in understanding the composition of a particular account. For

example, we could clearly understand where the greatest portion of the Total

Asset is coming from under the Vertical Analysis.

There are several highlights that should be pointed out under theVertical Analysis

of Garuda Indonesias performance in 2011 and 2012. The first highlight is that

we should be aware that there is a slight decrease in the proportion of the Current

Asset towards Total Asset. In 2011, the proportion of Current Asset towards Total

Asset is 26.03%, but in 2012, this number has decreased to 25.28%. This will then

clearly change the proportion of Garuda Indonesias Non-Current Asset towards

Total Asset between 2011 and 2012. In 2011, the proportion of Non-Current Asset

towards Total Asset is 73.97%, while the proportion has slightly increased in 2012

to 74.72%. Hence, the first highlight is that there is an increase in the proportion

of Non-Current Asset towards the Total Asset which means that there is a decrease

in the proportion of Current Asset towards Total Asset in 2012, compared to 2011.

The next highlight that we can point out is under the Liabilities and Equity

Account. There is also changes in the proportion of Current Liabilities, Non-

Current Liabilities as well as Equity towards the Total Liabilities and Equity account.

In 2011, the proportion of Current Liabilities towards the Total Liabilities and

Equity is 35.2%, however in 2012, this proportion has decreased to only 30%. This

also goes for the proportion of Non-Current Liabilities towards Total Liabilities and

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Equity where in 2011, the proportion of Non-Current Liabilities towards Total

Liabilities and Equity was 34.2%, while in 2012 this number has decreased to

25.8%. The proportion of Total Liabilities has now decreased in 2012, in

comparison to 2011 and this means that there is an increase in the proportion of

Total Equity towards Total Liabilities and Equity. The proportion of Total Equity

towards Total Liabilities and Equity has increased from 30.6% in 2011 to 44.3% in

2012. Hence, the second highlight under the Vertical Analysis is that the

proportion of both, the Non-Current Liabilities and the Current Liabilities has

decreased towards Total Liabilities and Equity and the proportion of Total Equity

has increased.

Under the Comparative Income Statement, the base year will also be set to the

year 2011, but the base year amount of 100 will be set to Total Operating

Revenue. In 2011, the proportion of Total Operating Expense towards Total

Operating Revenues is as high as 97%. This means that 97% of the Total

Operating Revenues is transformed into the form of an expense, while the

remaining 3% becomes the Income from Operations of Garuda Indonesia in 2011.

The highlight that should be made is that the proportion of Total Operating

Expense in 2012 has decreased from 97% in 2011 to 95.2% in 2012. This means

that in 2012, the proportion of Total Operating Expense is only 95.2% towards

Total Operating Revenues. This is a good indicator because this means that

Garuda Indonesia has reduced the proportion of its Operating Expense towards

the Total Operating Revenues. Thus, the proportion of Income from Operation

towards Operating Revenues in 2012 has increased to 4.8% in 2012, in

comparison to 3.0% in 2011. This fact also confirmsthe increase in Net Income of

the Year for Garuda Indonesia in 2012.

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2C. RATIO ANALYSIS

The first point that should be highlighted is that Garuda Indonesia is an airline

service company that does not have any Inventories as well as Cost of Goods Sold

in their Financial Report. Hence, there are some Ration Analysis indicators that

cannot be satisfied, due to the fact that Garuda Indonesia operates in the service

industry.

We could start by analyzing the profitability of Garuda Indonesia in the year 2011

and 2012. The first Ratio Analysis that we can conduct to analyze Garuda

Indonesia profitability level is the Profit Margin Analysis. In 2011, the profit margin

of Garuda Indonesia has a value of 0.0207, but this value has increased in 2012 to

0.0319. This analysis confirms the statement under the Vertical Analysis where the

proportion of Income from Operations towards Total Operating Revenue has

increased between 2011 and 2012. Hence, it is confirmed by this ratio analysis

that Garuda Indonesia has experienced a greater Profit Margin in 2012, in

comparison to 2011.

This then goes on to the Return on Total Asset Analysis. Return on Total Asset

Analysis reflects Garuda Indonesias ability to use its asset to generate sales and is

a great indicator of Garuda Indonesias efficiency. Since Garuda Indonesia

recorded a higher Net Income in 2012, in comparison to 2011, the Return on Total

Assethas increased from the value of 0.03 in 2011 to 0.05 in 2012. This means

that Garuda Indonesia recorded a greater portion of Net Income towards its

Average Total Asset, and this is a positive indicator for the performance of Garuda

Indonesia.

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We could now also analyze Garuda Indonesias liquidity indicators, by looking at

their Current Ratio as well asAcid-Test Ratio. Under the Current Ratio Analysis, we

could see that Garuda Indonesia has improved its current ratio analysis that can

be seen by the increase in its current ratio from 0.74 to 0.84. The increase in the

current ratio of Garuda Indonesia shows that Garuda Indonesia have a stronger

liquidity position and that it has better abilities in fulfilling current obligation and

liabilities. Moreover, we could also take a look at the Acid-Test Ratio analysis

where they have managed to improve theirAcid-Test Ratio from a value of 0.49 to

0.61. Acid-Test Ratio assess the most liquid items and this shows that Garuda

Indonesia has a well short-term liquidity position.

Next, we will review Garuda Indonesias solvency performance, through the Debt

to Equity ratio and Time Interest Earned. The solvency test is basically to analyze

Garuda Indonesias ability to cover long-term obligations. Under the Debt toEquity ratio, Garuda Indonesia has managed to improve its solvency performance.

The Debt to Equity value of Garuda Indonesia in 2011 is 2.26, but it has

significantly decrease in 2012 to 1.25. This is mainly driven by a greater increase

in the proportion of Total Equity in comparison to the increase in Total Liabilities. A

decrease of Debt to Equity ratio from 2.26 in 2012 to 1.25 in 2011 shows that

Garuda Indonesia has better ability in fulfilling long-term obligation and this

means that the business is less risky. The Time Interest Earned Ratio is also another

indicator to test Garuda Indonesias solvency performance. This ratio reflects the

risk of Garuda Indonesias creditor in loan repayments with interest. In 2011, the

time interest earned for Garuda Indonesia has a value of 4.3 and this value has

increased to 8.49 in 2012. The greater value of this ratio shows that Garuda

Indonesia has greater Income before Tax and Interest to settle its Interest Expense.

This also means that Garuda Indonesia is less risky for creditors to issue loans. This

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ratio also shows that Garuda Indonesia has a good solvency performance and up

to now, Garuda Indonesia has performed tremendously well.

Last but not least is the Market Prospect Ratio which assess the markets

expectation for Garuda Indonesia and this test could be assessed by using the

Price-Earning Ratio. The Price-Earning Ratio can also be viewed as an indicator of

the markets expected growth and risk for a share. Garuda Indonesias Price

Earning Ratio has decreased from 2011 to 2012 from a value of 10.3 in 2011 to a

value of 8.16 in 2012. The lower Price-Earning Ratio in 2012 in comparison to

2011 shows that the market expects Garuda Indonesia to have higher risk in the

future. This test shows that Garuda Indonesia is expected to be more risky in the

future and this is the only aspect that Garuda Indonesia did not perform well on.

Therefore, we can conclude under the Ratio Analysis that Garuda Indonesia has

performed tremendously well in improving their liquidity, profitability and

solvency ratios, however it has a problem in the eyes of the market prospect

where the market sees Garuda Indonesia to be more riskier in the future.

However, overall, Garuda Indonesia has performed well, driven by lower

Operating Expense, higher Income from Operations, lower level of Liabilitiesand

higher level of Equity.

CHAPTER 3: CONCLUSION

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In conclusion, we could conclude that in the year 2012, Garuda Indonesia enjoy a

greater amount of Income, due to the reduction in the proportion of Operating

Expense towards Operating Revenues. This fact is also confirmed with the

profitability ratio where their Net Profit Margin increases between 2011 and 2012.

Garuda Indonesia also manage to reduce the level of debt (liabilities) that it holds

and increases the level of Equity which results in a better solvency position for the

company. Garuda Indonesias liquidity position also improve which means that

they have better abilities in meeting current obligation. Despite its staggeringly

good performance in 2012, the market sees that Garuda Indonesia will be riskier

in the future and this is shown from the Price-Earning Ratio. However, overall

Garuda Indonesia has created 2012 as their performing year where they have

managed to substantially increase sales as well as income.

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CHAPTER 4: APPENDICESA. Horizontal Analysis Calculation

B. Vertical Analysis Calculation

C. Ratio Analysis Calculation

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4A. HORIZONTAL ANALYSIS

Comparative Income Statement

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Comparative Balance Sheet

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4B. VERTICAL ANALYSIS

Comparative Income Statement

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Comparative Balance Sheet

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4C. RATIO ANALYSIS CALCULATION

Current Ratio

CR (2011) = Current Asset / Current Liabilities

= 422,061,515 / 570,334,808

= 0.74

CR (2012) = Current Asset / Current Liabilities

= 636,566,218 / 754,207,052

= 0.84

Ac id-Test Ratio

ATR (2011) = (Cash + Short-Term Investment + Current Receivable) / Current

Liabilities

= (2,766,623,874) / (570,334,808)

= 0.49

ATR (2012) = (Cash + Short-Term Investment + Current Receivable) / Current

Liabilities

= (463,133,653) / (754,207,052)

= 0.61

Account Receivable Turnover

ART (2011) = Net Sales / Average Account Receivable Net

= 3,096,328,405 / 141510635

= 2.188

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ART (2012) = Net Sales / Average Account Receivable Net

= 3,472,468,962 / 141,510,635

= 2.453

Days Sales Uncollected

DSU (2011) = Account Receivable Net / Net Sales

= (145672559 / 3096328405) x 365

= 0.04 x 365

= 17.172 days

DSU (2012) = Account Receivable Net / Net Sales

= (137,348,711 / 3,472,468,962) x 365

= 14.44 days

Total Asset Turnover

TAT (2011) = Net Sales / Average Total Asset

= 3,096,328,405 / 2,069,797,556

= 1.49

TAT (2012) = Net Sales / Average Total Asset

= 3,472,468,962 / 2,069,797,556

= 1.68

Debt-to-Equity Ratio

DTE (2011) = Total Liability / Total Equity

= 1,124,936,670 / 496,660,676

= 2.26

DTE (2012) = Total Liability / Total Equity

= 1,403,037,688 / 1,114,960,078

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= 1.25

Time Interest Earned

TIE (2011) = Income before Tax and Interest / Interest Expense

= 96,933,268 / 22,301,629

= 4.3

TIE (2012) = Income before Tax and Interest / Interest Expense

= 151,530,554 / 17,847,162

= 8.49

Net Profit Margin

NPM (2011) = Net Income / Net Sales

= 64,225,536 / 3,096,328,405

= 0.207

NPM (2012) = Net Income / Net Sales

= 110,842,573 / 3,472,468,962

= 0.319

Return on Total Asset

RTA (2011) = Net Income / Average Total Asset

= 64,225,536 / 2,069,797,556

= 0.031

RTA (2012) = Net Income / Average Total Asset

= 110,842,573 / 2,069,797,556

= 0.0535

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Price-Earning Ratio

PER (2011) = Market price per Common Share / Earning per Share

= 0.03 / 0.0029= 10.3

PER (2012) = Market price per Common Share / Earning per Share

= 0.04 / 0.0049

= 8.16

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