Armstrong Scenic Adventures and Blair's Tropical Discoveries are tour operators based in Cairns in far north Queensland. They both run land and sea adventure tours and passenger services.

You are an analyst employed by the Bank of Palm Cove. Both businesses are seeking additional funds from the Bank of Palm Cove to finance a business expansion.

Both Armstrong and Blair are direct competitors and the Bank of Palm Cove is only in a financial position to fund one but not both of the businesses. Your analysis will be a cornerstone in the decision made by the Bank of Palm Cove.

Apart from the financial information provided, additional information needs to be considered.

1.The cost of debt (interest rates) at the moment is 2.5%

2.Blair's PPE is relatively new and Blair is also investigating the purchase of a new all-terrain vehicle that has the capacity of 50 passengers which will accommodate them in total comfort especially for the over 50 year age group.

3. The Australian dollar (AUD) to the US dollar ($US) is 0.70. This is very favourable for international tourists.

4. A new hotel is being built on Green Island and another island is being commercially redeveloped for tourism.

5. The cost of fuel is at its lowest level in seven (7) years.

6. Armstrong's is in a pay dispute with its drivers which has lasted three weeks with a threat of strike action.

7. There has been an increase in Australians travelling to far north Queensland instead of overseas due to the unfavourable exchange rate.

	Armstrong Scenic Adventures	Blair's Tropical Discoveries
Specific Details:	$	$
Service Revenue	450,000	1,000,000
Net Profit	60,000	90,000
Average Total Assets	500,000	800,000
Average PPE	250,000	600,000
Total Liabilities	160,000	140,000
Cash Flow from Operating	200,000	500,000
Activities

1. Calculate the following ratios that will form part of the basis of your report.

	Armstrong Scenic Adventures	Blair's Tropical Discoveries
Return on Assets	Net Profit / Average Total Assets	Net Profit / Average Total Assets
Asset turnover	Service Revenue / A. Total Assets	Service Revenue / A. Total Assets
Net profit margin	Net Profit / Service Revenue	Net Profit / Service Revenue
Prove ROA	Asset T/O NP Margin	Asset T/O NP Margin
Gearing	Total Liabilities / Total Assets	Total Liabilities / Total Assets
Quality of Income	Cash Flow Operating Activity. / NP	Cash Flow Operating Activity. / NP

2. Write a detailed report as the analyst for the Bank of Palm Cove, making your recommendation of which business should be financed and your justification.

In your report a comparison of the two businesses is essential and in addition some commentary whether additional analysis should be conducted?