Accounting and Finance: BT Group plc Financial Analysis

Accounting and Finance

Table of Contents
INTRODUCTION...........................................................................................................................3
1. Background and external analysis of an organization over previous 3 years .........................3
2. Performance evaluation ..........................................................................................................4
3. Comparative analysis of common size statement ...................................................................4
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

INTRODUCTION
Accounting refers to system of recording the financial transactions of the business in
addition with storing, retrieving, summarizing, sorting and communicating the results to the
users that help in their decision making. On the other hand, finance referred as the study of
managing money and a practice of acquiring the funds needed. The present report is based on BT
group plc, a largest British multinational company operating its business within
telecommunication industry. Furthermore, the study involves background of the company and
analysing the financials of firm in comparison with its competitor for highlighting the analysis
regarding the performance and position of the firm in the overall industry. Moreover, appropriate
recommendations are been made in relation to appropriate measures that the company should
take for improving and enhancing its performance.
1. Background and external analysis of an organization over previous 3 years
BT is seen as one of the leading communication service firm that serves needs of the
customers in UK across 180 countries worldwide. The main activities of the company includes
provision of the fixed line services, mobile, TV products, broadband and the networked IT
services. It is the company that serves a global multinational enterprise with their security,
networking and the cloud computing (Overview of BT Group plc, 2018). The main purpose of
the company is to make use of the communications for making the world more and more better.
Its strategy is in leading with the converged services and the connectivity, capitalising on the
new business opportunities and in delivering an industry leading towards operational efficiency.
Over the 3 years, In terms of opportunities, market development of the company leads to
the dilution of the competitive edge and helps the BT group in increasing competitiveness
against its rivalry. Along with the new trends in consumer behaviour come up with the new
market for BT group plc and facilitates a great opportunity for the company in building new
streams of revenue and in diversifying into categories of new products. Core competencies of an
entity could be a success factor similar to the other fields of product. New technology provided
an opportunity to the BT group plc to the practices of pricing strategy in new market. It assist the
company in maintaining loyal customers with the great service and attracted new customers by
the value propositions. Growth in the economy and increased customer spending after the
recession years and slower growth rate within an industry is counted as an opportunity for the BT
group plc in capturing large customers and widening the market share. Government green drive

also had opened up for an opportunity in procurement of the BT group plc products by state and
the federal contractors.
In addition to these opportunities, BT group faces many problems in respect of new and
innovative technologies had been developed by competitors in the medium to the long term
future. As the company is operating its business in several countries, it is been exposed to the
currency fluctuations specifically giving a volatile political climate in the large number of the
markets around the globe (Grimm and Blazovich, 2016). The company is exposed towards
different liability claims that are present in changing policies within the markets. Imitation of
counterfeit and products with low quality is the major problem faced by BT group in the
emerging and the low profitable markets.
2. Performance evaluation
Evaluation of Financial statements of BT Group plc for the past three years that are 2016,2017
and 2018.
Profitability ratio
GP ratio Gross profit / sales * 100 94.50% 95.00% 94.60%
NP ratio Net profit / sales * 100 21.40% 17.10% 16.70%
Interpretations.
Profitability ratios shows the profitability of the company. It represent the efficiency of
company to manage its operation and generate profits by increasing the revenues. Seeing the
profitability ratios profitability of the company could be judged over the past three years.
Seeing the gross profit ratio of company it could be identified that company is efficiently
managing its profits and revenues. Gross profit of company for the three years have remain
constant and have not shown much variation during the three years. It is efficiently managing its
operations. Being telecommunications company do not have high direct cost that decrease the
gross profit margins (Farrés and et.al., 2015). Company is having margins around 95% for the
three years constantly that shows company has increased the revenues to the required level and
maintained the expenses proportionate t the revenues. Moving towards the net profit margin
company has declined the net profits during the three years the decline from 21.4 to 16.7 % is a
significant figure and represent high variations that could not be neglected or ignored by the
investors and the users of the financial statements. The decline is seen is due to increase in the