Financial Performance and Sustainability Report of Telstra

Running Head: CORPORTE FINANCE 1
CORPORTE FINANCE

Running Head: CORPORTE FINANCE
Table of Contents
Financial performance.....................................................................................................................3
Liquidity.......................................................................................................................................3
Profitability..................................................................................................................................4
Solvency.......................................................................................................................................4
Efficiency.....................................................................................................................................4
Market value................................................................................................................................4
Telstra sustainability report.............................................................................................................5

Running Head: CORPORTE FINANCE
Question 1: Financial performance
Financial performance is the tools that are used by the company in order to figure
whether the company is performing well or not. The performance in measured on the basis of
different parameters such as profitability, liquidity, solvency as well as efficiency and the market
conditions. In the current scenario the financial performance of Telstra is discussed in detail in
order to have an in-depth understanding of how well the company is performing either in terms
of the industry of against the competitors (Chiaramonte and Casu, 2017).
Liquidity
The liquidity is one of the easiest parameter to decide the ability of the company in terms
of the efficient utilization of the assets of current nature to handle the current liabilities. Under
the liquidity position the two major ratios are calculated such as current ratio and quick ratio.
The current ratio of Telstra can be observed to be at 0.83 in the year 2017 and the same declined
to 0.76. This proves to be the negative situation at on account of the company as the ratio is
deteriorating. The quick ratio on the other hand is the ratio which is also known as the acid test
ratio and defines the capacity of the company in order to have an understanding of how fast the
company can realize the cash. The quick ratio of the company is 0.77 and it reached to 0.72 in
the year 2018. Further, overall the liquidity position of the company is not at all smooth and the
immediate plans shall be made by the management to overcome such loss (Cole, 2019).
Key strategies: The key strategy to improve the situation is to focus on the long term
liabilities and to get rid of the outdated assets so that the company can focus only on those assets
that can produce the results in the positive manner.

Running Head: CORPORTE FINANCE
Profitability
Profitability of the company can be measured on the basis of the different elements such
as net profit ratio, return on equity as well as operating margin. The profitability ratio is basically
calculated by the investors, shareholders, the customers and the suppliers in order to understand
the company and the returns it can provide to them. In the case of Telstra, the net profit ratio also
saw a fall from 13.76% to 8.51% (Goldmann, 2017).
The net profit ratio is basically the pillar of the organization and if the net profit
decreases it means the company is not working efficiently towards its operations. The other
possible reasons are due to the increase in the expenses and the overall costs of the business. The
return on equity is the second parameter that is used to measure the performance of the business,
as the shareholders are majorly interested in how much return is associated with the business and
how much share they can avail in return (McLean, 2020).
The return on equity of Telstra is again steeping down towards the 14.79% from
24.33%. This is due to the fact that the net income is facing a downward trend. As such there are
no changed in the shareholders’ funds of the company. The gross margins also saw a falling
graph from 39.45% to 31.61%. Overall it can be concluded that the profitability position have
started to decline and the if the scenario remains the same the profitability can also reach in the
danger zone, like liquid ratios (Murphy and McGrath, 2016).
Key strategies: In order to improve the profitability of the business the alternative should
be found out to reduce the operating costs, the invoice shall be generated on the regular basis and
lastly the financial leverage shall be reduced on part of the management.