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Cost Volume Profit Analysis Assignment

   

Added on  2020-05-08

4 Pages684 Words121 Views
Evaluation of five companies in telecom industryEBIT and Return on Assets of five companies in the telecom industry are evaluated byanalyst and gave them rank on the basis of their performance.EBITEarnings before Interest and Taxes are the operating income of the company. It onlyconsiders the internal factors to measure the profit of the company from its main businessactivities. If the EBIT of a company is higher than the company can easily pay its debts infuture. When operating expenses are deducted from the operating income the result is calledas Earnings before interest and tax. In the current assignment, the analyst has taken fivetelecom companies and measures their profits and give them rank. MNF Group Limited is themost profitable company because its EBIT is highest among the five companies. And thesecond is the Telstra, third is TPG Telecom, fourth is Inabox and the last is Zip TellLtd[ CITATION Tel14 \l 9225 ]. ROA is the return on the assets invested in the business. It iscalculated by the EBIT or net income divided by the total assets. If the EBIT is high than thereturn on the assets is more but if the EBIT is low than the return on the assets is also low.The return on assets will always dependent on EBIT and they have a direct relationship.The policies framed by the MNF Group are best because their policies help them in earning agood income in the core activities of the business.EBIT($million)Companies201420152016AverageMNF GroupLimited5780752091907496.67TelstraCorporation Ltd7445 677967927005.33TPG Telecom258.671

Ltd172224380Zip Tell Ltd-0.24 -5.68-14.08-6.67Inabox GroupLtd5.4651.8072.43.224Return on Assets (ROA)Return on Assets is the calculation done for finding the profitability of the company byinvesting in the total assets.It also gives idea that how well the management of the companyuse the asset of the company to generate the earnings. Return on Assets is always displayedin the percentage. If the return on the total assets is higher than the management of thecompany use the asset in more efficient and effective way. The return on the total assets iscalculated by dividing the EBIT of the company from the Total assets. It is a financial ratioand it is widely used all over the world in all business[ CITATION JOU15 \l 9225 ].In the current situation, the best ROA is of Telstra Corporation. It is calculated afteranalysing the EBIT and the total assets of the company for the past 3 years. And the averageis calculated to find the best ROA. The ranks of the company based on the ROA are asfollows:1. Telstra Corporation Limited;2. MNF Group Limited;3. TPG Telecom Limited;4. Inabox Group Limited;5. Zip Tell Limited; RETURN ON ASSETS (ROA)YearAverage2

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