Equities and Investment Analysis

EQUITIES AND INVETSMENT ANALYSIS 1
Financial equities and investments reporting
Student’s name
Instructor’s name
Course
Institutional affiliation
City and state
Date

EQUITIES AND INVESTMENT ANALYSIS 2
Introduction
This is a detailed report about the equities and investment analysis. The report focuses
majorly on the financial analysis aspects together with valuation analyses. The chosen company
of analysis for this report is the Telstra Company. Therefore in making the analysis, part of the
information used as obtained from the Telstra group limited.
Financial analysis
Financial analysis is a process of evaluating and analyzing a business entity or any public
company together with its underlying financial records and reports in a given period. Ratio
analysis on the other hand however refers to a process of assessing and contrasting the items,
such assets, cash, and profitability liquidity among others within the different financial
statements of the entity (corporate finance institute, 2019). Such comparisons are usually made
over differing times. The process of undertaking a ratio analysis is helpful to a wide range of
individuals. These can be either internal or external. Therefore, this financial analysis report
about Telstra will focus on the following types of ratio analysis (Ready Ratios, 2019). These are:
the return on assets ratio, return on equity ratios, net profit ratios, and the debt to equity ratios.
Return on equity ratios
These are ratios that are used by the company or an investor to determine the amount of
income returned as a percentage of the share holder’s equity. This ratio is expressed as
percentage which is: ROE = net income/ share holder’s equity. It is calculated for the years 2018
and 2017. = 3,529/15,014
= 23.5%

EQUITIES AND INVESTMENT ANALYSIS 3
For 2017:
ROE = 3,874/14560
= 26.6%
After calculating the Telstra return on equity, results show that the company
underperformed during the year 2018 as compared to 2017 (Telstra annual report2018). An ideal
return on equity should have a range of about 15-20%. However, according to the results, Telstra
recorded about 26.6% in 2017. This was however slightly reduced to about 23.5% during 2018.
Such a reduction is therefore a worrying decline towards the lower margin of 15%. Therefore, an
investor would lose confidence in buying Telstra’s shares on the market due to the fear that the
company is losing capability to yield positive returns on equity capital invested in company.
Return on Assets (ROA)
This is one of the measures of profitability of a company. This ratio is used to measure
the efficiency and profitability of a company in relation to its total assets. It is therefore used in
determining the efficiency of management while using available assets to generate returns.
= net income/ average assets
For 2017:
3,874/( 42,133+ 43,286
2 )
=3,874/42,710
= 9.1