Financial Analysis Company Report - Telstra Corporation Ltd

Added on - 28 May 2020

  • 23

    pages

  • 3643

    words

  • 1

    views

  • 0

    downloads

Showing pages 1 to 6 of 23 pages
ACCOUNTING AND FINANCE1Executive summaryTelstra Corporation Ltd. is a telecommunication company in Australia. This report is allabout the overall financial analysis of the company, comparing with Queste CommunicationsLtd, another company in telecom sector which is listed on Australian Securities Exchange(About Us. 2018).It includes the financial statements and ratio analysis from year 2013 to2017.First part of the report deals with the horizontal and vertical analysis of Telstra’s incomestatement, balance sheet and cash flow statement. It shows the percentage change of each ofthe item mentioned in the statements. Some variations can be seen in the sales and net profitmade by the company. Telstra’s liabilities, assets and equities, all has increased with someproportion during the period of five years. The analysis of cash flow statement has alsoreported negative cash flows over the period.The second part deals with the ratio analysis of the company which includes calculation ofprofitability, efficiency, liquidity and capital structure ratios compared with Questecommunication Ltd. Telstra’s profitability and efficiency is much better than Queste. Theprofits of Queste are in negative values whereas Telstra’s profits are positive, thoughdeclining. Looking at the liquidity ratio, it can be said that Queste is much more liquid thanTelstra. Debt to equity ratio indicates that the liabilities of Telstra are comparatively morethan Queste in proportion to its total equities. Equity ratio of Queste is more than Telstrawhere as its Debt ratio is lower than it.The third part has conclusion which includes the overall findings of the analysis done. Itstates that although the net profit of the former company is reducing but it is performingmuch better than the latter company in terms of profitability and efficiency.
ACCOUNTING AND FINANCE2ContentsIntroduction...........................................................................................................................................3Income statement...................................................................................................................................3Balance sheet.........................................................................................................................................5Cash Flow Statement.............................................................................................................................7Financial Ratio Analysis........................................................................................................................8Profitability ratios..............................................................................................................................8Efficiency ratios.................................................................................................................................9Liquidity ratios................................................................................................................................10Capital structure ratio......................................................................................................................12Conclusion...........................................................................................................................................12References...........................................................................................................................................13Appendix.............................................................................................................................................15
ACCOUNTING AND FINANCE3IntroductionTelstra Corporation Limited is a leading telecommunications and technology companyoperating in Australia. The company builds telecommunication networks and provide productand services like mobile, internet access, pay television and many other. It provides 17.4million mobile services, 6.8 million fixed voice services and 3.5 million retail fixedbroadband services.The vision and mission of the company is to connect more and more people and to providethem more opportunities. For this, the company build simple and easy to use technology andcontent solutions, making it the largest national mobile network of Australia("Telstra",2018).Telstra was previously originated with the Australia Post as a government department butnow it is fully privatized. The CEO of the company is now focusing to make the companymore consumer focused by undergoing a change program. In August 2011, Telstra announcesto expand its customer services to social media having 24/7 coverage. By the end ofNovember 2012, the company enjoys the increase in its live chats and the growth rate of thisservice has also increased to a great extent("Telstra", 2018).As of 2016, the company owns about 360 retail stores and more than 300 stores are equippedwith low energy Bluetooth beacons. After the privatization, the shares of Telstra has risen to$5 per share in December 2013 to $6 per share in December 2014. The company is listed onAustralian Stock Exchange (ASX) and traded as ASX: TLS. The company is looking forwardto extend its growth in the international markets under the new CEO Andy Penn("Telstra -Investors", 2018).Income statementThe income statement also known as statement of performance, is prepared to measure theamount of profit created by the company. It also provides users with an idea about theprofitability of a concern (Buckland & Davis, 2016).Profit and loss is basically the differencebetween the total income and total expense. If the difference is positive, it is profit and if it isnegative, there is a loss. A financial profit shows an increase in the owner’s equity and a lossshows a decrease in the same. Income means earning benefits through reduction in liabilitiesor inflow of assets (Hussey, 2011).
ACCOUNTING AND FINANCE4Figure 1: Total net income or loss for the year ending 2013-2017123453,4003,6003,8004,0004,2004,4004,6004,800Net income/loss For Financial Year Ending2013-2017YearsAUD$(Million)The summary of income statement (Appendix 1.1) shows the data of Telstra Corporation forthe financial year starting from 2013 to 2017. During the first two years, it can be seen thatthe profit has increased by $684 million. In financial year 2015, the trend reversed and profitstarted decreased by $263 and continues to decline by approx. 17% in FY 2016 and 2017, ascompare to the percentage change in FY 2014. The maximum profit earned was in FY 2014,$4,549 (Figure 1).Figure 2: Sales revenue, COGS and Gross margin comparison1234(40.00)(20.00)-20.0040.0060.0080.00Sales Revenue, Cost of Sales, and Gross Margin ComparisonSalesCOGSGross ProfitYearsAUD$(Million)Ideally, to run a healthy business, the % increase in the sales should be greater than than the% increase in expenses including cost of sales (Charifzadeh & Taschner, 2017).Taking thedata from the horizontal analysis of income statement (Appendix 1.2) and keeping 2013 asbase year, it can be seen that there has been an increase in the sales from -1.50% to 1.34% inyear 2014-2015 followed by a rise in COGS from 1.20% to 7.04%, as a result of which, gross
ACCOUNTING AND FINANCE5profit has declined $18,975 in FY2015 as compare to that of $19.084 in 2013. The same trendcontinues in the subsequent years and profit tends to declines.The vertical analysis (Appendix 1.3), shows that the gross profit margin as a percentage ofsales was almost constant from the year 2013-2016. Later it decreases to 57.71% in 2017.COGS keeps on increasing from 25.17% in 2013 to 42.29% in 2017. An increase inadministrartive cost as a percentage of sales revenue is reported during the period whereasother operating expenese reduces during 2013-2017, with lowest of 7.07% in 2017.A fluctuating trend has been noticed in the net income of the company. The income as a % ofsales increases to 18.11% in 2014 and then tends to decraese in following years. in 2017, neticome was 14.95% of sales revenue.Figure 3: selected factors as a percentage of sales12345-10.0020.0030.0040.0050.0060.0070.0080.00COGSGross ProfitAdministrative costother operating expensesNet income/loss after taxesYears%ofSalesRevenueBalance sheetThe sheet of balances is also known as statement of financial position. It represents thefinancial position of the company in the market for a given period of time. It shows all theassets and liabilities owned by the organization (Woolf & Hindson, 2011).Analysing Telstra’s balance sheet for FY 2013-2017, it can be said that the total assets hasincreased over the period but a decrease is also there in FY 2017 $42,133 as compare to theprevious four years. Total liabilities and total equities both have increased throughout theperiod. Liabilities from $ 25,916 to $ 27,592 and equities from $12,611 to $14,541 (Figure 4,Appendix 1.4)
ACCOUNTING AND FINANCE6Figure 4:Total Assets, liabilities, and equities comparison1234505,00010,00015,00020,00025,00030,00035,00040,00045,00050,000Total Assets, liabilities, and equities comparisonTOTAL ASSETSTOTAL LIABILITIESTOTAL EQUITYYearsAUD$(Million)In FY 2014, current assets were 26.52% of total assets and by the end of 2017, they made up18.66% of total assets. On the other hand, in FY 2015, non-current assets were 82.77% oftotal assets which reduces to 81.34% in FY 2017 (Figure 5 a, Apeendix 1.6). The reason forthis large percentage is the incresase in the proportion of assets used for property, plant andequipment and also the increased goodwill (Figure 5 b)Figure 5:Selected Factors as % of Total Assets (a)-20.0040.0060.0080.00100.00120.00140.00Selected Factors as % of Total AssetsTotal current assetsTotal non-current assetsTotal current liabilitiesTOTAL LIABILITIESYearsAUD$(Million)
desklib-logo
You’re reading a preview
card-image

To View Complete Document

Become a Desklib Library Member.
Subscribe to our plans

Unlock This Document