Financial Analysis of Telstra Corporation and Comparison with Queste Communications Limited

RUNNING HEAD: ACCOUNTING AND FINANCE FOR MANAGER
System
[Pick the date]
Financial analysis

Accounting and finance for manager 2
Executive Summary
The report prepared discusses the overall financial analysis of the Telstra Corporation and
compare its ratios to its competitor Queste Communications Limited. It is also a
telecommunication entity functioning in the same industry and is listed on Australian Securities
Exchange. The report explains the nature of assets, liabilities and net income of the Telstra in
respect to the accounting model as well as analyzes, compare and interpret its financial
performance and position with its competitor Queste.
First part of the report contains horizontal and vertical analysis of Telstra’s financial statements
for the years starting from 2015 to 2018. The analysis interprets the overall performance of
Telstra and shows the percentage change in each item of the statements. It can be observed that
the assets, equities and liabilities of the firm have shown an upward trend in the past four years.
In addition, there were some fluctuations in the sales and profit earned by the company during
the years. Furthermore, the analysis of cash flow statement reflected that there were negative
cash flows in some of the past years.
The second part of the report discusses the key ratio of Telstra including the calculation of
liquidity, profitability, efficiency and capital structure ratios. The same figures are been derived
for Queste Communications also and for the same time period of four years. After that the results
are compared and the performance has been measured. The findings of ratio analysis state that
the liquidity position of Queste is much better than Telstra while on the other side, the company
is not as much profitable as its competitor Telstra. A high debt to equity ratio indicates that
Telstra has high financial risk and relies more on borrowings and liabilities. In the last, all the
findings of the report are summarized in conclusion section which provide insights about the

Accounting and finance for manager 3
overall position of Telstra and Queste. It suggests that though the profits of former company are
declining but it has performed better than its competitor (Queste) in relation to its profitability
and efficiency over the past years.

Accounting and finance for manager 4
Contents
Introduction.................................................................................................................................................5
Income statement.........................................................................................................................................6
Balance sheet...............................................................................................................................................9
Cash flow statement..................................................................................................................................11
Ratio analysis............................................................................................................................................13
Liquidity ratios......................................................................................................................................13
Profitability ratios..................................................................................................................................14
Efficiency ratios....................................................................................................................................15
Capital structure ratios...........................................................................................................................17
Conclusion.................................................................................................................................................18
References.................................................................................................................................................20
Appendix 1.................................................................................................................................................21

Accounting and finance for manager 5
Introduction
Telstra Corporation Limited is an Australian based telecommunication company operating and
expanding its business all over the country. The core activities of the company include
establishment and distribution of communication services like mobile services, internet access
and many others. It provides 17.7 million retail mobile services, 3.6 million retail fixed
broadband services and 4.9 million retail fixed voice services. The main objective of Telstra is to
offer quality services to its customers and make efforts to connect more and more people across
the world. In order to achieve its goals, the firm produces easy technologies and content
solutions which are user friendly (Telstra. 2018).
Telstra is recognized as the leading communication company of Australia having four major
segments operating across the country. Initially, it was incorporated as a government entity
named as Australia Post but later on the company was fully privatized. It got listed on ASX and
is traded with a ticker symbol ASX: TLS. The CEO of the firm is focused on making Telstra
more consumers oriented by undertaking a change program. After getting privatized, the share
price of the company rose to $5 per share in December 2013 to $6 per share in the same month
of 2014 (Telstra. 2018).
As far as its financials are considered, it earned a net profit of $3.5 billion in 2018 and revenue
worth $29 billion during the same year. As of 2017, the company’s assets were reported at $42.8
billion along with the equity amounted to $15 billion. There were approximately 32000
employees working in the organizations in 2017 and 150 subsidiaries owned by Telstra. Overall,
the company is making efforts and is focused on experiencing growth and success in the coming
future (Telstra. 2018).

Accounting and finance for manager 6
Income statement
It is one of the financial statements prepared by the company at the end of the accounting period.
It reflects the operating performance of the entity by taking into account the figures such as total
revenue generated, net profit earned, operating profit made and many others. The analysis of
statement of performance provides insights to the investors about the profitability position of the
company. The amount of net profit shown is basically the excess of total revenues over total
expenses incurred during the year. However, if the difference turns out to be negative then it is
considered as net loss and the same reflects the decrease in owner’s equity. The term income is
defined as the earnings made from the increase in assets and decrease in liabilities. The following
section shows the overall analysis of Telstra’s income statement for the past four years (Agtarap-
San Juan, 2007).
2015 2016 2017 2018
0
1000
2000
3000
4000
5000
6000
7000
Net income
Net income
Years
$million
Figure 1: Net income for 2015-2016
Referring to the appendix 1 as well as figure 1, it can be interpreted that the net profit or income
of Telstra has reduced after 2016. During the first two years, an increase of 36.61% was there in