Financial Analysis of Telstra Corporation and TPG Telecom Limited

Accounting
Assignment

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By student name
Professor
University
Date: 25 th Sep 2018.
Executive Summary
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In the given assignment two companies have been selected and their overall financial analysis
has been done. Based on the annual reports of the company’s important conclusion has been
drawn on important elements that includes cash flow statement, income statement, debt-equity
position of the shareholders of the company. The analysis will help the investors in
understanding which company is financially more viable and in which company should they
invest their funds. The aim is to draw a comprehensive analysis for an overall success of the
company and its stakeholders and the people who want to invest in the company in some way or
the other.
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Contents
Executive Summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
Owner’s Equity............................................................................................................................................4
Cash Flow Statement...................................................................................................................................7
Other comprehensive income statement..................................................................................................11
Accounting for Corporate Income Tax.......................................................................................................13
References.................................................................................................................................................16
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Introduction
In the given assignment two companies have been selected which are Telstra Corporation and
TPG Telecom Limited. Both the companies belong to the telecommunication sector and are
strong competitors of each other. Both the companies are listed on the ASX.
Telstra Corporation is one of Australia largest companies in the telecommunication sector and is
a leading provider of mobile phones, home phones, broadband connections and helps in
providing and building telecommunication lines. The company works under two models,
business to consumer and business and business and aims to provide software related issues
solution to the companies. The company was originally founded in 1901, and now the overall
revenue of the company is in millions and the company trades its share through the Australian
Stock Exchange (Abdullah & Said, 2017).
TPG Telecom is one of the biggest Australian company and it specializes in IT related services
for consumers and business-related services and provides mobile related services for the people.
It operates the largest mobile virtual network for the companies (Alsagoff, 2010). The company
is having thousands of mobile subscribers and they rely on the company for many of their
solutions related to mobile services and other telecommunication needs.
Analysis
In the given case the annual reports of both the companies have been downloaded and analysed
and important opinion on the various elements of the financial statements of the company are
given below-
Shareholder’s Equity
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Shareholders are the people who are investing their funds in the company and are dependent on
the company to earn good returns from the company. It is the duty of the management that they
should consider the needs of the shareholders on priority basis. It helps the company in raising
funds which they can invest in their market. Shareholders equity is an important part of the
financial statement of any company and stakeholders always to analyse the same to form an
opinion whether they want to invest in the company or not (Antle & Smith, 1985). The main aim
of the management is also to focus on shareholders wealth maximization. The various elements
that are included in the shareholder’s equity are-
 Equity Share Capital - The companies that have their names listed in the stock exchange
then they can raise their funds from those sources. The companies allocate the shares at
the nominal value and some shares are issued at a premium or discount. The aim of the
management is that they can raise the funds that they need to run their business
operations. It is also important that they are providing proper returns to the shareholders
who are investing in the company (Boghossian, 2017). In case of Telstra Corporation, the
company have an overall equity shareholding of $4,421 million shares and they have also
bought back few shares and have also invested in some new shares. Thus, we see that
there is a lot of change in the overall equity structure of the company and in case of TPG
Telecom there is sale of equity investments that has boosted the cash flow of
$124.5million, and the company has also bought back few of the shares. Total there is a
lot of change in the equity structure of the company (Coate & Mitschow, 2017).
 Retained Earnings – Retained Earnings are the overall earnings that the company has
accumulated over the years after paying of the equity and the preference shareholders of
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