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Financial Decision Making Report

   

Added on  2020-05-28

22 Pages4160 Words37 Views
Running head: FINANCIAL DECISION MAKINGFinancial decision makingName of the studentName of the universityAuthor note
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1FINANCIAL DECISION MAKING Table of ContentsSection A....................................................................................................................................21.Selection of the company....................................................................................................22.Introduction.........................................................................................................................23.Trend on vertical and horizontal analysis regarding profits, sales, liabilities and assets. . .34.Identification of profits.......................................................................................................35.Identification of dividends..................................................................................................56.Satiability and liquidity.......................................................................................................77.Other ratios.......................................................................................................................108.Asset value per share and market share price...................................................................119.Non-financial parameters..................................................................................................1210.Comparative analysis....................................................................................................13Section B..................................................................................................................................13Answer to Question 1...............................................................................................................13Answer to Question 2...............................................................................................................14Answer to Question 3...............................................................................................................14Answer to Question 4...............................................................................................................15Conclusion................................................................................................................................15References................................................................................................................................17Appendix..................................................................................................................................20
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2FINANCIAL DECISION MAKING Section A1.Selection of the companySingapore Telecommunication Limited, Singapore2.Introduction Singapore Telecommunication Limited known as Singtel is the biggest networkoperator for mobile in Singapore. It has 4.1 million subscribers and has more than 640million customers with regard to subscriber base for mobile. The company has their headquarter in Singapore and it has more than 130 years of experience in operation. Further, it hasinvested in the leading companies all over Africa, Asia that includes Telkomsel, Bharti Airtel,Advance Info Service and Globe Telecom. Singtel is committed for delivering one stop, endto end ICT solutions for improving the business agility, driving growth and improve theprofitability (Singtel.com 2018). Various products and services provided by the company arethe mobile services, cloud services, internet services, international roaming and calling, dataconnectivity, managed hosting and services, Singtel TV business, conferencing and telephonyand cyber security. The company employs more than 25,000 employees. The turnover of thecompany that is the net income of the company is more than $ 3500 million for all the past 5years and for the year ended 2017 its net income was $ 3,853 million. Top competitors forSingtel are Telstra Corporation Limited, Vodafone Group Public Limited Company andHutchison Telecommunication (Australia) Limited. 3.Trend on vertical and horizontal analysis regarding profits, sales, liabilities andassets Looking at the trend of Singtel, it is recognized that the sales revenue of the companyare in decreasing trend as compared to the year 2012. However, it went up in the year 2015
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3FINANCIAL DECISION MAKING and again went down in the year 2016 (Delen, Kuzey and Uyar 2013). Whereas, the salestrend in Singapore telecommunication industry is in increasing trend for the last 5 years. Theprofit of the company through went down in 2013 as compared to 2012, after 2013 it is inincreasing trend till the year 2016. However, the industry growth with regard to the profitswas higher as compared to Singtel. On the other hand under the balance sheet the assets ofthe company are in increasing trend whereas the liabilities of the companies are in decreasingtrend (Singtel.com 2018). 4.Identification of profits Profits of the company for last 5 years –2012 – $ 3989.5 million2013 – $ 3510.6 million2014 – $ 3656.9 million2015 - $ 3784.5 million2016 – $ 3858.3 milliona.Economic condition Entry of Colt in the Singapore Telco market was the biggest shakeup for the industry.TPG telecom became the 4th telecom operator in Singapore in the year 2016 after 3 biggestcompanies like M1, Starhub and Singtel. During the past 5 years the Telco industry grown at14.7% rate which were influenced by upsurge in the output form in the manufacturingindustry of the country (Weygandt, Kimmel and Kieso 2015). Along with the outstandingTelco market, the industry were able to build sophisticated telecom infrastructure andsuccessfully promoted themselves for achieving excellence in telecommunication and over20% of the homes installed 2 fixed line services.
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4FINANCIAL DECISION MAKING b.Financial ratios for profitSingtel - Ratio Formula20122013201420152016Gross profit ratioGross profit /sales0.280.290.310.300.30Net profit ratioNet profit/sales0.210.190.220.220.23Return on AssetsSales/Total assets1.350.910.820.820.78Operating ratio Operating profit/sales0.170.170.190.170.17201220132014201520160.000.200.400.600.801.001.201.40ProfitabilityGross profit ratioNet profit ratioReturn on AssetsOperating ratio Industry average Ratio20122013201420152016Gross profit ratio0.300.310.300.290.27Net profit ratio0.140.160.170.200.20Return on Assets0.950.920.970.880.76Operating ratio 0.200.200.210.190.18c.Comment on profitabilityFrom the above tables it can be identified that the gross profit ratio of the company ismoving between 0.28 and 0.31 whereas the industry average for the same is moving between0.27 and 0.31. Therefore, the gross profit ratio of the company is more or same with the
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5FINANCIAL DECISION MAKING industry average. On the other hand the net profit ratio of Singtel is high as compared to theindustry average for the last 5 years. The net profit ratio of the company as well as theindustry both are in increasing trend except the net profit of Singtel for the year 2013 that wasin decreasing trend (Singtel.com 2018). Return on assets of Singtel for 2012 is significantlyhigher as compared to the industry and for the years from 2013 to 2016 the ratios were as perthe industry average. Finally the operating ratios of the company for all the 5 years werelower as compared to the industry average. Therefore, the company shall control theoperating expenses to achieve the operating ratio as per the industry average. 5.Identification of dividendsa.Dividend ratio For Singtel –Ratio Formula20122013201420152016Dividend Yield ratioDividend per share/ Market value per share5.375.424.495.214.52Dividend payout ratioDividend /net income1.030.720.730.710.72Price earnings ratioMarket value per share/EPS0.120.140.160.140.16Earnings per share ratioNet income/no. of shares25.0422.0222.9223.7324.29
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