Analyze the Cash Flow Statement of T-Mobile US

The provided financial statement summary shows the company's movements in cash and cash equivalents during a given period. The net increase (decrease) in cash and cash equivalents was -447 at the beginning of the year, and it increased to 3,944 by the end of the year. The major inflows include: proceeds from issue of current and non-current financial liabilities, dividends received, and proceeds from disposal of intangible assets and property, plant, and equipment. Outflows include payments for investments in intangible assets, property, plant, and equipment, as well as net cash used in investing activities and net cash (used) from financing activities. Additionally, the effect of exchange rate changes on cash and cash equivalents and changes in cash and cash equivalents associated with non-current assets and disposal groups held for sale were also accounted for.

FINANCIAL MANAGEMENT

TABLE OF CONTENTS
Introduction......................................................................................................................................1
Task 1...............................................................................................................................................1
Task 2...............................................................................................................................................2
Task 3...............................................................................................................................................3
Task 4 calculation in appendix........................................................................................................5
.........................................................................................................................................................5
Task 5...............................................................................................................................................5
Task 6 ..............................................................................................................................................6
References........................................................................................................................................1
Appendix..........................................................................................................................................1

Introduction
Financial information produced from the financial statements is of great importance for
the company. It helps in taking many crucial monetary decision related to the business. The
purpose of this report is to analyse the financial performance of Vodafone PLC on the basis of
ratio calculation and annual statements.
Task 1
The financial statements reflects the information about the results of operations, financial
position and cash flows within the business. Companies makes decisions related to allocation of
resources by using that information (Abraham, Deo and Irvine 2008). Every statement has its
own objective. These can be defined as follows:
 Balance Sheet – This statement is a snapshot of the company’s business at the end of the
financial year. It includes all the assets and liabilities within the business. The purpose of
the balance sheet is to state the current financial position of the company in terms of
liquidity, funding, efficiency, debt etc.
 Cash flow statement – This document shows the inflows and outflows of the cash during
the reporting financial period (Statement of Cash Flows, 2000). The purpose of the cash
flow statement is to reflect the nature of cash receipts and disbursements in various
categories.
 Income statement – This document shows all the items related to income and expenses
within the business. The purpose is to show the ability of the company to generate profits.
It discloses the volume of sales and the nature of various types of expenses. It is also
capable of analysing the trends related to the company’s operations.
Terminology
 Debit and credit – Under the double entry bookkeeping system, debits and credits are the
entries made in the account ledgers. It records the changes in the values which generates
from business transactions (Ball, Jayaraman and Shivakumar, 2012). It is to be noted that
source destination for the event is credited and destination account for the event is
debited.
1

 Books of prime entry – These are the books where initially all the transactions within
business are recorded. Later on these books are used to generate entries in a double entry
bookkeeping system (Ittelson, 2009).
 Accounts and ledgers – Ledger is a book of final entry which records all the financial
events in form of individual accounts. Accounts can be of different types such as real,
nominal, personal etc. The transactions recorded in the journal follows three basic
principles:
Real account ‘Debit’ what comes in & ‘credit’ what goes out
Nominal account ‘Debit’ all losses & expenses, ‘credit’ all incomes and gains
Personal account ‘Debit’ the receiver & ‘credit’ the giver (Siano, Kitchen and
Confetto, 2010)
 Trial balance - It is a measure adopted to check the accuracy of the ledge accounts. It is
required that the debit side should match with the credit side.
 Financial accounts – These accounts are the summary and reporting of the financial
transactions which are made by the company. Every organization prepares final accounts
at end of the business period.
Task 2
Limited Company
In such kind of business the liabilities of the members of the organization is limited to the
extent they have invested into the business. It is being operated on a very large scale involving
many complex reporting requirements (Vickerstaff and Johal, 2014). The control remains with
the major owners and shareholders of the company.
These may be limited by share or buy guarantee. It can be public or private limited
companies. The main difference is that member limit of private ltd is restricted by law and the
company’s rules. On the other hand any individual can buy share in the public ltd. For instance
2

Vodafone is a public ltd organization headquartered in London, UK. The brand is listed on the
London Stock Exchange and is a member of the FTSE 100 index (Vodafone. 2015). The control
and management remains with the Board of Directors and major shareholder of the organization.
It is mandatory for Vodafone to produce all the three financial statements according to the
guidelines of IFRS and GAPE
Sole Trader
It is a very simplest form of business structure and it relatively involves very low cost for
set up. As a sole trader the owner of the business holds the responsibility for all the legal aspects.
He retains complete control on the assets and relevant financial decisions. There are very few
reporting requirements (Zoan, 2014). Very high amount of flexibility is there in adopting any
kind of change or innovation. The size of the business is low however there are unlimited
liabilities which means all the personal assets are at risk in case if things go wrong. The
preparation of the financial statements depends upon the willingness of the owner
Partnership
It is a kind of arrangement were parties known as the partners agrees to come together to
do a particular business. These partners could be individuals, companies, entities, schools etc. the
partners are liable for the debts and obligations of the company. The ratio for sharing of profits
and losses is decided in an agreed ratio. For that purpose a partnership deed has been established
between the parties (Ball, Jayaraman and Shivakumar, 2012). Under such business along with
the three financial statements, individual partner’s capital accounts are also prepared.
Task 3
Ratio Analysis
 Current Ratio – This ratio shows the short term obligations of the business. It can be
interpreted that company has able to maintain a current ratio around less than 1. This
reflects that company has maintained a conservative approach to the working capital
management.
 Quick ratio – It shows the extent of cash and other current assets that are readily
convertible into cash as compared to short term obligations of the business (Maynard,
2013). The ratio is lower than the industry average and this suggests that Vodafone is
taking too much risk by not maintaining a suitable safeguard of liquid resources.
3

 Gross Profit Margin – It shows the underlying profitability of the core activities of the
organization. Gross profit for the three years is showing a decreasing trend. It is probably
due to the increasing competition within the industry.
 Operating Profit Margin – It measures the profit generating efficiency of the company.
Vodafone has failed to maintain an appropriate operating profit margin. This decrease in
the ratio is due to increase in the proportion of selling, general and administration
expenses
 ROCE (Return on Capital Employed) – Very high amount of fluctuations can be noticed
in the ROCE of the company. This thing can reduce the earning available to the
shareholders (Zoan, 2014). Company is facing issues in maintaining the efficiency of
capital usage.
 Receivable Days – It is the number of days that a customer invoice is outstanding before
it is collected. The receivable rate for the business has deceased and this shows that there
is high effectiveness in the credit and collection efforts for the business.
 Payable Days - It tells how long a company takes to pay its invoices from the trade
creditors. The payable day’s period is stagnant and it is good for the business. It shows
that company is capable of paying its invoices in timely manner.
 Inventory Days – There are no too many fluctuations in the ratio (Vodafone. 2015). The
ratio is considerable and company holds its inventory in effective manner before selling
it.
 Gearing – The debt to equity ratio is not too much high. It is considerable from industry
point of view because Vodafone operates on a very large scale.
 Dividend Yield – Decrease in the dividend yield ratio can be noticed. However the
shareholders might be satisfied from this rate of dividend.
 Earnings Per Share – It reflects the earning per share for the shareholders. In the current
year the earing per share is very good because it reflects adequate amount of dividend for
the investors.
 Price Earnings Ratio – The price earnings ratio was very favourable for two years 2012-
13 but it decreased in 2014 (Vickerstaff and Johal, 2014). It will decrease the market
value per share also for the company
4

Task 4 calculation in appendix
Task 5
Vodafone
The financial performance of Vodafone reflects the combination of good performance in
the emerging markets and challenging conditions in Europe. Company has succeeded in
offsetting competitive, regulatory and macroeconomic pressures in Europe. However the price
earning ratio of Vodafone is not showing impressive results. It shows what the market is willing
to pay for a stock based on its current earnings. This low performance can restrict the investors
from investing in the stocks of Vodafone.
5
Figure 1 Financial Position of Vodafone
(Source: Vodafone. Annual Reports 2014)

The financial position of Vodafone can be reflected from the above figure. The revenue
was recorded at £43.6 bn. According to the annual reports the revenue has decreased by 1.9%.
The EBITDA margin was fell by 1.1pp percentage points. Further the capital expenditure for the
company has increased by 13.3% due to acquisition of Kabel Deutschland and some investments
in Spain. The profit for the financial year has increased by £58.8 billion because of pre-tax gain
on the disposal of interest in Verizon Wireles of recognition of deferred tax assets. Increase of
5.7% was also noticed in the cash generated from operations due to higher working capital
related cash flows. For the benefits of shareholders company offered a 8% increase in the
dividend per share.
Deutsche Telekom
On the other hand Deutsche Telekom is one of the strong competitor for Vodafone in UK
market. The net revenue for the business has not shown effective results as it has increased to
62658 million in the current year from 60132 million. The profit from the operations has
increased very significantly from 4930 to 7247 million. It is a strong sign of positive financial
growth. The earning per share for the shareholder has been very low as compared to Vodafone.
The company is doing good but the financial results are not up to the standard of Vodafone.
Task 6
The above figure shows the earning per share of Vodafone PLC for the three years. In the
existing position it seems that company is generating adequate earning per share for its
shareholders. Vodafone is looking profitable on a shareholder basis. Company is having
adequate profits to be distributed among the shareholders. Higher earning per share can increase
the stock price. This can be an opportunity for the new investors. However If I would have the
6
Figure 2 earnings per share of Vodafone
(Source Vodafone. Annual Reports 2014)

money to invest I would like to invest in the shares of Vodafone because at present organization
is showing strong continued growth. Their business is constantly evolving to adapt to changes in
the customer behaviour, technology, regulation and the competitive landscape. Taking that into
consideration I would prefer to invest in the shares of the company.
From the above study it can be concluded that Vodafone has maintained a considerable
financial position in the industry. The rate of competition for the company is also high. .
Company’s makes decisions related to allocation of resources by using the financial information.
7

References
Abraham, A., Deo, H. and Irvine, H., 2008. What lies beneath? Financial reporting and corporate
governance in Australian banks. Asian Review of Accounting. 16(1). pp. 4 – 20.
Ball, R., Jayaraman, S. and Shivakumar, L., 2012. Audited financial reporting and voluntary
disclosure as complements: A test of the confirmation hypothesis. Journal of Accounting
and Economics. 53(1). pp. 136-166
Ball, R., Jayaraman, S. and Shivakumar, L., 2012. Audited financial reporting and voluntary
disclosure as complements: A test of the confirmation hypothesis. Journal of Accounting
and Economics. 53(1). pp. 136-166.
Ittelson, R. T., 2009. Financial Statements: A Step-by-Step Guide to Understanding and
Creating Financial Reports. Career Press.
Maynard, J., 2013. Financial Accounting, Reporting, and Analysis. Oxford University Press
Siano, A., Kitchen, J. P. and Confetto, G. M., 2010. Financial resources and corporate reputation:
Toward common management principles for managing corporate reputation. Corporate
Communications: An International Journal. 15(1). pp.68 – 82.
Statement of Cash Flows, 2000. [Online]. Available through:<
http://www.bluelayouts.org/template/768.html>. [Accessed on 12th December 2015].
Vickerstaff, B. and Johal, P., 2014. Financial Accounting. Routledge.
Vodafone. 2015. [Online] Available through: < https://www.vodafone.co.uk/>. [Accessed on 12th
December 2015].
Zoan, N. G., 2014. Finance - Professional Essays and Assignments. Zoan NG.
1

Appendix
1 RATIO CALCULATION
Ratio Formula 2012 2013 2014
Current Ratio
Current Assets
Current Liabilities 0.83 0.74 0.99
Acid Test
Current Assets – Inventory
Current Liabilities
0.81 0.73 0.81
Gross Profit
Margin
Gross Profit x 100%
Sales Revenue
32.03 31.3 27.13
Operating
Profit Margin
Operating Profit x 100%
Sales Revenue
24.1 10.63 -10.20
ROCE (Return
on Capital
Employed)
Operating Profit x 100%
Total Equity + Non-
Current Liabilities
(Capital Employed)
6.84 1.35 56.07
Receivable
Days
Accounts Receivable x
365 = Days
Sales Revenue
5.17 3.97 4.71
Payable Days
Accounts Payable x 365 =
Days
Cost of Sales
51.95 52.97 59.03
1

Inventory Days
Inventory x 365 = Days
Cost of Sales
61.67 65.18 62.72
Gearing Debt / Equity
0.37 0.41 0.30
Dividend Yield
Dividend Per Share x 100
= %
Market Price Per Share
2.38 1.79 1.93
Earnings Per
Share
Profit After Tax
Attributable to
Shareholders = (Pence)
Number of Shares Issued
2.50 0.16 22.21
Dividend
Cover
Profit After Tax
Attributable to
Shareholders = Times
Total Dividend Paid
64.8 - 24.6
Price Earnings
Ratio
Market Price Per Share
Earnings Per Share
12.54 13.27 6.061
2. FINANCIAL STATEMENTS OF VODAFONE
Income statement
For the year ended 31 March
Restated
2014 2013
£m £m
Revenue 38,346 38,041
Cost of sales (27,942) (26,567)
2

Gross profit 10,404 11,474
Selling and distribution expenses (3,033) (2,860)
Administrative expenses (4,245) (4,159)
Share of results of equity accounted associates and joint ventures 278 575
Impairment loss (6,600) (7,700)
Other income and expense (717) 468
Administrative expenses
Operating loss (3,913) (2,202)
Non-operating income and expense (149) 10
Investment income 346 305
Financing costs (1,554) (1,596)
Loss before taxation (5,270) (3,483)
Income tax credit/(expense) 16,582 (476)
Profit/(loss) for the financial period from continuing operations 11,312 (3,959)
Profit for the financial period from discontinued operations 48,108 4,616
Profit for the financial period 59,420 657
Attributable to:
– Equity shareholders 59,254 413
– Non-controlling interests 166 244
59,420 657
Earnings/(loss) per share
From continuing operations:
– Basic 42.10p (15.66p)
– Diluted 41.77p (15.66p)
From continuing and discontinued operations:
– Basic 223.84p 1.54p
– Diluted 222.07p 1.54p
Cash flow statement
For the year ended 31 March
3

Restated
2014 2013
£m £m
Net cash flow from operating activities 6,227 8,824
Cash flows from investing activities
Purchase of interests in subsidiaries, net of cash acquired (4,279) (1,432)
Purchase of interests in associates and joint ventures (11) (6)
Purchase of intangible assets (2,327) (3,758)
Purchase of property, plant and equipment (4,396) (3,958)
Purchase of investments (214) (4,249)
Disposal of interests in subsidiaries, net of cash disposed – 27
Disposal of interests in associates and joint ventures 34,919 –
Disposal of property, plant and equipment 79 105
Disposal of investments 1,483 1,523
Dividends received from associates and joint ventures 4,897 5,539
Dividends received from investments 10 2
Interest received 582 461
Net cash flow from investing activities 30,743 (5,746)
Cash flows from financing activities
Issue of ordinary share capital and reissue of treasury shares 38 69
Net movement in short-term borrowings (2,887) 1,581
Proceeds from issue of long-term borrowings 1,060 5,422
Repayment of borrowings (9,788) (1,720)
Purchase of treasury shares (1,033) (1,568)
B and C share payments (14,291) –
Equity dividends paid (5,076) (4,806)
Dividends paid to non-controlling shareholders in subsidiaries (264) (379)
Other transactions with non-controlling interests in subsidiaries (111) 15
Other movements in loans with associates and joint ventures – 168
Interest paid (1,897) (1,525)
Net cash flow used in financing activities (34,249) (2,743)
Net cash flow 2,721 335
Cash and cash equivalents at beginning of the financial year 7,506 7,001
Exchange (loss)/gain on cash and cash equivalents (115) 170
Cash and cash equivalents at end of the financial year 10,112 7,506
4

Balance sheet
5

3 FINANCIAL STATEMENTS OF DEUTSCHE TELEKOM
Balance sheet
Consolidated statement of financial position
T 056
millions of €
Note Dec. 31, 2014 Dec. 31, 2013
Assets
Current assets 29,798 21,963
Cash and cash equivalents 1 7,523 7,970
Trade and other receivables 2 10,454 7,712
Current recoverable income taxes 25 84 98
Other financial assets 8 2,976 2,745
Inventories 3 1,503 1,062
Other assets 9 1,380 1,343
Non-current assets and disposal groups held for
sale 4 5,878 1,033
Non-current assets 99,562 96,185
Intangible assets 5 51,565 45,967
Property, plant and equipment 6 39,616 37,427
Investments accounted for using the equity method 7 617 6,167
Other financial assets 8 2,284 1,362
Deferred tax assets 25 5,169 4,960
Other assets 9 311 302
6

Total assets 129,360 118,148
Note Dec. 31, 2014 Dec. 31, 2013
Liabilities and shareholders’ equity
Current liabilities 28,198 22,496
Financial liabilities 10 10,558 7,891
Trade and other payables 11 9,681 7,259
Income tax liabilities 25 276 308
Other provisions 13 3,517 3,120
Other liabilities 14 4,160 3,805
Liabilities directly associated with non-current
assets and disposal groups held for sale 4 6 113
Non-current liabilities 67,096 63,589
Financial liabilities 10 44,669 43,708
Provisions for pensions and other employee
benefits 12 8,465 7,006
Other provisions 13 2,373 2,071
Deferred tax liabilities 25 7,712 6,916
Other liabilities 14 3,877 3,888
Liabilities 95,294 86,085
Shareholders’ equity 15 34,066 32,063
Issued capital 11,611 11,395
Treasury shares -53 -54
11,558 11,341
7

Capital reserves 51,778 51,428
Retained earnings including carryforwards -39,783 -37,437
Total other comprehensive income -1,838 -2,383
Total other comprehensive income directly
associated with non-current assets and disposal
groups held for sale 798 –
Net profit (loss) 2,924 930
Issued capital and reserves attributable to owners
of the parent 25,437 23,879
Non-controlling interests 8,629 8,184
Total liabilities and shareholders’ equity 129,360 118,148
Income statement
millions of €
Not
e
201
4 2013 2012
Net revenue
1
6
62,6
58 60,132 58,169
Cost of sales
1
7
-
38,539 -36,255 -34,256
Gross profit
24,1
19 23,877 23,913
Selling expenses
1
8
-
13,898 -13,797 -14,075
General and administrative
expenses
1
9
-
4,721 -4,518 -4,855
Other operating income
2
0
3,23
1 1,326 2,968
Other operating expenses
2
1
-
1,484 -1,958 -11,913
8

Profit (loss) from
operations
7,24
7 4,930 -3,962
Finance costs
2
2
-
2,340 -2,162 -2,033
Interest income 325 228 306
Interest expense
-
2,665 -2,390 -2,339
Share of profit (loss) of
associates and joint ventures
accounted for using the
equity method
2
3 -198 -71 -154
Other financial income
(expense)
2
4 -359 -569 -225
Profit (loss) from financial
activities
-
2,897 -2,802 -2,412
Profit (loss) before
income taxes
4,35
0 2,128 -6,374
Income taxes
2
5
-
1,106 -924 1,516
Profit (loss)
3,24
4 1,204 -4,858
Profit (loss) attributable
to
Owners of the parent (net
profit (loss))
2,92
4 930 -5,353
Non-controlling interests
2
6 320 274 495
Earnings per share
2
7
Basic € 0.65 0.21 -1.24
Diluted € 0.65 0.21 -1.24
Cash flow statement
9

10

millions of €
Note 2014 2013 2012
31
Profit (loss) 3,244 1,204 -4,858
Depreciation, amortization
and impairment losses 10,574 10,904 21,957
Income tax expense (benefit) 1,106 924 -1,516
Interest income and interest
expense 2,340 2,162 2,033
Other financial (income)
expense 359 569 225
Share of (profit) loss of
associates and joint ventures
accounted for using the
equity method 198 71 154
(Profit) loss on the disposal of
fully consolidated subsidiaries -1,674 -131 -6
Other operating income from
the agreement with Crown
Castle concerning the leasing
and use of cell towers in the
United States – – -1,444
Other non-cash transactions 166 101 15
(Gain) loss from the disposal
of intangible assets and
property, plant and
equipment -436 138 -83
Change in assets carried as
working capital -2,275 -1,266 -24
Change in provisions 382 -195 -203
Change in other liabilities
carried as working capital 2,207 696 -406
Income taxes received (paid) -679 -648 -694
Dividends received 344 273 490
Net payments from entering
into, canceling or changing
the terms and conditions of
interest rate derivatives 55 290 122
Cash generated from
operations
15,91
1
15,09
2
15,76
2
Interest paid -3,390 -2,961 -3,060
11

Interest received 872 886 875
Net cash from operating
activities
13,39
3
13,01
7
13,57
7
Cash outflows for investments
in
Intangible assets -4,658 -4,498 -2,811
Property, plant and
equipment -7,186 -6,570 -5,621
Non-current financial assets -806 -667 -1,028
Payments to acquire control
of subsidiaries and associates -606 -48 -19
Proceeds from disposal of
Intangible assets 16 8 26
Property, plant and
equipment 265 245 187
Cell towers from the
framework agreement with
Crown Castle in the United
States – – 1,769
Non-current financial assets 74 54 549
Proceeds from the loss of
control of subsidiaries and
associates 1,540 650 50
Net change in cash and cash
equivalents due to the first-
time full consolidation of
MetroPCS – 1,641 –
Net change in short-term
investments and marketable
securities and receivables 591 -701 219
Other 9 -10 8
Net cash used in investing
activities
-
10,761 -9,896 -6,671
Proceeds from issue of
current financial liabilities 12,785 10,874 22,664
Repayment of current
financial liabilities
-
17,089
-
18,033
-
29,064
Proceeds from issue of non-
current financial liabilities 4,275 9,334 3,539
Repayment of non-current
financial liabilities -1,042 -129 -171
Dividends -1,290 -2,243 -3,400
Deutsche Telekom AG share – -2 –
12