Telstra Financial Analysis and Recommendations

This assignment focuses on the financial performance of Telstra Corporation Ltd. through a comprehensive analysis of its financial statements for a given period. The analysis includes evaluating the company's liquidity position, exploring its sources of finance, identifying key ratios such as return on assets (ROA) and debt-to-equity ratio, and comparing them with industry averages or previous years' figures. The cash flow statement is scrutinized to determine the company's ability to generate sufficient cash flows from operations to support its capital expenditure. Based on this analysis, recommendations are made to improve Telstra's profitability and overall financial health.

Financial Statement
Analysis

Table of Contents
INTRODUCTION...........................................................................................................................1
INDUSTRY SITUATION AND COMPANY PLAN.....................................................................1
FINANCIAL STATEMENT ANALYSIS......................................................................................2
Identified accounting policies in preparation of the statements..................................................5
Identifying trends and items that might be different from the industry norms ..........................5
Statements of financial position..................................................................................................5
Cash flow statements...................................................................................................................8
RATIO ANALYSIS.........................................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Financial analysis is one of the important tool used by companies in order to assess
viability, stability and profitability of a business.. Under this project report, an example of
Telstra telecommunications is cited. Which is a public limited company and operating in
telecommunication industry. It is said to be an Australian telecom and media organisation which
is working as a network connectivity, market voice, mobile and internet access or other services.
It is known as one of the largest telecom company in Australia (Fridson and Alvarez, 2011). It
was founded on 12th June 1975. Current CEO of this company is Andy Penn.
The registered office of cited company is in Melbourne, Australia. Latest fiscal year is
31st march 2017. The products which are offered by the company which are fixed line and
mobile telephone, internet and other networking services. It covers entire areas of Australia and
some other places in few countries. Current Auditor of the company is Ernst & Young and
concern partner is SJ Ferguson. According to them, company is in a perfect position which is
concluded after analysing its income statements. The company’s current market price as on 31st
August 2017 was 3.67 and dividend per share is 0.24 with having 7.90% growth rate.
INDUSTRY SITUATION AND COMPANY PLAN
About Telstra telecom pvt Ltd:
It is a leading telecommunication and the fastest developing company with its recent
technology. They are known for providing wide connectivity, media and related to consumers.
They are focusing more on core strength networks and connectivity to get new opportunities in
the global market in order to make digital networking base worldwide. On an estimation of
around 55 million calls and 356 million information, connection are developed by the company
in each day. More than 75% of the Small scale businesses in Australia are customers of Telstra
those are using most of the services and facilities which are provided by the company.
Objectives:
Company's main objective is to provide better future connectivity for the future
generations. Which would assist to transform a better network around the world..
Vision Statements: Company's vision statements is to be in the world class position that would
assists people to connect each other.
Company Future plan
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On the basis of 2016 annual report of Telstra. A perfect company's plan is to be made in
order to enhance the profitability and market stability. The plan is associated with company's
goals to connect people with their effective network. It is only possible after making a perfect
analysis of market segment. Because before delivering services to the customers it is necessary
to identify its customer market. In preparing a perfect plan company's need to analyse market
opportunities. Internal and external factors are also need to analyse during planning phase.
Telecom Company is developing a chain to connect its services among different parts of the
countries (Healy and Palepu, 2012). They are having a strong growth opportunities because for
the expansion of there business they are having total NBN networking of 500,000 connectivity is
done by the company in current year. 1.1 million broadband networking system are developed by
the company. After making all the arrangement regarding its services and facilitate company
need to review the plan before making into action.
FINANCIAL STATEMENT ANALYSIS
It consists of income statements that represent a company's financial performance over a
certain specific financial year (Telstra Corp Ltd, 2017). With the help of such statement
company's stakeholders would get to know about company's performance so that they can take
rational decision within a time frame.
Income statements of Telstra telecom Corp Ltd. (Amount AUD in Millions)
Particulars 2013 2014 2015 2016 2017
Revenue 25502 25119 25845 25,834 25912
Cost of Revenue 12836 12990 13740 14494 21916
Gross Operating Profit 12666 12129 12105 11340 3996
Operating expenses
Research and development 4 8 4 - -
Sales, general and
administrative 15006 15046 15810 15726 18356
Staff cost - - - - -
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Depreciation and
amortization 8476 7900 7966 8310 8882
Other Operating Expenses -16733 -16573 -17658 -17308 -26836.1
Total Operating Expenses 6753 6381 6122 6728 401.9
Operating income before
interest and taxes 5913 5748 5983 4612 3594.1
Non-operating income 5051 6708 6163 6588 7699.9
Income before income taxes 10964 12456 12146 11200 11294
Provision for income taxes 7099 7907 7860 7368 7420
Net income from continuing
operations 3865 4549 4286 3832 3874
Net Income 3813 4275 4231 5780 3891
Net income available for
common shareholders 3813 4275 4231 5780 3891
Earnings per share
Basic 0.61 0.69 0.69 0.96 0.65
Diluted 0.61 0.69 0.69 0.95 0
Gross profit: It is said to be that profit of a company generated after deducting the costs
related with production and selling its products and costs which are related with delivering
services. According to the above income statement, company's is producing a net downfall in
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profit as 12105m in 2015, 11340m in 2016 and 3996m in 2017. In order to control its downfall
they need to manage its expenses those are related during production process.
Income from operations: In accordance with performance of the company's , it has been
observed that company is able to maintain its expenses from the past few years. This is the
reason; it was under control of company (Higgins, 2012).
Net income: In 2016, net income of Telstra was maximum because they are able to
manage their expenses with minimum cost and in the current year, from 3891m to 5780m it
decreases because company is using more expenditure in delivering services to its customers. .
Trend analysis of the company
Forecasted sale estimation by the company for coming years:
Year
Sales(AUD
m)
2018 25989
2019 26066
2020 26145
2021 26223
1 2 3 4
25850
25900
25950
26000
26050
26100
26150
26200
26250
25989
26066.967
26145.167901
26223.603404703
Sales
Linear (Sales)
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According to the estimated sale projected by company for the coming year, it has been
observed that with 0.3 % increase in every year will make company reach its estimated profit
that a company's need to projected in future. The maximum number of sales is forecasted in 2021
as 26223m.
Identified accounting policies in preparation of the statements
The main objective of financial statements is to guide company to collect information
about financial position and performance or cash flows that are generating by Telstra telecom
which are used as useful tool to most of the users in taking effective decision. Financial
statements must consist of accounting policies in order to identify the use in preparation of
statements through using accounting policies (Hofmann and Lampe, 2013). Some of the
judgements are made in the procedure of applying accounting policies. Under these accounting
policies, it is important to value of some inventory at minimum cost or original value. If
company's is making change in an accounting system it must be disclosed by the company.
Amount which is affecting the financial statements should be disclosed. It would be the most
helpful to persons that are related with preparation of financial statements.
Identifying trends and items that might be different from the industry norms
It is important to face recent digital goods and services that are playing an important role
through spending more capital on various aspects of company’s financial statements (Lisowsky,
2010). Those expenses which are affecting the profitability of business should be minimised in
order to reduce the losses. They are mostly different from the industry norms because of their
implications on financial positions of the company's
Statements of financial position
Assets
Current Assets (AUD in million)
Cash, cash equivalents, and short-term investments
Cash and cash equivalents 2479 5527 1396 3550 938
Short-term investments 43 23 7 62 21
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Total cash, cash equivalents,
and short-term investments 2522 5550 1403 3612 959
Accounts receivable - - - - -
Inventory 862 724 982 1114 1786
Other Current Assets 4519 4164 4585 4614 5117
Total current assets 7903 10438 6970 9340 7862
Non-Current Assets
Not property, plant and
equipment 40652 39684 40900 41162 42700
Equity and other investments - - - - -
Intangibles 16404 12764 18664 18458 19116
Deferred Income Taxes 10 14 132 108 88
Other Long-Term Assets -26442 -23540 -26221 -25782 -27633
Total non-current assets 30624 28922 33475 33946 34271
Total Assets 38527 39360 40445 43286 42133
Liabilities and stockholders' equity
Liabilities
Current Liabilities
Accounts Payable 2594 2328 2512 2930 2370
Taxes Payable - - - - -
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Current Debt 1370 4398 2806 5074 4738
Other current liabilities 3558 1958 2811 1184 2051
Total current liabilities 7522 8684 8129 9188 9159
Non-current liabilities
Deferred taxes liabilities 2660 2572 3116 2986 3078
Long Term Debt 28198 26632 27774 28756 29148
Other long-term liabilities -12200 -12212 -12270 -13479 -13774
Total non-current liabilities 18658 16992 18620 18263 18452
Total Liabilities 26180 25676 26749 27451 27611
Stockholders' equity
Common stock 5711 5719 5198 5167 4421
Additional paid-in capital - - - - -
Other reserves - - - - -
Retained earnings 7519 8331 8533 10642 10225
Minority Interests - - - - -
Total stockholders' equity 12347 13684 13696 15835 14522
Total liabilities and
stockholders' equity 38527 39360 40445 43286 42133
Representation that shows the assets = liabilities + stockholders equity.
: 42133m= 27611+14522
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Cash flow statements
Net operating cash flow in current year is 7775m and net income is 3891m which is much
less than operating cash flows (Li, 2010). So, most of the investments are made through
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operating activities. The major sources of finance for company come from investing activities. A
cash devaluation in seen from past year..
RATIO ANALYSIS
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Strength of company is the cash availability to them. In a healthy position and after
analysis of financial performance of Telstra. Cash is a major aspect of the company's which they
are using in order to make strong base for the company for the future. The liquidity position of
the company is strong which is use to pay off its debts and other liabilities.
Weaknesses of company arises from the net profit which is less as compared to previous
year.
CONCLUSION
From the above report, it has been concluded that financial analysis is a useful aspect of
any company that would provide valuable information about company’s performance in an
accounting period. It consists of various financial statements like income statements, balance
sheet and cash flow analysis. On that basis, various recommendations are made to do effective
corrections for the future growth and expansion of company. Telstra telecom needs to reduce its
expenses so that it would maximise its profit which is less in the current year.
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REFERENCES
Books and Journals
Fridson, M.S. and Alvarez, F., 2011. Financial statement analysis: a practitioner's guide (Vol.
597). John Wiley & Sons.
Healy, P.M. and Palepu, K.G., 2012. Business analysis valuation: Using financial statements.
Cengage Learning.
Higgins, R.C., 2012. Analysis for financial management. McGraw-Hill/Irwin.
Hofmann, E. and Lampe, K., 2013. Financial statement analysis of logistics service providers:
ways of enhancing performance. International Journal of Physical Distribution &
Logistics Management. 43(4). pp.321-342.
Li, F., 2010. The information content of forward‐looking statements in corporate filings—A
naïve Bayesian machine learning approach. Journal of Accounting Research. 48(5).
pp.1049-1102.
Lisowsky, P., 2010. Seeking shelter: Empirically modeling tax shelters using financial statement
information. The Accounting Review. 85(5). pp.1693-1720.
Online
Telstra Corp Ltd. 2017. [Online]. Available through:
<http://financials.morningstar.com/ratios/r.html?t=TTRAF&region=usa&culture=en-US>.
[Accessed on 1st September 2017].
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