Calculation and Analysis of Performance Ratios of TPG Telecom Limited

TPG TELECOM LIMITED
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Table of Contents
Introduction................................................................................................................................4
Brief Description of the TPG.....................................................................................................4
Calculation and Analysis of Performance Ratios.......................................................................4
Short-term solvency ratios......................................................................................................4
• Quick ratio........................................................................................................................5
• Current ratio.....................................................................................................................5
Long-term solvency ratios or Leverage ratio.........................................................................5
• Debt equity ratio...............................................................................................................6
• Debt to assets ratios..........................................................................................................6
• Debt to capital ratio..........................................................................................................6
• Debt to EBITDA ratio......................................................................................................6
• The asset to equity ratio....................................................................................................7
Efficiency ratio.......................................................................................................................8
• Accounts receivable turnover...........................................................................................8
• Inventory turnover............................................................................................................8
• Accounts Payable turnover...............................................................................................8
• Total assets turnover.........................................................................................................8
• Fixed assets turnover ratio................................................................................................8
• Operating expense ratio....................................................................................................9
• Return on investment........................................................................................................9
• Average collection period.................................................................................................9
• Average payment period...................................................................................................9
Profitability ratio..................................................................................................................10
• Return on equity.............................................................................................................11
• Earning per share............................................................................................................11
• Dividend per share..........................................................................................................11
• Price earnings ratio.........................................................................................................11
• Return on capital employed............................................................................................11
• Return on assets..............................................................................................................11
• Gross profit.....................................................................................................................11
• Net profit........................................................................................................................12
Market value ratios...............................................................................................................13
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• Book value per share......................................................................................................13
• Dividend Yield...............................................................................................................13
Graphs and comparison of share price movements..................................................................15
Share Valuation: Constant dividend growth model.................................................................15
Conclusion................................................................................................................................16
Recommendations....................................................................................................................16
References................................................................................................................................17
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Introduction
TPG is the second largest player in the telecom sector operating in Australia. TPG’s
performance is evaluated in various terms for the last two years.
Several ratios have been calculated to identify their performance for the last two years. The
deep understanding will enable shareholders to gain knowledge about the performance of the
company, return on investment, valuation of earning per share, market price per share,
analysis of assets deployed and the efficiency of its utilization, analysis of capital structure,
the flow of interest towards long-term debt and short-term debt.
Brief Description of the TPG
TPG deals in the telecommunications industry, where customers are delivered with the best
communication services which are fast, reliable and cost-effective. They deal in various types
of customers ranging from residential users, small and medium enterprises, government
bodies, large corporate enterprise to wholesale customers. TPG was formed with the
combination of two companies, Total Peripheral Group and SP Telemedia. The major areas
covered by this company are Australia, New Zealand, and Singapore.
Calculation and Analysis of Performance Ratios
Short-term solvency ratios
This ratio helps a company to understand its ability to meet its short-term financial
obligations, which helps a company to know about the financial loan prevailing in the short
run (Alexander, 2018). The short-term solvency ratios are categorized into two parts. These
are
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