Accounting and Finance Report: Telstra Corporation Financial Analysis

This report presents a financial statement analysis of Telstra Corporation, a leading Australian telecommunications company. The analysis covers the years 2014-2016 and utilizes financial ratios, horizontal, and vertical analyses to assess the company's performance. The report examines the income statement, balance sheet, and cash flow statement, highlighting trends in income, expenses, assets, liabilities, and cash flows. Key findings include a decline in operating profit due to rising expenses, an increase in the asset base, and fluctuations in cash flows from operating, investing, and financing activities. The report also delves into profitability, efficiency, liquidity, and capital structure ratios, revealing insights into Telstra's financial health. The analysis concludes that Telstra is struggling to maintain its competitive advantage and recommends corrective measures for the management to improve financial performance.

Running head: ACCOUNTING AND FINANCE FOR MANAGERS
Accounting and Finance for Managers
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1ACCOUNTING AND FINANCE FOR MANAGERS
Executive Summary:
The current report aims to evaluate the financial statement analysis of Telstra Corporation
with the help of financial ratios, horizontal and vertical analyses. Telstra Corporation is one of
the leading telecommunication companies in Australia building and operating
telecommunication networks, mobiles, internet access, markets voice, paid television and other
entertainment products and services. It has been found that the growth in expenses has outrun the
growth of total income and hence, it could be stated that the organisation has to incur additional
cost to carry its business operations, while the revenue has not increased in tandem. Moreover,
the ratios computed denote that Telstra Corporation is struggling to maintain its competitive
advantage in the market. Hence, the management of the organisation needs to adopt corrective
measures to recover from such situation.

2ACCOUNTING AND FINANCE FOR MANAGERS
Table of Contents
1. Introduction:................................................................................................................................3
2. Income statement:........................................................................................................................3
3. Balance sheet statement:..............................................................................................................6
4. Cash flow statement:....................................................................................................................8
5. Financial ratio analysis:.............................................................................................................10
5.1 Profitability ratios:...............................................................................................................10
5.2 Efficiency ratios:..................................................................................................................11
5.3 Liquidity ratios:...................................................................................................................14
5.4 Capital structure ratios:........................................................................................................16
6. Conclusion:................................................................................................................................17
References and Bibliographies:.....................................................................................................19
Appendices:...................................................................................................................................21

3ACCOUNTING AND FINANCE FOR MANAGERS
1. Introduction:
The current report aims to evaluate the financial statement analysis of Telstra Corporation
with the help of financial ratios, horizontal and vertical analyses. Telstra Corporation is one of
the leading telecommunication companies in Australia building and operating
telecommunication networks, mobiles, internet access, markets voice, paid television and other
entertainment products and services. After the deregulation of the telecommunications industry
in the beginning 1990s, the organisation has succeeded in remaining the biggest provider of
telecommunications services despite the growing popularity of its competitor, Optus. The
organisation has above 150 subsidiary businesses and it has managed to extend its market share
by discounting its mobile phone products as of 30th June 2016 (Telstra.com.au, 2018). Hence, the
current report would aim to evaluate its current performance by considering its financial reports
for the past three years.
2. Income statement:
According to Almamy, Aston & Ngwa (2016), the primary goal of a business
organisation is to create wealth or profit and the profit made in a particular year is the basic
concern of most of the users of financial statements. The income statement helps in gauging the
amount of profit that an organisation has earned in a year. Moreover, it enables the users to
obtain an insight of the way the profit was earned. Profit or loss could be defined as the
difference between incomes earned and expenses incurred. A profit denotes rise in shareholders’
equity, while a loss denotes fall in the same (Asquith & Weiss, 2016).
The following important items have been extracted from the income statement of Telstra
Corporation to evaluate its financial performance:

4ACCOUNTING AND FINANCE FOR MANAGERS
Comprehensive gain/loss:
2014 (in million $) 2015 (in million $) 2016 (in million $)
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
4,345 4,305
5,849
Total comprehensive gain/loss for
financial periods ending 2014-2016
Figure 1: Total comprehensive gain/loss for financial periods ending 2014-2016
(Source: Telstra.com.au, 2018)
According to the above figure, it could be observed that the net income of Telstra
Corporation has decreased from $4,345 million in 2014 to $4,305 million in 2015; however, it
has increased to $5,849 million in 2016. In other words, the net income of the organisation has
declined by 0.92% in 2015; however, it has increased by 35.87% in 2016 (Refer to Appendices,
Appendix 4). The possible reasons identified behind such increase in net income are the fall in
labour costs, purchase of other goods and services and rise in other expenditures. Hence, the goal
of the organisation in maximising profit is achieved in 2016.
Income, expenses and operating profit:

5ACCOUNTING AND FINANCE FOR MANAGERS
Total income Total
expenses Operating
profit
-8.00%
-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
Income, Expenses and Operating
Profit Comparison
Percent change in 2014-15
Percent change in 2015-16
Figure 2: Income, expenses and operating profit comparison for financial periods ending
2014-2016
(Source: Telstra.com.au, 2018)
In a healthy business, the rise in total income per year needs to be greater in contrast to
percentage increase in expenses including cost of revenue (Bansal, 2014).With the help of
horizontal/trend analysis; it could be observed that total income has increased by 1.18% in 2015
and by 1.66% in 2016. However, the total expenses have increased by 4.58% in 2015 and by
4.53% in 2016. In addition, the operating profit has declined by 5.89% in 2015 and by 6.68% in
2016 (Refer to Appendices, Appendix 5). This denotes that the growth in expenses has outrun
the growth of total income and hence, it could be stated that the organisation has to incur
additional cost to carry its business operations, while the revenue has not increased in tandem.
Thus, it indicates unhealthy position of the business and its market share has not increased in
2017.
Selected factors as percentage of total income:

6ACCOUNTING AND FINANCE FOR MANAGERS
Labour Goods
and
services
purchased
Other
expenses Operating
profit Net profit
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
Selected factors as percentage of
total income
Percent in 2014
Percent in 2015
Percent in 2016
Figure 3: Selected factors as percentage of total income for financial periods ending 2014-
2016
(Source: Telstra.com.au, 2018)
With the help of vertical analysis, it could be seen that Telstra has incurred additional
cost in labour, goods and services and other expenses. The labour expenses have varied from
18.50% to 19%, while the expenses related to goods and services have varied from 25.50% to
27% over the years 2014-2016 (Refer to Appendices, Appendix 6). In addition, the other
expenses have remained within 15% to 16%; however, they have been on the increasing scale.
As a result, the operating profit of the organisation has declined over the years and the trend is
inherent in case of net profit as well. Thus, from the income statement analysis, it could be stated
that the financial performance of Telstra Corporation has declined in 2016.
3. Balance sheet statement:
In the words of Altman et al., (2017), the balance sheet statement, also called the
statement of financial position, helps in depicting the financial condition of an organisation at a

7ACCOUNTING AND FINANCE FOR MANAGERS
particular point of time. It depicts all the resources that an organisation controls and its overall
obligations.
Percentage change in total assets, total liabilities and total equity:
Percent change
in 2014 Percent change
in 2015 Percent change
in 2016-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
Percentage change in total assets,
total liabilities and total equity
Total assets
Total liabilities
Total equity
Figure 4: Percentage change in total assets, total liabilities and total equity for financial
periods ending 2014-2016
(Source: Telstra.com.au, 2018)
According to the above figure, it could be observed that the total asset base has increased
by 2.16% in 2014 and it has increased further to 2.76% in 2015 and it has increased further by
7.02% in 2017 (Refer to Appendices, Appendix 6). This is because of the rise in the current asset
base, especially in cash and cash equivalents. On the other hand, the trend is similar in case of
total liabilities and equity as well, which denotes that Telstra has utilised its cash base for
clearing its obligations.
Selected factors as a percentage of total assets:

8ACCOUNTING AND FINANCE FOR MANAGERS
Cash and
cash
equivalents
Trade and
other
receivables
Inventories Property,
plant and
equipment
Intangible
assets
-100.00%
-50.00%
0.00%
50.00%
100.00%
150.00%
200.00%
Selected factors as percentage of
total assets
2014
2015
2016
Figure 5: Selected factors as percentage of total assets` for financial periods ending 2014-
2016
(Source: Telstra.com.au, 2018)
According to the above figure, it could be seen that the overall cash base has comprised
of a major portion of the overall asset base; however, it is to receive maximum amount from the
debtors. Moreover, adequate amount item is not spent on maintaining inventory; however, there
is increase in long-term asset base, which denotes future expansion plan of the organisation
(Evans & Mathur, 2014).
4. Cash flow statement:
As commented by Collier (2015), the cash flow statement is an overview of the cash
payments and receipts over a year and it depicts the cash movements of an organisation for that
stated period. Cash flows need to be evaluated along with accrual accounting, since the potential
issues could be identified resulting in shortage of cash in the business. There is no recent

9ACCOUNTING AND FINANCE FOR MANAGERS
diversification on the part of Telstra Corporation due to the fall in inventory base and
prepayments.
Cash flows from operating activities:
It has been observed that the operating cash flows of the organisation have declined from
$10,387 million in 2014 to $10,066 million in 2015 and the decline is inherent further to $9,993
million in 2016 (Refer to Appendices, Appendix 8 and Appendix 9). This is because of the
additional payment made to the staffs and suppliers, which questions the ability of the
organisation in questioning its cash flow consistency.
Cash flows from investing activities:
It has been observed that the investing cash flows of the organisation have declined from
$1,130 million in 2014 to $5,692 million in 2015; however, the increase is significant to $2,207
million in 2016. This is because of the fall in payments associated with property, plant and
equipment and less proceeds.
Cash flows from financing activities:
It has been identified that the investing cash flows of the organisation have increased
from $4,430 million in 2014 to $6,882 million in 2015; however, there is decline in the same to
$3,777 million in 2016. The reasons identified behind such trend include the lower buyback of
shares and lower repayment of borrowings (Gippel, Smith & Zhu, 2015).
Due to these reasons, there has been fall in closing cash balance at the end of 2016, which
depicts that Telstra Corporation is suffering from cash flow problems.

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5. Financial ratio analysis:
5.1 Profitability ratios:
Particulars Details 2014 2015 2016
Revenue A
26,29
6
26,60
7
27,05
0
Operating profit B
7,18
5
6,76
2
6,31
0
Net profit C
4,34
5
4,30
5
5,84
9
Opening total assets D
38,52
7
39,36
0
40,44
5
Closing total assets E
39,36
0
40,44
5
43,28
6
Average total assets
F=(D+E)/
2
38,94
4
39,90
3
41,86
6
Shareholders' equity G
14,51
0
15,90
7
15,90
7
Operating margin B/A 27.32% 25.41% 23.33%
Return on assets C/F 11.16% 10.79% 13.97%
Return on equity C/G 29.94% 27.06% 36.77%
Table 1: Profitability ratios of Telstra Corporation for the years 2014-2016

11ACCOUNTING AND FINANCE FOR MANAGERS
(Source: Telstra.com.au, 2018)
2014 2015 2016
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
27.32% 25.41% 23.33%
11.16% 10.79%
13.97%
29.94%
27.06%
36.77%
Profitablity Ratios
Operating margin
Return on assets
Return on equity
Figure 6: Profitability ratios of Telstra Corporation for the years 2015-2017
(Source: Telstra.com.au, 2018)
According to the above figure, it could be observed that the operating margin of the
organisation has fallen 27.32% in 2015 to 25.41% in 2016 and the trend is inherent further to
23.33% in 2017. This is because of the increasing expenses in contrast to the overall income. On
the other hand, return on assets has increased over the years, as it has focused on utilising its
asset base by leasing to earn maximum income (Fields, 2016). Finally, the return on equity has
fallen in 2016; however, the increase is sharp in 2017. Hence, it could be stated that Telstra is in
a stable position in relation to its profitability level.
5.2 Efficiency ratios:
Efficiency Ratios:-
Particulars Details 2014 2015 2016

12ACCOUNTING AND FINANCE FOR MANAGERS
Revenue A
26,29
6
26,60
7
27,05
0
Cost of revenue B
11,19
7
11,76
8
12,28
8
Opening total assets C
38,52
7
39,36
0
40,44
5
Closing total assets D
39,36
0
40,44
5
43,28
6
Average total assets E=(C+D)/2
38,94
4
39,90
3
41,86
6
Opening inventory F
43
1
36
2
49
1
Closing inventory G
36
2
49
1
55
7
Average inventory H=(F+G)/2
396.5
0
426.5
0
524.0
0
Opening accounts receivable I
4,55
7
4,17
2
4,72
1
Closing accounts receivable J
4,17
2
4,72
1
4,73
7
Average accounts receivable K=(I+J)/2
4,364.5
0
4,446.5
0
4,729.0
0
Opening accounts payable L 4,24 3,83 4,04

13ACCOUNTING AND FINANCE FOR MANAGERS
1 4 5
Closing accounts payable M
3,83
4
4,04
5
3,94
8
Average accounts payable
N=(L+M)/
2
4,037.5
0
3,939.5
0
3,996.5
0
Asset turnover ratio A/E 0.68 0.67 0.65
Inventory turnover (in days) 365/(B/H) 13 13 16
Receivables turnover (in days) 365/(A/K) 61 61 64
Payables turnover (in days) 365/(B/N) 132 122 119
Table 2: Efficiency ratios of Telstra Corporation for the years 2014-2016
(Source: Telstra.com.au, 2018)
Asset turnover
ratio Inventory
turnover (in
days)
Receivables
turnover (in
days)
Payables
turnover (in
days)
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
Efficiency Ratios
2014
2015
2016
Figure 7: Efficiency ratios of Telstra Corporation for the years 2014-2016

14ACCOUNTING AND FINANCE FOR MANAGERS
(Source: Telstra.com.au, 2018)
According to the above figure, it could be observed that the asset turnover ratio of the
organisation has varied from 0.65 to 0.68 over the years, since it has deployed the assets for
long-term benefits. On the other hand, both inventory turnover and receivables turnover in terms
of days have increased with the passage of time due to fall in market demand; however, the
suppliers have extended their credit terms due to positive brand image of the organisation in the
market. Finally, payables turnover of the organisation has been high, which denotes that large
amount of cash is stuck in the hands of the debtors (Dokas, Giokas & Tsamis, 2014). Hence,
from the efficiency point of view, Telstra is not successful to increase its popularity further in the
market in 2016.
5.3 Liquidity ratios:
Liquidity Ratios:-
Particulars Details 2014 2015 2016
Current assets A 10,438 6,970 9,340
Inventory B 362 491 557
Current liabilities C 8,684 8,129 9,188
Cash and cash equivalents D 5,527 1,396 3,550
Operating cash flows E 8,613 8,311 8,133
Revenue F 26,296 26,607 27,050
Total liabilities G 25,400 25,935 27,379
Current ratio A/C 1.20 0.86 1.02
Quick ratio (A-B)/C 1.16 0.80 0.96
Cash ratio D/C 0.64 0.17 0.39

15ACCOUNTING AND FINANCE FOR MANAGERS
Cash flow to sales E/F 0.33 0.31 0.30
Cash flow to total debt E/G 0.34 0.32 0.30
Table 3: Liquidity ratios of Telstra Corporation for the years 2014-2016
(Source: Telstra.com.au, 2018)
Current ratio Quick ratio Cash ratio Cash flow to
sales Cash flow to
total debt
-
0.20
0.40
0.60
0.80
1.00
1.20
1.40
Liquidity Ratios
2014
2015
2016
Figure 8: Liquidity ratios of Telstra Corporation for the years 2014-2016
(Source: Telstra.com.au, 2018)
According to the above figure, it could be observed that the current ratio of the
organisation has fallen from 1.20 in 2014 to 0.86 in 2015; however, it has increased to 1.02 in
2016. The trend is similar in case of quick ratio, cash ratio, cash flow to sales ratio and cash flow
to total debt ratio. This is because of the lower amount of cash base, fall in operating cash flows

16ACCOUNTING AND FINANCE FOR MANAGERS
and rise in trade payables. Hence, from the liquidity point of view, Telstra is improving its
performance to clear its existing dues with short-term assets.
5.4 Capital structure ratios:
Capital Structure Ratios:-
Particulars Details 2014 2015 2016
Total liabilities A 25,400 25,935 27,379
Total equity B 14,510 15,907 15,907
Total assets C 39,360 40,445 43,286
Operating profit D 7,185 6,762 6,310
Interest expense E 957 689 710
Debt-to-equity ratio A/B 1.75 1.63 1.72
Debt ratio A/C 0.65 0.64 0.63
Equity ratio B/C 0.37 0.39 0.37
Interest cover ratio D/E 7.51 9.81 8.89
Gearing ratio A/(A+B) 0.64 0.62 0.63
Table 4: Capital structure ratios of Telstra Corporation for the years 2014-2016
(Source: Telstra.com.au, 2018)

17ACCOUNTING AND FINANCE FOR MANAGERS
Debt-to-
equity ratio Debt ratio Equity ratio Interest
cover ratio Gearing
ratio
-
2.00
4.00
6.00
8.00
10.00
12.00
Capital Structure Ratios
2014
2015
2016
Figure 9: Capital structure ratios of Telstra Corporation for the years 2014-2016
(Source: Telstra.com.au, 2018)
According to the above figure, it could be observed that the debt-to-equity ratio of the
organisation has fallen from 1.75 in 2014 to 1.63 in 2015; however, it has increased to 1.72 in
2016. The similar trend is observed in case of debt ratio, equity ratio and gearing ratio, which
implies that Telstra is relying largely on debt financing for conducting its business operations
(Gitman, Juchau & Flanagan, 2015). In addition, it contains greater business risk and thus, the
organisation is not in a stable position from the solvency point of view.
6. Conclusion:
Based on the above evaluation, it could be inferred that the growth in expenses has outrun
the growth of total income and hence, it could be stated that the organisation has to incur
additional cost to carry its business operations, while the revenue has not increased in tandem.
Thus, it indicates unhealthy position of the business and its market share has not increased in
2017. Moreover, the ratios computed denote that Telstra Corporation is struggling to maintain its

18ACCOUNTING AND FINANCE FOR MANAGERS
competitive advantage in the market. Hence, the management of the organisation needs to adopt
corrective measures to recover from such situation.

19ACCOUNTING AND FINANCE FOR MANAGERS
References and Bibliographies:
Almamy, J., Aston, J., & Ngwa, L. N. (2016). An evaluation of Altman's Z-score using cash flow
ratio to predict corporate failure amid the recent financial crisis: Evidence from the
UK. Journal of Corporate Finance, 36, 278-285.
Altman, E. I., Iwanicz‐Drozdowska, M., Laitinen, E. K., & Suvas, A. (2017). Financial Distress
Prediction in an International Context: A Review and Empirical Analysis of Altman's Z‐
Score Model. Journal of International Financial Management & Accounting, 28(2), 131-
171.
Asquith, P., & Weiss, L. A. (2016). Determining a Firm's Financial Health (PIPES‐A). Lessons
in Corporate Finance: A Case Studies Approach to Financial Tools, Financial Policies,
and Valuation, 7-25.
Bansal, R. (2014). A Comparative Analysis of the Financial Ratio of Selected Banks in the India
for the period of 2011-2014. Research Journal of Finance and Accounting, 5, 153-167.
Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for
decision making. John Wiley & Sons.
Dokas, I., Giokas, D., & Tsamis, A. (2014). Liquidity efficiency in the Greek listed firms: a
financial ratio based on data envelopment analysis. International Journal of Corporate
Finance and Accounting (IJCFA), 1(1), 40-59.
Evans, J. R., & Mathur, A. (2014). Retailing and the period leading up to the Great Recession: a
model and a 25-year financial ratio analysis of US retailing. The International Review of
Retail, Distribution and Consumer Research, 24(1), 30-58.

20ACCOUNTING AND FINANCE FOR MANAGERS
Fields, E. (2016). The essentials of finance and accounting for nonfinancial managers.
AMACOM Div American Mgmt Assn.
Gippel, J., Smith, T., & Zhu, Y. (2015). Endogeneity in Accounting and Finance Research:
Natural Experiments as a State‐of‐the‐Art Solution. Abacus, 51(2), 143-168.
Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson
Higher Education AU.
Lakshmi, T. M., Martin, A., & Venkatesan, V. P. (2016). A genetic bankrupt ratio analysis tool
using a genetic algorithm to identify influencing financial ratios. IEEE Transactions on
Evolutionary Computation, 20(1), 38-51.
Lev, B., & Gu, F. (2016). The end of accounting and the path forward for investors and
managers. John Wiley & Sons.
Loughran, T., & McDonald, B. (2016). Textual analysis in accounting and finance: A
survey. Journal of Accounting Research, 54(4), 1187-1230.
Nobes, C. W., & Stadler, C. (2015). The qualitative characteristics of financial information, and
managers’ accounting decisions: evidence from IFRS policy changes. Accounting and
Business Research, 45(5), 572-601.
Telstra.com.au. (2018). Retrieved 11 January 2018, from
https://www.telstra.com.au/aboutus/investors/financial-information/reports
Vogel, H. L. (2014). Entertainment industry economics: A guide for financial analysis.
Cambridge University Press.

21ACCOUNTING AND FINANCE FOR MANAGERS
Appendices:
Appendix 1: Income statement of Telstra Corporation for the years 2015-2017
Particulars 2014 (in million $) 2015 (in million $) 2016 (in million $)
Continuing operations:
Income:
Revenue (excluding finance income) 25,320 26,023 25,911
Other income 976 584 1,139
Total income 26,296 26,607 27,050
Expenses:
Labour 4,732 4,921 5,041
Goods and services purchased 6,465 6,847 7,247
Other expenses 3,988 4,113 4,312
Total expenses 15,185 15,881 16,600
Share of net profit from joint ventures
and associated entities 24 19 15
Net expenses 15,161 15,862 16,585
EBITDA 11,135 10,745 10,465
Depreciation and amortisation 3,950 3,983 4,155
EBIT 7,185 6,762 6,310
Finance income 156 157 86
Finance costs 1,113 846 796
Net finance costs 957 689 710
Profit before income tax expense 6,228 6,073 5,600
Income tax expense 1,679 1,787 1,768
Profit for the year from continuing
operations 4,549 4,286 3,832
Discontinued operations:
Profit/loss for the year from
discontinued operations (204) 19 2,017
Profit for the year from continuing
and discontinued operations 4,345 4,305 5,849
Earnings per share:
Basic 0.34 0.35 0.47
Diluted 0.34 0.35 0.47

22ACCOUNTING AND FINANCE FOR MANAGERS
Appendix 2: Balance sheet statement of Telstra Corporation for the years 2014-2017

23ACCOUNTING AND FINANCE FOR MANAGERS
Particulars 2013 (in million $) 2014 (in million $) 2015 (in million $) 2016 (in million $)
Current assets:
Cash and cash equivalents 2,479 5,527 1,396 3,550
Trade and other receivables 4,557 4,172 4,721 4,737
Inventories 431 362 491 557
Derivative financial instruments 43 23 7 62
Current tax receivables 79 2 9 8
Prepayments 314 329 346 426
Assets classified as held for sale - 23 - -
Total current assets 7,903 10,438 6,970 9,340
Non-current assets:
Trade and other receivables 943 973 1,171 1,293
Inventories 27 29 32 29
Investments- accounted for using the
equity method 18 196 201 171
Investments- other 38 127 137 394
Property, plant and equipment 20,326 19,842 20,450 20,581
Intangible assets 8,202 6,382 9,332 9,229
Derivative financial assets 1,062 1,322 1,790 2,180
Deferred tax assets 5 7 66 54
Defined benefit asset 3 44 296 15
Total non-current assets 30,624 28,922 33,475 33,946
Total assets 38,527 39,360 40,445 43,286
Current liabilities:
Trade and other payables 4,241 3,834 4,045 3,948
Employee benefits 0 - - 913
Provisions 918 932 970 92
Borrowings 751 2,277 1,496 2,655
Derivative financial liabilities 44 400 214 286
Current tax payables 444 296 291 176
Revenue received in advance 1,124 926 1,113 1,118
Liabilities classified as held for sale - 19 - -
Total current liabilities 7,522 8,684 8,129 9,188
Non-current liabilities:
Other payables 163 66 74 66
Employee benefits - - - 169
Provisions 276 261 284 127
Borrowings 14,313 13,547 14,138 14,647
Derivative financial liabilities 1,625 1,169 911 663
Deferred tax liabilities 1,330 1,286 1,558 1,493
Defined benefit liability 42 - 4 4
Revenue received in advance 381 387 837 1,022
Total non-current liabilities 18,130 16,716 17,806 18,191
Total liabilities 25,652 25,400 25,935 27,379
Net assets 12,875 13,960 14,510 15,907
Equity:
Share capital 5,711 5,719 5,198 5,167
Reserves (619) (228) 372 62
Retained profits 7,519 8,331 8,533 10,642
Equity available to shareholders 12,611 13,822 14,103 15,871
Non-controlling interests 264 138 407 36
Total equity 12,875 13,960 14,510 15,907

24ACCOUNTING AND FINANCE FOR MANAGERS
Appendix 3: Cash flow statement of Telstra Corporation for the years 2015-2017

25ACCOUNTING AND FINANCE FOR MANAGERS
Particulars 2014 (in million $) 2015 (in million $) 2016 (in million $)
Cash flows from operating activities:
Receipts from customers (inclusive of
goods and services tax (GST) 28,950 29,521 31,163
Payments to suppliers and employees
(inclusive of GST) (18,710) (19,621) (21,179)
Government grants received 147 166 182
Net placement of deposits by Autohome
Inc. that are not part of cash equivalents - - (173)
Net cash generated by operations 10,387 10,066 9,993
Income taxes paid (1,774) (1,755) (1,860)
Net cash provided by operating
activities 8,613 8,311 8,133
Cash flows from investing activities:
Payments for property, plant and
equipment (2,868) (2,845) (3,051)
Payments for intangible assets (894) (2,257) (1,143)
Capital expenditure (before
investments) (3,762) (5,102) (4,194)
Payments for business and shares in
controlled entities (net of cash acquired) (165) (984) (92)
Payments for joint ventures and
associated entities (3) (48) (38)
Payments for other investments (88) (72) (67)
Total capital expenditure (including
investments) (4,018) (6,206) (4,391)
Proceeds from sale of property, plant and
equipment 94 94 470
Proceeds from sale of business and shares
in controlled entities (net of cash
disposed) 2,397 4 1,340
Proceeds from sale of other investments 98 92 56
Distributions received from joint ventures
and associated entities 166 184 82
Interest received 150 167 131
Settlement of hedges in net investments (21) (31) -
Term deposits 4 4 -
Other - - 105
Net cash used in investing activities (1,130) (5,692) (2,207)
Operating cash flows less investing
cash flows 7,483 2,619 5,926
Cash flows from financing activities:
Proceeds from borrowings 1,572 1,714 4,987
Proceeds from borrowings from joint
ventures and associated entities - 79 -
Repayment of borrowings (1,387) (3,368) (3,954)
Repayment of borrowings to joint
ventures and associated entities - (45) -
Repayment of finance lease principal
amounts (91) (47) (101)
Share buy-back - (1,004) -
Staff repayments of share loans 3 2 -
Purchase of shares for employee share
plans (61) (54) (68)
Proceeds received from exercise of equity
instruments 29 - -
Proceeds from sale of controlled entity
shares - 333 -
Finance costs paid (947) (916) (860)
Issue of equity by controlled entities 160 121 -
Proceeds from sale of controlled entity
shares on behalf of non-controlling
interests 8 57 -
Payments to non-controlling interests for
sale of their shares in controlled entity
(including tax paid on
their behalf) - (54) -
Dividends paid to equity holders of
Telstra Entity (3,545) (3,699) (3,787)
Dividends paid to non-controlling
interests (22) (1)
Other (149) - 6
Net cash used in financing activities (4,430) (6,882) (3,777)
Net (decrease)/increase in cash and
cash equivalents 3,053 (4,263) 2,149
Cash and cash equivalents at the
beginning of the year 2,479 5,527 1,396
Effects of exchange rate changes on cash
and cash equivalents (5) 132 5
Cash and cash equivalents at the end of
the year 5,527 1,396 3,550

26ACCOUNTING AND FINANCE FOR MANAGERS
Appendix 4: Vertical analysis of income statement of Telstra Corporation for the years 2015-
2017
Particulars 2015 (in million $) 2016 (in million $) Percent change 2017 (in million $) Percent change
Continuing operations:
Income:
Revenue (excluding finance income) 25,320 26,023 2.78% 25,911 -0.43%
Other income 976 584 -40.16% 1,139 95.03%
Total income 26,296 26,607 1.18% 27,050 1.66%
Expenses:
Labour 4,732 4,921 3.99% 5,041 2.44%
Goods and services purchased 6,465 6,847 5.91% 7,247 5.84%
Other expenses 3,988 4,113 3.13% 4,312 4.84%
Total expenses 15,185 15,881 4.58% 16,600 4.53%
Share of net profit from joint ventures
and associated entities 24 19 -20.83% 15 -21.05%
Net expenses 15,161 15,862 4.62% 16,585 4.56%
EBITDA 11,135 10,745 -3.50% 10,465 -2.61%
Depreciation and amortisation 3,950 3,983 0.84% 4,155 4.32%
EBIT 7,185 6,762 -5.89% 6,310 -6.68%
Finance income 156 157 0.64% 86 -45.22%
Finance costs 1,113 846 -23.99% 796 -5.91%
Net finance costs 957 689 -28.00% 710 3.05%
Profit before income tax expense 6,228 6,073 -2.49% 5,600 -7.79%
Income tax expense 1,679 1,787 6.43% 1,768 -1.06%
Profit for the year from continuing
operations 4,549 4,286 -5.78% 3,832 -10.59%
Discontinued operations:
Profit/loss for the year from
discontinued operations (204) 19 -109.31% 2,017 10515.79%
Profit for the year from continuing
and discontinued operations 4,345 4,305 -0.92% 5,849 35.87%
Earnings per share:
Basic 0.34 0.35 2.94% 0.47 34.29%

27ACCOUNTING AND FINANCE FOR MANAGERS
Appendix 5: Horizontal analysis of income statement of Telstra Corporation for the years
2015-2017
Particulars 2015 (in million $) Percent 2016 (in million $) Percent 2017 (in million $) Percent
Continuing operations:
Income:
Revenue (excluding finance income) 25,320 96% 26,023 98% 25,911 96%
Other income 976 4% 584 2% 1,139 4%
Total income 26,296 100% 26,607 100% 27,050 100%
Expenses:
Labour 4,732 18.00% 4,921 18.50% 5,041 18.64%
Goods and services purchased 6,465 24.59% 6,847 25.73% 7,247 26.79%
Other expenses 3,988 15.17% 4,113 15.46% 4,312 15.94%
Total expenses 15,185 57.75% 15,881 59.69% 16,600 61.37%
Share of net profit from joint ventures
and associated entities 24 0.09% 19 0.07% 15 0.06%
Net expenses 15,161 57.66% 15,862 59.62% 16,585 61.31%
EBITDA 11,135 42.34% 10,745 40.38% 10,465 38.69%
Depreciation and amortisation 3,950 15.02% 3,983 14.97% 4,155 15.36%
EBIT 7,185 27.32% 6,762 25.41% 6,310 23.33%
Finance income 156 0.59% 157 0.59% 86 0.32%
Finance costs 1,113 4.23% 846 3.18% 796 2.94%
Net finance costs 957 3.64% 689 2.59% 710 2.62%
Profit before income tax expense 6,228 23.68% 6,073 22.82% 5,600 20.70%
Income tax expense 1,679 6.39% 1,787 6.72% 1,768 6.54%
Profit for the year from continuing
operations 4,549 17.30% 4,286 16.11% 3,832 14.17%
Discontinued operations:
Profit/loss for the year from
discontinued operations (204) -0.78% 19 0.07% 2,017 7.46%
Profit for the year from continuing
and discontinued operations 4,345 16.52% 4,305 16.18% 5,849 21.62%
Earnings per share:
Basic 0.34 0.35 0.47
Diluted 0.34 0.35 0.47

28ACCOUNTING AND FINANCE FOR MANAGERS
Appendix 6: Vertical analysis of balance sheet statement of Telstra Corporation for the years
2015-2017
Particulars 2013 (in million $) 2014 (in million $) Percent change 2015 (in million $) Percent change 2016 (in million $) Percent change
Current assets:
Cash and cash equivalents 2,479 5,527 122.95% 1,396 -74.74% 3,550 154.30%
Trade and other receivables 4,557 4,172 -8.45% 4,721 13.16% 4,737 0.34%
Inventories 431 362 -16.01% 491 35.64% 557 13.44%
Derivative financial instruments 43 23 -46.51% 7 -69.57% 62 785.71%
Current tax receivables 79 2 -97.47% 9 350.00% 8 -11.11%
Prepayments 314 329 4.78% 346 5.17% 426 23.12%
Assets classified as held for sale - 23 0.00% - 0.00% - 0.00%
Total current assets 7,903 10,438 32.08% 6,970 -33.22% 9,340 34.00%
Non-current assets:
Trade and other receivables 943 973 3.18% 1,171 20.35% 1,293 10.42%
Inventories 27 29 7.41% 32 10.34% 29 -9.38%
Investments- accounted for using the
equity method 18 196 988.89% 201 2.55% 171 -14.93%
Investments- other 38 127 234.21% 137 7.87% 394 187.59%
Property, plant and equipment 20,326 19,842 -2.38% 20,450 3.06% 20,581 0.64%
Intangible assets 8,202 6,382 -22.19% 9,332 46.22% 9,229 -1.10%
Derivative financial assets 1,062 1,322 24.48% 1,790 35.40% 2,180 21.79%
Deferred tax assets 5 7 40.00% 66 842.86% 54 -18.18%
Defined benefit asset 3 44 1366.67% 296 572.73% 15 -94.93%
Total non-current assets 30,624 28,922 -5.56% 33,475 15.74% 33,946 1.41%
Total assets 38,527 39,360 2.16% 40,445 2.76% 43,286 7.02%
Current liabilities:
Trade and other payables 4,241 3,834 -9.60% 4,045 5.50% 3,948 -2.40%
Employee benefits 0 - - 913 0.00%
Provisions 918 932 1.53% 970 4.08% 92 -90.52%
Borrowings 751 2,277 203.20% 1,496 -34.30% 2,655 77.47%
Derivative financial liabilities 44 400 809.09% 214 -46.50% 286 33.64%
Current tax payables 444 296 -33.33% 291 -1.69% 176 -39.52%
Revenue received in advance 1,124 926 -17.62% 1,113 20.19% 1,118 0.45%
Liabilities classified as held for sale - 19 0.00% - -
Total current liabilities 7,522 8,684 15.45% 8,129 -6.39% 9,188 13.03%
Non-current liabilities:
Other payables 163 66 -59.51% 74 12.12% 66 -10.81%
Employee benefits - - - 169 0.00%
Provisions 276 261 -5.43% 284 8.81% 127 -55.28%
Borrowings 14,313 13,547 -5.35% 14,138 4.36% 14,647 3.60%
Derivative financial liabilities 1,625 1,169 -28.06% 911 -22.07% 663 -27.22%
Deferred tax liabilities 1,330 1,286 -3.31% 1,558 21.15% 1,493 -4.17%
Defined benefit liability 42 - 4 0.00% 4 0.00%
Revenue received in advance 381 387 1.57% 837 116.28% 1,022 22.10%
Total non-current liabilities 18,130 16,716 -7.80% 17,806 6.52% 18,191 2.16%
Total liabilities 25,652 25,400 -0.98% 25,935 2.11% 27,379 5.57%
Net assets 12,875 13,960 8.43% 14,510 3.94% 15,907 9.63%
Equity:
Share capital 5,711 5,719 0.14% 5,198 -9.11% 5,167 -0.60%
Reserves (619) (228) -63.17% 372 -263.16% 62 -83.33%
Retained profits 7,519 8,331 10.80% 8,533 2.42% 10,642 24.72%
Equity available to shareholders 12,611 13,822 9.60% 14,103 2.03% 15,871 12.54%
Non-controlling interests 264 138 -47.73% 407 194.93% 36 -91.15%
Total equity 12,875 13,960 8.43% 14,510 3.94% 15,907 9.63%

29ACCOUNTING AND FINANCE FOR MANAGERS
Appendix 7: Horizontal analysis of balance sheet statement of Telstra Corporation for the
years 2015-2017

30ACCOUNTING AND FINANCE FOR MANAGERS
Particulars 2014 (in million $) Percent 2015 (in million $) Percent 2016 (in million $) Percent
Current assets:
Cash and cash equivalents 5,527 52.95% 1,396 20.03% 3,550 38.01%
Trade and other receivables 4,172 39.97% 4,721 67.73% 4,737 50.72%
Inventories 362 3.47% 491 7.04% 557 5.96%
Derivative financial instruments 23 0.22% 7 0.10% 62 0.66%
Current tax receivables 2 0.02% 9 0.13% 8 0.09%
Prepayments 329 3.15% 346 4.96% 426 4.56%
Assets classified as held for sale 23 0.22% - 0.00% - 0.00%
Total current assets 10,438 26.52% 6,970 17.23% 9,340 21.58%
Non-current assets:
Trade and other receivables 973 3.36% 1,171 3.50% 1,293 3.81%
Inventories 29 0.10% 32 0.10% 29 0.09%
Investments- accounted for using the
equity method 196 0.68% 201 0.60% 171 0.50%
Investments- other 127 0.44% 137 0.41% 394 1.16%
Property, plant and equipment 19,842 68.61% 20,450 61.09% 20,581 60.63%
Intangible assets 6,382 22.07% 9,332 27.88% 9,229 27.19%
Derivative financial assets 1,322 4.57% 1,790 5.35% 2,180 6.42%
Deferred tax assets 7 0.02% 66 0.20% 54 0.16%
Defined benefit asset 44 0.15% 296 0.88% 15 0.04%
Total non-current assets 28,922 73.48% 33,475 82.77% 33,946 78.42%
Total assets 39,360 100.00% 40,445 100.00% 43,286 100.00%
Current liabilities:
Trade and other payables 3,834 44.15% 4,045 49.76% 3,948 42.97%
Employee benefits - 0.00% - 0.00% 913 9.94%
Provisions 932 10.73% 970 11.93% 92 1.00%
Borrowings 2,277 26.22% 1,496 18.40% 2,655 28.90%
Derivative financial liabilities 400 4.61% 214 2.63% 286 3.11%
Current tax payables 296 3.41% 291 3.58% 176 1.92%
Revenue received in advance 926 10.66% 1,113 13.69% 1,118 12.17%
Liabilities classified as held for sale 19 0.22% - 0.00% - 0.00%
Total current liabilities 8,684 34.19% 8,129 31.34% 9,188 33.56%
Non-current liabilities:
Other payables 66 0.39% 74 0.42% 66 0.36%
Employee benefits - 0.00% - 0.00% 169 0.93%
Provisions 261 1.56% 284 1.59% 127 0.70%
Borrowings 13,547 81.04% 14,138 79.40% 14,647 80.52%
Derivative financial liabilities 1,169 6.99% 911 5.12% 663 3.64%
Deferred tax liabilities 1,286 7.69% 1,558 8.75% 1,493 8.21%
Defined benefit liability - 0.00% 4 0.02% 4 0.02%
Revenue received in advance 387 2.32% 837 4.70% 1,022 5.62%
Total non-current liabilities 16,716 65.81% 17,806 68.66% 18,191 66.44%
Total liabilities 25,400 100% 25,935 100% 27,379 100%
Net assets 13,960 100% 14,510 100% 15,907 100%
Equity:
Share capital 5,719 41.38% 5,198 36.86% 5,167 32.56%
Reserves (228) -1.65% 372 2.64% 62 0.39%
Retained profits 8,331 60.27% 8,533 60.50% 10,642 67.05%
Equity available to shareholders 13,822 99.01% 14,103 97.20% 15,871 99.77%
Non-controlling interests 138 0.99% 407 2.80% 36 0.23%
Total equity 13,960 100% 14,510 100% 15,907 100%

31ACCOUNTING AND FINANCE FOR MANAGERS
Appendix 8: Vertical analysis of cash flow statement of Telstra Corporation for the years
2015-2017
Particulars 2014 (in million $) 2015 (in million $) Percent change 2016 (in million $) Percent change
Cash flows from operating activities:
Receipts from customers (inclusive of
goods and services tax (GST) 28,950 29,521 1.97% 31,163 5.56%
Payments to suppliers and employees
(inclusive of GST) (18,710) (19,621) 4.87% (21,179) 7.94%
Government grants received 147 166 12.93% 182 9.64%
Net placement of deposits by Autohome
Inc. that are not part of cash equivalents - - 0.00% (173) 0.00%
Net cash generated by operations 10,387 10,066 -3.09% 9,993 -0.73%
Income taxes paid (1,774) (1,755) -1.07% (1,860) 5.98%
Net cash provided by operating
activities 8,613 8,311 -3.51% 8,133 -2.14%
Cash flows from investing activities:
Payments for property, plant and
equipment (2,868) (2,845) -0.80% (3,051) 7.24%
Payments for intangible assets (894) (2,257) 152.46% (1,143) -49.36%
Capital expenditure (before
investments) (3,762) (5,102) 35.62% (4,194) -17.80%
Payments for business and shares in
controlled entities (net of cash acquired) (165) (984) 496.36% (92) -90.65%
Payments for joint ventures and
associated entities (3) (48) 1500.00% (38) -20.83%
Payments for other investments (88) (72) -18.18% (67) -6.94%
Total capital expenditure (including
investments) (4,018) (6,206) 54.45% (4,391) -29.25%
Proceeds from sale of property, plant and
equipment 94 94 0.00% 470 400.00%
Proceeds from sale of business and shares
in controlled entities (net of cash
disposed) 2,397 4 -99.83% 1,340 33400.00%
Proceeds from sale of other investments 98 92 -6.12% 56 -39.13%
Distributions received from joint ventures
and associated entities 166 184 10.84% 82 -55.43%
Interest received 150 167 11.33% 131 -21.56%
Settlement of hedges in net investments (21) (31) 47.62% - 0.00%
Term deposits 4 4 0.00% - 0.00%
Other - - 105 0.00%
Net cash used in investing activities (1,130) (5,692) 403.72% (2,207) -61.23%
Operating cash flows less investing
cash flows 7,483 2,619 -65.00% 5,926 126.27%
Cash flows from financing activities: 0.00%
Proceeds from borrowings 1,572 1,714 9.03% 4,987 190.96%
Proceeds from borrowings from joint
ventures and associated entities - 79 0.00% - 0.00%
Repayment of borrowings (1,387) (3,368) 142.83% (3,954) 17.40%
Repayment of borrowings to joint
ventures and associated entities - (45) 0.00% - 0.00%
Repayment of finance lease principal
amounts (91) (47) -48.35% (101) 114.89%
Share buy-back - (1,004) 0.00% - 0.00%
Staff repayments of share loans 3 2 -33.33% - 0.00%
Purchase of shares for employee share
plans (61) (54) -11.48% (68) 25.93%
Proceeds received from exercise of equity
instruments 29 - -100.00% - 0.00%
Proceeds from sale of controlled entity
shares - 333 - -100.00%
Finance costs paid (947) (916) -3.27% (860) 0.00%
Issue of equity by controlled entities 160 121 -24.38% - 0.00%
Proceeds from sale of controlled entity
shares on behalf of non-controlling
interests 8 57 612.50% - 0.00%
Payments to non-controlling interests for
sale of their shares in controlled entity
(including tax paid on
their behalf) - (54) 0.00% - -100.00%
Dividends paid to equity holders of
Telstra Entity (3,545) (3,699) 4.34% (3,787) 0.00%
Dividends paid to non-controlling
interests (22) (1) -95.45% -100.00%
Other (149) - -100.00% 6
Net cash used in financing activities (4,430) (6,882) 55.35% (3,777) -45.12%
Net (decrease)/increase in cash and
cash equivalents 3,053 (4,263) -239.63% 2,149 -150.41%
Cash and cash equivalents at the
beginning of the year 2,479 5,527 122.95% 1,396 -74.74%
Effects of exchange rate changes on cash
and cash equivalents (5) 132 -2740.00% 5 -96.21%
Cash and cash equivalents at the end of
the year 5,527 1,396 -74.74% 3,550 154.30%

32ACCOUNTING AND FINANCE FOR MANAGERS
Appendix 9: Horizontal analysis of cash flow statement of Telstra Corporation for the years
2015-2017

33ACCOUNTING AND FINANCE FOR MANAGERS
Particulars 2014 (in million $) Percent 2015 (in million $) Percent 2016 (in million $) Percent
Cash flows from operating activities:
Receipts from customers (inclusive of
goods and services tax (GST) 28,950 278.71% 29,521 293.27% 31,163 311.85%
Payments to suppliers and employees
(inclusive of GST) (18,710) -180.13% (19,621) -194.92% (21,179) -211.94%
Government grants received 147 1.42% 166 1.65% 182 1.82%
Net placement of deposits by Autohome
Inc. that are not part of cash equivalents - 0.00% - 0.00% (173) -1.73%
Net cash generated by operations 10,387 120.60% 10,066 121.12% 9,993 122.87%
Income taxes paid (1,774) -20.60% (1,755) -21.12% (1,860) -22.87%
Net cash provided by operating
activities 8,613 100.00% 8,311 100.00% 8,133 100.00%
Cash flows from investing activities:
Payments for property, plant and
equipment (2,868) 76.24% (2,845) 55.76% (3,051) 72.75%
Payments for intangible assets (894) 23.76% (2,257) 44.24% (1,143) 27.25%
Capital expenditure (before
investments) (3,762) 93.63% (5,102) 82.21% (4,194) 95.51%
Payments for business and shares in
controlled entities (net of cash acquired) (165) 4.11% (984) 15.86% (92) 2.10%
Payments for joint ventures and
associated entities (3) 0.07% (48) 0.77% (38) 0.87%
Payments for other investments (88) 2.19% (72) 1.16% (67) 1.53%
Total capital expenditure (including
investments) (4,018) 355.58% (6,206) 109.03% (4,391) 198.96%
Proceeds from sale of property, plant and
equipment 94 -8.32% 94 -1.65% 470 -21.30%
Proceeds from sale of business and shares
in controlled entities (net of cash
disposed) 2,397 -212.12% 4 -0.07% 1,340 -60.72%
Proceeds from sale of other investments 98 -8.67% 92 -1.62% 56 -2.54%
Distributions received from joint ventures
and associated entities 166 -14.69% 184 -3.23% 82 -3.72%
Interest received 150 -13.27% 167 -2.93% 131 -5.94%
Settlement of hedges in net investments (21) 1.86% (31) 0.54% - 0.00%
Term deposits 4 -0.35% 4 -0.07% - 0.00%
Other - 0.00% - 0.00% 105 -4.76%
Net cash used in investing activities (1,130) 100% (5,692) 100% (2,207) 100%
Operating cash flows less investing
cash flows 7,483 100% 2,619 100% 5,926 100%
Cash flows from financing activities:
Proceeds from borrowings 1,572 -35.49% 1,714 -24.91% 4,987 -132.04%
Proceeds from borrowings from joint
ventures and associated entities - 0.00% 79 -1.15% - 0.00%
Repayment of borrowings (1,387) 31.31% (3,368) 48.94% (3,954) 104.69%
Repayment of borrowings to joint
ventures and associated entities - 0.00% (45) 0.65% - 0.00%
Repayment of finance lease principal
amounts (91) 2.05% (47) 0.68% (101) 2.67%
Share buy-back - 0.00% (1,004) 14.59% - 0.00%
Staff repayments of share loans 3 -0.07% 2 -0.03% - 0.00%
Purchase of shares for employee share
plans (61) 1.38% (54) 0.78% (68) 1.80%
Proceeds received from exercise of equity
instruments 29 -0.65% - 0.00% - 0.00%
Proceeds from sale of controlled entity
shares - 0.00% 333 -4.84% - 0.00%
Finance costs paid (947) 21.38% (916) 13.31% (860) 22.77%
Issue of equity by controlled entities 160 -3.61% 121 -1.76% - 0.00%
8 -0.18% 57 -0.83% - 0.00%