Vodafone's Financial Analysis: Accounting Records and Reporting

This report provides a comprehensive analysis of Vodafone's financial performance, covering various aspects of financial management and accounting. It begins with an examination of different techniques for managing working capital, highlighting Vodafone's approach to cash flow, inventory, and customer relations. The report then delves into the analysis of accounting records, including profitability, liquidity, solvency, and efficiency ratios, with data from 2018 and 2019. The analysis reveals Vodafone's financial strengths and weaknesses, offering insights into areas needing improvement. Furthermore, the report discusses the components and processes for commercial transactions, emphasizing the importance of separate accounting for different product lines and the use of efficient bookkeeping practices. Finally, it addresses the legal requirements for financial reporting in an organization, emphasizing the importance of compliance with IFRS and GAAP standards, and the need for maintaining good relationships with bankers and staying informed about financial legislation across different countries where Vodafone operates. The report concludes by referencing Vodafone Idea Ltd.'s company financial ratios analysis from 2019.

03.01 Different techniques for managing working capital
There are many more techniques through which a company can manage the working
capital. Vodafone is renowned telecommunication sector which puts a microscopic
observation on its working capital. There are few steps through which Vodafone maintain the
capital which is explained below:
l There would be specific restriction among the funds’ differentiation in outflow and
inflow both way.
l The outlays of cash should be significant according to cash flow amount.
l Maintaining agreements of bigger cash flow should be essential.
l There should be a specific reach of a line of the gross amount of cash flow in
business.
l The company should be honest towards the banker and should maintain a good
relationship with the banker too.
l The excess stock should be avoided as it may tie with the flow of cash; the company
has to observe distinctively on inventory levels.
l Customers should be offered different offers especially at the first payment time; the
customer has to be given discount offers. The due amounts have to get from the
consumers as fast as possible.
l The company should not get hesitate to ask about the deposits to the customers.
l Better conditions have to be taken from the suppliers for regarding longer payment
cases.
l Long-term assets should have to be financed which get the equal economy through
the life of the assets.
l Financing of cash flow should be hidden from the public as well as para-public
agencies and other organizations tool.
Overall the performance of Vodafone is not good as it gross profit ratio, current ratio,
solvency ratio and efficiency ratio is declining. This reflects that Vodafone should take
corrective measures for managing the working capital effectively by making timely payment
to the vendors, improving the receivable process and managing the debtors effectively for
making informed financing decisions.
03.02 How to analyse accounting records

Analysis of accounting records are too much important as the records for accounting
are based on the financial stability of the organization. There are much more variations how
the data of accounting would be recorded for the longer period. Vodafone secures its
accounting records so minutely that contains a long term relation with earnings which is full
of variant studies. Valuation of the assets of the company is much confidential, and it would
vary by the enlargement of the company, as Vodafone is a company which is running
telecommunication services since 1991 and has accounted for 26 long years. The structure of
the capital of the company must be differentiated as well as the consequences have to be
maintained followed by it. Vodafone is an experienced telecommunication company that
maintains every financial procedure precisely and in a much organized way. The company
must have to work on its capital and resources besides the banking options as well as assets
of its. The detailed records of cash inflow as well as outflow too, assets of the company,
liabilities of the organization, due amounts which are there in the market, other liquid cash
flow should have to be structured in order. The operations and financial ratios vary company
too company like Vodafone are a renowned telecommunication company running for twenty-
six years, and it has a large circle of accounts which are maintained precisely with
documented records of cash inflow and outflow. Under this report, accounting records of
Vodafone are been analysed by using the ratio analysis tool in order to make the comparisons
between the two years effectively and efficiently. Ratio analysis is been counted as the most
useful tool in order to assess the financial performance of the company.
Profitability ratio analysis
Profitability ratio analysis
2018 2019
Gross Profit 121040 118723
Net profit 41682 146039
Sales revenue 282471 370056
GP ratio Gross profit / sales * 100 43% 32%
NP ratio Net profit / sales * 100 15% 39%
From the above, it has been interpreted that the company's profitability ratio is
increase from 15% to 39% and as a result, it shows that the firm will easily make profit and

on the other side, the gross profit ratio of the company is decreases and for that, the firm may
to develop the strategies to improve this.
Liquidity ratio analysis
Liquidity ratio analysis
2018 2019
Current assets 102346 183812
Current liabilities 108309 542384
Inventory 367 42
Prepaid expenses 17442 2777
Current ratio
Current assets / current
liabilities 0.94 0.34
From the above, it has been interpreted that the ideal ratio is 2:1 but as per the table,
the current ratio for 2018 is 0.94 and for 2019, the current ratio is 0.33 which clearly reflect
that the ratio is less than 1 which shows that there is need to take some step in order to
improve the business condition.
Solvency ratio analysis
Solvency ratio analysis 2018 2019
Long-term debt
57.7
6 45.45
Shareholder's equity
27.6
6 25.96
Debt-equity ratio
Long-term debt / shareholders
equity 2.1 1.8
From the above it has been interpreted that solvency ratio determine or measure the
company's ability in order to meet the long term obligation and as per the table the company
have above 20% solvency ratio then it is consider that the company is healthy. But in 2019,
the company's solvency ratio is below 20% then it reflect that the company' is not working
properly, there is a need to develop strategies for improvement.
Efficiency ratio
Efficiency ratio analysis
2018 2019
Cost of goods sold 161431 251333

Average Inventory (opening inventory+ closing inventory)/2 477.5 204.5
Turnover or sales revenue 282471 370056
Average total assets (opening total assets+ closing total assets)/2
976409.
5 1641383.5
Average fixed assets (opening fixed assets+ closing fixed assets)/2 887074 1498304.5
Receivables or debtors 5512 24736
Creditors or payables 35479 126486
Cost of ggod sold 161431 251333
Stock turnover ratio (In
times) 338.08 1229.01
Total assets turnover ratio 0.29 0.23
Fixed assets turnover ratio 0.32 0.25
Receivables or debtors
turnover ratio (in days) (Debtors * 365) / Credit sales 7.12 24.40
Efficiency ratio determine the ability of a business to use the asset and for Vodafone,
the current assets for 2018 is 0.289 which means that in that year the company uses the asset
and the fixed asset ratio is 0.318 for 2018 while for 2019, it is 0.246.
3.3 The component and process for commercial transaction
For sales, of the company have more than one product line and department, then it
must kept the separate set of books for each. Even most of the entrepreneur also find separate
accounting with more meaningful information for their product and for sales, this practice
also reveal that which product will provide more profitability for the business and which one
is not. For example, for a company, some and all expenses may not apply to only one
department but it should be allocated among department so that it will help for correct
accounting.
On the other hand, in order to manage the sales. The company should be simplify the
bookkeeping and also combine the sales and cash receipt journals. Therefore, to manage the
sales, the company must have daily cash register, daily cash sheet and daily sales register.
For purchase, also the manager of the company should maintain the inventory
register in which in and out of the items should be recorded so that it will help to identify
which product is used maximum times.
Therefore, it is to be recommended to Vodafone to use Precoro plan for purchasing
the item which includes every detail and maintain daily cash register, daily cash sheet and
daily sales register for sales purpose.
03.04 The legal requirements for financial reporting in an organization

In an organization, there are always requirements of financial reporting which are
legal there. Every renowned company maintains this specific line of procedure at a certain
period. Vodafone also follows this method in a much-secured way. Each and every company
has maintained this methodology by the help of an accountant who knows every aspect of
every legal term and condition of financial reporting. Whether the accountant faces any
difficulties or critical issues regarding legal terms and regulations, as fast as possible the
accountant has to inform the higher authority as the authority can deal with that at the time. It
is very important to maintain a nice and smooth relationship with the bankers of the
company, as well as Vodafone has to maintain this procedure too. Thus the company would
able to know every legislation regarding financial reports and issues on a daily basis.
Vodafone is a multinational company which has many brunches around the world. In
different countries, the company has to face different issues contained with financial
reporting as in different places have different legislations for financial issues so that the
company has to maintain them minutely and with much observations. At the end of the year,
Vodafone has to report its audited final reports to users in compliance with the legal rules
that involves fulfilling IFRS standards and GAAP.

REFERENCES
ONLINE :
Vodafone Idea Ltd. Company Financial Ratios Analysis. 2019. [ONLINE].AVAILABLE
THROUGH:<https://www.goodreturns.in/company/vodafone-idea/ratios.html>.