Question

Week 6 Written Assignment

Financial Statement Analysis Paper Written Assignment

• One basic method that an accountant can use to analyze the financial situation of a business is ratio analysis. This can be a useful tool no matter the type of legal structure of the business and regardless of whether ownership is public or private. To help assure the availability of the necessary data, though, this assignment will be focused solely on a publicly traded company.
• As an overview, you will choose a publicly traded company from a list provided at the end of this assignment. Locate the company's website, retrieve the latest company's annual report from that site, calculate specific ratios for the latest two fiscal years, and respond to a limited number of analysis questions.
• Please note that this entails far more than finding precalculated ratios from a website such as Yahoo! Finance or Google Finance. If you desire, you can use such a site for a reasonableness check on the results of your calculations, but any such comparisons should not be part of your resulting paper. Also, you might not match exactly to their figures anyway because those may include quarterly updates.
• The paper should be three to four double-spaced pages (not counting the cover page and bibliography).
• The font size should be 12-point and the type can be Times New Roman, Verdana, or Arial.
• Your paper should be properly cited using APA referencing style. This means that citations should be in a bibliography and in the body of the paper wherever you refer to or directly quote any information or terms from other sources.
• Please submit your paper no later than midnight Sunday at the end of Week 6.
• For the section showing the ratio calculations, provide appropriate details regarding the formula used, the source of the data, and the resulting calculations. Although you are certainly welcome and encouraged to use Excel to complete these tasks, copying and pasting from Excel into the Word document is discouraged unless it can be done in a manner that is cosmetically appropriate.

The requirements for the ratio analysis section are as follows.

1. Compute the following for each of the two most recent years.
   • Profit margin
   • Return on shareholders' equity
   • Current ratio
   • Interest coverage ratio

2. Document your work by properly citing items such as the following.
   • The website for the company
   • The web page link for the annual report
   • The page number of the annual report
   • Appropriate details of the calculations

The questions that should be addressed in the second section of the paper are as follows.

1. If you were an accountant for a potential vendor for this company, explain which of these ratios would be of the most interest to you. Would there also be a second ratio of interest to you?
2. If you were an accountant for a potential investor in this company, explain which of these ratios would be of the most interest to you. In your opinion, what other ratio or ratios beyond the ones listed above should also be considered in an investment context?
3. What is your overall opinion of this company based on the limited analysis completed via the four ratios? Feel free to mention any questions that you feel should still be considered in view of the ratios or the changes from one year to the next.

Please also consider these suggestions for your success on this assignment.

• If you choose a company from the list and have any trouble finding its website, the annual reports, or specific information, consider selecting a different company from the list instead.
• If the company has subsidiaries, be sure to use the consolidated financial statements.
• Be sure to use the financial statements rather than summaries elsewhere in the annual report.

List of companies (choose one):

• Barnes & Noble, Inc.
• Intuit Inc.
• The Kroger Co.
• Macy's Inc.
• Dell Inc.
• Family Dollar Stores Inc.
• Kodiak Oil & Gas Corp.
• Tractor Supply Company
• Verizon Communications Inc

Answer 1

$ in Mio	2018	2017	Var	Var %
Operating Revenue	1,30,863	1,26,034	4,829	4%
Operating Income	22,278	27,425	-5,147	-19%
Cash flow from Operation	34,339	24,318	10,021	41%
Consolidated Statement Of Income
Operating Revenue			Var	Var %
Service Revenue &Others	1,08,605	1,07,145	1,460	1%
Wireless Equipment Revenie	22,258	18,889	3,369	18%
Total Operating Revenue	1,30,863	1,26,034	4,829	4%
Less
Total Operating Expenses	1,08,585	98,609	9,976	10%
Operating Income	22,278	27,425	-5,147	-19%
Operating Margin %	17%	22%

	2018-$ Mio	2017-$ Mio
Consolidated Net income	16,039	30,550
Add / Less
provision ( benefit ) of Income Tax	3,584	-9,956
Interest Expenses	4,833	4,733
depreciation & Amortization	17,403	16,954
Consolidated EBITDA	41,859	42,281
Add / Less
Other ( income ) / Expenses	-2,364	2,021
Equity in losses of Unconsolidated Balance Sheet	186	77
Severance charges	2,157	497
Gain on transaction - Spectrum		-270
Acquisition and Integration related charges	531	879
Product realignment charges	450	463
Oath Goodwill Impairment	4,591
net gain - divestment business		-1,774
Consolidated EBITDA adjusted(a)	47,410	44,174
Total Operating Revenue (b)	1,30,863	1,26,034
Consolidated EBITDA adjusted Margin (a/b)	36%	35%
Total Asset(d)	2,64,829	2,57,143
Operating Income (c)	22,278	27,425
Return on Asset (c/d)	8%	11%
Consolidated EBITDA adjusted (C1)	1,30,863	1,26,034
Return on Asset (c1/d)	49%	49%

Balance Sheet Ratio	2018-$ Mio	2017-$ Mio
Current Asset	34,636	29,913
Current Liability	37,930	33,037
Working Capital	-3,294	-3,124
Current ratio	0.91	0.91
	2018-$ Mio	2017-$ Mio	Var	Var %
Long Term Loan	1,05,873	1,13,642	7,769	7%

For our detail discussion , We have selected “ Verizon Communication Inc “

On the basis of Audited 2018 report , we noticed that company established 4% Revenue growth in 2018 as compared with 2017

Where as company lost position in Operating Income . As compared with last year Operating Income down ny almost 19% . This is alarming point for company .

Excellent point to Note that cash flow from Operation has increased by 41% , which is really excellent news and company keep on paying dividend on YOY basis,. 2018 – Company declared divided amount of $ Mio 2385

On further deep dive , noticed that revenue growth of almost 4% mainly due to growth in Wireless segment

While doing analysis of Operating Margin in 2018 , we need to highlight that this current year Selling and Admin cost much more hogher as compared with LY mainly due to company recorded “ severance charges of $ 1.8 Billion ( net of tax $ 1.4 billion ) . While doing analysis , we need to factor this amount and need to check margin accordingly

While doing Interest cost analysis and derived “ Effective Interest rate “ , noticed that in 2018 rate has slightly increased as compared with 2017 ( 4.8% vs 4.7%)

Very interesting reconciliation we have noticed to derived Adjusted EBITDA after considering Non cash and one time cost and noticed that Consolidated adjusted EBITDA number is higher in 2018 as compared with 2017 .

Company definitely having some challenge in relates to Working capital but as per companies cash flow , we noticed that Company having $ 3916 Mio of cash available after payment of Long term loan , Asset backed Liability and most important company keep on declaring dividend and strengthen Cash flow position . In 2018 as well as 2017 , company paid $ 9772 Mio amount if dividend . \

Company at presnt having good amount of EBITDA to support business for long term and maintain good ratio .

Another important point to note that Company is still doing “ Acquisition” Company keep on Investing money to acquire multiple company .

As per Long term liability point of view –we noticed that Long term debt amount has been reduced significantly ( almost $ 8000 + Mio)

Source to get complete financial - as requested - https://www.verizon.com/about/sites/default/files/2018-Verizon-Annual-Report.pdf- Refer page 50-52