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At&t vs verizon financial comparison
Analyze and compare Verizon and AT&t
Comparative analysis of verizon and at&t
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This report details the annual financial ratios for Verizon Communicating Inc. and some of its major competitors NTT System SA and AT&T Inc. Verizon is a global communication technology company that is traded on the New York Stock Exchange and will serve as the benchmark company for the purposes of this report. First things first, it is important to evaluate the ability of a company to pay its current liabilities. The current ratio measures a company’s ability to pay off its liabilities with its current assets. More specifically the ratio focuses on paying off the short term liabilities that are due within the year. Verizon’s current ratio at the end of the fiscal year was approximately 1.055. This indicates that the company has just slightly …show more content…
It is essentially the company’s ability to pay off its liabilities with its assets. The debt to equity ratio compares liabilities to assets and shows creditors and investors what companies are considered risky to work with. The financial ratio reports for the fiscal year showed that Verizon’s debt to equity ratio was 898.8 compared to AT&Ts ratio of 88.0. Looking at these ratios AT&T would be the more safe company to work with, whereas Verizon’s ratio can be viewed by investors and creditors as more risky. A higher debt to equity ratio illustrates that a company might not be preforming as well as it should as is the reason it would be seeking extra financing for its debts. Similar to evaluating a company’s ability to pay its debts it is also key to evaluate the profitability of a company. On method is calculating the company’s profit margin ratio. Verizon had a net profit margin of 11.44. NTT Systems had a profit ratio of 0.04 and AT&T had a profit ratio of 8.78. Net profit margins ratio specifically measures the amount of profits produced for certain levels of sales. The higher the ratio the more profitable the company. Verizon therefore has the highest profit per sale while its competitors have …show more content…
The return on assets shows investors how well a company can convert its invested assets into net income. Verizon has the highest ROA at 4.5, followed by AT&T at 2.0 and lastly NTT at 1.3. All three company’s maintain positive ratios which is good for investors as it shows at least some profitability; however, Verizon’s ratio displays that the company can effectively manage its assets and turn more of a profit than its competitors. The financial reports also calculate asset turnover ratio. The asset turnover ratio measures a company’s ability to get sales from its assets. The higher the ratio, the more favorable the company to investors and creditors. In this case NTT Systems has a better ratio than our benchmark company, Verizon. NTT Systems was the only company to have a positive asset turnover ratio at 2.8, while Verizon and AT&T were both negative at roughly .5 each. A higher ratio shows that a company better uses its assets to turn a profit. The price earnings ratio shows what a company’s stock is worth on the market based off of current earnings. This is important in finances and the stock market because the pe ratio can help determine future earnings per share. Verizon has a pe ratio of 19.9. NTT has a ratio of 9.5. AT&T has a ratio of 31.4. From an investors perspective AT&T has the best indication of a better future performance. The higher the ratio the
Suppliers are mostly concerned with a company 's ability to pay on their liabilities. Therefore, the current ratio and the quick ratio are both looked at by suppliers. The current ratio takes a company’s current assets and divides that by the company’s current liabilities. This number is
Equity ratio and debt ratio are both very important because it shows how much of the assets used for production is really owned by the owner of a company. According to calculations in the appendix, RBC has the highest equity ratio and the lowest debt ratio. This is considered favourable compared to Sun life and BMO’s equity and debt ratio. When it comes to return on total assets BMO has the highest return. Meaning it is earning more per assets than RBC and Sun
This ratio is calculated by dividing (short-term debt plus long-term debt) by (short-term debt plus long term-debt plus shareholder?s equity). Based on data shown in page 70 of their 2015 Financials.
Analysing the ratio of one with the other in the industry provides for better understanding about the performance of the company in market. An investor has to make a comparative analysis before making any investment decision.
Financial leverage ratio that is the most appropriate is the Debt to Equity Ratio. The Debt to Equity ratio measures the amount of debt a company uses to finance their assets relative to the amount of shareholder’s equity. The higher the debt to equity the more debt is used to finance the business. Boeing obtained a ratio of 1.5728 and the Industry has a 1.7587 or in other words Boeing uses 18.59% less debt to finance their company.
The return on total assets (ROA) is an overall measure of profitability which measures the total effectiveness of management in generating profits with its available assets. This ratio indicates the amount of net income generated by each dollar invested in assets. The higher the firm's return on total assets, the better. Harley Davidson's return on total assets was 14.04% for 2001, 14.27% for 2000. These percentages are high and show an upward trend, this shows strong performance in this area for the past two years.
The current ratio measures the ability of a business to pay back their liabilities. Kroger’s current ratio for both years was under one, which shows that Kroger has more current liabilities than current assets. This could predict that Kroger is not in good financial health at this time. However, some of their competitors have current ratios under one too. The grocery store industry trends to have lower liquidity ratios, because they keep lower levels of current assets. Their ongoing sales help pay upcoming liabilities. Still, business owners and investors would be looking for a current ratio over one at least.
Profitability ratios are a category of financial tools that are utilized to evaluate a company’s capability to produce revenue as associated to its expenditures and costs suffered during a specific timeframe. Profitability ratios present numerous gauges of the achievements of a company’s ability to produce revenue. For most of these ratios, having a greater figure in relation to a competitor or previous timeframe is suggestive that the business is flourishing. Common profitability ratios are profit margin, return on assets, and return on equity.
The telecommunications industry is of vital importance to the development of the information-based economy. AT&T need to supply access to cost efficient, timely and innovative telecommunications services.
The debt-to-equity ratio indicates a company’s reliance on loaned money. The lower the number, the less reliant a company is on borrowing money for operations. AT&T has a relatively low debt-to-equity ratio compared to the market average and
Ratio analysis are useful tools when judging the performance of a company by weighing and evaluating the operating performance (Block-Hirt). There are 13 significant ratios that can separate by four main categories, profitability, asset utilization, liquidity and debt utilization ratios. The ratio analysis covered here consists of eight various ratios with at least one from each of these main categories. These ratios were used to compare and contrast the performance of Verizon versus AT& T over the years 2005 and 2006.
Current ratio: This number is found by dividing the current assets by the current liabilities that is found on the balance sheet. The current ratio for 2010 was .666. This was calculated by $1550,631 / $2,326,966. The current ratio for 2011 was .905. This number was calculated by $1,543,816 / $1,705,132.
Ratios traditionally measure the most important factors such as liquidity, solvency and profitability, as well as other measures of solvency. Different studies have found various ratios to be the most efficient indicators of solvency. Studies of ratio analysis began in the 1930’s, with several studies of the concluding that firms with the potential to file bankruptcy all exhibited different ratios than those companies that were financially sound. Among the study’s findings were that the deciding factor of the predictor of bankruptcy should not be only a few ratios, as the measure of a company’s financial solvency may differ as the firm’s situations differ. The important question is to which ratios are to be used and of those ratios chosen, which ratios are given priority weight.
The analysis of these ratios shows how Ford stands as a company for the past five years. Return on equity (ROE) reveals how much profit a company earned in comparison to the total amount of shareholder equity on the balance sheet. For long-term investing with great rewards, companies that have high return on equity ratios can provide the biggest payoffs. This ratio also tells investors how effectively their capital is being reinvested, so it is a good gauge of management's money handling skills. Ford is showing a considerable turn around in this area this past year, which could easily be due to changes in management. They are also reasonably following the industry in this area.
The current ratio and quick ratios for the year 2003 are at 2.5 and 1.3, which are both higher than the industry average. The company has enough to cover short term bills and expenses. Both the current and quick ratios are showing an upward trend compared to 2001 and 2002. The current assets decreased by $ 20,264 to $ 1,531,181 and the current liabilities also decreased considerably by $255,402 to $616,000, a 29.3% decline, thus making the current ratio jump to a 2.5. The biggest decline was seen is accounts payable which decreased by $170,500 to $230,000, a decline of 42.6 %.