Financial Analysis Report Of Telstra Limited
Profit and Loss Statement of Telstra Limited
This report has been prepared to evaluate the financial position, performance and the financial strategy of Telstra limited. Telstra limited is one of the largest Australian telecommunication companies. This company is operating its business from decades in Australian market. Further, the performance and position of the company has been evaluated in this report with analyzing the financial statement (profit and loss account, cash flow statement and balance sheet) of the company and through conducting the study of ratio analysis of the company. Further, the same study has been conducted over the annual report of the company and management work, operations, analysis etc has been analyzed. The comparative study has also been conducted to evaluate the performance of the company in a better way. This study would make it easy for the investors and the analysts to evaluate the financial performance of the company and the total investment opportunities in the company.
Profit and loss statement of the company evaluates about the total profit which has been earn by the company in a particular period. This statement is required to be prepared by every company to make it easy for the management and the investors of the company to evaluate the performance of the company. Following is the profit and loss statement of the company:
|
TELSTRA CORP LTD (TLS) INCOME STATEMENT |
||
|
Fiscal year ends in June. AUD in millions except per share data. |
2017-06 |
2016-06 |
|
Revenue |
25912 |
25834 |
|
Cost of revenue |
10958 |
7247 |
|
Gross profit |
14954 |
18587 |
|
Operating expenses |
||
|
Research and development |
||
|
Sales, General and administrative |
9178 |
7863 |
|
Other operating expenses |
1831 |
5630 |
|
Total operating expenses |
11009 |
13493 |
|
Operating income |
3945 |
5094 |
|
Interest Expense |
729 |
796 |
|
Other income (expense) |
2431 |
1302 |
|
Income before taxes |
5647 |
5600 |
|
Provision for income taxes |
1773 |
1768 |
|
Net income from continuing operations |
3874 |
3832 |
|
Net income from discontinuing ops |
2017 |
|
|
Other |
17 |
-69 |
|
Net income |
3891 |
5780 |
|
Net income available to common shareholders |
3891 |
5780 |
|
Earnings per share |
||
|
Basic |
0.33 |
0.47 |
|
Diluted |
0.33 |
0.47 |
|
Weighted average shares outstanding |
||
|
Basic |
11968 |
12202 |
|
Diluted |
11968 |
12216 |
|
EBITDA |
10817 |
10551 |
The above statement explains that the total profit which has been earn by the company in last two years are $ 3891 M and $ 5780 M which explains that though the profits of the company are quite higher but in 2017, the profitability position of the company has been lower. At the same time, the profitability policy of TPG telecom has also been evaluated and it has been found that the profitability position of the company has been greater from $ 380 million t $ 414 million in 2017.
The above evaluation explains that the profitability position of the company has been lowered and the company is required to make little better decision about the revenues, diversification, expenses, policies and the total profit % of the company.
Balance sheet of the company evaluates about the total assets, liabilities and the equity which has been maintained by the company in a particular period. This statement is required to be prepared by every company to make it easy for the management and the investors of the company to evaluate the performance of the company. Following is the balance sheet of the company:
|
TELSTRA CORP LTD (TLS) BALANCE SHEET |
||
|
Fiscal year ends in June. AUD in millions except per share data. |
2017-06 |
2016-06 |
|
Assets |
||
|
Current assets |
||
|
Cash |
||
|
Cash and cash equivalents |
938 |
3550 |
|
Short-term investments |
21 |
62 |
|
Total cash |
959 |
3612 |
|
Receivables |
5468 |
4737 |
|
Inventories |
893 |
557 |
|
Prepaid expenses |
531 |
426 |
|
Other current assets |
11 |
8 |
|
Total current assets |
7862 |
9340 |
|
Non-current assets |
||
|
Property, plant and equipment |
||
|
Gross property, plant and equipment |
64312 |
64960 |
|
Accumulated Depreciation |
-42962 |
-44379 |
|
Net property, plant and equipment |
21350 |
20581 |
|
Equity and other investments |
2109 |
2745 |
|
Goodwill |
1269 |
1346 |
|
Intangible assets |
8289 |
7883 |
|
Deferred income taxes |
44 |
54 |
|
Other long-term assets |
1210 |
1337 |
|
Total non-current assets |
34271 |
33946 |
|
Total assets |
42133 |
43286 |
|
Liabilities and stockholders’ equity |
||
|
Liabilities |
||
|
Current liabilities |
||
|
Short-term debt |
2369 |
2537 |
|
Capital leases |
107 |
118 |
|
Accounts payable |
1185 |
1465 |
|
Deferred income taxes |
161 |
176 |
|
Deferred revenues |
1236 |
1118 |
|
Other current liabilities |
4101 |
3774 |
|
Total current liabilities |
9159 |
9188 |
|
Non-current liabilities |
||
|
Long-term debt |
14574 |
14378 |
|
Capital leases |
234 |
269 |
|
Deferred taxes liabilities |
1539 |
1493 |
|
Other long-term liabilities |
2086 |
2087 |
|
Total non-current liabilities |
18433 |
18227 |
|
Total liabilities |
27592 |
27415 |
|
Stockholders’ equity |
||
|
Common stock |
4421 |
5167 |
|
Retained earnings |
10225 |
10642 |
|
Accumulated other comprehensive income |
-105 |
62 |
|
Total stockholders’ equity |
14541 |
15871 |
|
Total liabilities and stockholders’ equity |
42133 |
43286 |
Balance Sheet of Telstra Limited
The above statement explains that the total assets of the company are $ 42133 million and $ 43286 million in 2017 and 2016. Further, the total liabilities and the total equity of the company are $ 9159 million and $ 9188 million in 2017 and $ 18433 million and $ 18227 million in 2016. It explains that the financial position of the company has been lowered. It expresses about the negative changes into the company and further, it depicts the investors about the losses through which company is suffering.
Cash flow statement of the company evaluates about the total cash inflow and outflow which has been managed by the company in a particular period. This statement is required to be prepared by every company to make it easy for the management and the investors of the company to evaluate the performance of the company. Following is the cash flow statement of the company:
|
TELSTRA CORP LTD (TLS) Statement of CASH FLOW |
||
|
Fiscal year ends in June. AUD in millions except per share data. |
2017-06 |
2016-06 |
|
Cash Flows From Operating Activities |
||
|
Other non-cash items |
7775 |
8133 |
|
Net cash provided by operating activities |
7775 |
8133 |
|
Cash Flows From Investing Activities |
||
|
Investments in property, plant, and equipment |
-3725 |
-3051 |
|
Property, plant, and equipment reductions |
679 |
470 |
|
Acquisitions, net |
-63 |
1248 |
|
Purchases of investments |
-82 |
-105 |
|
Sales/Maturities of investments |
285 |
56 |
|
Purchases of intangibles |
-1596 |
-1143 |
|
Sales of intangibles |
||
|
Other investing activities |
223 |
318 |
|
Net cash used for investing activities |
-4279 |
-2207 |
|
Cash Flows From Financing Activities |
||
|
Debt issued |
4710 |
4987 |
|
Debt repayment |
-4571 |
-3954 |
|
Common stock issued |
||
|
Common stock repurchased |
-1502 |
-68 |
|
Dividend paid |
-3736 |
-3787 |
|
Other financing activities |
-1005 |
-955 |
|
Net cash provided by (used for) financing activities |
-6104 |
-3777 |
|
Effect of exchange rate changes |
-6 |
5 |
|
Net change in cash |
-2614 |
2154 |
|
Cash at beginning of period |
3550 |
1396 |
|
Cash at end of period |
936 |
3550 |
|
Free Cash Flow |
||
|
Operating cash flow |
7775 |
8133 |
|
Capital expenditure |
-5321 |
-4194 |
|
Free cash flow |
2454 |
3939 |
The above statement explains that the total operating cash flow of the company is $ 7775 million and $ 8133 million in 2017 and 2016. Further, the total cash flow from investing activities and the total cash flow from financing activities of the company is $ -4279 million and $ -6104 million in 2017 and $ -2207 million and $ -3777 million in 2016. It explains that the cash inflow of the company has been lower than the cash outflow of the company. It expresses about the negative changes into the company and further, it depicts the investors about the losses through which company is suffering.
Further, the study of ratio analysis has been conducted to evaluate the investment opportunity of the company. Ratio analysis study briefs the financial statement of the company and explains about the various levels and the position of the company. Ratio analysis makes it easy for the investors to evaluate the position of the company. Following ratios express about the profitability, liquidity, efficiency and rate of return position of the company:
Profitability ratios express about the total profit of the company. The below given table express about the profitability position and return on assets of the company. It explains that the current return on assets of the company is 10.28% which was 15.17% in 2016. It explains about the lower level of the profit. Further, it explains that the company is required to enhance its profitability level again through adopting new policies and strategies.
|
2017 |
2016 |
2015 |
||
|
Profitability ratio |
||||
|
Return on assets |
(Net profit + Interest)/ average total assets |
10.82% |
15.71% |
12.72% |
Cash Flow Statement of Telstra Limited
Figure 1: Profitability Level
Efficiency ratios express about the working capital management and efficiency position to maintain the operations of the company. The below table depicts about the inventory turnover level of the company through dividing the cost of goods sold by average inventory of the company. It explains that the current inventory turnover of the company is 15.11 and 13.83 in 2017 and 2016 respectively. The current efficiency position of the company explains about a good level of inventory management.
|
2017 |
2016 |
2015 |
||
|
Efficiency Ratio |
||||
|
Inventory turnover |
Cost of goods sold/ Average inventory |
15.11 |
13.83 |
16.11 |
Figure 2: Inventory Turnover
Further, liquidity ratios express about the short term debt obligation of the company and the performance of the company. The below table depicts about the current liquidity level of the company through dividing the current assets by current liabilities of the company. It explains that the current liquidity ratio of the company is 0.85 and 1.02 in 2017 and 2016 respectively. The current liquidity position of the company explains about a good level of liquidity position of the company and depicts that the short term debt obligation could be paid by the company easily.
|
2017 |
2016 |
2015 |
||
|
Liquidity Ratio |
||||
|
Current ratio |
Current assets/ current liabilities |
0.85839 |
1.01654 |
0.85742 |
Figure 3: Current Ratio
Further, rate of return expresses about the net profit, dividends and the outstanding shares of the company and the performance of the company. The below table depicts about the earnings per share level of the company through dividing the net profit and preference dividend by weighted average share of the company. It explains that the earnings per share ratio of the company are 32.51% and 47.37% in 2017 and 2016 respectively. The earnings per share position of the company explain about a good level of rate of return of the company and depicts that the company would offer a great return to the investors of the company through the position of the company has been lower from last year.
|
2017 |
2016 |
2015 |
||
|
Rate of return |
||||
|
Earnings per share |
(Net profit + preference dividend) / Weighted average number of ordinary shares |
32.51% |
47.37% |
34.50% |
Figure 4: Earnings per share
Thus the above ratio expresses that the position of the company is quite good in the market. Though, the profitability position of the company expresses about few losses which have been faced by the company in the current year. Further, the liquidity position of the company expresses that the comapny has lowered the level of the assets and the current short term debt obligation of the company is quite better. More, the efficiency ratio and rate of return of the company explains that the position of the company is quite better and explains that the company is a good option for the investment opportunity. It would offer a great return to the stockholders of the company.
Ratio Analysis of Telstra Limited
Part 3:
Management work:
Further, the study has been done on annual report of the company which explains that the management committee of the company includes the experienced manager and well qualified manager who are operating and managing the business of the company in a great way. The management work of the company explains in the annual report that the various new projects have been adopted by the company in recent years to manage the financial and market position of the company. John P Mullen is the chairman of the company and he has expressed in the director’s report about the management work and the position of the company. He has explained into his report about the current losses of the company as well and has expresses that these losses have not occurred due to the ignorance of the management; there are different reasons behind these losses.
Further, the management work of the company explains that the main people of the company have been chosen with well dignity and honesty code and they all are following the same. Managers of every department of the company are well aware about their work and thus doing the work in a pretty manner. More to it, the management of the company explain that the CEO of the company, Andrew P Penn, explains that the performance, position, marketing, operations, finance, HRD, logistic etc department of the company are performing well.
The company has adopted various ethical policies and standards to manage the operations and the performance of the company. It explains that currently the ethical policies of the company are to manage the department and the management work in an ethical way. For it, company is using the hierarchy of ethical decision making, normative theory, stakeholder theory, descriptive theory, AAA 7 decision making etc.
The hierarchy of ethical decision making explains that the directors and the management of an organization should make the policies for the company with their wide range of experience and the knowledge. Further, the normative theory has been used by the company. This theory assists the company to manage the policies according to the employees so that it becomes easy for them to adopt the policies and follow it in a good manner. Further, AAA 7 theory explains that the decisions are made by the company after evaluating the entire operations and the activities of the company.
Conclusion:
Thus the above study on financial statement, ratio analysis and the annual report expresses that the position of the company is quite good in the market. Though, the few losses have been faced by the company in the current year. The financial position of the company explains that the company is required to make few changes into its current process to enhance the profitability level. Further, the ratio analysis study on the annual report of the company expresses that the comapny has lowered the level of the assets and the current short term debt obligation of the company is quite better though, the profitability position of the company has been lowered and the company should make few changes into its financial strategies.
Further, the annual report of the company explains about the good management work of the company and the various positive things about the department and the management of the company. The above report explains that the company is a good option for the investment opportunity. It would offer a great return to the stockholders of the company.
References:
Ackert, L. and Deaves, R. 2009. Behavioral Finance: Psychology, Decision-Making, and Markets. Cengage Learning.
Annual Report, 2018. Viewed as on 26 Jan 2018 from https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf-e/Annual-Report-2017.PDF
Arnold, G., 2013. Corporate financial management. Pearson Higher Ed.
Baker, H.K. and Nofsinger, J.R. 2010. Behavioral Finance: Investors, Corporations, and Markets. John Wiley & Sons.
Besley, S. and Brigham, E.F., 2008. Essentials of managerial finance. Thomson South-Western.
Bierman, H., 2010. An introduction to accounting and managerial finance: a merger of equals. World Scientific.
Damodaran, A, 2011, Applied corporate finance,3rd edition, John Wiley & sons, USA
Davies, T. and Crawford, I., 2011. Business accounting and finance. Pearson.
Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.
Gapenski, L.C., 2008. Healthcare finance: an introduction to accounting and financial management. Health Administration Press.
Hogarth, S., Javitt, G., and Melzer, D. 2008. The current landscape for direct-to-consumer genetic testing: legal, ethical, and policy issues. Annu. Rev. Genomics Hum. Genet., 9, 161-182.
Jiashu, G. 2009. Study on Fair Value Accounting——on the essential characteristics of financial accounting [J]. Accounting Research, 5, 003.
Morningstar, 2018. Viewed as on 26 Jan 2018 from https://financials.morningstar.com/cash-flow/cf.html?t=TLS®ion=aus&culture=en-US
Onyebuchi, V.N., 2011. Ethics in accounting. International Journal of Business and Social Science, 2(10).