final assignment due 12/18

VERIZON COMMUNICATIONS ANALYSIS

India Smith

University of Arizona

Professor Kristine Beaird

Running Head: VERIZON COMMUNICATIONS ANALYSIS 2

VERIZON COMMUNICATIONS ANALYSIS 2

29 November 2021

VERIZON COMMUNICATIONS ANALYSIS

Introduction

The information below relates to the financial analysis of Verizon Communication limited. For three financial years. This financial analysis will be used in analyzing financial information. The information has been sub-divided into three segments.

Part 1

Profitability ratios are used to determine an organization's ability to generate earnings relative to its revenues, costs, assets, and equity over a specified period. Verizon corporation will use this analysis to comprehend the nature of profits for the organization. The Return on Assets (ROA) increased from the financial year ended 2019 to the financial year ended 2019. It was later reduced in the financial year ended 2020. It is the case for the Return on Equity (ROE), Return on Investment (ROI), EBITDA, calculated tax rate, and the revenue per employee. One of the factors that may have given rise to the drop in the financial year ended in 2020 was the pandemic.

Liquidity ratios are used to assess the ability of the organization to pay its obligations and the margin of safety (Myšková & Hájek, 2017). Common liquidity ratios include the quick ratios and the current ratios. The current ratios assess the nature of the current assets in proportion to the current liabilities. The current Ratio reduced and then increased immensely from the financial year 2018 to 2020. The current Ratio in 2020 is very high, implying that the organization is at the best state of paying its short-term obligations. The trend for the quick Ratio is similar to the Current Ratio. Quick Ratio is an indicator of the ability of the organization to pay its short-term liabilities. The organization's quick Ratio in 2020 was at the best stage as its value was more than one.

Debt management ratios refer to the organization's ability to repay its long-term debt by looking into the proportion of the assets over debt (Myšková & Hájek, 2017). The long-term debt to equity ratio has reduced and later increased from the financial year 2018 to the financial year 2020. This was also the case for the total debt to equity ratio and the interest coverage ratio. Some organizations would prefer to have increased debt and reduced equity to enhance shareholder growth. Other organizations will prefer to have more equity than debt as they fear interest charges (Myšková & Hájek, 2017). The organization has increased debts which makes it the organization hard to borrow money from financial institutions.

Asset management is another financial ratio that looks into the organization's assets (Myšková & Hájek, 2017). Financial ratios in the asset management turnover have been reducing across the financial years 2018 to 2020 except for the accrued expenses turnover, which has been increasing. The book value per share has been increasing across the period. Book value per share follows the same trend.

Part 2

The ratios offered above entail stability of operations. The organization's operations have improved over time and later reduced (Myšková & Hájek, 2017). The pandemic resulted in lower profit ratios. However, the management reduced its debts, which was prudent as the operations declined and the organization gained financial stability.

There are instances where the organization is decreasing as the operations in the market have signified significantly reduced (Rashid, 2018). It would be the case as external forces have a part to play in a business's operations. The organization is stabilizing its operations even though it has increased its debt in the latest financial period. The organization is headed towards neutrality, where revenues are reducing, but the organization needs to ensure smooth operations.

Part 3

Verizon Communications corporation is average compared to its competitors in the market (Rashid, 2018). This is in terms of the ROA, ROE, gross margin, quick Ratio current Ratio. In terms of the debt-to-equity Ratio, Verizon Communication is lower than the average debt to equity and total asset turnover, inventory turnover, and interest coverage.

Part 4

Based on the information above, it is evident that Verizon Communication Inc is at the average level as most of the financial ratios are either higher or lower than the average. All ratios are essential for the analysis as the debt analysis aids the organization in managing debts in the organization. Profitability ratios will aid in measuring the viability of the organization, while debt ratios help assess corporate debt.

References

Myšková, R., & Hájek, P. (2017). Comprehensive assessment of firm financial performance using financial ratios and linguistic analysis of annual reports. Journal of International Studies, volume 10, issue: 4.

Rashid, C. A. (2018). Efficiency of financial ratios analysis for evaluating companies' liquidity. International Journal of Social Sciences & Educational Studies, 4(4), 110.