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Verizon Communications Inc. Financial Ratio Analysis

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As an accountant for a potential vendor, I would be interest in knowing Verizon Communications Inc.’s current ratio. I want to make sure the company has enough money to pay its bills and purchase raw materials to make the deliver products and/or services to us. The current ratio measures the liquidity a firm’s ability to meet short-term liabilities when it’s due within the next year. Most vendors’ prefers doing business on credit because it allows them to receive payments on a timely manner when products are delivered and services are performed. Usually the credit terms and conditions are set on the period expected to be pay back. Also, as an Accountant, I am interested in knowing the company’s quick ratio, which is to measure the company’s …show more content…

Profit margin, return on Shareholders’ Equity, and interest coverage ratio are some of the important ratios to know before investing. Profit margin measures the financial performance as to how much of the revenue a company can keep in earnings. In year 2015, Verizon Communications Inc.’s profit margin is 15%, meaning every dollar the company makes they keep $0.15. If I see the profit margin decrease from year to year, it can indicate there is a change in the market condition, an increase in competition, or cost is increasing. The return on Shareholders’ Equity ratio measures the return that shareholders will get from the overall business earnings. The interest coverage ratio calculates how many times over a company's current earnings can pay the interest on its outstanding debt. The interest coverage ratio is a measure of a company's ability to meet its interest payments. A higher ratio indicates a better financial health as it means that the company is more capable on meeting its interest obligations from operating earnings. If a ratio is less than 1, it indicates that a company has uses its entire earnings to pay the debt obligations, leaving no income for the common shareholders or to repay back the debt. In my opinion, another good ratio to know before investing into any company is the Altman Z-score, it is to analyze if the company is at potential risk of going into bankruptcy. Companies that are soon to be bankrupted can affect your company in receiving payment on a timely manner. Therefore, don’t just focus on short term liquidity because long term liquidity is important to know as well. The prediction to analyze bankruptcy using the Altman Z-score is as follows, (Investopedia,

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The three financial ratios are important tools that judge the leverage, profitability, and liquidity. “Profitability ratios are ratios that measure the rate of return a firm is earning on various measures of investment.” (2018, p. 150) This is important to a business because the whole purpose of a business is to make a profit, profitability shows the business exactly how it is doing and if the business is achieving that goal. “Profitability ratios also have many major ratios one being return-on-equity (ROE), calculated by dividing net income (profit) by owners’ equity, measures the income earned per dollar invested by the stockholders.”

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In table 2 are the five-year financial ratio trend for Boston Beer Co. and comparison of the ratios to two of the company large competitors Heineken and Anheuser Bush. Small craft breweries, while competitors to Boston Beer Co. cannot be included in this evaluation, because they are privately owned and their financial information is not public. Both short-term and long-term Solvency ratios do provide information about the company ability to pay short- term and long-term obligations. The ratios for Boston Beer Co. while fluctuating little over the period of five years still shows that Boston Beer is better prepared to pay both short-term and long-term debt than either Heineken or Anheuser Bush. The Times Interest Earned and Cash Coverage ratio

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Sally’s Beauty Holding, Inc., who has a current ratio of 2.4, is quicker to turn their current asset into cash but also is not investing excess assets. Both companies are able to meet their debt obligations. On the other hand, Coty’s Inc. current liabilities exceeds their current assets revealing their current ratio to be .94. Having a ratio below one can imply that current assets are barely being covered by the current liabilities. Ulta Beauty’s debt-to-equity is estimated to be .65, which reveals Ulta Beauty to have a low risk and not using high amounts of debt to finance operations, because total liabilities is $1,001,660 and total shareholders’ equity is $1,550,218.

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Accounting ratios offer insight into business performance. The financial stability of a company can be tested to see how a company is performing using financial ratios. I have three sets of accounts, it is my objective to calculate the ratios, and interpret them to show the overall performance levels of all three companies. Liquidity ratio evaluates the company’s ability to pay off any current liabilities as well as long-term liabilities. These ratios display the cash levels and the ability to turn assets into cash to pay off liabilities and other current obligations.

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Current Ratio: This is used to determine Rogers' short-term liquidity by comparing its current assets to its current liabilities. Rogers may experience short-term obligations; this ratio indicates its ability to meet these debts with its current assets. Growth Ratios: This ratio helps to estimate Rogers' growth potential, including revenue growth rate and earnings growth rate. In a competitive telecommunications industry, the ratios can provide insights into Rogers’ expansion strategy, its market share, and its profitability over time. Debt management ratios: The debt-to-equity ratio and interest coverage ratio are used to manage debt.

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A slightly low return on assets than the previous year shows that the profitability of the assets of the company falls down a little. Shareholders consider financial statements to make decisions regarding buying and selling their shares. They are also concerned about the maximization of their wealth. They take into account the profitability by showing interest in return on sales or net profit margins.

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The current ratio is the best way to assess the ability of a company’s capabilities to pay off its short term liabilities with short term assets.

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This is determined by calculating the following ratios: Debt ratio, Equity ratio, Debt-to-equity ratio, and times interest earned. The debt ratio and the debt-to-equity ratio have a rising trend which is not a good trend for this these specific ratios. The debt-to-equity ratio went from 1.94 in 2015 to 2.42 in 2017. So, in 2017 for every 1 in equity, they used 2.42 in debt.

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The debt to ratio is a ratio that compares a firms total liabilities and shareholders’ equity. It shows the proportion of the amount of money invested by the business owners as well as external entities. Debt to Equity Ratio = Total Liabilities/Shareholders’ Equity = $80,994/$931,490

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Current Ratio The preferred current ratio is 2:1, however financial institutions only accept ratios of 1.33:1. The company's current ratio decreased from 3.25:1 in 2014 to 3:1 in 2015, a decrease. One can see the amount owed fell in 2015, indicate that the company has fallen behind on its short-term debt payments and that this needs to strengthen the ability to do so. 2. Quick Ratio

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Next, was determining Target’s current ratio, the current ratio is calculated by dividing a company’s current assets by their current liabilities. The current ratio indicates if a company

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Things to Look at Before Buying Stock There are a few things you should consider prior to purchasing or investing in stock. They include: 1. Profit to Earnings Ratio. Also called P/E, this number tells you how much money you will be paying for every $1 in company earnings.

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For Sketchers, this decrease in the LTM means that they are on the right track, but it still needs some modifications to do for it to.   Coverage Ratios Times Earned Ratio= EBIT/Interest The Times Interest Earned ratio is a measure of the company’s preparedness to cover its debt payment by calculating the number of times it can honor its interest payments before paying

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So basically, the lower the interest coverage ratio, the higher the company’s debt burden and the greater the possibility of bankruptcy or default. "interest coverage ratio = " "profit before interest " /"interest paid" --- Financial Ratios Analysis of BA and Ryanair Using the formula ratios as laid out on the previous chapter, following are their result of calculations: a) Liquidity BA Ryanair No. Ratio 2011 2012 2013 2011 2012 2013 1. Current 0.75 0.60 0.63 1.89 2.14 1.97 2. Acid 0.72 0.57 0.61 1.89 2.13 1.97

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The current ratio is a liquidity and efficiency ratio that measures a firm's ability to pay off its short-term liabilities with its current assets. In the year 2012, KHB had a current ratio of 1.688 but it comes to decrease in 2013 to a 1.642. The ratio in the year 2014 was 1.670 indicating a slight increase. The competitor of KHB, the PMMB had a current ratio of 4.785, 4.012 and 3.622 from the year 2012 to 2014 respectively. A current ratio should be more than 2.0 as a higher current ratio indicates a more promising current debt payments.

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