Verizon Communications Inc. Financial Ratio Analysis

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

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,