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Accounting Final Project - analysis of three companies in the UK telecommunication sector.

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Introduction

´╗┐Content Introduction: The companies: Industry: Telecommunication: Rationale for Choice of Industry and companies: Rationale for choice of ratios: Liquidity ratio: Profitability ratio: Efficiency ratios: Solvency ratios: Preliminary competitive Analysis: Vodafone: Telefonica: BT group plc: Prior research (PESTEL Analysis): Ratios: Project Timeline: References: ________________ ACCOUNTING PROJECT The companies: * Vodafone * Telefonica * BT group Industry: Telecommunication Telecom industry is characterized with great competition, regulation and is having few major players sharing the majority of market. It is highly oligopolistic in nature, creating huge barrier for the new entrants. It is dominated by few key players like Vodafone, BT and Telfonica in UK. It is characterized with low growth, stable revenue, high capital requirements, great operating margins, stable cash flow and high dividends.(Research Report on Telecom, Indigo, 2012) The main objectives to select the telecom industry are as follows:- 1. It represents a very significant amount of GDP i.e. 3 to 5% of the whole UK economy. 2. It is one of the most important services which are essential for humans as well as business in their day to day needs. 3. It consists of type of stocks which can be termed as non-cyclical and is providing huge amount of dividends just like Utilities Company means the company here provides regular cash flow. 4. It can be characterized as highly levered industry which means the major players has huge debt in their balance sheet. Hence, one can understand the significance of leverage through analysis of this industry.( The University of Bath. Engelhardt, A., 2005) Hence, the telecom industry provides a way to understand the role played by various firms in grabbing the major market share through different strategies like low pricing, differentiation etc. Besides these it also helps in understanding the financials of highly leverage and high dividend paying company. The telecommunications is one of the most important machines around the world, the worldwide system that no one can deal without it. ...read more.

Middle

BT Group plc has a diverse customer base, which ensures strong top line performance. The company?s customer groups are classified under four major segments, namely, corporate (global corporations, multi-site organizations in the UK and overseas), business (small and medium enterprises), consumer customers in the UK, and wholesale. The group serves more than 15 million customers, in over 170 countries, ranging from individual consumers, including single line users, to government departments and the world?s biggest multinational companies. BT has robust research and development (R&D) capabilities. The R&D activities of the company are focused on improving the performance of products and developing new technologies. Its R&D capabilities enable the company to overcome technical barriers encountered in the commercialization of sophisticated communications solutions and services. The R&D team of the company has undertaken several projects to enhance and develop various products and technologies. The company?s employees hold engineering degrees, and its engineers actively participate in professional and industry technical conferences and working groups. As of March 31, 2013, the company has exclusive licenses to more than 4,400 patents and applications. In September 2012, the company in relationship with the School of Economics and Management at Tsinghua University (Tsinghua SEM) established a new research lab to be co-located at Tsinghua SEM in Beijing. The strong R&D capabilities of the company enable it to implement innovative technology and deliver advance products, and services that meet its customers' critical needs. Enable it to implement innovative technology and deliver advance products, and services that meet its customers' critical needs. Weaknesses Substantial debt burden could have a major impact on the operational performance of the company, as a major portion of the company's earnings would be diverted to servicing its debt obligations. This could be of concern to the investors and make it difficult for the company to raise funds on favorable terms from the market. Additionally, BT reported negative working capital in 2013. ...read more.

Conclusion

0.77 -0.387924528 -1.35915493 0.321131448 (Average stock/cost of sales)*365 133000 121,000.00 107000 121000 122000 7711000 6,000,000.00 8198000 8266000 7901000 6.295551809 7.360833333 4.763966821 5.342971207 5.635995444 (Account receivables/credit sales)*365 3658000 1,970,000.00 3295000 3370000 4449000 20223000 20,080,000.00 20859000 21390000 20704000 66.02235079 35.80926295 57.65736612 57.50584385 78.43339451 Long term liabilities/Total capital 6387000 12,510,000.00 9234000 12047000 9818000 4238000 1,950,000.00 -2650000 142000 5409000 1.507078811 6.415384615 -3.484528302 84.83802817 1.815122943 Total debt/Total Equity 19917000 21,590,000.00 31330000 29132000 23943000 4238000 1,950,000.00 -2650000 142000 5409000 4.699622463 11.07179487 -11.82264151 205.1549296 4.42651137 ________________ TELEFONICA: 2012 2011 2010 2009 2008 Current assets/Current Liabilities 18,478 20,823,000.00 21,054 23,830 17,973 24,974 32,578,000.00 33,492 26,936 25,132.00 0.739889485 0.639173675 0.628622787 0.88468917 0.715144039 Current assets-Inventory/Current liabilites 16,785.00 9,492,000.00 21,052,741.00 23,829,203.00 24,974.00 32,578,000.00 33,491,896.00 26,936,169.00 25,132.00 0.70052855 0.291362269 0.628592093 0.884654496 0.667873627 Gross profit/Revenues 4,977 10064000 4,014 3,910 4,180 14,458 62873000 15,255 13,533 14,308 0.344238484 0.16006871 0.263126844 0.288923372 0.292144255 Net Profit/Revenues 1,591 6187000 923 1,015 1,144 14,458 62873000 15,255 13,533 14,308 0.110042883 0.098404721 0.060504753 0.075001847 0.07995527 Net income/Total Assets 1,591 6187000 923 1,015 1,144 105,873 129623000 129,775 108,141 99,896 0.015027439 0.047730727 0.007147873 9.39E-06 0.01145191 Net income/Owners Equity 923,000 59961000 923,000 923,000 923,000 58,044 69662000 64,599 56,931 55,202.00 15.90172972 0.860741868 0.014288174 0.016212729 16.72040868 (Average stock/cost of sales)*365 17,495,000.00 9,492,000.00 21,052,741.00 23,829,203.00 16,785,000.00 139,603,000 42627000 148,536,000 131,420,000 138,900,000 45.74 81.28 51.73 66.18 44.11 (Account receivables/credit sales)*365 9,315 11331000 12,426 10,622 135,330,000 62873000 152,550,000 135,330,000 135,330,000 0.026059484 65.7804622 29.73060544 28.64742943 0.025123587 Long term liabilities/Total capital 55,593,000 55659000 55,593,000 55,593,000 55,593,000 58,044 69662000 64,598,878 56,930,576 55,202 957.7734133 0.798986535 0.860587702 0.976505138 1007.083077 Total debt/Total Equity 45,284 59961000 55,593 43,551 42,733 58 69662000 64,599 56,931 55 0.78016677 0.860741868 0.860587702 0.7649787 0.774120503 Competitive Analysis Template Parameter Vodafone BT TF Strength 6 8 6 Weakness 6 7 6 Opportunities 7 7 7 Threat 6 7 6 ROE 6 8 7 ROA 5 6 7 P/E ratio 6 8 7 Average Score 6.0 7.3 6.6 On the basis of above competitive framework British telecom is the best company amongst three which is having the resources to take use of opportunities and can nullify threat also. ...read more.

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