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British Telecom - company review

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Introduction

Table of Contents Table of Contents .................................................................................... 1 Introduction .......................................................................................... 2 Analysis of Company Performance ...............................................................4 Source of Long Term Finance and Shareholders Wealth ...................................... 9 Conclusion ..........................................................................................11 Bibliography ....................................................................................... 13 Introduction British Telecom is one of Europe's leading providers of telecommunication service. Its principal activities include local, national and international telecommunication services; the company provides local and long-distance telephone call products and services, international calls to and from the UK. In addition this company also provide higher-value broadband, and internet products and services and IT solutions. In the UK BT serves over 20 million business and residential customers with more than 29 million exchange lines, as well as providing network services to other network (BT Group PLC annual report). The company which has a motto 'delivering today, investing for tomorrow' is a public limited company registered in England and Wales, with listing on the London and New York stock exchange. In addition according to the BT annual report, BT is the UK's largest communication service provider market share. In addition BT group plc also covers BT Global Service, BT Retail, BT Wholesale, BT Exact and BT Openworld. Starting in 1981, the postal and telecommunication service of the Post Office become the responsibility of two separates corporation, with British Telecommunications (under the trading name of British Telecom) taking over the telecommunication business. In 1984, as a result of telecommunication act, British Telecommunication plc was incorporated in England and Wales as a public limited company, and wholly owned by the UK government. Afterwards, from 1991 British Telecommunication traded as BT. In 1999, BT acquired full control of Cellnet (now O2UK) by acquiring Securicor's minority holding. Eventually, on November 2001 BT completed the demerger of mmO2 comprising what were BT's wholly-owned mobile assets in Europe. ...read more.

Middle

Usually business seek to have neither current ratio or acid test ratio higher than 1:1, because it shows that the company can provide those short term liabilities by having sufficient liquid assets (McLaney, 2003). From the data below, this company has a figure of current assets �9378m for the end of this period and the figure of their current liabilities is �8548m. By assuming that this company is not in a supermarket industry, so the stocks or inventory is not included in the liquid assets, referring to the assumption, the liquid asset for the period end 31 March 2004 is �9289m. The current ratio for this company is 1.09 : 1 and the acid test ratio is 1.08 : 1. By knowing this number, it can be seen that the business capable to pay meet the liabilities and showing to the creditors that this business have a sufficient amount of current assets to cover the creditors claim and by showing this figure, it also increase the confidence level to give a short-term loans. In addition, after deducting the stocks from the current assets, the acid test ratio also shows that this business is good in managing their working capital. The last part to be analysed by using accounting statements is by analysing the cash flow of this company. From the cash flow statement, it can be analysed the real inflow and outflow of the cash in the company during the period. According to McLaney (2003), cash tends to be at the heart of most aspects of business and a business's ability to prosper and survive is likely depending on its ability to generate cash. There are three parts in the cash flow statement; those are the cash flow from operating, cash flow from financing and cash flow from investing. ...read more.

Conclusion

By doing part of the analysis, it can also be measure whether the company is under, fairly or over performance. Especially because of the ratio has been done above is from the financial statement which is the most important aspects in the company, moreover financial statements typically contain large amounts of data. So therefore we have to choose which one is the most important, especially when there is a limit to analyse a company. From the profitability ratios, it can be analysed that this business is not effective to generate profit. As it can be seen that they did not maintain their profit well in compare to the assets they have. They should have generated the profit by using the long-term liabilities. But when it comes to the return on equity the data shows a very good result, and it is very good from the shareholders point of view. From other ratio it can be seen that the business capable to pay meet the liabilities and showing to the creditors that this business have a sufficient amount of current assets to cover the creditors claim and by showing this figure, it also increase the confidence level to give a short-term loans. Moreover, the other ratio shows that this business is good in managing their working capital. To sum up, if we are looking from the profitability of the company, this company is not really stable this time, sometimes it shows a good profit margin and suddenly drops in the following period. By looking from the investors' point of view, this business is not highly valued by investors, but in some investors opinion this company might a save way to invest your money on, because this business always pays dividend an try to maximise the long term investors even they not making a profit at that period. ...read more.

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