Financial Analysis Report Of Telstra Limited

Profit and Loss Statement of Telstra Limited

This report has been prepared to evaluate the financial position, performance and the financial strategy of Telstra limited. Telstra limited is one of the largest Australian telecommunication companies. This company is operating its business from decades in Australian market. Further, the performance and position of the company has been evaluated in this report with analyzing the financial statement (profit and loss account, cash flow statement and balance sheet) of the company and through conducting the study of ratio analysis of the company. Further, the same study has been conducted over the annual report of the company and management work, operations, analysis etc has been analyzed. The comparative study has also been conducted to evaluate the performance of the company in a better way. This study would make it easy for the investors and the analysts to evaluate the financial performance of the company and the total investment opportunities in the company.  

Profit and loss statement of the company evaluates about the total profit which has been earn by the company in a particular period. This statement is required to be prepared by every company to make it easy for the management and the investors of the company to evaluate the performance of the company. Following is the profit and loss statement of the company:

TELSTRA CORP LTD  (TLS)  INCOME STATEMENT
Fiscal year ends in June. AUD in millions except per share data.	2017-06 Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper	2016-06
Revenue	25912	25834
Cost of revenue	10958	7247
Gross profit	14954	18587
Operating expenses
Research and development
Sales, General and administrative	9178	7863
Other operating expenses	1831	5630
Total operating expenses	11009	13493
Operating income	3945	5094
Interest Expense	729	796
Other income (expense)	2431	1302
Income before taxes	5647	5600
Provision for income taxes	1773	1768
Net income from continuing operations	3874	3832
Net income from discontinuing ops		2017
Other	17	-69
Net income	3891	5780
Net income available to common shareholders	3891	5780
Earnings per share
Basic	0.33	0.47
Diluted	0.33	0.47
Weighted average shares outstanding
Basic	11968	12202
Diluted	11968	12216
EBITDA	10817	10551

The above statement explains that the total profit which has been earn by the company in last two years are $ 3891 M and $ 5780 M which explains that though the profits of the company are quite higher but in 2017, the profitability position of the company has been lower. At the same time, the profitability policy of TPG telecom has also been evaluated and it has been found that the profitability position of the company has been greater from $ 380 million t $ 414 million in 2017.

The above evaluation explains that the profitability position of the company has been lowered and the company is required to make little better decision about the revenues, diversification, expenses, policies and the total profit % of the company.

Balance sheet of the company evaluates about the total assets, liabilities and the equity which has been maintained by the company in a particular period. This statement is required to be prepared by every company to make it easy for the management and the investors of the company to evaluate the performance of the company. Following is the balance sheet of the company:

TELSTRA CORP LTD  (TLS) BALANCE SHEET
Fiscal year ends in June. AUD in millions except per share data.	2017-06	2016-06
Assets
Current assets
Cash
Cash and cash equivalents	938	3550
Short-term investments	21	62
Total cash	959	3612
Receivables	5468	4737
Inventories	893	557
Prepaid expenses	531	426
Other current assets	11	8
Total current assets	7862	9340
Non-current assets
Property, plant and equipment
Gross property, plant and equipment	64312	64960
Accumulated Depreciation	-42962	-44379
Net property, plant and equipment	21350	20581
Equity and other investments	2109	2745
Goodwill	1269	1346
Intangible assets	8289	7883
Deferred income taxes	44	54
Other long-term assets	1210	1337
Total non-current assets	34271	33946
Total assets	42133	43286
Liabilities and stockholders’ equity
Liabilities
Current liabilities
Short-term debt	2369	2537
Capital leases	107	118
Accounts payable	1185	1465
Deferred income taxes	161	176
Deferred revenues	1236	1118
Other current liabilities	4101	3774
Total current liabilities	9159	9188
Non-current liabilities
Long-term debt	14574	14378
Capital leases	234	269
Deferred taxes liabilities	1539	1493
Other long-term liabilities	2086	2087
Total non-current liabilities	18433	18227
Total liabilities	27592	27415
Stockholders’ equity
Common stock	4421	5167
Retained earnings	10225	10642
Accumulated other comprehensive income	-105	62
Total stockholders’ equity	14541	15871
Total liabilities and stockholders’ equity	42133	43286

Balance Sheet of Telstra Limited

The above statement explains that the total assets of the company are $ 42133 million and $ 43286 million in 2017 and 2016. Further, the total liabilities and the total equity of the company are $ 9159 million and $ 9188 million in 2017 and $ 18433 million and $ 18227 million in 2016. It explains that the financial position of the company has been lowered. It expresses about the negative changes into the company and further, it depicts the investors about the losses through which company is suffering.

Cash flow statement of the company evaluates about the total cash inflow and outflow which has been managed by the company in a particular period. This statement is required to be prepared by every company to make it easy for the management and the investors of the company to evaluate the performance of the company. Following is the cash flow statement of the company:

TELSTRA CORP LTD  (TLS) Statement of  CASH FLOW
Fiscal year ends in June. AUD in millions except per share data.	2017-06	2016-06
Cash Flows From Operating Activities
Other non-cash items	7775	8133
Net cash provided by operating activities	7775	8133
Cash Flows From Investing Activities
Investments in property, plant, and equipment	-3725	-3051
Property, plant, and equipment reductions	679	470
Acquisitions, net	-63	1248
Purchases of investments	-82	-105
Sales/Maturities of investments	285	56
Purchases of intangibles	-1596	-1143
Sales of intangibles
Other investing activities	223	318
Net cash used for investing activities	-4279	-2207
Cash Flows From Financing Activities
Debt issued	4710	4987
Debt repayment	-4571	-3954
Common stock issued
Common stock repurchased	-1502	-68
Dividend paid	-3736	-3787
Other financing activities	-1005	-955
Net cash provided by (used for) financing activities	-6104	-3777
Effect of exchange rate changes	-6	5
Net change in cash	-2614	2154
Cash at beginning of period	3550	1396
Cash at end of period	936	3550
Free Cash Flow
Operating cash flow	7775	8133
Capital expenditure	-5321	-4194
Free cash flow	2454	3939

The above statement explains that the total operating cash flow of the company is $ 7775 million and $ 8133 million in 2017 and 2016. Further, the total cash flow from investing activities and the total cash flow from financing activities of the company is $ -4279 million and $ -6104 million in 2017 and $ -2207 million and $ -3777 million in 2016. It explains that the cash inflow of the company has been lower than the cash outflow of the company. It expresses about the negative changes into the company and further, it depicts the investors about the losses through which company is suffering.

Further, the study of ratio analysis has been conducted to evaluate the investment opportunity of the company. Ratio analysis study briefs the financial statement of the company and explains about the various levels and the position of the company. Ratio analysis makes it easy for the investors to evaluate the position of the company. Following ratios express about the profitability, liquidity, efficiency and rate of return position of the company:  

Profitability ratios express about the total profit of the company. The below given table express about the profitability position and return on assets of the company. It explains that the current return on assets of the company is 10.28% which was 15.17% in 2016. It explains about the lower level of the profit. Further, it explains that the company is required to enhance its profitability level again through adopting new policies and strategies.

		2017	2016	2015
Profitability ratio
Return on assets	(Net profit + Interest)/ average total assets	10.82%	15.71%	12.72%

Cash Flow Statement of Telstra Limited

Figure 1: Profitability Level

Efficiency ratios express about the working capital management and efficiency position to maintain the operations of the company. The below table depicts about the inventory turnover level of the company through dividing the cost of goods sold by average inventory of the company. It explains that the current inventory turnover of the company is 15.11 and 13.83 in 2017 and 2016 respectively. The current efficiency position of the company explains about a good level of inventory management.

		2017	2016	2015
Efficiency Ratio
Inventory turnover	Cost of goods sold/ Average inventory	15.11	13.83	16.11

Figure 2: Inventory Turnover

Further, liquidity ratios express about the short term debt obligation of the company and the performance of the company. The below table depicts about the current liquidity level of the company through dividing the current assets by current liabilities of the company. It explains that the current liquidity ratio of the company is 0.85 and 1.02 in 2017 and 2016 respectively. The current liquidity position of the company explains about a good level of liquidity position of the company and depicts that the short term debt obligation could be paid by the company easily.

		2017	2016	2015
Liquidity Ratio
Current ratio	Current assets/ current liabilities	0.85839	1.01654	0.85742

Figure 3: Current Ratio

Further, rate of return expresses about the net profit, dividends and the outstanding shares of the company and the performance of the company. The below table depicts about the earnings per share level of the company through dividing the net profit and preference dividend by weighted average share of the company. It explains that the earnings per share ratio of the company are 32.51% and 47.37% in 2017 and 2016 respectively. The earnings per share position of the company explain about a good level of rate of return of the company and depicts that the company would offer a great return to the investors of the company through the position of the company has been lower from last year.

		2017	2016	2015
Rate of return
Earnings per share	(Net profit + preference dividend) / Weighted average number of ordinary shares	32.51%	47.37%	34.50%

Figure 4: Earnings per share 

Thus the above ratio expresses that the position of the company is quite good in the market. Though, the profitability position of the company expresses about few losses which have been faced by the company in the current year. Further, the liquidity position of the company expresses that the comapny has lowered the level of the assets and the current short term debt obligation of the company is quite better. More, the efficiency ratio and rate of return of the company explains that the position of the company is quite better and explains that the company is a good option for the investment opportunity. It would offer a great return to the stockholders of the company.

Ratio Analysis of Telstra Limited

Part 3:

Management work:

Further, the study has been done on annual report of the company which explains that the management committee of the company includes the experienced manager and well qualified manager who are operating and managing the business of the company in a great way. The management work of the company explains in the annual report that the various new projects have been adopted by the company in recent years to manage the financial and market position of the company. John P Mullen is the chairman of the company and he has expressed in the director’s report about the management work and the position of the company. He has explained into his report about the current losses of the company as well and has expresses that these losses have not occurred due to the ignorance of the management; there are different reasons behind these losses.

Further, the management work of the company explains that the main people of the company have been chosen with well dignity and honesty code and they all are following the same. Managers of every department of the company are well aware about their work and thus doing the work in a pretty manner. More to it, the management of the company explain that the CEO of the company, Andrew P Penn, explains that the performance, position, marketing, operations, finance, HRD, logistic etc department of the company are performing well.

The company has adopted various ethical policies and standards to manage the operations and the performance of the company. It explains that currently the ethical policies of the company are to manage the department and the management work in an ethical way. For it, company is using the hierarchy of ethical decision making, normative theory, stakeholder theory, descriptive theory, AAA 7 decision making etc.

The hierarchy of ethical decision making explains that the directors and the management of an organization should make the policies for the company with their wide range of experience and the knowledge. Further, the normative theory has been used by the company. This theory assists the company to manage the policies according to the employees so that it becomes easy for them to adopt the policies and follow it in a good manner. Further, AAA 7 theory explains that the decisions are made by the company after evaluating the entire operations and the activities of the company. 

Conclusion:

Thus the above study on financial statement, ratio analysis and the annual report expresses that the position of the company is quite good in the market. Though, the few losses have been faced by the company in the current year. The financial position of the company explains that the company is required to make few changes into its current process to enhance the profitability level. Further, the ratio analysis study on the annual report of the company expresses that the comapny has lowered the level of the assets and the current short term debt obligation of the company is quite better though, the profitability position of the company has been lowered and the company should make few changes into its financial strategies.

Further, the annual report of the company explains about the good management work of the company and the various positive things about the department and the management of the company. The above report explains that the company is a good option for the investment opportunity. It would offer a great return to the stockholders of the company. 

References:

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Annual Report, 2018. Viewed as on 26 Jan 2018 from https://www.telstra.com.au/content/dam/tcom/about-us/investors/pdf-e/Annual-Report-2017.PDF

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Morningstar, 2018. Viewed as on 26 Jan 2018 from https://financials.morningstar.com/cash-flow/cf.html?t=TLS&region=aus&culture=en-US

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