Financial And Sustainability Performance Analysis Of Telstra Corporation Limited

Company Background

Telstra is an Australian based company which offers the services of telecommunications and media. This entity has different kinds of products segmentation such as mobile phone networks, internet, and broadband connection and entertainment services offer by an entity by offering paid TV subscriptions. This entity is recognized as a largest telecommunications company that offers its services in domestic as well as in the international market. This public limited company is also listed under the Australia stock exchange to boost up the share performance of an entity by dealing with various stock markets to increase the firm’s performance from one period to another (Telstra, 2018). Majority of customer’s of this entity belongs to its domestic country that is Australia but sells its services all over the world on their selected products.

General financial information	The financial year 2016 (Amount in $m)
(A) Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper
Total Assets	43286
Total Liabilities	27379
Total Owners Equity	15907
(B)
(Basic) Profit earned- per share (EPS)	47.4 cents
(C)
Total Ordinary Shares issued	12216 million
(D)
Profit received by Shareholders- per share (DPS)	31.0 cents
(E)
Net Cash flows from Operating Activities	8133
(F)
Net Cash flows from Investing Activities

Performance of an entity reflects in the accomplishment of its goals before the stipulated deadline given by the external market users. 4G internet service provided by Telstra Company captured 98% of the entire Australian market due to its affordable pricing and high internet speed which arouses the interest of all its users to utilize the services of Telstra Company. The vision of Telstra is to mark its presence in the entire country in which the firm is operating and also in the world by connecting with the majority of people through its different kinds of products. The aim of this company is to upgrade its company to a high-class level of technology by meeting the needs and the expectations of its users.

		Telstra	Vodafone
Particulars	Formula	2015	2016	2015	2016
Revenue		25834	25912	51955	47631
GP		18587	14954	15513	1363
GP Ratio	GP/Net sales*100	72%	58%	30%	3%
Operating Profit	7110	2067	2932	2356
Operating Profit Ratio	28%	8%	6%	5%
NP		5780	3891	7878	-5103
NP Ratio	NP/Net sales*100	22%	15%	15%	-11%
Total assets	43286	42133	167608	169552
Return on assets	Total assets/Revenue	1.68	1.63	3.23	3.56
Equity		15871	14541	165437	167737
Return on Equity	Equity/Revenue	0.61	0.56	3.18	3.52
Liquidity Ratios
Current assets	9340	7862	27139	35687
Current liabilities	9188	9159	39514	42346
Current Ratio	1.02	0.86	0.69	0.84
Inventory	557	893	659	719
Quick Asset	Current asset-Inventory	8783	6969	26480	34968
Quick ratio	Quick asset/current liabilities	0.96	0.76	0.67	0.83
Interest		796	729	2412	2038
EBIT		5600	5647	1497	-569
Time interest Earned	0.14	0.13	1.61	-3.58
Debt		14378	14574	30678	37188
Equity		15871	14541	165437	167737
Debt to equity ratio	Debt/equity	0.91	1.00	0.19	0.22

(Data Source: Vodafone Plc, 2018, Telstra Corp Ltd, 2018 from Morningstar)

Interpretation

Decreasing amount of gross profit shows lack of costs controls regulation uses by Telstra which results in the declining of its performance (Osteryoung Constand and Nast, 2012). In comparison with its competitor Vodafone, the performance of Telstra is better.

Interpretation

Profit generated by an entity by reducing the overall operating expenses from the gross profit. Decreasing operating profit shows the increased operating expenses. Vodafone’s performance is worst in comparison to Telstra.

Interpretation

Net profit is a final result of the hard work and patience of an entity which generated in a year-end showcasing the overall image of an entity. In the above chart, deficiency and poor profitability of Telstra show the burden of taxation and expenses on an entity.

Interpretations

This shows the participation of assets in generating returns for Telstra in the form of customer attraction by offering affordable mobile tariffs and easy internet connection. The firm is not able to convince its users through its existing assets as it is declining.

Interpretations

Equity used by Telstra in its own business rather than savings in the firm to generate results out of it. It is decreasing from 2016 to 2017 showing the deficiency lies in the earning system which needs to improve.

Interpretations

Current ratio helps in determining the ability of the firm by identifying the proportion of currents assets in relation to the overall liabilities held by a firm for short-term (Saleem. and Rehman, 2011). This ratio is declining due to the imposition of current liabilities over a current asset which is showing inefficient liquidity position of the company.

General Financial Information

Interpretation

A quick ratio checks the significance of current assets by excluding inventory factor in it in paying its overall current liabilities. This ratio gets decreases from one period to another due to higher quick liabilities in comparison to the overall quick liabilities.

Interpretations

This ratio tests the paying capacity of Telstra that can meet the expenses imposed on the debt sources of the company through the profits earned by the firm. Earning capacity of the firm is declining as their interest is higher than their overall earnings which need to be increased to cope with the market changes.

Interpretations

Debt to equity ratio is increasing from 2016 to 2017 due to increasing component of equity in the company in handling the burden of debt incurred on the business. This reflects the efficiency of Telstra in meeting its debt.

On the basis of the financial performance of the company and its comparison with its competitor, the efficiency of an entity is proved which guides an investor to invest in this company to multiply its returns.

An entity uses different kinds of financial indicators to test its overall performance from one period to another. The monetary and nonmonetary efficiency of Telstra is identified by applying different financial indicators to compare the existing condition of an entity with its competitor’s performance to ensure its survival in the market (Höbarth, 2006). There are various financial indicators showing the overall performance of Telstra is mention as below:

Operating expenses control- Expresses incurred in every entity so is by Telstra but controlling if the same differentiate an entity from its competitors. Operating expenses includes the routine daily expenditures incurred in Telstra such as Research and development expenses, Sales and admin charges and other operating expenses incurred by this company. The operating expenses in 2015 were 11477 which gets increased to 12887 that means operating expenses in Telstra has increased by 12.28% which showing the inefficiency of Telstra as this will affect the profitability of the company.

The success of the financial projects of Telstra reflects the reactions of the external market users. This entity has created a monopoly situation in the market by investing in giant technological projects as their vision is to be a word recognized entity that offers latest technologies (Telstra CEO Andy Penn’s plans for innovation and Asian expansion, 2016). The future project of this entity for next five years is of $66 billion which is a very big project by setting monopoly in mobile phones and internet connection market segment. This entity has a $56 billion trusted broadband network that generates higher returns for an entity. By doing all this, the firm has created a strong financial base which will produce $4.6 billion to $5.1 billion of cash flows into the pocket of an entity.

By considering the current performance of the company, shareholders are recommended to hold the investment as in future company has potential to improvise their financial position in order to deliver profitable returns.

References

Höbarth, L. L., 2006. Modeling the relationship between financial indicators and company performance. An empirical study for US-listed companies (Doctoral dissertation, WU Vienna University of Economics and Business).

Osteryoung, J., Constand, R. L. and Nast, D., 2012. Financial ratios in large public and small private firms. Journal of Small Business Management. 30(3).  p.35.

Saleem, Q. and Rehman, R.U., 2011. Impacts of liquidity ratios on profitability. Interdisciplinary Journal of Research in Business. 1(7). pp.95-98.

Telstra, 2018. Available through: < https://www.telstra.com.au/> [Accessed on 17^th May 2018].

Telstra CEO Andy Penn’s plans for innovation and Asian expansion, 2016.  Available through: < https://www.afr.com/brand/boss/telstra-ceo-andy-penns-plans-for-innovation-and-asian-expansion-20160110-gm3289> [Accessed on 17^th May 2018].

Vodafone Plc, 2018. Available through: < https://financials.morningstar.com/income-statement/is.html?t=VOD&region=usa&culture=en-US> [Accessed on 17^th May 2018].

Telstra Corp Ltd, 2018. Available through: < https://financials.morningstar.com/ratios/r.html?t=TTRAF> [Accessed on 17^th May 2018]