BWFF 2033 FINANCIAL MANAGEMENT

GROUP P

SESSION 2021/2022

(A211)

SUBMITTED TO:
DR. MUHAMMAD AIRIL SYAFIQ BIN MOHD KHALID

PREPARED BY:
NABEELLA BINTI AZMI
1.0 INTRODUCTION

Verizon Communications is a company that offers information, entertainment and

communications products and services to consumer. The headquarter of Verizon located

at New York City. Verizon Communications was formed on 30 June 2000 by Bell

Atlantic and GTE Corps and now Verizon become a global communications technology

company that active in 4G and 5G wireless networks, fibre optics and broadband.

2.0 FINANCIAL RATIOS

Types of ratios 2016 2017 2018 2019 2020

PROFITABILITY RATIOS
Profit margin 10.80% 24.24% 12.26% 15.01% 14.30%
Return on asset 5.57% 11.88% 6.06% 6.78% 5.80%
Return on equity 56.62% 68.36% 29.32% 31.49% 26.49%
ASSET EFFICIENCY RATIOS
Total asset turnover 0.52 0.49 0.49 0.45 0.41
NWC turnover -31.93 times -40.34 times -39.73 times -17.83 times 8.59 times
Fixed turnover asset 0.58 times 0.55 times 0.57 times 0.52 times 0.50 times
LIQUIDITY RATIOS
Current ratio 0.87 times 0.91 times 0.91 times 0.84 times 1.38 times
Quick ratio 0.83 times 0.87 times 0.88 times 0.80 times 1.33 times
Cash ratio 0.09 times 0.06 times 0.07 times 0.06 times 0.56 times
FINANCIAL LEVERAGE RATIOS
Total debt ratio 90.16% 82.62% 79.34% 78.46% 79.11%
Debt/equity 9.16 times 4.75 times 3.84 times 3.64 times 3.57 times
Equity multiplier 10.16 times 5.75 times 4.84 times 4.64 times 4.57 times

3.0 DISCUSSION

i. PROFIT MARGIN

Average ratio = 0.1532

The average ratio for profit margin is 0.1532. In year 2020, profit margin is 14.30% which is

higher than year 2016 by 3.5% (14.30% - 10.80%). The profit margin in year 2017 rose from
10.8% to 24.24% then went down in year 2018 at 12.26% and keep up and down during year

2019 and 2020. There is ratio trend in this profit margin since every year the ratio keep rising

and decreasing consequently throughout the year.

ii. TOTAL ASSET TURNOVER

Average ratio =0.4715

It shows that average ratio for total assets turnover is 0.4715. By comparison, total asset

turnover has a big difference since in year 2016 has higher number at 51.59% than in year

2020 by 11.05%. The total asset turnover in year 2017 is 49.01% means that it is lower than

in year 2016 and rose a bit to year 2018 at 49.41% and then keep decreasing in year 2019 at

45.20% and year 2020 at 40.54%. The ratio trend for total asset turnover keeps decreasing

from year 2016 to 2020 except year 2018.

iii. CURRENT RATIO

Average ratio = 0.9801

Based on number above, average ratio for current ratio 0.9801. In comparison, current ratio in

year 2020 is 1.38 times which means higher than in year 2016 by 0.51 times (1.38 – 0.87).

From year 2016 to 2017, the ratio increased to 0.91 then keep constant to year 2018. Then the

current ratio decreased to 0.84 and rose to 1.38 in year 2020. There is no trend for this ratio.

iv. DEBT/ EQUITY

Average ratio = 4.99

 The average ratio for debt/equity is 4.99 times. Debt/equity ratio in year 2016 was 9.16

times then in year 2020 decreased to 3.57 times, the difference in ratio is 5.59 times.

Debt/equity ratio from year 2016 to 2017 decreased to 4.75 times and keep decreasing to

year 2018 at 3.84 times. From year 2018 to 2019, the ratio keeps declining to 4.64 times

until year 2020 at 4.57 times. The ratio trend for debt/equity is decreasing throughout the

year from year 2016 to 2020.

4.0 FINANCIAL PERFORMANCE OF VERIZON COMMUNICATIONS

Financial performance is a subjective measurement that shows how well company

management their finance over certain period. After analysed the financial performance

based on ratios above, as an investor I will not invest to the Verizon Communications.

The profitability ratios show inconsistences and decreasing amount for every ratio such as

profit margin. In 2020, it only generated 14 cents of profit for every dollar of their sales

which will make investor feel unsecured. In asset efficiency ratios, only net working

capital turnover shows good performance but not the others that are having declining

amount for their ratios. This shows how Verizon utilizing its assets. Financial leverage

ratios still showing since the total debt is higher than total equity even the ratio keep

decreasing slowly except total debt ratio. This tells that the company is struggling with

their own debt and having high debt level.

APPENDICES

i. WORKING CALCULATION

PROFITABILITY RATIOS
net income
Profit margin¿
sales
2016 2017

$ 13,608 $ 30,550
×100 %=10.80 % ×100 %=24.24 %
$ 125,980 $ 126,034

2018 2019

$ 16,039 $ 19,788
×100 %=12.26 % × 100 %=15.01%
$ 130,863 $ 128,292
2020

$ 18,348
× 100 %=14.30
$ 128,292
net income
Return on asset ¿
total asset
2016 2017

$ 13,608 $ 30,550
×100 %=5.57 % ×100 %=11.88 %
$ 244,180 $ 257,143
2018 2019

$ 16,039 $ 19,788
×100 %=6.06 % ×100 %=6.78 %
$ 264,829 $ 291,727
2020

$ 18,348
× 100 %=5.80 %
$ 316,481
net income
Return on equity ¿
total equity

2016 2017

$ 13,608 $ 30,550
×100 %=56.62 % × 100 %=68.36 %
$ 24,032 $ 44,687
2018 2019

$ 16,039 $ 19,788
×100 %=29.32 % ×100 %=31.49 %
$ 54,710 $ 62,835
2020
 $ 18,348
×100 %=26.49 %
$ 69,272
ASSETS EFFICIENCY RATIO

sales
Total asset turnover¿
total asset
2016 2017

$ 125,980 $ 126,034
=0.52׿ =0.49׿
$ 244,180 $ 257,143
2018 2019

$ 130,863 $ 131,868
=0.49׿ =0.45׿
$ 264,829 $ 291,727
2020

$ 128,292
=0.41׿
$ 316,481
sales
Net working capital
(current asset−current liabilities)
2016 2017

$ 125,980 $ 126,034
=−31.93׿ =−40.34׿
$ 26,395−$ 30,340 $ 29,913−$ 33,037
2018 2019

$ 130,863 $ 131,868
=−39.73׿ =−17.83׿
$ 34,636−$ 37,930 $ 37,473−$ 44,868
2020

$ 128,292
=8.59׿
$ 54,594−$ 39,660
sales
Fixed asset turnover asset ¿
net ¿
2016 2017

$ 128,980 $ 126,034
=0.58׿ =0. 55׿
$ 217,785 $ 227,230
2018 2019

$ 130,863 $ 131,868
=0.57׿ =0 .52׿
$ 230,193 $ 254,254
2020

$ 128,292
=0.49׿
$ 261,887
LIQUIDITY RATIOS
 current asset
Current ratio¿
current liabilities
2016 2017

$ 26,395 $ 29,913
=0.87׿ =0.91׿
$ 30,340 $ 33,037
2018 2019

$ 34,636 $ 37,473
=0.91׿ =0.84׿
$ 37,930 $ 44,868
2020

$ 54,594
=1.38׿
$ 39,660
current asset −inventories
Quick ratio¿
current liabilties
2016 2017

$ 26,395−$ 1,202 $ 29,913−$ 1,034

=0.83׿ =0.87
$ 30,340 $ 33,037
2018 2019

$ 34 ,636−$ 1,336 $ 37,473−$ 1,422

=0.88׿ =0.80׿
$ 37,930 $ 44,868
2020

$ 54,594−$ 1,796
=1.33
$ 39,660
cash
Cash ratio¿
current liabilities
2016 2017

$ 2,880 $ 2,079
=0.09׿ =0. 06׿
$ 30,340 $ 33,037
2018 2019

$ 2,745 $ 2,594
=0.07 =0.06׿
$ 37,930 $ 44,868
2020

$ 22,171
=0.56׿
$ 39,660
FINANCIAL LEVERAGE RATIO

( total assets−total equity )

Total debt ratio¿
total assets
2016 2017
2018 2019
2020
 total debt
Debt to equity ratio¿
total equity
2016 2017
2018 2019
2020
total assets
Equity multiplier¿
total equity
2016 2017
2018 2019
2020