FIN 571 Week 3
“The objective of financial statements is tocommunicate information to users. They provideusers with information about the allocation and useof funds, the source and type of revenues and towhat extent revenues were sufficient to meetexpenditures” (2004, p.2) This paper will interpret the financial results according to AT&T statements. The balance sheetis important because it summarizes a company’s assets, liabilities and shareholders’ equity at a specific point in time. It help investors get an idea of what the company owns and owes, as well as the amount invested by the shareholders (Financial Dictionary, 2014).
Reviewing a company’s solvency is important because it tells the investors the short- term financial outlook of survival.AT&T has been doing fairly welllooking from a profitability standpoint. The company’s net margins have increased to 37.96% in 2013, which is considerably higher from previous years. Also, the company’s return on assets increased to 6.68% in 2013, a considerable jump from the 1.55% in 2011. The company’s main focus was on increasing consumer satisfaction and providing better quality services. Additionally, management has also been very beneficial at managing working capital efficiently. Continued focus on increasing revenues and stable working capital management terms led improved efficiency ratios year on year. Receivables turnover increased to 9.97 in 2013, whereas it was 9.58 in 2011, inventory turnover increased to 112.15 from 106.67 in 2011 and asset turnover remained the same during review period.
AT&T’s net margins were higher in 2013 at 14.41% the industry average is 14%. Also, return on asset was ar 6.68% compared to 6.50% industry average. Long-term debt equity ratio was 0.76 in 2013 compared to 1.23 for industry average. This can be due lower interest rates ordebt taken in 2013. The company’s receivable turnover ratio in 2013 was 9.97 compared to industry average of 9.30. Moreover, the inventory ratio was substantially higher than industry at 112.15. Current ratio for 2013 was 0.66 compared to industry average of 1.40. Quick ratio was also substantially lower than the industry average.
Learning team Reflection
Concept Review Video: Working Capital Management
Working capital reflects among the variances associated with present assets and present liabilities. It is crucial for business’ operational necessities. The Lichmans purchase of Finagle a Bagel is an example of how individuals can be successful in self-employment business if they can manage their working capital appropriately. This week Team D was task with the assignment of discussing strategies the Lichmans used to manage their working capital.
Finagle Bagel is a retail seller of bagels. Sales tend to be cash and credit card, with credit card funds being available within 24 hours. As stated in the video, “obviously you are cash flow positive” which is great to business, a positive cash flow allows a business to pay expenses and debt in a timely manner.
Finagle Bagel does have wholesale customers. The video states that wholesale business is trickier. You will not get paid before you have spent cash as a customer may purchase a large quantity. Finagle Bagel does set terms for sales; if receivable accounts are not paid, Finagle Bagel use interest, administrative fees, and “things of that nature” to aid in collecting. Many of the companies that Finagle Bagel deals with will penalize for not responding to email in an appropriate timeframe, terms are frequently changed.