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Introduction
Branded as Verizon , Verizon Communications Corporation is an American company that specializes in providing broadband and telecommunication services. The company trades its stock on the NYSE but the incorporation was done in Delaware (Verizon, 2014).
Summary of operations
The company employs more than 176,000 people and obtains revenue exceeding $120 billion and a net income of more than $23 billion (Verizon, 2014). It operates with total assets worth more than $274 billion and an operating income exceeding $31 billion (Verizon, 2014).
Table 1: Summary of operations.
Net sales
In 2011, the company recorded annual sales worth $110,875 billion, but increased to $115,846 billion in 2012 and to $120,550 billion in 2013. This means that the companys sales have been increasing by more than 3% per annum.
Gross margin
Between 2011 and 2013, Verizon experienced a steady increase in gross profit margin, which rose from 58% to 62%, with an annual growth of about 2% due to increased sales.
Operating margin
Between 2011 and 2012, the operating margin remained relatively stagnant at 11%, but rose swiftly to more than 26% in 2013.
Income before tax
Verizons income prior to taxation has been experiencing unbalanced changes since 2011. In 2012, the companys income before tax experienced a huge drop by 99% but increased again by about 19% in 2013.
Net income
The companys net income stagnated between 2010 and 2012 but experienced a rapid increase of more than 50% in 2013.
Summary of operations
The above analysis indicates that the companys ability to meet its expenses using its annual sales has been increasing since 2012. Nevertheless, it is evident that up to 2012, the company was previously experiencing problems, probably due to the impact of the economic recession of 2007-2010.
Financial position
Working capital
Verizons working capital was fairing badly between 2010 and 2012. In 2011, the companys WC was only $178,000 before dropping again to a negative number. This means that in 2012, the company could not use its current assets to meet its current liabilities.
Net property and equipment
It is worth noting that the value of Verizons plant, equipment and property remained constant, suggesting that there were no major expansions or disposals in the three consecutive fiscal years.
Long-term assets
Verizon was not involved in these initiatives because the value of long-term assets remained constant throughout the period.
Stockholders equity
The equity of Verizons stockholders increased slightly between 2011 and 2013 with an average positive change of about 0.7%. The change is plausible, given that the company had experienced huge deficits in the preceding trade periods.
Summary
The above analysis shows that Verizons ability to meet its liabilities increasing in 2013. In addition, it was not involved in major expansions during the period.
Financial Ratios
Liquidity ratios
Liquidity ratios are financial metrics used to determine the ability of an organization to meet the short-term debts and other obligations.
Current ratio.
The company current ratio is 2.62 in 2013. However, it is worth noting that Verizon had previously performed lower, with the CR averaging at 0.8 in 2012 from 1.0 in 2011.
Leverage ratios
At Verizon, the total debt-to-equity ratios are shown below:
The companys DET increased rapidly between 2011 and 2012 but stagnated in 2013. However, the companys ratio is 6.0, which indicates that its financial health is commendable.
Profitability ratio
These metrics assess the ability of an organization to generate income using the expenditure and other costs incurred when doing business.
As shown above, the profit margin ratio of Verizon remained at an average level of 0.09 in 2011 and 2012 but rose to 0.2 in 2013, indicating that the companys profits were rising.
Efficiency
Efficiency ratios show how well a firm is using its assets and liabilities in its external operations. The assets turnover ratio is a good example of efficiency ratio and is given by Asset Turnover = Sales or Revenues/Total Assets. As shown below, the asset turnover ratio for Verizon remained strong at an average of o. 495 throughout the period.
Summary
The liquidity, leverage, efficiency and profitability ratios of Verizon were strong and improving throughout the period. This is an indication that the companys financial health is strong and stable.
Historical financial review
Comparison with competitor
Verizons main competitors are AT&T and Sprint companies. Between 2011 and 2013, Verizon trailed both AT&T but performed better than Sprint in terms of revenue. In addition, the net income analysis shows that AT&T was the leader (AT&T, 2014) followed by Verizon, with Sprint is making losses instead of profits (Sprint, 2014).
Comparison with industrial standards
The communication industry was performing poorly between 2008 and 2011 (AT&T, 2014). This explains why all the three companies above were performing poorly up to 2011. However, there has been a steady improvement over the last three years as shown by Verizon and AT&T, but Sprint seems to be lagging behind.
Supplemental data
The data above were obtained from the company website as well as other online sources as shown in the appendices below.
References
AT&T. (2014). 2013 annual report. Web.
Sprint Inc. (2014). Reporting. Web.
Verizon Inc. (2014). Financial reporting: Annual Report 2013. Web.
Appendices
Financial reports for Verizon
Consolidated Statements of Income.
Consolidated Statements of Comprehensive Income.
Verizon Communications INC. and Subsidiaries Consolidated Balance Sheets.
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