Firm Performance – Telecom Limited Company Part 3

Repayment of Borrowings and Finance Leases

 

Firm Performance – Telecom Limited Company Part 3 This item is one of the most substantial areas that TPG made a huge change. Following, their past two years (i.e., 2012 to 2013), TPG repaid its borrowings and financial leases by a difference of US$3,217 million. In the recent past year, it reduced to US$140 million. This shows that there has been a flop in its ability to pay money borrowed and financial leases.

4.1.3 Dividends Paid

From the year 2012 to 2013, TPG’s dividend that was paid to shareholders decreased by US$120 million (difference between US$251million and US$131 million). It increased however, by US$450 million (difference between US$581 million and US$131 million). This happened because dividends also increased to U$0.20 per share .That showed a progress
from 30 to 40 per cent profit payout ratio dividend.

Firm Performance

 

 

5.1 Ratio Analysis

Strategic Changes and Firm Performance – Telecom Limited Company Part 3

Ratio analysis is done to obtain an understanding of a firm’s financial position and performances in several distinctive areas such as assets, liabilities, profits, expenses, equities, turnovers, inventories and the like. It can be categorized into:

  • Solvency/liquidity ratios
  • Leverage ratios
  • Profitability ratios
  • Operational efficiency ratios
  • Market value ratios
  • Asset management ratios

For the purpose of this report, two main items have been identified from the solvency ratios, leverage ratios, profitability ratios and operational efficiency ratios.

5.1.1 Solvency Ratio

The ratio items that were chosen under the solvency ratio are:

  • Current ratio
  • Quick ratio

5.1.1.1 Current ratio

From the Appendix, current ratio for the year 2012 was 1.72; the year 2013 was 2.59 and year 2014 was 1.37.

 

Commentary:

This ratio reveals the number of times short-term assets cover short-term liabilities. By comparing the current ratio position of TPG from 2012 to 2013, it shows that its current ratio is satisfactory since the number of times short term assets can cover short term liabilities increased. On the other hand, when you compare it to the year 2014, it dropped hence, showing a bad shape.

5.1.1.2 Quick ratio

This ratio shows the number of times cash,accounts receivable, and marketable securities cover short-term obligations. A higher number shows a good position of the firm than a small number.

Commentary:

Drawing inferences from the quick ratio analysis from the appendix, it is clear that there was an increase of quick ratio from the year 2012 to the year 2013 (i.e., from 1.43 to 1.91). Again, like it was in the current ratio, the ratio dropped to 0.92 in the year 2014. 2013 was preferred because it suggests a company has a strong ability to service short-term obligations. Conversely, the year 2014 was not favourable to the firm.

Telecom Limited Company

 

5.1.2 Leverage ratio

The ratio items that were chosen from this category of ratio are:

  • Debt to equity ratio
  • Common equity leverage

5.1.2.1 Debt to equity ratio

It measures the financial leverage of a company by indicating what proportion of debt and equity a company is using to finance its assets. A lower number suggests there is both a lower risk involvedfor creditors.

Commentary:

From the appendix, the year 2012 showed a ratio proportion of 3.00. It dropped to 2.95 in the year 2013 and again, it decreased to 1.99 in the year 2014. This shows a  strong, long-term, financial security for a company.

5.1.2.2 Common Equity Leverage

 

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