Financial analysis Essay
The analytical audit of the company’s capital constructions of the two companies shows that shows Arizon is extremely geared as compared to AT & A ; T. Gearing AT & A ; T is 43. 3 % for long term debt and 51. 76 % for entire equity which is non really high. In instance of Arizon. the ratio is really high at 59 % for long-run debt to equity while entire debt to equity is 74. 91 % . The Verizon instance indicates that the house does non hold sufficient and steady internal fiscal resources to finance its assets.
These acquire depleted compelling direction to utilize external fiscal instruments. This use of external beginnings to finance its assets increase opportunities of the company enduring fiscal hazard that may take to bankruptcy after proficient default. The audit of stock list ratio of the two companies supplied reveals a AT $ T does non hold stock while verizon has. This may be that AT & A ; T is a service sector or in the concern of industry at order or run Just In Time method of stock refurbishing.
While Arizona has stock list which is increasing bit by bit except in twelvemonth 2004 when it down from 1. 50 % in twelvemonth 2003. we are non supplied with income statement to be able to find the firms’ efficiency in using its resources ( stock list ) to bring forth gross revenues is. The close analysis of the two companies ratios provided indicates that AT $ T collectible history that fluctuates from clip to clip. While Arizona have payables with down ward tendency. This indicates that Arizona is pull offing her trade creditors good as compared to AT & A ; T.
if payables are non good managed may do fiscal emphasis to the company. The on the job capital of the Verizona contains a important proportion of hard currency fluctuating from clip to clip. In instance of AT & A ; T it is undistinguished and it is in the down ward tendency. The houses can non therefore. run into its compeling with the most liquid resources. Additionally. there are no marketable securities that can be easy converted into hard currency when a fiscal demand arises.
What this implies is that the house may happen it hard to run into its short term maturating fiscal duties as and when they fall due for payment. The same decision about fiscal place can be made utilizing both the acerb trial and hard currency ratios. From the ratios. the firm’s ability to run into its fiscal duties from the liquid assets is besides questionable. REFERENCES Luecke R ( 2002 ) Finance for Directors ; Harvard Business School Lindsay R. ( 1967 ) Financial Management. An Analytic Approach ; R. D Irwin. 1967
