Coroporate finance Research Paper Example | Topics and Well Written Essays - 1500 words

Coroporate finance - Research Paper Example Ratio analysis uses data from the financial statements to develop financial formulas that calculate ratios. The purpose of this paper is to utilize ratio analysis to analyze the financial performance of Qatar Telecom Q.S.C. and Vodafone Qatar Q.S.C. during the last two years. Company profile Qatar Telecom Qatar Telecom is the leading telecommunications company in the small Persian Gulf country of Qatar. The company’s landline business operates in a monopoly market since the firm is the only company that provides that service. Some of the services that the company provides to its customers include landlines, wireless communication, internet, and cable television. The firm is a multinational corporation that operates in 17 countries. The majority ownership of the company is held by the government of Qatar who owns 55% of the firm. The remaining 45% is owned by private investors who openly trade their stocks in the Qatar Exchange. Company profile Vodafone Qatar Vodafone is a mult inational corporation in the telecommunication industry that operates in over 30 countries. The firm was founded in 1985. The company has over 403 million customers around the world. The firm has used strategic alliances and partnerships to expand its reach. Its global network of partners is composed of 50 companies. The firm is considered the 7th most valuable brand within its industry. The organization has a diversified portfolio of products and services which includes mobile, business, and marketing solutions. Overview ratio analysis The use of ratio analysis can help companies evaluate the financial performance of an enterprise. The analysis is considered a quantitative tool. One of the advantages of applying ratio analysis is that it is easy to use. Any person that has basic business knowledge can retrieve the financial statements of a company and calculate its ratios. Nine additional advantages of the use of ratio analysis are listed below: Helpful in decision making Helpful i n financial analysis and planning Helpful in communication Helpful in coordination Helps in control Helpful in shareholder’s decisions Helpful in creditor’s decisions Helpful in employees decisions Helpful in governmental decisions (Svtuition, 2011). Another virtue of the use of ratio analysis is its comparability. The ratios of different companies can be compare to evaluate which firm is the better investment alternative. The five major categories of ratios are liquidity, financial leverage, asset efficiency, profitability, and market value ratios. Ratio analysis Qatar Telecom A ratio analysis of Qatar Telecom for the years 2011 and 2012 is illustrated below. 2011 2012 Net margin 18.71% 13.79% Earnings per share QR 14.80 QR 9.88 Return on assets 5.82% 4.93% Return on equity 15.09% 12.60% Current ratio 1.01 1.05 Acid-test ratio 1.00 1.03 Working capital QR 304908000 QR 975749000 Debt ratio 0.61 0.61 Debt to equity 1.59 1.55 Qatar Telecom generated total revenues of QR 33.71 billion in 2012. The sales of the company increase by 6.14% in comparison with the previous year. The firm’s net income in 2012 was QR 5.94 billion. The organization was able to increase its net income by QR 1.3 billion since the previous year. The net margin of the company in 2012 was 13.79%. The net margin is a metric that measures the absolute profitability of the company. It is calculated by dividing net income by total sales.