150 WORDS TO EACH QUESTION. RESPOND TO ALL BELOW. MUST HAVE AT LEAST 1 REFERENCE AND MUST BE CITED IN THE RESPONSE WHERE THE REFERENCE WAS USED.
Calculate the current ratio and profit margin ratio for the latest two years, and interpret the results. Then, explain what the ratios over the 2 years tell you.
In 2019 T-Mobile’s current ratio was 0.74 based on $9.31b in assets and $12.51b in current liabilities. In 2020 T-Mobile’s current ratio jumped to 1.1 based on $22.89b in assets and $21.7b in current liabilities. While some industries rely on a best practice of 2 to 1 to represent a healthy outlook, companies in the telecom industry regularly have lower current ratios, because they carry such low inventory and sell service (Porter, & Norton, 2018). This merger was a wise merger indeed to improve T-Mobile’s financial position so much in such a short period of time. The massive war chest of spectrum assets that Sprint had purchased over the years helped lift up T-Mobile due to their merger. The normal flow from one year to the next doesn’t exist in this case, but their leadership and management is leading the brand in a healthy solvency direction.
Locate the Management Discussion and Analysis comments in the latest annual report, and discuss the main points in your own words.
This particular year was interesting because T-Mobile acquired Sprint. Much of the Management Discussion and Analysis was about the merger, updating shareholders on where things stand with elements like the sale of Boost to Dish, and the details regarding the sale. Next it went into its response to and expense of the pandemic COVID-19 which is also a unique element for any brand in 2020. They discussed the $458 million in COVID costs, and that those costs are going to continue to build.
Locate the Auditor’s Report in the latest annual report, and discuss the opinion given and who conducted the audit.
The auditor’s report also was primarily focused on the Sprint merger. They point out early that some assets were not available for them to review which accounted for “elements of Sprint represent controls over approximately 14% of consolidated assets and approximately 30% of the consolidated total revenues as of and for the year ended December 31, 2020,” (T-mobile.,2021). My interpretation of this is that they cant verify that those portions of the sprint side of the merger are accurate and have been excluded from this audit. Also T-Mobile had to pivot how it reported and managed their leases based on the Sprint acquisition. The rest of the data seems to be in line with normal accounting standards.
Based on this initial quick review, provide your assessment of your chosen company.
Based on this quick review, it appears as though T-Mobile will be a solidly run firm with a higher current ratio than both of its main competitors AT&T and Verizon. They are managing their assets and liabilities well, a will likely be able to pay their debts and creditors into the near future while being competitive and growing thief footprint.
The company that I selected that trades on the New York Stock Exchange is Apple. Apple Inc. participates in the New York Stock Exchange as AAPL. THe financial reports for Apple are located at the bottom of their webpage under the “About Apple” section followed by the Investors tab. When clicking on investors, the first thing you see is “News and Results” and initially provides you with a date and time for the upcoming conference call to discuss the most up to date quarter results, which in this case would be FY 21 Fourth Quarter Results.
The way to determine the current ratio is by dividing current assets by current liabilities.
For the year 2020 as of September 26,
Apples Current Assets – $323,888 million
Apples Current Liabilities – $258,549 million
Current Ratio – 1.25 %
As of September 30,2019,
Apples Current Assets – $338,516 million
Apples Current Liabilities – $248,028 million
Current Ratio – 1.36%
The way to determine Profit margin is by dividing net income by revenue.
For the year 2020,
Apples Net Income – $57.41 billion
Apples Revenue – $274.52 billion
Profit Margin – 20.91%
For the year 2019
Apples Net Income – $55.26 billion
Apples Revenue – $ 260.17 billion
Profit Margin – 21.24%
The ratios above show that Apple had a bit of a struggle for the year 2020 as it appears the total number of assets decreased between 2019-2020. Also, it appears the profit margin decreased as well which tells us that Apple had a bit of a struggle when it came to sales. This tells us that they spent more than they brought in. However it is important to keep in mind the pandemic we recently faced as this caused a financial burden on many companies.
Management discussion and analysis says that the cause for the drop in sales was due to the decrease of net sales pertaining to the iPhone. However, it was also note that Apple hit an all time record of $111.4 billion which put them up 21%. Management showed appreciation for the Apple team as they put in an ample amount of effort to redeem themselves after being negatively affected by Covid.
Apple overall has shown to be a successful company over the years. They are constantly coming out with new products that target all audiences. I am sure most of us have at least 1 Apple product in our possession, whereas some of us may have multiple. I myself have 4 Apple products and have always been a supported of this brand, The numbers we see above tell us that Apple hit a bump in the road due to the pandemic, however due to their reputation I definitely see this company making a come back this year assuming they made a few adjustments. Due to COVID-19, Apple as well as other retailers were forced to close their doors which caused a decrease in sales. Now that we are back to somewhat of normality, Apple should be able to gain back when they lost.