Fin 571 Week 3

FIN 571 WEEK 3

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FIN 571 Week 3

Introduction

“The objective of financial statements is tocommunicate information to users. They provideusers with information about the allocation and useof funds, the source and type of revenues and towhat extent revenues were sufficient to meetexpenditures” (2004, p.2) This paper will interpret the financial results according to AT&T statements. The balance sheetis important because it summarizes a company’s assets, liabilities and shareholders’ equity at a specific point in time. It help investors get an idea of what the company owns and owes, as well as the amount invested by the shareholders (Financial Dictionary, 2014).

Reviewing a company’s solvency is important because it tells the investors the short- term financial outlook of survival.AT&T has been doing fairly welllooking from a profitability standpoint. The company’s net margins have increased to 37.96% in 2013, which is considerably higher from previous years. Also, the company’s return on assets increased to 6.68% in 2013, a considerable jump from the 1.55% in 2011. The company’s main focus was on increasing consumer satisfaction and providing better quality services. Additionally, management has also been very beneficial at managing working capital efficiently. Continued focus on increasing revenues and stable working capital management terms led improved efficiency ratios year on year. Receivables turnover increased to 9.97 in 2013, whereas it was 9.58 in 2011, inventory turnover increased to 112.15 from 106.67 in 2011 and asset turnover remained the same during review period.

AT&T’s net margins were higher in 2013 at 14.41% the industry average is 14%. Also, return on asset was ar 6.68% compared to 6.50% industry average. Long-term debt equity ratio was 0.76 in 2013 compared to 1.23 for industry...