American Telephone & Telegraph Company (AT&T)

Company Background of AT&T

AT&T is one of the largest Multinational telecommunication Corporation in the world. The organizations headquarter is located in Dallas Texas USA. The organization is the largest mobile telephone service provider in the world. The corporation was formed in the year 1983. The key products of the corporation include Broadband, Network Security, Cable Television, Pay Television and many other products. As per 2017 statistics, the corporation has employed 254000 employees. AT&T started its operations as Southwestern Bell Telephone Company but later involved in the business of American Telephone & Telegraph. The organization is listed on the New York Stock Exchange and is the component of S&P 100 and S&P 500.

Financial Analysis of AT&T

Liquidity Ratios: The liquidity ratios of the corporation indicate the short-term solvency position of the corporation. Through liquidity ratios, one can determine whether the organization is in the position to pay its short-term obligations or not. The current ratio & quick ratio of the AT&T Corporation in the year 2017 was 0.97 and 0.95 which is higher than the previous year. In 2016 the current & quick ratio was 0.76 and 0.72. It means over time the short-term liquidity position has improved. The corporation is currently in the position to pay back its short-term obligation. If the liquidity position of the company is compared with the industry average than it is quite clear that the performance of the company is better than the industry average (Finch, 2010).

Leverage Ratios: The financial leverage ratios indicate the long-term solvency position of the corporation. The company's finance its assets or operations through debt or equity. It is preferred that the company should maintain the optimum capital structure. The total debt ratio of the AT&T in 2017 was 68% which shows a bit of improvement from the previous year in which the debt ratio was 70%. The debt ratio of the organization indicates that most of the organization's assets are financed through debt. The equity multiplier ratio is also indicating that high financial leverage of the corporation. It would be more appropriate that in future the company should finance its activities through equity rather than debt (Tennent, 2008).

Efficiency Ratios: The efficiency ratios show how efficiently the organization is utilizing its assets to generate its sales. The efficiency ratios of the AT&T indicate that the business is not utilizing its assets properly to generate sales. In the year 2017, the total asset turnover ratio is 0.08 which is way lower than the industry average that is 0.52.  The receivable turnover ratio shows how efficiently the corporation is converting sales into cash and it can be seen that the company's receivable turns over in the year 2017 is 27.96 which is higher than industry average of 15.75. The high inventory turnover ratios indicate huge sales and low inventory turnover shows the decrease in the number of sales. The inventory turnover in 2017 is 3.91, which is lower than industry average of 59.2. It means AT&T is not generating many sales (Pandey, 2015).

Profitability Ratios: The profitability ratios indicate how much profit organization is generating in the specific period of time. After analyzing the profitability ratios of the AT&T it can be said that the organization is generating the significant amount of profit. In 2017, the profit margin of the corporation is 84% which is way higher than the industry average that is 6.16%. The return on asset (ROA) of the company is 7% which is also above the industry average. The ROE of the corporation in 2017 was 21% which is way higher than the industry average of `10.40% (Finch, 2010). The profitability ratios of the corporation have indicated that the company is generating profit which shows growth of the business and in the future the company can expand its business even further. Moreover, the investors invest in such corporations whose profitability is high and provide the significant amount of return on their investment (SINHA, 2012).

Market Ratios: The market ratios of the AT&T indicate the price-earnings ratio is lower than the industry average. In 2017, the P/E ratio was 8.15 which is way behind the industry that is 55.54. However, the price to sales ratio of the corporations is better as in 2017 it is 6.86, which is higher than industry’s average of 1.53. The market to book ratio is relative to the industry average.

Stock Graphs of AT&T 

Source: http://charts.equityclock.com/seasonal_charts/T_RelativeToSPX.PNG

The above graph indicates the performance of AT&T stock in comparison with the S&P 500 index. The performance of the AT&T is not good as compared to S&P 500 index. The above chart shows the performance of the year 2017. Only in the month of October, the performance shows improvement otherwise the stock's performance remains lower than the S&P 500 index. The company should take steps to improve its performance (Pandey, 2015).

Source: https://finance.yahoo.com/quote/T/chart?p=T

The above graph shows the performance of the AT&T stocks over the period of the past 4 years. It shows that in the past few years, the price of the stock has experienced fluctuations. In 2017 the price has experienced an increase but in 2018, it experienced a decrease. After 2017 the stocks prices are showing the downward trend. The corporation has to take steps in order to increase the prices of its stocks (Tennent, 2008).

Summary of Article: “Why AT&T's stock went up when its Time Warner deal got in trouble”

In this news article, the information about the stock prices and the deal with the Time Warner is provided in detail. In 2017 the deal of the AT&T with Time Warner got in trouble however it does not have any impact on the prices of the stocks. The AT&T stock prices move in the opposite direction instead of showing the decline. The reason for the stock’s prices increases even the deal does not go well is that the market does not believe the deal will be beneficial for the corporation. The stock prices might show a decrease if the market believes there would be the significant impact of the deal (Schnurman, 2017).

Conclusion on AT&T

After discussing all aspects, it is evident that profitability and liquidity position of the AT&T Corporation is exceptional however the corporation has to improve its efficiency & stock performance. The current ratio & quick ratio of the AT&T Corporation in 2017 was 0.97 and 0.95, which is higher than the previous year. In 2016 the current & quick ratio was 0.76 and 0.72. It means over time the short-term liquidity position has improved. After analyzing the profitability ratios of the AT&T it can be said that the organization is generating the significant amount of profit. In 2017, the profit margin of the corporation is 84% which is way higher than the industry average. However, the company should take steps to improve stocks performance.

References of AT&T

Finch, B. (2010). Effective Financial Management. Kogan Page Publishers.

Pandey, I. (2015). Financial Management. Vikas Publishing House.

Schnurman, M. (2017). Why AT&T's stock went up when its Time Warner deal got in trouble. Retrieved from https://www.dallasnews.com/opinion/commentary/2017/11/16/atts-stock-went-time-warner-deal-got-trouble

SINHA, G. (2012). FINANCIAL STATEMENT ANALYSIS. PHI Learning Pvt. Ltd.

Tennent, J. (2008). Guide to Financial Management (illustrated ed.). John Wiley & Sons.