The Environmental Protection Agency - Case Study Example

Corporate Reporting for users Part 1. An outline of what can be included under the headings of Social Reporting and Environmental Reporting and the arguments, for and against, the publication of such information, by all companies. All businesses and companies have an obligation to protect the environment and its human resources. Activities related to environment control activities are mandated to be reported to the Environmental Protection Agency, while ethics on social responsibility should be reported to stakeholders and employees and regulatory agencies. Social and environmental responsibility is part of the Annual Report wherein activities and resources spent on these are reported. A separate report is also prepared done in an environmental format and submitted to proper authority. Environment report includes the following items: The company policy for environment and employee enhancement The Key performance indicators in accordance with the policy Target goal The target beneficiaries Impact to beneficiaries Cost of implementation and performance evaluation Part 2 .A critical analysis of the social and environmental data published by BT Company, exploring the use of industry data, comparative data, specific issues relating to the company and/or industry, the usefulness of the data to investors and any other related issues. Annex 1 shows the CSR of British Telecom for the period 2006, 2007 and 2008. The target beneficiaries are shown on the table which includes customers, employees, suppliers, improvement of society, environment, technology and integrity. KPIs are the indexes used to measure performances against a target goal set for the year. It is expressed in percentages to show its impact to direct beneficiaries. Financial resources spent for each policy are also stated. BA report has shown this in a comparative data to present depth of commitment for the sustained development of CSR objectives. Findings from data published by BT show the following: CSR reporting differs from the regular accounting report in that it is presented more on narrative format which is easy to understand. Following are the interpretations gathered from BT CSR 1. With regards to customer service, growth rate of performance has been used as benchmark, and comparison of cost on a 3 year period is presented. BA has achieved 3% to 9% growth during this period of review, and a total of 1.5% cost from revenue was used. BA has exceeded target rate 5.4% measure of relationship with customer, while 25% of revenue has been used for this as a driver for customer satisfaction. 2. Going to employee’s attendance, specific targets were assigned to sick leaves and injury rates of employees. It will be seen that targets were achieved, but costs remain high increasing yearly. 3. Supplier relationship. Targets of supplier relations are set yearly, and for 2008 78% is accomplished against 89% expectations. A total of £8.6bn is spent for suppliers in 2008. 4. BA has classified suppliers as high risk and medium risk, and has target 100% follow-up on 213 risk suppliers. A total of £5.7bn was used on purchases from these suppliers. 5. Improving society. Target has been used to measure effectiveness of community relations of BA, and a total of £22.3 m was spent in 2008 for the improvement of communication skills, employability and social cohesion. It has invested funding and support and exceeded 1% level of pre-tax profit. 6. Improvement of environment. BT has set target measures to reduce impact of global warming, C02 emissions in their operations, but still way below the 1996 level. Cost spent for this project is increasing over the years Waste management. This reports how management has reduced wastes sent to landfill in three years and how recycled materials provided an income to the company. 7. Digital inclusion. This shows the measure of effort of BT to reduce numbers of non-internet users in UK to 36% by 2010. In 2008, only 33% has been achieved. 8. Integrity. This a measure set by BA to see if programs are done with integrity and has set an 84% measure. In 2008, this has been exceeded by having 85%. In a separate report, BT tops the sustainability index of Dow Jones, meaning it has been chosen from among 2,500 companies assessed as part of its annual review. Dow Jones defined sustainable businesses as “those businesses that manage their risks and exploit opportunities deriving from economic, environmental and social developments to deliver long-term shareholder value.” (BT Plc.com 2008) Part 3. An interpretation of the financial data for BT Company using ratio analysis, with particular reference to profitability, liquidity, gearing and any other issues you consider to be important for the investor. The company. BT Plc is a publicly listed company founded on October 1, 1981. Its major products consist of Retail and Wholesale local, national and international telecommunications products and services, broadband and internet products and services, IT and Network Solutions. Headquarters is based in London, England, and serves United Kingdom area. The following ratio tables highlight the financial position of the company as against industry. The industry index is used as benchmark for comparison of company performance. Table 1. Valuation   Company Industry Sector S&P 500 P/E Ratio (TTM) 4.93 6.62 8.01 13.36 P/E High - Last 5 Yrs. -- 0.93 0.49 29.83 P/E Low - Last 5 Yrs. -- 0.10 0.06 6.62 Beta 1.14 0.72 0.59 0.95 Price to Sales (TTM) 0.30 0.54 0.85 1.59 Price to Book (MRQ) 2.33 1.24 1.30 3.06 Price to Tangible Book (MRQ) -- 0.95 1.35 4.48 Price to Cash Flow (TTM) 1.53 1.77 2.85 9.03 Price to Free Cash Flow (TTM) 7.06 15.54 46.95 20.44 Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=BT.L 1. The price to earning ratio is the valuation ratio of the company’s current share price compared to its per share earnings. Generally, investors expect a high P/E as compared with companies with lower P/E. (Accounting for management) In our study, BT has lower P/E than the industry, and this requires another analysis. 2. The price to sales ratio helps investor in determining if the market is under or over valuing a stock price. The ratio is compared with the industry, and the lower the ratio means it has relative growth prospects. (Little, K.) Table 2. Dividends   Company Industry Sector S&P 500 Dividend Yield -- 0.33 0.24 3.06 Dividend Yield - 5 Year Avg. 5.48 1.44 1.59 1.99 Dividend 5 Year Growth Rate 19.44 11.09 32.69 11.83 Payout Ratio(TTM) 92.65 22.07 Table 3. Growth Rates   Company Industry Sector S&P 500 Sales (MRQ) vs Qtr. 1 Yr. Ago 5.49 -2.79 -4.01 -2.70 Sales (TTM) vs TTM 1 Yr. Ago 3.72 -0.33 -0.96 8.74 Sales - 5 Yr. Growth Rate 1.79 5.99 3.61 14.17 EPS (MRQ) vs Qtr. 1 Yr. Ago -71.82 67.50 34.97 -82.95 EPS (TTM) vs TTM 1 Yr. Ago -20.27 -- -- -- EPS - 5 Yr. Growth Rate -7.49 18.51 18.94 15.96 Capital Spending - 5 Yr. Growth Rate 5.14 5.12 3.00 13.81 Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=BT.L 1. BT sales growth as compared with industry index is low, on a 5 year average, but it has pulled up on a one year average leading with competitors. 2. Earnings Per Share is defined as the portion of company’s earnings that is allocated to each share of stock. EPS of BT shows a negative growth rate. (Streetauthority) Table 4. Liquidity. Company Industry Sector S&P 500 Quick Ratio (MRQ) 0.69 1.00 1.26 1.16 Current Ratio (MRQ) 0.70 1.10 1.39 1.41 LT Debt to Equity (MRQ) 473.62 103.05 59.22 78.30 Total Debt to Equity (MRQ) 580.62 137.89 77.55 111.73 Interest Coverage (TTM) -- 0.02 0.01 31.13 Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=BT.L 1. Table 4 discusses liquidity of the company. This gives investors idea on the promptness liquid assets is turned into cash to pay short term obligations. Quick ratio and current ratio of BT is lower than the industry showing difficulty in short term liquidity as compared to the industry. Current ratios should be 1.0 or greater, if it falls below zero, company has a problem in paying obligation. (Investorwords.com) 2, Long term debt to equity is the capitalization leverage of the company, and from Table 3 this means majority of BT’s assets are financed through debt. Table 5. Profitability Ratios   Company Industry Sector S&P 500 Gross Margin (TTM) -- 50.92 51.85 40.73 Gross Margin - 5 Yr. Avg. 82.94 57.40 56.35 40.26 EBITD Margin (TTM) 23.45 -- -- -- EBITD - 5 Yr. Avg 28.05 30.49 31.52 23.17 Operating Margin (TTM) 10.08 13.30 15.53 -- Operating Margin - 5 Yr. Avg. 13.55 12.17 14.44 17.85 Pre-Tax Margin (TTM) 7.68 13.10 14.89 12.87 Pre-Tax Margin - 5 Yr. Avg. 11.07 12.80 15.71 17.57 Net Profit Margin (TTM) 6.19 9.26 9.69 8.86 Net Profit Margin - 5 Yr. Avg. 9.61 7.83 9.64 12.30 Effective Tax Rate (TTM) 19.40 25.04 29.26 27.34 Effecitve Tax Rate - 5 Yr. Avg. 13.20 40.33 38.57 31.74 Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=BT.L Table 5 is a discussion of profitability of operations of BT Plc. The gross margin tells us on the percentage of profit left after deducting costs of sales . This is a measure of how well the company uses its capital and resources and a basis for measuring strength and weakness against competitor.(Business dictionary) BT Plc has a high gross margin, meaning it stands stronger in operation than competitors. Operating margin is what is left for the company after deducting all variable costs. It is the amount available to pay interests on debts and taxes. A high operating indicates healthy operations. BT has a higher operating and net margin than competitors. . Table 6 Management Effectiveness   Company Industry Sector S&P 500 Return on Assets (TTM) 4.51 5.41 6.44 7.86 Return on Assets - 5 Yr. Avg. 7.11 4.49 6.91 8.48 Return on Investment (TTM) 6.84 7.77 8.42 10.92 Return on Investment - 5 Yr. Avg. 11.41 6.42 9.08 11.50 Return on Equity (TTM) 37.23 11.56 11.48 25.54 Return on Equity - 5 Yr. Avg. 72.53 9.41 12.33 20.74 Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=BT.L 1. Return on assets This number simply tells us the efficiency of control of assets that brings profit for every dollar invested and is a best used when comparing competing companies in the industry. BT is a capital intensive company and most likely gives a lower return on asset because of heavy asset capital.(Moneychimp) 2. Return on equity. This is a ratio that tells investors how much profit is generated from the resources provided by the stockholders. This is significant to stockholders that look for a high and growing ROE. ROE and ROI of BT is higher compared to the industry and sector (Investorwords) Table 7. Efficiency   Company Industry Sector S&P 500 Revenue/Employee (TTM) 190,765 42,859,198 105,844,543 919,382 Net Income/Employee (TTM) 11,809 4,364,310 12,036,160 86,121 Receivable Turnover (TTM) 4.35 4.66 4.91 13.23 Inventory Turnover (TTM) -- 10.57 10.70 11.49 Asset Turnover (TTM) 0.73 0.51 0.57 0.87 Source: http://www.reuters.com/finance/stocks/financialHighlights?symbol=BT.L 1. Revenue per employee RPE measures the average revenue generated by each employee of the company. It can be calculated by dividing a firm's revenues by its total number of workers. A rising revenue per employee means company is able to squeeze more sales from each of its workers. RPE of BT employees is low compared to RPE of competitors, which means management is lacking in motivation to employees to produce sales. (Street.com) 2. Net income per employee. The total number of employees of BT as of 2009 is 108,500 (Wikipedia) and Net income per employee is below industry average. This is an alert situation that needs an explanation from BT management. It is an indication that bad things may be happening to the company, (Money Central..) 3. Receivable turnover shows how efficient the company is collecting their accounts receivable. A high ratio indicates efficiency of credit policy, and a low ratio means company should reassess its credit and collection policy. BT receivable turn over is lower than the industry index, meaning, review of credit policies is needed for BT. Analyst Rating. BT Plc is listed in the stock exchange. Price per share as of March 25, 2009 is 11.88 per share. Shown below is analyst rating and recommendation on BT Plc to hold buy. Analyst Ratings Source. Street.com. 2009 Recommendation. The ratio analysis used in the study the valuation and performance of BT Plc shows some doubts on its liquidity, efficiency and operation. Analysts have recommended “Hold Buy” in the stock market. As compared to the industry index, BT Plc has fared lower in many aspects, and would therefore recommend “Hold” to investors until such time issues are cleared. Annex 1 CSR Report format of BT Plc Source: mBT PLC. (2008) Society and Environment Report. References Accounting for Management. Price earning ratio. Definition. Retrieved March 25, 2009 from http://www..accountingformanagement.com/price_earning_ratio.htm BT PLC.com (2008) BT tops Dow Jones Sustainability Index Retrieved March 25, 2009 from http://www.btplc.com/Societyandenvironment/News/DowJones2004.htm BT PLC. (2008) Society and Environment Report. Retrieved d March 25, 2009 from http://www.btplc.com/Societyandenvironment/Ourapproach/Sustainabilityreport/index.aspx Business Dictionary. Gross income. Definition. Retrieved March 25, 2009 from http://www.businessdictionary.com/definition/gross-income.html Investorwords Return on equity. Definition. Retrieved March 25, 2009 from http://www.investorwords.com/4248/Return_on_Equity.html Investorwords. Current ratio. Definition. Retrieved March 25, 2009 from http://www.investorwords.com/1258/current_ratio.html Little K. Is a stock cheap or expensive?. nytimes.com. Retrieved March 25, 2009 from http://stocks.about.com/od/evaluatingstocks/a/Pricesale020305.htm, nytimes.com. . Money Central. Net income per employee. Retrieved March 25, 2009 from http://moneycentral.msn.com/investor/alerts/glossary.asp?TermID=97 Money Chimp. Glossary. Returm on Asset. Retrieved March 25, 2009 from http://www.moneychimp.com/glossary/roa.htm Street Authority. Earnings per share. Definition. Retried March 25, 2009 from http://www.streetauthority.com/terms/e/eps.asp Street Authority. Revenue per employee. Definition. Retrieved March 25, 2009 from http://www.streetauthority.com/terms/r/revenue-per-employee.aspWhat it is: street.com. (2009 March 25) Analyst rating. Retrieved March 25, 2009 from http://www.thestreet.com/quote/BT/details/analyst-ratings.html 3/25/09 Wikipedia. History of BT Plc. Retrieved March 25, 2009 from en.wikipedia.org/wiki/BT_Group - References Accounting for Management. Price earning ratio. Definition. Retrieved March 25, 2009 from http://www.accountingformanagement.com/price_earning_ratio.htm BT PLC.com (2008) BT tops Dow Jones Sustainability Index Retrieved March 25, 2009 from http://www.btplc.com/Societyandenvironment/News/DowJones2004.htm BT PLC. (2008) Society and Environment Report. Retrieved d March 25, 2009 from http://www.btplc.com/Societyandenvironment/Ourapproach/Sustainabilityreport/index.aspx Business Dictionary. Gross income. Definition. Retrieved March 25, 2009 from http://www.businessdictionary.com/definition/gross-income.html Investorwords Return on equity. Definition. Retrieved March 25, 2009 from http://www.investorwords.com/4248/Return_on_Equity.html Investorwords. Current ratio. Definition. Retrieved March 25, 2009 from http://www.investorwords.com/1258/current_ratio.html Little K. Is a stock cheap or expensive?. nytimes.com. Retrieved March 25, 2009 from http://stocks.about.com/od/evaluatingstocks/a/Pricesale020305.htm, nytimes.com. . Money Chimp. Glossary. Returm on Asset. Retrieved March 25, 2009 from http://www.moneychimp.com/glossary/roa.htm Street Authority. Earnings per share. Definition. Retried March 25, 2009 from http://www.streetauthority.com/terms/e/eps.asp Street Authority. Revenue per employee. Definition. Retrieved March 25, 2009 from http://www.streetauthority.com/terms/r/revenue-per-employee.aspWhat it is: street.com. (2009 March 25) Analyst rating. Retrieved March 25, 2009 from http://www.thestreet.com/quote/BT/details/analyst-ratings.html 3/25/09 Money Central. Retrieved March 25, 2009 from http://moneycentral.msn.com/investor/alerts/glossary.asp?TermID=97 Read More