Verizons Financial Health - Essay Example

Table 1 presents the net income, as well as the total assets and liabilities of Verizon from 2001 to 2005. From the given data, the total income increased overall, with a marked decline in 2003 because of the beginning of the Selling, General, and Administrative expenses (ph.advfn.com). The succeeding years thereafter showed an optimistic trend implying an adjustment in the operating system. It can be noted that it was in late 2003 that Verizon  conducted its “broadband industry” innovation (Rosenbush 58), and the rewards of this

Table 1. Income, Total Assets, and Liabilities of Verizon from 2001 to 2005 (ph.advfn.com) 20012002200320042005 Total Net Income (Mil) $ 389.0 $ 4,079.0 $ 3,077.0 $ 7,831.0 $ 7,397.0 Total current liabilities (Mil) $ 38,020.0 $ 27,047.0 $ 26,570.0 $ 23,129.0 $ 25,063.0 Total Assets (Mil) $ 170,795.0 $ 167,478.0 $ 165,968.0 $ 165,958.0 $ 168,130.0   innovation was observed immediately the year after as seen in the total net income of 2004. Assets over the five years remain at almost the same level while the total liabilities are decreasing, with a slight increase in 2005, suggesting a good overall trend. Figure 1 presents data on the profitability of Verizon from 2001 to 2005 namely price to earnings ratio and return on investment (ROI). The observed drop in Verizon’s price to earnings   Figure 1. Profitability measures data of Verizon from 2001 to 2005 (ph.advfn.com) ratio by 2002 shows that the company has begun acquiring better investments and a considerable increase in earnings. Return on investment shows a positive trend over five years with the same noted decrease in 2003 because of the transition in Verizon’s marketing strategy.  The five-year total debt/equity ratio, current ratio, and long-term debt/capital ratio of Verizon are presented in Table 2 (ph.advfn.com). The current ratio of the company from 2001 to Table 2. Current, Debt-to-equity and Debt-to-capital ratios of Verizon from 2001 to 2005  (ph.advfn.com) Solvency Ratios 2001 2002 2003 2004 2005 Current ratio 0.6 0.8 0.7 0.8 0.7 Debt/equity ratio 1.98 1.66 1.36 1.05 0.98 Debt/capital ratio 0.58 0.58 0.54 0.49 0.45   2005 was constant and remained within the normal range of 0.5 to 2.0 (reuters.com). The low and steady current ratio proves a standard cash payment system since the company is service-oriented, with the consumers paying every month (Rosenbush 58). Total debt/equity and long-term debt/capital ratios show that the company’s financial resources are stable and strong enough to pay both the short and long-term debts that it has incurred. The gradual decrease in both debt ratios also suggests that Verizon can manage the payment of its debts properly over the years, implying a steady growth in earnings during this period.  VERIZON AND ITS COMPETITORS Sprint Nextel Corp. and AT&T Inc. are some of Verizon’s competitors in the telecommunications industry (Rosenbush 58). Figure 2 presents a comparison of the profitability of Verizon against its competitors from 2001 to 2005. This shows that over five years, Verizon has been competing with AT&T for market shares. Sprint Nextel Corp. has a negligible effect in terms of competitiveness with the other two companies. The graph suggests    Figure 2. Comparison of the P/E ratios of Verizon and its competitors from 2001 to 2005 (ph.advfn.com)   that Verizon was only able to outrun AT&T beginning in 2004. This shows that Verizon’s marketing strategies in telecom service have helped them regain the consumers that it lost to its competitors in previous years. Read More