The Changes in the Economic Environment of Nokia - Essay Example

It is used in finding out how much the company is leveraged in debt, comparing what is owed to what is owned. This is a measure to find out the company’s ability to borrow and repay money. As shown, Nokia has 40% debt leverage in 2009. This figure is 29% higher than its D/E in 2009, and a significant departure from conservative borrowings from 2000 to 2007. Its long-term debt in 2009 amounted to 4.439B representing a 400% increase from 2008 of 861M. Nokia uses the international capital markets to finance investments.

The company sells stock, issue bonds, and obtain loans from commercial banks. The Nokia is a public limited liability company listed on the Helsinki, Frankfurt, and New York stock exchanges. Recent share price is offered at 9.64 € (Yahoo finance) Nokia has the same outstanding shares of 3.7bil for 2009 and 2008. This is a decline from its previous years’ outstanding shares which are above 4bil. from 2000 to 2007. (msn) Based on the figures derived from the company’s financial statements for 10 years, the company is still in a healthy financial position.

Its short-term operations have been affected by the economic recession as shown by the decline of sales and revenue for 2009 and 2008. Yet, the company has remained financially strong to pay its obligations. In 2009, the company has changed its strategy in a capital structure using more debts in financing its resources. As it is, the company is 40% leveraged and 60%f equity. At 40%, debt leverage is still a good balance as it is not more than the total equity. The company tends to have additional benefits in this capital structure such as tax advantage.

In conclusion, Nokia can be a safe investment because of its strength has been in business for many years. It operates worldwide and does not concentrate on US market alone. Its weakness lies in technology which is slow in responding to competition’s design. Opportunities remain strong for worldwide operations as communication is an important commodity for everybody. The threat is the fast-changing technology that has to be addressed by Nokia through continued research and development.