Analysis On Financial Statements Economics Essay

Analysis On Financial Statements Economics Essay ATandT Inc. (NYSE: T) is a United States telecommunications corporation headquartered in Texas. Founded in 1983 as SBC Communications, it became AT&T Inc. upon purchase of AT&T Corporation in 2005. It is the leading U.S. provider of wire-line and wireless communications. AT&T delivers 3G wireless services through AT&T Mobility LLC, a wholly-owned subsidiary. Other major segments include broadband internet, digital television, directory publishing, and business communications. In 2006, AT&T Inc. acquired BellSouth communications corporation, valued at $86 billion, absorbing its wire-line, wireless, and broadband interests. AT&T has stated specific future goals in 4G wireless, speech recognition, telehealth, and digital convergence. Recently, AT&T selected Alcatel-Lucent and Ericsson as equipment providers for its LTE (4G) wireless deployments. AT&T has over 150 million customers and 280,000 employees. AT&T reported a $124 billion operating revenue and $23 billion net income as of Dec . 31, 2008. Verizon Communications Inc. (NYSE: VZ) is a United States telecommunications corporation headquartered in New York. It was founded in 1983 as Bell Atlantic. Bell Atlantic acquired GTE Corp. in 2000 and changed its name to Verizon Communications Inc. It is the second largest U.S. provider of wire-line and wireless voice services. Verizon Wireless is a joint venture, with Vodafone Group holding 45 percent ownership. Through its FiOS product, Verizon provides fiber-optic delivery of internet, television, and digital voice. Other major operations include IP networks, applications, and professional services for business. In 2008, Verizon stated its goal to surpass AT&T as the U.S. market leader in wireless voice and data communications in the United States. It is aggressively pushing fiber-optic deployments to combat industry-wide access-line losses. Verizon has over 91 million customers and 220,000 employees. Verizon reported a $97 billion operating revenue and $6.5 billion net income as of Dec. 31, 2008. Balance Sheet – unusual items AT&T:   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  At Dec. 31, 2008, AT&T reported a current ratio of 0.53, and a long-term assets / long-term liabilities ratio of 1.92. This mismatching indicates that too much short-term financing has been used to acquire long-term assets. AT&T may have problems meeting its short-term obligations without additional refinancing. If additional financing cannot be obtained, a lack of asset liquidity poses a bankruptcy risk. At Dec. 31, 2008, AT&T reported goodwill at $71.8 billion, accounting for about 27% of their total reported assets. This stems from AT&T’s aggressive acquisition strategy. The high amount poses a great asset impairment risk. Only losses, not gains, can be recorded for goodwill. If the acquired entities lose value, as judged by an annual impairment test, the loss of recorded assets and corresponding write-offs against stockholders’ equity can be subst antial. Verizon:   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  At Dec. 31, 2008, Verizon reported wireless licenses valued at $62.0 billion. These are indefinite-lived intangible asset which account for 30.6% of Verizon’s total assets. Wireless licenses are extremely important for a telecommunications company, but placing such large valuation on an intangible is a serious risk. Estimating fair value is very subjective, and any significant write-offs (as judged by a periodic impairment test) could threaten stockholders’ confidence. At Dec. 31, 2008, Verizon reported cash and cash equivalents of $9.8 billion. Having such a large amount of cash and cash equivalents (investments with a maturity of 90 days or less) is good for liquidity. However, a significant portion of this $9.8 billion could be converted to less-liquid, higher-interest investments that mature within a year, or even long-term investments. Having so much cash-on-hand is a problem because it is not being inve sted to return additional value to the business.