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The Comparative Study and Performance

Evaluation of Major Telecom Providers in India

ABSTRACT:
Every company has its primary aim to Growth with the changing times
increase in competition has become their core competencies and should have
competitive edge over others. The Business matrices like Net sales, Profit after tax,
Total revenue, Total expenditure etc.; and level of satisfaction of the customers are
important indicators of representing a company in the market. A comparative
analysis of the major telecom providers like Bharti Airtel, Vodafone, Bharat
Sanchar Nigam Limited (BSNL) in India. In this paper on the basis of secondary
data which includes last Four Years Profit after tax, Total revenue, Total
expenditure etc.; has been collected to measure the level of satisfaction of the
Indian Telecom Providers customers. An empirical study has been done and
conclusions have been brought out on the basis of the data collected through online
to achieve this objective. The thesis applies the performance evaluation of the
major telecom providers in India. It means to evaluate how well the company is
performing to achieve their goals through ratio analysis of the major telecom
providers in India. The main data collection from the annual reports of the major
telecom providers in 2014-2016. Different financial ratios are evaluated such as
Liquidity, Debt, Asset management, Profitability and Market ratios. As
mathematical calculation is most important factor to evaluate the ratio analysis of
the company. In this paper the conclusion is that
Contents:
Abstract
1. Introduction
a. Back ground
b. Purpose and thesis questions
c. Limitation of study
d. Thesis outline
2. Literature Review
3. Methodology
a. Data collection
b. Data analysis
c. Formula for ratio analysis
4. Results and Analysis
a. Liquidity ratio
b. Debt coverage ratio
c. Asset management ratio
d. Profitability ratio
e. Market value ratio
5. Conclusion and Recommendations
6. References
1. INTRODUCTION
This chapter gives an introduction to the thesis and the general background of the
subject is followed by the thesis purpose, questions, limitations of the study and
thesis outline.
a. Background:
Performance evaluation of a company is usually related to how well a
company can use it Assets, Shareholders funds, Revenue, Expenses. Financial
analysis is one of the best tool to evaluate the performance of a company. In order
to determine the financial position of the major Telecom Providers and to make a
judgement how well their operations and efficiency are managed and how well
they are able to utilize their assets and earn profits.
I used ratio analysis for easily measurement of the liquidity position, debt
coverage situation, asset management condition, profitability and market value of
the major broadband service providers for the performance evaluation. The
analysis determines the greater the coverage liquid assets to short term liabilities
and compute the ability to pay the mortgage payments from the cash generate by
the major Telecom providers.
I am choosing the three major Telecom Providers in India.
1. Bharti Airtel:
Bharti Airtel is an Indian global telecommunications services
company based in New Delhi. It operates in 18 countries across south Asia and
Africa. Airtel provides GSM, 3G and 4G LTE mobile services, fixed line
broadband services and voice services depending upon the country of
operation. Bharti Airtel is the largest Broadband Service Provider in India with
400 million subscribers as of June 2016. The company complements its
mobile, broadband and telephone services and internet access with national and
international long distance services. It also has a submarine cable landing
station at Chennai which connects the submarine cable connecting Chennai and
Singapore.
2. Vodafone:
Vodafone India is the second largest mobile network operator in India
by subscriber base after Airtel with a market share of 18.42%. It has
approximately 200 million customers as of August 2016. Vodafone India
provides services on basis of 900MHz and 1800 MHz digital GSM technology.
Despite the official name being Vodafone communications, its products are
simply branded Vodafone.
3. Bharat Sanchar Nigam Limited (BSNL):
Bharat Sanchar Nigam Limited is an Indian state-owned telecommunications
company headquartered in New Delhi, India. It is incorporated On 15
September 2000 and took over the business providing of telecom services and
network management from erstwhile Central Government Department of
Telecom services (DTS) and telecom operations (DTO) with effect from 1
October 2000 on a going concern basis. It is largest provider of fixed
telephony, largest broadband service provider with more than 60% market
share and fifth largest mobile telephony provider in India. However, in recent
years the companys revenues and market share have plummeted into heavy
losses due to intense competition in the Indian telecommunications sector.
BSNL is Indias oldest and largest communication service provider with a
customer base of 255.73 million as of June 8, 2016.

b. Purpose and thesis questions:


The purpose of this study is a comparative analysis and performance
evaluation of major Telecom providers in India. I will analyze the financial
conditions of the three major Telecom providers in India.

Thesis questions:

What is the performance of the companies related to liquidity


ratios?
What is the performance of the companies related to debt
coverage ratios?
What is the performance of the companies related to asset
management ratios?
What is the performance of the companies related to
profitability ratios?
What is the performance of the companies related to market
value ratios?
Which is the best performer among major three Telecom
providers?

c. Limitation of study:
There is some limitation of this thesis. When we used the main methods
of ratio analysis for comparative study and performance evaluation of the
major Telecom providers. We can face different kinds of problem to achieve
the good performance evaluation we need to choose a ratio that is suitable.
This means that data must be correct, otherwise calculations of ratio may be
erroneous. In some cases, we cant find the items to analysis the ratio such
as common shareholder equity, market value of share, book value of share,
interest charged etc. as result we cant complete ratio analysis and also cant
compare among the major telecom providers.

d. Thesis outline:

Chapter: 01 Chapter: 02
Introduction Literature review

Chapter: 04 Chapter: 03
Result and analysis Methodology

Chapter: 05 Chapter: 06
Conclusion and References
recommendations
Chapter: 01- Introduction
The introductory chapter will lay out the general structure and framework of
the thesis. And explains the purpose and thesis questions, limitation of the study
and thesis outline.

Chapter: 02- Literature review


This chapter will review, analyze and summarize of all article those are used in
thesis.

Chapter: 03- Methodology


In this chapter I have shown the representation of how the data to be
collected, data analysis, model and formula to be used in thesis.

Chapter: 04- Result and analysis


In this chapter the process of the data, mathematical calculation of the major
broadband service providers, graphical analysis, statistical analysis, comparative
statement of the major broadband service providers, outcome of the analysis and
declaration of the best one among the major telecom providers.
Chapter:05- Conclusion and Recommendations
In this chapter thesis conclusion show that the best performer among the major
telecom provider and recommendation
Chapter:06- References
2.LITERATURE REVIEW
In this chapter I will discuss the summary of literature. In this paper I have
discussed about the Financial analysis for Comparative study and Performance
evaluation. It helps to evaluate the performance of the company so that investors
can decide whether to invest in that company. The different aspects of performance
such as liquidity, solvency, asset management, profitability and market value
ratios.
Liquidity ratios: It is analysis of the financial statements used to measure the
company performance through analyzing the income statement and balance sheet.
Investors and lenders will often use ratio analysis of the financial statements to
determine a companys profitability and liquidity position. If the ratios indicate
poor performance investors may be reluctant to invest. It is divided into three
categories:
a. current ratio: The current ratio or working capital ratio measures current
assets against current liabilities. It measures the companys ability to pay
back its short term debt obligations with its current assets.
Current ratio= current assets/current liabilities
b. Quick ratio: The quick ratio or acid test ratio measures the quick assets
against current liabilities. Quick assets which can be easily convert into cash.
Quick ratio= quick assets (current assets- {stock + prepaid
expenses})/current liabilities
c. Cash ratio: The cash ratio measures cash plus short investment against
current liabilities.
Cash ratio= Cash + short investment/ current liabilities
The liquidity ratios help good financial that a business has high profitability
and it can face short term financial problems. Any failure to meet these can
damage its reputation and creditworthiness and in extreme cases even lead to
bankruptcy.
Debt coverage ratios (or) solvency ratios:
The ratio of debt to equity has implications for return on equity ratios check the
financial structure of the business by comparing debt against total capital, total
assets against owners funds. This ratio helps to check how leveraged a company is
and also the financial plans of the company in difficult times. The debt ratios are
categorized into six. They are:
Debt ratio= Total liabilities/Total assets
Debt to equity ratio= total liabilities/shareholders fund
Term debt ratio (capitalization ratio) = long term debt / {long term debt +
shareholders fund}
Interest coverage ratio= PBIT/interest expense
Price/earnings ratio (p/e ratio) = stock per share/ earnings per share
Dividend yield ratio = annualized dividend per share/ stock price per share
Debt ratios and interest coverage ratios are related to check the soundness of a
companys financing policies. Debt funds can enhance returns to owners and high
debt can mean that the company will find it difficult to raise funds during lean
periods of business. The debt collection and debt recovery tools a company guide
to using debt solution tools for effective debt collection, credit insurance.

Asset management ratio:


Asset management ratio is different types of categories. They are:
1. I used to analyze accounts receivable and other working capital figures to
identify significant changes in the companys operations and financial
accounts. Accounts receivable is an important analytical tool for measuring
the efficiency of receivables operations. Many companies sell goods and
services on account that a customer purchases goods and services from a
company but does not pay for them at the time of purchase the payment will
make within short period of time ranging from a few days to a year
Account receivable turnover = sales/ average accounts receivable
Average age of accounts receivable (or) collection period = 365days/
accounts receivable turnover
2. The performance of inventory analysis and inventory turnover analysis is
used for better understanding of business as well as to identify the effective
inventory management. I analyze that companys financial performance
definitely includes performing inventory analysis. The inventory is
categorized into three parts. They are a. Raw material b. work-in- progress c.
finished goods
Inventory turnover ratio= cost of goods sold/average inventory
Average age of inventory = 360 Days / inventory turnover
3. Total revenue and average assets is to determine the turnover ratio while
calculating for a particular year the total revenue for that will be used instead
of using the year ending assets total from the balance sheet. The average
assets are to be determined for the same period that revenue is compared.
Asset turnover ratio= total revenue/ average assets
4. Fixed assets are the assets used in production or supply of goods and
services which are used to be within the business for more than one financial
Year. Fixed assets represent the companys long term income generating
assets and they can be neither tangible or intangible.
Fixed asset turnover ratio= sales/ net fixed assets
Profitability ratios:
The profitability ratio means the analysis of income and balance sheet statement
are used to measure the companys profit performance and shows the report of
profit and net worth of the company. This analysis shows how well the company is
doing in terms of profits compared to sales, assets are performing in terms of
generating revenue and also shows the net profit of the company by subtracting
expenses from gross profit. The profitability ratios measures margins and returns
such as gross, operating, net profit, ROA, ROE, ROCE ratios.
Gross profit is the surplus generated by sales over cost of goods sold.
Gross profit margin= gross profit/net sales or net revenue
Operating profit arrived by deducting the marketing, administration and
depreciation costs from the gross margin.
Operating profit margin = operating profit/ net sales or net revenue
Net profit margin: It shows the relationship between sales and profits and it
is also called as operating performance ratio because it is good indication of
operation efficiencies.
Net profit margin = Net profit/net sales
Return on assets: Return on assets is an important percentage that shows the
companys ability to use its assets to generate income.
ROA = net profit/ {total assets at beginning +total assets at end/2}.
Return on equity= net profit/ {shareholders fund at beginning +
shareholders fund at the end /2}
Return on capital employed= net profit / {average shareholders equity +
average debt liabilities}- debt liabilities
3.METHODOLOGY
This chapter describes how the data collection needed in order to fulfill the purpose
and discuss how to present the model and formula in the thesis. We used
quantitative approach for our thesis because the majority of data collection from
the quantitative approach.
a) Data collection:

Main data for the thesis are the annual reports of major telecom providers
(Bharti Airtel, Vodafone, BSNL) from 2013 to 2016. When we measured the
ratio analysis for any company, we must use the annual report.
I have used four main financial statements for ratio analysis of major
telecom providers such as balance sheet, income statement, cash flow
statement, statement of shareholders equity.

b) Data analysis:
I used this model for comparative study and performance evaluation of
major telecom providers. It indicates the different steps such as selection of
annual report, identification of balance sheet, income statement, cash flow
statement, ratio analysis, mathematical calculation, statistical analysis of
companies, comparison among three companies and finally declaration of
best one among the three companies.
Selection of Annual report: The Annual report present financial data
of a companys position, operating performance and funds flow for an
accounting period. we use annual reports of three companies from
2013 to 2016.
Identification of balance sheet, income statement and cash flow
statement from the annual report. I used some data from balance sheet
for finding different ratios such as liquidity, debt coverage, asset
management ratios. And from income statement I analyzed the
profitability and debt coverage ratios. From cash flow statement I
market value ratios.
Identifying the ratios for the comparative study and performance
evaluation such as liquidity, asset management, profitability, debt
coverage and market value ratios. These ratios are important for
analyzing how well a company can generate its assets, liquidity,
revenue, expenses, shareholder equity and profits or losses.
Mathematical calculations: The mathematical calculations have
been used for three companies from the income statement and balance
sheet.
Graphical analysis: The graphical analysis is an inexpensive, easy to
learn program for producing, analyzing and printing graphs. I used
Microsoft excel for graphs of three companies.
I compared all the ratios like liquidity, solvency, asset management,
profitability and market value ratios among the three companies. I
also commented why company better than other company and also
discuss why not those companies is not good position while
comparing with others.
Declaration: The best one among three declared and can easily
measure the best one because we use different kinds of ratios and
know the result of comparative study and performance evaluation of
the three companies.
Formula for ratio analysis:
I used different types of formula for calculation of different kinds of ratio. I
collected some formula from IPCC Financial management text book by ICAI. And
also collected some data from accounting principles by Weygand. Formula is the
most important thing the thesis to calculate the ratio analysis for the comparative
study and performance evaluation of three companies.
Liquidity ratio
Current ratio = current assets/current liabilities
Quick ratio = current assets {stock + prepaid expenses}/current liabilities
Cash ratio = cash + short investments/ current liabilities
Debt coverage ratio
Debt ratio = total liabilities/total assets
Interest coverage ratio = EBIT/Interest expense
Debt to equity ratio = long term liabilities/shareholders fund
Proprietary ratio = shareholders fund /capital employed
Asset management ratio
Account receivable turnover = sales / average accounts receivable
Average collection period = 360 Days/ accounts receivable turnover
Inventory turnover ratio = cost of goods sold/average inventory
Fixed asset turnover ratio = net sales/net fixed assets
Total asset turnover = sales/total asset
Profitability ratio
Gross profit margin = gross profit/ sales
Operating profit margin = operating profit/sales
Net profit margin = net profit/sales
Return on total assets = pat/total assets
Return on common stock equity = net income/common stockholders fund
Market value ratio
Earnings per share = net income / weighted average number of share outstanding
Book value per share = common stockholders equity/outstanding shares
Market/Book ratio = Market price per share/ book value per share
4.RESULT AND ANALYSIS
In this part I present the result from the data analysis. This part is separate into five
categories. At first, I examined briefly the performance of the liquidity position of
the three telecom providers, presentation of the asset management condition of
those companies, I demonstrated the performance of the profitability of those
companies, debt management position and representation of market value of those
companies.

1. Liquidity ratio:

Liquidity ratio refers to the ability of the company to interact its assets which
are most readily converted into cash. Assets are converted into cash in a
short period of time that are concerned to liquidity position. It is the
relationship between cash and current liability.
The liquidity ratio is categorized into:
Current ratio
Quick ratio
Cash ratio

Current ratio: The current ratio is calculated by dividing current assets by current
liabilities. Current assets include inventory, trade debtors, advances, deposits,
repayment, investment in marketable securities in short term loan, cash and cash
equivalents. Current liabilities include short term bank loans, long term loans, trade
creditors, liabilities for other finance etc. Current ratio is acceptable of short term
creditors for any company.

The formula is shown below:


Current ratio = current assets/current liabilities
(in crores)

Year Bharti Airtel Vodafone BSNL


2016 22154900/58107200 3559500/4223500 1.13/6.386=0.176
= 0.38127 =0.8427

2015 26765500/63443500 2306800.31/3358700.18 10.276/4.054=2.5347


= 0.42187 =0.6868

2014 22385700/56805000 2873400.55/2910300 9.827/5.089=1.93102


= 0.39407 =0.9873

Current ratio

2.5

1.5

0.5

0
2016 2015 2014
Bharti Airtel Vodafone BSNL
Analysis: A Current ratio of 1.0 or greater is an indication that the company is
well-positioned to cover its current or short liabilities. If it is less than 1.0 could be
a sign of trouble that the company runs into financial difficulty. According to the
above data all the three telecom providers are less than 1.0 it could be a sign of
trouble that the telecom providers runs into financial difficulty.

Quick ratio (or) acid test:


Quick ratio or acid test ratio is estimating the current assets minus inventories then
divide by current liabilities. It is easily converted into cash at turn to their book
values and it also indicates the ability of a company to use its near cash.

The formula of quick ratio or acid test ratio are as follow as;
Quick ratio = (current asset {inventories + prepaid expenses})/current liabilities
(in crores)
Year Bharti Airtel Vodafone BSNL

2016 22154900- 3559500- 1.13- (2.23+0)/6.386


(1692+0)/58107200 (71600+0)/4223500 =(0.176)
=0.38127 =0.825
2015 26765500- 2306800.31- 10.276- (2.031)/4.054
(7699+1211700)/ (56000+322700)/3358700 = 2.033
63443500 = 0.57406
= 0.40265
2014 22385700- 2873400.55- 9.827-
(13637+885100)/ (51200+437000)/2910300 (2.094+0)/5.087=1.519
56805000=0.3782 =0.81957
2.5

1.5

0.5

0
2016 2015 2014

-0.5

Bharti Airtel Vodafone BSNL

Analysis:
Quick ratio less than 1 indicates that the companys sales are decreasing or balance
sheet is over-leveraged and also it is having a hard time in collecting accounts
receivables. If it is greater than 1 it indicates that the company experiencing
revenue growth and collecting accounts receivables. According to above data all
the three telecom service providers are less than 1 which indicates that the sales are
decreasing and balance sheet is over-leveraged and it is having hard time in
collection of account receivables. The quick ratio is not a perfect indicator to
assume the liquidity of all current assets that comprise to cover the short term debts
since the company still needs a level of working capital to remain a going concern.
Cash ratio:
The cash ratio is estimate to current liabilities into cash. It can be taken that the
company can pay off its current liabilities in the given year from its operation. It is
the most famous ratio for realize the liquidity position of any company. Generally,
we know that current ratio and quick ratio is not good way to analysis the liquidity
position for a company because it is corresponding of account receivable and
inventory which takes time to convert into cash. Finally, we can express that the
cash ratio gives a better result.
The formula for current ratio is as below;
Cash ratio= cash/ current liabilities

(in crores)
Year Bharti Airtel Vodafone BSNL

2016 8892800/58107200 1825900/4223500 1.061/6.388=0.166


=0.1530 =0.4323
2015 10455900/63443500 1247900/3358700 2.168/4.054=0.5347
=0.16480 =0.3715
2014 11207300/56805000 1691500/2910300 0.378/5.089=0.074
=0.1972 =0.58121

0.6

0.5

0.4

0.3

0.2

0.1

0
2016 2015 2014

Bharti Airtel Vodafone BSNL


Analysis:

Cash ratio is not realistic for a company to maintain excessive levels of cash and
near-cash assets to cover current liabilities. According to the above data Vodafone
is maintaining excessive level of cash and near cash assets to cover its current
liabilities while compared with other providers.

Debt Coverage ratio


Debt coverage ratio measures the percentage of the total asset provided by creditor.
If any company has realized their debt coverage ratio less than 1 then the company
understand their income greater by a property is insufficient to collect their
mortgage. So more than is 1 is best for any company.
Debt ratio:
Debt ratio is laid out the percentage of a company total asset the change into total
debt. It is the most important financial ratio for performance evaluation of the three
Broadband service providers.
The ratio is calculated as follows:
Debt ratio= total liabilities/total assets*100
(in crores)
Year Bharti Airtel Vodafone BSNL
2016 158953800/225723100 8578200/16910700=0.507 7.533/22.819=0.3301
= 0.7041
2015 139288000/195781800 6558600.66/14246700.45=0.4603 6.581/21.76=0.3107
=0.7114
2014 123421200/183177200 5932100.82/14161500.48=0.4188 7.016/20.728=0.3384
=0.6737
Debt ratio

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2016 2015 2014
Bharti Airtel Vodafone BSNL

Analysis:
In this problem analysis we see that the percentage of ratio has decreased from
2015 to 2016 in the Bharti Airtel because their asset was increased at a higher rate
than from the last year. If any company debt ratio decreases day by day, it is a
good indicator for that company. While comparing with other two it is opposite to
Bharti Airtel because those companys debt ratio has increase than last year. For
this reason, those companies cant stand in the good position. Therefore, Bharti
Airtel is better than Vodafone and BSNL.

Debt equity ratio:


Debt equity ratio is a debt ratio used to measure a companys financial leverage
calculated by dividing a companys total liabilities by its stockholders equity. The
debt equity ratio indicates how much debt a company is using to finance its assets
relative to the amount of value represented in shareholders
The formula for calculating debt equity ratio is as follows;
Debt equity ratio= total liabilities/ shareholders fund
(in crores)
Year Bharti Airtel Vodafone BSNL
2016 46321800000/84446800000 293270000/67317000 83106.1/439130.7=0.1892
= 0.5485
=0.4356
2015 24027200000/78272900000 224350000/677330000 37853.4/478494.0=0.079
=0.306
=0.3312
2014 11420600000/66728000000 214540000/717810000 118568.0/575333.2=0.206

=0.171 =0.2988

Debt Equity ratio

0.6

0.5

0.4

0.3

0.2

0.1

0
2016 2015 2014

Bharti Airtel Vodafone BSNL

Analysis:

If a firms debt-equity ratio varies significantly from its competitors or the averages for
its industry, this should raise a red flag. Companies with a ratio that is too high can be at
risk for financial problems or even a default if they cant meet their debt obligations.
Interest coverage ratio:
The time interest earned ratio indicates the companys ability to meet interest
payment as they come due. It is calculated by dividing their earnings before
interest tax by the interest charged. The company able to pay its annual cost
because this ratio denote the annual interest charged for any company.
Interest coverage ratio = earnings before interest and tax/interest charged
(in crores)
Year Bharti Airtel Vodafone BSNL
2016 5846900/18795600=0.311 132000/150700=0.8759 1.075/0.048=22.395
2015 3515300/14837100=0.236 228600.26/98300.31=2.325 1.279/0.0152=8.414
2014 3644700/12181200=0.299 454800.11/125500.29=3.623 1.147/0.0128=8.9609
INTEREST COVERAGE RATIO

25

20

15

10

0
2016 2015 2014

Bharti Airtel Vodafone BSNL

Analysis:
In this discussion I realize that the higher ratio of time earned, it will have
indicated the higher the company ability to pay the interest from their opportunity
income. A declining interest coverage ratio is something for investors to be wary
of, as it indicates that a company may be unable to pay its debts in the future.
According to the above data BSNL is having higher ratio of time earned which
indicates that the company ability to pay interest from their income will be high
while comparing with other to they are declining in interest coverage ratio that
indicates that they are unable to pay them in future.

Asset management ratio


Asset management ratio are most notable ratio of the financial analysis. It
measures how effectively a company uses and control its assets. It analyzes how a
company quickly converted to cash or sale on their resources. It is also called
turnover ratio because it indicates that asset converted or turnover into sales.
Finally, we can recognize the company that company can easily measure their asset
because this ratio is between assets and sales.

Accounts receivable turnover:


The account receivable turnover is comparison of the size of the company sales
and uncollected bills from customers. If any company is difficult to collect money
so it has large account receivable and also indicates the low ratio.
Account receivable turnover ratio formula is
Account receivable turnover ratio= sales/ account receivable
(in crores)
Year Bharti Airtel Vodafone BSNL

2016 96619200/6576700=14.69 4981000/611700=8.142 13.581/3.221=4.216

2015 92135100/6220400=14.811 4908000.73/473800.73 12.667/5.788=2.188


=10.357
2014 85863500/5777200 4456900.82/429400.72 11.94/6.986=1.709
=14. 862 =10.3778

ACCOUNT RECEVIABLE TURNOVER


16

14

12

10

0
2016 2015 2014

Bharti Airtel Vodafone BSNL

Analysis:

Average collection period:


The average collection period is referring the average number of days of the
company. It maintains the company to collect its credit policy. It has made good
relationships between account receivable and outstanding payment. It measures the
average number of days customers take to pay their bills to divide by account
receivable turnover. The average number of day also indicate the 360 days.
The equation of average collection period is following as;
Average collection period= 360 days/ accounts receivable turnover

(in crores)
Year Bharti Airtel Vodafone BSNL

2016 360/14.69=24.50days 360/8.142=44.215days 360/4.216=


85.38days
2015 360/14.811=24.306days 360/10.357=34.759days 360/2.188=
164.53days
2014 360/14.862=24.22days 360/10.3778=34.689days 360/1.709=
210.64

AVERAGE COLLECTION PERIOD


(in crores)
Chart Title

250

200

150

100

50

0
2016 2015 2014

Bharti Airtel Vodafone BSNL

Analysis:
As a result, I recognize the average collection period had decreased from 2015 to
2016 for both Vodafone and BSNL. A low ratio indicates good collection period
and its also indicates of high cash balance whereas Bharti Airtel had increased
from 2015 to 2016 a high ratio indicates bad collection period and also indicates
low cash balance. If company increase the sale those company ultimately earn
profits.
Account payable turnover:
The accounts payable turnover ratio is computed by account payable to sales. It
measures the tendency of a company credit policy whether extend account payable
or not.
The account payable turnover ratio equation is as follow as:
Accounts payable turnover = sales/ account payable
(in crores)
Year Bharti Airtel Vodafone BSNL
2016 96619200/25580600=3.777 4981000/1791500=2.780 13.581/1.216=11.168
2015 92135100/10329100=8.919 4908000.73/592500.44=8.283 12.667/1.942=6.5226
2014 85863500/10576300=8.118 4456900.82/553300.74=8.054 11.94/1.139=10.482

12

10

0
2016 2015 2014

Bharti Airtel Vodafone BSNL

Analysis:
This analysis shows that there is opposite in accounts receivable turnover. Here in
Bharti Airtel has decreased by 2015 to 2016. It is the signal for the company that
there are maintaining a low accounts payable so we can say that the company pays
their accounts payable immediately. As a result, there is allow balance of cash. In
other two companies has gone opposite that ratio is increase compare than previous
year. So it is important for that companies because these company has high cash
balance. As result I confirm that Vodafone and BSNL is good condition compare
than Bharti Airtel service provider.

Account payable turnover in days:


Account payable turnover in days is represent that the number of days of a
company to pay their liability to their creditor. In any company if number of days
is more than the company is stretching account payable otherwise the company is
not holding their account payables. It evaluates the account payable turnover by
exchange into 360 days.
Accounts payable turnover in days=360days/accounts payable turnover

Year Bharti Airtel Vodafone BSNL

2016 360days/3.777 360days/2.780 360days/11.168


=95.31 =129.496 =32.23
2015 360days/8.919 360days/8.283 360days/6.5225
=40.36 =43.462 =55.192
2014 360days/8.118 360days/8.054 360days/10.482
=44.345 =44.69 =34.34

AVERGAGE COLLECTION PAYABLE PERIOD


140 129.496

120
95.31
100

80
55
60 44.345 44.69
40.36 43.462
32.23 34.34
40

20

0
2016 2015 2014

Bharti Airtel Vodafone BSNL

Analysis:
From this analysis I can express that the Bharti Airtel has increase double of this
ratio from 2015 to 2016. It broken that the account payable is standard position.
Conversely the Vodafone and BSNL also increases but not more than so Bharti
Airtel changed their creditor policy and tried to pay the payable as possible as to
increase current liability.

Inventory turnover ratio:


The inventory turnover ratio measures the number of the times on average the
inventory was sold during the period. The ratio is calculated by cost of goods sold
by inventory.
Inventory turnover ratio= cost of goods sold / inventory
(in crores)
Year Bharti Airtel Vodafone BSNL
2016 31099000/169200=183.80 3671300/71600=51.275 3.37/2.23=1.5112
2015 32041900/769900=41.61 3589400.36/56000.23=64.07 -
2014 31385300/1363700=23.01 3247700.18/51200.58=63.3602 3.34/2.094=1.595
INVENTORY TURNOVER

200
180
160
140
120
100
80
60
40
20
0
2016 2015 2014

Bharti Airtel Vodafone BSNL

Analysis:
In this analysis I identify that the continuous improvement of inventory turnover
ratio the years 2014,2015 and 2016 in Bharti Airtel, Vodafone and BSNL Service
providers. I understood that the cost of goods sold is increasing day by day as well
as the turnover is also increasing because the increasing rate of sales is higher than
average inventory. High ratio indicates inventory is selling quickly and that little
unused inventory is being stored. Generally, it is important that they are holding
much more inventory, which has make up the cash balance. So for the confirm that
the three providers capture much more inventory to be in best position.

Fixed asset turnover ratio:


Fixed asset turnover ratio is the sales to the value of fixed asset of the company. It
determines the effectiveness in generating net sales revenue from investments in
net property, plant and equipment back into the company evaluates only the
investments.
Fixed asset turnover = sales/ net fixed asset
(in crores)

Year Bharti Airtel Vodafone BSNL

2016 96619200/177994700=0.5428 4981000/9407900=0.5294 13.581/20.35=0.6673

2015 92135100/208059700=0.4428 4908000.73/14220000 12.667/10.655=1.1883


=0.34515
2014 85863500/200257400=0.4287 4456900.82/10738500.55 11.94/14.497=0.823
=0.41504

FIXED TURNOVER

1.2

0.8

0.6

0.4

0.2

0
2016 2015 2014

Bharti Airtel Vodafone BSNL

Analysis:
In this ratio I found that fixed asset turnover ratio was as high as in 2015 1.18 in
BSNL compare than other two companies. However, it decreased to 0.6673 in
2016. In contrast the two providers have rapid declination of fixed assets turnover
ratio in2016 occurred because sales and net fixed assets the increase of companies.
I mention that balance sheet shows that large amount of investments were made
during that year that inflate the money volume of fixed assets and give an
impression of mismanagement.

Total asset turnover ratio:


The total asset turnover ratio measures the ability of a company to use its assets to
generate sales. It considers all assets including property, plant and equipment,
capital working in process, investment long term, inventories, trade debtors,
advances, deposit and prepayment, investment in market securities, short term
loan, cash and cash equivalents etc. In these criteria a high ratio means the
company is achieving more profit.
The formula is following as:
Total asset turnover=sales/total asset
Year Bharti Airtel Vodafone BSNL

2016 96619200/225723100=0.4280 4981000/16910700=0.29 13.581/22.819=0.595


2015 92135100/195781800=0.4706 4908000.73/14246700.45 12.667/21.176=0.598
=0.3445
2014 85863500/183177200=0.468 4456900.82/14161500.48 11.94/20.728=0.5760
=0.3147
TOTAL ASSET TURNOVER

0.6

0.5

0.4

0.3

0.2

0.1

0
2016 2015 2014

Bharti Airtel Vodafone BSNL

Analysis:
In this analysis we see that a gradual fall of companys total asset turnover in 2015
declined to 0.447 times in Bharti Airtel. Instead the Vodafone and BSNL also
declined slightly. It may be an indicator of companys pricing strategy as company
with high profit margins trends to have low asset turnover. It is in fact might be
one of the reason for why the assets turnover was low in the year 2016 for all three
providers other than investment in marketable securities every other asset
especially long term investments, inventories, short term loans and cash balance
had gone up substantially profit margin may not be the actual reason for the
turnover to go down.
Profitability ratio:
Profitability ratio designate a companys overall efficiency and performance. It
measures the company how to use of its assets and control of its expenses to
generate an acceptable rate of return. It also used to examine how well the
company is operating or how well current performance compares to past records of
the three major broadband service providers.
Gross profit margin:
Gross margin express of the company efficiency of raw material and labor during
the working process. If any company higher gross profit margin, then the company
is more efficient to control their raw material and labor. So it is most important for
comparative study and performance evaluation of three broadband service
providers. It can be assigned to single products or entire company.
The gross profit margin ratio formula as follows;
Gross profit margin= gross profit/ sales*100
(in crores)
Year Bharti Airtel Vodafone BSNL

2016 65520200/96619200 1309700/4981000 10.212/13.581


=67.81% =26.28% =75.19%
2015 60093200/92135100 1318600.37/4908000.73 -
=65.22% =26.86%
2014 54478200/85863500 1209200.64/4456900.82 8.6/11.94=72.02%
=63.44% =27.13%

Gross profit margin


80.00%

70.00%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
2016 2015 2014

Bharti Airtel Vodafone BSNL

Analysis:
The gross profit margin has slightly decreased in 2016 compare with 2015 in
Vodafone and BSNL providers. On the contrary, in 2016 sales has increased as
well as gross profit margin has also increased for the Bharti Airtel to increase
profit margin they should try to decrease their cost of goods sold. I think that
Bharti Airtel is best performing because their gross profit is increase day by day.
Net profit margin:
The net profit margin is determined of net profit after tax to net sales. It argues that
how much of sales are changeover after all expenses. The higher net profit margins
are the better for any three broadband service providers.
Net profit margin = net profit after tax/ sales * 100

(in crores)
Year Bharti Airtel Vodafone BSNL
2016 6076700/96619200 (540500)/4981000 0.948/13.581
=6.28% =10.851% =6.98%
2015 5183500/92135100 669600.05/4908000.73 (0.496)/12.667
=5.625% =14.25% =(3.915%)
2014 2772700/85863500 6887100.33/4456900.82 (0.12)/11.94
=3.229% =154.52% = (1.005%)

160.00%

140.00%

120.00%

100.00%

80.00%

60.00%

40.00%

20.00%

0.00%
2016 2015 2014
-20.00%
Bharti Airtel Vodafone BSNL

Analysis:
In this analysis I think net profit margin has increased in 2016 compare than last
year in Bharti Airtel because net profit and sales increase from last year. As a
result, this company is standard in position. Instead I also see other two providers
in both years this net profit and sales is little bit increase not more than.
Return on assets ratio:
Return on asset ratio can be directly computed by dividing net income by average
total asset. It finds out the ability of the company to utilize their assets and also
measure of efficiency of the company in generating profits.
Return on assets= net profit after taxes/ total assets*100
(in crores)
Year Bharti Airtel Vodafone BSNL
2016 6893000/225723100=3.053 512700/16910700=3.03 0.809/22.819=3.545

2015 5308300/195781800=2.711 681100.12/14246700.45=4.780 1.116/21.176=5.27

2014 3019400/183177200=1.648 1314800.02/14161500.48=9.284 1.0/20.728=4.824

Return on assets

10
9
8
7
6
5
4
3
2
1
0
2016 2015 2014

Bharti Airtel Vodafone BSNL

Analysis:
Return on equity:
Return on equity is compute by dividing net income less preferred dividend by
average company stockholder equity. It demonstrates how a company to generate
earnings growth for using investment fund. It has some alternative name such as
return on net worth.
Return on common stock equity = net income/ common stockholders equity *100
Year Bharti Airtel Vodafone BSNL
2016 3799800/66769300 (540500)/8332500 0.948/22.819=4.154
=5.6909 =(6.4866)
2015 6076700/56493800 669600.05/7688000.79 (0.496)/21.176=(2.342)
=10.75 =8.7096
2014 5183500/59756000 6887100.33/8229300.65 (0.12)/20.728=(0.578)
=8.674 =83.68

Return on Equity

90

80

70

60

50

40

30

20

10

0
2016 2015 2014
-10
Bharti Airtel Vodafone BSNL
Market value ratios:
The final ratios are the market value ratio. It referred to the stock holder in
analyzing present and future investment in a company. In this ratio the
stockholders are interested in the way to certain variables affect the value of their
holdings. In order to the stockholder is able to analyze the likely future market
value of the stock market.
Earnings per share(EPS) ratio:
Earnings per share ratio are a small variation of ownership ratio. It calculated by
dividing net income into total number of share outstanding. It is most important for
deterring of share price.
Earnings per share ratio= Net income/ weighted average number of share
outstanding
(in crores)
Year Bharti Airtel Vodafone BSNL
2016 6076700/399700.4 (540500)/2655800.57 0.948/0.783=1.210
=15.205 =(0.20366)
2015 5183500/399700.4 669600.05/2655800.57 (0.496)/0.783
=12.967 =0.2521 =(0.633)
2014 2772700/399700.4 6887100.33/2655800.57=2.593 (1.2)/7.83=(0.1532)
=6.936
EPS RATIO

16

14

12

10

0
2016 2015 2014
-2

Bharti Airtel Vodafone BSNL