Financial Accounting 500

Spring 2022

Financial Accounting (MW 12:30) - Capstone

Professor Fadil Sahiti Ph.D
18/04/2022

Group Members:
Donika Gjini, Emma Erna Lluka, Valon Shala, Dita Shala, Olt Malazogu, Donat Halimi
 Financial Accounting 500
Spring 2022

Content:

Introduction………………………………………………………………………………….3
Description of the companies…………………………………………………………….3-4
News about the companies……………………………………………………………….5
Financial Position Overview……………………………………………………………….5-6
Ipko’s and Vala’s current position (SWOT Analysis) ....................................................

Analysis and Conclusions based on current financial situation

Issues we have detected.………………………………………………………………….
Best Tool Recommendation…………………….………………………………………...

Balance Sheet……………………………………………………………………………
Income Statement……………………………………………………………………….
Cash Flow……………………………………………………………………………….

Benchmark Information………………………………………………………………….
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Spring 2022

Introduction:

During this presentation, we will be presenting the financial overview of two companies called
IPKO and VALA which operate in Kosovo. We are going to describe both companies, then their
financial position statements, afterwards we will be describing a SWOT analysis on both
companies. We will describe some of the issues we detect and give recommendations on what
could be done to improve those issues. Finally, we will also be showing the balance sheet,
income statement and cash flow of both companies during the years 2018/2019 and then make a
comparison between.
 Overview of the companies:
Financial Accounting 500
Spring 2022

About IPKO
About VALA
IPKO is regarded as one of Europe's
fastest-growing telecoms firms. IPKO, Telecom of Kosovo JSC (the
which was founded in 1999 and was the first "Company") is a Kosovo-based joint stock
Internet provider in Kosovo, has evolved corporation.
into a contemporary organization that The Company's business operations include
provides a comprehensive range of the provision of telecommunication services,
integrated services and content in mobile including mobile and landline phone, postal
communications, fixed telephony, digital services, and internet and IPTV services.
cable TV, and Internet services. Today, Vala is a GSM mobile telephone operational
IPKO is Kosovo's first and most prominent unit that is now one of Kosovo's networks
mobile operator, providing high-speed and licensed mobile telephony service
mobile internet over 3G and 4G networks. providers. PTK signed a deal in 2000 with
IPKO's entry into the Kosovo "Monaco Telecom International" ("MTI")
telecommunications industry brought for the provision of mobile telephony
competition to the mobile telephony market. services in Kosovo, which allows PTK to
Prices have been reduced, while service utilize the MTI international code, allowing
quality has been improved to the best its mobile network to connect to
feasible level. IPKO continues to be the international networks. The usage of the
most popular internet service provider in Monaco International Call Code,
terms of both customer numbers and international traffic, roaming, and the
network coverage. The company is also the transfer of technical information are all
market leader in digital cable TV services, covered under the new contract structure,
with the greatest quality content and the which goes into effect on January 1, 2010.
largest customer base. With 350.000 ports Furthermore, the framework contract
accessible, IPKO has the largest landline-fix included a clause that provided for contract
network in Kosovo, and the number of severance if Kosovo provided or received its
consumers using fixed telephony is steadily own international calling code. Furthermore,
expanding. IPKO has the most modern and the new framework contract's Annex has a
high-quality network in our country in each provision for contract termination if Kosovo
segment – mobile, fixed, internet, and provides or gets its own international call
Digital Cable TV. code.
IPKO’s Mission and Vision
VALA’s Mission and Vision
Ipko strives to provide each user
with personal communication independence TK’s mission statement is "To
by allowing them to communicate with one always be a leader in delivering outstanding
another at any time and from anywhere. communication services that improve the
IPKO is attempting to achieve this goal by lives of all Kosovars, via the enthusiasm of
providing the finest value, quality, and our employees and the application of state-
pricing on the market. of-the-art proven technology."

Whereas, TK’s vision is ”To be a

driving force in boosting the nation's
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Spring 2022

prosperity and uplifting the News

lives about
of allthe companies:
Kosovars"

VALA
IPKO
02 July 2019- In 2018 Kosovo Telecom has
Prishtina, 9 August 2018 – IPKO will be the lost 15.5 million euros (Kastrati).
General Sponsor of the Kosovo National
Football Team and the Kosovo Football
Super League for the next two years.
31 December 2018- Gent Begolli has
Prishtina, 18 June 2018 – IPKO continues to resigned as the Chief Executive Officer of
sponsor the BONEVET Foundation's the Kosovo Telecom Public Enterprise
"Electric Buggy" and "Kosovo Makers (Post) .
League" programs. IPKO is supporting
BONEVET for the second time.

Prishtina, 21 June 2018 – IPKO announces

the release of its newest product, this time in
the area of home security. For those of you
who are concerned about the vulnerability of
your homes or buildings.
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Spring 2022

Current Financial Position: ([Link] in ‘000$)

IPKO VALA

Considering and analyzing the current Considering the analysis done we can see
situation in 2019 we can see an increase of that VALA is suffering and is not in good
14,312$ in Non-Current Assets. An increase condition. Based on the income statement
in real estate has caused this growth. Current their losses are greater than the last year (by
assets, however, have seen a decrease of 1671$). Also looking at the cash flow
4780$ since inventory, prepayments etc statement the cash from operating activities
have decreased in 2019. Besides the changes has decreased significantly therefore the
in assets, liabilities have seen an increase in company is not profiting much by selling
2019. Current liabilities have increased by their services. Total assets of VALA have
7845$ and what has mostly caused this decreased by 17,700$ this year which affects
change is the rent payments. Non- Current their profitability, liquidity and efficiency
Liabilities have increased by 3293$ and also ratios. What also needs to be mentioned is
here rent and loans have mostly caused this that their equity is down compared to that of
change. Equity has also seen a loss in this last year and what is interesting is that they
year. By comparing the information above pay a lot of dividends (15,000$). VALA has
and below, we can conclude that IPKO is only worsened during this year.
doing worse compared to 2018, but not by
much since the information in the cash flow
indicates that the company has cash in hand
(1412$ more than in 2018).
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inform clients about its products, despite the

fact that they are not well-informed about
SWOT Analysis:
IPKO's products.

VALA
IPKO

 Strengths:
 Strengths:
Vala was the first licensed mobile operator
IPKO is one of Europe's fastest growing in Kosovo and is one of the best telecom’s
telecoms firms, according to a journal on the companies in our region. Vala is Kosovo's
Devex website. IPKO is Kosovo's first and largest mobile operator and it provides
most dominant mobile provider, providing telephone communications, mobile data
high-speed mobile internet over 3G and 4G Vala, internet, and IP/TV. Vala is owned/run
networks. IPKO's entry into the Kosovo by the government and this means that the
telecommunications industry brought company has easier planning and
competition to the mobile telephony market. coordination and also more responsibility to
Prices have been reduced, while service protect the public interest.
quality has been improved to the best
feasible level. The company is also the
market leader in digital cable TV services,
with the greatest quality content and the
largest customer base. IPKO is in the midst
of a period of rapid expansion and
development. IPKO offers 19 official sales
locations across the country, as well as
technical and customer service assistance.

 Weaknesses:
 Weaknesses:
Vala being the biggest telecommunication
One of IPKO's flaws is that it has ongoing company in Kosovo shouldn’t have any
issues with online payment. Even though technical problems but it sometimes does,
they invest a lot in their website and have a this leads to mobile data not working in
large staff working on updating and certain areas and certain times causing
maintaining it, they still have problems with phone calls and internet to malfunction. This
it frequently, which makes customers has happened on some occasions and
unhappy, especially since the best, fastest, customers complain quite often. The
and easiest way for customers to pay these company has said that they are looking to fix
days is through online mediums, such as E- these issues and provide the best service for
banking or websites. Another of IPKO's its customers.
flaws is from the company's efforts to grow
throughout Kosovo with its shops or even by
granting small kiosks the right to sell and
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 Opportunities:
 Opportunities:
VALA is the leader in telecommunication in
IPKO spends a considerable amount of Kosovo by providing the best services and
money on product placement and sponsors the newest proven technology, they are
numerous sporting and cultural events. As a always looking to expand their services to
result, their brand recognition rises, and they their customers even in areas that are located
win a significant amount of market share by in deep regions of Kosovo. Their ability to
attracting new youthful clients. Since they satisfy customer needs has helped them
have a sizable share of the market, they have throughout this journey and has increased
begun to increase and invest in roaming their opportunities to expand on a national
packages for customers who travel abroad level. Providing better services and bringing
for a variety of reasons, such as vacations or new ones in the market could be a great
business. As a result, they were able to use opportunity for them to eliminate other
their network to operate throughout Kosovo threats (firms).
as well as beyond the border.

 Threats:
 Threats:
VALA operates in a group where there are
The only real threat to IPKO since then has not a lot of firms in the market therefore
been Vala Telecommunication, but as IPKO they do not have a lot of threats. However,
has developed and grown over the years, even though the market is a monopoly that
Vala is no longer a concern, although it is doesn't mean that they can do whatever they
still a tiny competitor. On the other side, in want. Other firms such as IPKO, KUJTESA
the last two years, a potential challenger can swoop in and fill the voids that VALA
called ARTMOTION, a DEVOLLI has. Because of this they need to maintain
Corporation product, has joined the Kosovo some standards and keep the prices under
market with extremely low costs, although it control and possibly offer good deals for its
still lacks service and quality. Furthermore, customers otherwise they might face
when compared to IPKO, ARTMOTION's consequences and threats from other firms
internet and landline availability is highly on the telecom market.
limited, as only clients with fiber optics may
access the internet. Z Mobile, a subsidiary of
DEVOLLI Corporation, might be
considered as a little threat or competitor to
DEVOLLI Corporation.
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Issues detected:

IPKO is a very large telecom company. First and foremost, IPKO and VALA are pure monopoly
companies and they do not have very much competition that threaten their business operation.
They operate in similar terms but one issue that could hold back IPKO is that they are not quite
expanded in rural areas (such as villages deeper in Kosovo) and that might cause them to lose
lineborpotential money. VALA on the other hand are not having this problem since they are
expanded in almost every part of Kosovo.
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Assessment through Ratio analysis

1. PROFITABILITY
1. ROCE: NOT ENOUGH INFO PROVIDED FOR VALA

IPKO Year 2018: 2265 / (115,699-20,768)= 0.42%

IPKO Year 2019: 1774 / (106,167-24,061)= 2.16%

Return on Capital employed shows the performance that a company has had during a year. From
these calculations we can see that IPKO has optimized their capital and is working more efficiently. The
increase on ROCE was 1.74%.

2. GROSS PROFIT MARGIN:

VALA 2018: 66238 / 66002 = 100.35 %

_________________________________________________________

IPKO 2018: 17,310 / 72,248= 0.2396 x 100 = 23.96%

IPKO 2019: 16,400 / 65,594 = 0.2500 X 100 = 25.00%

Gross profit margin indicates the amount of revenue remaining in a given accounting period after
a company pays for labor and materials, otherwise known as cost of goods sold (COGS). In the
year 2019 the company has improved by 1.04%.

3. OPERATING PROFIT MARGIN:

VALA 2018:48519 / 66002 = 73.51%

______________________________________________________
IPKO 2018: 983 / 72,248 = 1.36%
IPKO 2019: 1024 / 65,594 = 1.56%
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OP. Pro Margin shows how much is the profit on a dollar after selling and paying variable
expenses (wages, etc). IPKO is showing positive results in the current year since the percentage has
increased compared to the previous year.

4. Return on ordinary shareholders’ funds

2018: not enough info provided!

2019: not enough info provided!

EFFICIENCY RATIOS:

1. Inventory turnover period : NOT ENOUGH INFO PROVIDED FOR VALA

IPKO 2018: (2490 / 54938)x 365 = 16.5 DAYS

IPKO 2019: (1617 / 46194)x 365 = 12.8 DAYS

Inventory turnover period is the time it takes a company to sell its inventory. By our calculations
done for those two years the company has improved its efficiency by almost 4 days meaning that they are
able to sell their services/inventory/products faster.

2. SETTLEMENT PERIOD FOR TRADE RECEIVABLES:

VALA 2018: 9456 / 3285 = 2.9 DAYS

IPKO 2018: 72,248 / 9317 = 7.8 DAYS

IPKO 2019: 62,549 / 4548 = 13.8 DAYS

Settlement period measures the time it takes the firm to collect trade receivables. In this case the
company has resulted in an increase of time meaning that they now collect their receivables in a slower
time (6 days slower). That is a negative sign for the firm. They should improve their time

3. SETTLEMENT PERIOD FOR TRADE PAYABLES:

VALA 2018: 9256 / 4002 = 2.3 DAYS

________________________________________________________

IPKO 2018: 54,938 / 13,667 = 4 DAYS

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IPKO 2019: 46,149 / 14.060 = 3.3 DAYS

This formula measures the time lag it takes to pay the supplier. Ipko has seen an decrease in time
meaning that they pay their debts/collectors in a lower time than 2018 (0.7 days faster). That is a good
indication, especially for banks since they are happy to know that you are going to pay them faster.
However , when we do a cash flow analysis this might result in negative results.

LIQUIDITY RATIOS

1. CURRENT RATIO:

VALA 2018: 20,186 / 56,177 = 0.4 TIMES (0.4:1)

____________________________________________________________

IPKO 2018: 14,728 / 20,768 = 0.7 TIMES (0.7:1)

IPKO 2019: 9948 / 24,061 = 0.41 TIMES (OR 0.4:1)

Current ratio measures the company’s abilities to pay short-term liabilities or else said those
obligations that are within a year due. The current ratio for IPKO has lowered for 2019 and this might
indicate that the company has liquidity problems or might even face a crisis if it doesn't find efficient
ways to operate. (0.3 lower than 2018)

2. ACID TEST RATIO:

VALA 2018: (20,186-2) / 56177 = 0.4 TIMES

_____________________________________________________________

IPKO 2018: (14,728-2490) / 20,768 = 0.6 TIMES

IPKO 2019: (9948-1617) / 24,061 = 0.3 TIMES

Acid test ratio is also a calculation used to determine the time it takes a company to pay its bills
by time. This again has worsened for this year (2019) since it’s 0.3 times lower than the previous
year. Not a good indication since it means that they don’t have enough liquid assets to pay CL.

3. CASH RATIO: NOT ENOUGH INFO PROVIDED FOR VALA

IPKO 2018: 24,469 / 20,768 = 1.18 TIME (s)

IPKO 2019: 39,978/ 24,061 = 1.66 TIME (s)
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Cash ratio shows the companies abilities to pay CL with their cash. By these calculations we can
see that the company has enough cash to pay current liabilities and is able to cover them efficiently. This
is a good indication for the company since it has risen for 2019 by 0.48 times.

GEARING RATIOS:

1. GEARING RATIO:

IPKO 2018: (78,005 / 65,005+78,505) x 100 = 54.70%

IPKO 2019: (86,350 / 65,005 +86,350) x 100 = 57.05%

2. INTEREST COVER RATIO:

IPKO 2018: 2265 / 2785 = 0.8 TIMES

IPKO 2019: 1774 / 2912 = 0.7 TIMES

What this means is that the level of operating profit is 0.7 times higher than the level of
the interest. In this case the ratio has been lowered by 0.1 times and that is not a good thing since the
operating profit is lower than in 2018.
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For VALA gearing ratios could not be calculated since they do not own any non-current
liabilities or interest

Benchmark Information on both companies:

IPKO Financial Accounting 500
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Financial Accounting 500
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Financial Accounting 500
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VALA Financial Accounting 500
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Financial Accounting 500
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Financial Accounting 500
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Financial Accounting 500
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Financial Accounting 500
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Work Cited

“About IPKO.” IPKO Telecommunications, [Link]

“Misioni Dhe Vizioni.” Vala, [Link]

Kastrati, Dorentina. “Telekomi I Kosovës Në Vitin 2018 i Ka Humbur 15.5 Milionë Euro.”
KALLXO, 1 July 2019, [Link]/shkurt/telekomi-i-kosoves-ne-vitin-2018-i-ka-humbur-
15-5-milione-euro/.

“Jep Dorëheqje Të Parevokueshme Shefi i PTK-Së.” Edited by Prizren Post, Prizren Post,
2018, [Link]/al/jep-doreheqje-te-parevokueshme-shefi-i-ptk-se/.