Ratio analysis is a quantitative assessment of the financial performance of the company in terms of profitability, liquidity and solvency ratio. The following are few accounting ratios computed for Telus company for the three consecutive years- 2017, 2018 and 2019.
The current ratio of the company has shown a significant decrease in the liquidity performance of the company from 2017 to 2019. In the year 2017, the current ratio was recorded as 0.78:1 which slightly increased to 0.79:1 in the following and massively dropped to 0.55:1 in 2019 (Assets.ctfassets, 2017).
The quick ratio performance of the company has increased successfully and remained stable in 2018 and 2019. In 2017, the quick ratio for Telus was 0.45:1 which increased and remained stable in 2018 and 2019 at 0.60:1 (Assets.ctfassets, 2019).
By comparing the inventory turnover performance of Telus, it can be observed that over the years there is a higher chance of inefficiency faced by the company in converting its raw materials to final goods. The inventory turnover ratio had fallen to 13.8902 times in 2019 from 15.7011 times showing in 2017 (Assets.ctfassets, 2019).
The total debt ratio for the three years was more than. This means the relationship between equity, assets and debt is not stable. There is a higher proportion of debt capital within the company in comparison to owned funds like equity and assets.
The interest coverage ratio remained between 4.3 times for 2019 and 4.8 times for 2017 (Assets.ctfassets, 2017). There is a marginal decrease in the level of financial leverage for the company against making payment of statutory interest to debenture, preference shareholders and lenders.
Based on the calculation, the earnings derived from the trading of equity shares of Telus in the stock market have increased over the years. The income earned from each share by Telus is $0.95, $1.03 and $1.09 for 2017, 2018 and 2019 (Assets.ctfassets, 2017). This shows that the company has a high investment scope.
The price-earnings ratio is calculated as the share price divided by the EPS. The P/E ratio for the three years is $16.75, $16.42 and $16.65 for 2017, 2018 and 2019 (Assets.ctfassets, 2019). Hence, the market capitalisation for Telus remained adequate.
The profit margin for the company is determined as the net profit ratio. The profit margin for Telus remained stable for the three years at 11% (Assets.ctfassets, 2017). This shows that the company controlled the operating expenses and maintained a high operating income throughout the three years.
The ROE of the company remained stable around 15% for the past three years. The income generated from the trading of shares by Telus has generated an income between 15% and 17% throughout the three years which is considered moderate. The ROE of Telus are 17.89%, 15.70% and 16.66% for 2017, 2018 and 2019 (Assets.ctfassets, 2017).
The ROA measures the efficiency and effectiveness of the total assets of the business in bringing profitability to the company. The ROA for Telus for the past three years are 5.0054%, 4.9115% and 4.6768% for 2017, 2018 and 2019 respectively (Assets.ctfassets, 2019). This shows over the years the company’s assets are losing out its effectiveness in bringing profitability to the company.
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