TESU AT&T and Verizon Developing Financial Statements Paper

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Economics

Thomas Edison state University

Description

  • Obtain the most recent annual report for AT&T and Verizon.
  • Develop common size financial statements for the two companies for the most recent two years available.
  • Calculate financial ratios for a two-year comparison. Be sure to select financial ratios that are relevant to the telecommunication industry. A minimum of five financial ratios must be presented. The financial ratios should be calculated; do not rely upon other finance websites to obtain the general financial ratios. 

The analysis should include the following sections for each company:

  • Company Background: Present an overview of each company’s history, including key products/services and operations. Analyze and discuss the market valuation of the bonds and stocks issued by each company. 
  • Recent Merger and Acquisition (M&A) Activities: Evaluate the effect of interest rates and time value of money by presenting a summary of recent M&A activities for both companies. Summary should include a brief discussion of the financing tools used and the cost of capital for these M&A activities.
  • Financial Statements and Common Size Statements: Evaluate and interpret each company’s basic financial statements by presenting and discussing the common size financial statements including significant trends or variances. Calculate and discuss the two years of financial ratios.
  • Overall Analysis: Evaluate each company’s performance in managing its assets to generate the maximum value to shareholders. Using the information gathered, fully discuss the ways that each company’s decision makers have considered ethical and legal concerns as well as the financial data in making policies and choosing a strategic direction. 

After assessing each company separately, develop a conclusion that includes a comparison/contrast of the financial analysis results. Evaluate and compare the financial and economic strategic planning models within each organization, indicating how each company uses financial information to support its strategic direction. 

Explanation & Answer:
13 Pages
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Developing Financial Statements
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AT&T and Verizon

Introduction

This analysis will focus on the financial statements of the Verizon and AT&T
Companies. The two companies are known as significant performers in the communication
industry. More specifically, the discussion will highlight the two company’s market valuation
based on the stocks and bonds. Apart from that, the analysis will reflect on the companies’
merger and acquisition activities, including their financial tools. After analyzing the company’s
financial activities, the discussion will conclude by comparing their financial analysis and
economic strategic planning including the models used by both companies.

AT&T Company

Commonly known as the AT&T Company, the American Bell Telephone Company was
initially formed in 1885 as the American Telephone and Telegraph Company. The company later
sold its assets before being rebranded to AT&T Corp. It is also important to note that Alexander
Graham Bell originally invented the company in 1885 before it started full operations in 1876
(Robinson, Henry, & Broihahn, 2020). Bell and some of his partners launched the Bell
Telephone Company in 1877 before later forming the New England Telephone Organization in
1878.

The company provides technology, media and telecommunication based services.
Typically, it offers internet services, data and broadband and wireless communication services.
Apart from that, the company also offers telecommunications equipment, wholesale services,
managed networking and long-distance telephone services (Robinson, Henry, & Broihahn,

2020). AT&T Company also manufactures and distributes gaming, television, films and online
content especially in different digital and physical formats. It is also justifiable to state that the
company focuses on providing entertainment and advertising services especially to its customers.

Apart from serving its household customers, the company prefers serving business
enterprises because businesses tend to provide better revenues. To some extent, the company
also markets different services under specific brands such as AT&T PREPAID, SKY, Cricket,
Unefon and AT&T Fiber. Headquartered in Dallas, AT&T Company has its business across the
Middle East, North America, Asia-Pacific, Africa and Europe. Other regions where the company
continues to thrive are the Caribbean and Latin America region (Robinson, Henry, & Broihahn,
2020). The company has a unique business service segment that incorporates the use of global
communications services. Globally, the company has at least three million customers. The
company’s businesses range from multinational, large and small businesses.

Stocks and bonds

AT&T total debt is approximately 111.16 billion whereas its non-current debt is 110.4 billion.
On the other hand, the company’s debt current seems to have dropped to 7.4 billion this year
(Robinson, Henry, & Broihahn, 2020).

Recent Merger and Acquisition (M&A) Activities

Most recently, the AT&T Company announced that it was on a merging process with
Discovery. In this case, the Discovery Company would form part of the company’s content unit
WarnerMedia. The merger would see the introduction of Hollywood’s biggest studios, which
would also compete with Disney and Netflix. Through the agreement, the AT&T

Communications will unwind at least $85 billion as part of Time Warner acquisition (Robinson,
Henry, & Broihahn, 2020). It is important to note that Time Warner had closed at least three
years ago. Therefore, the merger would see the formation of an exciting media company
(Robinson, Henry, & Broihahn, 2020). The merging companies are hopeful of creating new
business for the commercial purposes. The business would be different from the AT&T services.
This means that the company would now be valued at more than $150 billion. The company’s
management claims that it would receive at least $43 billion as part of cash combination, and
WarnerMedia’s certain debt retention (Kumar, 2019).
Through the deal, the company’s shareholders would receive at least 71% of
WarnerMedia’s stock. On the other hand, the Discovery shareholders will own the rest of the
shares. In the event the regulators approve the deal, the situation would reverse AT&T’s long
term plans whereby it will be able to combine distribution and content as part of the company
(Robinson, Henry, & Broihahn, 2020). Discovery shares would rise to 9% within its first regular
trading. Financial tools that the company used when evaluating the share value of the deal
include cash flows, credit and collections and budget deviation analysis. The report suggests that
through the agreement, the AT&T Communications will unwind at least $85 billion as part of
Time Warner acquisition. This financial perspective can only be equated through the use of
budget deviation analysis.

Financial Statement (Common size con...

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