Financial Analysis of Sprint Corporation and Its comparison with Verizon Communications Inc
Sprint Corporation is US based telecommunication company which provides wireless and internet services. It was founded in 1899. HTC is considering shifting to this company’s communication system so this report synthesizes the financial analysis of the company so as determine its future prospects and financial viability. The tools of trend analysis, ratio analysis and stock price trend have been applied.
This financial analysis will become the base for taking the decision whether to shift to this company’s communication system or not. Sprint Corporation changed its financial year from Jan-Dec to April-March in 2014. So the financial period ending on March 2015 is of 15 months. The comparative study of financial performance of Sprint Corporation and Verizon Communications has also been done to study the prospects of Verizon Communications.
I. Trend analysis of financial performance in financial analysis of Sprint Corporation and Verizon Communications
The financial technique of trend analysis has been applied to evaluate the financial performance of Sprint Corporation for last three years along with its comparison with Verizon Communication Inc. for the last year i.e.2016.
Table 1: Trend analysis
|Sprint Corporation||Verizon Communication Inc|
|Revenue ($ in Millions)||35345||16891||34532||32180||131,620||125,980|
|Increase/decrease in Revenue (%)||-52%||-2%||-9%||-4%|
|Net income ($ in Millions)||-4326||-1860||-3345||-1995||17,879||13,127|
|Increase/decrease in Net Income (%)||-57%||-23%||-54%||-27%|
|Working Capital ($ in Millions)||4,885||2,389||-1,163||-5,130||-12,772||-3,945|
|Increase/decrease in working capital (%)||-51%||-124%||-205%||69%|
|Return on assets (%)||-8.57||-2.7||-4.03||-2.46||7.49||5.37|
|Return on equity (%)||-46.73||-11.39||-15.41||-9.62||124.48||67.4|
The above table depicts the trend value of revenue, net income, working capital, return on assets and return on equity.
- Revenue: There is decline in revenue of Sprint Corporation over the last three years. The reduction was huge in 2013 as it reduced by more than half. In 2014, the company was able to revive its revenue and able to gain revenue near to base year i.e. 2012. This financial period is of 15 months. It can be one of the reasons for recovery in revenue. In 2016, again the revenue reduced by 9%.
- Net income: There is declining trend in net income of Sprint Corporation. The value of net income is negative in all the years. The decrease in net income of financial period 2016 is greater than the decrease in revenue. It means the company has not been able to control its expenses.
- Working Capital: There is decreasing trend in working capital of the company, which represents the excess of current assets over current liabilities. The working capital was positive in 2013 but it became negative in 2015 and 2016. The decrease in working capital depicts the deterioration in the capability of the company to repay its short term liabilities in time.
- Return on assets: The return on assets of Sprint Corporation is negative in all years.
- Return on equity: Similarly return on equity of Sprint Corporation is also negative in all years.
If we compare the performance of Sprint Corporation for the financial year 2016 with the performance of Verizon Communication Inc, we find that the decline in net income of Verizon Communications Inc was also greater than the decline of its revenue. It also has deteriorated working capital position but it has been able to generate positive return on equity and assets.
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