Summary:This time the article I read named “Telus rings up 29% drop in Q4 profit”. This article talks about the second strongest telephone company- Telus, its profit dropped 29% in the Q4 profit. That is a huge dropping since the economic does not do well. Its profit dropped as it booked fewer tax-related gains and spent more on restructuring, but revenue rose stayed as strong as usual because of the company’s wireless business. The favorable tax-related adjustments of $32 million, compared with $143 million a year earlier. On the other hand, restructuring costs increased by $32 million, however, the company froze executive compensation, reduced some expenses and cut down management layers to maintain their profits as much as they can, but the profits still dropped a lot compared to a year before. In addition, the revenue rose 5.3% to $2.45 billion, fuelled by growth in wireless subscribers and the number of new high-speed Internet customers signed by dropped 27% compared with last year. Although revenue per subscriber fallen sharply, but more customers were sign up for feature-rich smartphones, which boosts data revenue.
Connection:
Chapters 15 in our textbook talks about compare different financial statements by using accounting ratio. From calculate different accounting ratios, we can determine how well a business operates. The two ratios connect between this article and chapter 15 is the rate of return on net sales ration and collection period ration. Rate of return one net sales ratio measures the dollars that remain after all expenses are deducted from net sales. Since Telus did not do well compared to last year or last 3 quarters, its net income will decrease, which means its rate of return on net sales will also decrease. However, there are more new customers sign up for new smartphones, high –speed internet, and those will cause increasing in collection period since we know most of our telephone bill paid after the month we used. The account receivables will increase and the collection period will also increase too.
Reflection:
The economy depression made many companies suffering a lot. The financial statements will not look as good as we expected due to the hard situation right now. Many companies try their best to keep the profits at a certain point by cutting down labors or decreasing the expenses. The debt percentages may increase and the equity ration may decrease. The current ratio will also be the one to decrease since the total assets of a company is decrease; its ability to pay the debts back is weaker than before. Due to the economy environment right now, my opinion is to try the best to keep your profits as much as you can, but do not take a risk to invest at this moment. Put yourself in a safe transition period until the economy looks better.
2 comments:
It is not surprising that TELUS has had a drop in its profit because many other companies are facing the hardships of the bad economy. I would suspect that if people lost their job or had a cut back, they would most often change their data plan to something more affordable to compensate a lost in wages. I have also heard that companies had cut back on their Christmas dinners for their employees and also on bonuses, to maximize their profits. I do not agree with Minna saying that it is bad to invest due to the economy. In a recent article I read, it encouraged that we should invest money our money into RRSPs even though we might not have that much extra money to spend. When contributing to RRSPs, you would get a tax break meaning you would pay lesser taxes and also that you’re preparing for your retirement. As well, it is good for the economy as the government wants us to spend and invest money in order to try and stimulate the economy.
Tommy On
Block A
Well, Most of the companies out there is having a hard time dealing with the recession. It is not surprising that Telus is one of them since it is facing really great competition. Rogers/Fido is very clever to leave Rogers the same and transform Fido into a low price carrier to suit customers who could not afford premium services. Telus has also created a discount mobile brand named "Koodo" early last year to deal with the poor economic status. Overall, Telus is still considered a pretty strong company, so I think that it will successfully overcome the recession. I do agree with you on the point that it is best to not take risks to invest in new areas at the a time like this.
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