Accounting Statement Analysis: Rogers Communication Essay

Question:

Discuss about the Accounting Statement Analysis for Rogers Communication.

Answer:

Introduction

Rogers Communication is a Canadian communications and media company with its headquarters based in Toronto, Ontario. The company mainly operates in the business of wireless communications, cable televisions, telephone and internet connectivity, telecommunication and mass media. Therefore it has a diversified business spread whole over Canada. This company has been in its business for more than 50 years. In this report we have analysed the financial report of Rogers’s communication for the year 2015 from an investor point of view (Rogers Communication Inc, 2015). We will check if the company’s financial condition is stable and worth investing for. All other important points are also covered in the report below.

Summary of Rogers’s communication financial statements

Rogers’s communication is a developing company which has been showing good results in its financial reports. Summary of the balance sheet of Roger’s Communication is given below:

Summary (in million Canadian $)

Particulars

2015

2014

Current Assets

2,622

2,345

Non-Current Assets

26,553

24,177

TOTAL ASSETS

29,175

26,522

Current Liabilities

5,017

4,920

Non-Current Liabilities

18,413

16,121

Equity Shareholder's Fund

5,745

5,481

TOTAL LIABILITIES

29,175

26,522

Overall we can see that the financial assets of the company have increased by over 10 percent in the current year. This has been the refection of increased operations by the company in the current year. The company has achieved huge development in the current year by implementing the use of various strategies; few of such strategies include taking steps to drive growth in the business market, investing and developing people, initiative to deliver compelling content everywhere, etc (Rogers Communication Inc, 2015).

Statement of Income

Rogers’s communication reported operating revenue of $ 13.4 million in the year 2015 as compared to the revenue of $ 12.9 million in the year 2014, that is, it reported a positive variance of almost 4 percent in the current year. The operating profit of the company was reported was reported as $ 5 million in the current year which is same as the profits of the last year. The company did not any increase in operating profits despite increase in revenue due to increased operating costs in the current year. Also the company reported an other income of $ 32 million as against the expense of $1 million in last year; this income was witnessed from gains earned from acquisition of Mobilicity and other investment incomes (Rogers Communication Inc, 2015). Therefore, overall a positive performance was witnessed by the company.

Ratio Analysis

Ratio Analysis helps us analyse certain attributes of the company and its performance. It lays down the development and growth made by the many in quantitative figures. This tool is not only used by the investors, but it also used by the management of the company to study its financial performance (Brigham & Ehrhardt, 2011). Following are the few ratios which will help us know about the financial condition of the company in a better manner.

Profitability ratios

These ratios help us assess the business’s ability to earn income as compared to its expenses. Few of the profitability ratios are:

Return on Assets Ratio

This ratio helps us to calculate earning earned per dollar spend on the assets of the company. This helps the company evaluate what returns it generates over its investment in assets (Choi & Meek, 2011).

Return on Assets

2015

2014

Net Income

1,381

1,341

Total Assets

29,175

26,522

Return on Assets (Net Income/Average Assets)

0.05

0.05

FOR Rogers Communication we have already seen earlier that the company has not achieved much positive variance in net income of the company. The company has managed to stay stable in its income position. Also, earnings per dollar spend on asset remains at $ 0.05 per dollar just as last year.

Net Profit Margin

This ratio is calculated in order to determine the margin of net profits earned by the company in the current year. If this is considered individually it will not be of much use, but if it used to compare figures on year to year basis, it shows company’s development and growth (Deegan, 2011).

Net Profit Margin

2015

2014

Net Income

1,381

1,341

Sales Revenue

13,414

12,850

Net Profit Margin [(Net Profit after tax/Sales Revenue)*100]

10.30

10.44

The company has had not much progress in improvement of its net profit margin in the current year. The net profit of the company maintains it levels at 10% just like last year. The current year is evident of increase in sales by 10% of the company, but due to increase in operating expenses the company has set off this increase in revenue.

Gross Profit Margin

This ratio is similar to gross profit ratio. The gross profit ratio calculates the profit margin taking into consideration income and expenses only from the operating activities of the company (Burke et. al, 2010). This ratio is calculated in order to find the efficiency of the company, as to how effectively the resources are used.

Gross profit Margin

2015

2014

Gross Income

2,559

2,665

Sales Revenue

13,414

12,850

Gross Profit Margin [(Gross Profit /Sales Revenue)*100]

19.08

20.74

The company operates at an average level of 20% gross profit. The company has in the current year operated at a gross profit margin of 19% whereas the gross profit margin of last year was almost 21%. This decline in gross profit margin was witnessed due to increase in operating expenses of the company, this lead to lower gross profits as compare to revenue.

Solvency Ratio

Solvency Ratios are the ratios which help us calculate the company’s ability to pay back its liabilities and meet its obligation. For the company’s healthy performance it is very necessary for the company to have proper capital structure (Christensen, 2011).

Debt Equity Ratio

This ratio helps us calculate what proportion of the company is funded by monies of the outsiders and what is the own portion of capital of the shareholders. Higher the owned part of capital better it is for company (Christensen, 2011). But there are few companies which work better when they are funded with outsider’s fund.

Debt Equity Ratio

2015

2014

Total Debt

18,413

16,121

Total Equity

5,745

5,481

Debt Equity Ratio

3.21

2.94

We see that the debt equity ratio of the company has gone up from 2.94 in 2014 to 3.24 in 2015. Even though it is not appropriate for the companies to invest too much in debt, in the current scenario we see that, the company has increased its debt investment as compared to last year. This has provide the company with funds which has been efficiently used by the company and has generated extra ten percent revenue in the current year.

Other Ratios

These other ratios will help the investors to read the performance of the company and benefits they provide to its shareholders. These ratios provide information from the investor’s point of view.

Price Earnings ratio

The price earnings ratio helps the investor calculate up to what maximum times of the earnings of the company the investor is ready to pay for the share (Brigham & Daves, 2012). Higher ratio indicated that the investor is ready to pay high amounts for the share of the company as per the earnings of the company; this is so because the company will be expected to grow.

Price Earnings Ratio

2015

2014

Price

47.72

44

Earnings

2.68

2.60

Price Earnings Ratio

17.81

16.80

We see that the price of share of Rogers Communication has gone up to $ 47.72 from $ 43.69 in the last year. The company has obviously done some good work which has been reflected in the share price of the company. Moreover, the price earnings ratio of the company has increased to 17.81 from 18.80, which shows that investors are ready to pay more amount than they were willing to pay last year for the share of the company (Fields, 2011).

Dividend per share

The dividend per share shows how much of the earnings have been distributed by the company as dividends per share to its shareholders (Brigham & Daves, 2012).

Dividend per share

2015

2014

Dividend per share

1.92

1.83

The dividend paid by the company last year was $ 1.83 per share held by the shareholders. In the current year the company has paid $ 1.92 per share as dividends to its shareholders.

Payment or non-payment of dividend by the company is a total discreet factor. If the company expects that the funds available can be put to more productive use then it may decide to pay low or no dividends and vice versa. Wealth maximisation should be the main motive of the investors of the company (Brealey et. al, 2011)

Conclusion

The company seems to have performed in a fair manner. The performance of the company from other point of view also seems to be fine; the overall performance of the company has provided the shareholders with positive results. The company should keep executing its operations in the same manner, except for it should find means to improve its operating expenditure. Improvement in this factor of the company will give it more positive results. Overall as an investor, investing in Rogers Communication seems to be a good investment, which in future is expected to generate high returns.

References

Brealey, R., Myers, S. and Allen, F 2011, Principles of corporate finance, New York: McGraw-Hill/Irwin.

Brigham, E. & Daves, P 2012, Intermediate Financial Management, USA: Cengage

Brigham, E.F. & Ehrhardt, M.C 2011, Financial Management: Theory and Practice, USA: Cengage Learning.

Burke, A., Van, S. A., & Thurik, R 2010, ‘Blue ocean vs. five forces’, Harvard Business Review, vol. 88, no. 5, pp. 28-29.

Choi, R.D. and Meek, G.K 2011, International accounting, Pearson.

Christensen, J 2011, ‘Good analytical research’, European Accounting Review, vol. 20, no. 1, pp. 41-51

Deegan, C. M 2011, In Financial accounting theory, North Ryde, N.S.W: McGraw-Hill.

Fields, E 2011, The essentials of finance and accounting for nonfinancial managers, New

York: American Management Association.

Rogers Communication Inc 2015, Rogers Communication Inc Annual Report and accounts 2015, viewed 20 July 2016,

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