Module 2 SLP: Understanding Financial Reports
ACC 501: Accounting for Decision Making
June 22, 2012
Where to Invest, Verizon or Sprint?
Most households in the US have at least one cellular phone. With the continuing increase in wireless devices and interface, it is important to look at the cellular carrier to decide who has the best coverage, best prices, and ultimately who will be able to continue to provide the best services. In deciding which carrier will be able to provide the best service in the future, we will look at two cellular providers, Verizon (VZ) and Sprint Nextel Corp (S). This comparison will focus on cash flow to see how they use their cash, what their cash position is, and determine which one is in the best financial position.
In evaluating Verizon's financial position we will use the investor home page: http://www22.verizon.com/investor/, their financials page: http://www22.verizon.com/investor/app_resources/interactiveannual/2011/fin02.html, and two other pages for investor information: http://investing.money.msn.com/investments/stock-balance-sheet?symbol=VZ& and http://www.stock-analysis-on.net/NYSE/Company/Verizon-Communications-Inc. Similarly for Sprint we will use their investor home page: http://investors.sprint.com/CorporateProfile.aspx?iid=4057219, their financial page: http://investors.sprint.com/docs.aspx?iid=4057219, and two other pages for investor information: http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=S:US and http://finapps.forbes.com/finapps/jsp/finance/compinfo/IncomeStatement.jsp?tkr=S.
The first step in this analysis process is to review the financial statements and determine both companies return on assets (ROA), profit margin, and asset utilization. The ROA is computed by taking the net income and dividing it by the total assets. First we will look at the ROA for Verizon. The company reported $10,198B in net...