At&T Industry Ratio Comparison
Five-Year Ratio Comparison
Liquidity
• There was a slight improvement in current ratio between 2005 and 2007, from 0.58 to 0.63. It then dropped to 0.53 in 2008, but increased again over the following two years, ending 2010 at 0.59. This measures AT&T’s ability to pay its short-term liabilities with short-term assets. In general, a current ratio over 1 is desirable because when it falls below one, it could mean that the company is unable to pay off its short-term liabilities, due to a shortage of cash on hand. • The quick ratio also experienced slight increases between 2005 and 2007. It started at 0.42 and ended 2007 at 0.46. It then decreased to 0.42 in 2008; peaked in 2009 at 0.52; and, dropped back down to 0.44 in 2010. Again, a common rule of thumb is that companies with a quick ratio over one are sufficiently able to to meet their short-term liabilities. This low quick ratio suggests that AT&T may be over-leveraged, struggling to maintain or grow sales, paying bills too quickly, or collecting receivables too slowly. • There were slight decreases in working capital per share between 2005 and 2007, from -2.8 to -2.4. It then plummeted to -3.35 in 2009; and, lastly, ended 2010 at -2.37. This ratio indicates that the company is not likely to be able to cover its short-term debt. This declining working capital ratio could be a red flag that warrants further analysis. This ratio also gives investors an idea of the company’s underlying operational efficiency, possibly due to slow collection of receivables, for example. • The cash flow per share saw a significant increase between 2005 and 2010. It started 2005 at 3.21 and ended 2010 at 6.51. This measures AT&T’s financial flexibility; it signals their ability to pay debt, pay dividends, buy back stock and facilitate the growth of business. As a general rule, a 10:1 ratio is good, so they are on their way to reaching that goal. • AT&T experienced a steady increase in available cash flow per share from
Liquidity
• There was a slight improvement in current ratio between 2005 and 2007, from 0.58 to 0.63. It then dropped to 0.53 in 2008, but increased again over the following two years, ending 2010 at 0.59. This measures AT&T’s ability to pay its short-term liabilities with short-term assets. In general, a current ratio over 1 is desirable because when it falls below one, it could mean that the company is unable to pay off its short-term liabilities, due to a shortage of cash on hand. • The quick ratio also experienced slight increases between 2005 and 2007. It started at 0.42 and ended 2007 at 0.46. It then decreased to 0.42 in 2008; peaked in 2009 at 0.52; and, dropped back down to 0.44 in 2010. Again, a common rule of thumb is that companies with a quick ratio over one are sufficiently able to to meet their short-term liabilities. This low quick ratio suggests that AT&T may be over-leveraged, struggling to maintain or grow sales, paying bills too quickly, or collecting receivables too slowly. • There were slight decreases in working capital per share between 2005 and 2007, from -2.8 to -2.4. It then plummeted to -3.35 in 2009; and, lastly, ended 2010 at -2.37. This ratio indicates that the company is not likely to be able to cover its short-term debt. This declining working capital ratio could be a red flag that warrants further analysis. This ratio also gives investors an idea of the company’s underlying operational efficiency, possibly due to slow collection of receivables, for example. • The cash flow per share saw a significant increase between 2005 and 2010. It started 2005 at 3.21 and ended 2010 at 6.51. This measures AT&T’s financial flexibility; it signals their ability to pay debt, pay dividends, buy back stock and facilitate the growth of business. As a general rule, a 10:1 ratio is good, so they are on their way to reaching that goal. • AT&T experienced a steady increase in available cash flow per share from