Financial

Company: Deutsche Telekom AG Computations: in millions EUROS Quick and Current Liquidity Ratios Quick Ratio 86116 – 13218 / 34742 = 2.09 Current Ratio 86116 / 34742 = 2.47 DuPont Ratio 690/15477 * 15477/86116 * 86116/59328 = .0116 Profit Margin 20423 / 46944 = .4350 Asset Utilization 4269 / 100084 = .042 Financial Leverage (3.2) / 8.3 = (.3855) Unlike manufacturing and retail there is more of a need in the telecommunications industry and the services offered than a clothing department such as Macy’s or a car manufacture such as Toyota. Especially since more and more of devices such as cell phones and televisions are in every home. This is shown in the financial analysis of these particular companies. Deutsche Telekom AG is one of the world’s leading telecommunications. They have a strong international presence in about fifty countries and three-quarters of sales come from Europe. They are based out of Germany and have about 247,000 employees. In America it is associated as T-Mobile but internationally company has over 140 million subscribers to wireless phone service. Deutsch Telekom is Germany’s major landline telephone carrier for domestic and international services under the T moniker. Keeping the trend Deutsch Telekom also is a leading internet service provider with more than 25 million broadband subscribers along with other data and internet television. With a company this large it is necessary that a good ethical accounting firm handle its financials. These firms are given standards that are from the International Accounting Standards Board. In the United States it is called the Financial Accounting Standards Board. Since there are different measurement conventions between the FASB and the ISAB; it is easier for unethical accounting behavior because of lesser rules in place internationally. This being true, more recently the ISAB and FASB are working more closely to align their presentation requirements. Along with the presentation standards companies like Deutsch Telekom need to uses a cash basis for accounting other than an accrual basis. Reason being, an accrual basis does a good job of matching revenues and expenses, but it does a poor job of tracking cash. Because you record revenue when the transaction occurs and not when you collect the cash, your income statement can look great even if you don't have cash in the bank. Whereas cash basis accounting does a good job of tracking cash flow, but it does a poor job of matching revenues earned with money laid out for expenses. This deficiency is a problem particularly when, as it often happens, a company buys products in one month and sells those products in the next month (Epstein). A cash basis would prove more valuable and workable in an industry such as telecommunications. References: Industry Center – Wireless Communications Deutsche Telekom Profile http://biz.yahoo.com/ic/43/43401.html IFRS Press Releases http://www.ifrs.org/News/Press+Releases/OCI+16+June+2011.htm Lita Epstein., Deciding between Cash-Basis and Accrual Accounting http://www.dummies.com/how-to/content/deciding-between-cashbasis-and-accrual-accounting.html#ixzz1RNdHzLcm All financial data was taken from the Deutsch Telekom 2010 year financials.