Analysis of Verizon Communications Essay

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Analysis of Verizon Communications

Verizon Communications formed by the merger of two big and successful companies, Atlantic Corp. and GTE Corp., is the largest telecommunication company. The company serves large part of the market in United States. However the company faces certain strengths and weaknesses which affect the way company formulate its strategies.

Internal Analysis:
The IFE (Internal Factor Evaluation) matrix summarizes the major strengths and weaknesses of Verizon Communications.

KEY INTERNAL FACTORS WEIGHTS RANKING SCORE
Strengths
1. Employee satisfaction. .05 3 .15
2. Well positioned company. .15 3 .45
3. Increase in revenue and EPS. .10 3 .30
4. Offering fiber-optic lines. .20 4 .80
5. Largest directory
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2. Verizon Communications is not able to achieve its objective of becoming the market leader in delivering innovative, integrated communications solutions to its customers (management).
3. The company widely covers most of the territories in United States but its telecommunication services are not being expanded globally in other parts of the world in comparison to its competitors (marketing).
4. Verizon's financial position is not very impressive. The company has $49 billion debt load. Moreover the Gross Profit Margin of 2003 has decreased to 0.67, which was 0.70 in 2002 (financial/accounting).
5. Verizon Communications is not well placed against its competitors like AT&T who offer services using technologies like TDMA (time division multiple access) (production).

FINANCIAL RATIOS

FINANCIAL RATIOS 2003 2002 2001
Liquidity Ratios
Current Ratios 0.68 0.79 4.49
Quick Ratios 0.64 0.73 0.55
Leverage Ratios
Debt to Total Asset Ratio 0.27 0.31 0.37
Debt to Equity Ratio 1.35 1.63 1.97
Long Term Debt To Equity Ratio 0.23 0.26 0.26
Times Interest Earned Ratio 0.11 0.22 0.17
Activity Ratios
Inventory Turnover 52.8 44.95 34.14
Fixed Asset Turnover 1.61 1.59 1.28
Total Asset Turnover 0.4 0.4 0.39
Accounts Receivable Turnover
Average Collection Period
Profitibility Ratios
Gross Profit Margin 0.67 0.7 0.38
Operating Profit Margin 0.11 0.22 0.17
Net Profit Margin 0.45 0.06 0.005
Return On Total Assets 0.18 0.02
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