Analyze Nokia's Financial Strength

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Analyze the company 's financial strength a. Assess the financial strength of the company. b. How is the financial strength likely to change in the next year or so? c. What are its sources of capital and what is the value of the company 's capital? a. Financial strength assessment Financial strength is the result that company uses financial resources to carry out investing activities, and embodies the value of the enterprise’s financial management capabilities, which mainly includes solvency, profitability, operation efficiency and market value measures. ●Solvency 1) Short-term solvency or liquidity ratios, which measure the company 's ability to meet its short-term obligations. a. Current Ratio (calculated as current…show more content…
Although Nokia Corp. has still kept the top spot of the world mobile phone market, occupying 25.5% market share compared to 21.3% of Samsung Corp. and 8.3% of Apple Inc., the fact that net loss exists last three quarters in a row can’t be covered. Moreover, sales decreased by 29% compared to the same period last year. And by the end of the year, net loss totaled 10.7 EURb; however, a 7.45 EURb profit was made last year. The good news is that the sales of Smartphone is 1,960 million, exceeding the expected market. Under the situation described above, the financial strength of Nokia will absolutely be affected. Liquidity should deteriorate because of the deficit state. Long-term solvency couldn’t escape as well, so management may raise loans to repay the unpaid matured commitments, leading to unhealthy debt ratios. Market capitalization significantly deteriorated because of delisting, so did earnings per share. Apart from these, ratios reflecting profitability and operation efficiency are determined mostly by the strategy decided, the goal set and the control conducted by the management. c. The Value and Sources of Capital ●The sources of company’s capital are mainly composed of two parts, one is debt (the creditor’s capital), and the other is equity (the shareholder’s capital). According to the Form 20-F 2011 of Nokia Cop., details are as followed: 1) Debt, including: a. Long-term interest-bearing liabilities, such as loans from bank, committed

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