Financial Analysis of Nippon Telegraph

Financial Analysis of Nippon Telegraph

Introduction

The company Nippon Telegraph and Telephone Corporation is a Japan's holding organization which through its numerous subsidiaries provides system integration, telecommunications equipment sales, communication services based on IP/packet, voice related services on fixed and mobile devices, and numerous services related to telecommunications. The major operations of the group are in Japan. The company has headquarters in Japan and provides fulltime employments to approximately 224,239 individuals. In the recent quarter ending Jun 30, 2012, the company's revenue rose up to $134.01 b from $129 b, with earnings before income and tax with dividend added, to be $40.22 b (finance.yahoo.com, 2012a). We will be exploring the financial statements of the company and will assess the financial health of the company. We will advise if any issue might require special consideration. We will evaluate the industries attractiveness using the Michael Porter's five forces and will develop a SWOT analysis of the company.

Discussion

The company's financial statements, income statement, balance sheets and cashflow all show improvements from the previous year on a number of areas.

Income Statement

The income statement reports the in the period ending, the NTT received an increase of 2.7% in revenue over the previous fiscal year to the amount of 127 b (finance.yahoo.com, 2012b) (see table 1).

Table 1: Income Statement of NTT, (retrieved from finance.yahoo.com, 2012)

Income Statement

Period Ending

30Mar12

30Mar11

30Mar10

Total Revenue

127,679,000  

124,336,000  

108,962,000  

Cost of Revenue

53,186,000  

49,878,000  

43,266,000  

 

Gross Profit

74,493,000  

74,459,000  

65,696,000  

 

 

Operating Expenses

 

 

Selling General and Administrative

36,232,000  

36,074,000  

32,110,000  

 

Non Recurring

183,000  

47,000  

91,000  

 

Others

23,218,000  

23,679,000  

21,533,000  

 

 

 

 

 

Operating Income or Loss

14,861,000  

14,659,000  

11,962,000  

 

 

Income from Continuing Operations

 

Total Other Income/Expenses Net

883,000  

195,000  

616,000  

 

Earnings Before Interest And Taxes

15,744,000  

14,854,000  

12,577,000  

 

Interest Expense

684,000  

667,000  

590,000  

 

Income Before Tax

15,060,000  

14,187,000  

11,987,000  

 

Income Tax Expense

7,143,000  

5,738,000  

4,784,000  

 

Minority Interest

2,198,000

2,320,000

2,029,000

 

 

 

Net Income From Continuing Ops

5,683,000  

6,149,000  

5,268,000  

 

Net Income

5,683,000  

6,149,000  

5,268,000  

 

 

Net Income Applicable To Common Shares

5,683,000  

6,149,000  

5,268,000  

 

From table 1 above, the area of concern is the despite the increase in revenue, we still are earning less net income. We can see that the cost of revenue has risen by 7 % over the previous year. The second area of concern is the staggering rise in the Nonrecurring expenses which has increased to 289% over the previous year. As income of the company has risen, it has also increased it interest expenses by 24%. It can be observed that the major contributor to the reduction in the net income can be attributed to the rise in cost of revenue and income tax expenses.

Balance Sheet

Table 2 illustrates the balance sheet of the company.

Table 2: Balance Sheet of NTT, (retrieved from finance.yahoo.com, 2012)

Period Ending

30Mar12

30Mar11

30Mar10

 

Assets

Current Assets

 

Cash And Cash Equivalents

12,396,000

17,316,000

9,750,000

 

Short Term Investments

3,730,000

2,017,000

4,091,000

 

Net Receivables

33,294,000

30,607,000

25,422,000

 

Inventory

4,002,000

3,800,000

2,984,000

 

Other Current Assets

3,835,000

3,817,000

3,190,000

 

Total Current Assets

57,257,000

57,557,000

45,438,000

Long Term Investments

10,189,000

10,343,000

10,019,000

Property Plant and Equipment

119,161,000

119,458,000

107,636,000

Goodwill

9,374,000

9,019,000

5,349,000

Intangible Assets

19,543,000

19,516,000

15,560,000

Accumulated Amortization

 

Other Assets

10,497,000

10,683,000

9,813,000

Deferred Long Term Asset Charges

9,591,000

10,702,000

8,871,000

 

Total Assets

235,612,000

237,278,000

202,687,000

 

Liabilities

Current Liabilities

 

Accounts Payable

29,193,000

27,986,000

23,542,000

 

Short/Current Long Term Debt

9,225,000

12,806,000

11,686,000

 

Other Current Liabilities

4,042,000

3,719,000

3,175,000

 

Total Current Liabilities

42,460,000

44,511,000

38,402,000

Long Term Debt

43,098,000

42,580,000

36,576,000

Other Liabilities

25,900,000

26,337,000

23,139,000

Deferred Long Term Liability Charges

2,061,000

2,218,000

 

Minority Interest

26,310,000

24,858,000

21,219,000

 

 

Total Liabilities

113,518,000

115,645,000

98,118,000

 

Stockholders' Equity

Misc Stocks Options Warrants

 

Common Stock

11,397,000

11,317,000

10,038,000

Retained Earnings

59,405,000

62,206,000

57,863,000

Treasury Stock

5,085,000

7,277,000

12,905,000

Capital Surplus

34,415,000

34,194,000

30,382,000

Other Stockholder Equity

4,348,000

3,664,000

2,029,000

 

Total Stockholder Equity

95,785,000

96,775,000

83,349,000

 

Net Tangible Assets

66,868,000

68,240,000

62,440,000

We can observe that the short term investments have increased by 84.93%. The inventory levels have also increased by 5.32%. The total current assets have marginally decreased by 0.52%. The short / current long term debt has decreased by 28% while other liabilities have increased by ...