This work is related to the financial analysis of telecommunication company Motorola and its comparison with the number one leading company Nokia. This also covers the comparison of the both companies on the behalf of financial analysis.
THE OBJECTIVE OF THE WORK:
This coursework is based on the aim to know and understand about the importance of the financial management for the companies. This is very important for the students and as well as for the management to have a proper knowledge about the financial management.
MOTOROLA is known company in the communication sector. From the last few years it's going to be increasing its growth. In this competitive market there are many competitive rivals to which this has to compete. For this the company has to done the financial analysis so that it came to know about the present position of his company or its competitive rivals in the industry. Simultaneously there is comparison of the both companies this will also include conclusion and recommendation.
On the other hand the second company discussed is NOKIA which is leading company of the world. There is evaluation of the performance of the company.
Content Page
Abstract …………………………………………………
Brief description of companies …………………………4
Motorola ………………………………………………..5
Nokia …………………………………………………..5
Financial Analysis of Motorola ……………………….6
Ratios …………………………………………………..6
Financial Analysis of Nokia ……………………………7
Ratios …………………………………………………...7
Comparison of Both Companies ……………………….8
Conclusion ………………………………………………10
Recommendations ……………………………………….10
References ………………………………………………..11
Appendixes ……………………………………………..12
BRIEF DESCRIPTION OF COMPANIES
Motorola
Motorola Inc. is one of the leading and well know company basically US corporation business and it was established in 1928, it is a multinational company in the telecommunication arena and is based in the Schaumburg, Illinois in the city Chicago (source - Motorola Website, 2010). The rank of this company was on 65th of Fortune 500 ranking system but now it known to be have second rank in the telecommunication and networking the company has it annual venue in US dollar is 22063 million according to Cnnmoney (2010). It was stated previously that this company involved in the manufacturing of wireless telephone handsets (Mobiles) and is well known for his technology and services and good products. As stated earlier Motorola is a producer of wireless telephone handsets provides best ever experienced technologies, products and services (Motorola Website, 2010). In accumulation to this company Motorola furthermore engaged in scheming and trading of the wireless infrastructure for the apparatus like signal amplifiers and cellular transmission signal apparatus (Source - Motorola Website, 2010).
On the other hand, in addition to all this the company has involved in the manufacture of the equipments for the home base and for the broadcasting of the network systems. Its manufacturing and management clientele consist fundamentally of wireless right to be heard and broadband arrangements use to put up clandestine networks and community protection interactions systems such as "Astro" and "Dimetra" ( Source- Motorola Website, 2010). The company has focus over the increasing the sales of handsets too by adding the new technologies and styles to their products and by using the "Google open source" Android Cellular technique of work. For the year 2007 the company had loss of |$1.2 billion and due to this in the coming year the company has cut is the jobs by 3500 worker for time and then 4000 job cuts in 2008. Due to this market shares of Motorola has fallen by 18.4 % to 6 % but in year 2009 the company had earned the profit of $26 million and increased its shares to 12% Then in 2010 following the profit strategy the company has got the profit of $162 million and this is the first time in years that the company had profit with the earnings of $87 Million.
Nokia
In the present scenario the company nokia has at the leading position in the communication market. The company is serving its customers in 130 countries of the world and interesting is that there is 3% of the total revenues are coming from its originated land i.e. Finland. This leading company has started its business in 1865 as the paper mill situated at the river of Nokia from its got his name Nokia in the country Finland. The company started its business in the wood pulp and paper making till 1800 century and then company began to diversify involving the rubber products. Then in 1922 the Nokia Corporation had joined with a cable company Finish Cable Works (FCW) from where it started manufacturing the cables of telephone, equipments for the telephones and power cables. This way the company entered into the market of telecommunication.
From this start, they go into several global markets. In the 1980's, they set in motion to focus on the manufacturing of mobile phones. Nowadays, Nokia is the biggest supplier of mobile phones at the world wide level. The company has achieved about 33% of the market share in the mobile phone industry, through their subsequently nearby opponent bringing up the rear behind at 17%. This marketplace share translates into over 133 million mobile phones that are sold in the 2000 (source - Business Week, Jan. 22, 2001). At present the company possesses production facilities in 10 countries with development and research centres in 12 countries of the world. The company has emploted more than 55,000 people at the world wide and this is in real means a global company in the world. (www.nokia.com)
Corporate structure of Nokia
Financial analysis of Motorola
For the company Motorola there is considered the financial statement, balance sheet and ratio formula for the analysis purpose of the company. By this reader came to know about the position of the company. The analysis is for time period 2006-2009. According to the data in appendixes the table gave the analysis of the company financial profile in brief. From the data given in the statement it has noticed that company has decrement in the current assets and even in the total assets. There is also decrement in the gross profit of the company from 2006-2009. This indicates that the company need to pay attention over the strategies for growth of the profits for the future.
Summary of financial statement and balance sheet is as follow:
Financial
Values
2006
2007
2008
2009
Total current Assets
30 975
22 222
17 363
16 032
Total Assets
38 593
34 812
27 869
2 5603
Total current Liabilities
15 425
12 500
10 620
8 261
Total Liabilities
21 451
19 365
18 362
15 828
Total Common Equity
17 142
15 447
9 507
9 775
Total Equity
17 142
15 447
9 507
9 775
Total Liabilities and Equity
38 593
34 812
27 869
25 603
Total Revenue
42 847
36 622
30 146
22 044
Gross Profit
12 768
10 333
8 851
7 135
Operating Income
4 158
812
412
571
Net Income
3 661
-49.0
-4 244
-51
Ratio analysis
For Motorola on the basis of balance sheet and financial statement the ratios are found out. For this following are the ratios calculated.
Return on Assets (ROA) = 3.15 %
Return on Equity (ROE) = 3.50 %
Return on Capital (ROC) = 5.78 %
Total Assets Turnover = 0.9
Fixed Assets Turnover = 11.2
Inventory turnover = 10.0
Current Ratio = 2.0
Quick Ratio = 1.5
Total debt/Equity = 32.5
Total liabilities / Total assets = 59.7
Financial analysis of Nokia
It is well known that this company is at present leading company in the world. There is increment in the total assets from year 2006 - 2007 but in the next coming year it again fall and continue in the year 2009. Even having looked at the gross profit of the company it is seen that there is continues downfall in the gross profit of the company. The operating income and net income in also decreased during that time period of last five year of the company. It is shocking that there is great decrement in the net income in 2009 year.
Financial
Values
2006
2007
2008
2009
Total current Assets
18 586
29 294
24 470
23 613
Total Assets
22 617
37 599
39 582
35 738
Total current Liabilities
10 161
18 976
20 355
15 188
Total Liabilities
10 649
22 826
25 374
22 650
Total Common Equity
11 968
14 733
14 208
13 088
Total Equity
11 968
14 733
14 208
13 088
Total Liabilities and Equity
22 617
37 599
39 582
35 738
Total Revenue
41 121
51 058
50 710
40 984
Gross Profit
13 379
17 586
17 775
13 415
Operating Income
5 362
8976
6 161
2 559
Net Income
4 306
7 205
3 988
891
Ratio analysis of Nokia
On the basis of above data collected there are calculated ratios for the Nokia Company.
Return on Assets (ROA) = 4.66 %
Return on Equity (ROE) = 16.02 %
Return on Capital (ROC) = 8.47 %
Total Assets Turnover = 1.2
Fixed Assets Turnover = 21.6
Inventory turnover = 12.3
Current Ratio = 1.5
Quick Ratio = 1.1
Total debt/Equity = 43.3
Total liabilities / Total assets = 63.7
Comparison of Nokia and Motorola
From the above analysis it has been noticed that the Nokia is leading company than that of Motorola. The Motorola has to keep it up to become reside in the competition and to attain the good place.
Motorola
Nokia
Company
1Q10
Units
1Q10 Market Share (%)
1Q09
Units
1Q09 Market Share (%)
Nokia
110,105.6
35.0
97,398.2
36.2
Motorola
9,574.5
3.0
16,587.3
6.2
Source - "http://www.pluggd.in/mobile-handset-sales-worldwide-nokia-297/"
From the above charts and tables and analysis of the statements of both companies it is seen that there is big difference between these companies. The nokia has got the 35 % of market share on the other hand the Motorola has only 3 % of the market shares in the share market. One thing is common between these two companies is that they intend to fall in loss from last five year there is no progress and growth seen in the companies.
Conclusion
From above discussion it is found that there is very hard competition in the telecommunication market and it is not easy to get a better place in the market. Due to having wrong follow up of the strategies there is threat of lose and even to get the decrement in the market shares and profit to company. For the better understanding there are taken two examples for the analysis of the industry so that there can be better understanding regarding the financial management for the companies in the industry. It is mandatory for the managers to have good and skill full knowledge of all the aspects of the management. Financial management is the most important aspect of the management and there should be proper knowledge and understanding of this area is there. Moreover the financial statement, balance sheets and financial ratios are the key factors to understand the position and stand up of the company and by having proper understanding of them there is good management of the business. Hence the financial management and planning is the essential and crucial part of all the industries. It is how the company set up their goals for the future planning's.
Recommendations
From above discussion it is recommended for the both companies that they has to review over their policies regarding the financial management as they are falling in continues loss in the market. There must be proper evaluation of the market and analyse the various strategies for the better implementation and use of finance in the field where it is needed. By following up suitable strategy the companies can make profit in the market. It is very competitive market and is not easy to get in progress as this is the era of globalisation.
