Finance

Company Overview
Verizon was formed by the merger of two companies Bell Atlantic Corp and BTE Corp in 30th June 2000. The operation of Verizon was shared by both the managers of Bell Atlantic and BTE. The company is based in New York which was incorporated in Delaware. Its stocks started trading in New York Stock Exchanges on 3rd July 2000. In 2004 Verizon had an addition of Dow Jones Industrial Average to the company which made provide over 100 million people in United State with wire lines and wireless. In 2006 the Verizon made another addition of MCI, Inc.

The main mission of Verizon is to provide communication to people with each other. Mainly it has two different segments of it, wireless and wire line. The wire line is further divided into two strategic units, Verizon Telecom and Verizon Business. Verizon provides its customers with different types of services. Its services include different types of land lines services, Plain Old Telephone Service and even Voice over Internet Protocol. It even provides its customers with the voice mail services for residential and business purpose. It provides the service DSL and wireless even. The Verizon has become the largest wireless service provider in United States. It serves over 80 million people.

Ratio Analysis
Consolidated Statements of IncomeVerizon Communications Inc. and Subsidiaries

(dollarsinmillions,exceptpershareamounts)Years Ended December31,200920082007Operating Revenues107,80897,35493,469Operating ExpensesCost of services and sales (exclusive of items shown below)44,29939,00737,547Selling, general and administrative expense32,95026,89825,967Depreciation and amortization expense16,53214,56514,377Total Operating Expenses93,78180,47077,891Operating Income14,02716,88415,578Equity in earnings of unconsolidated businesses553567585Other income and (expense), net90282211Interest expense(3,102)(1,819)(1,829)Income Before Provision for Income Taxes, DiscontinuedOperations and Extraordinary Item11,56815,91414,545Provision for income taxes(1,210)(3,331)(3,982)Income Before Discontinued Operations and Extraordinary Item10,35812,58310,563Income from discontinued operations, net of tax142Extraordinary item, net of tax(131)Net Income10,35812,58310,574Net income attributable to noncontrolling interest6,7076,1555,053Net income attributable to Verizon3,6516,4285,521Net Income10,35812,58310,574Basic Earnings Per Common Share(1)Income before discontinued operations and extraordinary itemattributable to Verizon1.292.261.90Income from discontinued operations attributable to Verizon, net of tax0.05Extraordinary item attributable to Verizon, net of tax(0.05)Net Income attributable to Verizon1.292.261.91Weighted-average shares outstanding (in millions)2,8412,8492,898Diluted Earnings Per Common Share(1)Income before discontinued operations and extraordinary itemattributable to Verizon1.292.261.90Income from discontinued operations attributable to Verizon, net of tax0.05Extraordinary item attributable to Verizon, net of tax(0.05)Net Income attributable to Verizon1.292.261.90Weighted-average shares outstanding (in millions)2,8412,8502,902
(1)Total per share amounts may not add due to roundingSee Notes to Consolidated Financial Statements

Consolidated Balance SheetsVerizon Communications Inc. and Subsidiaries
(dollarsinmillions,exceptpershareamounts)At December31,20092008AssetsCurrent assetsCash and cash equivalents2,0099,782Short-term investments490509Accounts receivable, net of allowances of 976 and 94112,57311,703Inventories2,2892,092Prepaid expenses and other5,2471,989Total current assets22,60826,075Plant, property and equipment228,518215,605Less accumulated depreciation137,052129,05991,46686,546Investments in unconsolidated businesses3,5353,393Wireless licenses72,06761,974Goodwill22,4726,035Other intangible assets, net6,7645,199Other investments4,781Other assets8,3398,349Total assets227,251202,352Liabilities and EquityCurrent liabilitiesDebt maturing within one year7,2054,993Accounts payable and accrued liabilities15,22313,814Other6,7087,099Total current liabilities29,13625,906Long-term debt55,05146,959Employee benefit obligations32,62232,512Deferred income taxes19,31011,769Other liabilities6,7656,301EquitySeries preferred stock (.10 par value none issued)Common stock (.10 par value 2,967,610,119shares issued in both periods)297297Contributed capital40,10840,291Reinvested earnings17,59219,250Accumulated other comprehensive loss(11,479)(13,372)Common stock in treasury, at cost(5,000)(4,839)Deferred compensation - employee stock ownership plans and other8879Noncontrolling interest42,76137,199Total equity84,36778,905Total liabilities and equity227,251202,352(The above financial statements are taken from the companys website)

2009 2008 2007
Return on Capital Employed 6 10 10
Operating profit ratio 7 18 19
Current ratio 0.81 11 0.81
Interest cover 5x 10x 9x
EPS 1.29 2.26 1.91
Net asset turnover 54 55 58

The trends in the operating revenues have been increasing since 2007 by 4 in 2008 and by 11 in 2009. With the increasing operating revenues the operating expenses have also increased. The interest expense was almost same in the year 2007 and 2008 but in 2009 it has almost doubled. There are a few changes seen in the assets, they have increased in the three years. But the return on capital employed has decreased in three years. This is due to the decrease in operating profit margin of the company, the sales have increased but the profit before interest and tax has not increased to the same ratio as it should increase with respect to sales. This decrease can also be due to the decrease in the net asset turnover. The interest cover has decreased by 5 in 2009 compared to 2008, which means that the company ability to pay interest has decreased. The current ratio is same in the year 2007 and 2009 but in 2008 the current assets and current liabilities of Verizon were equal while in the other two years the current assets were a little less than the liabilities. The earnings per share has increased in 2008 but in 2009 it decreased but it was more than that in 2007.

Stock Price Analysis
As at December 31
Data points in dollars20052006200720082009Verizon77.9104.8128.0104.9108.9SP Telecom Services94.7129.3144.7100.6109.6SP 500104.9121.5128.180.7102.1

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(Verizon, 2010)

As seen in the above table the stock prices were increasing till 2007 and then they decreased in 2008 but in 2009 they have started to increase again. The decrease could be due to the recession period in United States.

Investing Verizon is a good idea because they have a dividend payout ratio of 6 and no matter what the company is more concerned with its own growth regardless of the uncertainty of the market (Forbes, 2010). The main reason, Verizon is better than other companies to invest because it provides its customers with best speed. As it is the era of mobile internet, the race between different service providers is to provide the best speed of internet possible.  Verizon is leading in providing wireless and its profit growth is even better than its competitors. Therefore investment in Verizon is a good idea as its stocks are more attractive than that of any other company (MSN, 2010).