Financial Analysis Of Cyta
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FINANCE 231 MANAGERIAL FINANCE
FINANCIAL ANALYSIS OF CYTA
Prepared for: Dr Loukia Evripidou
Prepared by: Margarita Englezou
Reg. no: F2004638
Course: FIN 231
Date:19/12/2007
FINANCIAL ANALYSIS OF CYTA
For the purpose of this project the company of my concern is CYTA. By using the annual report of 2004-2005 I will try to analyze the financial flotation of CYTA and I will also try to make industry analysis in order to compare the company with the rest of the industry.
Furthermore I will conduct an extended ratio analysis for the last two years of the company operations (based on the auditors and financial reports of 2004-2005) and finally I will criticize the company’s performance and end up with recommendations upon specific problems that I will define as crucial for the survival of the company.
Theory of the subject matter
CYTA AS A MONOPOLY
As Cyta has always been a monopoly in the telecommunications services in Cyprus, it found itself in a very crucial position once Cyprus was about to enter the European Union. Being a monopoly means 100% market share. It also meant that the rates of calls for mobile as well as for fixed telephony were controlled and decided only by the State. Cyta was making millions of profit, however, since there was no competition it was operating as any monopolist – having developments and changes certainly not as a number one goal. Cyta was reluctant to any pressures for reduction of call charges and updates.
CYTA showed millions of profits the last years. Although other companies entered the market the last three years, Cyta managed to boost up their profits importantly.
Revenue from other activities increased by ÐЈ5m or 16.7% due to increased revenue from the ATM service, internet services and i-choice. Since the introduction of competition in Cyprus as from 1st January 2003, Cyta, in accordance with the interconnection agreements, charges other services providers for the use of its network. As a result, interconnection revenues increased from ÐЈ33000 to ÐЈ2.6m.
FINANCIAL ANALYSIS
Six year financial analysis
2005(ÐЈm)
2004(ÐЈm)
2003(ÐЈm)
2002(ÐЈm)
2001(ÐЈm)
2000(ÐЈm)
Operating revenue
Operating surplus
Surplus transferred to reserves
Total assets
Total liabilities
Reserves
Cash flow from op. activities
Investing activities
We draft the organizations financial statements from 1999-2005 and the 2005 Auditors Report and we will present you key figures that lead us in understanding the financial position that Cyta has today as well as its financial growth.
As we can clearly see in the graph, Cyta’s operating revenues increase rapidly. Operating revenue figure represents the net receipts from all telecommunication subscribers, mobile, fixed and Internet and includes both, rent of lines and calls. A 32% increase in operating revenue was market the last five years. The revenues climb from ÐЈ168m at 1999 to ÐЈ222m in 2004 and ÐЈ232m in 2005. A slight reduction is observed during fiscal 2003 when competitors entered the market but two year after revenues jump to ÐЈ232m. It shows clearly that the organization has still potential growth even in a fully competitive environment.
On the other hand the organization’s operating expenses grow steadily. Operating expenses represent all expenses incurred for the sake of profit and are directly related with the operating profit. Operating expenses were increased from ÐЈ103m at 1999 to ÐЈ168m at 2004 and ÐЈ180m in 2005. This increase can be considered as expected because during the last five years a lot of changes occurred to the organizations structure and strategy and they needed cash to support them.
Ratio Analysis
2004в‚¤Ð²Ð‚™000
2005в‚¤Ð²Ð‚™000
1. Current Ratio
2. Cash Ratio
PROFITABILITY RATIOS
3. NET PROFIT MARGIN
4. Gross Profit Margin
5. ROI
6. ROE
ACTIVITY RATIOS
7. Asset Turnover
8. Fixed Asset Turnover
9. Days Debtors
10. Days Creditors
11. Gearing Ratio
Ratios and Calculations
Current Ratio
Current Assets / Current Liabilities
224,494/99160
244,783/102172
Cash Ratio
Cash/Current Liabilities
128,165/99160
130,275/102,172
Net Profit Margin
Net Profit/Sales * 100
30 803/10914 * 100
13309/18489 * 100
Gross Profit Margin
GrossProfit/Sales*100
52175/231,595 * 100
35906/230,450 * 100
Net Profit/Total Sales
30803/231,595 * 100
18309/230,450 * 100