Financial Analysis of Singtel free essay sample

As my research and analysis project topic chosen is the ‘Topic 8: An analysis of business and financial performance of an organization over a three–year period’, I have selected Singapore Telecommunications Limited (SingTel) to be my research organization from 1 April 2007 to 31 March 2010. Business analysis is the discipline of identifying business needs and determining solutions to business problems. Solutions often include a systems development component, but may also consist of process improvement or organizational change or strategic planning and policy development. It focuses on the needs of the business to achieve its corporate objectives and develop the strategy. Financial analysis refers to the finance function of the business and examines its historical data, such as financial statements, to gain the information about the financial health of the business. And it can be used in a wide variety of ways to help managers to make their critical decisions, just as Alan S. Donnahoe wrote in his book What Every Manager Should Know about Financial Analysis. In a very real sense, finance is the language of business. Goals are set and performance is measured in financial terms. Plants are built, equipment ordered, and new projects undertaken based on clear investment return criteria. Financial analysis is required in every such case. † In summary, the analysis of business and financial performance reflect a clearer picture of the organization about its activities, strength, weaknesses and potential problems and also can provide more useful and wider information to the users who are interested in. 1. 2 Reason for choosing the topic and the organization This topic allows me to get deeper and better into the understanding of business and financial analysis. With the availability of annual report, I can apply my theoretical knowledge of P2 and P3 in real practical organization. Furthermore, it is also helpful to improve my skills in financial analysis areas as my dream position is CFO of my future career. The reason to choose SingTel as my research organization is that this organization is familiar to me as I am currently the client of SingTel which I have a better understanding of it than other organizations. And nowadays, the telecommunication industry plays an important role in our daily life that everyday we need to contact our family and friends by using phones and internet. In fact, SingTel is the largest company by market capitalization listed on the Singapore Exchange (Wikipedia2010) and I am interested in its success that I want to know more about it. 1. 3 Objectives of report This project’s objective is to evaluate the business and financial performance of SingTel over a three-year period by applying the accounting knowledge and skills from ACCA learning. By doing this, it is not only to improve my studies and gain confidence, but also make the information from financial statements easier for users to understand and make decisions. 1. 4 Research questions My report aims to solve and analyze the following concerns related to SingTel’s success: †¢ How is the probability and liquidity analysis of SingTel in these three years? †¢ What factors helped SingTel to become one of the most successful international companies in Singapore as there are not many international companies in Singapore? †¢ What are the challenges faced by SingTel? What are the future prospects of SingTel affected by the economic downturns? †¢ What are the strength, weakness, opportunity and threat of SingTel in its business environment? 1. 5 Research and Analysis Methodology Secondary source is my major approach to gather research information which is mostly available in SingTel annual report and other author’s analysis of it that can b e searched on internet and in the library. My research and analysis section has four parts: Firstly, the ratio analysis of the financial performance of SingTel during three-year period is compared among each year. Secondly, SingTel will be compared with M1 which is also in the telecommunication industry for the benchmarking for the past three years which can enhance the overall analysis of the report. Thirdly, PESTEL analysis model is used to analyze the macro-environment of the company for the business performance. Finally, there is a SWOT model used to have a deeper analysis both in the internal strength and weaknesses and in the external opportunities and threats. Chapter Two: Information gathering analysis method used 2. 1 Source of information Information gathering is the first step during the process of my project. Learning to develop effective information gathering strategies will help me understanding the organization in a number of different ways. And all the sensible judgments and effective techniques depend on that sufficient and quality information. Generally, there are two types of information sources: †¢ Primary source: it refers to a term used in a number of disciplines to describe source material that is closest to the person, information, period, or idea being studied (Wikipedia2010), i. . it can be collected by interviews, surveys, observation or questionnaires. It serves as an original source of information about the topic. †¢ Secondary source: it collects from a document or recording that relates or discusses information originally presented elsewhere (Wikipedia2010). It can be collected both externally and internally. Internally, it can be gained from records or documents within the organization. Externally, the information from relevant reports in newspapers, magazines or journals has been gathered for you. It is less timely cost than primary data, but it has risk once these information collected by others which are lack of judgments or appropriate sampling. 2. 2 Collection of data As we know, the primary source is more reliable than secondary source. However, it is timely consuming and costly whereas there are constraints of time and confidentiality which it is unlikely to obtain sufficient information in a short time. This report is an analysis of business and financial performance of SingTel which can get relevant information from annual report of the company from website. Therefore, I use secondary source for information gathering during my RAP. 2. 3 Source of data My main source of data relies on secondary source. The methods use to gather information as following: †¢ Internet †¢ Newspaper †¢ Relevant books †¢ Library 2. 3. 1 Internet Nowadays, internet is regarded as one of the fastest and most convenient method to gather information. We can access the information by search engines, such as Google and yahoo, which can facility us to locate all the relevant websites. With the help of internet, I downloaded the annual reports of SingTel and M1 from their company websites which are very useful for both financial and non-financial analysis. In addition, I also visited other websites to gather more information about the backgrounds, history and activities profiles of SingTel. 2. 3. 2 Newspaper In Singapore, it is easy to get information from newspapers which every weekday there are free newspapers to allocate in the MRT station during the lunch time which is convenient to know about the big news happened on time. And I also bought some other newspapers to gather relevant information to further the business and financial knowledge of my report, such as and . 2. 3. 3 Relevant books Relevant books play an important role in the process of information collection. They help me to clear my thoughts and ideas by the guidelines provided, such as text books. 2. 3. 4 Library The National Library in Singapore provides a large amount of information about the techniques and applications of financial and business analysis that make me have an in depth knowledge. The different opinions and perspectives by other authors also help me to enhance the understanding of the financial and industry environment of SingTel. 2. 4 Limitations of information gathering As above, my information gathering mostly depends on secondary source due to some limitations of time and cost which may not as reliable as primary source. And, even though SingTel is one of the most transparency companies in Singapore stock market, there are stills some limitations during the gathering of information because of the confidentiality. 2. 5 Ethical issues I am strictly following the requirements by Oxford Brooks University that all students undertaking research need to comply with the University’s Code of Practice ‘Ethical standards for Research involving Human Participants’ and rules, policies, and regulations for information gathering. During my process of information gathering, I selected information from the reputable websites and books with clear reference in my RAP which is transparency to the public. Any sensitive and confidential information against ethical and professional issues is not disclosed in this report. 2. 6 Accounting and business techniques used In order to have an effectively and completely analysis of business and financial performance of the company, the accounting and business techniques used are important to adopt: †¢ Ratio analysis: an analysis of financial performance of SingTel from profitability, liquidity, long-term insolvency and investment ratio to reflects its financial condition, its attractiveness and its operations as an investment. It enables the manager to spot the trends in the business and compare its own ratios for several successive years, watching especially for any unfavorable trends that may be starting. Benchmarking: It is the process of comparing ones business processes and performance metrics to industry bests and/or best practices from other industries (Wikipedia2010). It is a good tool to improve the business to identify its comparative strengths and weaknesses. †¢ PESTEL: it describes a framework of macro-environment factors used in the environmental scanning component of strategic ma nagement affected the company as political, economic, social, technology, environmental and legal. It will help the company to understand these external factors to respond if there is any changes, even they cannot control them. †¢ SWOT: it summarizes the key issues from the business environment and the strategic capability of an organization that are most likely to impact on strategy development (JSW). This enables users to recognize the strengths and weaknesses within the organization to take the opportunities or to overcome the threats outside the organization. 2. 7 Limitations of accounting and business techniques used During the process of ratio analysis, it is based on historical data which the future performance may not be in line with the trends analyzed from past information since the changes always exist. Due to the constraints of time and confidentiality, there may not have sufficient information gathered for making a good PESTEL and SWOT analysis. In benchmarking, different companies may have different accounting techniques and policies used which may affect the reliability. Chapter Three: Research, Analysis, Conclusion and Recommendation 3. 1 Background of organization 3. 1. 1 History Singapore Telecommunications Limited, commonly known as SingTel, is a telecommunications company, providing a diverse range of communication services and solutions, including fixed, mobile, data, Internet, info-communications technology, satellite and pays TV with a combined mobile subscriber base of 285 million customers from its own operations and regional associates at the end of December 2009. The history of SingTel can be traced back to 1879 when the Singapore became one of the first cities in the east to have telephone services; three years after Alexander Graham Bell patented his invention. In 1988, a subsidiary, Singapore Telecom International, was formed. This marked the beginning of SingTel’s expansion into overseas markets. In 2005, SingTel launched its commercial 3G services in February. And then Mio TV was launched commercially on 20 July 2007 and began its services on 21 July 2007. On July 10 2009, Apple Inc. and SingTel announced that they are launching iPhone 3GS commercially. In Singapore, SingTel has 130 years of operating experience and has played an integral part in the development of the country as a major communications hub in the region.