The Final Project allows you to demonstrate your knowledge and understanding of basic financial statements, financial ratio analysis, trend and common size analysis, market valuation of bonds and stocks, and how companies manage their assets and make capital budgeting decisions to generate maximum value to stockholders.

The project requires you to use the financial reporting package of two publically traded companies: AT&T and Verizon. A careful financial analysis of each company must be completed, including the development of the common size statements and financial ratios.

Complete the following steps:

1. Obtain the most recent annual report for AT&T and Verizon.

1. Develop common size financial statements for the two companies for the most recent two years available.

1. Calculate financial ratios for a two-year comparison. Be sure to select financial ratios that are relevant to the telecommunication industry. A minimum of 10 financial ratios must be presented. The financial ratios should be calculated; do not rely upon other finance website to obtain the general financial ratios.

1. Prepare a financial statement analysis including charts and diagrams.

1. Present the analysis in formal written format incorporating items 2 through 4 above.

The written analysis should be structured with the following sections for each company:

1. Company Background: Evaluate market valuation of the bonds and stocks issued by each company, and present an overview of each company?s history key products/services and operations. This summary should be between two and three pages long.

1. Recent Merger and Acquisition (M&A) Activities: Evaluate the effect of interest rates and time value of money by presenting a summary of recent M&A activities for both companies. Your summary should include a brief discussion of the financing tools used and the cost of capital for these M&A activities.

1. Financial Statements and Common Size Statements: Evaluate and interpret each company?s basic financial statements by presenting and discussing the common size financial statements including significant trends or variances. Calculate and discuss the two years of financial ratios.

1. Overall assessment: Evaluate each company?s performance in managing its assets to generate the maximum value to shareholders.Using the information gathered, present an overall assessment of the analysis. Be sure to identify the strengths and weaknesses identified for each company.

After analyzing each company, develop a final conclusion which includes a comparison/contrast of the financial analysis results. Be sure to fully support your conclusion by referring to the analysis provided. The final conclusion should be at least two pages.

Report Specifications/ Guidelines:

• Follow accepted research approaches and citation format (APA).

• Convey your understanding of the readings and concepts.

• Be organized, coherent, and unified.

• Check for spelling, structure, and grammatical errors.

• Demonstrate graduate-level analytical skills.

MNP 540- Final Project Analysis of AT&T and Verizon Dr. Elaine Gregory, CPA, CFE Objective The objective of the final project is to evaluate and interpret organizational financial information through basic financial analysis. The project requires you to use the financial reporting packages of AT&T and Verizon Question: What 'industry' do these companies belong to? Requirements: 1. Obtain the most recent annual report for AT&T and Verizon. You must provide the links for all of the websites for review. https://www.sec.gov/edgar/searchedgar/companysearch.html Find the most recent SEC10K reports for AT&T and Verizon. 2. Develop common size financial statements for the 2companies for the most recent 2-years available. Go back to Chapter 3 3. Calculate financial ratios for a 2-year comparison - be sure to select financial ratios that are relevant to the industry. Research the industry and identify and defend the ratios. A minimum of 10 financial ratios must be presented. You must have a mix of balance sheet/ income statement/ and cash flow ratios Re calculate the financial ratios by showing both the formula and calculation in your project 4. Prepare a financial statement analysis including charts and diagrams. Include next to your chart, the data used to create the chart. You can use pie charts, bar/line graphs, whatever you choose to properly visualize the data. F/S analysis charts must include one chart each representing the balance sheet, income statement and cash flow statement. Diagrams can be used to synthesize the data. For example, you can prepare a diagram that lists the various components of the company's balance sheet 5. Present the analysis in formal written format incorporating items 2 through 3 above. SEC10K reports for AT&T and Verizon . Common size financial statements . Develop common size financial statements for the 2companies for the most recent 2-years available. Refer to Chapter 3 Balance Sheet, Income Statement, and Cash Flow Statement Example of Common Size Analysis and Graph Vertical Common-Size Analysis: Interpret Results! Graphically: Proportion of Assets 100% 80% 60% 40% 20% 0% 2008 2009 2010 2011 2012 Fiscal Year Cash Net plant and equipment Inventory Intangibles Accounts receivable 2013 Example of Common Size Analysis and Graph Horizontal Common-Size Analysis (base year is 2008): Year Cash Inventory Accounts receivable Net plant and equipment Intangibles Total assets Graphically: 2008 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Percentage of Base Year Amount 2009 101.00% 103.00% 102.00% 104.00% 100.50% 103.08% 130% 120% 110% 100% 90% 2008 2010 102.01% 106.09% 104.04% 108.16% 101.00% 106.27% 2011 103.03% 109.27% 106.12% 112.49% 101.51% 109.57% 2009 2012 104.06% 112.55% 108.24% 116.99% 102.02% 112.99% 2010 Interpret Results! 2013 105.10% 115.93% 110.41% 121.67% 102.53% 116.53% 2011 2012 2013 Fiscal Year Cash Inventory Accounts receivable Net plant and equipment Intangibles Total assets Financial Ratios Calculate financial ratios for a two-year comparison You must have a minimum of 10 ratios and they must be 'industryspecific' Do not rely on financial website data (no 'copy and paste') Include the definition of the ratio and WHY it is relevant to the industry. Provide the formula and each calculation Explain the meaning of the ratio for each company. WHAT DOES IT MEAN TO THE READER?? Financial Statement Analysis \"The process of selecting, evaluating, and interpreting financial data, along with other pertinent information, in order to formulate an assessment of a company's present and future financial condition and performance (CFA, 2013). Market Data Financial Disclosures Economic Data Financial Analysis Financial Statement Analysis: Examples Financial Disclosures Balance Sheet, Income Statement, Cash Flow Statements Balance Sheet: Assets, Liabilities, Equity Income Statement: Revenues and Expenses Cash Flow Statement: Operating, Investing, and Financing Activities Notes to Financial Statements Market Data (MorningStar, Bloomberg's, Reuter's) Economic Data (Industry information) Layout of the Paper: Approximately 10-12 pages, not including cover or references: Template Provided Company Background. Overview of the company's history key products/services and operations. Evaluate the market valuation of the bonds and stocks issued by each company. You might look to Morningstar or Bloombergs for additional research Recent Merger and Acquisition (M&A) Activities. You can find some of this in the company's website, SEC reports, media coverage, or business magazinesewspapers. Financial Statements and Common Size Statements. Present and discuss the common size financial statements including significant trends or variances Financial Ratios. Calculate and discuss the two years of financial ratios. Overall assessment: Present an overall assessment of the analysis. Be sure to identify the strengths and weaknesses identified as well as performance within the industry. Final conclusion - minimum 2 pages e e c x e t o n ! o s D ge pa 6 1 d Report Specification Requirements The report must be formatted according to APA guidelines and demonstrate graduate-level analytical skills. References, citations and other APA information can be located in the portal under \"Research Resources, General Resources, APA Style References\" Times New Roman, 12pt. Double spaced. Note: 1 double space between paragraphs, not 2! Use of tables, graphs, and figures required. Use of Wikipedia, Investopedia, Technopedia, Motley Fool and any other open source websites are not allowed. Convey your understanding of the company's and concepts. You are writing a technical, professional document and you must use appropriate language and tone. 'Conversational' tone or lack of professional terminology will receive point deductions Demonstrate graduate-level analytical skills Be organized, coherent, and unified. Check for spelling, structure, and grammatical errors. Points will be deducted for errors in writing. Always refer to the Grading Rubric for guidance. Grading Rubric Company background You present a clear and You present an appropriate accomplished overview of each overview of each company that company that includes the company includes the company history, key history, key products and services, products and services, operations, operations, and an evaluation of its and an evaluation of its stocks and stocks and bonds. bonds. You present an incomplete overview of each company that includes some of the following information: the company history, key products and services, operations, and an evaluation of its stocks and bonds. You present a careless and/or erroneous overview of each company that is missing some of the following information: the null company history, key products and services, operations, and an evaluation of its stocks and bonds. Clear, complete, products, operations, & equity Merger and acquisition activities You thoroughly and accurately summarize recent merger and acquisition activities for both companies; you include a clear discussion of financing tools used and the cost of capital. M&A, financing tools, cost of capital You sufficiently summarize recent merger and acquisition activities for both companies; you include a discussion of financing tools used and the cost of capital. You inadequately summarize recent You loosely summarize recent and acquisition activities for merger and acquisition activities for merger both companies; you include an both companies; you include an insufficient or inaccurate discussion null unclear discussion of financing tools of financing tools used and the cost used and the cost of capital. of capital. Financial statements You skillfully evaluate two years of financial ratios for each company and provide a thoughtful discussion of trends and/or variances. You competently evaluate two years You imprecisely evaluate two years of of financial ratios for each company financial ratios for each company and and provide an adequate discussion of provide an incomplete discussion of trends and/or variances. trends and/or variances. You incorrectly evaluate two years of financial ratios for each company and null provide an insufficient discussion of trends and/or variances. 10 ratios, 2 years comparison, trends/variances Overall assessment You provide an insightful assessment of each company's financial performance; you astutely identify each company's strengths and weaknesses. You provide a satisfactory assessment of each company's financial performance; you identify each company's strengths and weaknesses. You provide a superficial assessment of each company's financial performance; you weakly identify strengths and weaknesses of each company. You provide a poor assessment of each company's financial performance; you insufficiently null identify strengths and weaknesses of each company. You reach a dubious conclusion that is weakly supported by your analysis; your conclusion includes a limited comparison/contrast of the financial analysis results. You reach illogical conclusions that are not supported by your analysis; your conclusion includes a deficient comparison/contrast of the financial null analysis results or includes no comparison/contrast at all. Financial performance, strengths & weaknesses Conclusion You reach a well-reasoned conclusion that is supported by your analysis; your conclusion includes a comprehensive comparison/contrast of the financial analysis results. Compare/contrast financial analysis results You reach an acceptable conclusion that is supported by your analysis; your conclusion includes a sufficient comparison/contrast of the financial analysis results. Purpose You effectively establish the context and purpose of the project. You establish the context and purpose of the project. You somewhat establish the context and purpose of the project. Your project reflects all requirements and is complete in all respects. Your project reflects most requirements and is Your project reflects few requirements and is complete in most respects. incomplete in many respects. You ineffectively establish the context and purpose of the project. null Introduction Completeness Your project does not reflect requirements and null is incomplete in most respects. Meet all requirements Content development You use appropriate, relevant, and compelling content that demonstrates mastery of the subject; provide an advanced and thoughtful analysis of ideas; present an in-depth synthesis of ideas demonstrating insight and interpretation; and include appropriate references to readings wherever necessary. You use appropriate and relevant content that demonstrates sufficient command of the subject; provide a germane analysis of ideas; and include references to readings. You use somewhat appropriate content that demonstrates limited command of the subject; You use inappropriate and irrelevant content, provide a cursory analysis of ideas that lacks provide little, if any, analysis, and do not insight and interpretation; and include minimal include references to readings. references to readings. null Do you demonstrate that you understand the concepts, the analysis? Is this in-depth? Do you have outside sources to support your assertions? Did you synthesize? Organization You implement a coherent, observable You implement a generally observable organizational pattern (specific introduction organizational pattern (specific introduction and conclusion, sequenced material within the and conclusion, sequenced material within the body, and transitions) that effectively elucidates body, and transitions) that successfully explains the content of the presentation. the content of the presentation. Did you follow the template? Can the reader follow your logic? You implement a somewhat observable organizational pattern (specific introduction and conclusion, sequenced material within the body, and transition) that inconsistently explains the content of the presentation. You implement an incoherent organizational pattern (lacking specific introduction and conclusion, sequenced material within the null body, and transition) that inadequately explains the content of the presentation. Sources and documentation You clearly and effectively document sources of information using in-text citations linked to references at the end of the paper; APA format is complete and entirely accurate. You properly document sources of information using in-text citations linked to references at the end of the paper; APA format may include a few minor errors. Go back and review all feedback on this. Use APA or Purdue OWL for examples. Make sure that you state at the bottom of your work which source you used: APA or Purdue OWL Mechanics You write in complete, wellconstructed sentences with faultless grammar, word choice, punctuation, and spelling; writing is sharp, coherent, and demonstrates sophisticated clarity. You write in complete sentences with mostly correct grammar, word choice, punctuation, and spelling; minor errors may exist but do not compromise meaning. You incompletely document sources of information using in-text citations linked to references at the end of the paper; APA format includes significant errors. You inadequately document sources of information using either in-text citations references at the end of the null paper; whatever documentation exists includes multiple and serious errors. Microsoft Office APA is not current! You write in unclear sentences with significant errors in grammar, word choice, punctuation, and spelling that may compromise meaning. You write in incomplete, incomprehensible sentences filled with serious errors in grammar, word null choice, punctuation, or spelling. You incompletely analyze the key financial operating characteristics of the organization. You inadequately analyze the key financial operating characteristics of the organization. Are you writing at the Graduate Level? Professional and Technical Operating characteristics You carefully analyze the key financial You adequately analyze the key operating characteristics of the financial operating characteristics of organization. the organization. Is your work relevant to the industry? null Financial planning You skillfully analyze financial information to create support for a strategic direction. You adequately analyze financial information to create support for a strategic direction. You superficially analyze financial information to create support for a strategic direction. You inadequately financial information to create support for a strategic null direction. Did you analyze the information or just provide financial statements/ratios without connecting back to the 'Why'? Data-informed decision making You appraise comprehensive data from You appraise adequate data from You appraise a modicum of data from You appraise little, if any, data from internal sources and expertly integrate internal sources and capably integrate internal sources and insufficiently internal sources and incapably the appropriate evidence. the appropriate evidence. integrate appropriate evidence. integrate appropriate evidence. Do you 'walk the talk'? null Template Word Document Template is provided with headings so you can confirm that you have met all of the requirements necessary in the final project. Do not alter the headings; just type your work under each heading. You do need to set your default at double spacing and indent each paragraph. The references will need to be single spaced, with a hanging indent. Double space (2 lines) between each reference. Template References Due Date Sunday, Week 12 - March 26th. Questions? MNP 540 Final Project (Last Name, First Initial) MNP 540 - Final Project Analysis of AT&T and Verizon (student's name) (Course ID) Mentor: Dr. Elaine Gregory (Date) 1 MNP 540 Final Project (Last Name, First Initial) INTRODUCTION (Your introduction goes here. Introduction is a minimum of 2 paragraphs) COMPANY BACKGROUNDS AT&T VERIZON RECENT MERGERS AND ACQUISITIONS (Introduce what M&A is and the items that will be covered in each company. Compare and contrast each company) AT&T VERIZON FINANCIAL STATEMENT ANALYSIS (Introduction of Common Sized Statements) Balance Sheet Analysis Income Statement Analysis 2 MNP 540 Final Project (Last Name, First Initial) Cash Flow Analysis Significant Trends and Variances FINANCIAL RATIOS (Introduction of selection of financial statement ratios) Ratio 1: (Name of Ratio) Ratio 2: (Name of Ratio) Ratio 3: (Name of Ratio) Ratio 4: (Name of Ratio) Ratio 5: (Name of Ratio) Ratio 6: (Name of Ratio) Ratio 7: (Name of Ratio) Ratio 8: (Name of Ratio) Ratio 9: (Name of Ratio) Ratio 10: (Name of Ratio) 3 MNP 540 Final Project (Last Name, First Initial) OVERALL ASSESSMENT (Evaluate each company's performance in managing assets to generate maximum value to shareholders) Management of Assets in Generating Maximum Value to Shareholders AT&T VERIZON Strengths and Weaknesses AT&T. VERIZON. CONCLUSION (Comparison/contrast of financial analysis results, using and referring to the analysis you have provided. Must be at least 2 pages) References (Identify Source: APA or Purdue Owl) 4 MNP 540 Final Project (Last Name, First Initial) MNP 540 - Final Project Analysis of AT&T and Verizon (student's name) (Course ID) Mentor: Dr. Elaine Gregory (Date) 1 MNP 540 Final Project (Last Name, First Initial) 2 INTRODUCTION Financial statements provide the key information about the financial performance of any corporation. The users extract various information from them to determine the financial condition. They provide information about profitability, assets, liabilities etc. of the company. But the figures provided in the financial statements are less meaningful unless they are compared with some other figures or are seen in relation to other numbers. Ratio analysis is a tool that facilitates the comparison among various numbers of the financial statement and makes the results more meaningful. It also enables the users to compare the results of one financial year with the other. The results of ratios can also be compared with other corporations or with industry averages as benchmarks. The other tool to analyze the financial statements is common-size analysis of the financial statements. It is also called vertical analysis. It changes the financial statements in terms of percentage and all the figures of every statement is compared with one base figure. Net income is taken as base figure in income statement and total assets is taken as base figure in balance sheet. This paper makes an attempt to make financial analysis of Verizon communications and AT&T. To complete the analysis ratio analysis of the financial statements is performed. The common-size analysis is also completed to see the check the financial potential of the companies and to make comparison. COMPANY BACKGROUNDS AT&T Headquartered in Dallas, Texas, United States AT&T is a Telecommunications and mass media multinational company. It is the largest fixed telephone service provider of United States MNP 540 Final Project (Last Name, First Initial) 3 and is also the second largest mobile phone service provider. The revenue of the company is high and it is the largest telecommunication company of the world in terms of revenue. The other services of the company, in United States, also include broadband subscription television. The Chief Operating Officer of AT&T is Randall Stephenson and John J. Stephens is its Chief Financial Officer. The history of AT&T dates back to Bell Telephone Company. American Telephone and Telegraph Company was the subsidiary company of AT&T. Earlier the name of the company was AT&T Corporation. During the year 2005 the AT&T was purchased by SBC Communications and adopted its brand name. On May 18, 2014 the company purchased Direct TV for $67.1 billion. In 2015 the company made other big acquisition of Lusacell and NII Holdings. It merged both the companies and created AT&T Mexico. James, M. (2016) confirmed that the executives of Times Warner are engaged in talks with AT&T and it is expected that there can be a potential merger or partnership. The primary products of the company are fixed line telephone, digital television, satellite and digital television, etc. The major subsidiaries of AT&T are AT&T Mobility, DirecTV, AT&T Corporation, AT&T Mexico Bellsouth and Cricket Wireless. The total number of employees that the company has is more than 245,000. The stock of AT&T is traded at New York Stock Exchange and the ticker symbol of the company is T. The stock is also component of S&P 500 and S&P 100. VERIZON Verizon Communications is a United States based multinational company. The industry of Verizon is Telecommunications and its sector is technology. Verizon is the largest provider of wireless communication in United States. The company is headquartered at Basking Ridge, New MNP 540 Final Project (Last Name, First Initial) 4 Jersey, united States. The Chairman and Chief Executive Officer of the company is Lowell McAdam. Ronan Dunne is executive vice president of the company. The two main division of the company are Verizon wireless and Verizon wireline. The different products of Verizon include mobile telephony, digital television, broadband, internet services, fixed line telephone, etc. Various subsidiaries of Verizon include Verizon Delaware, Verizon Washington, Verizon North, AOL, Verizon Enterprise solutions, Verizon Wireless, Verizon New York, Verizon New England, etc. The company was established in October, 1983 in name of Bell Atlantic. In April, 2000 Verizon Communications came into existence as a result of joint venture between Vodafone and Bell Atlantic. The total numbers of employees in the company are more than 188,200 all around the world. The stock of company is traded at New York Stock Exchange and its ticker symbol is VZ. The stock of Verizon is also component of DJIA, S&P 100 and S&P 500. The slogan of Verizon is 'better matters'. RECENT MERGERS AND ACQUISITIONS AT&T The major mergers and acquisitions of AT&T are discussed below: In June, 2007 AT&T acquired Dobson Cellular which was the primary service provider of United States in rural areas in name of Cellular One. The company acquired it by paying $2.8 billion and by assuming the outstanding debt of $2.3 billion. During November, 2008 the company acquired Centennial Communications Corporation. The acquisition was made for $944 million. During 2011 the company completed another major acquisition by buying spectrum from Qualcomm for $1.93 billion. MNP 540 Final Project (Last Name, First Initial) During the year 2013 the company acquired Leap Wireless for $1.2 billion in which it acquired all the towers, stores and 5.3 million customers. The company has also announced its plans to acquire Times Warner for $109 billion. 5 Trainer, D. (2016) suggested that \"AT&T (T) recently announced plans to acquire media giant Time Warner (TWX) for $109 billion including net liabilities.\" VERIZON The major mergers and acquisitions of AT&T are discussed below: During January, 2016 the company closed merger with MCI and created a strong competitor for Advanced Communications Services. During May, 2007 the Verizon Communications acquired information security services of Cybertrust During December, 2011, Verizon Communications acquired spectrum from Comcast, Bright House Networks and Times Warner for $3.6 billion. In July, 2012 the company completed the takeover of Hughes Telematics. In January, 2014, Verizon Communications acquired assets of Intel media which will be useful for next-generation video services. In May 2015 Verizon Communications acquired AOL. During August, 2016 Verizon Communications acquired Fleematics, a leading global provider of fleet and mobile workforce management solutions for $2.4 billion. During February, 2017 the company completed acquisition of fiber business of XO Communications. FINANCIAL STATEMENT ANALYSIS Common size statements enable the users to view the financial statements in terms of percentage of some base figure. The base figure for income statement is total revenue and for balance sheet the base figure is total assets. There are different views about base figure of MNP 540 Final Project (Last Name, First Initial) 6 statements of cash flow. For the purpose of analysis the total revenue is taken as base figure for both the companies. Balance Sheet Analysis The balance sheet of AT&T show total current assets of 11.32% of total assets during the fiscal year 2013 which decreased during the fiscal year 2014 and stood at 8.91%. During the fiscal year 2015 the current assets again increased as a percentage of total assets and stood at 9.50%. The total current assets of Verizon Communication were 9.16% during the fiscal year 2015 which increased to 10.81% during the fiscal year 2016. The company has high investment in property, plant and equipment (PPM). The PPM of the company for the fiscal year 2014 was 38.03% which decreased significantly during the fiscal year 2015 and stood at 30.91% of total assets. During the fiscal year 2016 the PPM improved marginally and stood at 30.93%. The PPM of Verizon Communications was significantly higher at 34.71% of total assets during the fiscal year 2016. The goodwill showed an increasing trend and increased from 23.48% during the fiscal year 2013 to 26.05% during the fiscal year 2016. The good will of Verizon was lower at 11.44% of total assets. The current liabilities of the company were 12.56% of total assets which decreased during the fiscal year 2015 and stood at 11.57% of total assets. During the fiscal year 2016 the total current assets again increased and stood at 12.52% of total assets. The total current liabilities of Verizon were 12.43% of total assets. It could be said that the total current liabilities of both the companies were almost equal. The company is also high on debts and the long term debts were 29.43% of total assets during the fiscal year 2015 which decreased to 28.15% during the fiscal year 2016. The long term debts of Verizon communications were significantly higher at 43.18% of the total assets. Income Statement Analysis MNP 540 Final Project (Last Name, First Initial) 7 The 90.90% of the total revenue of AT&T comes from service and the remaining 9.10% comes from equipment. 86.10% of the total revenue of Verizon Communications comes from service and 13.90% of the total revenue comes from wireless equipment. The major expenditure of AT&T is in selling, general and administrative expenses that amounts to 22.9% of the total revenue whereas the same figure for Verizon stood at 25.06% for the fiscal year 2016. Total operating expenses of AT&T amounted to 85.13% of the total revenue whereas for Verizon the total operating expenses were 78.52% of the total revenue. The operating income of AT&T was 14.87% of the total revenue during the fiscal year 2016 whereas the same number for Verizon was 21.48%. The net income of Verizon Communications stood at 10.80% which is significantly higher than net income of AT&T at 8.14%. Cash Flow Analysis AT&T had a higher cash flow of 24.02% of total revenue as compared to 18.03% of Verizon communications. The cash from operating activities of Verizon declined significantly during the fiscal year 2016 as it was 29.58% of total sales during the fiscal year 2015. Owing to high inflow of cash from operating activities the outflow of cash of AT&T was also higher at 14.78% of total revenue in investing activities. The outflow of cash of Verizon stood at 8.72% of the total revenue. The net cash used in financing activities of AT&T was 8.83% of total revenue whereas the same number for Verizon was higher at outflow of cash of 10.57% of the total revenue. Significant Trends and Variances The revenue of AT&T has shown an increasing trend during last three years whereas the revenue of Verizon Communications decreased during the fiscal year 2015 and again increased in the fiscal year 2016. The operating income of Verizon has shown decreasing trend during the MNP 540 Final Project (Last Name, First Initial) 8 period of analysis whereas that of AT&T increased significantly during the fiscal year 2015 but decreased marginally during the fiscal year 2016. The total assets of Verizon Communications have shown an increasing trend during the period of analysis. The total assets of AT&T have also increased significantly during the period of analysis. FINANCIAL RATIOS The financial ratios help the users to analyze the financial statements in a more meaningful manner by making comparison among the different numbers. The ratios that are calculated for both the companies include profitability ratios, efficiency ratios, liquidity ratios and solvency ratios. The profitability ratios measure the net income the company is earning in terms of percentage of total revenue. It also measures the efficiency of the company in utilizing its assets for generation of net income. The efficiently ratios measure the efficiency of the company in utilizing its assets. the liquidity ratios measure the ability of company in paying its short term obligations from its current assets and quick assets. Solvency ratios make comparison of the debts of the company with assets, equity, liabilities, etc. Profit Margin This ratio measures the net income of the company in relation with the total revenue. To calculate this ratio net income is divided with total revenue. The ratio of Verizon Communication was 13.58% during the fiscal year 2015 which decreased to 10.42% during the fiscal year 2016. It indicates a decline in the profitability of the company. The profit margin of AT&T also showed similar trend and the ratio decreased from 9.32% in 2015 to 8.14% during the year 2016. It indicates that the ratios of both the companies have decreased during the fiscal year 2016. Return on Assets MNP 540 Final Project (Last Name, First Initial) 9 This ratio measures the efficiency of the company in generating net income from utilization of its total assets. To calculate this ratio net income is divided by average total assets. Higher the ratio better it is. The return on assets of Verizon decreased from 7.50% during the fiscal year 2015 to 5.38% during the fiscal year 2016. The same ratio of AT&T was lower at 3.31%. Return on Equity This ratio measures the efficiency of the company in utilizing the wealth of its stockholders in generating net income. To calculate this ratio net income is divided by average stockholder's equity. The ratio of Verizon stood significantly higher at 62.70% as compared to 10.76% of AT&T. The primary reason for this great difference is that Verizon Communications has lower stockholder's equity. Accounts Receivable Turnover This ratio measures the ability of the company in converting its accounts receivables in to cash. To calculate this ratio the net credit sale is divided by average accounts receivables. It is better to have a higher ratio at it indicates that the company has converted its accounts receivables into cash more number of times. The ratio of Verizon showed a decreasing trend and stood at 8.14 in fiscal year 2016 as compared to 9.59 during the fiscal year 2015. Contrary to it the ratio of AT&T showed an increasing trend and the ratio increased to 9.83 times in 2016 from 9.45 times during the fiscal year 2015. It indicates that AT&T is more efficient in collecting accounts receivables. Total Assets Turnover This ratio measures the efficiency of the company in utilizing its total assets for generating revenue. To calculate this ratio total revenue is divided by average total assets. Higher MNP 540 Final Project (Last Name, First Initial) 10 the ratio better it is. The ratio of Verizon communications stood higher at 0.55 and 0.51 for the fiscal year 2015 and 2015 respectively. The ratio of AT&T stood at 0.42 and 0.42 for the same period. It indicates more efficient utilization of assets by the Verizon for generating total revenue. Days sale Outstanding This ratio measures the number of days it takes the company to collect its credit sales. It is always better to have a lower ratio. The ratio of Verizon Communications stood at 38.06 during the fiscal year 2015 which declined significantly during the fiscal year 2016 and stood at 44.86. the ratio of AT&T stood at 38.361 and 37.31 during the fiscal years 2015 and 2016 respectively. Current Ratio This ratio measures the ability of the business to pay its short term obligations from its current assets. Higher the ratio be and tter it is. To calculate this ratio current assets are divided by current liabilities. This ratio tells what the company is having against each dollar of current liabilities. The ratio of Verizon Communications stood at 0.64 during the fiscal year 2015 which increased to 0.87 during the fiscal year 2017. The ratio of AT&T stood at 0.75 and 0.76 for the same periods. It suggests that both the companies have a poor ability to pay their current liabilities from current assets. Times Interest Earned This ratio calculates the ability of the company to pay interest obligations on the debts that it is having. A higher ratio shows a higher ability of the company to pay its interest obligations. The ratio of Verizon stood at 6.74 and 5.80 for the fiscal years 2015 and 2016 respectively whereas the ratio of AT&T stood at 6.02 and 5.04 for the same periods. It suggests a higher ability of Verizon to pay its interest obligations. MNP 540 Final Project (Last Name, First Initial) 11 Debt Ratio This ratio measures the total liabilities of the company in relation to its total assets. A higher ratio suggests that the company is high on debts so it is always better to have a low debt ratio. The ratio of Verizon communications stood at 0.93 and 0.90 during the fiscal years 20415 and 2016. The ratio of AT&T was lower at 0.69 for both the years. It suggests that Verizon is higher on debts. Debt to Equity This ratio measures the total debts of the company in relation to its total equity. A higher ratio indicates that more of the assets of the company are financed by debts. It is always better to have a lower debt to equity ratio. The ratio of Verizon communications stood at 12.69 and 9.16 for the fiscal year 2015 and 2016 which is significantly higher than the ratio of AT&T which stood at 2.26 and 2.25 for the same period. Strengths and Weaknesses AT&T The strengths and weaknesses of AT&T include the following. Strengths The company is globally renowned and its core strength is work force of more than 250,000 employees. It is the largest fixed telephony provider. The company is second largest provider of mobile telephony. The company has access in more than 200 countries and serves more than 100 million customers worldwide. MNP 540 Final Project (Last Name, First Initial) 12 The acquisition of other companies all around the globe has made the company more powerful and globally present. Weaknesses The telephone segment is competitive industry and the market share of each company is limited. The company has liabilities and obligations from old business units spin offs. The telecommunications industry is turning more price competitive in both the retail as well as wholesale markets. VERIZON The strengths and weaknesses of Verizon Communications include the following. Strengths 4G and 5G network capabilities offered by the company are its primary strength. The company has good brand recognition and high global goodwill It is one of the largest wireless carriers of the United States. Good distribution between strategic business units The company has strong brand presence Weaknesses The presence of company is limited primarily to the United States. The company can charge premium prices for a limited period only. CONCLUSION The above analysis reveals that AT&T has a competitive edge over Verizon. AT&T has operations wider in the market. It operates globally and has a high customer base. The total assets of AT&T are also higher. The revenue of AT&T has shown an increasing trend during last three years whereas the revenue of Verizon Communications decreased during the fiscal year 2015 and again increased in the fiscal year 2016. The operating income of Verizon has shown MNP 540 Final Project (Last Name, First Initial) 13 decreasing trend during the period of analysis whereas that of AT&T increased significantly during the fiscal year 2015 but decreased marginally during the fiscal year 2016. The total assets of Verizon Communications have shown an increasing trend during the period of analysis. The total assets of AT&T have also increased significantly during the period of analysis. It suggests that the position the AT&T has improved during the period of analysis. The Verizon communications is also higher on debts and maximum of its capital comes in form of borrowings. In comparison to it AT&T has low debts and higher equity. Higher debts of any business are not considered goods because it indicates that the company has fixed interest expenses and major portion of the profits is washed out in form of interest of the debts. The balance sheet of AT&T show total current assets of 11.32% of total assets during the fiscal year 2013 which decreased during the fiscal year 2014 and stood at 8.91%. The total assets of AT&T have risen significantly during the fiscal year 2015. During the fiscal year 2014 the total assets of the company were $296,384 million which increased significantly by $105.838 million or 35.66% and stood at $402,672 million. The sudden rise in the assets of the company was due to the acquisitions it made. During the fiscal year 2015 the current assets again increased as a percentage of total assets and stood at 9.50%. The total current assets of Verizon Communication were 9.16% during the fiscal year 2015 which increased to 10.81% during the fiscal year 2016. The company has high investment in property, plant and equipment (PPM). The PPM of the company for the fiscal year 2014 was 38.03% which decreased significantly during the fiscal year 2015 and stood at 30.91% of total assets. During the fiscal year 2016 the PPM improved marginally and stood at 30.93%. The PPM of Verizon Communications was significantly higher at 34.71% of total assets during the fiscal year 2016. The goodwill showed an increasing trend and increased from 23.48% during the fiscal year 2013 to 26.05% during the fiscal year 2016. MNP 540 Final Project (Last Name, First Initial) 14 The good will of Verizon was lower at 11.44% of total assets. The current liabilities of the company were 12.56% of total assets which decreased during the fiscal year 2015 and stood at 11.57% of total assets. During the fiscal year 2016 the total current assets again increased and stood at 12.52% of total assets. The total current liabilities of Verizon were 12.43% of total assets. It could be said that the total current liabilities of both the companies were almost equal. The company is also high on debts and the long term debts were 29.43% of total assets during the fiscal year 2015 which decreased to 28.15% during the fiscal year 2016. The long term debts of Verizon communications were significantly higher at 43.18% of the total assets. The profit margin of Verizon Communication was 13.58% during the fiscal year 2015 which decreased to 10.42% during the fiscal year 2016. It indicates a decline in the profitability of the company. The profit margin of AT&T also showed similar trend and the ratio decreased from 9.32% in 2015 to 8.14% during the year 2016. It indicates that the ratios of both the companies have decreased during the fiscal year 2016. Thus it could be concluded that the AT&T, Inc. has a better financial condition as compared to Verizon Communications and it is expected that the company will do good in future. MNP 540 Final Project (Last Name, First Initial) 15 References Form - 10-K (2016) Verizon Communications. Retrieved from: https://www.sec.gov/cgibin/viewer?action=view&cik=732712&accession_number=0001193125-17050292&xbrl_type=v# Form - 10-K (2016) AT&T, Inc. Retrieved from: https://www.sec.gov/cgibin/viewer?action=view&cik=732717&accession_number=0000732717-17000021&xbrl_type=v James, M. (October, 2016). In yet another giant media merger, AT&T may be trying to buy Time Warner Inc. Retrieved from: http://www.latimes.com/entertainment/envelope/cotown/laet-ct-time-warner-att-merger-20161020-snap-story.html Trainer, D. (2016). AT&T Time Warner Acquisition A Rare Deal That Makes Economic Sense MNP 540 Final Project (Last Name, First Initial) 16 https://www.forbes.com/sites/greatspeculations/2016/11/15/att-time-warner-acquisition-arare-deal-that-makes-economic-sense/#7b2787ab11fa Verizon Communications Inc. Consolidated Statements of Income shares in Millions, $ in Millions Operating Revenues Service revenues and other Wireless equipment revenues Total Operating Revenues Operating Expenses Cost of services (exclusive of items shown below) Wireless cost of equipment Selling, general and administrative expense, net Depreciation and amortization expense Total Operating Expenses Operating Income Equity in (losses) earnings of unconsolidated businesses Other income and (expense), net Interest expense Income Before Provision For Income Taxes Provision for income taxes Net Income Net income attributable to noncontrolling interests Net income attributable to Verizon Basic Earnings Per Common Share Net income attributable to Verizon Weighted-average shares outstanding (in millions) Diluted Earnings Per Common Share Net income attributable to Verizon Weighted-average shares outstanding (in millions) Dec. 31, 2016 12 Months Ended Dec. 31, 2015 $108,468 17,512 125,980 $114,696 16,924 131,620 29,186 22,238 31,569 15,928 98,921 27,059 -98 -1,599 -4,376 20,986 -7,378 13,608 481 $13,127 29,438 23,119 29,986 16,017 98,560 33,060 -86 186 -4,920 28,240 -9,865 18,375 496 $17,879 $3.22 4,080 $4.38 4,085 $3.21 4,086 $4.37 4,093 nths Ended Dec. 31, 2014 $116,122 10,957 127,079 28,306 21,625 41,016 16,533 107,480 19,599 1,780 -1,194 -4,915 15,270 -3,314 11,956 2,331 $9,625 $2.42 3,974 $2.42 3,981 Verizon Communications Inc. Consolidated Balance Sheets - USD ($) $ in Millions Dec. 31, 2016 Dec. 31, 2015 Current assets Cash and cash equivalents $2,880 $4,470 Short-term investments 350 Accounts receivable, net of allowances of $845 an 17,513 13,457 Inventories 1,202 1,252 Assets held for sale 882 792 Prepaid expenses and other 3,918 2,034 Total current assets 26,395 22,355 Plant, property and equipment 232,215 220,163 Less accumulated depreciation 147,464 136,622 Plant, property and equipment, net 84,751 83,541 Investments in unconsolidated businesses 1,110 796 Wireless licenses 86,673 86,575 Goodwill 27,205 25,331 Other intangible assets, net 8,897 7,592 Non-current assets held for sale 613 10,267 Other assets 8,536 7,718 Total assets 244,180 244,175 Current liabilities Debt maturing within one year 2,645 6,489 Accounts payable and accrued liabilities 19,593 19,362 Liabilities related to assets held for sale 24 463 Other 8,078 8,738 Total current liabilities 30,340 35,052 Long-term debt 105,433 103,240 Employee benefit obligations 26,166 29,957 Deferred income taxes 45,964 45,484 Non-current liabilities related to assets held for sal 6 959 Other liabilities 12,239 11,641 Equity Series preferred stock ($.10 par value; none issued) Common stock ($.10 par value; 4,242,374,240 share 424 424 Contributed capital 11,182 11,196 Reinvested earnings 15,059 11,246 Accumulated other comprehensive income 2,673 550 Common stock in treasury, at cost -7,263 -7,416 Deferred compensation - employee stock ownershi 449 428 Noncontrolling interests 1,508 1,414 Total equity 24,032 17,842 Total liabilities and equity $244,180 $244,175 Dec. 31, 2014 Dec. 31, 2013 $10,598 555 13,993 1,153 552 2,648 29,499 230,508 140,561 89,947 802 75,341 24,639 5,728 6660 $232,616 $53,528 601 12,439 1,020 3,406 70,994 220,865 131,909 88,956 3,432 75,747 24,634 5,800 4,535 $274,098 $2,735 16,680 8,572 27,987 $3,933 16,453 6,664 27,050 110,536 33,280 41,563 5,574 89,658 27,682 28,639 424 11,155 2,447 1,111 -3,263 424 1,378 13,676 232,616 5,653 297 37,939 1,782 2,358 -3,961 421 56,580 95,416 274,098 Verizon Communications Inc. Consolidated Statements of Cash Flows - USD ($) $ in Millions Cash Flows from Operating Activities Net Income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense Employee retirement benefits Deferred income taxes Provision for uncollectible accounts Equity in losses (earnings) of unconsolidated businesses, net of dividends received Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses Accounts receivable Inventories Other assets Accounts payable and accrued liabilities Other, net Net cash provided by operating activities Cash Flows from Investing Activities Capital expenditures (including capitalized software) Acquisitions of businesses, net of cash acquired Acquisitions of wireless licenses Proceeds from dispositions of wireless licenses Proceeds from dispositions of businesses Other, net Net cash used in investing activities Cash Flows from Financing Activities Proceeds from long-term borrowings Proceeds from asset-backed long-term borrowings Repayments of long-term borrowings and capital lease obligations Decrease in short-term obligations, excluding current maturities Dividends paid Proceeds from sale of common stock Purchase of common stock for treasury Acquisition of noncontrolling interest Other, net Net cash used in financing activities Decrease in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period Dec. 31, 2016 12 Months Ended Dec. 31, 2015 Dec. 31, 2014 $13,608 $18,375 $11,956 15,928 2,705 -1,063 1,420 138 16,017 -1,747 3,516 1,610 127 16,533 8,130 -92 1,095 -1,743 -5,067 61 449 -1,079 -4,385 22,715 -945 -99 942 2,545 -1,411 38,930 -2,745 -132 -695 1,412 -3,088 30,631 -17,059 -3,765 -534 -17,775 -3,545 -9,942 9,882 493 -10,983 48 1,171 -30,043 -17,191 -182 -354 2,367 120 -616 -15,856 12,964 4,986 -19,159 -149 -9,262 3 6,667 30,967 -9,340 -344 -8,538 40 -5,134 -17,669 -475 -7,803 34 -2,705 -13,322 -1,590 4,470 $2,880 1,634 -15,015 -6,128 10,598 $4,470 -58,886 -3,873 -57,705 -42,930 53,528 $10,598 Verizon Communications Inc. Consolidated Statements of Income shares in Millions, $ in Millions Operating Revenues Service revenues and other Wireless equipment revenues Total Operating Revenues Operating Expenses Cost of services (exclusive of items shown below) Wireless cost of equipment Selling, general and administrative expense, net Depreciation and amortization expense Total Operating Expenses Operating Income Equity in (losses) earnings of unconsolidated businesses Other income and (expense), net Interest expense Income Before Provision For Income Taxes Provision for income taxes Net Income Net income attributable to noncontrolling interests Net income attributable to Verizon Basic Earnings Per Common Share Net income attributable to Verizon Weighted-average shares outstanding (in millions) Diluted Earnings Per Common Share Net income attributable to Verizon Weighted-average shares outstanding (in millions) 12 Months Ended Dec. 31, 2016 86.10% 13.90% 100.00% 23.17% 17.65% 25.06% 12.64% 78.52% 21.48% -0.08% -1.27% -3.47% 16.66% -5.86% 10.80% 0.38% 10.42% $3.22 4,080 $3.21 4,086 12 Months Ended Dec. 31, 2015 Dec. 31, 2014 87.14% 12.86% 100.00% 91.38% 8.62% 100.00% 22.37% 17.56% 22.78% 12.17% 74.88% 25.12% -0.07% 0.14% -3.74% 21.46% -7.50% 13.96% 0.38% 13.58% 22.27% 17.02% 32.28% 13.01% 84.58% 15.42% 1.40% -0.94% -3.87% 12.02% -2.61% 9.41% 1.83% 7.57% $4.38 4,085 $2.42 3,974 $4.37 4,093 $2.42 3,981 Verizon Communications Inc. Consolidated Balance Sheets - USD ($) $ in Millions Dec. 31, 2016 Dec. 31, 2015 Current assets Cash and cash equivalents 1.18% 1.83% Short-term investments 0.00% 0.14% Accounts receivable, net of allowances of $845 an 7.17% 5.51% Inventories 0.49% 0.51% Assets held for sale 0.36% 0.32% Prepaid expenses and other 1.60% 0.83% Total current assets 10.81% 9.16% Plant, property and equipment 95.10% 90.17% Less accumulated depreciation 60.39% 55.95% Plant, property and equipment, net 34.71% 34.21% Investments in unconsolidated businesses 0.45% 0.33% Wireless licenses 35.50% 35.46% Goodwill 11.14% 10.37% Other intangible assets, net 3.64% 3.11% Non-current assets held for sale 0.25% 4.20% Other assets 3.50% 3.16% Total assets 100.00% 100.00% Current liabilities Debt maturing within one year 1.08% 2.66% Accounts payable and accrued liabilities 8.02% 7.93% Liabilities related to assets held for sale 0.01% 0.19% Other 3.31% 3.58% Total current liabilities 12.43% 14.36% Long-term debt 43.18% 42.28% Employee benefit obligations 10.72% 12.27% Deferred income taxes 18.82% 18.63% Non-current liabilities related to assets held for sal 0.00% 0.39% Other liabilities 5.01% 4.77% Equity Series preferred stock ($.10 par value; none issued) Common stock ($.10 par value; 4,242,374,240 share 0.17% 0.17% Contributed capital 4.58% 4.59% Reinvested earnings 6.17% 4.61% Accumulated other comprehensive income 1.09% 0.23% Common stock in treasury, at cost -2.97% -3.04% Deferred compensation - employee stock ownershi 0.18% 0.18% Noncontrolling interests 0.62% 0.58% Total equity 9.84% 7.31% Total liabilities and equity 100.00% 100.00% Dec. 31, 2014 Dec. 31, 2013 4.56% 0.24% 6.02% 0.50% 0.24% 1.14% 12.68% 99.09% 60.43% 38.67% 0.34% 32.39% 10.59% 2.46% 0.00% 2.86% 100.00% 19.53% 0.22% 4.54% 0.37% 0.00% 1.24% 25.90% 80.58% 48.12% 32.45% 1.25% 27.64% 8.99% 2.12% 0.00% 1.65% 100.00% 1.18% 7.17% 0.00% 3.69% 12.03% 47.52% 14.31% 17.87% 0.00% 2.40% 1.43% 6.00% 0.00% 2.43% 9.87% 32.71% 10.10% 10.45% 0.00% 2.06% 0.18% 4.80% 1.05% 0.48% -1.40% 0.18% 0.59% 5.88% 100.00% 0.11% 13.84% 0.65% 0.86% -1.45% 0.15% 20.64% 34.81% 100.00% Verizon Communications Inc. Consolidated Statements of Cash Flows - USD ($) $ in Millions Cash Flows from Operating Activities Net Income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense Employee retirement benefits Deferred income taxes Provision for uncollectible accounts Equity in losses (earnings) of unconsolidated businesses, net of dividends received Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses Accounts receivable Inventories Other assets Accounts payable and accrued liabilities Other, net Net cash provided by operating activities Cash Flows from Investing Activities Capital expenditures (including capitalized software) Acquisitions of businesses, net of cash acquired Acquisitions of wireless licenses Proceeds from dispositions of wireless licenses Proceeds from dispositions of businesses Other, net Net cash used in investing activities Cash Flows from Financing Activities Proceeds from long-term borrowings Proceeds from asset-backed long-term borrowings Repayments of long-term borrowings and capital lease obligations Decrease in short-term obligations, excluding current maturities Dividends paid Proceeds from sale of common stock Purchase of common stock for treasury Acquisition of noncontrolling interest Other, net Net cash used in financing activities Decrease in cash and cash equivalents Cash and cash equivalents, beginning of period Cash and cash equivalents, end of period Dec. 31, 2016 12 Months Ended Dec. 31, 2015 Dec. 31, 2014 10.80% 13.96% 9.41% 12.64% 2.15% -0.84% 1.13% 0.11% 12.17% -1.33% 2.67% 1.22% 0.10% 13.01% 6.40% -0.07% 0.86% -1.37% -4.02% 0.05% 0.36% -0.86% -3.48% 18.03% -0.72% -0.08% 0.72% 1.93% -1.07% 29.58% -2.16% -0.10% -0.55% 1.11% -2.43% 24.10% -13.54% -2.99% -0.42% -13.50% -2.69% -7.55% 7.84% 0.39% -8.72% 0.04% 0.89% -22.83% -13.53% -0.14% -0.28% 2,367 0.09% -0.48% -12.48% 10.29% 3.96% -15.21% -0.12% -7.35% 0.00% 0.00% 0.00% -2.15% -10.57% -1.26% 3.55% 2.29% 5.07% 0.00% -7.10% -0.26% -6.49% 0.03% -3.90% 0.00% 1.24% -11.41% -4.66% 8.05% 3.40% 24.37% 0.00% -13.90% -0.37% -6.14% 0.03% 0.00% -46.34% -3.05% -45.41% -33.78% 42.12% 8.34% AT&T, Inc. Consolidated Statements of Income Years Ended December 31, Operating Revenues Service Equipment Total operating revenues Operating Expenses Equipment Broadcast, programming and operations Other cost of services (exclusive of depreciation and amortization shown separately below) Selling, general and administrative Asset abandonments and impairments Depreciation and amortization Total operating expenses Operating Income Other Income (Expense) Interest expense Equity in net income of affiliates Other income (expense) - net Total other income (expense) Income Before Income Taxes Income tax expense Net Income Less: Net Income Attributable to Noncontrolling Interest Net Income Attributable to AT&T Basic Earnings Per Share Attributable to AT&T Diluted Earnings Per Share Attributable to AT&T (dollars in millions, except per share amounts) 2016 2015 2014 $148,884 14,902 163,786 $131,677 15,124 146,801 $118,437 14,010 132,447 18,757 19,851 38,276 36,347 361 25,847 139,439 24,347 19,268 11,996 35,782 32,919 35 22,016 122,016 24,785 18,946 4,075 37,124 39,697 2,120 18,273 120,235 12,212 -4,910 98 277 -4,535 19,812 6,479 13,333 -357 $12,976 $2.10 $2.10 -4,120 79 -52 -4,093 20,692 7,005 13,687 -342 $13,345 $2.37 $2.37 -3,613 175 1,581 -1,857 10,355 3,619 6,736 -294 $6,442 $1.24 $1.24 AT&T, Inc. Consolidated Balance Sheets At December 31, Current Assets Cash and cash equivalents Accounts receivable - net of allowances for doubtful accounts of $661 and $704 Prepaid expenses Other current assets Total current assets Property, Plant and Equipment - Net Goodwill Licenses Customer Lists and Relationships - Net Other Intangible Assets - Net Investments in Equity Affiliates Other Assets Total Assets Current Liabilities Debt maturing within one year Accounts payable and accrued liabilities Advanced billings and customer deposits Accrued taxes Dividends payable Total current liabilities Long-Term Debt Deferred Credits and Other Noncurrent Liabilities Deferred income taxes Postemployment benefit obligation Other noncurrent liabilities Total deferred credits and other noncurrent liabilities Stockholders' Equity Common stock ($1 par value, 14,000,000,000 authorized at December 31, 2016 and 2015: iss Additional paid-in capital Retained earnings Treasury stock (356,237,141 at December 31, 2016 and 350,291,239 at December 31, 2015, at Accumulated other comprehensive income Noncontrolling interest Total stockholders' equity Total Liabilities and Stockholders' Equity (dollars in millions, except per share amounts) 2016 2015 2014 2013 $5,788 16,794 1,555 14,232 38,369 124,899 105,207 94,176 14,243 8,441 1,674 16,812 403,821 $5,121 $ 16,532 1,072 13,267 35,992 124,450 104,568 93,093 18,208 9,409 1,606 15,346 402,672 $ 8,603 $ 14,527 831 9,645 33,606 112,898 69,692 60,824 812 5,327 250 13,425 296,834 $ 3,339 12,918 960 5,979 23,196 110968 69273 56433 763 5016 3860 8278 277,787 9,832 31,138 4,519 2,079 3,008 50,576 113,681 7,636 30,372 4,682 2,176 2,950 47,816 $ 118,515 6,056 23,592 4,105 1,091 2,438 37,282 $ 75,778 5,498 21,107 4,212 1,774 2,404 34,995 69,290 60,128 33,578 21,748 115,454 56,181 34,262 22,258 112,701 38,436 37,079 17,989 93,504 36,308 29,946 15,766 82,020 6,495 89,604 34,734 -12,659 4,961 975 124,110 $403,821 6,495 89,763 33,671 -12,592 5,334 969 123,640 $ $402,672 $ 6,495 91,108 31,081 (47,029) 8,061 554 90,270 $ 296,834 $ 6,495 91,091 31,141 (45,619) 7,880 494 91,482 277,787 AT&T, Inc. Consolidated Statements of Cash Flows At December 31, Operating Activities Net Income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Undistributed earnings from investments in equity affiliates Provision for uncollectible accounts Deferred income tax expense Net (gain) loss from sale of investments, net of impairments Actuarial loss (gain) on pension and postretirement benefits Asset abandonments and impairments Changes in operating assets and liabilities: Accounts receivable Other current assets Accounts payable and accrued liabilities Equipment installment receivables and related sales Deferred fulfillment costs Retirement benefit funding Other - net Total adjustments Net Cash Provided by Operating Activities Investing Activities Purchase of property and equipment Interest during construction Acquisitions, net of cash acquired Disposition Sales (purchases) of securities, net Other Net Cash Used in Investing Activities Financing Activities Net change in short-term borrowings with original maturities of three months or less Issuance of long-term debt Repayment of long-term debt Issuance of other long-term financing obligations Purchase of treasury stock Issuance of treasury stock Dividends paid Other Net Cash (Used in) Provided by Financing Activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents beginning of year Cash and Cash Equivalents End of Year (dollars in millions, except per share amounts) 2016 2015 2014 $13,333 $13,687 $6,736 25,847 -37 1,474 2,947 -169 1,024 361 22,016 -49 1,416 4,117 91 -2,152 35 18,273 -27 1,032 1,948 -1,461 7,869 2,120 -1,003 1,708 118 -576 -2,359 -910 -2,414 26,011 39,344 30 -1,182 1,354 -3,023 -1,437 -735 1,712 22,193 35,880 -693 -1,018 2,310 -5,043 -347 -560 199 24,602 31,338 -21,516 -892 -2,959 646 506 0 -24,215 -19,218 -797 -30,759 83 1,545 2 -49,144 -21,199 -234 -3,141 8,123 -1,890 4 -18,337 0 10,140 -10,823 0 -512 146 -11,797 -1,616 -14,462 667 5,121 $5,788 -1 33,969 -10,042 0 -269 143 -10,200 -3,818 9,782 -3,482 8,603 $5,121 -16 15,926 -10,400 107 -1,617 39 -9,552 -2,224 -7,737 5,264 3,339 $8,603 AT&T, Inc. Consolidated Statements of Income Years Ended December 31, Operating Revenues Service Equipment Total operating revenues Operating Expenses Equipment Broadcast, programming and operations Other cost of services (exclusive of depreciation and amortization shown separately below) Selling, general and administrative Asset abandonments and impairments Depreciation and amortization Total operating expenses Operating Income Other Income (Expense) Interest expense Equity in net income of affiliates Other income (expense) - net Total other income (expense) Income Before Income Taxes Income tax expense Net Income Less: Net Income Attributable to Noncontrolling Interest Net Income Attributable to AT&T Basic Earnings Per Share Attributable to AT&T Diluted Earnings Per Share Attributable to AT&T (dollars in millions, except per share amounts) 2016 2015 2014 90.90% 9.10% 100.00% 89.70% 10.30% 100.00% 89.42% 10.58% 100.00% 11.45% 12.12% 23.37% 22.19% 0.22% 15.78% 85.13% 14.87% 13.13% 8.17% 24.37% 22.42% 0.02% 15.00% 83.12% 16.88% 14.30% 3.08% 28.03% 29.97% 1.60% 13.80% 90.78% 9.22% -3.00% 0.06% 0.17% -2.77% 12.10% 3.96% 8.14% -357 $12,976 $2.10 $2.10 -2.81% 0.05% -0.04% -2.79% 14.10% 4.77% 9.32% -342 $13,345 $2.37 $2.37 -2.73% 0.13% 1.19% -1.40% 7.82% 2.73% 5.09% -294 $6,442 $1.24 $1.24 AT&T, Inc. Consolidated Balance Sheets At December 31, Current Assets Cash and cash equivalents Accounts receivable - net of allowances for doubtful accounts of $661 and $704 Prepaid expenses Other current assets Total current assets Property, Plant and Equipment - Net Goodwill Licenses Customer Lists and Relationships - Net Other Intangible Assets - Net Investments in Equity Affiliates Other Assets Total Assets Current Liabilities Debt maturing within one year Accounts payable and accrued liabilities Advanced billings and customer deposits Accrued taxes Dividends payable Total current liabilities Long-Term Debt Deferred Credits and Other Noncurrent Liabilities Deferred income taxes Postemployment benefit obligation Other noncurrent liabilities Total deferred credits and other noncurrent liabilities Stockholders' Equity Common stock ($1 par value, 14,000,000,000 authorized at December 31, 2016 and 2015: iss Additional paid-in capital Retained earnings Treasury stock (356,237,141 at December 31, 2016 and 350,291,239 at December 31, 2015, at Accumulated other comprehensive income Noncontrolling interest Total stockholders' equity Total Liabilities and Stockholders' Equity (dollars in millions, except per share amounts) 2016 2015 2014 2013 1.43% 4.16% 0.39% 3.52% 9.50% 30.93% 26.05% 23.32% 3.53% 2.09% 0.41% 4.16% 100.00% 1.27% 4.11% 0.27% 3.29% 8.94% 30.91% 25.97% 23.12% 4.52% 2.34% 0.40% 3.81% 100.00% 2.90% 4.89% 0.28% 3.25% 11.32% 38.03% 23.48% 20.49% 0.27% 1.79% 0.08% 4.52% 100.00% 1.20% 4.65% 0.35% 2.15% 8.35% 39.95% 24.94% 20.32% 0.27% 1.81% 1.39% 2.98% 100.00% 2.43% 7.71% 1.12% 0.51% 0.74% 12.52% 28.15% 1.90% 7.54% 1.16% 0.54% 0.73% 11.87% 29.43% 2.04% 7.95% 1.38% 0.37% 0.82% 12.56% 25.53% 1.98% 7.60% 1.52% 0.64% 0.87% 12.60% 24.94% 14.89% 8.32% 5.39% 28.59% 13.95% 8.51% 5.53% 27.99% 12.95% 12.49% 6.06% 31.50% 13.07% 10.78% 5.68% 29.53% 1.61% 22.19% 8.60% -3.13% 1.23% 0.24% 30.73% 100.00% 1.61% 22.29% 8.36% -3.13% 1.32% 0.24% 30.70% 100.00% 2.19% 30.69% 10.47% -15.84% 2.72% 0.19% 30.41% 100.00% 2.34% 32.79% 11.21% -16.42% 2.84% 0.18% 32.93% 100.00% AT&T, Inc. Consolidated Statements of Cash Flows At December 31, Operating Activities Net Income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Undistributed earnings from investments in equity affiliates Provision for uncollectible accounts Deferred income tax expense Net (gain) loss from sale of investments, net of impairments Actuarial loss (gain