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Liquidity analysis using cash flow ratios and traditional ratios: the telecommunications sector in Australia.

Introduction

The global financial crisis has reignited the concern over the liquidity of businesses in general, banks in particular and more importantly countries. Of the various methods for monitoring liquidity of businesses the most common has been the use of financial ratios. Traditionally the current ratio and the quick (acid test) ratio were used to analyses the short term liquidity of a business. However, these ratios relied exclusively on the values derived from the Statement of Financial Position, also known as the Balance Sheet, and were not always reliable due to the vagaries of accounting measurement of the values of assets and accrual accounting. In order to overcome the problems associated with accrual accounting and to provide a more specific focus on the cash position of a business the Australian accounting profession introduced the Statement of Cash Flows. This resolved the lack of detail concerning cash flow and also provided for the creation of a new set of ratios which could be used to analyse the liquidity of a business.

Since the introduction of the Statement of Cash Flows a number of ratios have been developed and their use can best be described as evolving. Certainly a limited number of these new cash flow ratios have been included in first year accounting text books. However, their use and value in terms of the analysis process has received very limited attention. In deed little has been done to incorporate these into any of the existing models that are used for predicting business failure. The literature contains minimal research where such ratios have been included in an effort to broaden the model or address the limitations that had been associated with the dependence on the values contained in the Statement of Financial Position.

The telecommunications sector has undergone a number of changes as a result of the emergence of new technologies the demand to keep pace with these changes has in turn meant that firms have had to invest heavily in order to remain competitive (Berg, 2004). In the case of the Australian telecommunications sector there have been a number of significant developments that have emphasised the need for vigilance over the cash flow of firms. The sector has been involved in major upgrades to infrastructure and increased competition from both international firms and more recently new technology linked to the internet (More & McGrath, 1999). The impact of these changes has placed a greater emphasis on the need for working capital and liquidity. The collapse of OneTel was a prime example of a firm that failed to pay sufficient attention to its liquidity and in particular its cash flow (Anderson & Davis, 2009). Thus the telecommunications sector provides an ideal area for examining the relevance of the cash flow ratios against the traditional ratios.

This paper seeks to address the gap in the literature by demonstrating the usefulness of the cash flow ratios as a means of clarifying the findings of the traditional liquidity ratios. To that end the paper is concerned with only the short-term liquidity ratios and their place in the analysis process.

Literature review

The current ratio and the quick ratio rely on the values identified as current assets and current liabilities in the Statement of Financial Position. The current ratio is simply determined by dividing the total current assets by the total current liabilities to arrive at a ratio between the two amounts. The quick ratio provides a more narrow focus and is concerned with only those items otherwise included in the total current assets such as cash, marketable securities, and accounts receivable. This reduced amount is divided by the total current liabilities to provide a ratio between the two amounts. The analysis in very simple terms relies on the ratio being an indicator of the ability to pay for every dollar that is currently liable. Industry benchmarks are considered to be a valuable guide to the analysis process however, where these are not available a rule of thumb is generally used. As part of this research an industry standard on an annual basis will be calculated and included for analysis purposes.

There are a number of ratios which also assist in the process of evaluating the liquidity position of a business. The most common are the accounts receivable turnover ratio, the inventory turnover ratio and the interest coverage (or interest earned) ratio. For the purpose of this paper the interest coverage ratio is used as a comparative cash flow ratio exists.

From the Statement of Cash Flows there a number of ratios which may be juxtaposed to the traditional ratios in order to obtain a comparative perspective. For the purpose of this paper the focus will be on the ratios that are most comparable with regards to the short term liquidity analysis and they are specifically, the cash flow ratio, critical needs cash coverage ratio, and cash interest coverage ratio. These ratios share some attributes which are similar to the traditional ratios and have thus been given names that indicate their similarity. The details of the ratios are presented in Table 1.

There exists a well established literature on the nature and interpretation of the various ratios and as such it is not the intention of this paper to provide an indepth discussion as to the interpretation of each and every ratio (1). Rather the focus of the paper is on providing a basis by which the traditional ratios may be compared against the ratios eminating from the statement of cash flows.

Research method

The method used in this study is based upon the approaches employed in prior research (Bell, 2001; Rahmatian & Cockerill, 2004). The research involved the comparison between the ratios of companies in the same industry over a five year period. The data for the five year period were obtained from the FinAnalysis database. There were thirty seven (37) firms in the data set, however eleven (12) were excluded as they did not have data for all the years being examined, the number of firms in the study are therefore 25. The names of the remaining twenty five firms in the final data set are provided in Table 2.

Results

The ratios are presented on a company by company basis given that there are five years worth of ratios. The comparative analysis is concerned with identifying trends and indications of differences between the traditional ratios and the cash flow ratios.
AMM--Amcom Telecommunications Limited

                           2007     2008     2009     2010     2011

Current Ratio               0.6     1.04     1.06     1.27     3.45
Cash Flow Ratio            0.59     1.29     0.96     0.95     1.17
Quick Ratio                0.54     0.96        1     1.21     3.38
Critical needs coverage    0.57     1.19     0.88     0.88     1.10
Interest Cover            34.99    13.53    11.43     32.7    23.81
Cash interest coverage    30.93    17.06    12.69    15.77    20.34


Comment--Whilst the traditional ratios and the cash flow ratios were intially very close the differences become apparent in 2011. Note that the cash flow ratios show a weaker short term liquidity position.
BGL--Bigair Group Limited

                            2007     2008      2009    2010      2011

Current Ratio               1.24     1.17      1.74     1.4      0.91
Cash Flow Ratio            -0.17     0.04      1.37    1.47      1.12
Quick Ratio                 1.22     1.16      1.74     1.4      0.91
Critical needs coverage    -0.17     0.04      1.37    1.47      1.12
Interest Cover             12.79    28.26    -14.73      --    -39.73
Cash interest coverage    -66.03       --        --      --    531.24


Comment--In this company the cash flow ratios show a better liquidity position than is indicated by the traditional ratios.
BRO--Broad Investments Limited

                             2007     2008     2009    2010      2011

Current Ratio                4.21     0.86     1.07    1.65      1.16
Cash Flow Ratio             -1.32    -0.03    -0.05    0.33     -0.27
Quick Ratio                  4.21      0.6     0.65    1.65      1.16
Critical needs coverage     -1.27    -0.03    -0.05    0.32     -0.27
Interest Cover            -216.56    23.23    411.9    8.56      7.79
Cash interest coverage     -34.94   -47.78   -38.27   14.63   -19,339


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios.
EFT--Eftel Limited

                            2007     2008     2009     2010      2011

Current Ratio               0.59     0.49     0.48     0.42      0.54
Cash Flow Ratio             0.18     0.15     0.04     0.05     -0.04
Quick Ratio                 0.59     0.49     0.48     0.42      0.54
Critical needs coverage     0.17     0.15     0.04     0.05     -0.04
Interest Cover             -98.5    10.66    -8.14    -2.61        --
Cash interest coverage     17.88    11.85     2.49     1.12    -24.31


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios. Noteably the trend indicates that the cash flow position was deteriorating.
ENG--Engin Limited

                            2007      2008      2009     2010     2011

Current Ratio               1.94      1.61      1.35     1.64
Cash Flow Ratio            -1.42     -2.62     -0.29     0.18
Quick Ratio                 1.84      1.48      1.31     1.58
Critical needs coverage    -1.39     -2.32     -0.29     0.18
Interest Cover             26.56    -28.76     43.27    18.88
Cash interest coverage    -57.66    -19.22    -13.71    23.81


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios. Although the trend is clearly that the liquidity was improving.
FRE--Freshtel Holdings Limited

                            2007     2008       2009     2010    2011

Current Ratio              11.31      5.7          3     2.37    0.65
Cash Flow Ratio            -3.95    -3.09      -5.50    -7.28   -1.83
Quick Ratio                11.19     5.59          3     2.36    0.63
Critical needs coverage    -3.92    -3.07      -5.47    -6.67   -1.71
Interest Cover             10.93    11.41      43.74  -421.86  -85.74
Cash interest coverage   -562.00  -707.88  -1,422.99   -84.51  -37.93


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios. Noteably the trend indicates that the cash flow position was however improving.
HTA--Hutchison Telecommunications (Australia) Limited

                           2007    2008        2009    2010    2011

Current Ratio               0.6    0.32        0.23    0.04    0.03
Cash Flow Ratio           -0.05    0.24       -1.47    0.00    0.01
Quick Ratio                0.46    0.29        0.23    0.04    0.03
Critical needs coverage   -0.04    0.23       -1.46    0.00    0.01
Interest Cover             -0.8   -0.72        3.04   -1.87   16.56
Cash interest coverage     0.98    5.48   -1,102.39    3.42   14.18


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios. Noteably the trend indicates that the cash flow position was however improving.
IIN--iiNET Limited

                           2007      2008     2009     2010     2011

Current Ratio              1.04       0.5     0.57     0.48     0.56
Cash Flow Ratio            0.52      0.76     0.60     0.65     0.91
Quick Ratio                1.03      0.49     0.56     0.47     0.52
Critical needs coverage    0.48      0.74     0.58     0.64     0.84
Interest Cover            16.77    366.06    18.36    18.63     9.35
Cash interest coverage     7.99     43.51    25.82    31.35    13.49


Comment--In this company the cash flow ratios show a stronger liquidity position than is indicated by the traditional ratios. Noteably the trend indicates that the cash flow position was improving in contrast to the traditional ratios which reflect an decrease over the period.
IPX--Intrapower Limited

                           2007     2008     2009     2010     2011

Current Ratio                       1.02     1.17      1.3     0.93
Cash Flow Ratio                     0.24     0.45     0.63     0.40
Quick Ratio                         1.01     1.15     1.28     0.91
Critical needs coverage             0.21     0.36     0.53     0.34
Interest Cover                      4.99    -4.74     1.66     -0.5
Cash interest coverage              2.68     3.95     4.68     3.26


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios. Noteably the trend for both the traditional ratios and the cash flow ratios indicate a decline over the period.
MAQ--Macquarie Telecom Group Limited

                           2007    2008     2009     2010       2011

Current Ratio              1.26    1.24     1.49     1.93       1.75
Cash Flow Ratio            0.31    0.42     0.65     0.72       0.97
Quick Ratio                 0.9    1.24     1.49     1.93       1.75
Critical needs coverage    0.30    0.41     0.65     0.71       0.97
Interest Cover            -44.1    5.39   -11.63     -6.9      -7.17
Cash interest coverage    15.08   24.26    69.53   155.79   2,555.39


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios. However the interest coverage is noteably stronger in the cash interest coverage ratio over the period.
MNF--My Net Fone Limited

                             2007     2008    2009     2010     2011

Current Ratio                0.73      0.4    0.49     0.69     0.86
Cash Flow Ratio             -0.84    -0.26    0.11     0.25     0.34
Quick Ratio                  0.73      0.4    0.49     0.69     0.86
Critical needs coverage     -0.84    -0.26    0.11     0.25     0.33
Interest Cover              74.89    59.78   -6.39   -26.41   -11.02
Cash interest coverage    -141.87   -72.95   26.39    44.76    62.84


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios. However the interest coverage provides a different perspective with a reverse situation between the cash interest coverage ratio and the interest coverage ratio over the period.
MNZ--Mnet Group Limited

                           2007     2008      2009      2010      2011

Current Ratio              4.47     1.49      1.45       1.2       1.8
Cash Flow Ratio            0.00    -0.08     -0.26     -0.37      0.53
Quick Ratio                4.47     1.49      1.45       1.2       1.8
Critical needs coverage    0.00    -0.08     -0.26     -0.37      0.52
Interest Cover               --    20.75     14.54     31.24    -35.58
Cash interest coverage       --     1.25    -33.71    -84.12     93.82


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios. Noteably the trend for both the traditional ratios and the cash flow ratios indicate a decline over the period.
MTU--M2 Telecommunications Group Limited

                             2007     2008     2009     2010     2011

Current Ratio                 0.9     1.06     0.84     1.18     0.88
Cash Flow Ratio              0.28     0.26     0.11     0.20     0.47
Quick Ratio                   0.9     1.05     0.81     1.18     0.87
Critical needs coverage      0.28     0.26     0.11     0.19     0.46
Interest Cover             -15.86    94.66    23.86    13.17    52.34
Cash interest coverage     302.20    28.97    16.51     9.55    24.67


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios. Noteably the trend in the cash flow ratios indicates an improvement over the period.
NBS--Nexbis Limited

                           2007     2008    2009       2010    2011

Current Ratio              2.44     1.39    9.81       0.82    5.15
Cash Flow Ratio            0.30     2.05    2.25       1.72   -7.73
Quick Ratio                2.44     1.39    9.81       0.82    5.15
Critical needs coverage    0.30     1.91    1.98       1.47   -4.00
Interest Cover            32.59  -101.98  -393.7  -1,238.35  -56.77
Cash interest coverage   156.71    34.55   21.45      13.87   -5.06


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios. Noteably the trend for both the traditional ratios and the cash flow ratios indicate a decline over the period.
NWT--Newsat Limited

                           2007      2008    2009       2010    2011

Current Ratio              0.67      0.73    0.76       1.06    1.12
Cash Flow Ratio           -0.56     -0.67    0.00       0.21    0.07
Quick Ratio                0.59      0.64    0.69       0.97    1.07
Critical needs coverage   -0.45     -0.65    0.00       0.21    0.07
Interest Cover            -2.61   -117.52   -8.61       0.68   -3.91
Cash interest coverage    -2.06    -26.65   -0.09   2,151.00   50.39


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios. Noteably the trend for both the traditional ratios and the cash flow ratios indicate an improvement over the period.
QUE--Queste Communications Limited

                            2007    2008      2009     2010      2011

Current Ratio              10.54   31.68     10.32    27.78     14.83
Cash Flow Ratio             1.57   -0.72     -0.42    -0.50     -1.54
Quick Ratio                10.28   31.45      9.61    26.35     13.22
Critical needs coverage     1.57   -0.71     -0.42    -0.49     -1.52
Interest Cover            -62.37   12.74     24.64     0.56     41.26
Cash interest coverage    751.10   12.36   -176.29   -24.17   -162.90


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios. Noteably the trend in the cash flow ratios indicates a decline over the period.
REF--Reverse Corp Limited

                             2007     2008     2009    2010      2011

Current Ratio                1.78     1.55     0.75     1.1      1.78
Cash Flow Ratio              2.34     2.89     1.56    2.02      0.96
Quick Ratio                  1.77     1.54     0.75     1.1      1.77
Critical needs coverage      2.32     2.84     1.52    1.92      0.96
Interest Cover            -140.16   -99.83   280.51   40.31   -140.16
Cash interest coverage     417.64   266.77   111.16   52.97        --


Comment--In this company the cash flow ratios show a stronger liquidity position than is indicated by the traditional ratios. Noteably the trend in the cash flow ratios indicates a decline over the period.
SDL-NZ--Solution Dynamics Limited

                           2007     2008     2009     2010     2011

Current Ratio              0.61     0.55     0.72     0.67     0.79
Cash Flow Ratio            0.14     0.30    -0.06     0.17     0.24
Quick Ratio                0.58     0.51     0.67     0.62     0.76
Critical needs coverage    0.12     0.27    -0.05     0.16     0.23
Interest Cover            -2.09     0.03    -0.48     -0.1     2.29
Cash interest coverage     2.63     4.08     0.26     3.75     5.69


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios. Noteably the trend for both the traditional ratios and the cash flow ratios indicate a decline over the period. Further, the interest coverage provides a different perspective with the cash interest coverage ratio indicating a better situation than the interest coverage ratio over the period.
SGT--Singapore Telecommunications Limited

                           2007     2008     2009     2010     2011

Current Ratio              1.16      0.7     0.74     0.75     0.77
Cash Flow Ratio            1.25     0.95     1.01     0.78     0.71
Quick Ratio                1.14     0.68     0.71      0.7     0.73
Critical needs coverage    1.12     0.89     0.95     0.74     0.68
Interest Cover            13.63    14.22    14.09    15.53    14.16
Cash interest coverage    12.68    15.73    16.25    17.49    17.26


Comment--In this company the cash flow ratios show a slightly stronger liquidity position than is indicated by the traditional ratios. Noteably the ratios are closely approximated over the period.
TEL-NZ--Telecom Corporation of New Zealand Limited

                           2007     2008     2009     2010     2011

Current Ratio              1.94     0.81      0.8     0.79     0.67
Cash Flow Ratio            1.04     0.74     1.05     1.24     0.75
Quick Ratio                1.89     0.79     0.74     0.75     0.64
Critical needs coverage    0.88     0.66     0.90     1.09     0.68
Interest Cover             5.14     7.41     4.23     4.07     4.12
Cash interest coverage     7.19     7.55     7.45     9.68     8.24


Comment--In this company the cash flow ratios show a slightly stronger liquidity position than is indicated by the traditional ratios. Noteably the ratios are closely approximated over the period.
TLS--Telstra Corporation Limited

                           2007     2008     2009     2010     2011

Current Ratio              0.57     0.68      0.8     0.83     0.87
Cash Flow Ratio            0.90     1.09     1.16     1.12     0.94
Quick Ratio                0.53     0.64     0.77     0.79     0.84
Critical needs coverage    0.81     0.95     1.03     1.00     0.82
Interest Cover             5.32     5.73     7.29     6.75     5.02
Cash interest coverage     8.86     8.96    11.01    10.59     7.55


Comment--In this company the cash flow ratios show a slightly stronger liquidity position than is indicated by the traditional ratios. Noteably the ratios are closely approximated over the period.
TPC--Tel. Pacific Limited

                          2007    2008    2009        2010         2011

Current Ratio                     1.14    1.17        1.04         0.93
Cash Flow Ratio                   0.29    0.10        0.10        -0.20
Quick Ratio                       1.13    1.15        1.03         0.88
Critical needs coverage           0.29    0.10        0.10        -0.20
Interest Cover                   -3.19   -3.46       -2.71         8.04
Cash interest coverage                           12,443.60   -14,364.39


Comment--In this company the cash flow ratios show a weaker liquidity position than is indicated by the traditional ratios. Noteably the trend for both the traditional ratios and the cash flow ratios indicate a decline over the period. Further, the interest coverage provides a different perspective with the cash interest coverage ratio indicating a better situation than the interest coverage ratio initially and then taking a steep decline in 2011.
TPM--TPG Telecom Limited

                           2007     2008     2009     2010     2011

Current Ratio              1.75     0.78     0.51     0.25     0.27
Cash Flow Ratio            0.28     0.12     1.02     0.75     0.79
Quick Ratio                1.72     0.77     0.51     0.25     0.27
Critical needs coverage    0.26     0.11     0.94     0.70     0.70
Interest Cover             3.67    -5.99     3.94     6.89     5.14
Cash interest coverage     6.51     5.02    14.94    12.54     7.54


Comment--In this company the cash flow ratios show a slightly stronger liquidity position than is indicated by the traditional ratios. Noteably the ratios are closely approximated over the period.
TTK-NZ--TeamTalk Limited

                           2007     2008     2009     2010     2011

Current Ratio              1.07     0.77     0.61     0.56     0.54
Cash Flow Ratio            1.65     0.96     1.04     0.93     0.87
Quick Ratio                1.01     0.69     0.54     0.49     0.46
Critical needs coverage    1.25     0.76     0.84     0.83     0.77
Interest Cover             4.26     3.49     3.69     5.07      6.1
Cash interest coverage     7.11     5.47     5.53     9.41     8.83


Comment--In this company the cash flow ratios show a slightly stronger liquidity position than is indicated by the traditional ratios. Noteably the ratios are closely approximated over the period.
VOC--Vocus Communications Limited

                           2007     2008     2009     2010      2011

Current Ratio             42.63    32.29    57.98     1.08      0.92
Cash Flow Ratio            0.88    -0.58    -0.22     0.38      0.76
Quick Ratio               42.63    32.29    57.98     1.08      0.92
Critical needs coverage    0.88    -0.58    -0.22     0.37      0.74
Interest Cover             1.34     0.47     0.39    16.27    405.23
Cash interest coverage                               17.20     39.50


Comment--In this company the cash flow ratios show a stronger liquidity position than is indicated by the traditional ratios.

Discussion

This study provides evidence of the importance of using the cash flow ratios as a means of testing the validity of the conclusions that can be made from analysis of traditional liquidity ratios alone. There were examples of companies that had seemingly good traditional ratios and yet the cash flow ratios projected a different perspective. In contrast there were also companies that had seemingly poor traditional ratios and the cash flow ratios provided a better perspective.

The analysis highlights the usefulness of the cash flow ratios in conducting an investigation of the financial statements of companies. The ratios used in this study represent but a few of the cash flow ratios that exist and were selected for the purpose of making the comparison between the traitional ratios more explicit. Further research may benefit from the provision of a greater number of cash flow ratios as compared to a wider variety of traditional ratios.

The implications of this study are that in essence the determination of cash flow ratios provides a more wholistic approach to the analysis of the liquidity position of companies and in doing so becomes a means for making better decisions based on the data. For the purpose of the evaluation of financial data the cash flow ratios provide a valuable means by which to justify or question the relevance of the outcomes of traditional ratios.

Reference List

Anderson, J. & Davis, K. (2009).Employee Entitlements and Secured Creditors: Assessing the Effects of the Maximum Priority Proposal, Australian Journal of Management, vol. 34, no. 1, 51-71.

Berg, C. (2004).The Revolution in Telecommunications, Review-Institute of Public Affairs, vol. 56. No. 4 , 18-19.

Carslaw, C. & Mills, J. (1991). Developing Ratios for Effective Cash Flow Statement Analysis, Journal of Accountancy, vol. 172, no. 5, pp. 63-70.

Figlewicz, R. & Zeller, T. (1991). An Analysis of Performance, Liquidity, Coverage, and Capital Ratios from the Statement of Cash Flows, Akron Business and Economic Review, vol. 22, no. 1, pp. 64-91.

Giacomino, D. & Mieke, D. (1993). Cash Flows: Another Approach to Ratio Analysis, Journal of Accountancy, vol.175, no. 3, pp. 55-58.

Gibson, C. (2009). Financial Reporting & Analysis: Using Financial Accounting Information, 11th Edn., South-Western, Cengage Learning: Mason, OH.

Gombola, M. & Ketz, J. (1983). A Note on Cash Flow and Classification Patterns of Financial ratios, Accounting Review, vol. 58, no. 1, pp. 105-114.

Laing, G. (1996). Butterworths Accounting Companions: Financial Statement Analysis, Butterworths: Sydney.

Mills, J. & Yamamura, J. (1998). The Power of Cash Flow Ratios, Journal of Accountancy, vol. 186, no. 4, 53-61.

More, E. & McGrath, M. (1999). Working cooperatively in an age of deregulation Strategic alliances in Australia's telecommunications sector, Journal of Management Development, vol. 18, no. 3, 227-254.

Sylvestre, J. (1994). Effective Methods for Cash Flow Analysis, Healthcare Financial Management, vol. 48, no. 7, pp. 62-69.

Zeller, T. & Stanko, B. (1994). Operating Cash Flow Ratios Measure a Retail Firm's "ability to pay", Journal of Applied Business Research, vol. 10, no. 4, 51-??.

(1) Most accounting text books provide a valuable source for interpretation of traditional and some cash flow ratios--see for example Hogett et al (2011) and Horgren et al. (2011). There are also text books which specifically address financial ratios--see for example Gibson (2009) and Laing (1996).

Ross Kirkham

School of Business

Faculty of Arts & Business

University of the Sunshine Coast, Queensland, Australia

Email: rkirkham@usc.edu.au
Table 1: Comparison of Ratios

Traditional Ratios

Ratio                                Formula

Current                       Total Current Assets/
ratio                       Total Current Liabilities

Quick
ratio           Total Current Assets - Inventories - Prepayments/
(Acid-test)                 Total Current Liabilities

Interest
Coverage          Net Operating Profit + Interest + Tax (EBIT)/
                                 Annual Interest

Cash Flow Ratios

Ratio                                Formula

Cash Flow                   Net Operating Cash Flow/
ratio                       Total Current Liabilities

Critical            Net Operating Cash Flow + Interest paid/
needs                 Total Current Liabilities + Interest
cash
coverage

Cash                Net Operating Cash Flow + Interest + Tax/
Interest                         Annual Interest
Coverage

Table 2: List of Telecommunication Companies

Abbreviation     Name

AMM              Amcom Telecommunications Limited
BGL              Bigair Group Limited
BRO              Broad Investments Limited
EFT              Eftel Limited
ENG              Engin Limited
FRE              Freshtel Holdings Limited
HTA              Hutchison Telecommunications (Australia) Limited
IIN              iiNET Limited
IPX              Intrapower Limited
MAQ              Macquarie Telecom Group Limited
MNF              My Net Fone Limited
MNZ              Mnet Group Limited
MTU              M2 Telecommunications Group Limited
NBS              Nexbis Limited
NWT              Newsat Limited
QUE              Queste Communications Limited
REF              Reverse Corp Limited
SDL-NZ           Solution Dynamics Limited
SGT              Singapore Telecommunications Limited
TEL-NZ           Telecom Corporation of New Zealand Limited
TLS              Telstra Corporation Limited
TPC              Tel. Pacific Limited
TPM              TPG Telecom Limited
TTK-NZ           TeamTalk Limited
VOC              Vocus Communications Limited
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Author:Kirkham, Ross
Publication:Journal of New Business Ideas and Trends
Article Type:Report
Date:Jan 1, 2012
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