Analysis of Financial and Operating Performance of Vodafone Assignment

Analysis of Financial and Operating Performance of Vodafone - Assignment Example The slow growth of sales is caused by the economic recession that started in 2008, the stiff competition from other mobile companies and internal operations problems. The net profit has also decreased in 2009 by 15% because the costs of selling, administrative and unexplained unusual expenses went up. The decline in the net profit will have an effect on the ability of the company to pay its short and long-term obligations as well as earnings per share. Earnings per share for 2009 is $13 and industry is $15 For 2009, the gearing ratio or debt to equity is 1 meaning company has used up an equal weight of debt and equity financing, while for 2008 it is only .63%. Because of this shift to debt financing, the interest expense of the loans has increased from $1398M in 2008 to $1798M 2009. Debt financing becomes risky because of the volatility of interest rate charges. The limited net profit margin makes it difficult for the company to quickly pay its short-term obligation For instance; its current and the quick ratios for the past two years showed a ratio of less than 1 that gives an idea that Vodafone is going to have difficulty in paying its maturing obligations. Investment returns remain the same for 2008 and 2009. Vodafone had significant higher capital investments in 2009 than in 2008 that included long-term investments and acquisitions of property, plant, and equipment. Sources of funds of these investments are debt and equity financing. The return on assets for both periods has been almost the same in spite of additional investments in assets. Consequently, the ROI provided a negative return that should alarm the company. Several factors have contributed to the decrease in share prices of Vodafone. Vodafone Share price as reported on the London Stock Exchange (high) shows  £1.49 for 2005,  £1.55 for 2006,  £1.54 for 2007,  £1.98 for 2008 and a decreased share price of  £1.70 in 2009.