Introduction
The financial information for a business would allow making better decisions and therefore being a manager, there is a need to assess the liquidity as well as profitability. These two acts of a finance manager are significant and assist in the decision making role of a manager. The business can raise funds either from debt or from equity. The chosen organization for the study is Nokia, Finland.
Nokia Corporation is public limited liability organization consolidated as per the legislations of the Republic of Finland. In this report, any reference to ” “the Group” or “Nokia” implies Nokia Technologies situated in Finland and Nokia’s proceeding with operations, aside from where it is clarified as discontinued operations. The key ratios for Nokia Finland are stated as below:
| RATIOS | 2011 | 2012 | 2013 | 2014 | 2015 | |
| EUR(m) | EUR(m) | EUR(m) | EUR(m) | EUR(m) | ||
| Liquidity Ratio | ||||||
| Current Ratio | Current Assets/Current liabilities | 1.46 | 1.43 | 1.46 | 1.88 | 2.47 |
| Profitability Ratio | ||||||
| Return on assets | Net profit after tax/total assets | 1.03 | 0.91 | 0.46 | 0.55 | 0.6 |
| Net Profit margin | Net profit/ Sales | -3.01 | -10.29 | -4.84 | 27.19 | 19.73 |
| Capital structure Ratio | ||||||
| Debt equity ratio | Total liabilities/Total shareholders’ equity | 0.33 | 0.63 | 0.51 | 0.3 | 0.19 |
| Debt to assets ratio | Total liabilities/Total assets | 24332/36205 | 21888/29949 | 18723/25191 | 12452/21063 | 10423/20926 |
| 0.67 | 0.73 | 0.74 | 0.59 | 0.5 | ||
| Interest Cover Ratio | Net Profit + Income Tax + Interest (EBIT)/Interest Expense | -10.75 | -6.78 | 1.75 | 0.39 | 12.08 |
| Market value Ratio | ||||||
| EPS | 1.93 | -2.68 | ||||
These have been extracted from the annualr reports of the corporation as well as reliable sources (as stated in Appendix (1). There has been a high current ratio for the business, as the rise shows that business has been adding more to its current assets, with decrease in its liabilities. The business has ability to fulfill its short term liabilities in an easy manner. The fall in return n assets as well as net profit margins show that the business has been inefficient in its operations with unprofitable results. Yet this non-profitability has been transformed into high productivity in the years 2014 and 2015, showing that Nokia Finland has been moving towards improvement phase. There have been huge liabilities yet the assest are more than the total liabilities, thus the business has been constantly able to settle its liabilities. The ratios of this business reveal that the business has been able to recover its pitfalls and losses due to changed in its ways of operation and its innovative implementation. The current P/E ratio for Nokia has been 26.4, even when the industry has average of 20.1 and its last 5 yrs average has been 30.5%. Still it has been estimated to fall below the industry’s average to 17%, so it is not advisable to invest in such a firm. This drop is expected due to the tax dispute faced by the Finnish firm. As per the above figures (attached in appendix) there has been a rapid fall in the Net sales of the business. The cause for the same is that the Nokia Technologies business group has a purpose to create net sales and productivity by authorizing of the Nokia brand, the improvement and offers of items in the regions of virtual reality, advanced media and computerized areas, and additionally different business projects including innovation, development and, which may not emerge as arranged or by any means. Yet the Earnings per share has been falling and the company’s allocation of retained earnings and profits is totally up to a restricted amount. This means even if the business performs well, the investments in this business would not be highly fruitful. Looking at the other firms operating in the same industry, the business will need to put in more towards the innovation and technical advancements to meet the competition.
Analysis
Nokia Corporation (NYSE: NOK) is Finland’s biggest organization and most prevalent American Depository Receipt (“ADR”) exchanging the USA. With above 1.3 bn individuals utilizing its items, the organization is a worldwide pioneer in mobile interchanges that make it simple to catch and share encounters, access data, discover their direction, and address each other.
In 2012, Nokia accounted for incomes of $30.2 billion, working losses of $2.3 bn, and net loss of $3.1 bn, or 84 cents/ share. Its accounting report showed almost $30 bn in assets, about $22 billion in liabilities, and shareholders’ value of around $8 billion. The organization has been losing cash subsequent to the worldwide monetary emergency because of higher rivalry and lower needs.
It is not recommended to invest in Nokia, As per the Finnish Companies Act, the company may convey its retained profits on our shares just upon a shareholders’ determination and subject to constrained exemptions in the sum planned by the Board. The measure of any allocation is constrained to the measure of distributable profit of the parent organization in accordance with the last records endorsed by its shareholders, considering the economic changes in the monetary circumstance of the organization after the end of the last budgetary period and a statutory prerequisite that the dispersion of income must not bring about indebtedness of the organization. Depending on exemptions linked with the rights of minority shareholders to ask for a specific least allocation, the allocation might not be more than the sum planned by the Board.
27% year-on-year net sales lessening has been seen in the first quarter of 2016. Business execution was influenced by the nonattendance of the accompanying three things which profited in the first quarter of previous year (2015):
- non-repeating changes in accordance with accrued net sales from existing contracts,
- Revenue share identified with already stripped intellectual property rights (“IPR”), and
- IPR divestments.
Barring these three things, net sales expanded each year by roughly 10% because of advanced IPR authorization returns.
An additional risk to Nokia, Finland is that trade is reliant on the improvement of the commercial enterprises in which it works, together with the data innovation (IT) and correspondences businesses and related markets. The information transfers industry is repeating and is influenced by numerous variables, together with the general monetary background, buying conduct, organization, implementation planning and spending by services suppliers, buyers and firms.
Decision of whether or not to invest in business
Advantages & Risks of putting in Nokia, Finland
Finland’s economy has various key advantages for speculators. To start with, it’s among the most grounded economies in the eurozone, which makes it best for financial specialists searching for experience to the locale without as much threat. What’s more, the Nordic locale usually has figured out how to keep up solid economies devoid of a significant part of the political turmoil seen in different areas of the world.
Obviously, financial specialists ought to likewise know about the dangers connected with putting resources into Finland before submitting any capital. The nation’s participation in the eurozone and exchange ties with the locale implies that its economy is helpless to its turmoil, as delineated by its two retreats, while the greater part of the securities excluding Nokia includes restricted sums of liquidity.
At last, speculators ought to counsel a monetary expert prior to conferring any capital and know about the potential taxation and different inferences to their cases. Since the formation of new innovation resources and protected developments is vigorously centred around R&D exercises with extensive lead-time to incremental incomes, the business might periodically see venture opportunities that have vital significance. This for the most part influences the working costs prior to sales show an earning on those ventures.
Constant Dividend Growth Rate model
Gordon Model is utilized to decide the present cost of a security. The Gordon model accepts that the present cost of a stock will be influenced by the profits, the development rate of the profits, and the necessary rate of earnings by shareholders.
Current Annual Dividends = Annual dividends paid to investors in the previous year = 0.14 Eur
K = necessary rate of return by investors in the industry = 9% (assumed)
G = likely constant growth rate of the yearly dividend payments = 4% (assumed)
Current Price = existing price of stock = 2.91 Eur
Consequently, constant growth rate is 4.08%
The primary constraint of the Gordon development model lies in its presumption of a steady development in profits for each share. It Nokia, Finland’s yearly report does not demonstrate the steady development in their profits because of trade cycles and startling monetary troubles or victories. Along these lines, the model is restricted to firms demonstrating stable development rates. The second issue needs to do with the relationship between the rebate component and the development rate utilized as a part of the model. In the event that the required rate of return is not exactly the development rate of profits per offer, the outcome is a negative quality, rendering the model useless. Additionally, if the real required rate of return is identical to the development rate, the value per share methodologies ∞, thus the suppositions have been formed.
Income taxes for progressing operations was a net advantage of EUR ~1720 Mn in 2014, a change of EUR ~1990 Mn contrasted with a net cost of EUR ~270 Mn in 2013. The net pay tax cut was fundamentally owing to the acknowledgment of EUR ~2125 Mn conceded charge resources from the reassessment of recoverability of assessment resources in Finland and Germany in 2014, which brought about EUR ~2035 Mn non-trade tax reduction out the second from last quarter 2014. Taking after the worldwide rebuilding moves made basically in 2012 and 2013 to lessen annualized working costs and creation overheads; and the late gainfulness of Nokia Networks, the divestment of the already misfortune making Devices and Services business; and gauges of future productivity for Continuing operations, Nokia group could re-set up an example of adequate benefit in Finland and Germany to use the combined misfortunes, remote duty credits and other interim contrasts. A noteworthy bit of the Nokia’s Finnish and German conceded charge resources are inconclusive in nature and accessible against future Finnish and German taxation liabilities.
Nokia Finland is liable to different legal systems and locales that manage extortion and in addition monetary and exchange assents and arrangements, and all things considered, the degree and result of conceivable procedures is hard to assess with any assurance. Its auxiliary Alcatel Lucent has been, and keeps on being, required in examinations concerning charged infringement of hostile to defilement laws, and has been, and could again be, liable to material fines, punishments and different approvals as a consequence of those examinations.
In the most recent 10 years inability to stay aware of Apple, Google and Samsung has cut €200 billion (£168 billion) from Nokia’s fairly estimated worth. Its rate of Finland’s GDP has tumbled from 4 to 0.4 for every penny (up from a negative in 2012), its offer of fares has more than divided and its offer of Helsinki’s stock trade market capital has dove from 70% to 13 %.
It is seen that the work reductions, which discharged more than 10K of Nokia’s overwhelmingly R&D based Finnish representatives into the occupation market subsequent to 2006, likewise hasn’t made Finland’s begin industry any damage.
However to just see it along these lines does Nokia an insult in light of the fact that on its way down it began tossing out various life pontoons. April 2011 saw the beginning of the Nokia Bridge hatchery program which granted up to EUR 20K (£16K) to each excess staff part with a believable start-up thought. It permitted up to four workers to club together for a EUR 100K (£84 K) reserve with further financing of up to EUR 50K (£42 K) per start-up.
For an organization confronting so much terrible press pessimists contend the expense was justified regardless of the great PR, yet for an organization discharging cash there is a solid counterargument and it is another motivation behind why Finns still have placed Nokia so near to their minds.
Conclusion
Nokia Technologies’ is not ready to create net deals and productivity by allowance of the Nokia brand, the advancement and offers of items and administrations, and in addition different business projects which may not emerge as arranged. There is an introduction to authoritative structures and wards that manage extortion, monetary exchange authorizations and approaches, and Alcatel Lucent’s past and current association in against debasement assertions. There are potential complex expense issues, charge question and assessment commitments which, the business may confront in different wards, including the danger of commitments to pay extra duties; the real or foreseen execution is additionally among other disheartening components, which could diminish Nokia’s capacity to use conceded charge resources. The handling sums of goodwill might not be recovered.
