Introduction
When it comes to media, entertainment, and communication, AT&T is at the top of its game globally. A rapidly expanding business, AT&T Inc. has increased its dividends for over 39 consecutive years. Customers from all over the world can take advantage of AT&T’s services. The AT&T Company provides television and voice services to millions of people in the United States (Thomson Reuters, n.d.). The company’s technological agility has allowed it to better meet the needs of its core clientele through the development of industry-first products and services. In addition, AT&T Inc. has gotten ahead of the curve in employing video advertisements to promote its products. Due to data-driven insights, the company’s contact with its intended audience has been the most fruitful. However, like other businesses, AT&T faces risks that might significantly impact the company’s bottom line.
Main body
Securities market volatility is a big threat that AT&T must contend against as it can lead to deterioration of financial health. When AT&T’s stock price drops significantly, investors will lose interest in buying the company’s stock, which could threaten its financial stability. Whenever a company’s stock price stays mostly unchanged, it’s a good sign of its financial health (Zaborovskaya et al., 2019). Company officials need to know how much their stock deviates from the market average so they can do a thorough risk analysis of the potential for stock volatility. In a market where a high beta is considered riskier than a low beta, AT&T can utilize beta as a measure of volatility for its stocks. If a firm’s beta is greater than 1, the stock price volatility poses a high danger to the company, but the volatility poses a little risk when it is less than 1.
The AT&T Company’s bottom line is also vulnerable to debt capital risk. Unsecured notes and bonds, both short- and long-term, are considered forms of debt capital. Debts are a financial risk since they put a corporation in a perpetually vulnerable position as its liability grows. To repay the agreed-upon dividends to shareholders after the maturity term, a corporation must achieve strong financial results, which is a significant risk. Lacking adequate funding, the company may be forced to liquidate its assets to pay off its shareholder debts. In 2021, AT&T had $152.82 billion in debt and $551.622 billion in capital (Financial Reports, 2021). This indicates that the company is not at debt-to-capital risk.
Debt to capital ratio for AT&T= total debt/total capital
=$152.82 billion/$551.622 billion
=0.28
= Debt to equity ratio= debt/equity
=$152.82 billion/$183.86 billion
=0.83
For the years 2020 and 2021, AT&T Inc. operates with the following operating leverage and combined financial leverage.
Degree of operating leverage= percentage change of earnings before interest and taxes
Percentage change in sales
Percentage earnings before interest and taxes= ($26.947 billion – 2.856 billion/$26.947 billion)*100=0.89%
Percentage change in sale= $168.864 billion/$26.947 billion *100
=6.2%
Operating leverage = 0.83%/6.2%
=0.13
Degree of financial leverage= percentage change in earnings per tax/percentage change in earnings before interest and tax
= {(0.68-0.58)*100}/0.89%
= 11%
Conclusion
In conclusion, effective risk management at AT&T is essential to the company’s successful operations and the uninterrupted delivery of services to domestic and foreign clients. It is essential to maintain control over the annual income of the company. To guarantee that they are making a sufficient profit to finance the innovations and tactics that can boost the firm’s sales so that they can serve every consumer in the market.
References
Financial Reports. Annual Report 2021 | AT&T. (2021). Web.
Thomson Reuters. (n.d.). T.n – AT&T Inc. | stock price & latest news. Reuters. Web.
Zaborovskaya, A., Zaborovskiy, V., & Pletnev, K. (2019). Possibilities of preventing manipulative transactions on the stock market in the conditions of new industrialization. Proceedings of the 2nd International Scientific Conference on New Industrialization: Global, National, Regional Dimension (SICNI 2018). Web.