kuaiji009 - or 1 Identify and account for current operating...

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or- lJlm c..» m::a oz -1- _z <I:> m Ul 1. Identify and account for current operating liabilities. (p. 392) 4. Analyze and account for financial statement effects of long-term nonoperating liabilities. (p. 405) 2. Describe and account for current nonoperating (financial) liabilities. (p. 398) 5. Explain how solvency ratios and debt ratings are determined and how they impact the cost of debt. (p. 411) 3. Explain and illustrate the pricing of long- term nonoperating liabilities. (p. 401)
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C HAP T E R Reporting and Analyzing Liabilities In 2000, Bell Atlantic Corporation merged with GTE to form Verizon Communications. After its 2006 acquisition of MCI Communications Corp, and subsequent acquisition of Alltel Corporation in 2008, the corporation has become the world's largest provider of communications services. The firm recent- ly ranked 17th in the United States and 1st in the telecommunications industry by revenues. While revenues and operating profits have grown by 48% and 55%, respectively, since 2004, the company's stock price has not kept pace. The firm's stock price, which traded as high as $70 in late 1999, has recently traded at under $30 per share. The industry is experiencing increased competition fueled by AT&T's acquisition of Bell South. Ivan Seidenberg, Verizon's CEO since mid-2002, has one of the toughest jobs in business as he attempts to fend off a host of competitors including Corneas!, awest, Sprint Nextel, DirecTV Group, AT&T, and a host of others. Seidenberg will be betting the firm on extending its fiber-optic service (FiOS) to 18 million homes-one-half its market-by 2010 at a cost of $23 billion. The firm is also faced with $55.1 bil- lion of long-term debt not including $6.1 billion maturing in 2010, and $32.5 billion In accumulated employee benefit obligations. Fortunately, the firm's cash flow from operations remains strong at $26.6 billion. Seidenberg will need it all and more as he attempts to reposition the firm in the face of increased competition and mounting cash needs. -- - -~- ~ VERIZON I' Verizon Stock Price V5. Telecom Industry (2003;; 100) --=- ~ '" /' ~ "- ~ --. ~ "- -- .... 200 180 160 140 120 100 80 60 40 20 o 2003 2004 2005 2006 2007 2008 --#- verlzon Common Stock S&P Telecom Index (continued on next page) 389
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(continued from previous page) This chapter focuses on liabilities-that is, short-term and long-term obligations. Liabilities(inciuding debt) are one of two financing sources for a company. The other source is shareholder financing. Bonds and notes are a major part of most companies' liabilities.Inthis chapter, we show how to price liabilitiesand how the issuance and subsequent payment ofthe principaland interest on them affect financialstatements. Wealso discuss the requireddisclosures that enable us to effectively analyze a company's abilityto make its liabilitypayments as they mature. AsVerizonfaces increased competition from other telecom companies, cable, and Internet providers, it must continueto innovate inorder to maintain its position as the industry leader. Thisobjective willrequire large investments intechnology and infrastructure, only part of which willcome from its operating cash flow.To be successful, Seidenberg willneed to manage
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  • Fall '12
  • Michael
  • Balance Sheet, ........., Generally Accepted Accounting Principles, Verizon Communications, Anatyzing Liabilities

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