Liquidity
Telus Corp. appears to be more liquid than BCE Inc. in terms of current ratio, even though the value is less than 1.
However both companies might have some liquidity problems since their current asset is less than their current liability.
Moreover, for the cash to current debt coverage, Telus is still more liquid than BCE because the company is generating relatively more cash to pay its debt.
Another metrics that shows high liquidity of Telus is the receivable turnover.
Telus is more efficient in collecting money from clients’ credits compared to BCE, which explains the reason why Telus has more cash in hand.
Similar to current ratio, both companies have low receivable turnovers, but this is not necessarily a negative trend of financial behavior because credit policies vary with companies.
If a company has a high receivable turnover on its financial report, it might not be able to sustain a good partnership with its clients; which is true for service companies.
However, investors may be interested in the credit policies offered by the companies since receivable turnover is still an important measurement for the financial status.
Solvency
BCE has a higher debt to total asset ratio, which indicates that it is less solvent than Telus.
Both companies have ratios higher than 0.5, which means that more than half of the total asset is from debt.
This may suggest a high risk on companies’ operations because they would have more difficulty obtaining new loans for new projects.
Moreover, BCE is still less solvent since the time interest earned is lower than that of Telus.
Telus is more capable in repaying its debt.
October 2013
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