INTRODUCTION
The Southern Company, as well as its subsidiaries, have been operating as a public electric utility company. The company is active in the generation, transmission, along with the distribution of energy through coal, nuclear, oil and gas, and hydro resources in the states of Alabama, Georgia, Florida, and Mississippi. The company constructs, acquires, owns, and manages technology assets, including alternative energy projects. By December 31, 2013; the company owned and has been able to control 33 hydroelectric producing stations, 32 fossil fuel generating stations, 3 nuclear producing stations, 13 blended cycle/cogeneration stations, 6 PV facilities, 1 landfill gas facility, and 1 biomass center. The company also provides digital instant communication services together with various communication choices, including push to talk, cellular assistance, text messaging, wireless Internet access, wireless data, and wholesale fiber optic solutions to telecommunication providers inside the Southeast under the Southern Telecom identify. The company was founded in 1945 and is headquartered in the Atlanta area, Georgia.
INDUSTRY AN COMPETITION
Competition for retail energy sales among the suppliers of energy is affected by different factors, which include price, availability, technological breakthroughs, service, and also reliability. These kinds of factors tend to be, in convert, affected by simply, among other influences, regulating, political, and also environmental factors, taxation, and supply.
THE FINANCIAL STATEMENT ANALYSIS
Southern’s financial statement analysis section will probably discuss Southern’s financial ratios that were computed using the historical financial statement information from 2010 to 2013. The financial analysis section is divided into the following categories short-term and long-term solvency ratios; property utilization or turnover; profitability proportions; market value ratio; and DuPont analysis. The meaning of Ratios will possibly be explained by analyzing the significance of each ratio’s components which may be extracted from the financial statement. The ratios will be used to compare Southern Company competitors that are Center Point Energy, Inc., and NextEra Energy Inc. At the end of each section, a brief discussion will explain what the ratio means.
QUICK RATIO
| SOUTHERN COMPANY | CenterPoint Energy, Inc. | NextEra Energy, Inc | ||
| Acid Test Ratio | ||||
|
2013 |
0.36 |
0.79 |
0.64 |
|
|
2012 |
0.26 |
0.84 |
0.59 |
|
|
2011 |
0.41 |
0.71 |
0.73 |
|
|
2010 |
0.30 |
0.69 |
0.76 |
The higher this ratio will be the more liquidity of the firm. The above mentioned figures show that Southern Company has low quick ratio to their competitors companies during the period 2010 to 2013 which indicate that Southern Company has low cash to meet its short term obligations with its most liquid assets.
CURRENT RATIO
| Current Ratio | SOUTHERN COMPANY | CenterPoint Energy, Inc. | NextEra Energy, Inc | |
|
2013 |
1.01 |
0.8804 |
0.51 |
|
|
2012 |
0.88 |
0.8039 |
0.47 |
|
|
2011 |
0.95 |
0.9013 |
0.57 |
|
|
2010 |
0.91 |
0.9855 |
0.64 |
Current Ratio also helps to evaluate the company’s paying ability towards its short term obligations with its short term assets. The above figures suggest that in year 2013 Southern Company has a high current ratio. Overall Current ratio is quite satisfactory as compared to their competitors such as CenterPoint Energy and Nextra Energy current ratios. Southern Company is more efficient to pay its short term obligation with respect to their short term assets.
RECEIVABLE TURNOVER RATIO
| Receivable Turnover | SOUTHERN COMPANY | CenterPoint Energy, Inc. | NextEra Energy, Inc | |
|
2013 |
17 |
0.37 |
7.2 |
|
|
2012 |
17 |
0.41 |
6.2 |
|
|
2011 |
17 |
0.35 |
6.5 |
|
|
2010 |
16 |
0.32 |
6.7 |
This ratio indicates the company’s effectiveness regarding extending credit and collecting obligations. This ratio also evaluates how the company should use its assets. As shown in the above figures, Southern Company has a high receivable turnover ratio during the past four years, and their competitors such as Centerpoint and Nextera energy have low receivable turnover ratios.
DAYS REQUIRED TO COLLECT A/R
| Days Required to Collect A/R | SOUTHERN COMPANY | CenterPoint Energy, Inc. | NextEra Energy, Inc | |
|
2013 |
21.94 |
15 |
0 |
|
|
2012 |
21.94 |
15.21 |
0 |
|
|
2011 |
21.03 |
15.5 |
0 |
|
|
2010 |
23.15 |
17.7 |
0 |
This ratio is used to determine the average days to collect payment on the goods sold. Above figures show that Southern Company requires almost 21 days to collect their payments for the goods Sold during the past four years and Centerpoint Energy approximately requires 15 days to collect their payment on the goods sold.
TOTAL ASSET TURNOVER
| Total Asset Turnover | SOUTHERN COMPANY | CenterPoint Energy, Inc. | NextEra Energy, Inc | |
|
2013 |
0.26 |
0.37 |
0.23 |
|
|
2012 |
0.26 |
0.41 |
0.22 |
|
|
2011 |
0.30 |
0.43 |
0.25 |
|
|
2010 |
3.58 |
0.47 |
0.2 |
The higher the Asset turnover ratio the better the position of the company which means the company is generating more revenues per dollar for each asset. In the case of Southern Company, they have low asset turnover as compared to their competitors. Southern Company’s total turnover ratio decreased from 2010 to 2013 that means Southern Company lost their sales and they lost their efficiency for using their assets to generate sales.........................
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