Liquidity Analysis of Vodafone Idea Limited

Case Code: CLFIN041 Case Length: 5 Pages Period: 2018-20 Pub Date: 2023 Teaching Note: Available

Price: Rs.200 Organization : Vodafone Idea Limited Industry :Technology & Communications Countries : India Themes: Accounting and Control ,Financial Analysis

Abstract

Two students studying finance, were given an assignment by their professor to analyze the liquidity position of India-based telecom company Vodafone Idea Limited (VIL) for the financial years 2019-20 and 2018-19. In his briefing, the professor told them that the liquidity position of a company can be determined by analyzing various components of current assets and current liabilities.

The students started identifying the current assets and current liabilities of VIL in order to analyze the short term liquidity of the company. However, after identifying and classifying the current assets and current liabilities, they were not clear how to go about determining the liquidity. They needed to understand the criteria to be considered and the process to be followed in determining the liquidity position of the company. The present case study can be helpful in discussing the concept of short-term liquidity, various ratios, and the criteria to be considered in analyzing and determining the short-term solvency of a company.

Issues

• The concept of liquidity analysis.
• The application of liquidity ratios
• The short-term solvency of a company

Introduction

Arun and Akshit, two students studying finance, had been given an assignment by their finance professor to analyze the liquidity position of India-based telecom operator Vodafone Idea Limited (VIL). They started out by learning more about VIL. They understood that VIL was one of the leading telecom companies in India and had been among the top three players in the telecom sector in the country. Arun and Akshit continued to read up on the company and they discussed the services offered by VIL. They also took a look at the company’s annual reports. The two students then started identifying the components relevant for calculating the liquidity position of the company. As they had been told by the professor during class that the short term liquidity position of a company was determined based on the current assets and current liabilities, they decided to focus on identifying and classifying VIL’s current assets and current liabilities (Refer to Exhibit I for Composition of Current Assets and Current Liabilities of VIL)..

Keywords

Vodafone-Idea; short-term liquidity; current ratio; quick ratio; cash ratio; current assets; current liabilities;

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