Telecommunications Service in Canada: An Industry Overview

Glossary of Terms

Amortization

The gradual expensing of capitalized intangible assets and deferred charges (e.g., goodwill, patents, financing costs, business transformation costs).

Asset

Any possession that has value in an exchange.

Average Annual % Change (Compounded) or CAGR (Compounded Annual Growth Rate)

(((a / b)1/t)-1) x 100
a = End of period number
b = Beginning of period number
t = Number of years

ARPU (Average Monthly Revenue per Unit)

[(Revenue from cellular/PCS/ESMR service) ö12 ] / Annual average number of subscribers

Measures the average amount of revenue that a cellular/PCS ESMR service earns from each subscriber

Capital Expenditures

Amount used during a particular period to acquire or improve long-term assets such as property, plant, or equipment.

Cash from Operations

The cash generated from operating activities. Equal to net income + non-cash expenses + decrease in non-cash working capital assume the cost of capital.

CPI (Consumer Price Index)

An index used by Statistics Canada to measure price inflation in the economy. The CPI tracks the price changes experienced by a fixed basket consumer items.

Debt-to-Equity Ratio

Represents the portion of capital financed by long-term debt.
Long Term Debt / Shareholders' Equity

Depreciation

The gradual expensing of fixed assets such as property, plant and equipment.

EBIT (Earnings before interest and taxes)

The operating revenue net of operating expenses but before including charges for interest payments and taxes.

EBITDA (Earnings before interest, taxes, depreciation and amortization)

The operating revenue net of operating expenses but before including charges for depreciation and amortization, interest payments and taxes.

Equity (or shareholders' equity)

Includes capital invested by shareholders through the purchase of common and preferred shares and the accumulated earnings from profitable operations.

GDP

Is a measure of an industry's value-added to the economy. GDP at factor cost is essentially total sales by the industry (gross output) less the input of goods and services provided by sources other that the industry itself.

Liabilites

The term used to describe financial obligations that appear on a firm's balance sheet (e.g., accounts payable, debt).

Monopoly

An industry in which one firm serves the whole market.

Net Income

The company's total earnings, reflecting revenues adjusted for costs of doing business, depreciation, interest, taxes and other expenses.

Net Margin

Net Profit (Loss) x 100
Operating Revenue

An Indicator of profitability.

Net Profit (Loss) Margin

The net income measured as a percentage of operating revenues.

Net Revenue

Refers to the revenue earned by international telecommunications carriers after they account for payments to other carriers for the traffic termination.

Operating Expenses

Costs associated with sales and administrative functions as distinct from those associated with production.

Operating Margin

(Operating Revenue - (Operating expenses + Depreciation & Amortization)) x 100
Operating Revenue

Operating Profit

Operating revenue after operating expenses are deducted.

Operating Revenues

The income earned from the provision of services and the sale of goods during a given period.

Other Investments

Investments in assets other than capital assets. For example, an acquisition of another business' assets.

Percentage Change 1995 / 1996

(a x 100 -100)/ b

a = End of period number
b = Beginning of period number

Period % Change

[(a - b) x 100] / b

Profit Margin

(Profit (Loss) x 100) / Operating Revenue

An Indicator of profitability.

Return on Assets

( Profit (Loss) x 100 ) / Total Assets

Return on Equity

( Profit (Loss) x 100 ) / Total Equity

An indicator of profitability that is based on net profit after taxes.

Share Capital

The combined book value of a firm's common and preferred stock.

Working Capital Ratio

Current Assets / Current Liabilities

An indicator of financial liquidity. Current assets are assets that can quickly be converted into cash. Current liabilities are liabilities that are due within a short period of time. Current assets are usually required to meet current liability obligations.