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Verizon Communications Inc. (VZ) | Analysis of Investments

Investment Accounting Policy

Verizon has investments in marketable securities which are considered “available-for-sale” under the provisions of the accounting standard for certain debt and equity securities. Marketable securities are included in the accompanying consolidated balance sheets in Short-term investments, Investments in unconsolidated businesses or Other assets. Verizon continually evaluates investments in marketable securities for impairment due to declines in market value considered to be other-than-temporary. That evaluation includes, in addition to persistent, declining stock prices, general economic and company-specific evaluations. In the event of a determination that a decline in market value is other-than-temporary, a charge to earnings is recorded for the loss, and a new cost basis in the investment is established.

Source: Verizon Communications Inc., Annual Report

Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

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Verizon Communications Inc., adjustment to Net Income (loss) Attributable To Verizon

USD $ in millions

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  12 months ended Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
Net income (loss) attributable to Verizon (as reported)
Add: Unrealized gains (losses) on marketable securities
Net income (loss) attributable to Verizon (adjusted)

Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

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Verizon Communications Inc., adjusted ratios

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  Net Profit Margin
Reported net profit margin % % % % %
Adjusted net profit margin % % % % %
  Return on Equity (ROE)
Reported ROE % % % % %
Adjusted ROE % % % % %
  Return on Assets (ROA)
Reported ROA % % % % %
Adjusted ROA % % % % %
Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Verizon Communications Inc.'s adjusted net profit margin deteriorated from 2008 to 2009 and from 2009 to 2010.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders' equity. Verizon Communications Inc.'s adjusted ROE deteriorated from 2008 to 2009 and from 2009 to 2010.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Verizon Communications Inc.'s adjusted ROA deteriorated from 2008 to 2009 and from 2009 to 2010.

Adjusted Net Profit Margin

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  As Reported
Net income (loss) attributable to Verizon (USD $ in millions)
Operating revenues (USD $ in millions)
   
Net profit margin1 % % % % %
  Adjusted: Mark to Market Available-for-sale Securities
Adjusted net income (loss) attributable to Verizon (USD $ in millions)
Operating revenues (USD $ in millions)
   
Adjusted net profit margin2 % % % % %

2010 Calculations

1 Net profit margin = 100 × Net income (loss) attributable to Verizon ÷ Operating revenues
= 100 × ÷ = %

2 Adjusted net profit margin = 100 × Adjusted net income (loss) attributable to Verizon ÷ Operating revenues
= 100 × ÷ = %

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Verizon Communications Inc.'s adjusted net profit margin deteriorated from 2008 to 2009 and from 2009 to 2010.

Adjusted Return On Equity (ROE)

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  As Reported
Net income (loss) attributable to Verizon (USD $ in millions)
Equity attributable to Verizon (USD $ in millions)
   
ROE1 % % % % %
  Adjusted: Mark to Market Available-for-sale Securities
Adjusted net income (loss) attributable to Verizon (USD $ in millions)
Equity attributable to Verizon (USD $ in millions)
   
Adjusted ROE2 % % % % %

2010 Calculations

1 ROE = 100 × Net income (loss) attributable to Verizon ÷ Equity attributable to Verizon
= 100 × ÷ = %

2 Adjusted ROE = 100 × Adjusted net income (loss) attributable to Verizon ÷ Equity attributable to Verizon
= 100 × ÷ = %

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders' equity. Verizon Communications Inc.'s adjusted ROE deteriorated from 2008 to 2009 and from 2009 to 2010.

Adjusted Return On Assets (ROA)

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  As Reported
Net income (loss) attributable to Verizon (USD $ in millions)
Total assets (USD $ in millions)
   
ROA1 % % % % %
  Adjusted: Mark to Market Available-for-sale Securities
Adjusted net income (loss) attributable to Verizon (USD $ in millions)
Total assets (USD $ in millions)
   
Adjusted ROA2 % % % % %

2010 Calculations

1 ROA = 100 × Net income (loss) attributable to Verizon ÷ Total assets
= 100 × ÷ = %

2 Adjusted ROA = 100 × Adjusted net income (loss) attributable to Verizon ÷ Total assets
= 100 × ÷ = %

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Verizon Communications Inc.'s adjusted ROA deteriorated from 2008 to 2009 and from 2009 to 2010.

February 8, 2012

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