Table of Contents
Financial Statement Analysis for the year 2011 and 2012. 2
Financial Statement Analysis for the year 2011 and 2012
In the given report, analysis of the financial statement of the company Etihad Etisalat CO is conducted which help to provide a clear and precise idea at about the company financial performance over the given period of time i.e. 2011 and 2012. The financial analysis help to provide a clear understanding on the financial position of the company in the UAE business environment and the financial market and also help another user to take effective decision related to the investment in the given company (Horrigan, 1967).
Company overview
Etisalat is one of the first telecommunication firms in the United Arab Emirates, which established in the year 1976 with around paid capital of (AED) 7906140000 and the par value of the share is 1.00 AED. The trade aim of the ETIHAD ETISALAT CO, which was launched in the year 2005, the company, is the winning bidder for Saudi Arabia second best GSM licence in the year 2004, which in real helps to provide mobile communication around the nation. The major owner of the the company is the federal government of UAE, which have 61.03% of total share of the company. The prime services of the company are to provide suitable offer, which suit each and everybody need. Etisalat is also provide several other core service to the nation which are TV, internet and host of other significant service which provide service across the UAE.
The financial statement helps to provide a clear knowledge of the financial position of the company in the financial market. The financial statement is generally prepared with the help of several key team or committee. The audit committees of the company consist of a Chairman and member. The Chairman of the audit committee is H.E. Essa Abdulfattah Kazim and the team member of the audits committees six key member, which under the supervision of the Chairman prepare the audit report of the financial statement. The auditor report to the shareholder help to provide a identification of the problem determined from the financial statement analysis which is evaluated on the basis of the International Financial Reporting Standard (IFRS) (Helfert, 1987). According to the auditor report, the company consolidated financial statement determined fairly and the financial performance, cash flows for the given year ended in accordance with the international financial reporting standard.
Total asset, Total liabilities and Total stockholder equity
| ETIHAD ETISALAT CO (7020) BALANCE SHEET | ||
| Year | 2011-12 | 2012-12 |
| Total assets | 37501 | 38623 |
| Total liabilities | 19113 | 17717 |
| Total stockholders’ equity | 18388 | 20906 |
From the analysis of the table given above clear indicate that the total asset and total stockholder equity is increase for the given company which is a positive sign for the company financial potion in the market as the liabilities is decreasing the capital flow for the company is increasing. On the contrary, the liability of the company is decreasing which help to provide the company increase in the liquid asset.
Ratio Analysis
The financial ratio analysis is obtained from the key financial statement, which are income statement, statement of financial and the cash flow statement. The three financial statement are the most essential statement which helps to calculate the significant ratio which help to determine the company several significant aspect such as solvency risk, liquidity risk, profitability, efficiency, activities, and market ratio (Gil Lafuente, 2005). The ratio helps the company and other key several users to determine the company current financial position in the market and its ability to generate income and sustainability in the coming future.
- Liquidity: Liquidity ratio help to provide a clear and precise idea about the company current asset and liabilities also help to determine the company capability to meet its short-term obligation. In the year, 2011 the company is at liquidity risk as the current and quick ratio are both below one. It indicate in the year 2011 the company is not able to meet its short-term obligation. On the other hand, the company financial capabilities increase which is indicated in the current ratio and quick ratio which signify that the company was able to meet its short-term obligation in the year 2012.
| Liquidity/Financial Health | 2011-12 | 2012-12 |
| Current Ratio | 0.55 | 1.03 |
| Quick Ratio | 0.44 | 0.72 |
- Activities: The activities help to determine the significant ratio of the company, which is calculated from the financial statement, which are also termed as the efficiency ratio. The efficiency ratio include the days sales outstanding, days inventory ratio, payable period, receivable turnover ratio, inventory turnover ratio, fixed asset turnover ratio, and the asset turnover ratio (Fridson & Alvarez, 2002). The given ratio helps to identify the overall management capability of the company. The company is able to manage it overall business operation or not is determined with the help of a significant activity. From the overall analysis of the activities of the company, indicate that the company is efficiently manage it inventory, fixed asset turnover, payable turnover and receivable turnover which help the company to maintain its asset management which eventually help the company to earn more revenue for the given period of time.
| Key Ratios -> Efficiency Ratios | ||
| Efficiency | 2011-12 | 2012-12 |
| Days Sales Outstanding | 110.06 | 94.52 |
| Days Inventory | 14.38 | 18.73 |
| Payables Period | 271.66 | 215.61 |
| Receivables Turnover | 3.32 | 3.86 |
| Inventory Turnover | 25.39 | 19.49 |
| Fixed Assets Turnover | 1.39 | 1.4 |
| Asset Turnover | 0.57 | 0.62 |
- Leverage: Leverage also help to determine the company susceptible to the long term solvency risk. The gearing ratio is determined with the help of the debt equity ratio and the financial advantage ratio or debt ratio. The financial leverage ratio which indicate that the total capital used to increase the level of profit is better in the year 2011 which help the company Etisalat to have greater degree of independence and higher financial leverage. Debt to equity ratio is one of the most significant indicators of the leverage of the company which is determined with the help of the debt to equity ratio. The debt to equity ratio indicates the ratio between debt and equity. The ratio is less in the year 2011 however in the year 2012 the ratio increase which indicate that the company is able to meet its current liabilities.
| Financial Gearing Ratio | 2011-12 | 2012-12 |
| Financial Leverage | 2.04 | 1.85 |
| Debt/Equity | 0.05 | 0.36 |
- Profitability: Profitability ratio is determined with the help of the income statement of the company. The income statement is also known as the profit or loss statement, which helps to signify the income, incurred and expense occurred for the given period. The profitability ratio include net profit margin, gross profit margin, operating margin, asset turnover, return on asset, financial leverage, return on equity and return on invested capital which collectively help to indicate the profitability ratio of the company. The profitability ratio analysis helps to determine that the company net profit margin is increasing which is a positive for the company overall growth (Palmer, 1983). The higher the profit margin more the better it is for the company overall growth which help to lower the relative price of the product which are sold. Return on asset help to calculate the profit incurred with the available asset, which from the analysis indicate that the company is generated profit from the last year. Return on equity is one of the most significant factors to determine the profitability ratio of the company. It helps to determine the return total earned on common stockholder investment in the company ETISALAT. The analysis help to determine the ROE, which indicates that the company were off better in the year 2012 than in 2011as the return on equity, is increasing in the year 2012 (morningstar.com, 2011).
| Key Ratios -> Profitability | ||
| Year | 2011-12 | 2012-12 |
| Revenue | 100 | 100 |
| COGS | 48.51 | 49.1 |
| Gross Margin | 51.49 | 50.9 |
| Operating Margin | 53.14 | 26.19 |
| EBT Margin | 25.62 | 25.75 |
| Profitability | 2011-12 | 2012-12 |
| Tax Rate % | 1.06 | 1.15 |
| Net Margin % | 24.68 | 25.45 |
| Asset Turnover (Average) | 0.57 | 0.62 |
| Return on Assets % | 14.98 | 15.81 |
| Financial Leverage (Average) | 2.04 | 1.85 |
| Return on Equity % | 29.56 | 30.63 |
| Return on Invested Capital % | 26.12 | 25.19 |
- Market ratio: Price earnings ratio (P/E) helps to determine the amount of the investor who is interested to pay each dirham of the organization total earning. Higher the rate of the share betters the chance or the confidence level of the investor in the company ETISALAT. The market ratio consists of the book value, earning per share which collectively help to determine the market of the company.
Price earnings ratio of the company in the year 2011 and 2012 help to provide clear and precise idea that the company is better in the year 2012 which help to increase the level of confidence in the investor to invest in the given company which will yield the investor a better return in the coming future (Financials.morningstar.com, 2011).
| Financials | ||
| 2011-12 | 2012-12 | |
| Revenue SAR Mil | 20,052 | 23,642 |
| Earnings Per Share SAR | 7.12 | 7.82 |
| Dividends SAR | 2.95 | 4.55 |
| Shares Mil | 700 | 770 |
| Book Value Per Share SAR | 26.95 | 27.15 |
Statement of cash flows
The statement of cash flow is one of the most significant financial statements, which help to provide a clear and precise idea about the company three primary activities, which are operating activities, financing activities and investing activities, which help to generate the net cash inflow and outflow incurred for the given period.
Determine the changes in cash
The net cash flow is determine with the help determining the difference between the cash at the beginning and the cash at the end of the period which is also termed as the total cash inflow and total cash outflow. The change in the cash flow calculated in the year 2011 is positive on the contrary, the total cash flow in the year 2012 is negative which indicate that the company is not able to generate revenue from the overall activities (Financials.morningstar.com, 2011).
| ETIHAD ETISALAT CO (7020) Statement of CASH FLOW | ||
| Fiscal year ends in December. SAR in millions except per share data. | 2011-12 | 2012-12 |
| Net change in cash | 28 | -387 |
| Cash at beginning of period | 1661 | 1690 |
| Cash at end of period | 1690 | 1302 |
| Net change in cash | 28 | -387 |
Determine the net cash flow operating activities
The cash flow statement consists of three primary activities, operating activities is one of the activities in the cash flow statement. The net cash flow from operating activities helps to provide the cash flow from key operating activities. In the year 2011, the cash flow from operating activities is 6673 whereas the cash flow from operating activities in the year 2012 is increases 7037 (Financials.morningstar.com, 2011). This indicates the cash flow from the operating activities is increases in the year 2012.
| ETIHAD ETISALAT CO (7020) Statement of CASH FLOW | ||
| Fiscal year ends in December. SAR in millions except per share data. | 2011-12 | 2012-12 |
| Cash Flows From Operating Activities | ||
| Inventory | -173 | -252 |
| Prepaid expenses | -1094 | |
| Accrued liabilities | -356 | |
| Other working capital | -1423 | 46 |
| Other non-cash items | 8269 | 8692 |
| Net cash provided by operating activities | 6673 | 7037 |
Determine cash flow from investing and financing activities
The cash flow statement consist of the three core activities investing and financing activities are the two core part of the cash flow statement which help to generate the net cash flow for the given period of time (Ardalan, 2000). The cash flow statement helps to determine the cash flow from investing activities and financing activities, which indicate that the company that the company is making efficient use of the resource. The investing activities of the company in the year are -3408 and -5408 in the year 2011 and 2012 respectively. On the other hand, the financing activities the company cash flow is -3237 and -2338 for the year 2011 and 2012 respectively which indicate the company net cash flow from investing and financial activities is not efficiently managed.
| ETIHAD ETISALAT CO (7020) Statement of CASH FLOW | ||
| Fiscal year ends in December. SAR in millions except per share data. | 2011-12 | 2012-12 |
| Cash Flows From Investing Activities | ||
| Investments in property, plant, and equipment | -3700 | -4860 |
| Property, plant, and equipment reductions | 10 | 84 |
| Acquisitions, net | -168 | |
| Purchases of intangibles | -310 | |
| Other investing activities | 450 | |
| Net cash used for investing activities | -3408 | -5086 |
| Cash Flows From Financing Activities | ||
| Debt issued | 870 | 7415 |
| Debt repayment | -1832 | -6253 |
| Dividend paid | -2275 | -3500 |
| Other financing activities | ||
| Net cash provided by (used for) financing activities | -3237 | -2338 |
References
Ardalan, A. (2000). Economic & financial analysis for engineering & project management (1st ed.). Lancaster, Penn.: Technomic Pub. Co.
Bowlin, O., Martin, J., & Scott, D. (1990). Guide to financial analysis (1st ed.). New York: McGraw-Hill.
Financials.morningstar.com,. (2011). Growth, Profitability, and Financial Ratios for Etihad Etisalat Co (7020) from Morningstar.com. Retrieved 26 July 2014, from http://financials.morningstar.com/ratios/r.html?t=7020®ion=sau&culture=en-US
Financials.morningstar.com,. (2014). Growth, Profitability, and Financial Ratios for Etihad Etisalat Co (7020) from Morningstar.com. Retrieved 26 July 2014, from http://financials.morningstar.com/ratios/r.html?t=7020®ion=sau&culture=en-US
Fridson, M., & Alvarez, F. (2002). Financial statement analysis (1st ed.). New York: John Wiley & Sons.
Gil Lafuente, A. (2005). Fuzzy logic in financial analysis (1st ed.). Berlin: Springer.
Hansen, B., & Palmer, A. (1997). FRAN, Financial Ratio ANalysis and more (1st ed.). Radnor PA (5 Radnor Corp CTR Suite 200, Radnor 19087-4585): U.S. Dept. of Agriculture, Forest Service, Northeastern Forest Experiment Station.
Helfert, E. (1987). Techniques of financial analysis (1st ed.). Homewood, Ill.: Irwin.
Horrigan, J. (1967). An evaluation of financial ratio analysis (1st ed.). Chicago: University of Chicago.
Horrigan, J. (1978). Financial ratio analysis (1st ed.). New York: Arno Press.
Morley, M. (1984). Ratio analysis (1st ed.). Berkshire, England: Published for the Institute of Chartered Accountants of Scotland by Gee & Co.
Palmer, J. (1983). Financial ratio analysis (1st ed.). New York, N.Y.: American Institute of Certified Public Accountants.
Appendix
Income Statement
| ETIHAD ETISALAT CO (7020) INCOME STATEMENT | ||
| Fiscal year ends in December. SAR in millions except per share data. | 2011-12 | 2012-12 |
| Revenue | 20052 | 23642 |
| Cost of revenue | 9728 | 11608 |
| Gross profit | 10324 | 12034 |
| Operating expenses | ||
| Sales, General and administrative | 2870 | 3443 |
| Other operating expenses | 2149 | 2399 |
| Total operating expenses | 5019 | 5842 |
| Operating income | 5305 | 6192 |
| Interest Expense | 213 | |
| Other income (expense) | 46 | -104 |
| Income before taxes | 5138 | 6088 |
| Provision for income taxes | 54 | 70 |
| Net income from continuing operations | 5083 | 6018 |
| Other | -5083 | |
| Net income | 6018 | |
| Net income available to common shareholders | 6018 | |
| Earnings per share | ||
| Basic | 7.82 | |
| Diluted | 7.82 | |
| Weighted average shares outstanding | ||
| Basic | 770 | |
| Diluted | 770 | |
| EBITDA | 7500 | 8591 |
Balance sheet
| ETIHAD ETISALAT CO (7020) BALANCE SHEET | ||
| Fiscal year ends in December. SAR in millions except per share data. | 2011-12 | 2012-12 |
| Assets | ||
| Current assets | ||
| Cash | ||
| Cash and cash equivalents | 1690 | 1302 |
| Short-term investments | ||
| Total cash | 1690 | 1302 |
| Receivables | 6334 | |
| Inventories | 470 | 721 |
| Prepaid expenses | 2493 | |
| Other current assets | 1399 | 5910 |
| Total current assets | 9893 | 10427 |
| Non-current assets | ||
| Property, plant and equipment | ||
| Gross property, plant and equipment | 16412 | 24716 |
| Accumulated Depreciation | -7461 | |
| Net property, plant and equipment | 16412 | 17255 |
| Goodwill | 1530 | |
| Intangible assets | 10942 | |
| Other long-term assets | 9665 | |
| Total non-current assets | 27607 | 28197 |
| Total assets | 37501 | 38623 |
| Liabilities and stockholders’ equity | ||
| Liabilities | ||
| Current liabilities | ||
| Short-term debt | 6096 | |
| Accounts payable | 8002 | |
| Other current liabilities | 3949 | 10075 |
| Total current liabilities | 18047 | 10075 |
| Non-current liabilities | ||
| Long-term debt | 977 | 7506 |
| Other long-term liabilities | 89 | 137 |
| Total non-current liabilities | 1066 | 7643 |
| Total liabilities | 19113 | 17717 |
| Stockholders’ equity | ||
| Retained earnings | 9810 | 11726 |
| Accumulated other comprehensive income | 8578 | 9180 |
| Total stockholders’ equity | 18388 | 20906 |
| Total liabilities and stockholders’ equity | 37501 | 38623 |
Cash Flow Statement
| ETIHAD ETISALAT CO (7020) Statement of CASH FLOW | ||
| Fiscal year ends in December. SAR in millions except per share data. | 2011-12 | 2012-12 |
| Cash Flows From Operating Activities | ||
| Inventory | -173 | -252 |
| Prepaid expenses | -1094 | |
| Accrued liabilities | -356 | |
| Other working capital | -1423 | 46 |
| Other non-cash items | 8269 | 8692 |
| Net cash provided by operating activities | 6673 | 7037 |
| Cash Flows From Investing Activities | ||
| Investments in property, plant, and equipment | -3700 | -4860 |
| Property, plant, and equipment reductions | 10 | 84 |
| Acquisitions, net | -168 | |
| Purchases of intangibles | -310 | |
| Other investing activities | 450 | |
| Net cash used for investing activities | -3408 | -5086 |
| Cash Flows From Financing Activities | ||
| Debt issued | 870 | 7415 |
| Debt repayment | -1832 | -6253 |
| Dividend paid | -2275 | -3500 |
| Other financing activities | ||
| Net cash provided by (used for) financing activities | -3237 | -2338 |
| Net change in cash | 28 | -387 |
| Cash at beginning of period | 1661 | 1690 |
| Cash at end of period | 1690 | 1302 |
| Free Cash Flow | ||
| Operating cash flow | 6673 | 7037 |
| Capital expenditure | -3700 | -5170 |
| Free cash flow | 2973 | 1867 |
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