College of Business AdministrationMaster of Business Administration ProgramMaster of Human Resource Management Program<\/p>\n
Financial Management: FIN512<\/p>\n
Spring Semester AY2013-2014<\/p>\n
Financial Ratio Analysis of Gulf Livestock Company<\/p>\n
Under the supervision of<\/p>\n
Dr. Najla Ellili<\/p>\n
Table of Contents<\/p>\n
Introduction ————————————————————————————— 3<\/p>\n
Companies Profile ——————————————————————————- 4<\/p>\n
Company Analysis——————————————————————————– 6<\/p>\n
Cross Sectional Analysis For the Three Companies ————————————– 21<\/p>\n
Conclusion —————————————————————————————– 31<\/p>\n
References —————————————————————————————– 32<\/p>\n
Appendix ——————————————————————————————- 33<\/p>\n
Companies Profile<\/p>\n
Gulf Livestock Company<\/p>\n
The company was founded in 1982 and is headquartered in Ras Al-Khaimah, the United Arab Emirates. The company was as a Kuwait shareholders company by Al-Homaizi group and other 38 employees. Currently Gulf livestock is among the largest specialized cross-breeding company involved in livestock trading. The company also process frozen and fresh meat and other animal products and these facilities are located in Australia. <\/p>\n
The company\u2019s history commenced in 1984 when Australian state asked the owner to infuse investment and consequently control a hybrid research program in developing high quality cross-breed sheep in Australia. This process went successfully and made the company to be popular and greater access to the marketplace. <\/p>\n
Presently, Gulf livestock import nearly 150,000 sheep to other countries and Kuwait. The company got listed in Abu Dhabi securities Exchange in 2009 and in October 2009, Gulf Livestock Company offered 100 million shares with a nominal value of Dh1 of equivalent to $0.27. <\/p>\n
The company\u2019s owners are Sklyer Group General Trading who owns shares of 36.14 %, Naif Al Sabah who has 8.76 % worth of shares, Al Salem Ltd Co with 6.18 %, Ahmed Al Nuaemi with shares of 5.18 %, and Ras Al Khaimah Government who owns 5.00 % of shares. <\/p>\n
Company AnalysisGulf Livestock Company<\/p>\n
Liquidity AnalysisCurrent RatioThe total current assets in 2012 was 94,215,792 while in 2013 it was 112,881,415. The current liabilities in 2012 was 50,019,988 while in 2013, current liabilities was 48,749,478. Current ratio in 2012 was 94,215,792\/50,019,988 coming to 1.883563. For 2013 current ratio was 112,881,415\/48,749,478 coming to 2.315541. The current ratio increased indicating a strengthening company assets. The assets increased and liabilities decreased. <\/p>\n
Quick RatioQuick ratio is obtained by (Current assets \u2013 Inventory) \/ Current Liabilities. The higher the quick ratio the higher the chances and ability of company to borrow on short term basis. <\/p>\n
Year Current assets inventory Current liabilities Current assets minus inventory Quick ratio <\/p>\n
2012 94,215,792 147,302 50,019,988 94,068,490 0.99844<\/p>\n
2013 112,881,415 506,386 48,749,478 112,375,029 0.99551<\/p>\n
The quick ratio decreased from 2012 to 2013 indicating that the liabilities reduced while assets increased for the company. <\/p>\n
Cash RatioYear current and non-current assets current liabilities cash ratio<\/p>\n
2012 521,552,624 50,019,988 10<\/p>\n
2013 554,521,879 48,749,478 11<\/p>\n
Cash ratio has increased from 10 to 11 indicating that the company has the amount of cash available to meet its short-term liabilities and because of this the creditors would be willing to extend to the company.<\/p>\n
Long Term Solvency AnalysisTotal Debt RatioIt indicates the company\u2019s leverage. <\/p>\n
Year total liabilities total assets debt ratio<\/p>\n
2012 50,019,988 307,884,208 0.162464<\/p>\n
2013 48,749,478 333,701,647 0.146087<\/p>\n
In 2012, debt ratio was 0.162464 while in 2013 it was 0.146087. This indicates that there was a decreasing leverage and reducing financial risks. The total debt ratio decreased, this means there is low degree of leverage and financial risk. The company had successfully reduced its outstanding debts. <\/p>\n
Debt to Equity RatioIt indicates Company\u2019s long term solvency. <\/p>\n
Year total liabilities shareholder’s equity Debt to Equity Ratio<\/p>\n
2012 50,019,988 213,668,416 0.234101<\/p>\n
2013 48,749,478 220,820,232 0.220765<\/p>\n
There is a reduction indicating there are more assets in 2013 compared to 2012 as is indicated in the decrease in debt to equity ratio. The reduction indicates that assets provided by the stockholders are more than assets provided by the creditors. <\/p>\n
Time interest earnedYear Earnings before Interest and Tax Interest Expense Time interest earned<\/p>\n
2012 94,215,792 50,019,988 1.883563<\/p>\n
2013 112,881,415 48,749,478 2.315541<\/p>\n
The increase in time interest earned indicates a strengthening company in terms of assets and its ability to pay its long term debts. The ratio increased from 1.88 to 2.32 indicating the company was able to pay its interest and debts compared to the previous year (2012). On the contrary, an increase in time interest earned indicates that company is excessively paying debts other than concentrating on other projects. It means the company is not using some funds properly. <\/p>\n
Inventory AnalysisInventory Turnover RatioYear cost of goods sold average inventory Inventory Turnover Ratio<\/p>\n
2012 94,215,792 213,668,416 0.440944<\/p>\n
2013 112,881,415 220,820,232 0.511191<\/p>\n
The inventory turnover ratio increased from 2012 to 2013 and this shows the company improved in its inventory and costs of goods sold. The company thus had more sales in 2013 compared to 2012. Normally, this ratio is high for companies selling perishable products like Gulf (selling milk). <\/p>\n
Day Sales in InventoryThe day\u2019s sales inventory for 2012 was 239.94 while for 2013 the value rose to 251.07. this was an indication that the company had increased its inventory sales but the increase was small indicating the company was not selling off its inventories. On the contrary, it could also indicate the company\u2019s decision to maintain high inventory levels so that it can achieve high order fulfillment rates. <\/p>\n
Receivables TurnoverYear net credit sales accounts receivable Turnover<\/p>\n
2012 29,516,580 1,367,071 21.59111<\/p>\n
2013 42,857,928 943,755 45.41213<\/p>\n
The receivable\u2019s turnover increased indicating the company was growing in assets and not using it effectively. The value in 2012 was 21.5911 while in 2013 the value rose to 45.41213 indicating almost a double the value. This is also indication that the company was able to effectively collect its receivables. <\/p>\n
Total Asset turnoverYear Sales or Revenues Total Assets Asset Turnover <\/p>\n
2012 29,516,580 46,000 641.6648<\/p>\n
2013 42,857,928 76,942 557.016<\/p>\n
The increase in asset turnover indicates the growth in sales between two years. The table indicates that converting asset ratio sales in 2013 was lower than in 2012. This indicates that only 5.5% was converted in 2013 compared to 6.4% converted in 2012. For the company it is a serious challenge to increase the ratio by improving its efficiency. <\/p>\n
Profitability AnalysisProfit Margin Ratio<\/p>\n
Revenue Profit Profit Margin Ratio<\/p>\n
2012 29,516,580 9,328,884 0.316056<\/p>\n
2013 42,857,928 26,879,473 0.627176<\/p>\n
The company\u2019s profit margin increased from 31% in 2012 to 62.7% in 2013. The possible reason might be increased sale or reduced operational and production costs. Increase in sales might be due to improved products or proper marketing techniques. <\/p>\n
Return on Asset (RoA)Year net income total assets Return on Asset <\/p>\n
2012 29,516,580 46,000 641.6648<\/p>\n
2013 42,857,928 76,942 557.016<\/p>\n
The returned assets decreased from 64% to 56% suggesting the profitability on total asset decreased and is negative sign the company since it indicates that in 2013, the company was bale to convert its investments to profits compared to 2012. <\/p>\n
Return on Equity (RoE)Year net income shareholder\u2019s equity Return on Equity <\/p>\n
2012 29,516,580 193,263,741 0.152727<\/p>\n
2013 42,857,928 204,166,600 0.209916<\/p>\n
The value in 2012 was 0.15 while in 2013, the value rose to 0.21 indicating a growth in net income and reduction in shareholder\u2019s equity. This is an indication that the company was rowing in its sales while reducing the further investments. <\/p>\n
Market Value Ratios<\/p>\n
Price to Earnings RatioThis is determined by dividing Market Value per Share by Earnings per Share (EPS). The share prices remained the same due to similar investments and shares. <\/p>\n
price per share earnings per share P\/E ratio<\/p>\n
2012 0.20187696 30 0.006729232<\/p>\n
2013 0.15978455 43 0.00371592<\/p>\n
The investors for the company is decreasing as indicated by the ratio. This is an indication that the company is willing to pay fewer prices in 2013 compared to 2012. This will led to decrease in stock prices of the company. <\/p>\n
Market to Book Ratiobook value per share earnings per share Market to Book Ratio<\/p>\n
2012 4.953512278 30 0.165117076<\/p>\n
2013 6.258427364 43 0.145544822<\/p>\n
The value has decreased from 0.16 to 0.14 in 2012 and 2013 respectively. This is an indication that the company market value was reducing compared to the previous year. It also idnciates that the investors were not ready to pump in more money to the company. <\/p>\n
References<\/p>\n
Peterson, D. P., & Fabozzi, F. J. (2012). Analysis of financial statements.<\/p>\n
Vandyck, C. K. (2006). Financial ratio analysis: A handy guidebook. Victoria, B.C: Trafford.<\/p>\n
Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2012). Intermediate accounting. Hoboken, NJ: Wiley.<\/p>\n
Appendix:<\/p>\n
Summary of Financial ratios of the three companies<\/p>\n
2013 Financial Ratios result<\/p>\n
Average<\/p>\n
liquidity current ratio 2.315541<\/p>\n
quick ratio 0.99551<\/p>\n
cash ratio 11<\/p>\n
Solvency Total Debt 0.146087<\/p>\n
debt\/equity 0.220765<\/p>\n
time interest earned 2.315541<\/p>\n
inventory ratios inventory turnover 0.511191<\/p>\n
days sales in inventory 251.07<\/p>\n
receivables turnover 45.41213<\/p>\n
days sales in receivable 140<\/p>\n
total asset turnover 557.016<\/p>\n
profitability profit margin 63%<\/p>\n
return on asset 0.209916<\/p>\n
return on equity 0.209916<\/p>\n
market value PE ratio 0.00371592<\/p>\n
market to book 0.145544822 <\/p>\n
2012 Financial Ratios result<\/p>\n
Average<\/p>\n
liquidity current ratio 1.883563<\/p>\n
quick ratio 0.99844<\/p>\n
cash ratio 10<\/p>\n
Solvency Total debt 0.162464<\/p>\n
debt\/equity 0.234101<\/p>\n
time interest earned 1.883563<\/p>\n
inventory ratios inventory turnover 0.440944<\/p>\n
days sales in inventory 239.94 <\/p>\n
receivables turnover 21.59111<\/p>\n
days sales in receivable 126<\/p>\n
total asset turnover 641.6648<\/p>\n
profitability profit margin 31.6%<\/p>\n
return on asset 3%<\/p>\n
return on equity 0.152727<\/p>\n
market value PE ratio 0.006729232 <\/p>\n
market to book 0.165117076<\/p>\n
GULF LIVESTOCK PJSC CONSOLIDATED STATEMENT OF FINANCIAL POSITION DEC 31,2013 ASSETS Dec 31,2013 Dec 31,2012<\/p>\n
NOTE AED AED<\/p>\n
Non Current assets Property and equipment 5 506,386 147,302 <\/p>\n
Intangible asset 6 76,942 46,000 <\/p>\n
Investment in subsidiary 7 60,000 0 <\/p>\n
Investment properties 8 204,166,600 193,263,741 <\/p>\n
Available for sale investment 9 15,978,455 20,187,696 <\/p>\n
Refundable deposits 31,849 23,677 <\/p>\n
Total non current assets 220,820,232 213,668,416 <\/p>\n
Current assets Deferred revenue 743,160 743,160<\/p>\n
Financial assets at fair value through profit or loss (FVTPL) 10 81,713,899 72,701,871<\/p>\n
Trade and other recievables 11 943,755 1,367,071<\/p>\n
Cash and cash equivalents 12 29,480,601 19,403,690<\/p>\n
Total current assets 112,881,415 94,215,792<\/p>\n
Total assets 333,701,647 307,884,208<\/p>\n
EQUITY AND LIABILITIES Equity and reserves Share capital 13 100,000,000 100,000,000<\/p>\n
Statutory reserve 14 50,000,000 50,000,000<\/p>\n
General reserve 15 50,000,000 50,000,000<\/p>\n
Retained carnings 83,356,601 55,498,673<\/p>\n
Total equity and reserves 283,356,601 255,498,673<\/p>\n
Non current liabilities Tenant’s refundable deposits 977,850 1,102,768<\/p>\n
Provision for employees’ end of service indemnity 16 617,718 1,262,779<\/p>\n
Total non current liabilities 1,595,568 2,365,547<\/p>\n
Current liabilities Undistributed dividends 17 31,243,875 25,299,726<\/p>\n
Other payables 18 17,505,603 24,720,262<\/p>\n
Total current liabilities 48,749,478 50,019,988<\/p>\n
Total equity and liabilities 333,701,647 307,884,208<\/p>\n
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DEC 31,2013<\/p>\n
Sales 19 0 302,313 <\/p>\n
Cost of sales 20 0 (427,187)<\/p>\n
Gross (loss) 0 (124,874)<\/p>\n
Loss on revaluation of property and equipment (126,570) (42,975)<\/p>\n
Loss on revaluation of intangible assets (9,200) (82,000)<\/p>\n
Selling, general and administrative expenses 21 (6,984,592) (3,840,342)<\/p>\n
Gain from investments 22 50,805,027 35,291,685 <\/p>\n
Other income 23 1,643,235 856,583 <\/p>\n
Other cost (2,469,972) (2,541,497)<\/p>\n
Net Comprehensive income for the year 42,857,928 29,516,580 <\/p>\n
Basic earnings per share (in UAE fils) 43 30 <\/p>\n","protected":false},"excerpt":{"rendered":"
College of Business AdministrationMaster of Business Administration ProgramMaster of Human Resource Management Program Financial Management: FIN512 Spring Semester AY2013-2014 Financial<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-51067","post","type-post","status-publish","format-standard","hentry"],"yoast_head":"\n