Analysis Of Financial Strengths And Weaknesses Finance Essay

We can see from the above fiscal study ( balance sheet of Emaar in the twelvemonth 2007 and in the twelvemonth 2008 ) that entire plus of the company in the twelvemonth 2007 were AED 54,790,875,000, which were increased to AED 60,690,798,000. This shows that there was an increase of 10.77 % in the entire plus in one twelvemonth. When we compare liabilities of the company, entire liabilities of AED 17,602,609,000 in the twelvemonth 2007 increased to 24,128,444,000. This means that there was an addition of 37 per centum in the entire liabilities of the company. Finally, if we compare entire equity of the company, entire equity for Emaar was AED 37,188,267,000 in the twelvemonth 2007 and it went to AED 36,562,354,000 in the twelvemonth 2008. This means that there was a lessening of 1.6 % in the entire equity.

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Therefore, from the analysis of balance statement of the company, we can state that company ‘s value of assets has gone down from 2007 to 2008 and company has more and more under debt in 2008 as compared to its state of affairs in 2007.

Income Statement

2007-2008

Entire Revenue obtained by Emaar in the twelvemonth 2008 was dropped down to AED 16,015,333,000 as compared to AED 17,868,672,000 in 2007. There was a decrease of 10.37 % in the span of one twelvemonth in the gross revenues. Operating income earned by the company i.e. net income before involvement and revenue enhancement of the company ( EBIT ) in 2008 was AED 6,811,358 as compared to AED 7,053,765,000 in 2007. This shows that there was a decrease of 3.4 per centum in the operating net income of the company. Equally far as net net income of Emaar is concerned, it has a net net income of AED 3,080,531 in 2008, whereas the net net income of the company in 2007 was AED 6,550,812 which shows that there was a ruin of 53 per centum in the net net income of the company.

Cash Flow Statement

2007-2008

Cash generated from entire operating activities in the twelvemonth 2008 was AED 5,551,783,000, whereas hard currency generated from entire operating activities in the twelvemonth 2007 was AED 5,973,402,000. This shows that there was a lessening of 7 per centum from the hard currency generated from entire operating activities in this one twelvemonth.

When we talk about puting activities, hard currency used is AED 2,806,782,000 in the twelvemonth 2008 whereas hard currency used in puting activities in the twelvemonth 2007 was AD 7,058,087,000. This shows that there was a lessening of 60 per centum in the hard currency used for investing intent in 2008.

In instance of net incomes from fiscal activities, AED 329,083 were earned in the twelvemonth 2008 whereas there was an earning of AED 1,959,714,000 in 2007 which shows that there was a lessening of 83 per centum in gaining from fiscal activities in the twelvemonth 2008 as compared to the twelvemonth 2007.

Analysis of the fiscal strengths and failings revealed by the Financial Statements analysis utilizing cardinal ratios

2007

Short Term Liquidity Ratio

Current Ratio = Current Assets/Current liabilities

= AED 11,717,524/ AED 14,305,029

= 0.819

Acid-test ( Quick ratio ) = Cash & A ; Cash Equivalent + M.S +Net receivable/ C.L

= AED ( 5,175,223 + 587,579 ) / AED 14,305,029

= 0.403

Working capital= Current assets-Current liabilities

= AED 11,717,524 – AED 14,305,029

= – AED 2,587,505

Cash ratio ( hard currency to current liabilities ) = hard currency & A ; hard currency equivalent + M.S/ C.L

= AED 5,175,223 / AED 14,305,029

= 0.362

Cash to current assets = hard currency & A ; hard currency equivalent +M.S / C.A

= AED 5,175,223 / AED 11,717,524

= 0.442

Sales- to- working capital = gross revenues / mean on the job capital

= AED 13,926,334 / AED 2,587,505

= 5.382

Defensive interval = Cash & A ; hard currency equivalent+ net receivables + M.S / daily runing hard currency escape

= AED ( 5,175,223 + 587,579 ) / 5,551,583

= 1.038

Liquidity index = weighted non hard currency current assets / current assets

= 0.523 / 0.467

= 1.12

Activity Ratios

Inventory turnover = COGS/ mean stock list

= AED 10,814,907/ AED 1,610,358,000

= 0.0057

Number of yearss of inventory= 365/inventory turnover

= 365/0.0057

= 64,035 yearss

Receivables turnover= net recognition gross revenues / mean A.R

= AED 13,926,334 / 406,379

= 34.26

Number of yearss of receivables = 365 / receivables turnover

= 365/ 34.26

= 11 yearss

Operating rhythm = figure of yearss of INV. + figure of yearss of REC.

= 64,035 days/ 11 yearss

= 5821.86

A.P turnover =net recognition purchases / mean A.P

= AED 7,058,087/ AED 406,379

= 17.36

Number of yearss of A.P= 365 / A.P turnover

= 365/ 17.36

= 21

Cash cycle=operating rhythm – figure of yearss of A.P

= 5821.86 – 17.36

= 5804.5 yearss

Fixed assets turnover= net gross revenues / mean fixed assets

= AED 13,926,334 / AED 28,392,470

= 0.49

entire plus turnover= net gross revenues / mean entire assets

= AED 13,926,334/ AED 30,612,166

= 0.45

Profitability Ratios

Net income border on gross revenues = net income / net gross revenues

= AED 6,536,358/ AED 17,868,672

= 0.366

Net runing income to gross revenues = EBIT / net gross revenues

= AED 7,053,765/ AED 17,868,672

= 0.395

Tax return on investing ( ROI ) = net income / mean entire assets

= AED 6,536,358/ AED 30,612,166

= 0.214

Du Pont equation ( ROI ) = ( net sales/aver. entire assets ) A- ( net income/net gross revenues )

= 0.214 tens 0.395

= 0.084

Net runing income to entire capital= EBIT / ( equity + involvement bearing debt )

= AED 7,053,765/ ( AED 37,188,266 + AED 17,602,609 )

= 0.129

Tax return on common equity= ( Net income – P.S dividends ) / Aver. Common equity

= AED 7,053,765/ AED 36,536,040

= 0.193

Tax return on entire equity= ( Net income-Div. on redeemable P.S ) /Ave.Total equity

= AED 7,053,765/ AED 37,188,266

= 0.19

Gross margin= ( net gross revenues – COGS ) / net gross revenues

= ( AED 17,868,672- AED 10,814,907 ) / AED 17,868,672

= 0.395

Basic gaining per portion ( BEPS ) = Net income available to C.S / Aver. Outstanding portions

= AED 7,053,765/ 1,446,049

= AED 4.88

Monetary value gaining ratio ( P/E ) = market monetary value per portion / EPS

= ( AED 54,790,875/ 1,446,049 ) / 4.88

= 7.76

Gaining yield= EPS / market monetary value per portion

= 1/ 7.76

= 0.129

Dividend payout ratio = dividends per common portion / EPS

= AED 3.65/ AED 4.88

= 0.75

Sustainable equity growing rate = [ ( Net income – P.S Div. ) / Aver. C.E ] A- [ 1- ( DPS/EPS ) ]

= ( AED 7,053,765/ AED 37,188,266 ) ten ( 1- 0.75 )

= 0.047

Tax return to stockholders = ( dividends + capital addition ) / measurement period

= ( AED 1,215,111 + AED 649,606 ) /1

= 0.511

return on shareholdersU? investing ( ROSI ) =

( dividends +market value of reinvested net incomes ) /M.P

N.A

Shareholder multiple= ( dividends+ market value of reinvested earning ) /earning

N.A

Book value per portion = Equity / portions outstanding

= AED 37,188,266 / 1,446,049

= AED 25.72

Price- to- book ratio = Market monetary value per portion / book value per portion

= AED 7.76/ AED 25.72

= 0.3

Operating hard currency flow to income = Net operating hard currency flow / net income

= AED 5,973,402/ AED 7,053,765

= 0.847

Capital Structure and Coverage Ratios

Fixed assets to Equity Capital = Fixed assets / Total Equity

= AED 28,392,470/ AED 37,188,266

= 0.76

Net touchable assets to long-run debt = Net touchable assets / long- term debt

= AED 65,200,400/ AED 17,602,609

= 3.7

Entire liabilities to net touchable assets= Total liabilities / cyberspace touchable assets

= 1/ 3.7

= 0.27

Times-interest-earned ratio = EBIT / involvement disbursal

= AED 10,814,907/ AED 38,956

= 277.6

Cash flow per portion = ( hard currency provided by operations – P.D ) / C.S outstanding

= AED 5,973,402/ 1,446,049

= 4.13

Entire debt ratio = Total liabilities / entire assets ( capital )

= AED 17,868,672/ AED 54,790,875

= 0.33

entire debt -to-equity ratio = Total liabilities / equity

= AED 17,868,672/ AED 36,922,203

= 0.33

Fixed charge coverage ratio = ( EBIT + leases involvement ) / ( involvement +leases involvement )

= AED 10,814,907/ AED 38,956

= 277.61

Operating hard currency flow to entire debt ratio = Operating hard currency flow / entire debt

= AED 5,973,402/ AED 17,868,672

= 0.33

2008

Short Term Liquidity Ratio

Current Ratio = Current Assets/Current liabilities

= AED 8,642,670/ AED 7,208,468

= 1.198

Acid-test ( Quick ratio ) = Cash & A ; Cash Equivalent + M.S +Net receivable/ C.L

= AED ( 2,131,679 + 406,379 ) / AED 7,208,468

= 0.351

Working capital= Current assets-Current liabilities

= AED 8,642,670 – AED 7,208,468

= AED 1,434,202

Cash ratio ( hard currency to current liabilities ) = hard currency & A ; hard currency equivalent + M.S/ C.L

= AED 2,131,679 / AED 7,208,468

= 0.296

Cash to current assets = hard currency & A ; hard currency equivalent +M.S / C.A

= AED 2,131,679/ AED 8,642,670

= 0.247

Sales- to- working capital = gross revenues / mean on the job capital

= AED 17,868,672 / AED 1,434,202

= 12.56

Defensive interval = Cash & A ; hard currency equivalent+ net receivables + M.S / daily runing hard currency escape

= AED ( 2,131,679 + 406,379 ) / 5,973,402

= 0.425

Liquidity index = weighted non hard currency current assets / current assets

= 0.54 / 0.46

= 1.174

Activity Ratios

Inventory turnover = COGS/ mean stock list

= AED 10,814,907/ AED 1,084,000,000

= 0.0085

Number of yearss of inventory= 365/inventory turnover

= 365/0.0085

= 42,941 yearss

Receivables turnover= net recognition gross revenues / mean A.R

= AED 16,015,133/ 587,579

= 27.52

Number of yearss of receivables = 365 / receivables turnover

= 365/ 27.52

= 13 yearss

Operating rhythm = figure of yearss of INV. + figure of yearss of REC.

= 42,941 days/ 13 yearss

= 3303.15

A.P turnover =net recognition purchases / mean A.P

= AED 2,806,782/ AED 587,579

= 4.78

Number of yearss of A.P= 365 / A.P turnover

= 365/ 4.78

= 76.36

Cash cycle=operating rhythm – figure of yearss of A.P

= 3303.15 – 76.36

= 3226.79 yearss

Fixed assets turnover= net gross revenues / mean fixed assets

= AED 16,015,133/ AED 35,460,931

= 0.45

entire plus turnover= net gross revenues / mean entire assets

= AED 16,015,133/ AED 38,103,346

= 0.42

Profitability Ratios

Net income border on gross revenues = net income / net gross revenues

= AED 3,077,962/ AED 16,015,133

= 0.19

Net runing income to gross revenues = EBIT / net gross revenues

= AED 6,811,358/ AED 16,015,133

= 0.43

Tax return on investing ( ROI ) = net income / mean entire assets

= AED 3,077,962/ AED 38,103,346

= 0.081

Du Pont equation ( ROI ) = ( net sales/aver. entire assets ) A- ( net income/net gross revenues )

= 0.081 tens 0.19

= 0.015

Net runing income to entire capital= EBIT / ( equity + involvement bearing debt )

= AED 6,811,358/ ( AED 36,562,354 + AED 24,128,444 )

= 0.112

Tax return on common equity= ( Net income – P.S dividends ) / Aver. Common equity

= AED 3,077,962/ AED 36,000,753

= 0.0854

Tax return on entire equity= ( Net income-Div. on redeemable P.S ) /Ave.Total equity

= AED 3,077,962/ AED 36,562,354

= 0.084

Gross margin= ( net gross revenues – COGS ) / net gross revenues

= ( AED 16,015,133 – AED 9,203,775 ) / AED 16,015,133

= 0.425

Basic gaining per portion ( BEPS ) = Net income available to C.S / Aver. Outstanding portions

= AED 3,077,962/ 6,091,239

= AED 0.505

Monetary value gaining ratio ( P/E ) = market monetary value per portion / EPS

= ( AED 60,690,798/ 6,091,239 ) / 0.505

= 19.73

Gaining yield= EPS / market monetary value per portion

= 1/ 19.73

= 0.507

Dividend payout ratio = dividends per common portion / EPS

= AED 0.20/ AED 0.505

= 0.396

Sustainable equity growing rate = [ ( Net income – P.S Div. ) / Aver. C.E ] A- [ 1- ( DPS/EPS ) ]

= ( AED 3,077,962/ AED 36,562,354 ) ten ( 1- 0.396 )

= 0.051

Tax return to stockholders = ( dividends + capital addition ) / measurement period

= ( AED 1,218,248 + AED 537,062 ) /1

= 0.288

return on shareholdersU? investing ( ROSI ) =

( dividends +market value of reinvested net incomes ) /M.P

N.A

Shareholder multiple= ( dividends+ market value of reinvested earning ) /earning

N.A

Book value per portion = Equity / portions outstanding

= AED 36,562,354 / 6,091,239

= AED 6

Price- to- book ratio = Market monetary value per portion / book value per portion

= AED 19.72/ AED 6

= 3.29

Operating hard currency flow to income = Net operating hard currency flow / net income

= AED 5,551,583/ AED 3,077,962

= 1.8

Capital Structure and Coverage Ratios

Fixed assets to Equity Capital = Fixed assets / Total Equity

= AED 35,460,931/ AED 36,562,354

= 0.97

Net touchable assets to long-run debt = Net touchable assets / long- term debt

= AED 60,251,407/ AED 24,128,444

= 2.497

Entire liabilities to net touchable assets= Total liabilities / cyberspace touchable assets

= 1/ 2.497

= 0.4

Times-interest-earned ratio = EBIT / involvement disbursal

= AED 9,203,775/ AED 25,220

= 364.94

Cash flow per portion = ( hard currency provided by operations – P.D ) / C.S outstanding

= AED 5,551,583/ 6,091,239

= 0.91

Entire debt ratio = Total liabilities / entire assets ( capital )

= AED 24,128,444/ AED 60.690,798

= 0.397

entire debt -to-equity ratio = Total liabilities / equity

= AED 24,128,444/ AED 36,562,354

= 0.66

Fixed charge coverage ratio = ( EBIT + leases involvement ) / ( involvement +leases involvement )

= AED 9,203,775/ AED 25,220

= 364.94

Operating hard currency flow to entire debt ratio = Operating hard currency flow / entire debt

= AED 5,551,583/ AED 24,128,444

= 0.23

Decision and Recommendation

We can reason from the above analysis that fiscal state of affairs of Emaar Company in the twelvemonth 2008 was hapless as compared to the fiscal state of affairs of 2007. Sing the issues from the really get downing that company has bigger liabilities in 2008 as compared to 2007 and besides companies assets were declined.

Coming to the net incomes made by the company, we have seen in the above analysis that it had lesser net income because there was lesser sale in the twelvemonth 2008.

Besides, as we have seen in the ratio analysis, company has a better standing in the twelvemonth 2007 as compared to 2008.

One of the really important grounds for this diminution might be the Global Financial Crisis. Emaar is a existent estate company and existent estate was the really first cause of the fiscal crisis and consequence on existent estate industry all over the universe was black.

We can give some of the recommendations to better the state of affairs of the company. These are as follows:

Company should look frontward to publicize itself more and should conceal their defect every bit more as possible. This will draw the investors towards the company

Company has lost a immense sum of capital outstanding in the twelvemonth 2008, company should acquire back that capital payment

Company should look for those assets which it has lost or has declined in the fiscal crisis.

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