Organization And Activities Of Etihad Etisalat Company Finance Essay

Etihad Etisalat Company is a Saudi articulation stock company that incorporated with the council of curate. The chief laminitis of this company is Jumad Al Thani and besides it registered this company in to Riyadh besides. The company is besides the 2nd largest nomadic telecommunication service in the land of Saudi Arabia. The company with a portion of 5 billion was divided into 100 million portions. The stockholder was the emirates telecommunication corporation-eitsalat and uae keeping the most portion capital of 35 % .

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During 2007 the company invested approximately 100 % of the portion capital of a subordinate company with bangaro India Company.

During the last one-fourth of 2008 the company entered into the involvement rate understanding with several local and international Bankss to fudge the hard currency flow hazards to the loans from funding activities of a national sum. The understanding was based upon the barter between the company and Bankss of fixed rates against drifting rates.

The company has besides established a modesty by the appropriation of 10 % of the one-year net income of the portion capital.

The company besides believed that operational sections information with be non required due to the face that the company has merely one major runing sector chiefly in the land of Saudi Arabia.

The just values of the assets and liabilities approximate their carrying sums. The direction besides believes that is non necessary to put on the line into aforementioned.

Besides the grosss from sale of French telephones equipment and accoutrements are recognized so the French telephones equipment and advisories are delivered to the endorsers and client.

The meantime amalgamate fiscal statements, expressed in Saudi riyals are prepared inner the historical cost convention utilizing the accrual footing of accounting the traveling concern premise.

Major reclamations and betterment are capitalized if they increase its runing useful of life assets.

Liabilitiess related to merchandise and capital outgos are recognized for sums to be paid in the hereafter for goods services.

The subordinate Mobile info tech enjoys a three old ages period revenue enhancement freedom from the day of the month of operations and terminal in twelvemonth 2010.

The surplus of consideration paid for the acquisition of a subordinate over the affair value of net assets acquired is recorded as good will and is measured at the terminal of each fiscal period and reported in the meantime amalgamate fiscal statement at transporting value after accommodation for damage in value if any.

The above term loan period is 6 old ages and repayable through semi-annual scheduled installments with a refund of muerabaha on a quarterly footing.

Fiscal assets that subject to concentration of recognition hazard consist chiefly of hard currency and hard currency equivalents, short term investings histories receivable and other assets. The hard currency equivalents are deposited with high recognition rated Bankss therefore the recognition hazard is limited. The company does non see itself exposed to concentration of recognition hazard with regard to histories receivable due to its diverse and big endorser ‘s base.

Payments made under operating rentals are recognized into the interim amalgamate statement of income on a consecutive line footing over the footings of the rentals. Lease incentives received are recognized in the interim amalgamate statement of income as a tax write-off from lease disbursal.

Interconnection costs represent state and international interconnectedness charges paid to local and foreign operators. Interconnection costs are recorded in the period when relevant calls are made and are included in the cost of services caption.

The company equity portion in the net income of the subordinates is computed at 100 % based on direct investing in the portion capital of the subordinates and indirect investing by certain subordinates and but one of the stockholders in a subordinate who assigned his shareholdings in favour of the company at March 31 2009.

The meantime amalgamate fiscal statement expressed in Saudi riyals is prepared under the historical cost convention utilizing the accrual footing of accounting and the traveling concern premise.

Provision are recognized in the meantime amalgamate fiscal statements when the company has a present duty as a consequence of a past evened and it is likely that an escape of economic benefit will be required to settle the duty and a sensible estimation can be made of the sum of the duty.

ETIHAD ETISALAT COMPANY Common-Size Balance Sheets

March 31,2008 and 2009

( SR’000 )

Assetss 2009 2008 Change

Current assets

Cash and hard currency tantamount 2.31 % 2.9 % – 0.59

Short term investing 4.6 — – + 4.6

Account receivable 13.1 8.87 + 4.23

Due from related parties 0.087 0.217 – 0.13

Inventory 6.0 0.35 + 2.5

Prepaid disbursals and other assets 4.4 4.0 +0.4

Entire current assets 25.1 16.3 +8.8

Non-current assets

Property and equipment, net 31 29.4 +1.6

Licenses fees, net 38.4 54.27 – 15.87

Goodwill 5.4 — –

Investing in an unconsolidated subordinate — – 0.0089 – 0.0089

Entire non-current assets 74.86 83.67 – 8.81

Entire assets 100 % 100 % .0 %

Liabilitiess and Shareholders ‘ Equity

Current liabilities

Short term loans 6.68 % — – + 6.68 %

Current part of long term loan 4.74 4.9 – 0.16

Histories collectible 15.3 17.15 – 1.85

Dividends collectible 1.86 1.23 + 0.63

Due to related parties 0.16 0.28 – 0.12

Accrued disbursals and other liabilities 13 8.7 + 4.3

Entire current liabilities 41.76 32.2 +9.56

Noncurrent liabilities

Long-run loan 23.58 38.5 -14.92

Provision for employees ‘ terminal of-service insurances 0.187 0.148 +0.039

Entire non-current liabilities 23.8 38.65 – 14.85

Entire liability 65.5 70.87 – 5.37

Share holders ‘ equity

Value of authorised, issued and outstanding portion capital 24.8 24.32 +0.48

Statutory reserve 1.2 0.67 + 0.53

Retained net incomes 8.4 4.1 +4.3

Entire portion holders ‘ equity 34.47 29.1 +5.37

Entire liabilities and proprietors ‘ equity 100.0 % 100.0 % .0 %

Common-Size Balance sheets

We construct common-size balance sheets by showing each point as a per centum of entire assets, which will do it easy for us to read and compare.

For illustration if we see current assets were 25.1 per centum of entire assets in2009, up from 16.3 per centum in 2008.Current liabilities were 41.76 per centum in 2009, up from32.2 per centum of entire liabilities and equity.

Entire equity rose from 29.1percent of entire liabilities and equity to 34.47 per centum.

Finally the maintained net incomes rose from 4.1 to 8.4 per centum.

Over all Etihad company making good so far, but we think that company in liquidness hazard.

As we can read further in liquidness analysis.

ETIHAD ETISALAT COMPANY Common-Size Income Sheets

March 31,2008 and 2009

( SR’000 )

2008

2009

Servicess Gross

Cost of service

2,307,788

1,077,643

2,810,455

1,193,797

Gross net income

1,230,145

1,616,658

Less Operating disbursals:

Selling and selling disbursals

General and administrative disbursals

Depreciation and amortisation

179,826

323,984

292,395

346,101

362,247

374,806

Operation income

433,940

533,504

Finance charges

Other income

119,786

14,031

75,430

23,246

Income before zakat

328,185

481,320

Zakat

2,171

1,158

Net income

326,014

480,162

Financial Ratio Analysis

Short-run Solvency, or liquidness, Measures for 2008 & A ; 2009 RS’000

Current Ratio

2008

Current Ratio= Current assets 3358227 0.51times

Current Liabilitiess 6625677

2009

Current Ratio= Current assets 7083074 0.60 times

Current Liabilitiess 11764158

As we can see that Etihad Company has current ratio of 0.51 times in 2008 while in 2009 it has current ratio of 0.60times. That mean in 2009 the public presentation of company was better but still it ‘s non standard as it ‘s below 1 which mean the net working capital of the company is negative and the company is non executing good in the market.

Analysis this current ratio

Current Ratio of less than 1 would intend that net working capital ( current assets less current liabilities ) is negative, which show that Etihad Company is non healthy house, due to less than 1times in current ratio. However the company “ believes that it is non exposed to important hazard in relation to liquidness ” ( delight read page 15 of the Auditors ‘ reappraisal study ) .

However we think this low liquidness due to Dividends collectible the company agrees to pay in ( March 21, 2009 ) which is o.5 for each outstanding portion ) .Further more may be due to loan payment the company in on March 29, 2007 with last installment due on December 31, 2012.

Note ( delight read page 13 of the Auditors ‘ reappraisal study ) .

Quick ratio

2008

Current assets -Inventory 3358227 – 71035

Quick ratio = = 0.98 times

Current assets 3358227

2009

Current assets -Inventory 7083074 – 170730

Quick ratio = = 0.59 times

Current assets 11764158

Quick ratio of Eithad Company in 2008 was 0.98times while in 2009 it was 0.59times. That means that in 2008 the company run into its short term duty with it ‘s liquidate assets better than in 2009. The higher the speedy ratio the better is the public presentation of the company. In 2009 the public presentation was bad.

Analysis this Quick ratio

Quick ratio show that Etihad Company has really little stock list, while we can see this clear if we compare between current ratio and Quick ratio.

Note: we remove stock list for many ground 1 ) Least liquid current assets

2 ) Least dependable as step of market value

3 ) Some of it might be harm.

Cash Ratio

2008

Cash 595478

Cash Ratio= = =0.089 times

Current liabilities 6625677

2009

Cash 650881

Cash Ratio= = =0.055 times

Current liabilities 11764158

Cash ratio in Eithad Company in 2008 was 0.089 times while in 2009 was 0.055 times, that is in 2008 the company could pay its short term debt faster than in 2009.

Cash Ratio

The ratio ofA a company ‘s entire hard currency and hard currency equivalentsA to its current liabilities.A TheA cashA ratio is most normally used as a step of company liquidness. It can therefore determine if, and how rapidly, the companyA can repayA its short-run debt. A strong hard currency ratio is utile to creditors when make up one’s minding how much debt, if any, A they would be willing to widen to the inquiring party.A

The hard currency ratio is by and large a more conservative expression at a company ‘s ability toA cover its liabilitiesA than many other liquidness ratios. This is due to the fact that stock list and histories receivable are left out of the equation. Since these two histories are a big portion of many companies, this ratio should non be used in finding company value, but merely as one factor in finding liquidness. hypertext transfer protocol: //www.investopedia.com/terms/c/cash-ratio.asp

Long-run Solvency Measures for 2008 & A ; 2009

Entire debt Ratio

2008

Entire assets – Entire equity 20560676 – 5988541

Entire debt Ratio = 0.708 times

Entire assets 20560676

2009

Entire assets – Entire equity 28169640 – 9709472

Entire debt Ratio = 0.655 times

Entire assets 28169640

Entire debt ratio in 2008 of Eithad Company was 0.708 while in 2009 it was 0.655 which mean that the debt in 2008 was greater than 2009.

( A debt ratio of greater thanA 1 indicates that a company has more debt than assets, meanwhile, a debt ratio of less than 1 indicates thatA a company has more assets than debt. Used in concurrence with other steps of fiscal wellness, the debt ratio can assist investors find a company ‘s degree of hazard ) . hypertext transfer protocol: //www.investopedia.com/terms/d/debtratio.asp

Debt-equity ratio

2008

Entire debt 0.708

Debt-equity ratio = = =2.42 times

Entire equity 0.292

2009

Entire debt 0.655

Debt-equity ratio = = =1.89 times

Entire equity 0.345

In 2008 the debt equity ratio of Eithad Company was 2.24 while in 2009 it was 1.89. This means that in 2008 the company was to a great extent financing its growing with debt while in 2009 the ratio was less.

Timess involvement earned ratio

2008

EBIT 328185

Time involvement earned ratio = = = 151.2 times

Interest 2171

2009

EBIT 481320

Time involvement earned ratio = = = 415.6 times

Interest 1158

In 2008 the clip involvement earned ratio of Eithad Company was 151.2 while in 2009 it was 415.6. This means that the company has higher gaining in 2009 to run into involvement payment while in 2008 the company had lower earning.

Asset Management, ( Turnover steps )

Which used for mensurating the efficiency by which the company uses it ‘s assets to bring forth gross revenues.

Inventory turnover

2008

Cost of goods ( service ) sold 1077643

Inventory turnover = = = 15.2 times

Inventory 71035

2009

Cost of goods ( service ) sold 1193797

Inventory turnover = = = 6.99 times

Inventory 170730

In 2008 stock list turnover of Eithad Company was 15.2times while in 2009 it was 6.99times. This means that in 2008 the company stock list is sold and replaced 15.2 clip while in 2009 it was merely 6.99 times.

Dayss ‘ gross revenues in stock list

2008

365 yearss 365 yearss

Dayss ‘ gross revenues in stock list = = = 24.1 yearss

Inventory turnover 15.2

2009

365 yearss 365 yearss

Dayss ‘ gross revenues in stock list = = = 52.2 yearss

Inventory turnover 6.99

In 2008 Day ‘s gross revenues in stock list of Eithad Company was 24.1 yearss while in 2009 it was 52.2days. This means that in 2008 the company stock list was sold in 24.1 yearss and replaced while in 2009 it was sold in 52.2 yearss. So 2008 was better than 2009.

Receivables turnover and yearss ‘ gross revenues in receivables

Receivables turnover & A ; Days ‘ gross revenues in receivables

With receivables turnover and yearss ‘ gross revenues in receivables will demo us how fast the company collects on those gross revenues.

2008

Gross saless ( services gross ) 2307788

Receivables turnover = = = 1.26 times

Histories receivable 1823314

365 yearss 365

Dayss ‘ gross revenues in receivables = = = 289.7 yearss

Receivables turnover 1.26

2009

Gross saless ( services gross ) 2810455

Receivables turnover = = = 0.76 times

Histories receivable 3693886

365 yearss 365

Dayss ‘ gross revenues in receivables = = = 480.2 yearss

Receivables turnover 0.76

In 2008 receivable turnover of Eithad Company was 1.26times while in 2009 it was 0.76times. This means that in 2008 the company got at that place receivable faster than in 2009.

In 2008 Day ‘s gross revenues in receivable of Eithad Company was 289.7 yearss while in 2009 it was 480.2days. This means that in 2008 the company received money of recognition gross revenues after 289.7 yearss while in 2009 they received after 480.2 yearss.

Entire plus Employee turnover

Entire plus turnover is really of import ratio, and demo how good the company are working, every bit far as bring forthing gross for theA corporation. A high figure for theA assetA turnoverA indicates that the current usage of resources in the gross revenues and selling attempts is working, and bring forthing an first-class return. hypertext transfer protocol: //www.wisegeek.com/what-is-an-asset-turnover.htm

2008

Gross saless ( services gross ) 2307788

Entire Asset turnover = = = 0.11 times

Entire Assetss 20560676

2009

Gross saless ( services gross ) 2810455

Entire Asset turnover = = = 0.09 times

Entire Assetss 28169640

In 2008 entire plus turnover of Eithad Company was 0.11times while in 2009 it was 0.09times. This means that in 2008 the company was more competency at utilizing its assets to bring forth gross while in 2009 it was non. So 2008 was better than 2009 as the entire plus turnover was higher.

If we analyst this plus turnover it seem to be really low, nevertheless high plus turnover ratio is ever a good mark for the company public presentation ; but it is n’t needfully ( as the book of finance said ) because of many grounds:

Old assets and to the full depreciated, or might be outdated. Which will allow the book value of assets is low, lending to a higher plus turnover.

On other manus a low plus turnover might look bad, but could bespeak antonyms: for illustration if the company “ purchased new equipment which will connote that the book value of assets is comparatively high, these new assets could be more productive and efficient than those used by the company ‘s rivals. “ ( Necessities of corporate finance ) And we think this is right if we compare Etihad investment activities ( page 4 ) in the hard currency flows, we can see that the company purchase of belongings and equipment of more than SR 205396000 in 2009 than the prevus twelvemonth 2008. This is due besides because Saudi Arabia open the door for other telecommunication company to work in the state like for illustration UAE Etisalat.

Capital Intensity

2008

Entire Assetss 20560676

Capital Intensity = = = 8.90 times

Gross saless 2307788

2009

Entire Assetss 28169640

Capital Intensity = = = 10.1 times

Gross saless 2810455

In 2008 Capital strength of Eithad Company was 8.90 while in 2009 it was 10.l that is the less than capital strength the more attractive company will be. So Eithad Company is better executing in 2008 so in 2009 as they use less capital to general an extra 1 SR.

Profitableness Measures

Net income border

A ratio of profitableness calculated as netA incomeA divided by grosss, or net net incomes divided by gross revenues. It measures howA much outA of every dollarA of gross revenues a company really keeps in net incomes.

Net income border is really utile when comparingA companies in similar industries. A higher net income border indicates a more profitable company thatA has better control overA its costs compared toA its rivals. Profit border isA displayed as a per centum ; a 20 % net income border, for illustration, means the company has a net income of $ 0.20 for each dollar of sales.A

hypertext transfer protocol: //www.investopedia.com/terms/p/profitmargin.asp

2008

Net Income 326014

Net income border = = = 14.1 %

Gross saless 2307788

2009

Net Income 480162

Net income border = = = 17.1 %

Gross saless 2810455

In 2008 net income border of Eithad Company was 14.1 % while in 2009 it was 17.1 % . So we can state that the company has generated higher net income in 2009 than in 2008.

Tax return on Assetss

Tax return On Assetss – ROA

What DoesA Return On Assets – ROAA Mean?

An index of how profitable a company is comparative to its entire assets.A ROA gives an ideaA as to how efficientA direction isA at utilizing its assets to bring forth earnings.A Calculated by spliting a company ‘s one-year net incomes by its entire assets, ROA is displayed as a per centum. Sometimes this is referred to as “ return on investing ” .

explainsA Return On Assets – ROA

ROAA tells you what net incomes were generated from invested capital ( assets ) . ROA for public companies can change well and will be extremely dependent on the industry. This is why when utilizing ROA as a comparative step, A it is best to compare it againstA a company’sA old ROA Numberss or the ROA of a similar company.A

The assets of the company are comprised of both debt and equity. Both of these types of funding are used to fund the operations of the company. The ROA figure gives investors an ideaA of how efficaciously the company is change overing the moneyA it hasA to put into net income. The higher the ROA figure, the better, because the company is gaining more money on less investing. A hypertext transfer protocol: //www.investopedia.com/terms/r/returnonassets.asp

So after this account let see Etihad Company

2008

Net income 326014

Tax return on assets= = = 1.58 %

Entire assets 20560676

2009

Net income 480162

Tax return on assets= = = 1.70 %

Entire assets 28169640

In 2008 return on assets of Eithad Company was 1.58 % while in 2009 it was 1.70 % . So in 2009 the company earned more money so in 2008.

Tax return On Equity – Roe

What DoesA Return On Equity – ROEA Mean?

The sum of net incomeA returnedA as a percentageA of stockholders equity.A Return on equityA measures a corporation ‘s profitabilityA by uncovering how muchA net income a company generatesA with the money stockholders have invested.A A

ROE is expressed as a per centum and calculated as:

Tax return on Equity = Net Income/Total Shareholder ‘s Equity

hypertext transfer protocol: //www.investopedia.com/terms/r/returnonequity.asp

2008

Net income 326014

Tax return on Equity = = = 5.44 %

Entire equity 5988541

2009

Net income 480162

Tax return on Equity = = = 4.95 %

Entire equity 9709472

In 2008 return on equity of Eithad Company was 5.44 % while in 2009 it was 4.95 % . ROE in 2008 was higher than that in 2009 which mean the company earned more net income in 2008 from the investor ‘s money so in 2009.

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