Financial Ratio Analysis And Industry Averages Finance Essay

Financial symmetry Analysis And Industry Averages Finance EssayThe price earning P/E symmetry yields how attractive a firms stock is for investment. The P/E of Etisalat has change magnitude from previous year 2009 which shows that in 2010 Etisalat has become more attractive for investments.Profit cogency proportionsReturn on mutual Equity (ROCE or roe)ROE = Earnings after Tax Equity Shareholders fund x 100This balance shows the rate of sound reflection of the risk takers also referred to as the stockholders (Sinha, 2009). The ratio shows the stockholders or investors the rate of crop of their investments in stocks of Etisalat. The pursual bow shows the ROE ratio for EtisalatFinancial Ratios20102009ProfitabilityROE20.4122.17The above circuit board clearly shows that the rate of return for the shareholders of Etisalat has reduced from 22.17% in 2009 to 20.41% in 2010. Therefore the risk of investment in stocks of Etisalat has increased in 2010 comparing with the ratio of 2 009.ROA (Return on make sense Assets)Return on Total Assets (ROA) = (Net Income Total Assets) x 100Higher ROA indicates the high return on Assets, this ratio must be above the industry average to show greater returns on Assets (Brigham Houston, 2009). Note another reason for a low ROA could also indicate the intentional habituate of debt for financing activities of a firm. The sideline table shows the ROA calculated for Etisalat.Financial Ratios20102009ProfitabilityROA9.7412.40The ROA for Etisalat has reduced in 2010 to 9.74% from 12.40% in 2009, which shows the reduced rate of return on assets, indicating the poor performance of Etisalat also showing the use of debt by the firm.Liquidity RatiosCurrent ratioCurrent Ratio = Current Assets Current LiabilitiesThe ratio shows the weak or stronger fluidness position of a firm, higher the current liabilities lower the current ratio and vice versa. The calculated ratios of Etisalat are shown in the following tableFinancial Ratios20 102009LiquidityCurrent Ratio0.790.83The liquidity position of Etisalat has reduce negatively when comparing current ratio of 0.79x in 2010 with 0.83x in 2009, consequently the ability of Etisalat to convert its assets into cash has reduced. rapid RatioQuick, or acid test, ratio = (Current assets Inventories) Current LiabilitiesQuick Ratio also depicts the liquidity position of the firm to pay off short-term liabilities without relying on sales (inventories). The following table shows the calculated Quick Ratio for Etisalat.Financial Ratios20102009LiquidityQuick Ratio0.780.82Acid test of Etisalat revealed that the liquidity of the firm to pay shot-term liabilities has reduced from 0.82x in 2009 to 0.78x in 2010.Asset Management Ratios instrument Turnover RatioInventory Turnover Ratio = Sales InventoriesThis ratio shows the number of times inventories are morose over into sales, and higher value shows that the inventories are being held for longer times. The Inventory disorder ra tio of Etisalat is shown by the following table.Financial Ratios20102009Asset ManagementInventory Turnover Ratio100.96115.03The ratios in the table clearly show the ability of Etisalat to convert inventories into sales has increased shown by declining Inventory Turnover Ratio of 100.96x in 2010 from 115.03x in 2009.Debt Management RatiosTotal Debt to Total AssetsDebt ratio = Total Debt Total AssetsThis ratio shows in percentage the risk level faced by the firm, the debt ratio of Etisalat is shown with the help of following tableFinancial Ratios20102009Debt ManagementTotal Debt to Total Assets Ratio6.344.52The values in the table above show that the risk of commit in Etisalat has increased from 4.52% in 2009 to 6.34% in 2010.Financial Profile Emirates Integrated telecoms Company PJSC and its SubsidiaryThe fiscal profile of Emirates Telecommunication is presented by the data retrieved from financial statements of the firm.Financial Ratio Analysis Emirates Integrated Telecommunicat ions Company PJSC and its Subsidiary 2010 and 2009Data retrieved from the Financial Statements20102009AED000AED000Current Assets4,671,7792,224,887Total Assets12,519,6789,531,905Current Liabilities6,441,4623,676,842Total Liabilities7,423,9116,740,365Inventories47,30038,931Sales Revenue7,074,0975,338,699 busy102,19912,998EPSAED 0.31AED 0.06N.I.1,310,431264,124Market Value Per ShareAED 2.72AED 2.79Total Shareholder Equity5,095,7672,791,540Total Debt904,7353,000,000The ratio analysis is conducted on the basis of data retrieved in the table bove.Ratio Analysis of Emirates Integrated Telecommunications Company PJSC and its SubsidiaryMarket Value RatiosP/E Ratio(P/E) Price/Earnings Ratio = Market Price Per popular Share Earnings Per ShareThe share price of Emirates Integrated Telecommunications for the year ended 31 December, 2009 was AED 2.786 and 31 December, 2010 AED 2.72 (Bloomberg, 2013). The following table shows the calculated P/E for Etisalat.Financial Ratios20102009Market ValueP /E8.7746.43The price earning P/E ratio shows how attractive a firms stock is for investment. The P/E of Emirates Telecommunication has reduced drastically from previous year 46.43x in 2009 to 8.77x in 2010 which shows that in 2010 Emirates Telecommunication has become less attractive for investments.Profitability RatiosReturn on Common Equity (ROCE or ROE)ROE = Earnings after Tax Equity Shareholders fund x 100This ratio shows the stockholders or investors the rate of return of their investments in stocks of Emirates Telecommunication. The following table shows the ROE ratio for Emirates TelecommunicationFinancial Ratios20102009ProfitabilityROE25.729.46The above table clearly shows that the rate of return for the shareholders of Emirates Telecommunication has increased from 9.46% in 2009 to 25.72% in 2010. Therefore the risk of investment in stocks of Emirates has reduced in 2010 comparing with the ratio of 2009.ROA (Return on Total Assets)Return on Total Assets (ROA) = (Net Income Total Assets) x 100The following table shows the ROA calculated for Emirates Telecommunication.Financial Ratios20102009ProfitabilityROA10.472.77The ROA for Emirates Telecommunication has increased in 2010 to 10.47% from 2.77% in 2009, which shows the increased rate of return on assets.Liquidity RatiosCurrent ratioCurrent Ratio = Current Assets Current LiabilitiesThe calculated current ratio for Emirates Telecommunication are shown in the following tableFinancial Ratios20102009LiquidityCurrent Ratio0.730.61The liquidity position of Emirates Telecommunication has reduce negatively when comparing current ratio of 0.73x in 2010 with 0.61x in 2009, consequently the ability of Emirates Telecommunication to convert its assets into cash has reduced.Quick RatioQuick, or acid test, ratio = (Current assets Inventories) Current LiabilitiesThe following table shows the calculated Quick Ratio for Emirates Telecommunication.Financial Ratios20102009LiquidityQuick Ratio0.720.59Acid test of Emira tes Telecommunication revealed that the liquidity position of the firm to pay shot-term liabilities has increased from 0.59x in 2009 to 0.72x in 2010, which shows that Emirates Telecommunication is more liquid in 2010.Asset Management RatiosInventory Turnover RatioInventory Turnover Ratio = Sales InventoriesThe Inventory turnover ratio of Emirates Telecommunication is shown by the following table.Financial Ratios20102009Asset ManagementInventory Turnover Ratio149.56137.13The ratios in the table clearly show the ability of Emirates Telecommunication to convert inventories into sales has decreased shown by increasing Inventory Turnover Ratio of 149.56x in 2010 from 137.13x in 2009.Debt Management RatiosTotal Debt to Total AssetsDebt ratio = Total Debt Total AssetsThe debt ratio of Emirates Telecommunication is shown with the help of following tableFinancial Ratios20102009Debt ManagementTotal Debt to Total Assets Ratio0.070.31The values in the table above show that the risk of invest ing in Emirates Telecommunication has reduced from 0.31% in 2009 to 0.07% in 2010.Industry Averages in Telecommunication Industry UAEThe industry averages of the telecommunication for P/E, ROE, ROA, Debt Ratio and Current Ratio areP/EP/E Industry Average Telecommunication Industry UAE20092010P/E Etisalat9.6910.31P/E Emirates46.438.7720092010P/E Industry Average28.069.54ROEROE20092010Etisalat22.1720.41Emirates9.4625.7220092010ROE Industry Average15.81523.065ROAROA20092010Etisalat12.49.74Emirates2.7710.4720092010ROA Industry Average7.58510.105Debt RatioDebt Ratio20092010Etisalat4.526.34Emirates0.310.0720092010Industry Average2.4153.205Current RatioCurrent Ratio20092010Etisalat0.830.79Emirates0.610.7320092010Industry Average0.720.76