Du and Etisalat Telecommunications Company's Performance - Example

Du and Etisalat Telecommunications Company’s Performance Student Name Student ID Course Number and Section Instructor Name Date of Submission Institutional Affiliation Du and Etisalat Telecommunications Company’s Performance Company Profile: Du Telecommunications The company was founded and established in 2006 in the United Arab Emirates. The Company becomes a public traded company in 2007 where IPO transactions were conducted by both Emirates Bank and Emirates Financial Services. 39.5% of the company is owned by Emirates Investment Authority (EIA) while 20.08% is owned by Mubadala Development Company. The Company is listed on the Dubai Financial Market and trade with the ticker symbol: Du. the Company is headed by Osman Sultan who also doubles-up as the Chairman of the board (Du.Com, 2012). Etisalat Company profile Etisalat is the largest mobile operator in the Middle East. It is also the third largest corporation within the GCC section of the continent. The company is considered to be a multi-national firm with operations in more than 17 countries across the Middle East. The company was founded in 1976 and thus remains to be one of the oldest telecommunications firms within the Middle East. The current Chief Executive Officer is Ahmad Abdulkarim Julfar who also doubles-up as the company’s board chairman (Etisalat, 2012). Financial Ratio Analysis: Du Telecommunications Ratio: (I) Liquidity Ratios Year 2012 Year 2011 Year 2010 Current ratio=CA/CL 5,170,191/4,332,122=1.19:1 3,978,674/3,653,734=1.08:1 4,,671,779/6,441,462 =0.73 Quick ratio =CA-I/CL (5,170,191-24,547)/4,332,122=1.19 (3,978,674-52,262)/3,653,734=1.07 (4,671,779-47,300)/6,441,462= 0.72 (II) Leverage Ratios Debt-to-Total Assets= Total debt/Total Assets 1,844,118/13,922,179=0.13 2,079,176/12,055,172=0.17 904,735/12,055,622=0.075 Debt-to-Equity Ratio= Total debt/Total stockholders’ equity 1,844,118/7,527,619=0.24 2,079,176/6,218,936=0.33 904,735/5,095,767=0.18 Times-interest-Earned ratio= profits before interest and taxes/ total interest charges 6,897,383/843,961=8.17 5,900,771/714,556=8.26 4,600,306/183,915=25.01 (III) Activity Ratios Inventory turnover= sales/inventory of finished goods 9,841,516/24,547=400.93 8,854,683/52,262=169.42 7,074,097/47,300=149.55 Fixed Assets turnover= sales/fixed assets 9,841,516/8,751,988=1.12 8,854,683/8,076,498=1.09 7,074,097/7,847,899=0.58 Total Assets turnover= sales/ total assets 9,841,516/13,922,179=0.71 8,854,683/12,055,172=0.73 7,074,097/12,055,622 = Accounts collection Period= Accounts Receivable/ total credit sales/ 365 1,109,872/(9,841,516/365)=41 days 881,600/(8,854,683/365)=36 days 1,122,401/(7,074,097/365)= 57 days IV) Profitability ratios; Gross profit margin= sales-cost of goods sold/sales (9,841,516-2,944,133)/9,841,516=0.7 (8,854,683-2,953,912)/8,854,683=0.67 (7,074,097-2,473,791)/7,074,097=0.65 Net profit Margin= net income/sales 1,979,541/9,841,516=0.2 1,097,590/8,854,683=0.12 1,310,431/7,074,097=0.19 ROA=net income/total assets 1,979,541/13,922,179=0.14 1,097,590/12,055,172=0.09 1,310,431/12,055,622=0.11 ROE= net income/ total stockholder’s equity 1,979,541/7,527,619=0.26 1,097,590/6,218,936=0.18 1,310,431/5,095,767=0.26 Earnings per share= net income/no. of common stocks 1,979,541/4,571,428,571=4.33 1,097,590/4,571,428,571=2.4 1,310,431/4,571,428,571=2.87 Price earnings ratio= price per share/EPS 4.63/4.33=1.1 4.60/2.4=1.92 4.6/2.87= 1.6 Financial Ratio Analysis: Etisalat Ratio: (I) Liquidity Ratios Year 2012 Year 2011 Current ratio=CA/CL 19,313,791/24,477,988=0.79:1 19,562,585/23,488,380=0.83:1 Quick ratio =CA-I/CL (19,313,791-316,261)/ 24,477,988=0.78:1 (19,562,585-272,410)/ 23,488,380=0.82 (II) Leverage Ratios Debt-to-Total Assets= Total debt/Total Assets 5,204,599/75,607,130=0.07:1 3,421,704/71,378,596=0.05:1 Debt-to-Equity Ratio= Total debt/Total stockholders’ equity 5,204,599/38,715,925=0.13 3,421,704/36,391,609=0.09 Times-interest-Earned ratio= profits before interest and taxes/ total interest charges 6,996,442/384,836=18.18 8,814,963/571,493=15.42 (III) Activity Ratios Inventory turnover= sales/inventory of finished goods 31,929,488/316,261=100.95 31,334,387/272,410=115.02 Fixed Assets turnover= sales/fixed assets 31,929,488/20,723,269=1.54 31,334,387/17,748,186=1.77 Total Assets turnover= sales/ total assets 31,929,488/75,607,130=0.42 31,334,387/71,378,596=0.44 Accounts collection Period= Accounts Receivable/ total credit sales/ 365 8,448,082/(31,929,488/365)=96 days 7,638,302/(31,334,387/365)=88days IV) Profitability ratios; Gross profit margin= sales-cost of goods sold/sales (31,929,488-18,545,525)/ 31,929,488=0.42 (31,334,387-14,365,129)/ 31,334,387=0.54 Net profit Margin= net income/sales 7,077,185/31,929,488=0.22 8,647,622/31,334,387=0.28 ROA=net income/total assets 7,077,185/75,607,130=0.09 8,647,622/71,378,596=0.12 ROE= net income/ total stockholder’s equity 7,077,185/38,715,925=0.18 8,647,622/36,391,609=0.24 Earnings per share= net income/no. of common stocks 7,077,185/8,000,000=0.88 AED 8,647,622/8,000,000=1.08 AED Price earnings ratio= price per share/EPS 9.92/0.88 = 11.27 9.87/1.08 =9.14 Profitability Ratio Analysis Gross profit margin; for Du Tel. in 2012 is 0.7 while that of Etisalat Tel. is placed at 0.42. This means that Du Telecommunications has a higher total margin that is accessible for covering the company’s operating expenses. In this case, Du Tel. is placed at a favorable position to meet high profit yields as opposed to Etisalat Company. Net profit margin; for Du Tel. in 2012 is placed at 0.22 while that of Etisalat Company stands at 0.2 within the same year. This means that for Etisalat Tel. the after-tax profit per each dollar of sales is favorable as opposed to Du Tel. Return on Assets ratio; for Du telecommunications is 0.14 in 2012 while that of Etisalat is placed at 0.09 within the same period. This means that for Du Tel. the after-tax profit for each dollar spent on assets is higher and favorable as opposed to Etisalat Company. Return on Equity ratio; for Du Tel. is 026 in 2012 while that of Etisalat stands at 0.18 within the same year. This means that the after-tax profits for each dollar spent on stockholder’s investment of the company is higher as opposed to that of Etisalat. This is a favorable ration on the part of Du Telecommunications. Earnings per Share ratio for Du Telecommunications stand at 4.33 AED in 2012 while that of Etisalat is placed at 0.88 AED within the same year. This is a favorable ratio on the part of Du Tel. given that it depicts a higher level of earnings that is available to the respective owners of commons stock. Additionally, it is a positive ratio to Du Telecommunications since it aids in attracting more potential investments in the equity markets as opposed to its immediate competitors within the industry. The Price Earnings ratio; for Du Tel is placed at 1.1 in 2012 while for Etisalat is placed at 11.27 within the same year. This is an indication that Etisalat has a higher chance of issuing dividends to its immediate shareholders as opposed to its counterpart: Du Telecommunications. References Bloomberg.Com.(N.d).Emirates Integrated Telecommunications Co: Share prices. Retrieved from http://www.bloomberg.com/quote/DU:UH Bloomberg.Com.(N.d). Etisalat Share Prices. Retrieved from http://www.bloomberg.com/quote/ETISALAT:UH Du Telecommunications. (2011). 2011 Annual reports. Accessed from http://www.dfm.ae/documents/efsah/2013/Mar/06/9302cbb6-e342-441c-b241- 3cce2ea13fed/du_ANN_19_02_2013_0736AM_N.pdf Du.Com. (2012). About Du. Accessed from http://www.du.ae/Files/Sustainability%20Reports%20A4-E%20FINAL/index.html Etisalat.Com. (2011). 2011 Annual report. Accessed from http://www.etisalat.com/html/financial-results.html Etisalat. (2012). 2012 Annual reports. Accessed from http://www.adx.ae/English/News/Pages/20130219153015506-ETISALAT- Dec.12%20FS%20English2-19-20133-42-51PM.pdf Read More