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financ

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nada ss

on 4 May 2012

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Transcript of financ

Financial analysis between two companies
Done by :
Sahar Aljabaan
Nuha Alsuhaim
Alaa Alshuail
Haya al-suleteen
Hanan Alsugair
Introduction
Financial Ratio analysis is one of the ways in which you can use to look at
the performance of the company.You can look at the performance of the
firm across a number of time periods as well as against other firms
in your particular industry.
In addition to ratio analysis being part of a financial and business studies syllabus, it is a very useful thing to know anyway!
We dealt with the Ratio Analysis and we define it as: the selection, evaluation and interpretation of financial data in easier to understand ratios, which have been identified as critical indicators of financial performance of the business and can be used for strategy and decision-making. Financial ratio analysis is popularly used to compare a firm’s financial performance over a period of time or to assess performance in comparison to other businesses.
And so we choose two Saudi contributions companies to apply this more realistically.
In chapter 3 of Fundamentals of Corporate Finance,,
About The companies !!
(cc) photo by medhead on Flickr
5+7=
(cc) image by anemoneprojectors on Flickr
savola
sadafco
 Establish :
1979/01/10
Establish :
1396/04/21
Mission:
In terms of our culture of “The Balanced Way”
We at The Savola group are committed to our Social Responsibility,
and we will work relentlessly in achieving world class standards of openness, transparency and accountability towards all our stakeholders, and build bridges to reach out and serve the communities we operate in.
Mission:
To be the best performing FMCG company
in the GCC.
5+7=
(cc) image by anemoneprojectors on Flickr
savola
sadafco
Values:
We want to create a business environment
that encourages all employees to behave in
the most ethical manner possible, driving
our businesses forward and taking account
of the needs of different stakeholders

Values:
SADAFCO is a result and customer focused
company with committed employees who
are empowered to win in a transparent business
environment and where everyone is treated fairly

Company activity:
The Savola Group is one of Saudi Arabia leading
industrial companies in securing basic food in
Saudi Arabia. With a strong presence throughout
the MENA region & beyond. It is now one of the
most successful and fastest growing multinational
food groups in the Gulf and the Middle East Region,
also penetrating North African and Central Asian
countries, with a wide portfolio of businesses
including: (Edible Oils, Sugar, and Packaging)

Company activity:
SADAFCO Manufactures and distributes Saudi Dairy ,
foodstuff, Ice cream and Juices in different sizes in
Saudi Arabian markets
Ratio analysis:
1- SHORT TERM SOLVENCY (LIQUIDITY):
1- Current ratio :
SADAFCO has for every 1 SR in current liabilities, 3.774 SR in current assets But, SAVOLA has for every 1 SR in current liabilities, 1.004 SR in current assets.
SADAFCO has higher than SAVOLA current ratio, so SADAFCO it is in healthy situation can pay its current liabilities from its current assets 3.774 times over, The higher current ratio is better because when company has more liquid it is will be in safety situation to experience financial distress and bankruptcy also better to a creditor such as a supplier, but maybe it’s generally less profit to hold.
We recommend SAVOLA to increasing current assets or reducing current liabilities to improve current ratio.
2-Quick ratio:
For every 1 SR in current liabilities, SAVOLA has 0.597 SR in quick assets but, for every 1 SR in current liabilities, SADAFCO has 2.517 SR in quick assets
SADAFCO can pay its current liabilities from its quick assets 2.517 times over, but SAVOLA can pay its current liabilities from its quick assets 0.597 times over.
As a result SADAFCO quick ratio is higher than SAVOLA quick ratio.
And the company has more ability to satisfy current liabilities with its most liquid assets.
SAVOLA should increasing liquid assets or to increase Quick ratio
3-Cash ratio :
For every 1 SR in current liabilities, SAVOLA has 0.156 SR in cash and for every 1 SR in current liabilities SADAFCO has 1.088 SR in cash
SAVOLA can pay its current liabilities from its cash 0.156 times over ,but SADAFCO can pay its current liabilities from its cash 1.088 times over.
A cash ratio of SADAFCO will be able to pay all its current liabilities in immediate short term.
And Creditors usually preferred cash ratio to be a high, but companies do not keep their cash for a long time because they cannot use cash to generate profits.
We recommend SAVOLA to increase its cash
4-Net working capital to total assets:
SADAFCO and SAVOLA has increase in
networking capital to total asset
SADAFCO form 0.45 to 0.51 and
SAVOLA from -0.045 To 0.001 is a
positive sign, showing the company's
liquidity is improving over time.
5-Interval measure :
The length of time SADAFCO can continue everyday business
with using current assets in the event of a halt of cash inflow
is 357.93 days more than SAVOLA 130.38 days.
2-LONG TERM SOLVENCY (FINANCAL LEVERGE):
1- Long- term debt:
The best long term ratios it is Saudia Dairy & Foodstuff .Co because the long term dept for it less than SAVOLA. Also, less long term debt make the property of risky and bankruptcy little. From other side, the high long term dept it’s good for company investment, also you can use it for financial leverage.
SAFOLA has long term dept in 2011 less than 2010 that is good because it investment their money to cover long term dept until become less in 2011.
2-Total debt ratios & debt equity ratios:
SADAFCO for every 1(SR) from assets has,
33% long term dept & SAFOLA for every
1 (SR) from assets has, 53 long term dept.
I think Saudia Dairy & Foodstuff .Co best
than SAVOLA because 67% from assets
generate from equity.
3- Equity multiplier
Saudia Dairy & Foodstuff .Co for every 1 (SR) has 67% from equity & SAFOLA for every 1 (SR) has 47% from equity.
3-ASSETS MANAGEMENT RATIOS (TERNOVER):
1- Inventory turnover:
SAVOLA has 6.7 time and Saudia Dairy & Foodstuff .Co has 3.2 times
Then, SAVOLA is better because it indicates a more turn the inventory to sales, so it has a high liquidity compared with Saudia Dairy & Foodstuff .Co.
We recommend to Saudia Dairy & Foodstuff .Co to manage its inventory more efficiently to get more sales.
2- Days' sales in inventory :
SAVOLA has 54.2 time and Saudia Dairy & Foodstuff .Co has 113.6 times
Then, SAVOLA is better because it indicates ability to turn its inventory into sales then into cash in a short period and faster, so it has a higher liquidity compared with Saudia Dairy & Foodstuff .Co.
3-Receivables turnover:
SAVOLA has 13.8 time and Saudia Dairy & Foodstuff .Co has 5.6 times
Then, SAVOLA is better because it indicates the company sells its product and collecting its outstanding credit accounts on sales faster compared with Saudia Dairy & Foodstuff .Co.
We recommend to Saudia Dairy & Foodstuff .Co to manage its receivable more efficiently to get more sales
SAVOLA has receivables turnover in 2010 less than 2011 that is good because it indicates the company developed it is management for better in 2011,and sells its product and collecting its outstanding credit accounts on sales faster
4-Days' sales in receivables :
SAVOLA has 26.3 time and Saudia Dairy & Foodstuff .Co has 64.5 times.
Then, SAVOLA is better because it has a lower DSI number compared with Saudia Dairy & Foodstuff .Co
5-NWC turnover :
SAVOLA has 751.3 time and Saudia Dairy & Foodstuff .Co has 2.2 times.
Then, SAVOLA is better because it is using its working capital to generate sales better compared with Saudia Dairy & Foodstuff .Co
6-Fixed Asset turnover :
SAVOLA has 2 times and Saudia Dairy & Foodstuff .Co has 3.7times.
Then, Saudia Dairy & Foodstuff .Co is better because it indicates a more sales that have better control over its fixed assets compared with SAVOLA.
So, we can say: for every 1(SR) in fixed assets, Saudia Dairy & Foodstuff .Co generates 3.7 (SR) and SAVOLA has generates 2 (SR)
We recommend to Saudia Dairy & Foodstuff .Co to increase of fixed assets to get more sales.
7- Total Asset turnover :
SAVOLA has 1.2 time and Saudia Dairy & Foodstuff .Co has 1.1 times.
Then, Saudia Dairy & Foodstuff .Co is better because it indicates a more sales that have better control over its total assets compared with SAVOLA.
So, we can say: for every 1(SR) in fixed assets, Saudia Dairy & Foodstuff .Co generates 1.1 (SR) and SAVOLA has generates1.2 (SR)
We recommend to Saudia Dairy & Foodstuff .Co to increase of assets to get more sales.
4-PROFITABILITY MEASURES:
1- Profit margin:
SAVOLA has 4.77% and Saudia Dairy & Foodstuff .Co has 11.45%
Then, Saudia Dairy & Foodstuff .Co is better because it indicates
a more profitable that has better control over its cost compared
with SAVOLA.
So, we can say: for every 1(SR) in sales, Saudia Dairy & Foodstuff .Co
generates.114 (SR) and SAVOLA has generates.047 (SR)
We recommend SAVOLA to develop its sales to get more profit.
2-Return on Assets (ROA):
SAVOLA has 5.98% and Saudia Dairy & Foodstuff .Co has .0029%
Then, SAVOLA is better because the company is earning more money on less investment.
And Saudia Dairy & Foodstuff .Co has more than SAVOLA on its assets but it’s not used it in right way.
So, we can say: for every 1(SR) in total assets, SAVOLA generates.059 (SR) in profit and, Saudia Dairy & Foodstuff .Co generates.000029 (SR) in profit.
We recommend Saudia Dairy & Foodstuff .Co evolution of their investments in assets to get more profit.
But on other hand we can see that Saudia Dairy & Foodstuff .Co in 2010 its assets and its net income were greater than 2011 so it’s has greater ROA in last year, so the company decrees in this year.
3-Return on Equity (ROE):
SAVOLA has 13.25% and Saudia Dairy & Foodstuff .Co has .0040%
Then, SAVOLA is better because the company is more efficient in utilizing its equity base and the better return is to investors.
But Saudia Dairy & Foodstuff .Co has more equity so the company has a lot of cash but it’s not used it in right way.
So, we can say: for every 1(SR) in total equity, SAVOLA generates.1325 (SR) in profit and, Saudia Dairy & Foodstuff .Co generates.000040 (SR) in profit.
We recommend Saudia Dairy & Foodstuff .Co evolution of their equity more than relies on debt to get more profit in save way.
5-MARKET VALUE RATIOS:
1- Price- Earnings ratio (PE ) :
SAVOLA has 11.95 times and Saudia Dairy & Foodstuff .Co has 11.84 times.
Both companies give the same output. So, we can say: The two investors are willing to pay 11 (SR) per Saudi Riyals from current profits, or that the investor needs to 11 years to recover its capital in the form of dividends and retained in equity.
So Market value of the shares of that companies are high, investors may be expected to increase in future revenues.
We recommend that the two companies to increase investments to create a higher value to earnings per share, in order not to be a resident share the highest values.
In 2010 SAVOLA GROUP COMPANY have 16.18 in PE ratio, which is more likely to be considered "risky" investments than 2011, since a high P/E ratio signifies high expectations.
And we expect the PE ratio for the next year approximating what it was in 2011.
2-Market- to- Book ratio :
SAVOLA has 1.85 times and Saudia Dairy & Foodstuff .Co has 2.01 times.
Then, Saudia Dairy & Foodstuff .Co is better because it creating more value for its stockholders.
So, we can say: investors are willing to pay the amount for each 1(SR) of equity
The market value more than the book value.
Recommendation and Conclusion:
In last, we ending our analyses about SAFOLA & Saudia Dairy & Foodstuff .Co Company, Saudia Dairy & Foodstuff .Co it is healthy company because it’s has more liquidity from SAFOLA. SAFOLA shoed increase their assets to have more liquidity.
From other side, Saudia Dairy & Foodstuff .Co it able to pay all its current liabilities in immediate short term, & SAFOLA shoed increase their cash to able bay in short term.
Also, SADFCO has long term dept less than SAFOLA, BUT long term dept not bad because maybe the company use it for financial leverage & company investment.

3-ASSETS MANAGEMENT RATIOS (TERNOVER):
1- SHORT TERM SOLVENCY (LIQUIDITY):
2-LONG TERM SOLVENCY (FINANCAL LEVERGE):
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