Analysis and Comparison

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Financial Statements Analysis

Analysis and Comparison

Between

Sweets of Oman SAOG and National Biscuit Trades Ltd. SAOG (Group)

Content Page

Item

Page Number

Introduction

3

Report’s Objective

3

Scope of report

3

Trend Analysis

4-6

Ratio Analysis

7

Productivity ratios

7-8

Activity Ratios

8

Leverage Ratios

8

Long Term Solvency

8-9

Cash Flow Analysis

9

Off-Balance Sheet Analysis

9-10

Z-Score

10

Conclusion

10-11

Recommendations

11

References

12

1- Introduction

Financial analysis is an organized study for the available financial statements in order to obtain the information to be used in decision-making, performance evaluation process in the past and present in addition to predicted what is expected in the future. Financial analysis involves interpretation of the published financial statements, which are being prepared and presented in accordance with specific rules controlled by accounting standards and theories besides the help of additional data in the light of other considerations and for specific purposes.

Report’s Objective

The main aim of this report is to analyse financial statements for two important corporations in Oman which are National Biscuit Trades Ltd. SAOG (group) and Oman SAOG for a period of four years from 2010 to 2013 using methods of comparison and interpretation to get the variances in several matters of financial declarations to resolve the best outcomes of these corporations as a consequent to development analysis as well as ratio analysis. This report will compare between the two corporations and comparison will depend on financial statements performance.

Scope of report

Contrasting and investigating the financial reports of Oman SAOG and National Biscuit Trades Ltd. SAOG for a period of four years to recognize the best performance for one of the two corporations relying on various outcomes of the analysis. Methods of financial analysis that are applied to investigate the corporations’ financials are many such as: Vertical analysis, Ratio analysis and Horizontal analysis (Quintero, 20070).

This analysis helps to assess financial effectiveness of the two corporations and to show the level of their accomplishment. It helps as well to determine changes from year to another for every corporation which were destructive and which were optimistic via numerous analyses of numerous financial reports throughout the years from 2010 to 2013.

2- Trend Analysis

Trend analysis will be referred to by excel sheets that include data of Sweet of NBI Income Statement, Oman income statement, NBI Balance Sheet and Sweets of Oman Balance Sheet.

In 2011 the Sweet of Oman SAOG attained great sales in comparison with the financial year 2010 and the growth in sales was increased by 20% but the net value after taxation decreased in 2011 by 22% in comparison to the year 2010 as a result of growth in charge of sales by 27% which symbolized the charge of assets, remunerations and other expenditures for the workers in 2011. There is also growth in distribution expenditures and selling, overall managerial expenditures and financial charge by 22% ,12% and 11% correspondingly it headed to a decline in the in the net value after taxation and incomes per share by 22% for everyone (Zughaibi, 2005).

On the contrary, while contrasting the sales of the 2011National Biscuit Trades Ltd. SAOG (Group) for the year 2010, it displays that there is a great growth in sales by 28% in 2011 although an growth in sales in charge of sales increased by 33% which influenced value limits and consequently reduced the net value after taxation by 49%.Also the managerial expenditures, distribution, selling and other expenditures are increased by 13% and 22% correspondingly in 2011.

Throughout the previous contrast, it is obvious that both the corporations have growth in sales and decrease in value after taxation and that is result of growth in charge of sales and expenditures. By comparison National Biscuit Trades Ltd. SAOG (group) more influenced in value decline than Sweet of Oman .SAOG in 2011 compared to 2010.Because of the causes earlier in the analysis.

In contrasting the financial outcomes for 2012 to 2010 for Sweets of Oman SAOG corporation show that there is a growth in sales in 2012 increased by 31% result of increased marketing movements of the corporation and explore new export markets for the different products of the corporation, as the growth in additional investments the corporation has helped to strengthen its position in the markets of Gulf Cooperation Council, but there is a growth in the charge of sales in 2012 by 35% and there is an growth in selling and distribution expenditures and overall and managerial expenditures and financial charge by 46% ,22% and 86% correspondingly which led to a decline in the net value after taxation and incomes per share by 4% for every one.

On the contrary side by Contrasting the sales of the NBI (Group) for the years 2010 and 2012 show that the sales growth by 23% in 2012 despite an growth in sales also there is an growth in charge of sales by 17%.As for the net value after taxation in 2012, increased by 16% result of improve the achievement of sales in all markets and take the right measures to improve the variety of products for different markets (Arjaja, 2009).

Via what is stated in the earlier analysis via contrasting the variations that took place in 2012 compared to 2010, for the two corporations declared that the obvious development and optimistic variation in net value after taxation for National Biscuit Trades Ltd. SAOG. This outcome is result of better incomes has further than Sweet of Oman .SAOG which has further growth in many expenditures in 2012.

In contrasting financial outcomes for 2013 to 2010 for Sweets of Oman SAOG corporation it is shown that there is growth in sales in 2013 increased by 37% and that is for similar causes declared before , but there is growth in the charge of sales in 2013 by 35% and there is an growth in distribution expenditures, selling, overall managerial expenditures and financial charge by 92%,33% and 17% correspondingly but that didn’t impact reduction in the net value after taxation since there is growth on other incomes by 90% in 2013 and the net value after taxation growth by 0.4% and incomes per share continue to be unchanged about 0.136 RO per share.

On the contrary, contrasting the outcomes of NBI (group) for the years 2010 and 2013 displays growth in sales by 21% in 2013. There is similarly a growth in the charge of sales and managerial expenditures by 20% and 50% correspondingly in 2013.The distribution expenditures, selling and financial charges are reduced by 21% and 71% correspondingly in 2013. The net value after taxation increased in 2013 paralleled to 2010 by 188% and that is high development in value margin. This was attained by growing the corporation presenting of innovative goods in the GCC nations (Kieso, 2007).

Through what is stated in the earlier analysis via contrasting the variations that occurred in 2013 in comparison with 2010, for the two corporations declared that the obvious development and optimistic variation is in net value after taxation for National Biscuit Trades Ltd. SAOG. This conclusion is result of the causes declared in the outcomes and analysis (Shabir, 2013).

By contrasting the variations in balance sheets of the two corporations for four years in net fixed assets of Sweets of Oman in the years 2011, 2012 and 2013 paralleled with 2010 it is obvious that there is growth by 7%, 24% and 50% correspondingly. This is an optimistic pointer which designates the corporation's capability to purchase extra assets. While NBI confronted decline in net fixed assets by 10%, 16% and 18% correspondingly throughout the years that are previously declared. This results from the reduction of fixed assets, and the auction of certain assets to compensate particular duties as it is obvious via the balance sheet of the corporation in these years. Consequently it can be determined that the outcomes and optimistic variations in net fixed assets are in favour with the Sweet of Oman. This assumption is founded on the causes specified earlier.

Present Assets of Sweet of Oman increased in 2011, 2012 and 2013 by 58%, 55% and 86% correspondingly as a result of growth in business, accounts, cash and bank balances and extra receivables. However, bank balances and cash were reduced in 2012 by 87% that is a result of reimbursement of mortgage from stockholders, economics tenancy accountabilities, short term mortgages and long term mortgages. On the contrary, the present assets of National Biscuit Trades increased by 36%, 47%, 30% for similar earlier period is a result of growth in industry, advances, accounts receivables and records. Cash is also reduced in 2011and 2013 by 28% and 59% correspondingly as a result of refunds of long and short term scrounging. Consequently, variations in present assets, that occurred throughout the four years is more optimistic for Sweet of Oman.

Concerning the full long term accountabilities of Sweet of Oman as it is obvious that there is decline over the past 2011, 2012 and 2013 by 21% and 37% and 45% in comparison with 2010 as a result of the refund of mortgage from borrowings, owners, financial tenancy accountabilities and long term mortgages. Ehrhardt & Brigham (20080 stated that particular present accountabilities are also reduced as a result of payment of share of long term accountabilities and financial tenancy accountabilities. On the contrary, overall long term accountabilities of National Biscuit Trades are reduced by 18%, 39% and 51% for the same periods of time as a result of refunds of borrowing as well as delayed tax. Nevertheless, present accountabilities of NBI are increased in 2011 and 2012 by 27% and 24% because of borrowing, industry, accruals, outstanding accounts, amounts as a result of associated parties and tax. In 2013 present overall accountabilities were reduced by 4% as a result of refund of barrowing (Hamouda, 2013).

Consequently, according to the analysis, earlier causes, optimistic outcomes and variations in accountabilities, the situation is more optimistic for Sweet of Oman. Overall equity for the two corporations is increased from 2010 to 2013 and that is a result of growth in retained incomes; variation in equity is more optimistic in Sweet of Oman.

3- Ratio Analysis: (Refer to excel sheet named ratio analysis)

Liquidity Ratio is the normal of present ratio of Sweet of Oman for the last four years is 1.67 times which is paralleled with the normal of present ratio of National Biscuit Trades is 1.0 times which designates that Sweet of Oman owns a superior capability to encounter the hazards of pay off liable for present accountabilities.

It is noted that the growth in this ratio is not continually an optimistic outcome for the corporation. Great growth in this ratio can be a result of the increased present assets as a result of the accrual of stored items that are not settled and which is not good point as it designates to weak control over stock. This can also be for the reason that of important growth in cash designates that the corporation is not better in the use of its liquidness. However, the normal present ratio of Sweets Corporation Oman is a satisfactory ratio.

Productivity ratios expresses that normal overweight value ratio is 26% for Sweet of Oman and 15% is for National Biscuit Trades as a result of great sales attained by Sweet of Oman which permitted the corporation to regulate the charge of sales.

The normal reoccurrence on asset ratio for Sweet of Oman and National Biscuit Trades is 16% and 6% correspondingly, which designates that capability and great competence in administration in addition to good application of assets in favour of the Sweets of Oman.

Normal return on equity ratio for Sweet of Oman and National Biscuit Trades is 34% and 13% correspondingly, which designates that the profit attained by owners on investing their funds in the corporation was the most suitable in Sweets of Oman.

Activity Ratios states that the normal of fixed assets revenue for Sweet of Oman and National Biscuit Trades is 8.7 times and 3.6 times correspondingly, which designates that Sweets of Oman Corporation profited from its fixed assets to accomplish values. From the trend analysis, it is obvious that overall fixed assets for Sweet of Oman are increased yearly.

The normal of inventory revenue ratio for Sweet of Oman and National Biscuit Trades is 3.2 times and 8.3 times correspondingly, which designates that National Biscuit Trades is heartbreaking its bonds better, this is for favour of corporation as it helps in attaining values (Sharaifat, 2012).

The normal of debtors’ turnover ratio for the two corporations is nearly equivalent, which is about 4 times; this displays the competence of gathering procedure and checking consumers' duties.

The normal of overall assets turnover ratio for both corporations is nearly equivalent, which is around 1.6times, this displays that the movement of assets and their capability to produce sales is equivalent for the two corporations.

Leverage Ratios shows that the normal overall duties that are related to assets ratio for the two corporations are equivalent, which is 0.6 times. This displays that both corporations has opportunity and capability to insure overall accountabilities by applying overall assets.

Normal debit to equity ratio for Sweet of Oman and National Biscuit Trades is 1.4 times and 1.8 times correspondingly. This displays that both corporations have probability and capability to insure the overall accountabilities, applying equity with modest inclination to Sweets of Oman.

Long Term Solvency displays normal fixed assets to net value ratio for Sweet of Oman and National Biscuit Trades is 0.43 times and 1.22 times correspondingly; the extent to cash is frozen proprietors in the form of fixed assets and the possibility of funds for the procedures of the corporation (active money). Via the ratio reached the benefit in this case is in favour of Sweets of Oman. National Biscuit Trades is greater than 0.75 which is regularly not required; since it designates that commerce is susceptible to actions and unanticipated variations in the occupational atmosphere.

The normal patented of equity ratio for Sweet of Oman and National Biscuit Trades is 0.42 times and 0.37 times correspondingly, which displays that both corporations have nearly equivalent situation of the long term creditworthiness with modest inclination to Sweets of Oman.

4-Cash Flow Analysis: (Denote to Excel sheet named cash flow analysis)

The two corporations own good normal net cash flow of functioning actions as a result of great sales attained yearly and leads to growths in receivables and growths in inventory with inclination to National Biscuit Trades. Normal net cash flow from investing actions in Sweet of Oman is supplementary as a result of the venture in fixed assets and procurements of modern fixed assets.

Normal net cash flow from funding actions for National Biscuit Trades is supplementary as a result of debt payment, borrowing and purchasing of shares and value distribution.

5-Off-Balance Sheet Analysis:

The foundation of planning commercial reports of both corporations happens in agreement with the historic charge agreement and in harmony with of International Financial Reporting Standards besides the necessities of Commercial Corporations Law of 1974 (as edited) and in acquiescence with the revelation necessities founded inside the instructions as well as circumstances of discovery via distribution of securities and local transaction supplied by the Capital Market Authority of Oman.

Off-balance sheet analysis needs planning of commercial declarations in agreement with International Financial Reporting Standards to apply definite serious accounting approximations. The two corporations are achieving estimations as well as suppositions regarding future. They include areas of great grade gratitude or difficulty; or zones in which evasions and approximations are noteworthy to commercial reports and unveiled notes.

Actions of the two corporations in experts for numerous commercial dangers, comprising impacts of variations to marketplace hazard (the threat of external currency altercation) as well as the credit danger and liquidness danger. Emphases here on danger administration course for the two corporations in overall to the irregularity for economic marketplaces that pursues to lessen possible contrary impacts on monetary act.

6-Z-Score: (Denote to Excel sheet named Z score analysis)

This type of analysis is an instrument for assessing if the corporation can be safe to insolvency or not. The two corporations are measured as industrial corporations. By applying Z-Score analysis, the study of the outcome will be detailed here:

  • More than 2.67, the corporation is at a good state besides if the outcome is between 2.67 and 1.81 the corporation is in a regular condition. However, if the corporation is less than 1.8, it is in a dangerous zone and displays that it can face liquidation in the near future.
  • Regular Z-Score for the previous four years is 3.05 which designate that the commercial condition is worthy plus it is far from risk of liquidation. Normal Z-Score for National Biscuit Trades is 1.5 which is in dangerous zone and this clarifies that the corporation can encounter liquidation in the forthcoming.

7- Conclusion

All in all, this report investigated commercial reports for the two corporations for the previous four years applying various methods in the analysis as tendency analysis, ratio analysis, cash flow analysis, off-balance sheet and Z-Score analysis. All concluding points that have been grasped are included throughout the analysis earlier.

Adding to this, it is identified which corporation is superior to the other at every step of the numerous features of the analysis and the outcomes that have been obtained via this report study.

Both corporations have permitted strategy, leadership and commands in its industrial processes that are subjected to modification from period to another to guarantee that transaction on credit is restricted to a smallest possibility.

Recommendations

The two corporations function in a region organized by great international corporations in addition to the strong rivalry in charges and diversity of native and global changes. Furthermore, unpredictability in prices of rare assets offers contests and hazards for both corporations. It is suggested that both corporations can increase distribution of network and growth of fabrication capability in addition to development of goods’ variations to attain an outstanding enactment to encounter contests and manage the progress of customer’s marketplace for those merchandises to expand economic outcomes.

8-References

Books

Arjaja, I., 2009. Enterprise Economy. Algeria: Ben Aknoun Publications Office.

Kieso, et al., 2007. Intermediate Accounting. Hoboken, NJ: John Wiley & Sons.

Zughaibi, H., 2005. Management and Financial Analysis. Jordan: Dar Al Fikr for Publishing and Distribution.

Journals

Quintero, J., 2007. Regional Economic Development: An Economic Base Study and Shift and Shares Analysis of Hays County, Texas. Development and Administrations Journal, 25 (8), pp. 31-40.

Websites

Ehrhardt, M., & Brigham, E., 2008. Corporate Finance. Available at: {http://www.sfaf.com/}.

Hamouda, M., 2013. Introduction to Financial Analysis. Available at: {http://www.f2smhstaps.ups-tlse.fr/tp/fichier/VP8/VP8__Introduction_Analyse_Financiere le}. Accessed on 4th November 2014. Accessed on 10th December 2014.

Shabir, A., 2013. Average Capital Cost. Available at: {http://cubba.yoo7.com/t1394-topi ,le}. Accessed on 2nd November 2014. Accessed on 1st November 2014.

Sharaifat, K., 2012. Finances Decisions. Available at: {http://www.youscribe.com/catalogue/livres/vie-pratique/finances personnel’s/analyse-decisions-}. Accessed on 29th October 2014.

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