Date: 17th October 2018
MBA
Financial Accounting Research Analysis
Fawaz Abdulaziz Al Hokair & Co. and its subsidiaries
(A Saudi Joint Stock Company)
Submitted To:
Dr. Mohamed Mostafa
Prepared By:
Hossam Tarek
Karim Tarek
1
Introduction
Company Profile
• Fawaz Abdulaziz Alhokair Co Fawaz Abdulaziz Al Hokair Co (known as: Al Hokair)
is a public Saudi company.
• Established in March 1990.
• Listed on Saudi Stock Exchange “Tadawul” (TDWL) since December 2006.
• Al Hokair operates within the Retailing sector focusing on Apparel Retail.
• It has Companies operating across Southern and Central Asia, Northern Africa,
Middle East and Southern Europe.
• Al Hokair is based in Riyadh, Saudi Arabia.
2
Balance Sheet Horizontal Analysis
Item
2015
Amount (SAR)
2014
Amount (SAR)
Current Assets
Comments
-
Cash and bank balances
279,957,636
101,006,685
178,950,951
177.2%
Account receivable
882,333,590
739,364,628
142,968,962
19.3%
Amounts due from related parties
281,728,504
137,728,024
144,000,480
104.6%
Inventory
2,016,265,250
1,534,192,950
482,072,300
31.4%
Total Current Assets
3,460,284,980
2,512,292,287
947,992,693
37.7%
Non-Current Assets
This increase can be mainly attributed to the large increase in the
long term fund taken by the company
By looking at the net sales we found an increase of
about 25% so an increase in accounts receivable by this amount is
normal
This very big increase is a good thing because it is
mainly attributed to rentals due from newly opened shops
Increasing in inventory might indicate attempts of growth by the
company by looking at the overall increasing trend of all the assets
-
Investments
318,467,050
260,091,647
58,375,403
22.4%
Fixed Assets
2,046,973,906
1,641,000,670
405,973,236
24.7%
Other Assets
943,898,928
602,532,933
341,365,995
56.7%
Total Non-Current Assets
3,309,339,884
2,503,625,250
805,714,634
32.2%
Total Assets
6,769,624,864
5,015,917,537
1,753,707,327
35.0%
Current Liabilities
All the assets have experienced an increasing trend and when
looking at this and relating it to the fund taken it is apparent that the
company is attempting to a growth in its operations
This is an indicator the compamy has increased its
finances through loans
The company has been paying off what is due from the
long term fund and thus the amount decreased
Short term loan
833,290,230
465,692,323
367,597,907
78.9%
current portion of long term fund
195,587,581
307,357,934
(111,770,353)
-36.4%
Accounts payable
570,495,843
550,155,761
20,340,082
3.7%
A small increase in the firm's obligations to others
other current liabilities
511,151,946
603,847,059
(92,695,113)
-15.4%
The firm's short term obligations have decreased
Total Current Liabilities
2,110,525,600
1,927,053,077
183,472,523
9.5%
Non-Current Liabilities
-
Long Term Funding
2,163,460,629
565,709,222
1,597,751,407
282.4%
End of service indemnities
78,756,624
70,161,999
8,594,625
12.2%
Total Non-Current Liabilities
2,242,217,253
635,871,221
1,606,346,032
252.6%
Total Liabilities
4,352,742,853
2,562,924,298
1,789,818,555
69.8%
Shareholders Equity
3
Increase or (Decrease) during 2015
Amount (SAR)
Percent
The company has taken a long term fund to finance its
growth operations which in turn increased its long term liabiities by
a very large amount
-
Capital & resrves
1,951,725,690
1,378,278,314
573,447,376
41.6%
retained earnings
447,720,167
1,047,467,808
(599,747,641)
-57.3%
Total Shareholder Equity
2,399,445,857
2,425,746,122
(26,300,265)
-1.1%
minority interest
17,436,154
27,247,117
(9,810,963)
-36.0%
Total Equity
Total Liabilities &
Shareholders Equity
2,416,882,011
2,452,993,239
(36,111,228)
-1.5%
6,769,624,864
5,015,917,537
1,753,707,327
35.0%
Capital increased indicating more investment by the owners
The company has decided to reduce its dividends as a
strategy for debt reduction due to the short and long term debts the
company has undertaken
Balance Sheet Horizontal Analysis
Horizontal Balance Sheet
Cash increase by 177%
300 000 000
250 000 000
200 000 000
150 000 000
Ряд1
100 000 000
50 000 000
0
2015
2014
Years
Long Term Funding increase by 282%
2 500 000 000
2 000 000 000
1 500 000 000
Long Term Funding
1 000 000 000
500 000 000
0
2015
4
2014
Balance Sheet Horizontal Analysis
Horizontal Balance Sheet
Account Receivable
900 000 000
850 000 000
800 000 000
750 000 000
Ряд1
700 000 000
650 000 000
2015
2014
Net Sales
8 000 000 000
7 000 000 000
6 000 000 000
5 000 000 000
4 000 000 000
Ряд1
3 000 000 000
2 000 000 000
1 000 000 000
0
2015
5
2014
Balance Sheet Horizontal Analysis
Horizontal Balance Sheet
Тысячи
Non Current assets Increase
2 500 000
2 000 000
1 500 000
Investments
Fixed Assets
1 000 000
Other Assets
500 000
0
2015
2014
Total Liabilities Increase
2 500 000 000
2 000 000 000
1 500 000 000
Short term loan
Long Term Funding
1 000 000 000
500 000 000
0
2015
6
2014
Balance Sheet Horizontal Analysis
Horizontal Balance Sheet
Owner's Equity
2 500 000 000
2 000 000 000
1 500 000 000
Capital & resrves
retained earnings
1 000 000 000
500 000 000
0
2015
2014
• The owners increased the investment in the company by increasing capital
• Even Though there was a net income. Yet, during the accounting period the
company paid about 600m SAR in dividends which in turn reduced retained
earnings in 2015 by 57%
7
Balance Sheet Vertical Analysis
Item
Current Assets
2015
Amount (SAR)
Percent
2014
Amount (SAR)
Percent
Difference
Comments
Cash and bank balances
279,957,636
4.1%
101,006,685
2.0%
Account receivable
Amounts due from related
parties
882,333,590
13.0%
739,364,628
14.7%
The percentage of cash from total asstes has doubled and this can be
2.1% mainly attributed to the long term fund.
It is a good thing that accounts receivable (even though they increased) yet
-1.7% they decreased as a percantage of total assets
281,728,504
4.2%
137,728,024
2.7%
1.4%This increase is mainly attributed to rentals due from newly opened shops
Inventory
2,016,265,250
29.8%
1,534,192,950
30.6%
-0.8%
Total Current Assets
Non-Current Assets
3,460,284,980
51.1%
2,512,292,287
50.1%
1.0%
Investments
318,467,050
4.7%
260,091,647
5.2%
Fixed Assets
2,046,973,906
30.2%
1,641,000,670
32.7%
Other Assets
943,898,928
13.9%
602,532,933
12.0%
Total Non-Current Assets
3,309,339,884
48.9%
2,503,625,250
49.9%
Total Assets
Current Liabilities
6,769,624,864
100%
5,015,917,537
100%
Short term loan
833,290,230
12.3%
465,692,323
9.3%
current portion of long term
fund
195,587,581
2.9%
307,357,934
6.1%
Due to loans taken the short term loan as a percentage of Liablities and OE
3.0% has increased
All other percentages of short term liabilities as a percentage of Liabilities
and OE have decreased but they were mainly replaced by the huge increase
-3.2% in the percentage of long term funding
Accounts payable
570,495,843
8.4%
550,155,761
11.0%
-2.5%
other current liabilities
511,151,946
7.6%
603,847,059
12.0%
-4.5%
Total Current Liabilities
Non-Current Liabilities
2,110,525,600
31.2%
1,927,053,077
38.4%
-7.2%
0.0%
Long Term Funding
2,163,460,629
32.0%
565,709,222
11.3%
This long term fund represents the major part of liabilities and OE with a
20.7% huge increase of 20%
End of service indemnities
78,756,624
1.2%
70,161,999
1.4%
-0.2%
Total Non-Current Liabilities
2,242,217,253
33.1%
635,871,221
12.7%
20.4%
Total Liabilities
Shareholders Equity
4,352,742,853
64.3%
2,562,924,298
51.1%
The total liabilities represent the major part of the liabilities and OE in 2015
13.2% mainly due to the long term fund
Capital & resrves
1,951,725,690
28.8%
1,378,278,314
27.5%
retained earnings
447,720,167
6.6%
1,047,467,808
20.9%
Total Shareholder Equity
2,399,445,857
35.4%
2,425,746,122
48.4%
minority interest
17,436,154
0.3%
27,247,117
0.5%
-0.3%
Total Equity
Total Liabilities &
Shareholders Equity
2,416,882,011
35.7%
2,452,993,239
48.9%
-13.2%
5,015,917,537
100%
8
6,769,624,864
100%
-0.5% Even though horizontal analysis showed an increasing trend of non current
assets it is obvious from vertical analysis that this increase as a percent of
-2.5%
total assets is more from cash and receivables than from fixed assets and
1.9% investments. The fixed assets and investments as a percentage of total assets
experienced a decrease
This indicates that in general even though assets are increasing the increase
-1.0% in cash and receivables are more than increase in fixed assets.
0.0%
1.4% An overall decrease in owner equity as a percentage and an increase in
liabilities as a percentage of liabilities and OE also mainly due to the long
-14.3%
term fund
-12.9%
Vertical Balance Sheet
Vertical Balance Sheet
2015 Assets as a % of total Assets
2014 Assets as a % of Total Assets
100%
100%
90%
90%
Other Assets
80%
Other Assets
80%
Fixed Assets
Fixed Assets
70%
60%
Investments
60%
Investments
50%
Inventory
50%
Inventory
70%
40%
Amounts due from
related parties
30%
40%
Amounts due from related
parties
30%
Account receivable
Account receivable
20%
20%
Cash and bank balances
Cash and bank balances
10%
10%
0%
0%
2014
2015
• Even though horizontal analysis showed an increasing trend of assets it is obvious from vertical
analysis that this increase as a percent of total assets is more from cash and receivables than
from fixed assets and investments.
• The fixed assets and investments as a percentage of total assets experienced a decrease
• This indicates that in general even though assets are increasing the increase in cash and
receivables are more than increase in fixed assets and investments.
9
Vertical Balance Sheet
Vertical Balance Sheet
2014 Liabilities and O.E
2015 Liabilities and O.E
100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
Total Equity
50%
Total Equity
50%
Total Liabilities
40%
Total Liabilities
40%
30%
30%
20%
20%
10%
10%
0%
2014
0%
2015
• An overall decrease in owner equity and an increase in liabilities as a percentage of liabilities
and OE also mainly due to the loans taken by the company
10
Income Statement Horizontal Analysis
Increase or (Decrease) during 2015
Item
Year Ended
Year Ended
31 March 2015 31 March 2014
Revenues
Net Sales
Direct Cost
Amount (SAR)
Percent
6,898,673,324
5,482,386,435
(5,111,496,492) (4,084,411,294)
1,397,975,141
1,416,286,889
25.8%
(1,027,085,198)
25.1%
Increase in net sales is a good sign for the company
As sales increase the cost of goods sold also increases which is a
normal sign
389,201,691
27.8%
An increase in gross profit which is a good indication
Gross Profit
Expenses
Selling and Marketing
expenses
1,787,176,832
(301,366,415)
(205,146,809)
(96,219,606)
46.9%
Administrative expenses
(351,048,740)
(246,873,655)
(104,175,085)
42.2%
Depreciation and amortization (288,908,161)
(225,756,380)
(63,151,781)
28.0%
11
Comments
Total Expenses
(941,323,316)
(677,776,844)
(263,546,472)
38.9%
Income from operations
845,853,516
720,198,297
125,655,219
17.4%
An increase in marketing expenses for example together with a
jump in sales indicate that the marketing activities were effective
in driving up sales
.In general the expenses such as depreciation expenses have
increased which can bedirectly attributed to the growth trend of
the company and that it is increasing its assets
Share in Earnings from
associates
31,460,690
13,156,725
18,303,965
139.1%
This represents income for other subsidiaries or companies that
the firm is investing in and this increase is a good sign that the
company is investing well
financing charges
(100,107,335)
(50,421,618)
(49,685,717)
98.5%
These charges increased as share in earnings increased
other income
54,817,844
130,622,937
(75,805,093)
-58.0%
Income before Taxes
832,024,715
813,556,341
18,468,374
2.3%
Income Tax
Income Before minority
interest
(19,707,110)
(41,958,330)
22,251,220
-53.0%
812,317,605
771,598,011
40,719,594
5.3%
Minority Interest
(9,366,055)
(244,518)
(9,121,537)
3730.4%
Net Income for the year
802,951,550
771,353,493
31,598,057
4.1%
Net income has increased which is a good sign
Income Statement Horizontal Analysis
Horizontal Income Statement
Cost of Sales
Net Sales
(6 000 000 000)
8 000 000 000
7 000 000 000
(5 000 000 000)
6 000 000 000
(4 000 000 000)
5 000 000 000
4 000 000 000
Ряд1
(3 000 000 000)
Direct Cost
3 000 000 000
(2 000 000 000)
2 000 000 000
1 000 000 000
(1 000 000 000)
0
2015
2015
2014
0
Gross Profit
2 000 000 000
1 800 000 000
1 600 000 000
1 400 000 000
1 200 000 000
1 000 000 000
Gross Profit
800 000 000
600 000 000
400 000 000
200 000 000
0
2015
12
2014
2014
Income Statement Horizontal Analysis
Horizontal Income Statement
Increase in expenses
Fixed Assets
(400 000 000)
2 500 000 000
(350 000 000)
2 000 000 000
(300 000 000)
(250 000 000)
Selling and Marketing expenses
(200 000 000)
1 500 000 000
Administrative expenses
Fixed Assets
Depreciation and amortization
1 000 000 000
(150 000 000)
(100 000 000)
500 000 000
(50 000 000)
2015
0
2014
0
2015
2014
• An increase in marketing expenses for example together with a jump in sales
indicate that the marketing activities were effective in driving up sales
• An increase in depreciation expenses when compared to the increase in fixed
assets can be directly attributed to the growth trend of the company and that it is
increasing its assets
13
Income Statement Horizontal Analysis
Horizontal Income Statement
Share in Earnings from associates
35 000 000
Net Income for the year
810 000 000
805 000 000
30 000 000
800 000 000
795 000 000
25 000 000
790 000 000
20 000 000
785 000 000
Share in Earnings from associates
15 000 000
Net Income for the year
780 000 000
775 000 000
10 000 000
770 000 000
765 000 000
5 000 000
760 000 000
755 000 000
0
2015
2014
2015
2014
• The share in earnings from Associates represents income for other subsidiaries or
companies that the firm is investing in and this increase is a good sign that the
company is investing well.
• Net income has increased which is a good sign
14
Income Statement Vertical Analysis
Year Ended 31 March 2015
Item
Revenues
Amount
Net Sales
6,898,673,324
Percent
100%
Year Ended 31 March 2014
Amount (SAR)
Percent
Difference in
%
5,482,386,435
100.0%
0.0%
Direct Cost
(5,111,496,492)
74.1% (4,084,411,294)
74.5%
Decreasing the cost of goods as a percentage of
-0.4% sales is a good sign
Gross Profit
Expenses
1,787,176,832
25.9%
25.5%
0.4% Increase of gross profit as a sales percentage is good
3.7%
Increase in expenses with respect to sales is
0.6% consistent with the previous conclusion of a growth
and investment trend of the company
1,397,975,141
Selling and Marketing
expenses
(301,366,415)
4.4%
Administrative expenses
(351,048,740)
5.1% (246,873,655)
4.5%
0.6%
Depreciation and amortization (288,908,161)
4.2% (225,756,380)
4.1%
0.1%
(205,146,809)
Total Expenses
(941,323,316)
13.6%
(677,776,844)
12.4%
1.3%
Income from operations
Share in Earnings from
associates
financing charges
other income
Income before Taxes
Income Tax
Income Before minority
interest
Minority Interest
845,853,516
12.3%
720,198,297
13.1%
-0.9%
31,460,690
(100,107,335)
54,817,844
832,024,715
(19,707,110)
0.5%
1.5%
0.8%
12.1%
0.3%
13,156,725
(50,421,618)
130,622,937
813,556,341
(41,958,330)
0.2%
0.9%
2.4%
14.8%
0.8%
0.2%
0.5%
-1.6%
-2.8%
-0.5%
812,317,605
(9,366,055)
11.8%
0.1%
771,598,011
(244,518)
14.1%
0.0%
-2.3%
0.1%
14.1%
Even though the dollar amount of income with
respect to sales has increased yet the percentage of
net income to sales has decreased which can be
attributed to the overall increase in expenses due to
-2.4% growth operations
Net Income for the year
15
Comments
802,951,550
11.6%
771,353,493
Income Statement Vertical Analysis
Vertical Income Statement
Direct Cost as a percentage of net sales
Direct Cost as a percentage of net sales
100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
Net Sales
50%
Net Sales
50%
Direct Cost
Direct Cost
40%
40%
30%
30%
20%
20%
10%
10%
0%
0%
2015
2014
• Decreasing the cost of goods as a percentage of sales is a good sign
16
Income Statement Vertical Analysis
Vertical Income Statement
100%
Vertical Analysis
100%
Vertical Analysis
90%
90%
80%
80%
Net Income for the year
Net Income for the year
70%
70%
Minority Interest
Minority Interest
60%
Income Tax
Income Tax
60%
other income
other income
50%
50%
financing charges
financing charges
40%
Share in Earnings from
associates
30%
40%
Share in Earnings from
associates
30%
Depreciation and
amortization
Depreciation and amortization
Administrative expenses
Administrative expenses
20%
Selling and Marketing
expenses
10%
20%
Selling and Marketing
expenses
10%
0%
0%
2014
2015
-10%
• Increase in expenses with respect to sales is consistent with the previous conclusion
of a growth and investment trend of the company
• Even though the dollar amount of income has increased yet the percentage of net
income with respect to sales has decreased which can be attributed to the overall
increase in expenses due to growth operations
17
Ratio Analysis
Ratio analysis has been done using 4 main Tests:
 Test of Profitability: To view the overall profitability of the firm which ensures a
reasonable return to its owners and optimum utilization of its assets. It is a
primary measure of the overall success of a company.
 Test of Liquidity: Helps in determining the liquidity position of the firm. A firm can
be said to have the ability to meet its current obligations when they become due,
which is measured by the help of liquidity ratios.
 Test of Solvency: Helps in assessing the long term financial viability of a firm, and
ability to meet its obligations.
 Market Test: Relate the current market price of a share of stock to an indicator of
the return that might accrue to the investor.
18
Ratio Analysis – Test of Profitability
Nr.
1
2
3
4
5
6
7
19
Ratios
Particulars (2015)
Net Income
Return on Equity = Net
= 802,951,550
Income / Average
Average Stockholders' Equity
Stockholders' Equity
= (2,399,445,857 +
2,425,746,122)/2
Net Income
= 802,951,550
Return on Assets = (Net
Interest Expense (net of tax)
Income + Interest Expense
=0
(net of tax)) /
Average Total Assests
Average Total Assets
= (6,769,624,864 +
5,015,917,537)/2
Return on Equity
Financial Leverage
= 33.3%
Percentage = Return on
Return on Assets
Equity – Return on Assets
= 13.8 %
Earnings per Share (EPS) =
Net Income /Average
Number of Shares
Outstanding for the Period
Net Income
= 802,951,550
Average Number of Shares
Outstanding for the Period
= 210,000,000
Cash Flow from Operating
Quality of Income = Cash
Activities
Flow from Operating
= 238,584,557
Activities / Net Income
Net Income
= 802,951,550
Net Income
Profit Margin = Net Income = 802,951,550
/ Net sales
Net Sales
= 6,898,673,324
Net Sales Revenue
Fixed Asset Turnover = Net = 6,898,673,324
Sales Revenue / Average
Average Net Fixed Assets
Net Fixed Assets
= (3,309,339,884 +
2,503,625,250)/2
Purpose
This measure indicates
how much income was
earned for every dollar
invested by the owners
Many analysts consider
this ratio as the best
overall measure of a
company’s profitability
Financial leverage is the
advantage or disadvantage
that occurs as the result of
earning a return on equity
that is different from the
return on assets
Earnings per share is
probably the single most
widely watched financial
ratio
A ratio higher than 1
indicates high-quality
earnings
This ratio tells us the
percentage of each sales
dollar that is income
This ratio measures a
company’s ability to
generate sales given an
investment in fixed assets
Values (2015) Values (2014)
33.3%
13.6%
34.7%
17.0%
Al Othaim Markets
Co - Values (2015)
Remarks
22.5%
The % is very good as an
indication of a profitable
business, even compared to Al
Othaim
8.5%
The % decreased from 2014 to
2015 due to the increase in
total assets. Still a good
indication of profitability even
compared to Al Othaim
19.7%
17.7%
14.0%
SAR 3.82
SAR 3.67
SAR 2.57
0.30
0.96
0.94
11.6%
2.37
14.1%
2.19
The % is high in 2015 but close
to that of 2014, and higher
than that of Al Othaim, which
indicates that AlHokair depend
on loans to fund their assets,
that is risky
The EPS increased a bit from
2014 to 2015 due to having
same Nr. Of shares and slightly
increased net income. It is
better than that of Al Othaim
by SAR 1.25 per share
2015 value is very low
compared to 2014 and
AlOthaim which is a very bad
indication about the net
income for 2015
3.8%
The % was lower than that of
2014 but much better than Al
Othaim
5.77
The value is not good
compared to Al Othaim, whose
value is more than double that
of Al Hokair
Ratio Analysis – Test of Liquidity
Nr.
1
2
3
4
5
6
7
8
9
20
Ratios
Cash Ratio = Cash + Cash
Equivalents / Current
Liabilities
Current Ratio = Current
Assets / Current Liabilities
Particulars (2015)
Purpose
Cash & Cash Equivalents
= 279,957,636
Current Liabilities
= 2,110,525,600
This ratio measures the
adequacy of available cash
Current Assets
= 3,460,284,980
Current Liabilities
= 2,110,525,600
This ratio measures the
ability
of the company to pay
current
debts as they become due
Quick Assets
Quick Ratio = Quick Assets /
= 1,435,157,408
Current Liabilities
Current Liabilities
= 2,110,525,600
Net Credit Sales
Receivable Turnover = Net = 6,898,673,324
Credit Sales / Average Net Average Net Receivables
Receivables
= (882,333,590 +
739,364,628)/2
Days in Year
Average Age of Receivables
= 365
= Days in Year / Receivable
Receivable Turnover
Turnover
= 8.51
Cost of Goods Sold
Inventory Turnover = Cost of = 5,111,496,492
Goods Sold / Average
Average Inventory
Inventory
= (2,016,265,250 +
1,534,192,950)/2
Days in Year
Average Days’ Supply in
= 365
Inventory = Days in Year /
Inventory Turnover
Inventory Turnover
= 2.88
Cost of Goods Sold
Accounts Payable Turnover = 5,111,496,492
= Cost of Goods Sold /
Average Accounts Payable
Average Accounts Payable = (570,495,843 +
550,155,761)/2
Days in Year
Average Age of Payables =
= 365
Days in Year / Accounts
Accounts Payable Turnover
Payable Turnover
= 9.12
This ratio is like the current
ratio but measures the
company’s immediate
ability to pay debts
This ratio measures how
quickly a company collects
its accounts receivable
This ratio measures the
average number of days it
takes to collect receivables.
This ratio measures how
quickly the company sells
its inventory
This ratio measures the
average number of days it
takes to sell the inventory
This ratio measures how
quickly the company pays
its accounts payable
This ratio measures the
average number of days it
takes to pay its suppliers
Values (2015) Values (2014)
0.13
1.64
0.68
8.51
42.90
2.88
126.76
9.12
40.01
0.05
1.30
0.12
7.41
49.22
2.66
137.10
7.42
49.16
Al Othaim Markets
Co - Values (2015)
Remarks
0.23
The ratio is 0.13 to 1 which
means that the cash in hand is
not safe to pay for the current
liabilities
0.82
The ratio is 1.64 to 1, which is
considered safe that the
company has good liquidity for
the short term
0.25
The ratio is 0.68 to 1, which
explains that AlHokair's
immediate ability to pay debts
is not safe, but better than
2014 and AlOthaim
214.07
8.51 Times, which is not good,
considering that AlOthaim's
turnover is much better
1.71
42.9 Days, which seems high
even compared to that of
AlOthaim
9.40
2.88 Times, which is not good
being low even compared to
that of AlOthaim
38.83
126.76 days,which is not good
being high even compared to
that of AlOthaim
5.43
9.12 Times, which is
acceptable and higher than
that of 2014 and AlOthaim
67.17
40.01 Days, which is
acceptable being better than
2014 and AlOthaim
Ratio Analysis – Test of Solvency and Market Test
Nr.
Ratios
Particulars (2015)
Purpose
This ratio measures
Total Liabilities
Debt-to-Equity Ratio =
the amount of
= 4,352,742,853
1 Total Liabilities /
liabilities that exists
Stockholders’ Equity
Stockholders’ Equity
for each $1 invested
= 2,399,445,857
by the owners
Price/Earnings (P/E)
Ratio = Current
2 Market Price Per
Share / Earnings Per
Share
21
Current Market Price
Per Share
= 101
Earnings Per Share
= 3.82
This ratio measures
the relationship
between the current
market price of the
stock and its earnings
per share
Values
(2015)
1.81
26.44
Values
(2014)
1.06
25.89
Al Othaim
Markets Co Values (2015)
Remarks
1.80
The value is very high in
2015, even compared to
2014 which is not safe.
However almost same
value was noted for Al
Othaim
20.86
The P/E ratio in 2015
suggests that the stock
price is relatively high
compared to earnings
Conclusion
 Al Hokair seems well performing on the profitability level, where compared to its
competitor “AlOthaim”, it has higher ratio % for Return on Equity and Return on
Assets. It’s EPS is also good exceeding AlOthaim by SAR 1.25. These indications
would attract investors to invest their monies in AlHokair’s stock.
 The draw backs in profitability would be the Financial leverage ratio that is high
indicating that their earnings are volatile, also their Quality of income in 2015
was very low which was highly affected by the big reduction in Cash flow from
Operating Activities.
 On the liquidity level, AlHokair’s current ratio indicates that they are good to pay
their debts in the short period, but the cash ratio and quick ratio indicate that
they cannot provide immediate payments for their debts.
 This means that AlHokair has sufficient assets to cover short-term debt
obligations which indicates less risk for creditors. However, a lower liquidity ratio
is generally preferred by shareholders because it indicates that assets are being
used to fund and expand a company’s operations.
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Conclusion
 Al Hokair’s Receivable Turnover and Average age of Receivables are relatively not
good compared to AlOthaim, which indicates trouble with the company’s credit
and collection policies.
 Al Hokair’s Inventory Turnover and Average Days’ Supply in Inventory are
relatively not good compared to AlOthaim, which may cause problems since the
longer inventory remains in a company’s warehouse, the more likely it will be
outdated and subject to being obsolete.
 Al Hokair’s Accounts Payable Turnover and Average Age of Payables are relatively
good compared with AlOthaim, which may put AlHokair in a better position
regarding dealing with suppliers whom may favor AlHokair due to their better
payment policies.
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Conclusion
 Al Hokair’s Debt to Equity Ratio is very high being 1.81 which means that more
assets are financed by debt than those financed by money of shareholders‘. The
ratio increased from 2014 to 2015 by more than 70% which is alarming because it
means that the percentage of assets that are financed by the debts is increasing.
 Al Hokair’s P/E ratio is higher than that of AlOthaim which means that the market
values AlHokair’s earnings at a higher level. The relatively high P/E ratio in 2015
shows that investors may be willing to pay a higher share price because of growth
expectations in the future.
 The high P/E ratio suggests that the stock price is relatively high compared to
earnings, which may indicate that AlHokair’s shares are overvalued, but it could
also mean that AlHokair deserves a premium on the value of its earnings due to
superior management.
 Overall, Al Hokair had constant performance during 2014 and 2015 with high
profitability and high net income, which may be tempting for investors, however
their quality of income and the huge loan they acquired in 2015 are high risks
that are important to be considered by investors.
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Graphs Interpretations
Thank You
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