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It is a Saudi-Arabia
based joint stock company. It is operating in Saudi-Arabia and Egypt. It main
activities are food wholesaling, grocery stores and malls. It has currently 183 stores, out of which 143
are super markets and hypermarkets, including 27 convenience stores, and 13
outlets of whole sale throughout Saudi Arabia. It has 31 stores in Egypt. The
markets of AL-Othaim are ranked no 3 in the Arab world by the Forbes.
Panda
.Inc: Panda .Inc is a franchise of food and beverages
basically. It is related to the Arby’s
group of restaurants. It is operating currently in 19 locations in Nebraska and
Western Lowa. It has 11 to 50 employees and its headquarters are located in
Omaha, Nebraska.
The ratio analysis of
both the companies is as under;
|
Ratio |
Al Othaim |
Panda, Inc. |
Interpretation |
|
Liquidity Ratios: |
|
|
|
|
Current Ratio= Current Assets / Current Liabilities |
18,424/11,327= 1.626 |
48,331/55,561= 0.870 |
As the ideal current
ratio is considered 2, the liquidity of Al-Othaim seems better than Panda,
Inc. |
|
Accounts Receivables Turnover=
Net Credit Sales/ Average Debtors |
65,357/ 7,525= 8.68 |
408,214/ 4,025= 101.42 |
The receivables
turnover ratio of Panda. Inc is better than AL- Othaim, it might indicate
that the better turnover ratio of Al-Othaim is due to a big amount of
receivables in its current assets. |
|
Average Collection Period= Trade Receivables/ Sales * 365 |
7,525/ 65,357* 365
days= 42.025 days |
4,025/408,2148*365days = 3.50 days |
The collection period
of Panda. Inc is better than AL-Othaim. Al-Othaim needs to strengthen its
collection efforts. |
|
Inventory Turnover= Cost of Goods Sold/ Average Inventory |
45,583/6,942= 6.57 |
304,657/ 33,836= 9 |
The inventory turnover
of Panda .Inc is better, it indicates that the inventory of Panda Inc is sold
earlier. |
|
Days in Inventory= Average Inventory/ Cost of Goods Sold *365 |
6,942/45,583*365days =
55.59days |
33,836/394,657*365days
= 31.3 days |
The inventory turnover (days)
of, Panda, Inc is better. |
|
Solvency Ratios: |
|
|
|
|
Current Cash Debt Coverage Ratio= Net Cash provided by Operating Activities/
Average Current Liabilities |
5,881/ ((11,327+10,512)/2)=
0.54 |
26,249/((55,561+54,390)/2)=
0.477 |
The debt coverage ratio
of Al- Othaim is better, so creditors would be more comfortable with Al-
Othaim. |
|
Debt to Assets Ratio= Total Debts/ Total Assets |
Total liabilities at
end of the period= 11,327+17,859=29,186 Liabilities at start of the
period= 30,394 Average debt or liabilities=
29,790 Total Assets at ending=44,533 Total assets at
beginning=44,106 Average assets=44,319.5 Debt/ Assets= 0.672 |
Liabilities at
ending=55,561+44,089= 99,650 Liabilities at start= `97,747 Average debt= 98,698.5 Assets at ending= 170,706 Assets at beginning= 163,429 Average assets= 167,067.5 Debt / Assets=
98,698.5/167,067.5= 0.591 |
In AL- Othaim around 60%
of total assets are financed by creditors and in Panda. Inc around 50% of
total assets are financed by creditors. Al- Othaim is more leveraged than
Panda. Inc. |
|
Times Interest Earned= Earnings before Interest and Tax/ Interest |
EBIT=65,357- 45,583-
15,101+94=4,767 Interest= 707 4,767/707= 6.742 |
EBIT=
408,214+411-304,657-79,607=24,361 Interest= 2,065 24,361/2,065= 11.8 |
An interest cover of
both the companies is satisfactory but, Panda, Inc is in a better position of
paying interests on time. |
|
Cash Debt Coverage ratio= Net Cash provided by operating activities/
Average Liabilities |
5,881/ 29,790= 0.020 |
26,249/ 98,698.5= 0.266 |
The Cash Debt Coverage
Ratio of Panda. Inc is better for the long run. |
|
Profitability Ratios: |
|
|
|
|
Profit Margin Ratio= Net profit/Sales |
2,488/ 65,357*100=
3.807 |
14,335/ 408,214*100=
3.512 |
The profitability of
both companies is almost same, AL-Othaim is .3 times better. |
|
Assets Turnover= Net Sales/ Total Assets |
65,357/44,319.5=1.475 |
408,214/167,067.5=2.443 |
The turnover of Panda, Inc is
better. |
|
Return on Common Shareholder’s Equity=
Earnings after tax and preference dividend/ Shareholder’s Equity * 100 |
2,488/((15,347+13,712)/2)*100= 17.12% |
14,335/((71,056+65,682)/2)*
100= 20.97% |
The return on equity is
better of Panda. Inc. the investors could better trust Panda. Inc. |
|
Return on Assets= Net Income/
Average Assets |
2,488/44,319.5=0.056 |
14,335/167,067.5=0.086 |
Panda. Inc has a better return on assets. |
|
Average total asset |
$44,106+$44,533/2=$44,319 |
$163,429+$170,706=$167,068 |
Panda. Inc has more average total asset. |
|
Average total liability |
$11,327+$10,512/2=$10,920 |
$54,390+$55,561/2=$54,975 |
Panda inc. has more credibility to return the debts. |
The
comparison of ratios of both the companies is done as under;
Liquidity
Ratios: The
current ratio of Al-Othaim is better, however the receivable turnover of Panda.
Inc seems better. The collection period of debtors of Al-Othaim is way less
than Panda. Inc. The better current ratio of Al- Othaim might be due to the
accumulation of a large amount of receivables, Al=Othaim needs to work on the
collection efforts, otherwise there is a huge risk of many receivables turning
bad. The inventory turnover of Panda .Inc is better, than the other company
also its days in inventory are lesser in comparison to Al-Othaim. Panda .Inc
seems to have better selling efforts as well. That is why its inventory
turnover is better. Al – Othaim might have a lot of dead stock in its inventory
that is contributing to its current ratio looking better, but its quick ratio
might not be as satisfactory.
Solvency Ratio: The debt cover of
Al-Othaim is better. Al-Othaim is more levered than Panda. Inc, as around 60%
of its total assets are financed by debt. The interest coverage of Panda .Inc
is better. Panda. Inc is in a better position to service interests on time and
also it is less levered so it seems like a more stable company.
The
profitability of Al-Othaim is .3 times better than the other company. The Panda
.Inc is better at assets turnover, return on equity and return on assets. So
the assets of Panda are used more efficiently than AL-Othaim, and so the Panda
.Inc gets a better return on its assets as well. The equity share holders of
Panda .Inc also get a better return.
From the above, profitability,
solvency and liquidity analysis it can be concluded that the Panda .Inc is better in all the respects from
Al-Othaim . Its shareholders get a better return, it is also better at debt service. So it is better to purchase
shares of Panda .Inc.
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