Financial Analysis for Managers

Document Type:Thesis

Subject Area:Finance

Document 1

Asset Turnover = ONEIC OIM 2015 2014 2016 2015 0. ii. Equity Turnover = ONEIC OIM 2015 2014 2016 2015 1. b. Liquidity i. Acid Ratio = ONEIC OIM 2015 2015 1. ii. Quick ratio = ONEIC OIM 2015 2015 1. c. Profitability i. Profit margin = * 100% ONEIC OIM 2015 2015 5. ii. Return on Assets = * 100% ONEIC OIM 2015 2015 2. d. Gearing i. Debt to equity ratio = ONEIC OIM 2015 2015 15. ii. Debt ratio = ONEIC OIM 2015 2015 0. e. Market ratios i. Book value per share = ONEIC OIM 2015 2015 2. ii. Earnings per share = ONEIC OIM 2015 2015 0. Task 2: Literature Review Oman National Engineering and Investment Company (ONEIC) The company was established in 1978. During the past 32 years it has been successful dealing in power, water and utility sectors in Oman. The company has recorded a continuous stable growth supported by concerned shareholders, committed management and trained staff of over 2900. It has four division: Billing, Engineering, Investment and Business Development. It has nine departments; finance, marketing, procurement et cetera. The company is also diversified into various projects and maintenance (Oneic. com. om 2018). Oman International Marketing Company (OIMC) The OIMC is based in Oman and was established in 1993. It has business interests in global trade, product resourcing and development. The company trades in office wares, print, telecommunications hardware, stores, exhibitions services, publishing, advertisements and computer hardware and software. Among its subsidiaries are; Loay International (LLC), Oman International Marketing Co SAOG and Exhibition Services Company LLC. It has more than 9200 employees (Oman-oil. com 2018). Analysis of Literature Based on the literature review above, Oman International Marketing Co. is a large company compared to Oman National Engineering and Investment Co. since it is a holding company with subsidiaries and it deals with a vast number of products and services.

Sign up to view the full document!

is in a better financial position than Oman National Investment and Engineering Co. The previous having 16 and the later 1. This shows that Oman International has more than enough current assets to cove for its current liabilities when they fall due than Oman National. Another reason is that Oman International has very few current liabilities compared to Oman National and it does not have inventories. This gives Oman International an upper hand for investors to be attracted to it. However, the difficulty in evaluating and using non-financial information in investment appraisal resulting from challenges in translating the nonfinancial data into monetary terms causes managers to underestimate the importance of non-financial factors. For instance, Adler (2000) argued that the intangibility and lack of measurability of non-financial factors often makes their analysis subjective resulting in many organizations failing to realize the important contribution of nonfinancial information in the economic analysis of business projects.

Sign up to view the full document!

Bhimani and Langfield-Smith (2007) postulated that the reason why non-financial factors are rarely considered in project appraisal is as a result of a lack of an analytic framework which would provide awareness on the important of non-financial information and guidelines for their incorporation in project appraisals. Nonetheless, financial decision making can take into consideration the subjective interpretation of non-financial factors since it is still a challenge in the estimation and quantification of non-financial information in project appraisals. One of the non-financial factors includes organizational strategy. Lastly, past and future trends are likely to impact the potentiality of an investment. If the cash flows has been increasing or decreasing in the past, managers will be guided on how to make decisions (Bhimani & Langfield-Smith 2007). Task 4: Investment Advice Based on market share Oman National shows a high book value of 2.

Sign up to view the full document!

and earnings per share of 0. than Oman International that has a book value of 0. Task 4: Demand Product A has lower fixed costs than product B while Product B has lower variable cost per unit than product A. In times of high demand Product B will earn more profit because the cost per unit of production is low so it can produce more products easily. In times of low demand product A seems profitable because the fixed costs are low even if the sales price per unit will reduce than product B. On the other hand, both products can operate simultaneously since the variable costs in one is covered (same) as fixed costs in the other. Task 5: The Role of BEP in Business Decision Making. In other words, for a company to attain the BEP, it should be able to reach a point where the sales or revenues produced must equal all of its expenses.

Sign up to view the full document!

Therefore, at the BEP, the company should make neither a loss nor a profit. Hence, the calculation of the BEP enables the manager to know whether the costs of producing a certain volume of products is sufficiently covered by the revenues generated from the sale of those products or services. Subsequently, the BEP information in the CVP can be used by the management in making decisions such as pricing, development of competitive bids, and the evaluation of viable financing plans. Similarly, at the economic perspective, the BEP enables the manager to understand the volume of goods at which the decision of the manager in regard to the CVP would be indifferent. Additionally, the BEP helps the business to realize the margin contribution each product or service makes to the total profit making the manager to easily decide the profitability or the unprofitability of a new product or service in due time before the company’s profit margins are adversely affected (Kimmel, Weygandt, & Kieso 2011).

Sign up to view the full document!

Question 3 Task 1: ARR Calculations Investment 1 Investment 2 Annual depreciation = RO( 260,000- 20,000)/5 = RO 48,000 Annual depreciation = RO( 180,000 – 15,000)/5 = RO 33,000 Average accounting = RO (64000-48000) = RO 16,000 Average accounting = RO (50,000-33,000) = RO 17,000 ARR = RO ( 16,000/260,000) ARR = RO ( 17,000/180,000) ARR = 6. ARR= 9. Task 2: ARR Rule, Merits and Demerits The Accounting Rate of Return, a derivative of accounting information, incorporates all accounting data used in the determination of profitability. Conversely, for the ARR, all the calculated accounting profits are determined from assumptions, and which include the non-cash items. Ignores the economies of scale of a project. ii. ARR separates individual investments and may not record the effect of a project to the entire organization both effectively and ineffectively. iii. It does not consider the risk in long term projects which is presumed to be a higher risk (Magni and Peasnell, 2012).  Quantitative Methods for Business.

Sign up to view the full document!

Cengage Learning. Bimini, A. and Lang field-Smith, K. Structure, Formality and the Importance of Financial and Non-Financial Information in Strategy Development and Implementation. Wiley. Magni, C. A. and Peasnell, K. V. om. Home - ONEIC. About Us. Retrieved from http://oneic. com.

Sign up to view the full document!

From $10 to earn access

Only on Studyloop

Original template

Downloadable