Comparative Financial Analysis of ALDAR Properties and EMAAR Properties

The assignment compares the financial performance of two companies, ALDAR Company and EMAAR Company. Both companies are property developers, but ALDAR operates locally while EMAAR operates internationally. The analysis covers various aspects such as cash flow, ratios, income statement, and management accounting techniques. Despite operating on a smaller scale, ALDAR's financial performance is found to be better than EMAAR's in terms of cash flow, gross profit, revenue, and net profit.

Introduction
In this present paper, we will discuss the financial analysis of ALDAR and EMAAR Company then both the
financial statements are compared on the basis of financial ratios and statements of the company. The
EMAAR is a real estate development company which is located in the United Arab Emirates. The
company comes under the public joint stock company and it is also listed under the Dubai Financial
Market as DFM: EMAAR. The EMAAR operates internationally and it provides management services and
property development services (Emaar Properties PJSC et al., 2017). The company has sixty active
companies and six business segments. The company is present in thirty six markets across the North
Africa, Middle East, Europe, Pacific, and North America. The company comes under one of the largest
real estate developers in the UAE. The company is majorly known for its greatest achievements such as
development of Burf Khalifa which is the tallest tower in the world and it is the seven star hotels across
the globe. The company was founded in 1997 by its chairman Mohamed Alabbar (Aldar Properties et al.,
2017). The company has diversified its interest into real estates which includes the building of residents,
commercials, malls, hospitals and others. The company directly contributes towards the development of
the country and its revenue in the year 2010 was $3.307 Billion. The total employees of the company in
2010 were ten thousand. The company was owned by the public and the founding shareholders of the
company has 24.3 percent share in the company. Whereas the ALDAR properties is also one of the real
estate development company which is presiding in Abu Dhabi, United Arab Emirates. It is the investment
management company which is popular for the successfully delivery of various projects such as Al Jimi
Shopping Centre, Yas Island, Al Gurm Resort, Abu Dhabi commercial market and others. The company is
founded in 2001 and it is owned by the Abu Dhabi institutions. The company has various individual
shareholders such as Abu Dhabi Investment Company, Abu Dhabi national hotel company, Mubadala
Development Company and others. The company comes under the real estate industry and it operates
in Abu Dhabi. The present portfolio of the company includes re-development, development within the
Abu Dhabi which includes Al raha beach, coconut island central market and others. The EMAAR
properties work internationally whereas the ALDAR properties work locally within Abu Dhabi. The shares
of ALDAR Company are 25.4% holds by the government and the foreign ownership is passed by the
government which does not exceed forty percent. The company accounts forty five percent of the
property within the capital in the past ten years. The company also contributes towards the gross
domestic product of the country by developing the infrastructure of the country. The company has
strong relationship with the government of Abu Dhabi. The company has wide scope in the future
because there are various business opportunities in Abu Dhabi which enables to expand the business
growth. The EMAAR properties have also developed neighborhoods of Dubai such as The Greens, The
Springs, The Lakes, The Meadows and others. The EMAAR has done international projects in various
countries such as Egypt, India, Saudi Arabia, Syria, Pakistan, and turkey.

Ratio analysis
The company analysis is done on the basis of ratio analysis of the company in the year 2014-2015. The
ratios analysis of the company enables to analyze the financial position of the company. The ratio
analysis is defined as the type of financial analysis which is used to obtain the quick indication regarding
the financial position of the company within the particular time period. The financial ratios are classified
into four segments, namely, liquidity, profitability, solvency and efficiency ratios. The analysis of the
financials of the company is described below:
1. Liquidity ratio
It is defined as the ratio which is used to determine the liquidity of the company within the particular
time period. It measures the capability of the company to convert the assets into cash within one year.
a. Current ratio
It is defined as the ratio which is calculated by dividing the current assets upon current liabilities.
The ideal current ratio is 2:1 which shows that the company has twice current assets in context
of current liabilities. The current ratio of the ALDAR Company in 2015 is 1.23 and in the year
2014 is 1.21 which shows that the current ratio is increased by 1.65%. It shows that the current
ratio of the company is improved in the year 2015 from the year 2014. The current ratio of the
EMAAR Company in 2015 is 1.05 and in the year 2014 is 0.79 which shows that the current ratio
of the company is increased by 32.91% (annualreport2015 et al., 2017). By comparing the
current ratio of the both the company it shows that the liquidity of ALDAR Company is more
satisfactory than the EMAAR Company.
2. Solvency ratio
It is also known as the leverage ratio which is used to calculate the ability of the company to sustain the
operations indefinitely by comparing the debt level of the company with equity in the particular period
of time. It is used to determine the long term sustainability of the company.
b. Debt equity ratio
It is defined as the ratio which is calculated by comparing the total debt to total equity of the
company within the particular time period. The debt equity ratio of the ALDAR Company in the
year 2015 is 0.02 and in the year 2014 is 0.02. It shows that the debt equity ratio of the company
remains same in two years. The debt equity ratio of the company is low which shows that the
contribution of debt in the equity is low and the company has the capability to operate its
business activities. The debt ratio of EMAAR Company in the year 2015 is 0.35 and in the year
2014 is 0.37 which indicates that the company is using more creditors financing than the
investors financing and it shows that the operations are more funded by the creditors
(annualreport2015 et al., 2017). The EMAAR Company is more risky than the ALDAR Company.

3. Efficiency ratio
It is defined as the ratio which is used to determine the utilization of assets by the company in order to
generate higher profits within the particular period of time. It is also known as activity ratio. It is used to
determine the efficiency of assets or resources in order to contribute towards the higher profits.
c. Assets turnover ratio
It is defined as the ratio which is used to determine the ability of the company in utilizing its
assets to generate sales. It is calculated by comparing net sales with the average total assets of
the company. The asset turnover of ALDAR Company in the year 2015 is 1.85 and in the year
2014 is 1.97 which shows that the assets turnover of the company is decreased by 6.48%
(annualreport2015 et al., 2017). The decrease in assets turnover shows that utilization of assets
is decreased by the company which is a poor indicator that directly impacts on the profitability
of the company. The assets turnover of EMAAR Company in the year 2015 is 0.18 and in the year
2014 is 0.14 which shows that the assets utilization of the company is increased by 28.57%. By
comparing the assets turnover of both the company it shows that the assets utilization of ALDAR
Company is better than the EMAAR Company.
4. Profitability ratio
It is the most useful ratio which is used to determine the profitability of the company within the
particular period of time. It determines the ability to generate profits from the business operations. It is
majorly used by the creditors and investors in order to determine the profitability of the company.
d. Return on equity
It is defined as the ratio which is used to determine the total return received by the
shareholders from the total profits of the company. It is used to measure the ability of the
company to generate profits from the investment of shareholders. The ratio reflects that how
much profit the company is generating from the common stockholder’s equity within the
specific accounting period. The return on assets of ALDAR Company in the year 2015 is 7.19 and
in the year 2014 are 4.02 which show that the ratio is increased by 78.85%. It shows that the
returns on equity is improved which is a positive indicator of the performance of the company.
The return on equity of EMAAR Company in the year 2015 is 11.48 and in the year 2014 are
9.75. It shows that the return on equity is increased by 17.74%. By comparing the ratios of both
the companies it shows that the ALDAR Company is performing better than the EMAAR
Company.
Company relationship with employees and management
The EMAAR Company is focusing on maintaining healthy relationship with the employees and
management in order to add competitive advantage to the company. The successful projects delivered
by the EMAAR properties shows that the company has best manpower who directly contributes towards
the achievement of higher profits and brand image in the eyes of the customers. The company is

offering lucrative packages with the additional benefits in order to motivate the employees towards the
achievement of vision of the company whereas the ALDAR Company also has multi-disciplinary staffs
who work towards the sustainable development of the business. The ALDAR Company has five hundred
man powers whereas the EMAAR has approximately ten thousand employees who work collaboratively
in an organized manner. Both the companies are using management accounts which reflect the internal
position of the company and it is used for the decision purpose.
Accountability of company
The structure of EMAAR Company is very wide as it consists of ten thousand employees who work
internationally whereas the ALDAR Company has comparatively small structure who works within the
Abu Dhabi. The accountability of both the company is done through a formal structure.
Investors Analysis
From the investor’s point of view, the EMAAR Properties is a high investment company because the
goodwill of the company is better than ALDAR Company. The leverage ratio is considered by the
investors at the time of making investment and the debt equity ratio of EMAAR properties over the past
five years is stable average 0.288 and the average debt equity ratio of ALDAR Company over the past
five years is 0.02 which shows that the investment in ALDAR Company is less risker than EMAAR
Company.
Source of finance Analysis
The ALDAR Company is using both equity and debt funding. The company issue shares, bonds,
debentures, and others in order to receive the funds for the business whereas the EMAAR properties is
a public listed company which raise funds through initial public offerings, loans, debentures, bonds, and
others.
Cash flow analysis
The cash flow statement analysis is defined as the analysis of financial statement which is to determine
the inflow and outflow of cash in the company within the particular period of time. The cash flow
statement comprises of three segments, namely, cash flow from operations, cash flow from investing
and cash flow from financing. The analysis of cash flow is explained below:
1. Cash flow from operations

The cash flow from operation of ALDAR Company in the year 2015 is 6,008,107 and in the year 2014
are 6,661,944 which show that the net cash generated from the operations is decreased by 10.88%.
It shows that the ability to generate profit from internal sources is reduced. The cash flow from
operations of EMAAR Company in 2015 is 5,612,999 and in the year 2014 is 7,830, 252. It shows that
the cash generated capacity from operation is reduced by 39.5%. By comparing the cash flow from
operations of both the companies it shows that the ALDAR Company by is generating higher cash
from operations than the EMAAR Company.
2. Cash flow from investment
The cash generated from investment of ALDAR Company in the year 2015 is (3,350,280) and in the
year 2014 are 66,152 it shows that the cash used in investing activities goes negative which indicates
that the company is not able to meet the requirements of future expansion but generally the
investing cash flow is negative because requirement for increased financing leads to increase in the
cost of financing which reduces the future income. The cash flow from investment of EMAAR
Company in the year 2015 is (3,356,614) and in 2014 are 2,519,312. It shows that the cash outflow
of the company for investing in long term investments of the company. By comparing the cash flow
from investment of the companies it shows that the ALDAR Company is making high investment in
order to generate higher profits than EMAAR Company.
3. Cash flow from financing
The cash flow from financing of ALDAR Company in the year 2015 is (4,179,647) and in the year 2014
is (5,676,716) it shows that the net cash used in financing activities is improved by 35.8%. The
negative cash flow shows that the cash is flowing out for paying debt, dividend or repurchase of
stock. The Cash flow from financing of EMAAR Company in 2015 is (998,448) and in 2014 is
(6,704,816) it shows that the company has increased its cash outflow by paying bonus to the
director, repayment of loans and borrowings and others with 85.10%. By comparing the cash flow
from financing of both the company it shows that the ALDAR Company is managing its financials
better than EMAAR Company.
Income statement Analysis
The income statement analysis is defined as the evaluation of financial statement of the company by
analyzing the income and expenditure made by the company within the particular period of time. It help
to determine the revenue generate by the company in the particular accounting year.
1. Gross profit
The gross profit of EMAAR Company in the year 2015 is 7,262,924 and in the year 2014 are
5,940,728 which show that the gross profit is increased by 22.2%. The gross profit of ALDAR
Company in the year 2015 is 2,205,924 and in the year 2014 are 1,518,406 which show that the
gross profit is increased by 45.27%. By comparing the performance of both the companies it shows
that the ADLAR Company is performing better than EMAAR Company.
2. Revenue

The total revenues of the EMAAR Company in the year 2015 are 13,660,536 and in the year 2014 are
9,930,044 which show that the revenue is increased by 37.56%. The revenue of the ALDAR Company
in the year 2015 is 2,205,924 and in the year 2014 is 1,518,406 which show that the revenue of the
company is increased by 45.27%. By comparing the performance of the company it shows that the
ADLAR Company is generating higher revenue than the EMAAR Company.
3. Net Profit/loss
The net profit of the EMAAR Company in the year 2015 is 4,589,293 and in the year 2014 are
3,686,430 which show that the net profit is increased by 24.4%. The net profit of the ALDAR
Company in the year 2015 is 2,559,867 and in the year 2014 are 2,266,353 which show that the new
profit is increased by 12.9%. By comparing the performance of both the companies it shows that the
EMAAR Company is generating profit in high percentage than ALDAR Company.
Conclusion
From the above analysis it can be concluded that the ALDAR Company is performing better than the
EMAAR Company despite the fact that the ALDAR Company operates locally and EMAAR Company
operates internally the performance of the ALDAR Company is better. The cash flow analysis shows that
the ALDAR Company is managing its cash flow in an effective manner. The ratios analysis shows that
ALDAR Company is more stable than EMAAR. The income statement shows that the ALDAR Company
has higher gross profit and revenue than EMAAR.

Part -2
Company expansion
Sources of money
Strength and weakness
Company analysis
P/E ratio
Part -3stings
Current
Management accounting techniques
Budgeting
Current commercial environment

References
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