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Comparative Financial Analysis of ALDAR Properties and EMAAR Properties

   

Added on  2019-09-16

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IntroductionIn this present paper, we will discuss the financial analysis of ALDAR and EMAAR Company then both thefinancial 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 ofthe 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 investmentmanagement 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 sharesof 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.
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Ratio analysisThe 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 ratioIt 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 ratioIt 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 ratioIt 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 companyremains 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.
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3.Efficiency ratioIt 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 year2014 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 ALDARCompany 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 equityIt 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 towardsthe achievement of higher profits and brand image in the eyes of the customers. The company is
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