Name – SANA SOHAIL MAYET

Student ID – 14192
Course – FINANCIAL STATEMENTS ANALYSIS
Course ID – FIN3111
Batch – MORNING
Semester – SPRING 2020
Dr. – BASHAR ALMONSOUR
ASSIGNMENT 1
 INTRODUCTION TO COMPANY

Aramex is a global company headquartered in Dubai, United Arab Emirates (UAE), for express,
mail service and logistical services. Fadi Ghandour and Bill Kingson established the company in
1982.It is also the first Arab-based company to be mentioned on the NASDAQ stock exchange.
Aramex is identified on the Dubai Financial Market. Bashar Obeid works as Managing Director of
the company. Aramex has about 13,800 staff in 54 nations, and a chain of 40 autonomous
express firms.
INTRODUCTION TO FINANCIAL MARKET

The Dubai Financial Market (DFM) is a stock exchange in

Dubai, United Arab Emirates. It was formed on 26 March 2000. DFM is among three UAE stock
exchanges. Abu Dhabi Securities Exchange (ADX) also predominantly lists UAE companies and
NASDAQ Dubai has also been set up for international stock trading. DFM was entirely owned by
the Dubai government until November 2006 until it became a public joint-stock corporation through
an IPO that resulted in the selling of 20 percent of its shares to the public and 80 percent were
acquired by the Dubai-owned Borse Dubai. Indeed, the IPO of DFM has been oversubscribed 118
times.
LITERATURE REVIEW
Financial statement analysis is used by internal and external stakeholders to examine their
organizations performance and value. It is reviewed in the form of Income Statement, Balance
Sheet and Cashflow Statement. In this report we will be analyzing and comparing the financial
statements for the years 2014-2018
Income Statement
Is a financial statement used for reporting an organizations financial performance over a specific
period. Income Statement focuses on the organization’s revenue and expenses. It reveals their
profit and loss over a period. The profit or loss is determined by taking all revenues and
subtracting all expenses from operating and non-operating activities, this is defined as Net
Income. Net Income = Income – Expenses
Balance Sheet
Is a financial statement that array the organizations total assets, and how these assets are
financed, through debt and equity. It is also referred to as a statement of net worth, or a statement
of financial position. It is divided into two sections. The left, that outlines all the organizations
assets and the right, that outlines the organizations liabilities and shareholder’s equity. The assets
and liabilities are also categorized in two separated categories: Current assets/liabilities and non-
current assets/liabilities. This statement is based on this equation: Assets =Liabilities + Equity.
Cashflow Statement
Statement of Cashflow acts as a bridge between the income statement and balance sheet by
showing how money is moved in and out of the business. Cashflow statement has three sections
firstly Operating Activities, that is revenue generating activities, cashflows from current assets and
current liabilities. Secondly, Investing Activities are cashflows from the acquisition and disposal of
long-term assets and other investments. Lastly, Financing Activities are cashflows that result in
changes in size and composition of the contributed equity capital or borrowing of the entity.

COMMON SIZE INCOME STATEMENT ANALYSIS OF ARAMEX

The following can be seen from the table of the common size income statement of Aramex
Company. In 2014 the net income was 9.5% which has increased to be 10.39% in 2018, this
increasing is due to the increasing of the operating profit as shown in the table from 10.49% in
2014 to 13.54% in 2018. This means that there was an increase in the core business functions
before the deduction of interest and tax. This increasing is also due to the reducing expenses
namely, the share of results of joint ventures and associates, selling and marketing expense,
administrative expenses, operating expenses and other incomes. The decrease in operating
expenses which records values of 20.16% in 2014 and 17.59% in 2018. That means that Aramex
is paying less for there operating expenses, that means there is less cash outflow. In addition to
the increasing behind the net income is the reducing of selling and marketing expenses which has
decreased from 4.9% in 2014 to 4% in 2018, this means that Aramex was using the low cost
selling and marketing strategies to reduce cash outflow. Another reason for the increasing of net
income was the dropping of share results of joint ventures and associates which records values of
0.10% and 0.07% in 2014 and 2018 respectively. Moreover, profit before income tax has raised as
well from being 10.49% in 2014 to 12.27% in 2018, this is due to the above expenses decreasing.
It is also visible in the table that earnings per share have increased from 0.217% in 2014 to
0.336% In 2018, this is a result of increasing net income, as they have a positive relationship.
COMMON SIZE BALANCE SHEET STATEMENT ANALYSIS OF ARAMEX
COMPANY
The following can be deduced from the table of the common size balance sheet statement of
Aramex Company. We can see that current assets have increased respectively from 2014 to
2018, from 46.72% to 50.47%, this means that Aramex has increased liquidity. Furthermore, the
current liabilities have increased as well from 24% in 2014 to 39% in 2018, this means that
Aramex took more short-term obligations and that previous accounts were not paid off therefore
less cash outflow. The current assets have always exceeded the current liabilities, and this means
that Aramex is able to fulfil its short-term obligations for this period.

Cash and bank balances have decreased from 19.4% in 2014 to 17.8% in 2018 this means that
Aramex is investing cash therefore the decrease. Account Receivables have increased as the
values were recorded in 2014 it was 21.4% to 24.2% in 2018, this means that they are using the
strategy of selling on credit. Another increase is in the other assets which have raised from 5.9%
to 11.3%, respectively from 2014 to 2018, this means that there was and increase cash outflow.

Property, plant, and equipment are long-term assets vital to business operations and not easily
converted into cash. Property, plant, and equipment are tangible assets. Aramex had an increase
from 16% (2014) to 20% (2018) this increase is due to the company investing in equipment and
plant. On the other hand, goodwill has decreased by 10% from 2014 to 2018 this decrease could
be due to company’s image deteriorating.

There was a decrease in over 10% in equity during this 5-year period, from 68% In 2014 to 51% in
2018. This decrease could be due to a few different reasons, one of them being external cause
such as foreign currency translation which caused a decrease from 4.7% (2014) to 7.8% (2018).
Another reason could be that equity was used for business operations. Apart from that there was a
increase in retained earnings of 5% which means that the company is staying consistently
profitable.

There was an increase in current liabilities from 31% in 2014 to 48% in 2018, this increase was
due to raising percentages in account payables, bank overdrafts and other liabilities and interest-
bearing loans and borrowings. Accounts payable was increased from 5.1% (2014) to 6.1% (2018),
this means that the Aramex purchased good on credit. Another increase that occurred was the
increase of bank overdraft from 0.5% to 2.5% respectively, from 2014 to 2018. This means that
they withdrew money from the bank due to insufficient funds, or as they didn’t want to use their
liquidity.

Increase in interest bearing loans and borrowing for current, which was recorded as 1.6% (2014)
to 6.8% (2018) and non-current assets which was recorded as 3.0% (2014) to 4.6% (2018)
means that there was cash inflow from short term obligations as well as long term obligations as
the company is borrowing more and therefore and increase in interest.
CONCLUSION
After completing the common size analysis of Aramex for the five-year period (2014-2018) we can
conclude that revenue growth of 8% in 2018 was contributed by most of their regions, supported
by the strong growth of cross-border e-Commerce business. Direct and indirect cost witnesses’
efficiencies due to our digital transformation strategy and the restructuring process.

Net Income in 2018 increased as a result of revenue growth and improved cost efficiency.
The liquidity position of the company is in place as they are able to fulfil their short-term
obligations, as their current assets exceed their current liabilities.

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