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Executive Summary

This report evaluates the cash flow statement, balance sheet and income statement of Jeema Mineral Water Company. The years taken for the companys financial presentation are 2006, 2007, 2008 and 2009. The concentration of the report is to reveal a clear picture about the business appearance of Jeema evaluate with the industry .The topics taken into account are the companys geographical market place , SWOT analysis, product and companies in the same industry. In addition an important evaluation of the financial appearance of the company is carried out using modes of analysing the financial situation of the company including trend analysis, ratio analysis, horizontal analysis, DFL and DOL This report is completed as a part of the curriculum section TBS 980 International Financial Management .This assignment has assisted me to get better knowledge of financial account analysis.

INTRODUCTION Jeema Mineral Water Company is a UAE based company, established in 1980 by His Highness Sheikh Rashid Al Maktoum and late Sultan Al Owais. Jeema Mineral Water Company is mainly engaged in manufacturing plant for production of mineral water and delivering them .Since 25 years, the company seeks to be in its top position in the mineral water industry. By using latest techniques in advertising and innovative packaging technology, they try to overcome international competition. The headquarters of Jeema is located in Dubai and their major water plant is constructed near Jeema Wadi and Hatta, the natural springs which were discovered by Katadyn of France and Evian .The bottles used for packaging are eco friendly and easy to use. They manufacture around 375,000 bottles of mineral water every day. Jeema has made up long term relationship with U.S Navy, Emirates airlines and also with lots of hotels mainly five star hotels and seven star hotels and resorts for marketing their brand name through the supply of bottles. In 2004 Jeema was the most profitable mineral water producing company in UAE and over AED 25 million was their annual turnover. With the strong dedication to quality and excellent business practice, the company had been honoured by the certifications, ISO and HACCP. Jeema Mineral Water Companys vision is to give Middle East and UAE with good quality mineral water in a suitable and cost effective way. The companys mission is to encourage the UAEs water availability as the most clean and good quality mineral water in the world. To examine the financial performance of Jeema Mineral Water Company, we compared the company with industry average by using ratio analysis. They are Asset Utilization Ratios, Profitability Ratio, Liquidity Ratio and Debt Utilisation Ratio

Ratio analysis 1 Profitability ratio Profitability ratio is used to identify how efficiently or well the companys operation are. Profitability ratio gives an idea about a firms ability to use its resources to produce a good income .To calculate the profitability ratio, net income is divided by sales ,then multiplied with 100 to transfer it into a percentage form .To calculate profitability ratio ,net income divided by sales ,and then multiplied with 100 to transfer it in to a percentage form .This is based on the company pricing policies and its ability to control its costs .This ratio is important for investors and stockholders as this gives an indication whether the company is performing well financially and has good control over costs .Higher the profit margin better is the companys financial position .Jeema Mineral Water company profit margin for the years from 2006-2009 is shown in the table below Profit margin = [net income /sales]*100

Profit Margin Jeema Industry Average

2006 16.67% 7.29%

2007 8.64% 5.38%

2008 5.22% 8.81%

2009 7.14% 9.23%

According to what we have calculated from the year 2006 2009, Jeemas profit margin has been decreasing from 2006 2008. Profit Margin for 2006 was 16.67% and it decreased to 5.22% in 2008 which shows us that the companys ability to pay long term interest has decreased and then the companys long term payment ability increased to 7.14% in 2009. The average of the FMCG industry is also fluctuating during the year 2006 2009 from 7.29% in 2006 9.23% in 2009.

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Jeem a Industry A verage

2006

2007

2008

2009

If we compare the company, Jeema Mineral Waters profit margin with the industry average from 2006- 2009 we can see that the profit margin for the company is higher than the industry average during the year 2006-2008. This shows us that the cost or goods sold was high and the cost of revenue and expenses is less for the company.

2 Return on assets Return on Assets denotes how efficient a firm is when we take into consideration the total assets. Return on assets indicates how well a firm uses its asset to generate a high income. A higher return on assets shows the companys efficiency in using its total assets to generate profit .Return on Assets is calculated by dividing Net profit by Total Assets Return on assets =Net income /total assets According to Du Pont system of Analysis this ratio can also be calculated by Return on Assets= Profit Margin l Asset Turnover = [Net profit /sales]*[sales /Total Asset]

Return on Assets Jeema Industry Average

2006 5.24% 4.12%

2007 2.77% 4.37%

2008 3.11% 6.8%

2009 3.55% 12.14%

The Return on Assets of Jeema Mineral Water is fluctuating from 2006-2009. If we compare the Return on assets of the company with the industrial average during the year 2007-2009 we can find out that the industrial average has higher return on assets which means that the industrial average is making use of its total assets very efficiently and is generating increased sales per dollar of assets. The Return on Assets is high on 2009 for the industry average indicates that the industrial average is making a lot of money using less investment.

1 4 1 2 1 0 8 6 4 2 0 20 06 20 07 20 08 20 09 J eem a In u tryA ds vera e g

iii) Return on Equity Return on Equity is an important ratio that shareholders and investors should look at before investing. Return on Equity shows percentage changes in the income of shareholder equity which means the profit that are available for sharing with the equity holders of the company. It specifies the profit the firm makes with the shareholders investment in the industry.

Return on Equity = [Net Profit /Shareholders Equity]*100 According to Du Pont system of analysis this ratio can also be calculated by Return on Equity=Return on Assets / [1-Debt/Asset]

Return on Equity Jeema Industry Average

2006 5.72% 5.86%

2007 3.01% 7.22%

2008 4.03% 18.33%

2009 5.45% 21.07%

The Return on Equity for Jeema keeps on fluctuating from 2006-2009. When we compare the company with the Industry average, the industry average has higher Return on Equity than Jeema Mineral water because of high return of assets.

25 20 15 10 5 0 Jeem a Industry A verage

2006

2007

2008

2009

Total Asset Turnover Jeema Industry Average

2006 0.31 times 0.92 times

2007 0.32 times 1.01 times

2008 0.60 times 1.49 times

2009 0.49 times 1.24 times

1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2006 2007 2008 2009 Industry A verage Jeem a

The Total Asset Turnover has increased for Jeema Mineral Water from 2006-2008 and is less in 2009 compared to the Industry Average.

Debt to Total Asset Jeema Industry Average

2006 8.44% 28.34%

2007 7.97% 29.06%

2008 22.91% 37.28%

2009 34.73% 33.36%

40 35 30 25 20 15 10 5 0 2006 2007 2008 2009 Jeem a Industry A verage

The debt to total assets is high in 2009 and from 2008-2009 for the company. This shows us that there is a high usage of debt which in turn increased the return of equity increasing the return on assets. In 2007 the company has less Return on Equity because of low asset turnover Looking at the debt to total assets during 2006 2009, return on equity for the industry average has increased which indicates high debt usage hence increasing the return on equity which increased the return on assets. Jeema Mineral Water had a poor Return on Equity in 2007 because of poor asset turnover ratio. When we compare the company with the industry average we can see that the Debt to Total Asset is increasing during 20062008 for the company and the industry average. This shows that there is a high risk in the operations which leads to less borrowing capacity of funds and decreases the financial elasticity.

B. Asset Utilisation Ratio Asset Utilisation ratio, helps us calculate the speed at which a firm turns over its account receivables, inventory and long term assets. Asset utilisation ratio helps us to know the efficiency of the firm in using its assets to generate sales, inventory management and the credit policy of the company. Asset utilisation is calculated by using the below equations. The ratios predict the companys ability in utilizing its assets. 1. Receivables Turnover Receivables Turnover = Sales/ Accounts Receivables Receivable Turnover indicates how good the company is in managing its receivables. It also tells us about the credit policy of the company to collect its receivable .This ratio shows how efficient the company is in collecting its payments. Higher the value better the companys ability in collecting payments

Receivables Turnover Jeema Industry Average

2006 3.54 times 4.35 times

2007 3.79 times 4.33 times

2008 3.39 times 6.90 times

2009 4.40 times 8.11 times

9 8 7 6 5 4 3 2 1 0 2006 2007 2008 2009 Jeem a Industry A verage

The Receivables Turnover of Jeema Mineral Water from 2006 2008 decreased due to the decrease in the collection of the receivables. Jeema Mineral Waters Receivables Turnover are less when we compare it with the Industry Average which indicates that the company had difficulty in collecting back the money from the market, while for the industrys credit policies were really strong and didnt find it difficult to collect back the money from the customers. ii) Average Collection Period Average Collection Period shows the period or time a company takes to collect its receivables from the customer. Due to the huge transaction, companies used to do the credit transaction with the customer, the main problem in this credit transaction is the time of repayment. Less average collection period is the best as the company does not take much time to collect its receivables. This ratio indicates the average time the company takes in receiving payments. A low average collection period is always good for the company Average Collection Period =365 / Receivable turnover

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Average Collection Period Jeema Industry Average

2006 103.19 days days

2007 96.33 days days

2008 107.82 days 61.45 days

2009 82.86 days 50.56 days

88.86 86.14

10 2 10 0 8 0 6 0 4 0 2 0 0 20 06 20 07 20 08 20 09 J eem a In u try ds A vera e g

The Average Collection Period of Jeema Mineral Water is fluctuating from 2006-2009. When we compare it to the industry average, the average collection days is less for the industry than for the company during the years 2006-2009, since the industry has a decrease in the accounts receivable and was efficient and fast in collecting back the accounts receivable. The average collection period was highest for the company in 2008 which indicates to us that the company was slow in collecting back the receivables from the clients. In order for the company to be successful the company has to reduce the receivables by finding ways to increase the speed of receivables collection.

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iii) Inventory Turnover Inventory turnover shows how good a company is in generating sale by using its inventory. A low inventory turnover shows poor sales which leads to an increase in the excess inventory being unsold this ratio gives the ability of the company to turn over the inventory to sales. A low value indicates poor inventory turnover and the company will be having dead stock in the form of inventory. Alternatively a high inventory turnover shows the stability of the company in utilizing its inventory. (http://www.answers.com/topic/inventory-turnover) Inventory Turnover is calculated by Inventory Turnover = Sales/ Inventory

Inventory Turnover Jeema Industry Average

2006 8.60 times 6.58 times

2007 5.50 times 6.97 times

2008 4.71

2009 5.94

times times 8.21 8.03 times times

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1 .0 0 0 8 0 .0 6 0 .0 4 0 .0 2 0 .0 0 0 .0 20 06 20 07 20 08 20 09 J eem a In u try ds A vera e g

The inventory turnover for the industry average is increasing from 2006-2009 compared to the company. This means that industry during the period was having strong sales and was efficient in controlling the cost of production. The industry average sold many goods and was good in managing the inventory. The inventory turnover has decreased from 2006-2008 for the company. This shows that the sales were less over this period and that the company was finding it difficult to control the cost of production. The companys inventory turnover also reduced during this period, hence the number of goods sold were less.

iv)

Fixed Asset Turnover

Fixed Asset Turnover tells us how good a company is in using its fixed assets (property, plant and machinery] to generate sales. Low fixed asset turnover shows the firms inefficiency in using the fixed assets for the operations this indicates the efficiency and capability of the company to utilize its fixed assets like machinery; property to create more revenue in the form of sales. A high fixed asset turnover is always a good sign for the company and indicates its operational stability. (http://www.answers.com/topic/fixed-asset-turnover)

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It can be calculated by Fixed Asset Turnover = Sales/ Fixed Assets

Fixed Asset Turnover Jeema Industry Average

2006 0.42 times 2 times

2007 0.41 times 2.62 times

2008 0.98 times 3.92 times

2009 0.68 times 3.1 times

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2006 2007 2008 2009

Jeem a Industry A verage

Jeemas fixed asset turnover was less when we compare it to the industry average which means that the company isnt efficient in controlling its fixed asset so as to gain efficient revenue. For both the industry average and for the company we will be able to notice that the fixed asset turnover is increasing hence denoting fixed asset usage efficiency.

v) Total Asset Turnover This indicates the efficiency and capability of the company to utilize its total assets to create more revenue in the form of sales. A high total asset turnover is always a good sign for the company and indicates its operational stability.

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It is calculated by Total Asset Turnover = Sales/ Total Asset Turnover

Total Asset Turnover Jeema Industry Average

2006 0.31 times 0.92 times

2007 0.32 times times

2008 0.60 times 1.01 1.49 times

2009 0.49 times 1.24 times

1 .6 1 .4 1 .2 1 0 .8 0 .6 0 .4 0 .2 0 20 06 20 07 20 08 20 09

J eem a In u try ds A vera e g

The total assets turnover is increasing during the period 2006-2009, which means that the company has high total assets efficiency resulting in high revenue from sales because of high resource efficiency, The industry average was increasing from 2006-2008 and then started decreasing in 2009.

C. Liquidity Ratio

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Liquidity Ratio shows the companys ability to pay off its short term obligations in case of liquidation .High liquidity ratio means the company is in safe position to liquidate and company can pay off its all short term debts. These are important ratios for investors as this shows the current position of the company to pay of its immediate debts. (http://www.answers.com/topic/liquidity-ratio) i) Current Ratio Its calculated using the formula given below. A higher current ratio is good as indicates the ability of the company to pay offs its current liabilities. Current Ratio = Current Asset/ Current Liabilities

Current Ratio Jeema Industry Average

2006 3.30 2.20

2007 3.06 2.18

2008 1.81 1.63

2009 1.24 1.79

3.5 3 2.5 2 1.5 1 0.5 0 2006 2007 2008 2009 Jeem a Industry A verage

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The current ratio of Jeema Mineral Water has decreased from the year 2006-2009, which indicates to us that company cant liquidate its assets resulting in the company becoming risky. The industry average has also decreased from 2006-2008 and then increased in the year 2009 which indicates that the industry is becoming less risky.

ii) Quick Ratio It is calculated using the below formula. It is important for investors as this gives the current ability of the company to manage its liabilities. Higher the ratio better for the company. This is called the acid test ratio as it shows the company ability to pay back short term obligations .Inventory is excluded in this, because some companies will find hard to liquidate the inventories Quick Ratio = (Current Assets Inventories)/ Current Liabilities

Quick Ratio Jeema Industry Average

2006 2.82 1.52

2007 2.25 1.41

2008 1.22 1.06

2009 0.86 1.11

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3 2.5 2 1.5 1 0.5 0 2006 2007 2008 2009 Industry A verage Jeem a

The quick ratio for Jeema Mineral Water has decreased from 2006-2009, hence indicating the difficulty for the company to liquidate but for industry average in the year 2009 liquidating is easy. If we compare the company with the industrial average we can see that the industrial averages quick ratio is much less than the company. The ideal quick ratio should be 1. If the quick ratio is high it means that the organization can liquidate fast its short term assets. D. Debt Utilisation Ratio The Debt Utilisation Ratio gives the overall debt position of the firm in terms of assets, which means the ability of the firm to meet its financial leverage. Debt Utilisation ratio helps to measure the exact risk of debt of a company based on assets. This ratio is used to identify the potential risk for the company based on the debts of the company. i) Debt to Total Assets This ratio gives an indication of the companys debt compared to the total assets. Low ratio shows a stable operation compared to higher value. A high value means the company is risky.

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Debt to Total Assets Jeema Industry Average

2006 8.44% 28.34%

2007 7.97% 29.06%

2008 22.91% 37.28%

2009 34.73% 33.36%

4 0 3 5 3 0 2 5 2 0 1 5 1 0 5 0 20 06 20 07 20 08 20 09 J eem a In u try ds A vera e g

The debt total assets for both the industry average and the company are increasing from the year 2006- 2008, which indicates to us that both of them rising debt structure depending on the companys debt and is less risky. If we look at the diagram and the table we can find out that the industry average has higher debt to total assets in 2008 which means higher risk with the operations resulting due to the small borrowing funds capacity. Higher debt total assets ratio lowers the financial elasticity of the organization. The investors wouldnt be attracted to the company because of less debt to total assets ratio. ii) Times Interest Earned Times Interest Earned is the companys ability to pay off its debt payments. Higher the value better is the companys ability to pay its debts. (http://www.investopedia.com/terms/t/tie.asp)

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It is calculated by Times Interest earned = Earnings before Interest and Tax (EBIT)/ Interest

Times Interest Earned Jeema Industry Average

2006 68.82 times 21.36 times

2007 43.41 times 15.73 times

2008 14.73 times 9.74 times

2009 59.21 times 37.39 times

8 0 7 0 6 0 5 0 4 0 3 0 2 0 1 0 0 20 06 20 07 20 08 20 09 J eem a In u try ds A vera e g

The number of times interest earned for Jeema Mineral Water and the industry average decreases from 2006-2008 which indicates that there is a decrease in the ability to pay off its debt payments. In the year 2009 we can see that the number of times interest earned has increased.

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iii)

Fixed Charge Coverage

This indicates the ability of the company to meet all its fixed obligations other than interest payments .It indicates the times the company has earned interest before tax .It also helps in finding out how many times the companys cash flow covers fixed charges. It is calculated by Fixed Charge Coverage = Income before fixed charges and taxes / Fixed charges

Fixed Charge Coverage Jeema Industry Average

2006 1.98 times 3.55 times

2007 3.17 times 4.24 times

2008 -5.31 times 0.68 times

2009 12. 34 times 11.82 times

14 12 10 8 6 4 2 0 -2 -4 -6 -8

Jeem a Industry A verage 2006 2007 2008 2009

The Jeema Mineral Waters and the industry averages fixed coverage has increased from 2006 -2007 and then it drooped in 2008 which indicates that the interest earned before tax

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was less. In the year 2009 fixed charge coverage started increasing again for both the industry average and the company OVERALL RATIO ANALYSIS

2006 Jeema Mineral Water Profitability Ratio Profit Margin Return on Assets Return on Equity Asset Utilization Ratios Receivables Turnover Average Collection Period Inventory Turnover Fixed Asset Turnover Total Assets Turnover Liquidity Ratios Current Ratio Quick Ratio Debt Utilization Ratio Debt To Total Assets Times Interest Earned Fixed Charge Coverage 8.44% 68.82 times 1.98 times 28.34% 21.36 times 3.55 times Below Average Good Below Average 3.30 2.82 2.20 1.52 Average Average 3.54times 103.19days 8.60 times 0.42 times 0.31 times 4.35 times 88.86 days 6.58 times 2 times 0.92 times Average Below Average Average Below Average Below Average 16.67% 5.24% 5.72% 7.29% 4.12% 5.86% Good Average Below Average Industry Average Comments

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2007 Jeema Mineral Water Profitability Ratio Profit Margin Return on Assets Return on Equity Asset Utilization Ratios Receivables Turnover Average Collection Period Inventory Turnover Fixed Asset Turnover Total Assets Turnover Liquidity Ratios Current Ratio Quick Ratio Debt Utilization Ratio Debt To Total Assets Times Interest Earned Fixed Charge Coverage 7.97% 43.41 times 3.17 times 29.06% 15.73 times 4.24 times Below Average Good Below Average 3.06 2.25 2.18 1.41 Average Average 8.64% 2.77% 3.01% 5.38% 4.37% 7.22% Average Below Average Below Average Industry Average Comments

3.79 times 96.33 days 5.50 times 0.41 times 0.32 times

4.33 times 86.14 days 6.97 times 2.62 times 1.01 times

Below Average Below Average Below Average Below Average Below Average

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2008 Industry Jeema Mineral Water Profitability Ratio Profit Margin Return on Assets Return on Equity Asset Utilization Ratios Receivables Turnover Average Collection Period Inventory Turnover Fixed Asset Turnover Total Assets Turnover Liquidity Ratios Current Ratio Quick Ratio Debt Utilization Ratio Debt To Total Assets Times Interest Earned Fixed charge coverage 5.22% 3.11% 4.03% 3.39 times 107.82 days 4.71 times 0.98 times 0.60times 1.81 1.22 22.91% 14.73 times -5.31 times Average 8.81% 6.8% 18.33% 6.90 times 61.45days 8.21 times 3.92 times 1.49 times 1.63 1.06 37.28% 9.74 times 0.68 times Comments Below Average Below Average Below Average Below Average Below Average Below Average Below Average Below Average Average Average Below Average Good Below Average

2009 Jeema Mineral Water Profitability Ratio

Industry Average

Comments Below

Profit Margin Return on Assets

7.14% 3.55%

9.23% 12.14%

Average Below

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Average Below Return on Equity Asset Utilization Ratios Receivables Turnover Average Collection Period Inventory Turnover Fixed Asset Turnover Total Assets Turnover Liquidity Ratios Current Ratio Quick Ratio Debt Utilization Ratio Debt To Total Assets Times Interest Earned Fixed Charge Coverage 5.45% 21.07% Average Below 4.40times 82.86 days 5.94 times 0.68 times 0.49 times 8.11 times 50.56 days 8.03 times 3.1 times 1.24 times Average Below Average Below Average Below Average Below Average Below 1.24 0.86 34.73% 59.21 times 12.39 times 1.79 1.11 33.36% 37.39 times 11.82 times Average Below Average Average Good Average

Horizontal Analysis Horizontal analysis is a straightforward method for analysing financial statements and is used to evaluate the trends in the accounts over the years. It is calculated by Horizontal Analysis= (Current year amount Last year amount)/Last year amount

Horizontal Analysis for Income Statement

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2006 - 2007 Sales Cost of Goods Sold Gross Profit General Administrative Expense Operating Profit Income from Investment Interest Revenue Other Income Finance costs Net Profit 30.29% 1.84% 54.75% 59.03% - 97.61 -68.64% -16.73% 2.87% 7.95% 32.49%

2007-2008 28.03% 15.10% 51.94% 13.39% -563.26% -43.99% -97.73% 17.37% 139.02% 22.61%

2008-2009 14.11% 21.31% 4.03% 55.63% 55.63% 105% -3.19% -59.54% -92.08% 56.07%

Jeema Mineral Waters sales have decreased and the cost of goods sold has increased, resulting in the decrease of gross profit. The operating profit and the general administrative expense and net profit are fluctuating from 2006 2009. In the year 20062008 we can see that the net profit is decreasing which indicates to us that the company wasnt having a proper management of the inventory. When we were calculating the net profit or loss, tax wasnt taken into consideration as Dubai doesnt levy tax. .

Horizontal Analysis of Balance sheet 2006 -2007 ASSETS Current Assets Cash and bank Accounts and other receivables Inventories Total Current Assets -289.20% -32.16% 103.61% 11.95% -93.29% 73.00% 49.66% 23.06% 17.65% 2.82% -9.57% -1.11% 2007-2008 2008-2009

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Non Current Assets Investments available for sale Property, plant and equipment Long term payment Total Non Current Assets Total Assets LIABILITIES Current Liabilities Accounts and other payables Total Current Liabilities Non Current Liabilities Employees end of service benefits Total Non Current Liabilities Total Liabilities Equity Legal Reserve Investment Revaluation Reserve Retained Earnings Total Shareholder's Equity Total Liabilities and Shareholder's Equity 19.35% 19.35% 20.84% 4.27% 74.04% -1.41% 28.41% 27.75% 5.65% 5.65% 98.04% 3.17% -80.84% -5.60% -42.23% -31.04% 40.61% 40.61% 119.880% 4.79% 54.86% 28.69% 15.60% 38.40% 7.79% 20.84% 51.28% 108.44% 7.24% 47.46% 33.03% 27.75% -46.26% -31.04% 47.70% -1.02% -63.22% 5.69% 20.92% 117.75% -4.34% 62.86% 38.04%

The horizontal analysis of balance sheet indicates that the total assets are fluctuating from the period 2006-2009. Liabilities have increased during this period because of high debt. Shareholders equity is also fluctuating during this period, indicating to us that the shareholders were getting profit only in the year 2006-2007 due to the mismanagement of sales and inventory. This problem affected the whole profit of the company. Trend Analysis

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Trend analysis helps us to predict the future based on the past data. Trends are divided into three types: short term, intermediate and long term. This report looks at the future of the company based on long term trends. (http://www.investopedia.com/terms/t/trendanalysis.asp) Its calculated by Trend Percentage = (Current Year Amount/ Base Year Amount)*100 The base year 2006 is used to compare how the company has performed through the years.

Trend Analysis on Ratios

Trend Analysis on Ratios Ratios 2006 2007 Profitability Ratio Profit Margin 100% 51.82% Return on Assets 100% 52.86% Return on Equity 100% 52.62%

2008 31.31% 59.35% 70.45%

2009
42.83% 67.74% 95.27%

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Asset Utilisation Ratios Receivables Turnover Average Collection Period Inventory Turnover Fixed Asset Turnover Total Assets Turnover Liquidity Ratios Current Ratio Quick Ratio Debt Utilisation Ratio Debt To Total Assets Times Interest Earned Fixed Charge Coverage 100% 100% 100% 100% 100% 100% 100% 100% 100%
100% `

107.06% 93.35% 63.95% 97.61% 103.22% 92.72% 79.78% 94.43% 63.07%


160.10%

95.76% 104.48% 54.76% 233.33% 193.54% 54.84% 43.26% 271.44% 21.40%


-268.18%

124.29 % 80.29% 69.06% 161.90 % 158.06 % 37.57% 30.49% 411.11 % 86.03% 625.75 %

i) Profit Margin
120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2006 2007 2008 2009 P rofit Margin

From the above table its clear the profit margin was the highest for 2006 and from their there was a decline in 2007 and 2008 which was not a good sign. However the profit margin shows a recovery in 2009.

ii) Return on Assets

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120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2006 2007 2008 2009 Return on Assets

From the above table its clear the return on assets was the highest for 2006 and from their there was a decline in 2007 and 2008 which was not a good sign. However the return in assets shows a recovery in 2009.

3 Return on equity
120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2006 2007 2008 2009 Return on Equity

From the above table its clear the return on equity was the highest for 2006 and from their there was a decline in 2007. However the return on assets showed a good recovery in 2008 and further increased in 2009 hence indicates the strength of the company to recover from tough situations.

Assets Utilisation Ratios

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i) Receivables Turnover

140.00% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2006 2007 2008 2009 Receivables Turnover

The receivables turnover is consistent throughout and has increased in 2009.This is a positive sign for the company since it has no difficulty in getting back the money from the clients.

ii) Average Collection Period

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120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2006 2007 2008 2009 Average Collection Period

The average collection period was consistent from 2006 till 2008.However it reduced in 2009 which is good sign as the company is now fast in collecting the accounts receivables and has a stringent credit policy

iii)

Inventory Turnover

120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2006 2007 2008 2009 Inventory Turnover

The inventory turnover was highest in 2006 and since then company inventory turnover declined in 2007 and 2008.In 2009 although they increased the turnover, still lot of work has to be done to reach the level achieved in 2006 iv) Fixed Asset Turnover

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250.00% 200.00% 150.00% 100.00% 50.00% 0.00% 2006 2007 2008 2009

Fixed Asset Turnover

The fixed asset turnover was low in 2006 and 2007.However in 2008 the fixed asset turnover increased considerably. This may be because the company was efficient in utilizing the purchased assets in creating more revenue in the form of sales. This is a good sign as they need to keep this ratio high for the coming years. v) Total Asset Turnover

250.00% 200.00% 150.00% 100.00% 50.00% 0.00% 2006 2007 2008 2009 Total Assets Turnover

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The total asset turnover was low in 2006 and 2007.However in 2008 the total asset turnover increased considerably. This may be because the company was efficient in utilizing the total assets in creating more revenue in the form of sales. This is a good sign as they need to keep this ratio high for the coming years. Liquidity Ratio i) Current Ratio

120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2006 2007 2008 2009 Current Ratio

The current ratio shows a steady decline from 2006, which indicates the company inability to pay short term dues because of reduced cash flow. The ratio is lowest in 2009.The company needs to improve the current ratio to attract short term investors

ii)

Quick ratio

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120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2006 2007 2008 2009 Quick Ratio

The quick ratio shows a steady decline from 2006, which indicates the company inability to pay short term dues because of less liquidity of investments. The ratio is lowest in 2009.The company needs to improve the quick ratio to attract short term and long term investors Debt Utilisation Ratio 1) Debt to total assets
450.00% 400.00% 350.00% 300.00% 250.00% 200.00% 150.00% 100.00% 50.00% 0.00% 2006 2007 2008 2009 De bt to Total Asse ts

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The debt to total assets shows a sharp increase in 2008 and 2009 which is a worrying sign for the company and creditors. This shows the company inability to clear debts. They need to decrease this ratio in the coming years to win the confidence of creditors ii) Times Interest Earned

120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2006 2007 2008 2009 Times Interest Earned

The company times interest earned had declined from 2006 till 2008.However it increased the times interest earned in 2009 to almost the level achieved in 2006.This shows the company is recovering from the set back in 2007 and 2008. Trend Analysis using Income Statement

Particulars 2009 Sales Cost of Goods Sold Gross Profit General Administrative Expense 100% 100% 100% 100%

Trend Analysis 2008 52.52% 82.43% 96.11% 85.56% 2007 68.44% 110.32% 63.25% 274.95% 2006 36.23% 84.23% 0.71% 172.88%

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Operating Profit Income from Investment Other Income Net Profit

100% 100% 100% 100%

64.25% 48.77% 247.16% 64.07%

9.68% 87.09% 210.58% 82.79%

406.10% 277.79% 72.85% 122.65%

Degree of Operating Leverage (DOL) Leverage ratio briefing the outcome of a particular amount of operating leverage has on a company's earnings before interest and taxes (EBIT). This ratio helps us to determining the effects that a given level of operating leverage has on the earnings potential of the firm. Operating leverage uses a huge proportion of fixed costs to variable costs in the operation of the firm. The higher the value of operating leverage, the more volatile is the EBIT. It also used to calculate the most suitable level of operating leverage in order to maximize the company's EBIT. The formula is as follows:

It is calculated by Degree of Operating Leverage = % change in EBIT/ % change in Sales

Degree of Operating Leverage 2006 Jeema Mineral Water 3.01 2007 -1.05 2008 -0.67

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3.5 3 2.5 2 1.5 1 0.5 0 -0.5 -1 -1.5

DO L

2006

2007

2008

The earnings before interest and tax decreased from AED 4,907,667 in 2006 to AED 4,010,904. The sales of the company has increased from AED 29,008,528 in 2006 to AED 55,226,141 in 2009, while the degree of operating leverage has decreased from the year 2006 to 2009 from 3.01. to -0.67

Degree of Financial Leverage (DFL) DFL shows the relation ship between financial leverage and companys earning per share (EPS). Financial leverage engages in using fixed costs to finance the company, and will contain higher expenses before interest and taxes (EBIT). The more unstable is the value in earning per share results a higher degree of financial Leverage. follows: Degree of Financial Leverage = % change in EPS / % change in EBIT The formula is as

Degree of Financial Leverage 2006 Jeema Mineral Water 0.72 2007 0.97 2008 1.51

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1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2006 2007 2008 Jeema Mineral Water

Earnings per share of the company Jeema Mineral Water has decreased from 0.16 in 2006 to 0.13 in 2009. Earnings before interest and tax had decreased from AED 4,907,667 in 2006 to AED 4,010,904. The degree of financial leverage for 2006 to 2009 has increased from 0.72 in 2006 to 1.51 in 2009.

Who gets affected by the companys performance? Creditors

Creditors are the main concerned of the financial status of the company. High debt level represents low capacity to borrow money, and increased risk level of the company. We can see that the cost of goods sold has been increased; this is affected in the gross profit of the company. In future the creditors might have concern to give credit to the company and this is indicated by the liquidity ratios and inability to pay back short term dues. Customers Customers are seems to be more happy with Jeema mineral water company, because the company is giving good credit policies to customer. Stockholders

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Stockholders play a significant role in the company, because company is using shock holders money to run the business. We can see that Jeema Mineral Water Company is giving returns to the stockholders but the company should plan to give improved returns for their investments.

RECOMMENDATIONS Company should Inventory Management: The company should improve their inventory management, if they applied just in time method in their inventory management system they can meet the vendors to arrive at a just in time supply position. It will reduce the time to release goods by the suppliers against the order. Introduce new flavoured products:

Mineral water business is becoming more competitive day by day, so in addition to mineral water company should think about launching new products like soda water, flavoured water, juice items, Etc. It will help the company to increase the sales and their by a good returns to the share holder. Improve Distribution

No customer would prefer aged products, so if the company improve their distribution channel according the demand, they can distribute fresh products to their customers. It will help them to increase the sales volume.

REFERENCES

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