Accounting Financial Analysis Report

Question: Describe about the Accounting Financial Analysis Report. Answer: This assignment is based on the subject area of accounting. The assignment is divided into two parts. In the first part, the focus has been made on the preparation of adjusted trial balance, comprehensive income statement and statement of financial position for the company Weather and Sons. In the second part of the assignment, the discussion is made on the financial positions of two major airline companies in United Kingdom and that are British Airways and Ryan Air. The analysis and comparison of the annual reports and financial position of the companies are done based on the financial ratio analysis. Adjustment with the trial balance Adjusted Trial Balance Amount (in ) Amount (in ) Retained profit 88000 Sales 636000 Share capital 100000 Share premium 200000 Inventory 87000 purchases 230000 trade payables 86000 trade receivables 205000 bank 83900 Motor expenses 12987 Maintenance 12000 Salaries and wages 106000 Administration expenses 33220 Telephone 5687 Heat and light 14300 Equipment at cost 318000 Provision for depreciation equipment 45000 Motor vehicles at cost 45000 provision for motor vehicles 6000 rent 68000 advertising 19118 bad debts 3788 provision for bad debts 2000 long term loan 90000 interest 9000 equipment depreciation 47700 motor vehicle depreciation 11250 prepayments 13000 accruals 22600 Suspense 53000 Table 1: Adjusted trial balance (Source: Created by author) Preparation of Statement of Comprehensive income Statement of Comprehensive Income of Weather and Sons as on 30th June 2013 Particulars Amount () (Debit) Amount () (credit) sales 636000 Closing inventory 50000 Opening inventory 87000 Purchase 230000 Gross profit C/F 369000 Gross profit B/F 369000 Motor expenses 12987 Maintenance 12000 Salaries and wages 106000 Administration expenses 33220 Telephone 5687 Heat and light 9300 Provision for depreciation equipment 45000 Provision for depreciation motor vehicles 6000 Rent 60000 Advertishing 19118 Bad debts 3788 Provision for bad debts 2000 Depreciation on equipment 47700 Depreciation on Motor vehicles 11250 Accrual telephone 4300 Profit before interest and tax -9350 Interest 9000 taxation 18300 Net profit -36650 Table 2: Income statement (Source: Created by author) Preparation of statement of financial position Statement of Financial Position of Weather and Sons for 30th June 2016 Amounts (in ) Amounts (in ) Fixed Assets: Equipment 225300 Motor Vehicles 27750 Total Fixed assets 253050 Current Assets: Closing inventory 50000 Trade receivables 203000 Prepayment of rent 8000 Prepayment of heat and lighting 5000 Bank 83900 Total Current assets 349900 Total Assets 602950 Shareholders' fund: Share capital 100000 Reserve and surplus: Share premium 200000 Retained profit 88000 P/L account -36650 351350 Current liabilities: Trade payables 86000 Accrual tax 18300 Accrual telephone 4300 Total current liabilities 108600 Suspense account 53000 Non-current liabilities: Long term loan 90000 Total liabilities 602950 Table 3: Statement of Financial Position (Source: Created by author) This part of the study has analyzed the financial performance of the two major airline companies in UK and the companies are British Airways and Ryan Air. The analysis has been done based on the financial ratios. The data has been collected from the annual reports of the companies for 2013, 2014 and 2015. The report has mainly emphasized on three categories of financial ratios profitability ratios, liquidity ratios and efficiency ratios. The comparison between the financial performance of these two companies are stated below: Financial ratios of Ryan Air and British Airways from 2013 to 2015 Ryan Air and British Airways are the giant companies in airline industry in United Kingdom. Ryan Air has started its business in the year of 1984 and currently, the fleet size of the company is 355 (Ryanair.com 2016). On the other side, British Airways has started its business in 1974 and it is currently having 295 fleet sizes (Britishairways.com 2016). The financial ratios of the two companies are calculated as per the data available in the annual reports of the companies and stated below: Financial ratios of Ryan Air: Financial Ratios 2013 2014 2015 Operating profit ratio 14.7052 13.076 18.4453 Net profit ratio 11.6564 10.3798 15.329 Current ratio 3.00361 1.51431 0.38225 Quick ratio 3.0022 1.51321 0.38162 Receivable collection period 0.20178 0.18117 0.13557 Inventory turnover period 3.17187 1.80407 0.9721 Table 4: Financial ratios of Ryan Air from 2013 to 2015 (Source: Ryanair.com 2016) In the above table, it can be identified that the profitability of Ryan Air has increased from 2013 to 2015. In 2013, the operating profit ratio of the company was 14.7052, which increased to 13.076 in 2014 and 18.4453 in 2015. This indicates that the operating profit of the company has increased gradually. At the same time, the above table is also disclosing the fact that the net profit ratio of the company was 11.6564 in the year of 2013, which has declined in 2014 to 10.3798. However, the net profit ratio of the company has increased in 2015 by more or less 5% (Ryanair.com 2016). As per the table, the liquidity position of the company has declined during the last three years that means from 2013 to 2015. In 2013, the current ratio of the company was 3.00361, which declined to 1.51431 in 2014 and again declined to 0.38225 in 2015. The same type if result can also be identified in the quick ratio of the company. However, the efficiency ratios of the company enhanced during the last three financial years (Ryanair.com 2016). Financial ratios of British Airways from 2013 to 2015 Financial ratio 2013 2014 2015 Operating profit ratio 5.70003 8.31982 11.1533 Net profit ratio 2.46038 5.99027 22.1301 Current ratio 0.63 0.65122 0.59649 Quick ratio 0.60622 0.62704 0.57211 Receivable collection period 3.51545 4.14242 4.47675 Inventory turnover period 29.1364 32.4933 47.2833 Table 5: Financial ratios of British Airways from 2013 to 2015 (Source: Britishairways.com 2016) According to the above table, the overall financial position of British Airways was average in the last three years. The profitability of the company has increased in 2015, but the efficiency and liquidity positions of the company have moved to negative directions. The operating profit ratio and the net profit ratios of the company have increased at high rate in the last year but before that, the improvement in the profitability ratios was less (Britishairways.com 2016). Apart from the profitability ratios, the financial position of the company is also dependent on the other two ratio categories and that are liquidity ratio and efficiency ratios. The receivable collection period and inventory turnover period of the company are stating that the efficiency of the company has decreased. At the same time, the current ratio and quick ratios of the company are also disclosing the weak liquidity position of the company (Britishairways.com 2016). Comparison between the financial performance of Ryan Air and British Airways According to the above discussion, it can be stated that the financial position and performance of the two companies (Ryan Air and British Airways) were not excellent in the last three years. If the comparison is done between the financial performances of the two companies, then it can be stated that the profitability of British Airways has improved at higher rate than the profitability of Ryan Air. In Ryan Air, the operating profit ratio has been increased by more or less 4% from 2013 to 2015, whereas, in case of British Airways, the percentage increased in the operating profit ratio from 2013 to 2015 was near about 6%. Along with the operating profit ratio, the percentage increased in the net profit ratio was also high in case of British Airways. In the financial year 2015, the net profit ratio has increased by near about 17% than that of 2014. However, in case of Ryan Air, the percentage increased in the net profit ratio from 2014 to 2015 was much lesser than British Airways. The percentage increased in the net profit ratio of Ryan Air in 2015 was only 5%. These results indicate that the performance of British Airways was better than that of Ryan Air. However, Lukic (2015) mentioned that the sudden increase in the profitability of the company creates doubts in the minds of the investors regarding their companys business operations. On the contrary, Dagiliene (2015) noted that improvement in the profitability of the company helps to attract new shareholders and investors. Therefore, if the profitability of British Airways is high then it can attract more investments in the coming financial years. However, the company needs to maintain the high standard of profitability in the future years also. In case of Ryan Air, it can be stated that the company needs to improve its profitability more in order to compete with British Airways as well as the other companies in the Airline industry in UK (Arun, Almahrog and Aribi 2015). Apart from profitability, the financial health of a company also depends on its liquidity position (Uechi et al. 2015). Due to this, while analyzing the financial position of a company, it is very important to analyze the liquidity position of the organization. If the liquidity positions of British Airways and Ryan Air are compared then it can be identified that liquidity positions have been declined in both the companies. However, the rate of decline is high at Ryan Air than that of British Airways. From 2013 to 2015, the percentage decreased in the current ratio of Ryan Air was near about 3%, where as in the same time span, the percentage decreased in the current ratio of British Airways was 0.4%. It is indicating that the performance level of Ryan Air was low than the performance level of British Airways. Along with the current ratio, the quick ratios of the companies are disclosing more or less the same result during the last three years. Percentage decreased in the quick ratio of Ryan Air was near about 3%, whereas the percentage decreased in the quick ratio of British Airways was 0.3%. Therefore, it can be understood that in the last year, the performance of British Airways was better than Ryan Air in terms of liquidity, but the performance of the two companies was not of high standard. However, in 2013 and 2014, the liquidity position of Ryan Air was better than the British Airways. This indicates that Ryan Air has the capacity of quality or liquidity improvement, which the company can utilize in the coming years, if it want to sustain in the market (Garefalakis et al. 2016). Apart from the liquidity and profitability, analyzing the level of efficiency is also very important to understand the actual financial position of the company. The level of efficiency of a company can be understood with the help of the efficiency ratios of the company (Sulkava et al. 2015). In case of the Ryan Air and British Airways, the performance of Ryan Air was better than British Airways in respect to the receivable collection period. The receivable collection period of a company indicates the efficiency of the company in converting its receivables or debts into cash. If the receivable collection period of a company is less then it denotes that the company is efficient in converting the receivables into cash (Rajitha and Babu 2015). Figure 1: Receivables Collection Period of Ryan Air and British Airways (Source: Created by author) In case of Ryan Air, the receivable collection period has decreased gradually from 2013 to 2015. In 2013, the receivable collection period was 0.20178, which decreased to 0.13557 in 2015. On the other side, in case of British Airways, the receivables collection period has increased from 2013 to 2015. In 2013, the receivable collection period was 3.51545, which increased to 4.47675 in 2015. Therefore, it is very clear that Ryan Air was more efficient than that of British Airways. At the same time, it can also be said that British Airways needs to take care of the receivable collection period, so that it does not increase further. On the other hand, if the efficiency level is measured with the help of inventory collection period, then it can also be identified that the performance of Ryan Air was better than British Airways. Figure 2: Inventory Turnover Period of Ryan Air and British Airways (Source: Created by author) The inventory turnover period of Ryan Air has decreased from 2013 to 2015 but in the same time span, the inventory turnover period of British Airways has increased. This indicates that the inventory management system at British Airways was weak than that of Ryan Air during the period of 2013 to 2015. Therefore, from the overall discussion, it can be said that the financial performance of Ryan Air was better in the years of 2013 and 2014. However, in 2015, the performance of British Airways was better than the performance of Ryan Air. However, the efficiency level was always good at Ryan Air. Conclusion In this assignment, the comprehensive income statement of Weather and Sons has been prepared and it has been identified that the company has incurred loss in the financial year. On the other side, in the second part of the assignment, it has been identified that the liquidity position and the efficiency level of Ryan Air are better than that of British Airways. However, in case of profitability, the performance of British Airways was better in last three years. Reference list and Bibliography: Arun, T.G., Almahrog, Y.E. and Aribi, Z.A., 2015. Female directors and earnings management: Evidence from UK companies.International Review of Financial Analysis,39, pp.137-146. Bell, C., 2015.Generic organizational strategy integration impacts on profit margin ratio and inventory turnover in publically traded Oklahoma manufacturing organizations(Doctoral dissertation, INDIANA STATE UNIVERSITY). Bowman, D., Cai, F., Davies, S. and Kamin, S., 2015. Quantitative easing and bank lending: Evidence from Japan.Journal of International Money and Finance,57, pp.15-30. Britishairways.com. 2016. Book Flights, Holidays Check In Online | British Airways. [online] Available at: https://www.britishairways.com/ [Accessed 7 Aug. 2016]. Dagiliene, L., 2015. THE INVESTIGATION OF FINANCIAL REPORTSCOMPLEXITY IN LARGE COMPANIES.Economics and Management, (14), pp.28-32. Garefalakis, A., Mantalis, G., Lemonakis, C. and Vassakis, K., 2016. Determinants of Profitability in Aviation Industry of Europe and America.International Journal of Supply Chain Management,5(2), pp.131-137. Hancerliogullari, G., Sen, A. and Agca, E., 2016. Demand uncertainty and inventory turnover performance: an empirical analysis of the US retail industry.International Journal of Physical Distribution Logistics Management,46(6/7). Joshi, A. and VYAS, D.V., 2015. A study of liquidity ratios of selected private sector banks of India.ZENITH International Journal of Business Economics Management Research,5(5), pp.131-137. Khan, M.N. and Khokhar, I., 2015. THE EFFECT OF SELECTED FINANCIAL RATIOS ON PROFITABILITY: AN EMPIRICAL ANALYSIS OF LISTED FIRMS OF CEMENT SECTOR IN SAUDI ARABIA.Quarterly Journal of Econometrics Research,1(1), pp.1-12. Lukic, R., 2015. The Analysis of Efficiency of Managing Inventories in Trade in Serbia.Revista de Management Comparat International,16(2), p.222. Prommin, P., Jumreornvong, S., Jiraporn, P. and Tong, S., 2016. Liquidity, ownership concentration, corporate governance, and firm value: Evidence from Thailand.Global Finance Journal. Rajitha, P. and Babu, P.C., 2015. A Study on Liquidity and Profitability Position with Reference to ITL Pvt. Ltd.The International Journal of Business Management,3(8), p.98. Ryanair.com. 2016. Official Ryanair website | Cheap flights | Exclusive deals. [online] Available at: https://www.ryanair.com [Accessed 7 Aug. 2016]. Sulkava, M., Sepponen, A.M., Yli-Heikkil, M. and Latukka, A., 2015. Clustering of the self-organizing map reveals profiles of farm profitability and upscaling weights.Neurocomputing,147, pp.197-206. Uechi, L., Akutsu, T., Stanley, H.E., Marcus, A.J. and Kenett, D.Y., 2015. Sector dominance ratio analysis of financial markets.Physica A: Statistical Mechanics and its Applications,421, pp.488-509. Accounting Financial Analysis Report Question: Discuss about the Accounting Financial Analysis Report. Answer: Introduction Union Cement Company is the foremost producer of cement that had established in the United Arab Emirates in the year 1972. The company is PSC, a publicly quoted firm that has been engaged in manufacturing and marketing of different varieties of Portland cement. It distributes and sells across the world by way of direct selling[1]. The company is engaged in the process of manufacturing, marketing and distribution for different oil-well cement products and kinds of Portland across the UAE. The production plan of the company is situated at Khor chair located at Ras Al Khaimah Emirate. Stocks of corporate entity are listed on Abu Dhabi securities exchange. The report herein presents the financial positioning of the company for the year 2015 in comparison to the year 2014. On the basis of ratios ascertained a detailed analysis of directors report has been made further highlighting the financial status of the company. Moreover, the quality of earning of company and evaluation of statement of cash flow is done to assess the credentials of the company. The professional comparison is made with critical arguments by undertaking a group as a benchmark and lastly through the evaluation of assessment recommendation is to be served. Director report Directors report is a document, which enlists details about the company state and its compliances with a brief on the financial, accounting, and corporate social responsibility standards followed by the company. The board of directors of Union has sanctioned and reviewed the performance of Union Cement Company (PSC) by undergoing through its consolidated statements as of 30th June 2015, reflecting the financial position of the company and its subsidiaries (together signifying the Group). The abridged consolidated statements for six months period are issued comprising of its overall as well as comprehensive income, variations in equity and cash flows. As per the reports, there is a clear declaration that the financial information stated and prepared considering all material concerns and in accordance with the International Financial Reporting Standards (IFRS) complying with the Interim Financial Reporting[2]. The directors report does not serve full financial statement details but rather presents the results ascertained from them. Thus, presenting fair and all material statements. The contrast between financial statements of the year 2015 with the year 2014 is made. The company records as per director's report showcase consolidated sale revenue of AED 640.472 million through the year 2015 in comparison to AED 548.322 million for the same period in the year 2014. The results are clearly indicating a rise in the cost of sales by a ratio of 14.94%; further Gross profit is realised by AED 160.205 then to AED 130.486 million. Moreover, the Operating profits recorded in the year 2015 are AED 95.121 M compared to AED 71.307 M for the year ended 2014. The ratios ascertained vividly provides positive rise showcasing enhancement in their overall level of performance. Net consolidated profits that are realised during the period 2015 amounts to AED 103.671 M than AED 84.842 M meanwhile the net profit is attributable towards the shareholder of the company in the year 2015 amounted to AED 95.410 M than the AED 76.098 for a similar time period of the year 2014. Thus, increasing the EPS (Earning per share) from 0.11 AED in 2014 to 0.14 AED for the same period in the year 2015. Further, the shareholders are paid dividend amounting to 10% of the paid-up capital which amounted to AED 66.944 million for the year 2014. Thus, it can be seen from the directors report that the state of the company is progressive and it is keeping up the pace to satisfy its stakeholders with positive increment in the overall profits of the company. It serves to provide maximum benefit to its shareholders by giving an increasing dividend per year and the rise in overall earning per share of the shareholders in accordance to the directors report. Thus it further puts through the operating and financial review of company setting out the information of the potential areas of market and structural capacity of company to expand as well as exploit the new opportunities. The directors report states the long-term interest of shareholders, employees, community etc. Company surpass the needs of stakeholder by meeting its interest implying that it upkeeps to satisfy them by passing on the benefit of good performance. It assures to put through good statics of company through support from the company stakeholders. Effective directors report enhances interest and perspective of stakeholders towards the company. The positive balance in directors report and further sharing of profits amongst the shareholder's repose confidence in them towards the company. Moreover, stakeholders perceive the consistent company growth through such positive profit ratios and facilitate them to make a constructive investment in them. Information provided in the directors report of the company is viable to the financial statement as its summaries entire financial aspects in an effective manner. By considering the provided information, stakeholders will be able to have a brief overview of financial performance along with considering their future prospects in order to make rational decisions related to business. Lastly it is imperative for company to maintain its business reputations and this indeed is done through directors report, which helps in promoting the success of the company. But on the contrary it can be seen that the directors reports doesnt relocate or describe the principle risk and uncertainties that are being faced by the company. Additional matter for concerns should be included in directors report that holds more of strategic importance to the organization. While it is of significant importance that the business covers up within its report the areas of opportunity and investments it seeks to exploit in near future. It can be seen that a comprehensive balance sheet analysis of company performance has not been expressed in full. The content and quality is dependent on how does the directors report effectively communicates with shareholders about the promotion as well as success of the company. The report is focused towards past information only and no future prospects are being communicated. According to, it is of paramount importance to deliver the strategic aims and objectives KPI (key performance indicators) that shall be helpful in communicating deals to is stakeholders to measure progress against the current achievement with future accomplishments. The director report should include a brief discussion of future developments and its impact on the current performance and strategy of company. Quality of Earnings and Earning Sustainability. Revenue and Profitability analysis Table 1: Revenue and profitability analysis of past three years 2015 2014 2013 Revenue 640,472,000 100% 640,472,000 100 640,472,000 100 Gross profit 160,205,000 25% 130,486,000 23.8% 103,414,000 19.58% Profit for the year 103,671,000 16.2% 84,842,000 15.5% 50,868,000 9.63% Sales Growth 25% 24% 20% Return on Sales 16% 15% 10% Return on Assets 8% 6% 4% Figure 1: Revenue and profitability of past three years Figure 2: Revenue and profitability analysis of past three years In reference to the financial data served by the company, a clear comparison and revenue analysis of company can be drawn. The Gross profit indicates about the company revenue it earns after deducting the expenses associated with such revenue. As per the trend is shown in the above table, it can be seen that the revenue is consistent and gross profit calculated on such revenue is progressive[3]. Similarly looking at the profit for the year is also increasing with every consecutive year. The sales growth is rising, and so is the return on such sales. In tune with all the rising ratios signifying progressive growth, the Return on Assets is also mounting depicting the uprising state of the company. Technologies used in production Union Cement Company is one of the largest cement production company across the entire gulf region. They serve diversified cement production capabilities such as Oil Well Cement, Sulphate Resistant cement, Moderated Sulphate Resistant Cement and Ordinary Portland Cement. To meet the customer demands it also serves blended cement as its plants are well equipped with the own art of technology for enhanced production process. The company has erected and commission technology and project designing from international IHI, Japan and CMEC China. The plan installed in the Middle East has an over the capacity of 10000 TPD and hold competence to produce up to 12000 TPD. The factory makes use of the latest Japanese Process technology for the most effective and modernised process[4]. Company to serve the best possible quantity with quality to the consumers installs the best of Equipment. Such equipment is large and ensure optimum utilisation of resources serving utility products. Customer enrichment is also one of the key factors that are looked upon by the company serving as per convenience blend of cement products with the 100% quality assurance. Quality and Standards Since 1980, the production and manufacturing process is done keeping in mind the customer requirements and quality. The company mission is to attain complete customer satisfaction by serving best in class product and services that meet up their expectations and requirements. UCC has obtained ISO 9000 certification as being the first cement manufacturer in the Middle East[5]. Company for at par quality excellence and world-class competencies also obtains API (American Petroleum Institute) Q1 certification. This Q1 system certification is provided for organisation Quality Management System. Moreover, the ISO 9000 certification is also obtained by the organisation in 2000 towards its dedication for environmental management system. The organisation key focus is on enabling and enriching the client by overall improvement in organisation performance to gain the best market positioning Innovation and customer satisfaction With the increasing competition in the market, organisation are striving to attain greater innovation in their product and services. UCC has effectively realised the significance of Product Innovation that can help in sustaining its growth. Based on the facts of the company it seeks to make both social and technical quality management along with innovation[6]. The product innovation has helped it in providing the customer's specialised product and services with efficacy. The technical improvements made by the company are to an extent to which its plant products are framed to reduce complication in manufacturing. Moreover, to also reduce its impact on ecological footprints UCC has involved into renewable energy and efficiency solutions. Cement plant of the Union Cement Company, in Ras Al Khaimah, UAE has CDM project which involves installation of a system through waste heat recovery can be made by generation 82 MWH of zero emission electricity each year. Thus it has been both social and technically innovative company. Conclusion and Earning Sustainability The progressive trend in the profit ratios showed above it can be seen that company is moving forward and not stagnant or downward graph scale. Thus, if the trend would have been irregular then there would have been uncertainties in earning sustainability but since it is clear from the above ratios that the growth is consistent and unwavering ensuring positive earnings in future[7]. The product innovation has also further seen to provide competitive edge across the entire Middle East. Since, the investors are keen towards ascertaining the valuation ratios and comparing them across the companies it is important that company should look on to maintaining the sustainability of company earnings. It can be seen that currently the Union Cement Company is having positive earnings, which are not uncertain rather it is growing across the consecutive year. This increases the possibility of company to maintain this growth in future as well. The continual increment in earning should be maintained and must be competitive to achieve a positive earning sustainability of company. It can be seen that the ratios stated has helped investors in assessing the extent to which the firms reported earning are free from any errors or maneuverings reflecting the quality of firms earnings. Evaluation of Cash Flow Statements of Union Cement Company Cash flow from operating activities. While analysing the cash flow statements many ratios provide indicators to measure the company's quality of investment[8]. Investors often track these performance indicators to detect the ability of the company to convert sales into cash. Thus it is a good sign that the companys cash flow from operating activities has been increasing annually. The Cash flows from operations of a company mainly measures the cash-generating abilities from operating or current assets[9]. The net cash from operations reflects the amount of money that flowed into the business during the year less depreciation, and other non-cash charges. Table 2: Statement showing Cash flow from operating activities Particular Formula for the calculations 2013 2014 2015 Net sales to Operating Ratio Net Operating cash flow/ Net sales 4% 4.5% 1.57% Free Cash Flow Net operating cash flows capital expenditures (907278) (862970) (817470) Free cash flow coverage Free cash flow/ operating cash flow (6.99) (7.16) (5.80) Analysis of the Above Ratios It can be observed that in the year 2015 the net sale to operating ratio was significantly low as compared to the previous two years. However, the cash flow from operational activities and the profit was the highest in 2015. Thus it is good sign that the companys cash flow from operating activities has been increasing annually[10]. Thus a low net sale to operating ratio is to a worrisome indicator for the company. Union cement has a consistent negative free cash flow which indicates that the company is not capable of generating sufficient cash to support the business. Particular 2013 2014 2015 Cash flow from operating. 129634 120476 140832 Net cash flow from investing activities (3,340) (13,955) 16664 Net cash flow from Financing Activities (87186) (100930) (81232) Analysis of the cash flow statements The cash flows from the operating activities were the highest in the year 2015.Union Cement has constantly negative cash flows from the investing activities in the year 2013 and 2014. The reason behind these negative cash flows might be that the company is reinvesting its capital by at least the rate of depreciation[11]. Thus, it is not always bad to have a negative cash flow from investing activities. Nevertheless it may need further evaluations in detail before the final conclusion is drawn from the company's investing activities. However, in the year 2015, the company had inflow of cash from the investing activities. The reason behind such cash flow can be the proceeds from the disposal of fixed assets, investment instruments sale, and the proceeds from the collection of loans and insurance. The cash flow from financing activities was much higher in 2015 at 161034. The cash flows from the year 2013 and 2014 were 81553 and 87144, respectively. Figure 1: Cash Flow from Operating Activities for the Year 2013, 2014 and 2015 Figure 2: Cash Flow from investing and Financial Activities for the year 2015, 2014 and 2013. Assessing the Financial Credit Quality Before investing into debt security of company, investors always determine the entitys capability to meet its financial obligations. Independent and objective assessments of companies help investors to decide the risk of a particular security. For the purpose of judging the investment quality of a bond or mutual fund, credit quality is considered to be the primary criteria [12]. This aspect reports the investors the credit worthiness of the company and risk of default[13]. Thus gaining insight into investment environments is very important to understand the risks and advantages associated with the investment. For this purpose essential tools known as credit ratings aids in making investment decisions Professional Ranking Comparison of Union Cement Company with its competitors and Industry Table 3: Comparison of Union Cement Company with its competitors and Industry Union cement Gulf National cement RAK Industry average Revenue 640,472,000 612,26,174 261,541 335,174,306 46,24,03,370 Gross profit 160,205,000 97,493,467 39,800 51,404,871 8,72,25,834 Profit for the year 103,671,000 71,439,530 93,530 15,536,581 7,10,44,277 Sales Growth 25% -22% 14.56% -17.61% Return on Sales 16% 8.57% 2.8% 21.57% 15.36% Return on Assets 8% 4.94% 5.55% 1.36% 4.68% Operating cash flow 140,832 122,562,13 (39,981) 23,561,059 Financing cash flow (83,606) (84,071,65) (117,327) (81,028,238) Investing cash flow 16,664 63,177,638 108,794 47,937,862 Ranking of company in accordance with their performance Table 4: Ranking of company in accordance with their performance Union cement Gulf National cement RAK Revenue I II IV III Gross profit I II IV III Profit for the year I II IV III Sales Growth I IV II III Return on Sales II III IV I Return on Assets I III II IV Operating cash flow III II IV I Financing cash flow IV II III I Investing cash flow IV I III II Analysis Return on sales Return on sales is also termed as operating margin. This financial ratio evaluates the efficiency with which a company generate profits from its revenue. It evaluates the performance of the company by calculating what percentage of total earnings is converted into profit[14]. The same is used for comparing the performance of the company with its competitors and industry as well; so that appropriate measures can be taken for improvement. In accordance with the analysis of data of average industry return on sales is 15.36% but the return on sales for Union Cement Company is 16% which is higher in comparison with industry, but still, it is not the highest among four companies. RAK has been provided with the first rank as it is having the highest return on sales 21.57 %[15]. Thus, it can be concluded that even after having highest revenue the company is not able to maximum profit. Efforts should be made to improve the percentage by using more financial leverage, maximising profit margins, distributing idle cash at available investing opportunities, etc. Return on Assets Average Industry rate for return on asset is 4.68%, but the present return of asset rate of Union Cement Company is 8.68%. It is just double of the existing industry ratio, which means that the company is efficiently utilising the available resources[16]. Return on asset ratio is a profitability ratio which evaluates the net income produced from total assets during a period[17]. The same is done by comparing net profit to total average assets. The objective to this ratio is to ascertain the efficiency of the company regarding the management of assets for producing a profit during a period. Union Cement Company is holding having the highest percentage of return on assets in comparison to its competitors as well as the industry average[18]. The same depicts the efficiency of the company in converting its assets into profits. Investors look out in this ratio to ascertain the return in case company invests in its own capital assets[19]. Cash flows: Cash flow statement represents the position of total cash which comes in and goes out of the company. It is different from income statement as it record transaction when they occur rather than when they accrue. It assesses the cash generated by the company during the period and provides information regarding the manner in which it is expended. Operating Cash flows: The section of operating activities represents the cash which is received by the company through sale of its products and services reduced by the cash required for making those goods sale. As per above analysis it can be observed that Union Cement Co. is holding third rank which means that it requires more cash in comparison to its competitors regarding making its goods sold. Thus, it requires improving its performance under this section. Cash flow from Investing Activities: This section of cash flow reflects the amount that is expended on capital expenditure such as purchasing new equipment or any other investment. In case the company does not utilize its available funds in appropriate manner than large amount of cash inflow is available and the same is not sustainable. It can be observed from analysis it can be concluded that the company is holding lowest ratio. By considering performance analysis of company with competitors and industry it can be noticed that Union Cement Company is performing better but they are required to work on the strategies of cash management in order to attain better liquidity position. Conclusion In accordance with the current company financial analysis, it can be concluded that the company is performing well and has outshone an increasing trend over the course of the year. The industry has been further seen to keep pace with the competitors and attain good market standing across the entire Middle East. The financial performance has indeed assisted the company in providing maximum benefit to their shareholders. The ratios ascertained to determine the revenues and profitability status of company showcase a consistent and uprising growth of the company. The quality assurance is also for company prime importance. Furthermore, Union Cement Company has focused on delivering the product and services, which is best in class to meet the client expectations. It has certified by ISO 9000 and API Q1, which showcase its expertise in meeting the quality standards. Lastly, the company being listed on Abu Dhabi stock exchange has made all attempts to outperform its competitors by adopted the latest technologies and serving all class of products. It has a credibility, which makes it a prospective venture for investors to invest in the company. References Al-Hajj, A. and Hamani, K., 2011. Material waste in the UAE construction industry: Main causes and minimization practices.Architectural engineering and design management,7(4), pp.221-235. Brigham, E. and Ehrhardt, M., 2013. Financial management: Theory practice. Cengage Learning. Chandra, P., 2011.Financial management. Tata McGraw-Hill Education. Chandrasekaran, R., Manimannan, G. and Kumar, C.A., 2013. Assessment of Top Ranking Companions Using Financial Ratios. In International Journal of Engineering Research and Technology. ESRSA Publications. Eckerd, A., 2015. Two Approaches to Nonprofit Financial Ratios and the Implications for Managerial Incentives. Nonprofit and Voluntary Sector Quarterly. 44(3). Pp.437-456. El Beblawi, H., 2010. 11 Gulf industrialisation in perspective.Industrialisation in the Gulf: A Socioeconomic Revolution, p.185. Fazli, R.F., 2015. Industrial Development in the UAE: An Ambitious but Viable Plan.Journal of West Asian Studies,12. Fridson, M.S. and Alvarez, F., 2011.Financial statement analysis: a practitioner's guide(Vol. 597). John Wiley Sons. Halim, M.S.A., Osman, O. and Haniff, M.S., 2012. Financial Ratio Analysis: An Assessment of Malaysian Contracting Firms. Journal of Construction in Developing Countries, Supp. 1. Pp.71-78. Healy, P. and Palepu, K., 2012. Business Analysis Valuation: Using Financial Statements. Cengage Learning. Healy, P.M. and Palepu, K.G., 2012.Business analysis valuation: Using financial statements. Cengage Learning. Hindy, K.T., 2012. Utilisation of controlled cement dust as a concrete material in the United Arab Emirates.Environmental Management and Health,8(1), pp.20-27. Imbabi, M.S., Carrigan, C. and McKenna, S., 2012. Trends and developments in green cement and concrete technology.International Journal of Sustainable Built Environment,1(2), pp.194-216. Lawrence, A., 2013. Individual investors and financial disclosure. Journal of Accounting and Economics. 56(1). Pp.130-147. Nahmias, S. and Olsen, T.L., 2015. Production and operations analysis. Waveland Press. Naser, K.A.M.A.L., Nuseibeh, R.A.N.A. and Al-Hadeya, A.H.M.E.D., 2013. Factors influencing corporate working capital management: Evidence from an emerging economy.Journal of Contemporary Issues in Business Research,2(1), pp.11-30. Ormiston, A. and Fraser, L.M., 2013. Understanding financial statements. Pearson Education. Rousseau, P.L. and Wachtel, P., 2011. What is happening to the impact of financial deepening on economic growth?.Economic Inquiry,49(1), pp.276-288. Russell, A., 2008. The cement industry in Europe and the Middle East: A market/technology report. Selim, T. and Salem, A., 2010. Global cement industry: Competitive and institutional dimensions. Squalli, J., 2006. A non-parametric assessment of weak-form efficiency in the UAE financial markets.Applied Financial Economics,16(18), pp.1365-1373. Strumickas, M. and Valanciene, L., 2015. Development of Modern Management Accounting System. Engineering Economics. 21(4). Taib, M., 2010. The UNITED ARAB EMIRATES.Minerals Yearbook, 2008, V. 3, Area Reports, International, Africa and the Middle East, p.50. UNDP and the United Arab Emirates to reduce Dubai's carbon footprint, 2013. [Online]. Available from https://www.undp.org/content/undp/en/home/presscenter/articles/2013/04/12/undp-and-the-united-arab-emirates-to-reduce-dubai-s-carbon-footprint.html. [Accessed on 4th February 2017]. Weil, R.L., Schipper, K. and Francis, J., 2013.Financial accounting: an introduction to concepts, methods and uses. Cengage Learning.