Tern Paper: Compare Two Companies

Kazakhstan University of Management, Economics, and st commitgic Research Bang College of ancestry MBA program Term Paper fiscal epitome of JSC Shubarkol komir and JSC sit& telephoner Prep bed by 20101675 Kim Jonghon cc91481 Nurtas Kadyrbayev Instructor M Mujibul Haque, Ph. D. Executive messagemary This paper bequeaths an comp block offium and evaluation of the rate of flow and standardizedly increase tycoon, fluidity and financial stability of JSC ShubarkolKomir and JSC sit down& social club. Methods of summary allow in trend and vertical analyses as well as dimensions such as Debt, accredited and Quick dimensions.Other unhurriednesss admit rates of return on Shargonholders bumdour and meat additions and sugar per specify aside to name a few. All calculations can be found in the appendices. The report finds the prospects of the troupe in its certain position atomic number 18 not positive. The major areas of weakness require come a wide investigation an d remedial action by management. Recommendations discussed include improving the middling collection effect for accounts receivable improving/increasing roll overthrow reducing pre hires and perhaps increasing inventory developsThe report also investigates the occurrence that the digest conducted has limitations. around of the limitations include forecasting figures are not provided nature and type of come with is not kn declare nor the reliable economic conditions schooling limitations as not enough randomness is provided or enough exposit. For example, periodic peaks not cognise results are based on quondam(prenominal) performances not present. Acknowledgement We wish to express our sincere gratitude to Dr. M. MujibulHaque, for providing us an hazard to do our project, and for guidance and encouragement in carrying out this project work.We are heartily thankful that he support from the preliminary to the concluding direct enabled us to develop and underst anding of the subject. Lastly, We cristal our regards to all of those who supported us in any respect during the completion of the project. Dr. M. MujibulHaque Professor, Dean of Bang colledge of Business KIMEP, 4 Abay Ave. Dear Dr. Haque We are submitting herewith our landmark paper authorise JSC ShubarkolKomir and JSC sit& order. The main purpose of this paper is to master a set of concept to make effective financial summary. The paper shows detail approaches and orderology which are was applied during our paper.We hope that this paper will chastity your approval. Sincerely, Nurtas Kadyrbayev Kim Jonghon Contents Title page . 1 Executive Summary 2 Acknowledgement 2 Letter of Transmittal elude of Contents . 4 give in of dactyl/ circuit boards .. 5 I. Introduction . 6 1. Objective 2. kitchen stove .. 6 3. Methodology . 6 4. Limitation 6 II. Findings and depth psychology .. 6 1. Shubarkolkomir and sit& companionship companies overview .. 7 2. Du Pont analysis . 8 3. Wo rking detonator insurance .. 9 4. cracking Structure insurance 17 5. Dividend Policy .. . 18 6. Break- up to now analysis .. 23 7. P/E symmetry analysis . 24 8. Vertical analyses . 25 9. bm analysis .. 5 III. Summary and Recommendations 33 References .. 35 Appendices .. 36 List of add-ins and Figures instrument panel 1 Du Pont analysis .. 0 Table 2 Working not prominent(p) .. 11 Table 3 Liquidity analysis .. 11 Table 4 Debt analysis .. 12 Table 5 profitableness analysis . 3 Table 6 Efficiency analysis 15 Table 7 keen structure 17 Table 8 pileusization rate 17 Table 9 Dividend insurance proportion 2 Table 10 Break-even 23 Table 11 P/E balance . 24 Table 12 Vertical analysis (Income description) .. 25 Table 13 Trend analysis (Income statement) .. 25 Table 14 Vertical analysis ( relaxation Sheet) . 6 Table 15 Trend analysis ( chemical equilibrium Sheet) . 29 Table 16 Summary 33 Figure 1 Return on fairness .. 10 Figure 2 catamenia Assets/ ingrained Assets . 11 Figu re 3 true symmetry .. 2 Figure 4 Acid-test proportionality 12 Figure 5 Debt analysis 12 Figure 6 Sales growth rate 14 Figure 7 Profitability analysis .. 4 Figure 8 Efficiency analysis .. 16 Figure 9 Dividend constitution ratios 22 Figure 10 supplement analysis 23 Figure 11 Price per helping/EPS .. 24 I. IntroductionA financial statement analysis is an important cable bodily process that helps the top management assesses the stability and dineroability of the business. It is important to carry out a financial analysis, as it enables the management to decide upon the continuation or discontinuation of a particular project and to take decisions regarding the purchase of au naturel(p) material and machinery, enthronisation fundss, lending, and so on. Financial statement analysis involves the comparison of information of one entity over different periods of time or the comparison of information of different entities during the same period.The four main statements that a re analyzed during the effect include the residuum sheet, income statement, statement of owners candor, and statement of notes flows. Based on financial statements for past three course of instructions, they are 2010, 2009, 2008 which were easy on Kazakhstan Stock Exchange (KASE) of each company, we make a financial analysis. We have applied 3 methods to evaluate the position of these companies through methods like ratio analysis, vertical analysis, trend analysis, and greenness- size analysis.Limitations of this paper that there is considerable subjectiveness involved as there is no theory as to what should be the right number for the various ratios. Further, it is hard to reach a certain(prenominal) conclusion when some of the ratios are favorable and some are unfavorable. proportions are based on financial statements that reflect the past and not the future. Un slight the ratios are durable, one cannot make reasonable projections some the future trend. Financial statem ents provide an assessment of the costs and not value. For example, the market value of items may be very different from the cost figure given in the balance sheet.II. Findings and Analysis Joint Stock ships company ShubarkolKomir is one of the producers of steam sear largest in Kazakhstan. Shubarkol (from Kazakh shubar spotty, kol the lake) spotty lake. JCC ShubarkolKomir was created by mergering of Open joint stock company Shubarkolskiirazrez and open joint stock company Shubarkolskoe transportation management. JSC ShubarkolKomir act also covers pits on exertion of a construction stone, scorch processing, cognitive operation of access roads, rail transportation, shunting works, and also production and water sale. The company managed by Board of directors.Chief executive officer setted by board of directors. Form of self-command of JSC ShubarkolKomir is private. Joint Stock caller-out SAT Komir is formed in November, 2009. endeavour primary activity is working out of coal readys. Lines of activity investigating and working out of coal deposits. Extraction and realization coal for the manufacturing and ho officehold consumption. The purposes To achieve good results in development of the coal industry. successfully to solve problems on maintenance of internal requirements of the country in unfluctuating fuel and to an exit on the world market.The company develops the Kumyskuduksky site of the Verhnesokursky deposit of brown coal in the Karaganda in the Republic of ?azakhstan. Balance stocks of a site make to a greater extent than 356 million scores of coal, from which 124,3 million tons are considered on categories, And, In and ?1. On a geological structure, harmony of capacity of layers and qualities of coal, the Kumyskuduksky site is carried to 1 group, according to classification of stocks of deposits of unfluctuating minerals. burn mining is carried out by open way, horizontal ledges with transportation of volume weight by motor transport.The project on deposit working out is made Open Company Karaganda of Hypromines and To. Till the end of 2010 it is hateful to reach extraction volumes in 1,0 million tons of coal, 2011 to leave on designed capacity of 1,5 million tons of coal of year. To in repeat mountain works additional investigation of two reserve areas representing game potential for increase of resource base is spent. Now the company realizes soaring-quality coal of marks 2B, 2BC, 3B, 3BC. The prices for production for today make 2600 tenge shipment at own expense, and 3600 tenge from the car.The flexible system of discounts, depending on volume is provided. Joint Stock Company SAT & Company aims to join the top 30 largest metallurgical holdings of the CIS in depots of market dandyization. SAT & Company JSC solves the following tasks to achieve this aim Concentrating the Groups activities in the most promising heavenss metallurgy and mining sector Launching new plants and reaching producti on capacity Supporting liquidity of The Groups additions and increasing greatization by approaching impertinent capital markets and addressing minority apportion avocation.Main activity is wholesale of anoint products, petrochemistry, metal processing, air transportation and investments in the fastest developing sectors construction, fossil oil trading, oil and gas engineering, metallurgy, petrochemistry and transport. Du Pont analysis Table 1. Du Pont analysis JSC Shubarkol komir JSC sit down&Company Du pont 2010 2009 2008 fair(a) 2010 2009 2008 median(a) authorize profitmargin 30% 25% 33. 9% 29. 6% 60% 0. 89% 43. 6% 34. 8% congeries Assetturnover 0. 67 0. 79 1. 38 0. 94 0. 033 0. 128 0. 39 0. 183667 EquityMultiplier 2. 47 2. 2 2. 5 2. 39 2. 11 1. 7 1. 48 1. 63333 ROE 49. 66% 43. 86% 117% 70. 17% 4. 17% 0. 195% 25. 23% 9. 86% Figure 1. Return on candour Return on equity measures the rate of return on the possession bet of the common stock owners. It measures a firms efficiency at generating bread from every unit of shareholders equity. ROE shows how well a company uses investment funds to generate earnings growth. On figure 1,is shown the rapid rule out of return on equity from 2008 to 2009, and from 2009 to 2010 ROE was change magnitude only for 5. 8% approximately. We can scoop that world financial crises affected to Kazakhstan at the end of 2008.All manufacturing companies were suffered callable to financial crisis. If we compare Subarkol and sit companies, sit company is more capable for generating money internally. One of the reason could be bestow plus turnover. If we look to other factors, so we can see that issue forth asset turnover of both(prenominal)(prenominal) companies are declining each year. Table 2. Working Capital JSC Shubarkol komir JSC sit down&Company Working Capital 2010 2009 2008 ordinary 2010 2009 2008 middling Current Assets/ jibe Assets 0. 14 0. 17 0. 16 0. 15 0. 11 0. 27 0. 28 0. 22 CurrentAssets/Sales 0. 21 0. 22 0. 12 0. 18 3. 22 2. 11 0. 73 2. 2 Figure 2. Current Asset/ nub asset Aggressive enthronisation Policy results in minimal level of investment in topical assets versus fixed assets. In contrast, a conservative investment policy places a greater proportion of capital in liquid assets with the opportunity cost of lesser profitability. In fix to measure the spirit level of aggressiveness, following ratio will be employ AIP = add together Current Assets/ issue forth Assets. Where sightly ratio of Shubarkol is lower than sit Company. therefore, Shubarkol Company has a relatively aggressive policy, which leads to higher(prenominal)(prenominal) adventure and higher return in comparison with Sat Company. Table 3.Liquidity analysis JSC Shubarkol komir JSC Sat&Company Liquidity analysis 2010 2009 2008 middling 2010 2009 2008 honest Current Ratio 0. 73 0. 59 0. 40 0. 57 0. 59 2. 71 2. 74 2. 01 Acid-test Ratio 0. 48 0. 41 0. 28 0,39 0. 46 2. 46 2. 5 1,80 Figure 3. Curre nt ratio Figure 4. Acid-test ratio Another besotted aspect of the companys operation is its liquidity. From sightly liquidity ratios of both companies, Sat show better result than Shubarkol, it can cover its debt even if we exclude inventory. In order to cover its current liabilities Shubarkol Company should sell out its inventory.Table 4. Debt analysis JSC Shubarkol komir JSC Sat&Company Debt analysis 2010 2009 2008 Average 2010 2009 2008 Average Leverage ratio 2. 47 2. 21 2. 54 2. 40 2. 11 1. 7 1. 48 1. 76 Total Debt ratio 0. 59 0. 55 0. 61 0. 58 0. 52 1. 41 0. 33 0. 75 Debt-equity ratio 1. 47 1. 21 1. 54 1. 40 1. 11 0. 70 0. 48 0. 76 following coverage ratio 25. 46 13. 43 31,1 23. 33 2. 34 5. 83 2. 17 3. 45 Figure 5. Debt analysis Shubarkol komir has higher leverage ratio that Sat Company, which means it has possible difficulty in compensable interest and principal while obtaining more funding. Leverage ratio=Total assets/Shareholders equity. The debt ratio gives an recital of companies total liabilities in carnal knowledge to their total assets. The higher the ratio, the more leverage the company is using and the more risk it is assuming. Both total assets and liabilities can be found on the balance sheet. The debt ratio of both companies show low level. Debt Ratio = Total debts/Total Assets The debt to equity ratio is the most popular leverage ratio and it provides detail around the tally of leverage (liabilities assumed) that a company has in relation to the monies provided by shareholders.As you can see through the formula below, the lower the number, the less leverage that a company is using. Again, like the debt ratio, we must understand the drawbacks of this formula. Totalliabilities include operational liabilities that are required to run the business. These are not tenacious term in nature and can distort the debt to equity ratio. Some will exclude accounts paymentable from the liabilities and/or intangible assets from the shareholder equ ity component. Debt to equity ratio = Total debts/total equity The interest coverage ratio tells us how easily a company is able to pay interest expenses associated to the debt they currently have. The ratio is designed to understand the amount of interest receivable as a function of companies earnings originally interest and levyes (EBIT). The interest coverage ratio is very closely monitored because it is viewed as the last delineate of defense in a sense. A company can arouse by even when it is in a serious financial deposit if it can pay its interest obligations. Interest Coverage ratio = EBIT/Interest Expense Table 5.Profitability analysis JSC Shubarkol komir JSC Sat&Company Profitabilityanalysis 2010 2009 2008 Average 2010 2009 2008 Average SalesGrowth rate 14. 7 -9. 79 66. 69 23,86 -44 -54 -24. 4 -40. 8 porcineMargin/Sales 0. 6 0. 65 0. 64 0,63 0. 04 0. 22 0. 41 0. 22 EBIT/Sales 0. 55 0. 48 0. 62 0,55 1. 29 0. 21 0. 33 0. 61 Return on investiture 0. 30 0. 25 0. 34 0,2 9 0. 93 0. 009 0. 44 0. 46 Return onAssets 0. 2 0. 19 0. 47 0,28 0. 03 0. 001 0. 17 0. 067 Figure 6. Sales growth rate Sat Companys gross sales growth rate shows bad results, it has negative rates.Figure 7. Profitability analysis The gross profit margin looks at cost of goods sold as a percentage of sales. This ratio looks at how well a company controls the cost of its inventory and the manufacturing of its products and subsequently passing play on the costs to its customers. The larger the gross profit margin, the better for the company. The calculation is taxation Profit/Net Sales. Operating profit is also known as EBIT and is found on the companys income statement. EBIT is earnings before interest and taxes. The run profit margin looks at EBIT as a percentage of sales.The direct(a) profit margin ratio is a measure of overall operating efficiency, incorporating all of the expenses of ordinary, daily business activity. The calculation is EBIT/Net Sales. In just Return on inve stment has low ratio, even if Sat companies ratio is higher than Shubarkol company. The Return on Assets ratio is an important profitability ratio because it measures the efficiency with which the company is managing its investment in assets and using them to generate profit. It measures the amount of profit earned relative to the firms level of investment in total assets.The return on assets ratio is related to the asset management social class of financial ratios. The calculation for the return on assets ratio is Net Income/Total Assets. Table 6. Efficiency analysis JSC Shubarkol komir JSC Sat&Company Efficiencyanalysis 2010 2009 2008 Average 2010 2009 2008 Average Inventory overthrow 5. 57 6. 4 9. 56 7. 17 1. 6 4. 69 7. 78 4. 69 Total AssetsTurnover 0. 68 0. 79 2. 38 1. 28 0. 03 0. 13 0. 39 0. 18 AverageCollectionperiod 1. 68 7. 29 1. 2 3. 39 3. 26 2. 91 0. 65 2. 27 AccountsPayableturnover 9. 6 17. 48 2. 17 9. 75 0. 9 2. 85 3. 13 2. 22 Figure 8. Efficiency analysis Efficiency r atios are ratios that come off the the Balance Sheet and the Income Statement and therefore incorporate one dynamic statement, the income statement and one atmospherics statement, the balance sheet. These ratios are important in measuring the efficiency of a company in either turning their inventory, sales, assets, accounts receivables or payables. It also ties into the ability of a company to meet both its short term and great term obligations. This ratio is obtained by dividing the Total Sales of a company by its Total Inventory.The ratio is regarded as a test of Efficiency and indicates the adeptness with which the company is able to move its merchandise. Shubarkol Company is able to rotate its inventory in sales in average 7. 17 times in one fiscal year. When Sat company only 4. 69 times. The total asset turnover represents the amount of revenue generated by a company as a result of its assets on hand. Formula Total Asset Turnover = Sales/Total Assets. Total asset turnover of shubarkol company is higher, thusly it has the lower the profit margins, since the company is able to sell more products at a cheaper rate.The Average collection period ratio shows both the average time it takes to turn the receivables into cash and the age, in basis of days, of a companys accounts receivable. The ratio is regarded as a test of Efficiency for a company. The effectiveness with which it converts its receivables into cash. This ratio is of particular importance to credit and collection associates. To convert its accounts receivables into cash for Shubarkol Company takes in average 3. 39 days and for Sat company 2. 27 days. The Accounts Payable turnover shows investors how many times per period the company pays its average payable amount.Thus, Shubarkols accounts payable turned over 9. 75 times and Sats 2. 22 in average during the past year. Shubarkol Company is paying its suppliers very quickly, it may mean that the suppliers are demanding very fast compensation te rms. Sat Company is paying its suppliers more slowly, and may be an index finger of worsening financial condition. Capital Structure Policy Table 7. Capital Structure JSC Shubarkol komir shares B EBIT I EBT EAT Ki EPS P Ke=EPS/P S=shares x P V=S+B 4,500 200 11,236 24 11,212 10,098 10. 8 3. 6 1,250 0. 9 5,314,500 5,314,700 3,500 300 11,236 39 11,197 10,077 11. 7 4. 6 1,181 0. 39 4,375,000 4,375,300 2,500 400 11,236 56 11,180 10,062 12. 6 6. 5 1,140 0. 57 2,850,000 2,850,400 JSC Sat&Company shares B EBIT I EBT EAT Ki EPS P Ke=EPS/P S=shares x P V=S+B 3,000 1,000 3,678 130 3,548 3,448 11. 7 0. 91 1, one hundred 0,08 3,300,000 3,301,000 2,000 1,300 3,678 182 3,496 3,366 12. 6 1. 37 1,150 0. 12 2,300,000 2,301,300 1,000 1,600 3,678 240 3,438 3,278 13. 5 2. 73 1,200 0. 2 1,200,000 1,201,600 Table 8. Capitalization rate JSC Subarkol komir Ki(B/V ) + Ke(S/V) =Ko 0. 0004 0. 29 0. 29 0. 0008 0. 39 0. 39 0. 0018 0. 57 0. 57 JSC Sat&Company Ki(B/V ) + Ke(S/V) =Ko 0. 0035 0,08 0. 0835 0. 0071 0 . 12 0. 1271 0. 0180 0. 22 0. 2380 For Shubarkol Company the optimal level of debt is 400 000 tenge, because the lowest Ko= 0. 29 and highest price is 1250 tg/share. For Sat&Company the optimal level is degree centigrade 000 tenge, where Ko=0. 0835. Dividend Policy planning on dividend policy of JSC Shubarkol Komir 1. General provisionsThe present Provision on dividend policy of JSC Shubarkol Komir is developed according to the legislation of the Republic of Kazakhstan, the Charter, the Code of corporate system of JSC Shubarkol komir and other internal documents. The purpose of the present Situation is ensuring balance of interests of union and Shareholders and a transparent approach at determination of the amount of dividend honorariums of monastic order for shareholders. The policy of orderliness is based on respect and strict solemnity of the rights of the Shareholders provided by the legislation of the Republic of Kazakhstan, the Charter of hostel and its internal docu ments.The dividend policy of order is directed on increase of welfare of Shareholders, increase of investment appeal of confederacy and its capitalization. 2. Main conditions of compensation of dividends to Shareholders 2. 1. auberge, proceeding from the size of the have give the axe profit (total profit) in a year and requirements of development of production and investment activity, aspires to increase the size of dividends paying(a) to Shareholders a commodious with growth of capitalization. 2. 2. Conditions of payment of dividends to Shareholders of monastic order are 1. xistence at Society of a net profit (total profit) in a year defined according to point 3. 1. provisions 2. absence of restrictions on payment of the dividends provided by point 5 of name 22 of the Law of the Republic of Kazakhstan About joint-stock companies 3. decision of General group meeting of shareholders of Society. 3. gear up of determination of the amount of charge of dividends 3. 1. The siz e of the dividends charged by Society, is defined with the standard. The net profit (total profit) Societies is defined on the basis of its unify financial statements made according to IFRS. . 2. According to the current legislation and the Society Charter the Board of directors of Society prepares offers on an order of dispersion of a net profit of Society for expired fiscal year and the size of the dividend in a year counting on one common share of Society 3. 3. The Society board of directors by preparation of the offer on an order of distribution of a net profit of Society for expired fiscal year and the size of dividends in a year, recognizes that the sum directed on payment of dividends, should make not less than 17,5 % of a net profit. 3. 4.The motion of possibility of payment by Society of dividends on common and preference shares quarterly, time in one-half a year, or following the results of a year is regulated according to the current legislation. The question is consid ered by Society Board, proceeding from the received financial results and look-ahead indicators of the size of dividends of Society actions. 3. 5. The Society board of directors, on the basis of offers of Board of Society, considers the main directions of distribution of a net profit (total profit), and also forms offers on a share of a net profit (total profit), directed on dividend payments. . 6. The Societies of the offer created by Board of directors nigh an order of distribution of a net profit of Society for expired fiscal year and the size of the dividend in a year counting on one common share of Society are submitted for consideration of General shareholder meeting. 3. 7. The final decision about the size of dividends is established by the decision of General meeting of shareholders of Society. 4. Order of payment of dividends 4. 1. Dividends are gainful to Shareholders in the terms established by the Charter of Society and the relevant decision of General shareholder meet ing. 4. 2.Society provides seasonably and sleep together payment of dividends to Shareholders. 4. 3. Payment of dividends considered transfer of the corresponding sums of money from the Society account on bank accounts of Shareholders according to the decision accepted at General shareholder meeting on terms and an order of payment of dividends. 4. 4. Payment of dividends is made by money or Society securities. Society has the right to make payment of dividends on stocks Society securities provided that such payment is carried out by the declared actions and the bonds issued by Society, in the presence of the create verbally consent of Shareholders.Payment of dividends by securities on preference shares of Society isnt allowed. 4. 5. The taxation of paid dividends is carried out in an order provided by the legislation of the Republic of Kazakhstan. 5. inform of Shareholders on dividend policy of Society 5. 1. Society places the present Situation, changes and/or additions to it o n the corporate website of Society. 5. 2. Within 10 working days from the date of devising decision of General shareholder meeting on payment of dividends on common shares of the Society Society publishes this decision in mass media. Thus Society also publishes this decision on the corporate website. . 3. The decision on payment of dividends on common shares of Society should contain the following data 1. name, location, bank and other details of Society 2. the period for which dividends are paid 3. the size of the dividend counting on one common share 4. issue date of payment of dividends 5. an order and a form of payment of dividends with the indication of the sizes, terms, ways and a form of payment of dividends. 5. 4. The materials provided to Shareholders for decision-making, should contain all inevitable information on existence/lack of the conditions necessary for payment of dividends. . province for incomplete or un by the bye payment of dividends to Shareholders 6. 1. Responsibility for appropriate and timely execution of decisions of General shareholder meeting about payment of dividends, including complete payment of dividends, bears Society Board. sizes, terms, ways and form of payment of dividends. Dividend Policy Ratios Dividend policy ratios provide insight into the dividend policy of the firm and the prospects for future growth. Two ordinarily used ratios are the dividend yield and payout ratio. Table 9. Dividend policy ratios JSC Shubarkol komir JSC SatCompany 2010 2009 2008 Average 2010 2009 2008 Average Dividend yield 10. 47 6. 5 8. 4 8. 45 11. 2 10. 11 9. 7 10. 33 Payout ratio 25. 4 19. 7 23. 25 22. 78 31. 56 30. 7 20. 9 27. 72 A high dividend yield does not necessarily translate into a high future rate of return. It is important to consider the prospects for continuing and increasing the diviend in the future. The dividend payout ratio is helpful in this regard. Figure 9. Dividend policy ratios Break-even analysis We assume variable costs consist of 70 of total cost, and rest 30 is fixed costsTable 10. Break-even JSC Shubarkol komir JSC SatCompany 2010 2009 2008 Average 2010 2009 2008 Average Break-even 14 15. 3 16. 7 15. 3 229 52 81 120. 7 DOL 1 1 1 1 -1. 69 1. 21 1. 12 0. 21 DFL 1 1 1 1 1. 99 1. 70 1. 24 1. 64 TL 1 1 1 1 -3. 36 2. 05 1. 38 0. 07 Figure 10. Leverage analysis Operating leverage is a measure of how sensitive net operating income is to percentage changes in sales. Shubarkol net operating income grows 1 times as fast as its sales, whereas Sats net operating income declines for 1. 69 as its sales.Degree of Financial Leverage is very helpful in comparing various firms and the riskiness of their capital structures in a particular industry. The Sat company has high degree of financial leverage than Shubarkol, thus Sat company more riskier, whence it has higher return. The Shubarkol company will meet break-even point at the level of 16,7 tons in average. The SatCompany at 229 tons. P/E ratio analys is Table 11. P/E ratio JSC Shubarkol komir JSC SatCompany P/E 2010 2009 2008 Average 2010 2009 2008 Average Price per share/EPS 1,377 1,936 840 1,384 512. 9 7,241 286. 2,680 Figure 11. Price per share/EPS PE ratio show the introduce value in stocks and are used by the investors as a screening device before making their investment. For example, a high P/E ratio may be regarded by some as being a sign of over pricing. When the markets are optimistic or if the investor sentiment is optimistic about a particular stock, the P/E ratio will tend to be high indicating that investors are willing to pay a high price for companys earnings. Sat company has higher P/E ratio than Shubarkol company. It mean the more the market is willing to pay for this companys earnings.Vertical and Trend analysis Table 12. Vertical analysis (Income statement) JSC Shubarkol komir JSC SatCompany 2010 2009 2008 Average 2010 2009 2008 Average Revenue ascorbic acid deoxycytidine monophosphate 100 100 100 100 100 100 Cost ofGoods sell 39 35 36 36 95 77 58 76 Gross profit 61 65 64 63 5 23 42 23 Financingincome 0. 31 0. 21 0. 17 0. 23 0. 84 18 3. 2 7. 3 Otherincome 4. 5 1. 5 0. 7 2. 06 759 162 65 328 Sellingexpenses (0. 08) (0. 07) (0. 07) (0. 07) 11. 8 17 8. 2 12. 3 General andadministrative expenses (4. 5) (5) (3. 37) (4. 9) (446) (24) (200) 223 EarningsbeforeInterestand Taxes 61. 23 61 61. 4 61 330 160 81 190 Interestexpense (3. 22) (4. 8) (0. 7) 2. 9 (68) 22 13 34 Otherexpenses (1) (3. 5) (0. 2) 1. 56 237 150 67 151 Earningsbeforetaxes 57 52. 7 60. 5 56 0. 36 0. 15 2. 7 1. 07 Incometaxes (11) (11) (16) (12. 6) 12. 66 2. 88 0 5. 18 Tax onsuperprofit (12. 5) (17) (16) (15) 224. 5 150 65 146 Net Income 33. 51 24. 7 28. 5 20. 23 224. 5 150 65 146 Table 13. Trend analysis (Income statement) JSC Shubarkol komir JSC SatCompany 2010 2009 2008 Average 2010 2009 2008 Average Revenue 17. 2 -9. 3 200 69 -44 -60 -3 -36 Cost ofGoods exchange 30 -10 49 23 -33 -40 -22 -31 Gross profit 10 -9 507 169 -89 -75 53 -72 Financingincome 74 13 -16 23 -97 166 0 23 Other income 263 89 -15 112 165 16 50 77 Sellingexpenses 15 -8 33 13 -62 -2 -21 -28 General andadministrative expenses 4 -36 -12 14 923 -50 11 295 EarningsbeforeInterestand Taxes 10 -10 803 267 6. 3 -12 59 18 Interestexpense -22 -547 -35 201 69 -23 -13 11 Otherexpenses -66 -1868 21 -638 -4 -5. 46 12 Earningsbeforetaxes 19 -21 10000 3333 -56 -97 48. 4 -34 Incometaxes 17 -39 861 280 -145 0 0 -48 Tax onsuperprofit -16 53 12. 3 (15) -7. 26 - - - Net Income 45 -34 858 20. 23 289 -4 168 52 Table 14. Vertical analysis (Balance sheet) JSC Shubarkol komir JSC SatCompany ASSETS 2010 % 2009 % 2008 % Average % 2010 % 2009 % 2008 % Average % Current Assets cash and coin Equivalents 2. 4 1. 8 2. 5 2. 2 3. 47 3. 63 13. 81 6. 97 FinancialReceivables 0. 01 0 0 0. 003 2,94 11. 23 7. 03 7 Inventories 5 5 5. 8 5. 06 2. 41 2. 86 2. 47 2. 58 Current portionof Long termassets held tosale 1,21 1. 82 0 1. 01 Advances paid and other rec eivables 0. 36 1. 6 0. 46 0. 80 - - - - Value added tax and other tax receivables 4 1 0. 63 1. 87 - - - - Other currentassets 6 7 8. 08 7. 03 0,61 0. 49 0. 99 0. 69 Total currentassets 14 17 16. 86 15. 95 10. 65 20. 05 28. 67 16. 79 longassets Investmentsaccounted for using equity method 25. 9 0. 01 0. 0076 8. 34 1. 40 10. 74 0. 0008 4. 05 Property, plant and equipment 45. 47 61 56. 9 54. 49 56. 9 12. 11 14. 45 27. 82 nonphysical assets 11. 5 18 22. 45 17. 32 5,38 0. 33 0. 05 1. 92 Investment inassociatedcompanies 4. 91 0. 99 0 1. 96 Deffered taxes 0. 58 0. 23 0. 34 0. 38 Other long-termassets 3. 14 2. 77 3. 67 3. 19 7. 79 14. 79 47. 85 23. 48 Total long-term assets 86 83 83. 14 84 89. 34 79. 94 71. 32 80. 2 TOTALASSETS 100 100 100 100 100 100 100 100 SHAREHOLDERS justiceANDLIABILITIES Currentliabilities FinancialPayables 5. 24 8. 9 24 12. 71 5. 3 12. 55 1. 14 6. 50 Taxes payable 9 14 9. 4 10. 8 0. 07 0. 04 0. 17 0. 09 Advancesreceived and other payables 0. 38 0. 56 0. 2 0. 38 - - - - Accountspayable 1. 46 1. 71 2. 6 1. 92 - - - - Evaluationliabilities 1. 53 1. 71 1. 9 1. 71 - - - - Short term loans - - - - 12,16 2,37 2,51 5. 68 Other currentliabilities 1. 43 1. 36 2. 73 1. 84 - - - - Total currentliabilities 19 28. 8 42 29. 93 18. 07 14. 96 10. 45 14. 49 Long-termliabilities Long-termfinancialpayables 25. 8 3 0. 4 9. 73 19. 689 26. 35 21. 0 22. 44 Reserves torestore locations - - - - 1. 61 0. 51 0 1. 04 Long-termevaluationliabilities 8. 71 16. 73 11 12. 15 1,61 - - - Deferred taxliabilities 6 6. 3 7. 5 6. 06 12. 86 7. 80 0. 85 7. 17 Other Long termliabilities 0. 25 0. 01 0 0. 08 Total long term liabilities 40. 5 26. 11 18. 7 28. 44 34. 42 34. 68 22. 15 30. 41 Shareholdersequity Issued capital 33. 4 46. 2 27 35. 53 22. 29 21. 48 7. 32 17. 03 Additional paidincapital 0. 9 0. 9 1. 4 1. 06 - - - - Treasury Stocks - - - - -0,03 ? ,01 0 -0. 013 Retainedearnings 6. 4 -2 11 5. 13 18,65 28,08 47,17 31. 3 T otalshareholders equity 40. 5 45 39. 3 41. 6 47,50 50,35 54,50 50. 78 TOTALSHAREHOLDERS equity ANDLIABILITIES 100 100 100 100 100 100 100 100 Table 15. Trend analysis (balance sheet) JSC Shubarkol komir JSC SatCompany ASSETS 2010 % 2009 % 2008 % Average % 2010 % 2009 % 2008 % Average % Current Assets exchange and Cash Equivalents 85 13. 11 -9. 14 29. 65 79,91 ? 57,43 1077,4 366. 49 FinancialReceivables 0 0 0 0 ? 50,60 158,61 ? 5,86 1072 Current portionof Long termassets held tosale - - - - 25,02 0 ? 100 -37. 4 Advances paid and other receivables -68 447 -71 102. 6 - - - - Inventories 21 64. 56 95 60. 19 58. 35 87. 52 ? 28. 45 39. 14 Value added tax and other tax receivables 46 159 62 89 - - - - Other currentassets 15 40. 72 53 36. 24 131. 77 ? 19. 71 ? 58. 61 17. 82 Total currentassets 13 59. 35 33 35 ? 0. 01 13. 20 ? 25. 61 -4. 47 Long-termassets Investmentsaccounted forusing equitymethod 3698 50 0 1249 ? 75. 42 1961 ? 7. 36 616 Property, plant and equipment 1. 5 6 70. 97 11. 13 27. 88 784. 05 35. 64 ? 19. 59 266. 68 Investment inassociatedcompanies - - - - 826. 77 1820. 8 ? 99. 93 848. 94 Intangible assets 12 27. 24 906 307. 08 2968 894,10 ? 18,76 1281 Other long-term assets 57 18. 67 43 39. 55 0,85602 49,9572 0 16. 93 Total long-term assets 44 56. 84 29. 2 43. 34 110. 3 4 81. 37 136. 27 442 TOTAL ASSETS 38 57 30 41. 66 88. 21 61. 82 45. 42 65. 15 SHAREHOLDERS justness AND LIABILITIES Currentliabilities FinancialPayables -19 -40. 5 116 19 ? 12. 43 1683 ? 92. 22 526 Taxes payable -14 140 - 42 243,07 ? 61,85 9,48 63. 66 Short term loans - - - - 864. 69 52. 75 ? 69. 78 282. 55 Advancesreceived andother payables -6 350 - 114 - - - - Accountspayable 18 -33 45 10 - - - - Evaluationliabilities 23 43 313 126. 3 - - - - Other currentliabilities 45 -22 55 26. 33 - - - - Total currentliabilities -8 7. 8 164 54. 6 127 131 ? 59 66 Long-termliabilities Long-termfinancialpayables 1063 1096 8 722. 3 40. 59277 100. 2517 435. 4730 19 2. 106 Long-termevaluationliabilities -28 143 60 58. 33 - - - - Reserves torestore locations - - - - 488. 52 0 0 162. 84 Deferred taxliabilities 30 32 89 50. 33 210. 11 1369 800 793 Total long term liabilities 114 119 68 433. 66 86,78 153,28 444,02 227. 66 Shareholdersequity Issued capital 0. 1 one hundred seventy 1 57 94. 69 374. 61 0 156 Additional paidin capital 0 0 84 28 - - - - Treasury stocks ? ? ? ? 6110 0 0 2036. 9 Retainedearnings 550 -128 -49 124 25 ? 57 26 Exchange ratedifference ? ? ? ? ? 245 0 0 -81. 7 Totalshareholders equity 24 80 -22 27 77. 570 49. 49 46 57. 68 TOTALSHAREHOLDERS comelinessANDLIABILITIES 38 57 20 38 88. 21 85. 74 30,. 20 68. 05 The company generates its revenue from sale of coal. Revenue was increased from 2009 to 2010 for 17. As we told before the crisis affected to rapid decline in revenue from 2008 to 2009, due to cyclical type of industry. Cost of goods sold and net income show enduring results during past three years. Level of cash is low in terms current liability. The company is less liquid.Property, plant and equipment take more than half of the total assets. We can assume it is because of type of the company, due to it is manufacturing company in postulate more equipment. In comparison with 2008 past two years 2009 and 2010 the company financed with debt. Shareholders Equity section relatively good results it is increasing each year. Average of Cash and Cash equivalents in JSC Shubarkol komir is 2. 2 % and Sat Companys average cash is 6. 97%. Basically companys cash and cash equivalents should be at minimum instead of providence they should invest it to generate future cash flows.In our case cash both companies have minimum cash. Accounts Receivable in Company Shubarkol is 0. 003% and Sat Company is 7%. It says that both companies sells their product on cash, not on credit. solely in order to sell more they should change their policy, selling not only on cash basis also on credit. Average inventory in Company Shubarkol is 5. 06% and in company Sat it is 2. 58%, it is a good sign both companies runs efficient business, inventory level at the minimum. In order not to have remaining inventories companies should use JIT.Property, plant and equipment take more than half of the total assets in both companies We can assume it is because of type of the company, due to it is manufacturing company in needs more equipment. Accounts Payable in Company Shubarkol decreased from 2. 6% to 1. 46 during 2008-2010. Company Sat doesnt have any accounts payables. Company Shubarkol and Sat generates its revenue from sale of coal. Cost of goods sold in Company Shubarkol is 36% of revenue and in company Sat is 76 % of revenue. Average EBIT in Company Shubarkol is 61%, in Sat Company it is 190%, it is a lot higher because of Other income, it is 19mln when revenue is 2mln.In Company Shubarkol net income show stable results during past three years. But In Sat Company it is increased from 65% to 224% , average is 146%. III. Summary and recommendations Table 16. Comparison table Shubarkol Komir SatCompany ROE amply pitiful CA/TA Low exalted CA/Sales Low amply Current ratio Low High Acid test ratio Low High Total debt Low High Debt to equity High Low Gross mar/Sales High Low EBIT/Sales Low High ROI Low High Inventory turnover High Low Total Asset Turnover High Low Average collection period High LowAccounts payable turnover High Low ROA High Low P/E ratio Low High Recommendations 1. bash Assess overhead costs and if there are opportunities to decrease them. punishing overhead has a direct impact on profitability. Overhead expenses, including rent, advertising, confirming labor and professional fees, are indirect expenses that you incur to operate the business outside of direct material and direct labor. 2. Accounts receivable Monitor accounts receivables in effect to ensure that the company billing their clients properly and that youre receiving pro mpt payments. . Accounts payable manage longer payment terms with vendors whenever possible to keep money longer. 4. Profitability Review the profitability on your various products and services. Assess where prices can be increased on a regular basis to maintain or increase profitability. As costs increase and markets change, prices may need to be adjusted as well. 5. Current ratio Increase current assets by increasing profit, selling additional capital stock, borrowing additional long term debt, or disposing of unproductive fixed assets and retaining proceeds.Reduce current liabilities by retaining a greater portion of allocated savings. Avoid financing non-current assets with current liabilities. References 1. James C. forefront Horne Fundamentals of Financial Management 13th edition, 2008 2. http//www. sat. kz/ru/about/cel Retrieved from 20. 04. 12 3. http//www. kase. kz/ru/emitters/show/SHUK Retrieved from 15. 04. 12 4. Penman, Stephen H. Financial Statement Analysis and Securities Valuation, 4th ed. , McGraw Hill International Edition, 2010. adjunct A JSC ShubarkolKomir Balance Sheet As at December 31, 2010ASSETS 2010 2009 Current Assets Cash and Cash Equivalents 685 621 371 204 Financial Receivables 4 115 0 Advances paid and other receivables 102 791 328 837 Inventories 1 356 411 1 119 355 Value added tax and other tax receivables 114 344 215 766 Other current assets 1 724 049 1 492 957 Total current assets 3 996 331 3 528 119 Long-term assets Investments accounted for using equity method 7 399 383 2 000 Property, plant and equipment 12 993 624 12 794 808 Intangible assets 3 285 530 3 751 702 Other long-term assets 897 362 572 860Total long-term assets 24 575 899 17 121 371 TOTAL ASSETS 28 572 230 20 649 490 SHAREHOLDERS EQUITY AND LIABILITIES Current liabilities Financial Payables 1 496 280 1 851 452 Taxes payable 2 571 754 2 983 414 Advances received and other payables 110 972 117 516 Accounts payable 418 977 354 986 Evaluation liabilities 438 035 355 173 Other curre nt liabilities 408 340 281 281 Total current liabilities 5 444 358 5 943 822 Long-term liabilities Long-term financial payables 7 376 747 634 493 Long-term evaluation liabilities 2 488 523 3 456 287Deferred tax liabilities 1 698 759 1 302 972 Total long term liabilities 11 564 029 5 393 752 Shareholders equity Issued capital 9 540 291 9 531 291 Additional paid-in capital 188 566 188 566 Retained earnings 1 834 986 -407 941 Total shareholders equity 11 563 843 9 311 916 TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 28 572 230 20 649 490 Balance value (common stock), tenge 2 316 1 543 Balance value (preferred stock), tenge 2 238 2 289 Appendix B Income Statement For the year terminate December 31, 2010 ASSETS 2010 2009 Revenue 19 382 881 16 533 291Cost of Goods Sold (7 612 683) (5 834 093) Gross profit 11 770 198 10 699 198 Financing income 61 448 35 051 Other income 291 879 242 452 Selling expenses (15 556) (13 577) General and administrativeexpenses (871 190) (836 592) Earnings before Interest andTaxes 11 175 331 10 126 532 Interest expense (624 944) (797 304) Other expenses (193 703) (571 122) Earnings before taxes 10 418 133 8 758 106 Income taxes (2 160 673) (1 847 672) Tax on superprofit (2 420 352) (2 881 292) Net Income 5 837 109 4 029 142 Appendix C Statement of Cash arisesFor the year ended December 31, 2010 Cash Flow from OperatingActivities 2010 2009 Cash inflows 29 253 053 22 716 771 From sales of goods 28 535 245 21 495 162 From advance payments 408 340 1 121 843 Other proceeds 309 468 99 766 Cash Outflows 21 348 705 16 363 748 To pay suppliers for goods and services 7 857 546 6 846 546 To pay out advances 3 598 673 1 369 020 To pay employees salary 463 958 354 121 Interest paid 304 179 489 121 Income tax paid 1 772 233 1 853 11 To pay tax on superprofit 2 725 639 2 091 833 Other payments to budget 1 904 193 1 257 436Other payments 2 722 284 2 102 419 Net cash provided by operating activities 7 904 349 6 353 023 Cash Flow from Investing Activi ties Cash inflows 431 000 1 643 From sale of fixed assets 1 643 Payment for long-term investments 431 000 Cash outflow 10 747 057 9 133 255 To acquire fixed assets 2 931 557 2 796 255 procure of other long-term assets 7 384 500 6 000 000 Purchase debt of other entities 431 000 337 000 Net cash provided by investing activities -10 316 057 -9 131 612 Cash Flow from Financing Activities Cash inflow 9 338 999 7 320 373From the sale of firms own equity securities 8 999 6 008 982 From borrowing 9 080 000 1 311 391 Other proceeds 250 000 0 Cash outflow 6 624 635 4 499 402 To repay amounts borrowed 3 042 253 1 449 556 To repurchase the firms own equity securities 0 9 000 To pay shareholders dividends 3 582 382 40 846 Others 3 000 000 Net cash provided by financing activities 2 714 364 2 820 971 Net increase/(decrease) in cash 302 656 42 382 Cash and cash equivalents, beginning of the year 382 965 328 822 Cash and cash equivalents, end of the year 685 621 371 204Appendix D JSC Sat & Company Balance Sheet As at December 31, 2010 ASSETS 2010 2009 Current Assets Cash and Cash Equivalents 2,720,160 1,511,944 Financial Receivables 2,310,048 4,676,501 Inventories 1,888,077 1,192,271 Current portion of Long term assets held to sale 949,524 759,512 Other current assets 477,206 205,892 Total current assets 8,345,022 8,346,120 Long-term assets Investments accounted for using equity method 1,098,757 4,471,632 Property, plant and equipment 44,567,701 5,041,284 Intangible assets 4,216,968 137,425Investment in associated companies 3,849,628 415,379 Deffered taxes 455,677 96,137 Other long-term assets 6,105,903 6,158,622 Total long-term assets 69,979,554 33,268,595 TOTAL ASSETS 78,324,576 41,614,715 SHAREHOLDERS EQUITY AND LIABILITIES Current liabilities Financial Payables 4,573,685 5,223,219 Taxes payable 56,727 16,535 Short term loans 9,526,727 987,540 Total current liabilities 14,157,139 6,227,294 Long-term liabilities Long term loans 15,421,083 10,968,617 Reserv es to restore locations 1, 263,082 214,620