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Saudi Telecom Financial Analysis
.
Accounting & Finance Management
This is a financial analysis of STC and a comparison with Mobily
Contents
Contents......................................................................................................................................................1
Executive Summary.....................................................................................................................................3
Introduction.................................................................................................................................................3
.....................................................................................................................................................................5
.....................................................................................................................................................................6
SWOT ANALYSIS...........................................................................................................................................7
Industry Analysis........................................................................................................................................10
Saudi Telecom Five Forces Analysis.......................................................................................................10
1

Saudi Telecom Financial Analysis 2
Competitive Rivalry................................................................................................................................10
Bargaining Power of Saudi Telecom Clients..........................................................................................11
Bargaining Power of Saudi Telecom Vendor.........................................................................................12
Threat of Substitution............................................................................................................................12
Threat of New Entrants..........................................................................................................................14
Part 1.........................................................................................................................................................14
Ratio Analysis.............................................................................................................................................14
Gross Profit Margin................................................................................................................................14
Operating Profit Margin.........................................................................................................................15
Tax Rate.................................................................................................................................................16
Net Profit Margin...................................................................................................................................16
Return on Asset.....................................................................................................................................17
ROI.........................................................................................................................................................18
Interest Coverage Ratio.........................................................................................................................18
Account Recievable................................................................................................................................19
Debt to Equity........................................................................................................................................19
Part 2.........................................................................................................................................................20
Sources of Internal and External Finance Available Saudi Telecom:......................................................20
Internal sources:................................................................................................................................20
External sources:................................................................................................................................21
NET REVENUE....................................................................................................................................22
NET INCOME......................................................................................................................................22
CASH GENERATED FROM OPERATING ACTIVITIES TO MATURING OBLIGATIONS..............................23
Part 3.........................................................................................................................................................23
Budgeting...............................................................................................................................................23
Conclusion, Recommendation & Summary...............................................................................................28
References.................................................................................................................................................29

Executive Summary
The financial analysis is presented in this report which is based on Saudi Telecom
Corporation financial and non-financial performance. A full breakdown of financial ratio
analysis and organization’s profile will be determined and various methods for performance
enhancement will be discussed. A full analysis of competitor and their impact over Saudi
Telecom Corporation has also been discussed in this paper which enable in determining various
opportunities available to optimize the business operations. This report also provides the
budgetary information and analysis of Saudi Telecom Corporations, as well as sources of funds,
have been also discussed in this paper. By the end of this report, a transparent understanding of
various brands and Saudi Telecom Corporation under the status of finance has been determined
which enables the investors to execute their investment decision. The table below shows
thebroadband sales,dividends yield,market capitalization,Price earning,Price to Book ratio for
both STC and MOBILY.
UNIT STC MOBILY
12-Month Target Price % 30.4 27.5
Current market price 42.4 68.8
Market Capitalization 84,400 4,8000
P/E (12E) 9.6 8.2
P/B(12E) 1.4 2.2
EV/ EBITDA (12E) 5.6 7.2
Dividend Yield (12E) 4.8 5.0
Introduction
The analysis of financial statement is considered as a vital step in the analysis of business
operations. The analysis of business operations is considered as an organization’s operations
evaluating the process in which its risk and economic prospects are monitored and evaluated.
This process contains business environment analysis, its performance and financial position, and
its strategic strategies (Palepu, K., Healy, P. and Bernard, V, 2000).

The analysis of business operations is vital in a greater range of enterprise decision such
as extending credit through long and short terms periods, investing in debt or equity securities,
measuring the business worth in an offering of an initial public, and evaluating organization’s re-
engineering which contains acquisition, mergers, and divestitures. The analysis of financial
statement is an application method of various techniques and analytical tool for the purpose of
related data and financial statements of an organization. This methodology is used to inferences
the usefulness in an analysis of business operation and derives estimates. Some of the
importances of conducting a financial statement analysis range from:-
The company management is able to plan and make some projections of both expected
profits and revenue.
Analysis of statement of financial position,cash flow statements and income statement
makes it easy for the management to weigh their decision about borrowing,the effect on the
gearing level of the company that might result if the company decides to fund its operations
through borrowings.
Analysis of cash flow enables the company to trace how it raises and uses capital.
Ratios and their roles
1.Gross profit margin =gross profit*100
Sales
This ratio indicates the ability of a company to control cost associated to sales.
2.Operating profit margin=Operating profits/Earning Before Interest and Tax*100
sales
The ratio shows the ability of the firm to control its operating expenses such as salaries
and wages
3.Net profit margin=Net profit
Sales
The ratio indicates the ability of the company to control financing expenses in particular
iterest chaeges.
4.Return On Investment/Return On Total Asset=Net profit*100 OREBIT
Total assets Total asset
The ratio indicates return on profit from company investments.
5.Debt equity ratio=Fixed charge capital
Equity

The ratio shows the amount of fixed charge capital in the capital structure of the
company.
6. Interest Coverage ratio=EBIT
Interest expenses
The ratio measures how many times a company can pay its current current interest with
its available earning s.
Budgeting –This is the process of planning and deiding on how to spend money,capital
and available resources.
A business entity cannot ignore budgeting since it indicates the sources resources and
capital cash inflows,how the inflows are expended to meet revenue and capital expenditure the
company and last but not the least,to determine any anticipated cash deficit/surplus at any point
during forecasting.
Saudi Telecom Organization was incorporated during the period of 1998 and it was
registered in a Saudi Joint Stock Company in accordance with Royal Decree No. M/35. This
royal decree approves the transfer of telephone sector and telegraph of Post of Ministry of
interior, telephone and telegraph. This transfer is done with various elements, administrative and
technical facilities to the organization, and in relation with the Resolution of Council of
Ministers’ number two hundred and thirteen. This resolution was created during the period of
1998, which was approved by the association of Organizations’ articles (Vogel, H, 2007).
The whole organization is owned by the Government of Kingdom of Saudi Arabia.
Pursuant to the resolution of number 171 which was approved by the Council of Ministers during
the period of 2002, it was state in the resolution that around thirty percent of total share should
be hold by the Government of Saudi Arabia. During the period of 1998, Saudi Telecom received
its Commercial register to conduct its business operation as an Organization of Saudi Joint
Stock. The head office of Saudi Telecom is situated in Riyadh.
.

Saudi Telecom has fabricated a standout amongst the most capable and perceived brands
on the planet and the picture of a one of a kind "Saudi Telecom Experience". His main goal was
to alter the espresso business by building an impression of a bistro as the "third place" amongst
work and home. Wi-Fi in all stores makes it a spot where clients can work. The organization's
objective was to make each spot a group community for some higher-salary youth and school, a
gathering that inclines toward larger amounts of extravagance utilization.
During the period of 2005, mobily was incorporated as a telecommunication organization
on Kingdom of Saudi Arabia and it is considered as Kingdom’s second largest
telecommunication organization. Mobily is also considered as the second company which has
successfully secures the telecommunication license during the period of 2004. Furthermore,
Mobily, provides the services of cellular phone national wide, breaking the monopoly of Saudi

Telecom in the business of wireless communications. During the period of 2006, mobily
launched 3.5 services, and during the period of 2011, 4G services was introduced.
The first telecommunication franchise during the period of 2004 as a business operating
model in Gulf Region, and fully outlet branded, assuring expansion in cost effective and rapid of
its network of outlets.
In 2013,the company entered into Mobile Virtual Network Operation (MVNO) covenant
with Eithad Jawraa to allow it to use its network on frastructure,after licencing .
That same year,more than 2030 new 4G sites were created and the company launched a
managed security system being assisted by IBM.
In 2014,Mobily launched a cloud computing service that came up as a result of
collaboration with Virtustream
SWOT ANALYSIS
Strengths
1. Operating proficiency and solid
development prompting unrivaled money
related performance.2015 was one of the best
monetary years in Saudi Telecom' history. The
organization's income developed by 16.5%,
benefit developed by 33.3%, its obligation to-
resource proportion diminished, and 1677 new
stores were opened. Saudi Telecom' net overall
revenue expanded and its income developed to
a record high of US$3.749 billion, regardless
of the organization's tremendous extension
Strengths
1. Solid Brand name, perceived all over
Saudi, that best position the company to
higher benefits from the Saudi’s segment
growth.
2. The best situated to profit by
development portion information Arabia.
3. Operations of Saudi-just evade the
dangers of cash and nation.

2. Simplicity: SWOT examination does
not require any broad preparing or specialized
abilities to be use it effectively. The
investigator needs just a far reaching
comprehension of the way of the organization
and the business in which it contends and a
fundamental comprehension of relating this
data to his organization.
3. Lower Costs: Because there is no
requirement for any particular preparing and
aptitudes in this manner the utilization of
SWOT investigation can really decrease the
expenses connected with key arranging. This is
immediate preferred standpoint for firms.
4. Flexibility: Other preferred standpoint
of this apparatus is adaptability. It can improve
the quality in the association's key arranging
even without broad advertising data
frameworks. Be that as it may, when thorough
framework points of interest are available, they
can be effortlessly added to the primary system
of SWOT. Likewise the nearness of an
exhaustive data framework can make rehashed
SWOT examinations run all the more easily
and effectively.
Weakness:
1. As is the situation of qualities, each
association additionally has some shortcoming.
Now and again, this is self-evident; say for
instance as extremely rigid method for
working. In different cases, it involves point of
view; for instance an organization has 99 for
every penny piece of the overall industry and is
interested in assault from each new player as it
is unrealistic for any organization to be filled
4. Enhancement of income stream through
the emphasis on the corporate fragment.
5. Solid money era making ready for higher
.profits.
6. Strong cash flow generation that paves
way for commendable return in terms of
dividends to the prospective shareholders
Weaknesses:
1. Competition from other telecommunication
companies including the STS nibbling joints
implies restricted piece of the overall industry
development
2. Participation in the altered broadband
business sector is ruled by Saudi Telecom Co.
3. Expected decrease in EBITDA edges
subsequent to entering the corporate section.

just with qualities. Be that as it may, for a
major organization the effect of qualities might
be more than its shortcomings.
2. it is now and again connected with the
claimed overabundances of worldwide free
enterprise and can turn into the objectives of
hostile to bunches
i
Opportunity:
1. All associations have a few open doors
that they can pick up from and can support
benefits from it. These could run from
enhancement to offer of operations.
Distinguishing shrouded open doors is the
primary assignment of the business diversion
2. Developing Demand for Smart telephones
3. Development in Telecommunications
Services
4. Key Alliances with other telecom
administrators for worldwide range and
infiltration
Threats :
1. Versatile Number Portability creating client
efflux
Opportunity
1. Rising interest for information
administrations in the broadband fragment.
2. Bigger addressable business sector given
Saudi's positive demographics.
Threats:
1. Irrational rivalry in the portable and
broadband business sector.
2. Further geo-political occasions in the MENA
area.
3. Unfriendly administrative changes affecting
operations.

2. Expanding Competitive Forces bringing
about declining piece of the overall industry
3. Declining Returns from the business sector
Industry Analysis
Saudi Telecom Five Forces Analysis
Saudi Telecom confronts the effect of the five powers, as it showed up in Porter's model.
These five forces have distinctive qualities or qualities in perspective of the position of Saudi
Telecom, which looks much the same as:
1. regulation or contention focused (interminable force)
2. Deal power purchasers or clients of vitality (strong)
3. Deal power suppliers (low vitality)
4. Danger of supersession or supersession (strong organization)
5. Danger of nascent contenders or beginning entry (moderate force)
Saudi Telecom has an assortment of troubles related to these five potencies. Just the
power of bargain supplier has negligible sensitivity for the association. Considering this
investigation the five powers, Saudi Telecom must learn weight measurements need to give
attestation focusing power managing clients, and the hazard of supersession.
Competitive Rivalry
Article for supersession of component (for email, fax); It depends need superseding;
• nonexclusive supersession (video suppliers rival associations peregrinate);
• sundry enterprises have particular levels of contention

The state of the contention in a segment is affected by unequivocally prescribed five fiery
focuses. The more tightly to force purchasers and suppliers, and the more the hazards ground and
supersession step, the most extraordinary competition is obligated to be inside the organization.
Nonetheless, these five components are by no assigns the main ones who choose how
organizations in an industry battle - the structure of the organization itself can take a vital part.
Truth be told, the entire framework five money related force relies on upon a speculation kenned
as the model of "Execution Structure": the structure of an industry sodality chooses truculent
(disposition), subsequently it chooses profitability (execution).
Moved in organizations, as meant by this model, sodalities will be entrusted to bargain
less with anger, and make more prevalent benefits than separated. In any case, as erg have been,
histories and social orders of associations in the organization withal induce an indispensable part
in the combination attitude centered, and prospects of the SCP model ought to be comparatively
modified.
Bargaining Power of Saudi Telecom Clients
The energy of the purchasers is a model of the five resources of the Porter to look at the
high ground and verbalizes with the amount this power is influencing the organization asking for
lower costs, revised organizations and changing the nature of the article .
power purchaser is one of the two qualities of gauge that influence the portion of
punishment made by an industry. The most significant determinants of purchaser force are the
size and centralization of clients. The diverse components are the extent to which purchasers and
extension or separation of the contenders are taught. Kippenberger usually verbalizes it is
significant to apperceive the potential purchaser force of excitement or inspiration to use
thatdrive the purchaser, the workforce to get on a very basic level the "risk of dissatisfaction"
related to the use of a thing.
The utilization of this puissance in the media communications showcase Arabia, going with
methodologies ought to be considered:
1. The absence of divergence between organizations or articles,

2. Ease of consequent trade completely the presentation of the origination of mobility diverse
number, and
3. The purchaser has consummate information.
4. From the over, the power of bargain is pellucid is by and large high.
Bargaining Power of Saudi Telecom Vendor
This vitality source suppliers about the business that the organization is working under
survey. You can impact the business by growing expenses and diminish the way of organizations
or articles. As this power is predicated is affected benefit signature. Supplier of power is a mirror
picture of purchaser puissance. Likewise, examination of supplier force gathered usually first in
the relative size and meeting of suppliers with concession to industry individuals and second on
the bore of disseverment in the supplied inputs.
The office to charge their clients particular expenses as per differentiations in quality
made for each of these purchasers by and large demonstrates that the business area is played by
high-control supplier and, in the interim, the low purchaser power. In Telecom market when all
is said in done and in the Saudi market, this force is low. This as a result of the accompanying
variables:
1. Availability of numerous telecom suppliers,
2. The industry is critical variable for the supplier (less differing qualities),
3. Lack of separation among suppliers,
4. Standardization which anticipates forward incorporation, and
5. Low exchanging cost.
Threat of Substitution
One of the imperative powers that are overlooked a ton of organizations where the vast
majority of the emphasis on rivalry and alternate strengths and contenders that produce

.
comparable items or give the same administrations. This is the treat of substitute items
where the substitute gives the same capacity as an option for the first item.
The peril that supersessions position efficiency of an industry is predicated on the extents
relative expense to the execution of the sundry sorts of things or ascendant substances which
clients can swing to meet the same crucial need. The supersession danger is moreover impacted
by trade costs - ie spending ranges, for instance, reusing, re-hardware and modernization that
happened when a client changes to an option kind of component or organization
The accompanying elements will decide the level of this danger:
1. The quality gave by a substitute,
2. The client's ability to change,
3. The costs for the substitute, and
4. The exchanging cost.
The quality gave by VOIP (Voice over Internet Protocol) administrations is not ensured
contrasted with the quality gave by media transmission gadgets even though the costs are higher
still the clients like to get associated a long way from the VOIP. The new On the opposite side,
better approaches for media transmission, for example, better approaches for talking over BB
courier are accommodated and developed by the supplier in their offering so Saudi culture still
proceed with the high communication instrument Considering the not guaranteed quality by
VOIP as substitute item and contrasting the quality furnished with the portable specialized
apparatuses and The effect of this power on Saudi telecom industry is low.

Threat of New Entrants
Two issues to be considered in the examination of the risk of the new administrator. The
first is the effect available: "When the danger is high, holders must hold down their costs or
increment speculation to hinder new contenders". The second issue is that the new administrator
will need to face boundaries and shaped its system in like manner. "On the off chance that
hindrances to passage are low and newcomers expect little countering from settled in contenders,
the risk of a section is high and benefit of the area is moderate."
Both potential and existing contenders impact the normal benefit of the segment. The
danger of new participants is for the most part taking into account the boundaries to market
passage. They can take numerous structures and are utilized to keep a flood of firms in an
industry progressively benefits, balanced for the expense of capital, ascent above zero. In
actuality, there are passage hindrances at whatever point troublesome or is not monetarily
attainable for an outcast to duplicate the position of officeholders
The principal hindrances to passage in the Saudi media communications business sector
are:
1. The high permit charges,
2. High cost of foundation establishment,
3. The fast change of innovation,
4. Client exchanging expense is low, and
5. Simple access to dispersion channels
Part 1
Ratio Analysis
Gross Profit Margin
During the period of 2014-2013, the gross profit margin of Saudi Telecom Corporation
has been icreased. During the period of 2014, the gross profit of Saudi Telecom has been
increased to fifty eight point three percent from its based year of fifty seven point one percent in
2013. The change durig the period of 2014-2013, determines the increase of approximately
twenty one percent(Gowthorpe, 2008).
On the other hand, the gross profit margin of Saudi Telecom Corporation is below the
industry average, where the gross profit margin of industry average is fifty nine point eight
percent.

Operating Profit Margin
During the period of 2014-2013, the Operating profit margin of Saudi Telecom
Corporation has been icreased. During the period of 2014, the Operating profit of Saudi Telecom
has been increased to eighteen point seven percent from its based year of negative two point two
percent in 2013. The change durig the period of 2014-2013, determines the increase of
approximately seve hundred and fifty percent(Palepu, Healy and Bernard, 2000).
On the other hand, the Operating profit margin of Saudi Telecom Corporation is below
the industry average, where the Operating profit margin of industry average is nineteen point one
percent.

Tax Rate
During the period of 2014-2013, the Tax Rate of Saudi Telecom Corporation has been
icreased. During the period of 2014, the Operating profit of Saudi Telecom has been increased to
thirty four point five six percent from its based year of zero percent in 2013. The change durig
the period of 2014-2013, determines the increase of approximately hundred percent(Vogel,
2007).
On the other hand, the Tax Rate of Saudi Telecom Corporation is above the industry
average, where the Tax Rate of industry average is thirty one point one nine percent
Net Profit Margin
During the period of 2014-2013, the Net Proft Margin of Saudi Telecom Corporation has
been icreased. During the period of 2014, the net profit of Saudi Telecom has been increased to
twelve poit five seven percent from its based year of zero point zero six percent in 2013. The
change durig the period of 2014-2013, determines the increase of approximately twenty thousand
percent.
On the other hand, the Net Proft Margin of Saudi Telecom Corporation is below the
industry average, where the Net Proft Margin of industry average is thirteen point zero percent.

Return on Asset
During the period of 2014-2013, the Return on Asset of Saudi Telecom Corporation has
been icreased. During the period of 2014, the Return on Asset of Saudi Telecom has been
increased to eighteen point five seven percent from its based year of zero point zero eight percent
in 2013. The change durig the period of 2014-2013, determines the increase of approximately
twenty three thousand percent.
On the other hand, the Return on Asset of Saudi Telecom Corporation is below the
industry average, where the Return on Asset of industry average is nineteen point nine nine
percent

ROI
During the period of 2014-2013, the ROI of Saudi Telecom Corporation has been
icreased. During the period of 2014, the ROI of Saudi Telecom has been increased to thirty poit
seven nine percent from its based year of zero point four sixpercent in 2013. The change durig
the period of 2014-2013, determines the increase of approximately six thousand percent.
On the other hand, the ROI of Saudi Telecom Corporation is above the industry average,
where the ROI of industry average is twenty nine point three three percent.
Interest Coverage Ratio
During the period of 2014-2013, the INTEREST COVERAGE RATIO of Saudi Telecom
Corporation has been icreased. During the period of 2014, the INTEREST COVERAGE RATIO
of Saudi Telecom has been increased to fifty point two nine percent from its based year of
negative seven point nine percent in 2013. The change durig the period of 2014-2013, determines
the increase of approximately eight hundred point four percent.
On the other hand, the INTEREST COVERAGE RATIO of Saudi Telecom Corporation
is below the industry average, where the INTEREST COVERAGE RATIO of industry average is
fifty two point eight seven percent.

Account Recievable
During the period of 2014-2013, the Account Recievable of Saudi Telecom Corporation
has been icreased. During the period of 2014, the Account Recievable of Saudi Telecom has
been increased to fife point eight seven percent from its based year of eight point eight four
percent in 2013. The change durig the period of 2014-2013, determines the increase of
approximately twenty point five percent.
On the other hand, the Account Recievable of Saudi Telecom Corporation is above the
industry average, where the Account Recievable of industry average is five point four percent.
Debt to Equity
During the period of 2014-2013, the Return on Asset of Saudi Telecom Corporation has
been icreased. During the period of 2014, the Return on Asset of Saudi Telecom has been

increased to fife point eight seven percent from its based year of eight point eight four percent in
2013. The change durig the period of 2014-2013, determines the increase of approximately
twenty point five percent.
On the other hand, the Return on Asset of Saudi Telecom Corporation is above the
industry average, where the Return on Asset of industry average is five point four percent
Part 2
Sources of Internal and External Finance Available Saudi Telecom:
Internal sources:
• Retained profit: This is profit already made that has been set aside to reinvest in the
business. It could be used for new machinery, marketing and advertising, vehicles or a
new IT system.
• Working capital: This is short-term money that is reserved for day-to-day expenses such
as stationery, salaries, rent, bills and invoice payments.
• Sales of assets: There may be surplus fixed assets, such as buildings and machinery that
could be sold to generate money for new areas. Decisions to sell items that are still used
should be made carefully as it could affect capacity to deliver existing products and
services.

• Inventory:whe n inventory is liquidated,itbecomes more and the chances to sell it
quickly increases. The process of liquidation involves discounting products inorder to
push up sales and revenue.
External sources:
• Shares: Limited companies could look to sell additional shares, to new or existing
shareholders, in exchange for a return on their investment.
• Loans: There are debenture loans, with fixed or variable interest, which are usually
secured against the asset being invested in, so the loan company will have a legal shared
interest in the investment. This means that the company would not be able to sell the
asset without the lender’s prior agreement. In addition the lender will take priority over
the owners and shareholders if the business should fail and the cost will have to be repaid
even if a loss is made.
There are other types of loan for fixed amounts with fixed repayment schedules. These
may be considered a little more flexible than debenture loans.
• Overdraft: A bank overdraft may be a good source of short-term finance to help a
business flatten seasonal dips in cash-flow, which would not justify or need a long-term
solution. The advantage here is that interest is calculated daily and an overdraft is
therefore cheaper than a loan.
• Hire purchase: Hire purchase arrangements enable a firm to acquire an asset quickly
without paying the full-price for it. The company will have exclusive use of the item for a
set period of time and then have the option to either return it or buy it at a reduced price.
This is often used to fund purchases of vehicles, machinery and printers.
• Credit from suppliers: Many invoices have payment terms of 30 days or longer. A
company can take the maximum amount of time to pay and use the money in the interim
period to finance other things. This method should be treated with caution to ensure that
the invoice is still paid on time or else the firm might risk upsetting the supplier and
jeopardise the future working relationship and terms of business. It should also be
remembered that it’s not ‘found’ money but rather a careful balancing act of cash-flow.
• Grants: Grants are often available from councils and other Government bodies for
specific issues. For example there may be a council priority to regenerate a particular area
of a town and who are happy to help fund refurbishment of buildings. Alternatively there
may be an organisation that specialises in helping young entrepreneurs to launch new
businesses. Assessment for grants can be very competitive, is very individual and not
automatic.
• Venture capital: This source is most often used in the early stages of developing a new
business. There may be a huge risk of failure but the potential returns may also be big.
This is a high risk source as the venture capitalist will be looking for a share in the firm’s
equity and a strong return on their investment. However the significant experience these
investors have in running businesses could prove valuable to the company. This is what
the TV programme ‘Dragon’s Den’ is all about!

• Factoring: This involves a company outsourcing its invoicing arrangements to an
external organisation. It immediately allows the company to receive money based on the
value of its outstanding invoices as well as to receive payment of future invoices more
quickly. It works by the firm making a sale, sending the invoice to the customer, copying
the invoice to the factoring company and the factoring company paying an agreed
percentage of that invoice, usually 80% within 24 hours. There are fees involved to cover
credit management, administration charges, interest and credit protection charges. This
must be weighed up against the benefit gained in maximising cash flow, a reduction in
the time spent chasing payments and access to a more sophisticated credit control system.
The downside is that customers may prefer to deal direct with the company selling the
goods or services. In addition ending the relationship could be tricky as the sales ledger
would have to be repurchased.
Money is a scarce resource and each source has its own advantages and disadvantages. Lenders
will be looking for a return on investment, the size of the risk and the flexibility with which they
can get their money back when they want or need it. For the company seeking money, the
decision as to the best source will ultimately depend on what the money is for, how long the
money is needed for, the cost of borrowing and whether the firm can afford the repayments.
Ratio Analysis
Saudi Telecom has been able to maintain impressive gross profit margins for the year 2013 to
2014 trading period ranged between 62% and 64.5% which is better than its main competitor
Mobily whose gross profit margin was ranging from 49% to 51%and industry standard of
50.34%
NET REVENUE
Apparently, the cost structure of Saudi Telecom and its overall cost-position is
relativelybetter than Mobily although Mobilywas able to achieve higher revenue than Saudi
Telecom by up-to 33%. This is further evidenced by the cost-to revenue ratio which was in the
range of 73% and 69% for Saudi Telecom and 77% and 81% for Mobily
NET INCOME
Further, better overall cost-position by over 50%, and prudent cost-control enabled Saudi
Telecom to comparatively achieve better net incomes than Mobilyas indicated by Net-Profit-
Margin. On an average basis Saudi Telecom's NPM stands at 29.815% higher than
Mobily18.765% by 59%.
While current ratios for both companies are maintained at a reasonable standard of above
1:1 and are constant over the four years, quick ratios are also maintained at almost 1:1 and hence
found to be relatively reasonable in meeting the short-term financial obligations. The cash ratio
stands at 0.62:1 in 2014 which has improved, compared to 0.44:1, 0.32:1 and 0.23:1 in 2013,
2014and 20013 respectively, mainly due to the increase in cash and cash equivalents balances to
US$6.71bn in 2014from US$3.36bn in 2013, US$2.13bn in 2012 and US$1.88bn in 2011.
Generally, Saudi Telecom has been maintaining better cash ratios than Mobily

CASH GENERATED FROM OPERATING ACTIVITIES TO MATURING OBLIGATIONS
Furthermore, although cash provided by operating activities have been steadily increasing
at an overall growth rate of over 10%, Saudi Telecom's Cash-Generated-from-Operations-to-
Maturing-Obligation ratio declined to 0.59:1 in 2009 from 0.58 and 0.54 in 2014and
2013respectively due to the increase in current liabilities by over 39%. The key components to
the overall increase in current liabilities are:
Increase of maturities of the long-term debt to US$1.5bn in 2015 from US$0.3bn,
US$.18bn, US$0.1.6bn and US$1.4 in 2014, 2013, 2012and 2011respectively.
Increase of loans and notes payable to US$5.5bn in 2015 from US$4.6bn in 2014,
US$5.2bn in 2013, US$5,3bn in 2012 and US$5.0 in 2011.
Nonetheless, there shouldn't be major concerns as Saudi Telecom's ability to collect its
debts within 35 - 39 days and pay its creditors in almost 200 days while turning over its stock in
63 days, giving sufficient comfort to meet its financial obligations. Saudi Telecom has
strategized in 2005 that by 2009 it intends to generate cash from its operating activities to the
extent of 39 billion us$
Part 3
Budgeting
For the purpose of budgeting, we have selected Starbucks as the company.

Starbucks is a multinational coffee and coffee house chain company founded in 1971 and based
in Seattle, Washington. Starbucks is the largest coffeehouse company in the world, with 15,011
stores in 42 countries. Starbucks sells drip brewed coffee, espresso-based hot drinks, snacks and
items such as mugs, and of course their well renowned coffee beans. This analysis will provide
an overview of Starbucks and its industry; examine the current market and future market
conditions and suggestions for maximizing the organization’s future profits and growth.
Starbucks takes pride in delivering the highest quality of fresh roasted great tasting coffee. They
believe in making sure the customer is satisfied every time. Starbucks purchases the highest
quality of coffee beans and roast them on location to provide the finest coffee in the world.
However, one area of personal finance that rightfully gets a lot of attention is budgeting, the art
of directing how company money should be used. I think there were only few ways to budget,
but I can now name at least six, here are the various types of budgets:

1. Line item budget: This is the typical spreadsheet budget that most of us started out on. Each
estimated item gets a line and an amount, with the total hopefully adding up to less than your
planned income. This is an example of a “passive” budget, where actual expenditures might be
compared to budgeted amounts weekly or monthly, but always after the expense already occurs.
However Starbucks can use this type of budgeting method to evaluate their income and planned
how to estimate the total amount of money that will be spend yearly on their business, so that
they will not overspend on their budget. More also, the company can cut down on their expenses
by hiring small amount of employee.
2. Envelope (zero-sum) budget: My personal choice, envelope budgeting is an “active” process
that works by assigning income to various virtual “containers.” Money is spent from these
containers with a theoretical $0 limit, which makes it difficult to go over-budget in any particular
category. Saving for irregular expenses and short-term goals is also easier to grasp with this kind
of budget. For this type of budget Starbucks can assign how money will be spend on each
department and also the amount they have to spend on each product. For examples are the
amount they have to spend on coffee, milk, sweetener, sugar. It will also help Starbucks to reach
their goal.
3. Percentage budget: A favorite among those who enjoy rules of thumb, the percentage budget
assigns amounts for expenses based on a percentage of income. One example of such a budget
might call for: 50% “needs,” 30% “wants,” and 20% “savings.” Another type might call out
specific spending categories, for example: 35% “housing,” 15% “transportation,” etc. These
types of budget will help Starbucks to divide the amount they have to spend on what the need to
get to make the business running and also what they need for the business to make it more
profitable and also the amount of percentage the need to saving for the business.
4. Cash budget: A lot of people still like using cash for most purchases for the direct connection
it provides to spending actual money on something. One of the problems with a cash-rich system
is how easy it is to lose track of what amounts should to be allotted to what needs. Whether it’s
in your head or on paper, somehow all that cash should be budgeted and accounted for. This type
of budget might work for Starbucks because some of their distributor might want to collect cash
before the delivery of their order. Also in some cases they might prefer to use cash for their
purchase in other to afford debt.
5. Capital budget: This is something that companies often use to plan their long-term investments
and expenses. On the home front, one of my suggestions is to make most often to other people is
about having a wish list for everything you “want” to buy. This is a great example of long-term
“capital” planning. This type of budget will help Starbucks to have a long term investment and
expenses on how to plan their business and it is going to help the company on how to save and
also improve the business.
6. Starbucks should invest $40 million annually in the company's 4574 stores to increase labor
hour per week by another 20 hours. This investment will increase their income and it will also
help to make more profit.
7. I will recommend that Starbucks should be serving fresh brewed coffee, espresso and
cappuccino in addition to the product they are serving all their customers that will increase the

number of people that will be coming to their stores.
8. Also I will recommend varieties of breakfast along with their coffee, so that all their customers
will have different option of what to take for their breakfast. Meaning doing that it will increase
their income and also make more profit.
9. Operating budget- an operating budget is a budget covering operating expenses (OPEX) for
normal operations. Operating expenses can be budgeted and accounted for on a monthly,
quarterly, and/or annual basis. Operating budgets are usually fixed through a process different
from that used on capital budgets (in some companies, all management above a certain level
participate in the process). Operating budgets, once fixed, are usually not changed during the
period except maybe for emergency reductions following unexpectedly poor sales results or
other disasters. In other words, operating budgets are more often treated as static budgets, rather
than flexible budgets. For this type of budget it will help Starbucks to check how the business is
improving and also can be view monthly, quarterly or annual basis.
In summary, I will recommend capital and operating budget for Starbucks because is going to
help the company to know how to stand on their budget not go over it but they can work it out
and go below the budget that was planned for the year. Also is very important for the company to
list out their expense so that they will not go over their budget at the end of the year
Disadvantages
1. required time. It can be extremely dreary to make a money related arrangement,
particularly in a wasteful domain that illuminated various cycles of fiscal designation will
be required. Counting time is less if there is an arranging method made all-around built
up, delegates are adjusted to the methodology, and the association utilizes coordinating
programming. The time imperative can be shockingly gigantically giant if there is a
participatory coordinating procedure built up; as an aftereffect of a scale has a stunningly
cosmically tremendous number of delegates.
2. Marco. An expert director can endeavor to present spending crevice, which
incorporates imply diminish bespeakers of salary and the development of cost
bespeakers, all together that it can without quite a bit of a stretch to accomplish incredible
contrasts against the budgetary arrangement. This can be a noteworthy problem, and
requires broad checking to identify and without.
3. The inculpation for the outcomes. If a division does not accomplish the normal results,
the leader of the workplace can implicate some different workplaces that organizations
him not to have prosperously supported your zone of expertise.

4. appropriations costs. The money related grant can confirm that the all out measures
overheads are isolated into various divisions, and office directors can not acquiesce with
the dispersion methodologies utilized.
Advantages
1. suspected review. Coordinating procedure administration authority to consider why the
association is ready, and withal its principle suspicions about your business surroundings.
A rare re-appraisal of these issues can prompt altered suspicion, that can change in this
way the way where the administration picks to work the business.
2. Assessments of execution. You can work with delegates to set their objectives for an
organizing period, and maybe the same prizes circle time or distinctive main impetuses of
how they perform. At that point you can make the spending arrangement contrasted with
the flawless reports for the reprehension in regards to the path in which specialists are
moving towards their objectives. This procedure is more ordinary with money related
targets, nonetheless, operational goals (eg decrementing the rate component change)
Similarly can be incorporated to the monetary arrangement for the reasons for audit of
execution. This game plan is called assessment bookkeeping commitment.
Conclusion, Recommendation & Summary
Having analyzed after the Income Statement, Balance Sheet ascertains the proportions
and the outcome compared With the Earlier Data with the exploration.The analysis of financial
statement is an application method of various techniques and analytical tool for the purpose of
related data and financial statements of an organization. This methodology is used to inferences
the usefulness in an analysis of business operation and derives estimates.
This segment model investigation of the five strengths, the bartering force of purchasers
is additionally a standout amongst the most critical powers influencing organizations of Saudi
Telecom. Clients can without quite a bit of a switch segment of various brands Saudi Telecom in
light of the way that it is conceivable all things considered. Thus clients can shun Saudi Telecom
maybe in light of the way that there are various substitutes, for instance, beverages and
refreshments in eateries time. These variables strong rule the way singular buys are humble
complexity and aggregate incomes of Saudi Telecom. Consequently, this part of the investigation
model of the five powers demonstrates that the dealing force of clients will likewise be among
the need difficulties of Saudi Telecom
That Saudi Telecom has truly solid monetary Situations HAD 2012. Last Until 2013 Has
Been a hard year for Saudi Telecom, we can see from the proportions That Went down
Calculated liquidity, dissolvability has Decreased Dramatically, Went down benefit in 2013
enormously Comparing It With alternate years and the organization has been utilizing less
proficient than resources STI years prior. After the count above, we can shut everything down

improvement of the money related Saudi Telecom that has Decreased Dramatically the most
recent year, 2013.
References
1. Gowthorpe, C. (2008). Financial analysis. Oxford: CIMA.
2. Palepu, K., Healy, P. and Bernard, V. (2000). Business analysis & valuation. Cincinnati,
Ohio: South-Western College Pub.
3. Vogel, H. (2007). Entertainment industry economics. Cambridge: Cambridge University
Press.

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