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Introduction:
Etisalat is multinational company based in emirates; it provides services of telecommunications
and currently operating in more than sixteen different countries in Africa, Middle East, and Asia.
In 2014, Etisalat has become the 10th largest operator of mobile network in all over the globe.
The total consumer base of the company is 154 million. Etisalat is the main and only net provider
operating in United Arab Emirates. In 2012, the company was declared as the most powerful
telecommunication service provider in UAE and it was declared by Forbes Middle East. In
December 2020, the company has reported AED51.8 billion consolidated revenue and the net
profit of the Etisalat was AED9.1 billion. The capitalization of market of Etisalat is AED195
billion currently (Agwu, 2021).

Etisalat is known as the leading internet hub located in Middle East that provides connectivity to
different telecom operators across the region. Etisalat stood 12th largest carrier of voice in all
over the world and it is also the major voice traffic carrier on international level in Africa and
Middle East. In 2008, Etisalat has made 510 agreements of roaming with 186 different countries
to enable 3G, voice roaming, BlackBerry, and GPRS. The company is operating Point of
Presence also known as PoP in Frankfurt, Singapore, Amsterdam, Paris, London, And New
York. In 2011, the company has established the network of 4G LTE commercially.

Mission and Vision:

The mission of Etisalat group is to facilitate their customers with effective and best-in-class
experience on domestic as well as international level, to deliver good return to all of the
stakeholders by making investment in long-term plans, future and operations of the company as
well as to support the economic enhancement and development in every market where the
company is operating (Akpulonu, 2017).

Financial Ratios
Financial ratio analysis is used by the finance managers to determine the worth, profitability,
liquidity, market value, and efficiency of the organization. It utilizes the comprehensive
information given in financial statements such as income statement, balance sheet or cash flow
statements. This analysis is not only beneficial for the internal management but also it also
influences the decisions of investors who are determining the financial performance and health
of the company through this analysis.

Liquidity Ratios
Current Ratio: Current Assets / Current Liabilities

Year 2,020 2,019

Current Assets 83,319,224 80,907,920
Current Liabilities 50,827,798 44,343,836
Ratio 1.63 1.82

Interpretation:

The current ratio is used to determine the liquidation ability of the company. It demonstrates the
capability of firm to pay back its current or short term liabilities. The ratio greater than 1 means
firms is stable enough to payback these liabilities. The current ratio of Etisalat Group shows
gradual increase by 1.63 in 2020 means company has more assets as compared to its liabilities.
But the higher current ratio always does not mean that company has strong financial position. It
often shows that company may not manage its current assets or working capital in efficient way.
And this factor can be observed through increased trade debts (Account Receivables) as the
collection process of Etisalat is slow that also causing increase in their current assets.

Quick Test Ratio: Current Assets –Inventory / Current Liabilities

Year 2,020 2,019

Current Assets 83,319,224 80,907,920
Current Liabilities 50,827,798 44,343,836
Inventory 704,908 783,020
Ratio 1.62 1.806

Interpretation:

The quick test ratio is used to determine the availability of more liquid assets to pay off the
obligation and liabilities of the company. In 2020 it is seemed that the assets of the company are
little as compare to 2019 to meet the short-term obligations that reflect low liquidity of the
company.

Leverage Ratio

Total Debt to Assets: Total Liabilities / Total Assets

Year 2,020 2,019

Long term liability 83,319,224 80,907,920

Current Liabilities 50,827,798 44,343,836

long term + Current 134147022 125251756

Total Assets 133,017,911 128,266,333

Ratio 1.008 0.976

Interpretation:

Debt to Assets ratio helps to determine the financial leverage of the company. It demonstrates the
usage to debts to finance company assets. The ratio less than 40% indicates the strong position of
the company whereas large value shows the poor health of the company. The ratio shows that
company used 0.97 of their debt-financed assets in 2019 and 1.008 in 2020.

Total Debt to Equity: Long Term Debt / Total Equity

Year 2,020 2,019

Total Debt 134147022 125251756

Total Equity 60,550,021 57,767,099

Ratio 2.21 2.168

Interpretation:

Total debt to equity ratio compares the shareholder equity and total obligations of the company
The value less than 1 shows that company prefer the equity financing instead if debt financing.
The analysis of Etisalat Group shows that company utilized debt financing in all those years but
in 2020, the equity financing is used as the ratio is 2.21 in 2020 whereas in 2019 it was 2.168.

Profitability ratio:

Operating Profit Ratio: Operating profit/Net sales*100

Year 2,020 2,019

Operating profit 13,015,123 11,797,503

Net sales 51,708,211 52,186,413

Ratio 25.1% 22.6%

Interpretation:

The net profit margin ratio determines the contribution of net sales in the net profit of the
company. It is the most important ratio in profitability measurement of the company as net profit
is the bottom line after all direct and indirect expenditures.

It shows the amount left after paying off all operating and other expenses of the company. The
ratio shows that Etisalat group has maximum profit margin in 2020 and it is due the increase in
sales which reduced per unit cost, and transportation expenses of the company.

Net profit ratio: Net profit/Net sales*100

Year 2,020 2,019

Net Profit 10,315,736 9,494,578

Net sales 51,708,211 52,186,413

Ratio 19.94% 18.19%

Interpretation:

This profitability ratio helps to analyze the soundness and financial ability of the company to
meet long and short-term obligations.
The operating profit ratio shows that operating profit of Etisalat in 2020 is 19.94% which
decreased in 2019 due to increasing level of sales and reduction in per unit cost.

Return on assets: =Net income/ Average total assets *100

Year 2,020 2,019

Average total assets (123017821+133,017,911)/2 (133,017,911

+128,266,333)/2
Net Income 10,315,736 9,494,578

Ratio 8.05% 7.26%

Interpretation:

This ratio indicates the relation between total assets and net profit of the company. It helps to
determine that how effectively company managed their current and fixed assets to earn
maximum profit. Higher ROA shows the effective management and asset utilization in company.

It also increased in 2020 as the outbreak influenced overall practices of the firm. The net income
of the company increases and due to the uncertainty's risks of pandemic, company did not utilize
its total assets during 2019.

Return on equity= EAIT-Preferred dividend/ Average equity fund *100

Year 2,020 2,019

EAIT 10,315,736 9,494,578

Average equity fund (53430023+ 60,550,021 (60,550,021

)/2 + 57,767,099)/2
Ratio 18.1% 16.04%

Interpretation:

This profitability ratio helps to analyze and evaluate the effectiveness and financial soundness of
company in relation to capital investment in business. It indicates the ability of the firm to
produce profit through equity of the shareholders. It is one of the important ratios form investor
or shareholder perspectives, as it depicts the potential return for their equity or investment.

The return on equity ratio of Etisalat shows that in 2020, company had maximum profit from
each rupee for the equity. It shows that effectiveness and efficiency of the management to utilize
equity in right direction. The equity resources were managed effectively as compared to the other
years of analysis.

Conclusion:
The brief analysis of the annual report and above given information it is concluded that Etisalat
group Company is leading telecommunication sector as one of the largest producers of electric
and products. Etisalat is contributing and serving to fulfill the telecommunication gap in the
company. It had highest market capitalization in last year and in last few years, 2019 was the
most profitable and favorable year for the company. After the huge increase in their sales and
overall operations, the management made new strategies and started working on diversification
activities. But Etisalat needs to enter other categories of the business such as B2C, as the B2B
activities limited the market availability and customer’s diversity of Etisalat.

References:
Agwu, M. O. (2021). Corporate Social Responsibility and Non-‐-Financial Organizational Performance in
Etisalat Telecommunication Company United Arab Emirates.

Akpulonu, M. I. (2017). The Implementation of Total Quality Management (TQM) in the Telecommunications
Industry: Problems and Prospects (A Case Study of Globacom and Etisalat Limited, Enugu) (Doctoral
dissertation).