Pilot Study - Financial Ratio Benchmarks For Real Estate Companies of The G.C.C. - Mahesh N Butani

PILOT STUDY: FINANCIAL RATIO BENCHMARKS FOR REAL
ESTATE COMPANIES OF THE G.C.C.
Mahesh Narain Butani

Reg. No. 071303114
A dissertation submitted in partial fulfilment of the requirements for the degree

of
Master of Science in Quantity Surveying.
Dissertation supervisor: Prof. Ammar Kaka
Heriot-Watt University
School of the Built Environment
April 2010
Declaration:
I hereby confirm that this dissertation is my own work.
_________________________ __________________
Signature Date:
TABLE OF CONTENTS
Sr. No. Contents Page No.
Title page i
Declaration i
Table of Contents ii
List of Tables v
List of Figures vi
Acknowledgements vii
Abstract viii
Glossary ix
Chapter 1: Introduction 1
1.1 Rationale for the research 1
1.2 Research goals 3
1.3 Outline methodology 4
Chapter 2: Literature review: Financial performance 6
2.1 Introduction 6
2.2 Purpose of financial ratios 6
2.3 Categories of financial ratios 8
2.4 Evaluating financial statements 8
2.5 Evaluating financial ratios 9
2.6 Research trends and opinions 9
2.7 Typical user profiles 11
2.8 Sources of financial ratio statistics 12
2.9 Special financial ratios 13
2.10 Limitations of financial ratio analysis 14
2.11 Benchmarking 16
2.12 Case study: Financial performance of hospitals 16
ii
2.13 Summary 19
Chapter 3: Literature review: Financial ratios in construction 21
3.1 Introduction 21
3.2 Contractor insolvency models 21
3.3 Construction specific insolvency models 24
3.4 Analysis by surety providers 29
3.5 Construction industry in Malaysia 32
3.6 Health of contractors in Hong Kong 33
3.7 A model for the Egyptian construction market 35
3.8 Analysis of Indonesian construction firms 38
Chapter 4: Research design and methodology 41
4.1 Introduction 39
4.2 Research goals 42
4.3 Data collection 43
4.4 Objective 1: Identification of financial ratios 43
4.5 Objective 2: Creation of benchmarks 46
4.6 Objective 3: Selection of ratio for detailed analysis 55
4.7 Objective 4: Observation of data grouped by year 56
4.8 Objective 5: Observation of data grouped by country 56
4.9 Objective 6: Observation of data grouped by company size 57
4.10 Hypothesis 57
Chapter 5: Analysis of Results 58
5.1 Introduction 58
5.2 Companies included in the study 60
5.3 Collective balance sheet profile of the companies 61
5.4 Objective 1: Identification of financial ratios 64
5.5 Objective 2: Creation of benchmarks 64
iii
5.6 Objective 3: Selection of ratio for detailed analysis 75
5.7 Objective 4: Observation of data grouped by year 77
5.8 Objective 5: Observation of data grouped by country 79
5.9 Objective 6: Observation of data grouped by company size 86
5.10 Results of Kruskal-Wallis tests 91
5.11 Testing the hypothesis 92
5.12 Summary 93
Chapter 6: Conclusions 94
6.1 Introduction 94
6.2 Objectives 95
6.3 The research hypothesis 98
6.4 Research limitations 98
6.5 Areas of further research 99
6.6 Contact details 99
References 100
Appendix A: BW plot and stat data for financial ratios 106
Appendix B: BW plot and stat data for ROCE 137
Appendix C: KW test results for ROCE 152
Appendix D: Main spreadsheets for financial ratios 154
iv
LIST OF TABLES
Ref Details Page
Table 2.1 Users of financial ratios 11
Table 3.1 The constituent ratios of the model 28
Table 3.2 Description of variables used in the study 32
Table 3.3 Trend of changing ratios of the selected contractor 34
Table 3.4 Management action required based on grade obtained 37
Table 3.5 Revenue and profitability ratios 38
Table 3.6 Cash flow and liquidity ratios 39
Table 3.7 Leverage ratios 39
Table 3.8 Efficiency ratios 40
Table 4.1 Schedule of financial ratios selected 44
Table 4.2 Template of profit and loss statement 47
Table 4.3 Template of balance sheet 48
Table 4.4 Template of additional items 50
Table 4.5 Sample of data sheet for each financial ratio 54
Table 5.1 List of companies selected for the study 60
Table 5.2 Collective balance sheet profile of the companies 2008 61
Table 5.3 Proposed benchmark values for financial ratios 2006 to 2008 65
Table 5.4 Financial ratio medians for GCC countries 66
Table 5.5 ROCE medians for all countries and benchmarks 2006 to 2008 75
Table 5.6 KW test for ROCE of all companies 3 year data 78
Table 5.7 Anova test for ROCE of all companies 3 year data 78
Table 5.8 KW test results for grouped data for ROCE 91
v
LIST OF FIGURES
Ref Details Page

Figure 2.1 Approach to selecting key financial indicators 18
Figure 3.1 The cut-off between non-failed and failed groups 29
Figure 3.2 Construction failure rates 2006 - 2008 30
Figure 3.3 Model development steps 36
Figure 3.4 Performance grades (G) for different construction sectors 36
Figure 3.5 Performance grades of the selected company over a period 37
Figure 4.1 Sample of box - whisker plot 53
Figure 4.2 Sample of box - whisker plot for 3 years with median and mean 54
Figure 5.1 Collective balance sheet profile of all 30 companies 2008 62
Figure 5.2 Country-wise collective balance sheet profile 62
Figure 5.3 Size-wise collective balance sheet profile 63
Figure 5.4 Frequency distribution of ROCE 2006-08 76
Figure 5.5 Expanded frequency distribution of ROCE 2006-08 76
Figure 5.6 BW plot of ROCE for all companies 77
Figure 5.7 BW plot of ROCE group country-wise 2006 79
Figure 5.10 Column chart of ROCE group country-wise 2006-08 81
Figure 5.11 Column chart of ROCE group year-wise 2006-08 82
Figure 5.12 Web chart of ROCE 2006 83
Figure 5.15 Web chart of ROCE 2006-08 84
Figure 5.16 BW plot of ROCE group size-wise 2006 86
Figure 5.19 Column chart of ROCE group size-wise 2006-08 88
Figure 5.20 Column chart of ROCE group year-wise 2006-08 89
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ACKNOWLEDGEMENTS
First and foremost, I wish to thank Dr. Assem Al Haj for his comforting smile,
encouragement and support which has contributed in many ways to my learning.
My sincerest appreciation goes to Dr. Ammar Kaka, for his patience, advice and
guidance as my dissertation supervisor.
This study was inspired by an article by Pamulu Sapri and I am thankful to him for
providing his paper. I am also deeply indebted to all the scholars and authors of the
papers and books which I have referenced and who have contributed so much to my
understanding.
My gratitude goes to Ramakanta Rath, Heriot Watt librarian extraordinaire, who has
been invaluable in suggesting sources and ideas; and Anita Dias, assistant librarian, who
has been most helpful.
Heartfelt thanks to evening manager, John Mathew who has been exceptionally
supportive and the Heriot Watt administration staff; mainly Aisha Albulooshi,
Greeshma Ramesh, and Mahesh Naik who have been most kind and helpful.
Credit goes to my lovely wife, Anita for her endless support and concern; and to Snehal,
my daughter, for her help and prodding; as also to Nalini, Sunita and Madhu, my sisters
for their encouragement and love.
I am grateful to Joseph Medlej, my superior, who has been most considerate. I also
thank my colleague, Omar Mahmoud for his invaluable advice and reference material.
Also, I thank all my fellow students many of whom are now dear friends, in whose
company, studying was a joyful experience. Special thanks to Rupa Appukuttan for
introducing me to the university and initial assistance.
I am obliged to K K Varma for his review; and Priyanka Parkkot for her expert opinions
pertaining to financial analysis.
Special thanks to my office assistant Raju Sarvanna for being around.
I thank Arab Capital Markets Resource Center (ACMRC) the financial research and
consulting company for providing financial data on the companies
I also wish to thank all the professionals who responded to my queries from the
following forums: Allexperts.com: Ronny Fisher; LinkedIn: Asra Islam, Alan
Dibartolomeo, Amit Tandon, Jack Man and Robert Reitman; Finance30.com: Robert,
Brent Wheeler, Bill Wright, Glen Sawyer, Sundaramany, T Venkataraman, Arnel,
Charles Van Tongren, Joseph, Naresh, Gabriel von Bonsdorff, Fayez, Elizabeth
Sampedro, and Satish Singh; Stat-Help.com: Dr. Adrian Gilbert; and American
Statistical Association Professionals: Arthur Aguirre.
All mistakes, of course, are purely mine.
Above all, I dedicate this study to my mother, Duru for her unshaken confidence and
support throughout. Thank you, ma!
vii
ABSTRACT
The GCC region has been undergoing a transformation due to a surge of construction
activities in recent times. This has led to a mushrooming of real estate developers; some
of whom have gone public, and are listed on the stock exchanges. Real estate is the
driver of the parallel non-oil economy, and therefore it is important for the stakeholders
to have sufficient awareness of the financial performance of these firms. While the
financial ratios of these firms can be easily derived from the financial statements, there
do not exist any official benchmarks to compare the ratios. This pilot study aims to fill
this gap by creating rudimentary benchmarks for 30 financial ratios based on financial
statements of all the 30 companies listed on the GCC bourses. The study was initially
meant to cover UAE firms, but was extended to cover the GCC due to the limited
number of listed firms in the UAE. This extension was made on the assumption that the
GCC countries have similar economies. The benchmarks for 30 financial ratios for
2006-08 are presented and one ratio: the return on capital employed (ROCE), is
analysed in detail. The study confirms the hypothesis that the ROCE data is statistically
similar among the selected firms of the GCC for the three study years 2006-08, and it is
envisaged that the benchmarks created for the other 29 financial ratios may be used
across the GCC with limited prudence. The study shows that there are statistically
significant variances due to size effects; the study does not consider country effects due
to limitations of data. The study also shows that, in terms of ROCE, all the companies
fared better in 2007 than 2006 and poorly in 2008; and that the smaller companies went
through wild swings in terms of ROCE during the study period.
Keywords: financial ratio, benchmark, real estate, construction, GCC, ROCE
viii
GLOSSARY OF TERMS
ACMRC Arab Capital Markets Research Centre

ANOVA Analysis of Variance (test)
BACH Banks for the Accounts of Companies Harmonised
BTM Book-to-Market
BW Box-Whisker (plot)
BWC Backlog to Working Capital
CA Current Assets
CFMA Construction Financial Management Association, USA
CFROI Cash Flow Return on Investment
CIDB Construction Industry Development Board , Malaysia
CR Current Ratio
CVA Cash Value Added
DER Debt to Equity Ratio
DSS Decision Support Systems
EBIT Earnings Before Interest and Taxes
EPS Earnings Per Share
EVA® Economic Value Added
FA Fixed Assets
GAAP Generally Accepted Accounting Principles
GCC Gulf Cooperative Council
GDP Gross Domestic Product
HRCC Hospital Report Research Collaborative (Toronto)
IQR Inter Quartile Range
IRR Internal Rate of Return
KW Kruskal- Wallis (test)
MDA Multiple Discriminate Analysis
MIS Management Information Systems
NA Net Assets
NAICS North American Industry Classification System
NCE Net Capital Employed
PAT Profit after Tax
PBIT Profits before Interest and Taxes
PER Price Earnings Ratio
PI Performance Index
QR Quick Ratio
QUT Queensland University of Technology
REIT Real Estate Investment Trusts
RMA (The) Risk Management Association
ROA Return on Assets
ROCE Return on Capital Employed
ROE Return on Equity
ROS Return on Sales
ROTA Return on Total Assets
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SIC (International) Standard Industry Classification
SIO Surety Information Office
SSRN Social Science Research Network
STL Short Term Liabilities
TSO The Stationery Office, UK
TSR Total shareholder Return
UAE United Arab Emirates
UK United Kingdom
US United States of America
UTE Under billings to Equity
WCT Working Capital Turnover
x
CHAPTER 1 INTRODUCTION
1.1 Rationale for the research
The GCC economic overview

The Gulf Cooperative Council (GCC) countries comprise of six countries of the Arabian
Gulf, namely United Arab Emirates (UAE), Sultanate of Oman, Kingdom of Saudi
Arabia, State of Qatar, Kingdom of Bahrain, and State of Kuwait. The GCC countries
have the largest proven oil reserves in the world and this has resulted in the region
ranking as the largest producer and exporter of petroleum. For the region, oil & gas
represent 73% of total export earnings and the sectors account for 63% of government’s
revenues and 41% of the GDP’s. The countries follow somewhat similar paths of
economy, development, and governments. Other similarities are the pegging of the
local currencies to the US Dollar (except Kuwait) and the dependence on a large
expatriate workforce and expatriate businesses. The oil and natural gas boom has
created some of the world’s fastest growing economies in this region; which is now
coupled with a construction and real estate boom backed by decades of saved petroleum
revenues (GCC economic overview 2010). The six countries have enjoyed a
spectacular economic boom until late 2008; the GCC economy tripled in size to US
Dollar 1.1 trillion from 2002 to 2008. The region is continuing its economic reform
program, focusing to attract domestic, regional, and foreign private sector investment
into oil & gas, power generation, telecommunications, and real-estate sectors. The
decline in oil prices, stemming from the global financial crisis has slowed the pace of
investment and development projects, but the governments are in a position to use their
considerable financial resources to stabilize the economy if necessary (GCC economic
overview 2010).
Real estate in the UAE and the rest of the GCC countries
The ownership of real estate in the GCC countries was closed to foreigners until
recently. Lately, there have been partial relaxations in some countries, initiated by
Dubai, UAE and followed by others, each with their own laws, regulations, and
restrictions. This had resulted in the construction boom which started in Dubai circa
2005 and slowly spread to other GCC countries. This gave rise to a multitude of real
1
estate companies, large and small, both state sponsored, and privately owned, who are
the drivers of the parallel non-oil economy. Some of these companies have gone public
and became listed to enable them to tap funds from the public.
Gap in data on financial performance benchmarks

If an investor wished to appraise or compare the financial performance of these real
estate companies, he would want to look for regional benchmarks of financials; where
he would face a difficult predicament. There does not seem to be any organisation
producing benchmarks (or industry averages as they are also known) of financial ratios
of companies in the UAE. A search on the World Wide Web will confirm that there are
none in any of the GCC countries either. Some regional stock exchanges and some
stock broking companies and analysts do provide information on financial ratios of
individual companies, notably the Arab Capital Markets Research Centre (ACMRC),
there does not seem to be any agency publishing the benchmarks.
Bridging the gap

While working on an assignment on the subject of construction financial management,
the author noticed that the comparative benchmarks given were from the UK. As a
UAE company had been selected by the author for the assignment, it seemed odd to
compare the calculated financial ratios with UK benchmarks. This led to a quest for
similar benchmarks for UAE contractors; whereby it was realised that none existed.
This gap in information is what prompted the topic for the dissertation, which was
initially a proposal to create rudimentary benchmarks for financial ratios for UAE
contractors, based on a similar study of financial ratios of contractors in Indonesia by
Pamulu in 2008. It was then realised that contractors would have to be coaxed into
releasing their financial figures, which seemed a daunting task. Therefore it was
investigated if there was any information on financials on the public domain of the
internet. Only 3 construction companies were found listed on the stock exchanges - a
contractor with manufacturing facilities, an electromechanical contractor, and a fit-out
contractor. It was also noted that there were six real estate companies listed in the 2
stock exchanges in the UAE, which were a mixed bag in terms of size and
diversification, and by themselves too few to do a meaningful study of the benchmarks.
As the GCC countries have similar economic profiles, the search was extended to the
GCC countries, which resulted in finding 30 real estate companies listed in the various
2
bourses of the GCC. Therefore the goal was modified and it was then proposed to do a
study of the entire GCC real estate development companies.
This dissertation is an attempt – a pilot study to examine if the financial ratios of a
mixed bag of real estate companies make some meaning and patterns when they are put
together. This is proposed to be done by statistical analysis of variance and extraction
of medians to serve as rudimentary benchmarks.
1.2 Research Goals
This section describes the aims, objectives hypothesis, and assumptions of the research
Aim
To create benchmarks for select financial ratios for three years 2006 to 2008 and
statistically test if sufficient similarities exist in the underlying data to justifiably enable
the usage of data for the whole GCC listed companies to be used together with
confidence as a group.
Objectives
These objectives have emerged for the research through literature review and
examination of analysts’ websites:
1. Identification of financial ratios which would be useful, especially for the real
estate and construction industry.
2. Creation of benchmarks for each of the selected financial ratios for each of the
three study periods 2006-08.
3. Selection of one financial ratio for detailed analysis.
4. Observation of patterns and variance for the selected ratio in year-based group
data for all companies.
5. Observation of patterns and variance for the selected ratio in country-based
group data for each of the years of the study, to test the hypothesis.
6. Observation of patterns and variance for the selected ratio in size-based group
data.
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Hypothesis
One part of this research is designed to test the Hypothesis that:
H0 = There is no difference between financial ratio data across the GCC countries at
α =0.05 level.
The hypothesis is tested for the selected ratio and the results of the hypothesis are
extended to assume that the benchmarks created with the combined data of the selected
GCC companies may be confidently used throughout the region - or not.
1.3 Outline methodology
This section explains the structure and the proposed methodology for achieving the aims
and objectives of the research.
Stage 1: Literature review

In chapter 2, a review of the literature pertinent to the selected topic has been carried out
to gain a wider understanding of the research topic. It also highlights what work has
been carried out earlier by others and the controversies and problems relating to the
research. A detailed and systematic search did not yield any literature on financial
benchmark ratios for real estate developers in the GCC or UAE or anywhere else; none
was either found on the creation aspect of financial ratio benchmarks for construction
industry. Most of the literature on real estate is on topics related to Real Estate
Investment Trusts (REIT’s) and the investment ratios and other literature on financial
ratios in construction relate mostly to insolvency of contractors. Some literature was
found on a study of financial ratios in the construction industries of Indonesia, Hong
Kong, and Turkey. Interesting information was also found on benchmarking of
financial ratios found is a study undertaken by Deloitte and Touché for the Australian
wine industry. Another study undertaken by Toronto Hospitals for benchmarking of
financial performance has also been examined. The literature review was carried out
from books on financial accounting and statistical analysis; scholarly articles and PhD
theses were reviewed online on the Heriot - Watt electronic resources and Jstor,
Elsevier, SSRN, QUT ePrints, CSA Illumina, Springer science, Emerald, and
Routledge- Informaworld; all accessed through Athens. Some other journals which
were inaccessible were made available upon request by the university librarian. The
4
websites of some data providing companies and analysts were also reviewed to study
their methods and presentations of financial data.
Stage 2: Research Design and Methodology

In chapter 3, the research uses the information gathered from literature review for
designing the methodology. The first part requires identification of relevant financial
ratios: and 30 have been identified for the study. The second part is the collection of
raw data to calculate the selected financial ratios, which is collected from the websites
of the listed companies; from the regional stock exchanges; and the ACMRC. The
literature review revealed that 30 companies is the minimum requirement by the Risk
Management Association (RMA 2009) to create benchmarks. The ratios for years
2006-8 are calculated, tabulated, statistically analysed and a bench mark values for each
of the 30 ratios are presented. The financial ratios are also presented as box-whisker
plots in the appendix showing the quartiles, median and mean values for each of the 30
ratios. The financial ratio – Return on Capital Employed (ROCE) is selected for
detailed analysis, to validate the hypothesis and accordingly the ROCE data is split into
year based, country based, size based groups and results presented.
Stage 3: Analysis of Results

In chapter 4, the results obtained from the above analysis are presented in a table for all
the 30 ratios showing median values as benchmarks for the GCC. Also presented are
medians for each of the countries for each year. The ROCE analysis is also checked for
variances within the data based on grouping of the data to test the hypothesis. Some
benchmarks have comparative values from other countries and these have also been
shown wherever possible.
Stage 4: Conclusion
Chapter 5 provides conclusions drawn about objectives set out earlier based on analysis
of the results. It then makes a judgement about the validity of the hypothesis. This
chapter also notes the limitations of the research and provides suggestions for further
research which may be carried out.
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CHAPTER 2: LITERATURE REVIEW: FINANCIAL
PERFORMANCE
2.1 Introduction
This chapter aims to provide a general outlook of the literature on financial ratios
starting with the purpose definitions and moves on to explain the types of financial
ratios. It then goes on to explain the compatibility of the raw data obtained from the
financial statements of different firms; which is followed by a section on evaluation of
the financial ratios. A brief history and research trends are covered in the next section
followed by user profiles of the ratios and their requirements. A section also gives the
names of providers of the financial ratios in the UK and US derived from the literature
reviewed. There have also been special ratios, some even branded and patented, and a
selection of these is presented. This is followed by a discussion on limitations of use
and a conclusion on the future of financial ratios. The final section describes the
process of financial benchmarking and a case study of Ontario hospitals.
2.2 Purpose of financial ratios
The Dunn & Bradstreet Corporation reports that over 60,000 businesses fail each year,
on an average. Although many firms also cease to exist due to mergers or sales, a study
by the Small Business Associations showed that 25% of them shut down within 2 years
of operations, 50% within 4 years, and 70 % within 8 years. Out of these, 20 % failures
are contributable to inadequate capital or too much debt. From these findings it is
assumed that financial education is an important factor in determining whether a
business venture will be successful (Melicher 2008).
Can a business meet its financial obligations? Can it pay its debt? Is the firm liquid? Is
the business model successful? Is it making a reasonable profit? Is it utilizing its assets
to the fullest? Is the firm suitable investment for the shareholders? Would the returns
be better elsewhere? Is it a good investment? The answer to all the above lies in the
analysis of financial statements churned out by companies annually.
6
Financial statements are used to report the status of the firm at one point in time as well
as the results of its operations of the previous year. However, the real use comes in the
effective analysis to predict the future income and dividends along with the risks
associated with these variables. (Melicher 2008)
There is an assortment of analytical methods - trend analysis, common size analysis,
ratio analysis, segmental analysis and cash flow analysis (Alexander 2007), and out of
the various methods in use, financial ratios are the corner stone of financial statement
analyses (Horngren 2004) as they capture the critical dimensions of the economic
performance of the firm (Horngren 2004).
Financial ratios are the most widely used among other measures of financial
performance of a firm. Ratio analysis can be considered a means to determine a firm’s
strengths and weaknesses (Melicher 2008) and are increasingly being used as a tool by
management to guide, measure and subsequently reward the employees; Hewitt
associates, a compensation consulting firm reports that 60% of the 1941 large firms
have profit sharing programs (Horngren 2004).
Ratios standardize balance sheet and income statement numbers (Melicher 2008);
“business ratios are the guiding stars for the management of enterprises” according to
Walsh (2003) as they guide the management towards the most effective long and short
term strategies. Financial ratios are also used for modelling purposes by practitioners
(analysts) and researchers (Salmi 1994).
Besides the obvious uses, ratios have also been used in forecasting potential corporate
bankruptcies, classifying a potential customer’s credit rating; and lately there is research
into models to identify potential takeovers and also to value shares. This is made
possible because of progress in application of statistical techniques to ratios. This has
resulted in improvement of the quality of a ‘general picture’ of a company through time-
line analysis and line-of-business analysis (Pendelbury 2004).
The four major categories of financial ratios measure liquidity, profitability, leverage,
and efficiency. As a general rule, a higher value in profitability and liquidity and lower
values in leverage indicate a better financial health of a firm (Pamulu 2007).
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2.3 Categories of financial ratios
Different writers have classified the numerous ratios into various categories depending
upon their application.
Horngren (2004) has grouped the most ratios into four categories: short-term liquidity
ratios, long-term solvency ratios, profitability ratios and market price & dividend ratios;
whereas Melicher (2008) has classified them as: liquidity ratios, asset management
ratios, financial leverage ratios, profitability ratios and market value ratios.
Pendelbury (2004) has classified them as: profitability and performance ratios,
efficiency and effectiveness ratios, liquidity and stability ratios, capital structure ratios,
and investment and financial risk ratios.
2.4 Evaluating financial statements
A study of financial ratios would be imprudent before first touching the subject of the
raw data on which they are based; which is the financial statements; these are namely
the profit & loss statement, the balance sheet, the cash flow statement and the auditors
report.
Financial statements identify a multitude of figures for us and these figures do not mean
much until we compare them with something else. They are therefore analysed by
means of horizontal or vertical analyses. The analysis of the performance over a time
period is termed as “horizontal analysis” or “trend analysis,” whereas a comparison with
other firms in the peer group is termed as “vertical analysis” or “common size analysis.”
In trend analysis, a base year is chosen as a ‘benchmark’ and the various elements are
shown as an index of this benchmark. Literature suggests a minimum of 5 year time
frame (Alexander 2007) to check how the various items in a balance sheet have changes
over time. In a common size analysis the financial statements items are compared with
the peer group, and to remove the size effect, the balance sheet items are expressed in
terms of percentage of revenue and the balance sheet items in terms of percentage of
assets (Alexander 2007).
The elements of non-compatibility of financial statements should be carefully reviewed
prior to undertaking an analysis. These pitfalls could include changes relating to the
time span of the financial year of the statements, different balance sheet closing dates,
8
changes in the firm’s structure due to mergers, acquisitions or restructuring activities,
differences in valuation rules or accounting methods, and differences in presentation
rules (Alexander 2007).
2.5 Evaluating financial ratios
Financial ratios are calculated from the various figures of the financial statements. As
the data for financial ratios comes from financial statements, it can also be regarded as
an extension of other financial statement analytical techniques (Pamulu 2007).
In order to meaningfully evaluate the performance, a comparison would be needed with
the peer group of other firms in the industry, or the firms own past performance or an
absolute benchmark (Alexander 2007).
It would not make much meaning to judge the performance of a firm based on one or
two year results if there are no benchmarks for similar industries available and if the
results are too short to build an internal benchmark (Alexander 2007). Unfortunately
there is no ‘ideal’ or absolute standard benchmark for the ratios (Pendelbury 2004);
Alexander (2007) and Pendelbury (2004) suggests creation of a benchmark based on the
best performer or the most successful firm in the peer group. It should also be noted
that if the statistics are made based on larger companies, the benchmarks so created
would hold little relevance for the smaller companies in the same industry (Pendelbury
2004).
2.6 Research trends and opinions
A majority of the research literature on financial ratios is centred on several major

themes (Salmi 1994) with some overlaps which include functional form –the
proportionality debate, distribution characteristics, classification, comparability across
industries, time-series properties, bankruptcy prediction models, explanation of other
firm characteristics, stock markets, and forecasting ability – v/s financial models, and
the estimation of Internal Rate of Return (IRR).
According to Pamulu (2007), some of the most relevant research in financial ratio
analysis in construction has been by Fadel (1977), Akintoye (1991), Langford (1993),
9
Edum-Fotwe, (1996), Pilateris (2003), Cheah (2004), Chan (2005), Yee (2006), Singh
(2006), Ocal (2007), and Luu (2008).
In a research on ‘trends in financial ratios analysis research’, a review of the basis of
was conducted by Salmi (1994) of the four areas of financial ratios: function form,
distributional characteristics, classification, and measurement of profitability. The
generic conclusions of the research were that “there are several unexpectedly distinct
lines with research traditions of their own.” They also concluded that “while significant
irregularities can be observed, they are not necessarily stable across different ratios,
industries, and time periods” (Salmi 1994). It was observed that the proportionality was
stronger ‘within’ industries than ‘between’ industries, and the proportionality varied
between ratios and between time periods indicating problems in temporal stability
(Salmi 1994). A follow up review conducted by Salmi, Nikkinen, and Sahlström (2005)
has confirmed that the major conclusions were still valid even after a decade.
A research on ‘country and size effects’ on the financial ratios was conducted by Cinca
(2001) on European companies, which involved 11 countries, with 3 size groups and
over a 14 year period on 15 financial ratios; using multivariate statistical analysis. The
data was used from the harmonised aggregate financial statements published by the
European commission in the BACH (Bank for the Accounts of Companies Harmonised)
database. The results showed that financial ratios ‘did’ reflect the size of the firm; also
there were no significant ‘size related differences’ in profitability, but the differences
appeared when countries were compared. . The research has shown that size is
important in the financial structure of European firms and that its importance has not
varied over time (Cinca 2001). The research also found that strategic groups did exist
and they were related to country and not size. The research suggests as an example –
that a small Italian firm could take example from a small Austrian firm if it wanted to
increase its profitability rather than find benchmarks in a large Italian firm (Cinca
2001).
In another research on high Book-to-Market (BTM) firms, Piotroski (2000) has
examined whether a simple financial-analysis-based strategy, when applied to a broad
portfolio of high BTM firms could increase the returns to an investor through selection
of financially strong high BTM firms. High BTM firms tend to be neglected by the
analysts, suffer from low levels of investor interest, have limited access to the informal
types of disclosures and even these are considered unreliable (given their recent poor
performance), and the only source of their information dissemination is through the
annual financial statements. The evidence suggested that the market did not fully
10
integrate financial information into stock prices in a timely manner (Piotroski 2000).
The paper discusses that the application of a simple financial statement based heuristic
applied to these out-of-favour stocks could pick out firms with strong prospects. The
research was limited to financial statement analysis of small and medium firms with low
share turnovers and no analyst following – the unfavoured stocks (Piotroski 2000). The
research proved that an investment strategy based on the research generated a return of
23 % annually between 1976 and 1996 and in that market scenario of 2000, could
potentially generate an additional 7.5 % annually through the selection of financially
strong high BTM firms (Piotroski 2000).
2.7 Typical user profiles

Table 2.1: Users of financial ratios
Financial ratios are employed widely by all parties interested in an enterprise: the
owners, management, personnel, customers, suppliers, competitors, regulatory agencies,
and academics, each with their own objectives on application (Salmi 1994). All users
will no doubt be interested in the future prospects and different users would have varied
requirements based on the decisions required to be taken (Pendelbury 2004).
Potential shareholders would examine the financial statements as an excellent source of
information about a company (Melicher 2008) before they decide to invest in a
company’s shares. Subsequently they will continually assess their investments and
some of the results may be translated into ‘buy’, ‘hold’, or ‘sell’ decisions. There are
ratios specifically made for investors which focus on the returns to be obtained in the
11
form of dividends or capital appreciation (Alexander 2007). Some companies go the
extra mile to provide additional information for the investors; e.g., the annual report of
Taiwan Semiconductors provides a 5 year history on 30 ratios, which allows an analyst
to quickly access the effectiveness of management in several areas. (Horngren 2004)
While the present shareholders will want to monitor firm performance – mainly the
status of dividends and profitability (Pendelbury 2004), the management would review
if certain company goals are being met (Melicher 2008), whereas the employees would
be interested in information to bargain for better benefits and job security status
(Pendelbury 2004). An excellent example is the Duke Power Company, which decided
that profit may not be the right measure for rewarding employees and decided to use
ROE as one of the new measures; as ROE can be improved both by increasing
profitability and efficiency (Horngren 2004)
Lenders would be interested in the creditworthiness (Pendelbury 2004), and potential
buyers of bonds will want to ensure the timely payback capacity of principal and
interest (Melicher 2008).
Practitioners (analysts) use financial ratios to forecast the future prospects of a firm,
whereas the researchers aim to exploit the ratios for creation of better models (Salmi
1994).
2.8 Sources of financial ratio statistics
There are various private and governmental bodies that provide data on financial ratios;
some agencies in the UK are (Pendelbury 2004):
• Centre for Interfirm Comparison (a non-profit undertaking jointly established by
the British Institute of Management and the British Productivity Council)
• ICC information limited
• Datastream (Thomson Financial)
• Financial Times Interactive Data Limited
• Jordan & Sons Limited
• Dun and Bradstreet ltd
• Standard And Poor Compusat
• The times 1000
• The Stock Exchange Official Year Book
12
• Institute Of Chartered Accountants Of England And Wales
• Office Of The National Statistics
In the US, are (Melicher 2008):
• The Risk Management Association (RMA), (formerly Robert Morris associates.)
• Financial Dynamics
• Standard & Poor’s
• Federal Trade Commission
2.9 Special financial ratios
Of late some researchers and research firms have formulated special ratios, some of
which are even patented; a few of these are explained briefly below.
Shareholder value and total shareholder return

The concept of shareholder value emerged in 1980. Rappaport (1998) is regarded as the
founding father through his publication “creating shareholder value” and the idea was
that a stream of future earnings provided a better indicator to evaluate the potential of a
firm (Alexander 2007).
Total shareholder returns (TSR)

This represents the change in capital value of a company over a one year period plus
dividends expressed as a plus or minus percentage of the opening value (Alexander
2007).
EVA ®:
Economic Value Added is the most well known concept which builds on the residual
value concept and has been trademarked by Stern Stewart & Co. EVA ® is a monetary
tool and was created as a management tool for use within a firm and is less useful for
inter-company analysis (Alexander 2007).
CFROI and CVA

These Stand for Cash Flow Return on Investment and Cash Value Added respectively.
These were developed by the Boston Consulting Group and can be defined as the annual
gross cash flow relative to the invested capital of the firm and CVA is a residual income
13
measure. These are valuable tools for communication to the outside world as well as for
internal management and strategic decisions. (Alexander 2007)
Altman’s Z-score
In 1968, Professor Altman (1968) combined 5 ratios to produce this score; in his
seminal article. He found that companies with Z scores above 2.99 had not failed,
whereas companies with scores below 1.81 had failed. His research was limited to the
manufacturing sector and holds good for firms located in the same region, sector and
time period (Alexander 2007). Another model for prediction of failure was carried out
by Taffler (1982) in the UK, and is also only valid for the region from which the
company data was obtained (Alexander 2007)
Very often company managements create new ratios for the investors which show the
companies in better light; like the ‘like for like sales’, ‘profit before one time
expenditures, before goodwill and impairment’, and many others (Alexander 2007).
2.10 Limitations of financial ratio analysis
The limitations stated below also apply to the analysis of financial statements in general
and limit the usefulness of ratio analysis results as well:
Non-monetary factors
These are factors like labour relations and quality of products which affect a firm’s
prospect, but are not reflected in the statements. Some firms now try to overcome this
limitation by providing non-financial performance ratios in their statements (Alexander
2007).
Accounting standards
It is necessary to check for compatibility in the comparable statements prior to
undertaking a horizontal or vertical analysis (Alexander 2007). As accounting standards
often differ among firms and this can cause confusion (Melicher 2008).
Historic cost accounting

The interpretation of the business is based on historical cost figures and this may not be
the best guide for future performance (Alexander 2007)
14
Short –term fluctuations
Short term fluctuations within the year are not known and the figures represent one
point in time, where figures may present a better view of liquidity than has been
throughout the year (Alexander 2007).
Changes in value of money

Inflation and price changes can make the entire analysis invalid, though the short term
fluctuations are better covered in the interim reports (Alexander 2007).
Diversified companies
The growth by mergers and acquisitions has led to companies having diversified
operations in diverse industries and the calculation of ratios based on this diversification
is of very limited use (Pendelbury 2004). By their very nature, industry ratios are
focussed narrowly on a specific industry, but the operations of large firms such as GE,
Exxon-Mobil, and IBM often cross many industry boundaries (Melicher 2008).
Data mismatch
Comparing firms’ ratios to an average must be done with caution as some sources report
averages based on means, other on medians, yet others cite Interquartile ranges
(Melicher 2008).
Peer group
Caution must be urged in selection of the proper peer group as firms in the same
industry may be with vastly different characteristics with respect to size and turnover,
multinational as well as domestic (Melicher 2008)
Mode of calculations
Analysts and public bodies may have different ways of calculating the same ratios, e.g.
Some may use pre-tax earnings; others may assume debt only as long term debt, while
others may assume all liabilities as debt (Melicher 2008).
Foreign companies
According to Choi (1983), financial ratios are often ‘misused’ when applied to foreign
companies. In a study of Japanese and Korean firms participating in the US stock
15
exchanges, it was noticed that there was considerable misinterpretation of the financial
ratios. This was partly due to explainable differences in international accounting
practices; however even when the ratios were based on US GAAP; they were subject to
misinterpretation, as the US investor would not comprehend the foreign environment
which may influence the financial ratios in those environments. It was concluded that
institutional, cultural, political, and tax consideration between the two countries did
cause their financial ratios to vary considerably from the US industry averages and that
the numbers had very limited significance without an understanding of the
environmental context. (Choi 1983)
Subjectivity of analysts
The concept of best and worst in a benchmarks may not be taken seriously, as different
analysts would have their own assessment of what is good or bad; a very high current
ratio may be considered good by a short term creditor, as it would mean that there are
assets readily available to repay the debt, whereas management may consider higher
levels of inventory than necessary (Horngren 2004).
2.11 Benchmarking
Benchmarking is a process by which a firm or institution compares its own measured

performance with a selected standard known as a benchmark. This benchmark could be
based on its own set thumb rules or past performance or with an industry standard.
Accordingly, it is aptly named a horizontal, cross or vertical benchmark. There are
several performances which can be benchmarked and financial performance is one of
the important metrics for benchmarking.
2.12 Case study: Financial performance of Ontario hospitals
Since 1998, hospitals of Ontario have been voluntarily participating in a performance

reporting initiative, considered to be one of the largest in the world of its kind. This
project is initiated by the HRCC (Hospital Report Research Collaborative), which
consists of researchers to assist the hospitals in performance measurement activities.
16
The financial performance indicators were selected by an informal method, as they were
new to this when it started, and in 2005-06, they underwent a substantial change to
reflect changes in the industry (Pink 2007).
The methodology for selection of key financial indicators is depicted in the figure
appended below
The task group started off with convening of an expert panel to ground the research in
practical financial management, who provided advice on methods, relevance of data,
potential indicators of financial performance, selection of indicators to be produced
using secondary data, precise definitions of the selected indicators, validity of data
analysis and the interpretation of results and data limitations.
The experts went on to review of the existing reporting indicators and procedures based
on the first principles which guided the selection process.
Next, different aspects of financial performance were identified from books on
healthcare financial management, and the expert panel decided to retain the existing
structure. Selections of dimensions financial performances were made based on
financial viability, liquidity, capital, efficiency, and human resources.
A non-systematic review of literature was undertaken, and trade journals and
practitioner journals were referred to, with relevance on literary works post 1990.
A total of 114 indicators were identified, a frequency histogram made and the top 37
were selected which were more frequently referred to and used in the industry.
Finally, the evaluation was done according to the following criteria:
1. Validity: Could the indicator be accurately calculated and would there be any
significant variations in reporting.
2. Importance: Would the indicator be considered to bring about material change
and would the hospitals consider it significant and pay attention to poor
performance based on this indicator.
3. Usefulness: Could benchmarks be developed for the indicator and could it be
used to improve the financial performance?
17
Fig. 2.1: Approach for selecting key financial indicators
Source: Longwoods review (2007)
After selection, each of the indicators was precisely defined, and merged with
accounting procedures to determine exactly which items from the accounts statements
would go into the numerator and denominator of the ratios.
The research team then developed software to analyse the indicator values for individual
hospitals. Descriptive statistics, histograms, and scatter plots were used to verify
programme errors and errors in data due to impossible values, with a view to improving
18
the data quality with feedback on the errors in data. The expert panel was consulted at
every stage regarding data validity and outliers’ problems for resolution.
Finally, the documents were issued to all hospitals for their view s on the new system
and to provide feedback regarding the usefulness, validity, and importance of the new
indicators. The feedback was found to be of immense value as they found some
inherent bugs in the system to be resolved and several inconsistencies that required
fixing and quite a few improvements. The comments were analysed in a report that was
reviewed by the experts and as a consequence, some finer tuning was done to the
indicators.
The conclusions put forward by Pink (2007) in his report highlighted some of the great
things about this survey and problem areas.
The approach reaffirmed the value of collaboration of research skills of a university
team with research skills and practitioners with experience of hospital finances. The
literature, expert panel, and survey approach selected a different set of indicators than
those originally proposed. The literature alone provided insufficient basis to select key
financial indicators (Pink 2007).
The last concern of the authors was the data quality, which even after 10 years of
collection, still remained and it was hoped that the use of MIS (Management
Information Systems) would make hospitals aware of data quality problems and lead to
better data in the future.
In his review, Boissannault (2007) states that the HRCC approach was transparent and
reduced the chance of any influence by any pressure from special interest group; it is
scalable and can easily be adapted to other regions of Canada.
2.13 Summary
A reasonable assessment of any firm’s financial status, performance, potential and

position can be made with the discretionary use of several ratios with additional
information relating to trends, common size, industry and accounting analysis and a
good deal of common sense (Alexander 2007); Walsh (2003) adds that “the financial
ratios are only a reflection of what is actually happening and it is the reality and not the
ratios that must be managed.”
Due to the overt importance placed on the financial ratios, it would be reasonable to
assume that ratio analysis would figure a lot in microeconomic theories regarding asset
19
valuation and securities analysis, but apparently literature suggests otherwise
(Pendelbury 2004). Research into financial ratios has revealed that while significant
similarities and trends are observed, they are not constant across ratios, industries, or
time periods (Salmi 1994). This is due to the lack of conceptual founding regarding
financial ratios and decision making (Pendelbury 2004). If absolute values existed, ratio
analysis would be a mechanical procedure and it is because of the lack of absolute
criteria and the imperfection of surrogate ‘standards’ that a considerable lot of skill and
judgement is required to evaluate and interpret the ratios (Pendelbury 2004) .
Therefore a more elaborate research is required to be formulated to improve the
generalize-ability of the financial ratios analysis and the results must be theoretically
consistent to make the results useful for decision makers (Salmi 1994) and until then,
“ratios will be useful without ever establishing their usefulness” (Pendelbury 2004).
20
CHAPTER 3: FINANCIAL RATIOS IN THE CONSTRUCTION
INDUSTRY
3.1 Introduction
The literature on financial ratios in real estate relates to REIT’s, capital structure of real
estate companies, real estate investment financials, corporate real estate, and treatment
of real estate assets in valuation of companies. There is virtually no literature on
financial ratios of property developers. On the other hand, the literature on financial
performance in the construction industry generally relates to contractors’ insolvency,
country specific performance measurements, pre-bid selection of contractors based on
analysis of financial statements, and analyses of contractors by surety bond issuers.
They are based on experiences from Turkey, Egypt, Malaysia, Indonesia, Hong Kong,
U.K., and U.S. and a review of these is presented in this chapter.
3.2 Company insolvency models
Contractor solvency seems to be a popular topic as a lot of literature on construction is

focused around this. There have been research by Edmister (1972), Altman (1983),
Taffler (1983), Keasey and Watson (1986) in relation to all companies. In construction
the research has been carried out by Mason (1979), Kangari (1988), Abidali (1990),
Russell (1992), Langford (1993) Ramsey-Dawber (1993).
These have been critically appraised by Edum-Fotwe (1996) in his paper titled, “A
review of financial ratio tools for predicting contractor insolvency.” There are a variety
of methods used to evaluate the corporate performance of construction companies and
to identify potentially insolvent contractors. Edum-Fotwe (1996) has highlighted the
shortcomings of analysis using financial ratios and has suggested standardising the
assessment criteria of subjective index methods and also the transformation method to
improvise the efficiency of ratio models.
In the British economy, the sector most hit with a high proportion of insolvencies has
been the construction sector (Edum-Fotwe 1996). To survive, the timely evaluation by
of their financial status is required to enable them to take evasive strategies in time and
21
these must be built into their corporate strategy (Edum-Fotwe 1996). To achieve this
objective, some companies take guidance from external analysts which form the basis of
their planning (McNamee 1985). One of the significantly featured analyses is financial
and particularly financial ratios (Cannon 1991).
As the performance of traditional ratios to predict insolvencies has been woefully
inadequate, other models based on a combination of these ratios have emerged over
time to counteract these deficiencies (Inman 1991). The primary motivation for
development of the construction insolvency models has been to protect the clients and
financial institutions from the risks involved in dealing with contractors.
The application of a ratio model to sort out potentially insolvent contractors while
selecting a contractor and refrain from awarding them the contract was suggested by
Mason and Harris (1979). The use of similar models can also be used by contractors to
monitor their continued poor corporate performance and take evasive measures to avoid
eventual insolvency. Ratio analysis provides a quick and effective method to get an
insight of the company performance and by comparing these ratios with the industry
averages, the company’s position with respect to the peer group can also be obtained.
Traditional financial ratios

Traditional ratios are generally categorised as measuring liquidity, profitability,
leverage, and activity (Edum-Fotwe 1996).
Liquidity ratios measure if a company is capable of meeting its current liabilities; this is
one of the leading causes of company failure and the ratios in this category are the
current ratio and the solvency ratio. A value of 1.0 is considered satisfactory for both
ratios according to Harris and McCaffer (1995).
Profitability ratios comprise profit margin which measures how well a company
maximises the sales while keeping costs low; the return on assets measures the
efficiency in asset utilization in profit generation; and the return on equity measures the
profits in relation to the shareholders funds (Edum-Fotwe 1996).
Leverage ratios deal with the capital structure and show the extent of financial risk
exposure of the company. Gearing represents a proportion of the capital which is
borrowed funds; while there is no optimum level for this ratio, the lower levels are
associated with reduced financial risks (Padget 1991). The interest cover shows the
relationship between the interest liability and the profits; a higher cover is associated
with reduced financial risk (Pringle 1980).
22
The activity ratios measure efficiency of the company’s operations; the asset turnover
gives the performance of generating sales from available assets and several variants of
this can be calculated; the stock turnover indicates the times a contractor’s inventory
(work-in-progress plus raw materials) is turned over in a financial year (Edum-Fotwe
1996).
Financial ratio models

Financial ratio models combine a number of ratios in a statistical analysis to determine
an acceptable value beyond which a company can be considered in a safe zone, or a
doubtful zone or high risk zone (Edum-Fotwe 1996). Some of the popular models are
described below.
Altman’s z-score
The most popular of the financial ratio models has been the Z score developed by
Altman in 1968, to develop a corporate failure prediction model. He used data from
large U.S. companies outside construction and performed multiple discriminant analysis
of 22 financial ratios, and combined the weighted factors of 5 of these financial ratios to
provide a single index now famous as the Z score that classified businesses as failing, at
risk or non-failing. The result of these studies produced the composite model:
• “Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6 X4 + 1.0X5
Where:
• X1 = Working capital/Total assets
• X2 = Retained earnings since inception/Total assets
• X3 = Earnings before taxes and interest/Total assets
• X4 = Market value of equity/Book value of total debt; and
• X5 = Turnover/Total assets
Accordingly, companies were classified as:
• A score of < 1.8 implied imminent failure
• A score between 1.8 and 2.7 was regarded as a risk zone
• A score greater than 2.7 indicated a long term solvency potential”
23
Taffler’s Z-score
Taffler (1983) used data from British companies and came up with a four variable Z-
score model as follows:
• “Z = 0.53X1 + 0.13X2 + 0.18X3 + 0.16 X4
Where:
• X1 = Profit before tax/Current liabilities
• X2 = Current assets/Total liabilities
• X3 = Current liabilities/Total assets; and
• X4 = Turnover/Total assets
Accordingly, he suggested:
• A score of < 0.0 showed characteristics similar to a failed company
• A score greater than 0.2 was characteristic of good long term survival prospects”
Taffler did not provide any explanation as to why his model would provide a greater
reliability that Altman; however both models agreed on the ratio turnover/total assets as
a positive indicator of corporate failure.
3.3 Construction specific insolvency models:
As construction industry has a lot of insolvencies, some researchers developed models

for contractor insolvencies, and the more popular ones of these models are discussed
below.
Mason and Harris’s Z-score:

In 1979, Mason and Harris developed a six-variable model specifically for evaluation of
construction companies:
• “Z = 2.54 – 51.2X1 + 87.8X2 – 4.8X3 – 14.5X4 - 9.1X5 – 4.5X6
Where:
• X1 = Profit before tax and interest/Opening balance sheet net assets
• X2 = Profit before tax/Opening balance sheet net capital employed
• X3 = Debtors/Creditors
• X4 = Current liabilities/Current assets
24
• X5 = (Days debtors); and
• X6 = Creditors trend measurement
Accordingly, he suggested:
• A negative Z-score indicated potential insolvency
• A positive Z-score indicated a long term survival prospect”
There have been questions raised on the X1 being negative indicating higher profit
producing a greater tendency towards failure, and also X1 and X2 – both measures of
profit having opposite signs. It has been argued that this model could have been made
simpler by inverting the variables with negative signs.
Abidali’s Z-score
In 1990, Abidali also developed a seven-variable model specifically for evaluation of
construction companies on tender lists:
• “Z = 14.6 + 82.0X1 – 14.5X2 + 2.5X3 – 1.2X4 + 3.55X5 – 3.55X6 – 3.0X7
(4)
Where:
• X1 = Profit after tax and interest/Net capital employed
• X2 = Current assets/Net assets
• X3 = Turnover/Net assets
• X4 = Short term loans/Profit before tax and interest
• X5 = Tax trend over three years
• X6 = Profit after tax trend over three years; and
• X7 = Short term loan trend over three years.
Accordingly, he suggested that
• A Z-score > 2.94 at the least indicated a long term survival prospect.”
In line with the earlier findings of Edmister (1972) and Argenti (1980) Abidali (1990)
realised the fallacy of using single values as absolute measures for solvency and
recommended his model be used along with other analyses of management.
25
Shortcomings of the insolvency models
Single ratios have been criticised for not providing a broad view of the company
performance and required an analysis of a series of ratios to give a meaningful picture
of the health of a company; in addition to some of them giving contradictory
indications.
Evaluation with subjective index has been plagued with different experts having their
own opinions on the importance and weightages to different financial ratio (Edum-
Fotwe 1996).
The success ratings of Z-scores also leave much to be desired; Altman (1983) claimed a
prediction accuracy of 90 % for his model, which was found out by Inman (1991) to be
incorrect (Edum-Fotwe 1996).
Also, the data is derived from the year when failure is imminent, the data of the
preceding years is not considered where the signals could give more time for remedial
actions; therefore these models are useless as monitoring tools. This concentration on
final stage analyses is found to be driven by the clients who endorse these researches as
they are more concerned with the current year insolvency probability of the contractors
under study (Edum-Fotwe 1996).
Improving the models

The attempts of improving the predictability of financial ratio models have been in two
directions. Argenti (1980) has decided to use managerial efficiency factors – the A-
scores to be used in combination with the Z-scores, whereas Abidali (1990) has also
proceeded with development of A-scores for the construction industry.
Inman (1991) has noted that the latest development in financial ratio models depicts
trends rather than single figures and this approach required transformation of the various
financial ratios within the models. Latinen (1993) has indicated that construction
companies do not fail suddenly and in four phases characterised by a starting phase, an
intervening phase, a final phase and the failure phase and a financial ratio model based
on this failure process employing the transformation approach could be more useful to
contractors as well as clients seeking to reduce the risks of employing a potentially
insolvent contractor (Edum-Fotwe 1996).
26
An improved solvency model for contractors
Abidali (1995) describes research aimed at developing an operational system for
identification of construction companies in danger of failure, based on his earlier
research in 1990 described earlier.
In his model, the prime component is a Z-score based on a model with 7 variables
derived from the combination of financial ratio analysis and statistical multivariate
discriminant analysis. The other component is the A-score based on the weighted
factored management performance. By using the two scores in conjunction, it is
possible to predict corporate failure with confidence.
As a company moves towards insolvency, adverse financial and managerial indications
may be observed. It is possible to ascertain the status of liquidity and other measures
through the careful study of financial ratio; but this requires careful interpretation.
Hence a Z-score approach has been adopted with a view to simplifying and the removal
of subjectivity. Practitioners stress that financial ratio information alone is not enough
and the knowledge of past managerial actions is also necessary for proper assessment; it
has been observed that proper management actions have saved companies from the
brink of collapse. Consequently managerial performance related to bad judgements are
identified through losses, high leverage and overdrafts, etc; these factors are weighted
based on importance and converted to a score – the A-Score (Argenti 1983) to be used
in conjunction with the Z-score.
While the sample sizes were small, it has been reported that the method developed was
robust statistically. A total of 24 traditional ratios and 7 tend indicators variables were
initially selected for discriminant analysis and the variables which discriminated the
most between the two groups of failed and solvent companies were selected for the
model.
The constituent variables:

• “X1 = Profit after tax and interest/Net capital employed – This is a profitability
measure better known as ROCE; Return on capital employed. This value is
moves towards the negative in failing companies.
• X2 = Current assets/Net assets – this is a financial leverage measure; failing
firms have low current assets; also some failing firms net assets are also falling
and this ratio can become higher in these cases; as the firm may be liquidating
its long term assets to service its current liabilities.
27
• X3 = Turnover/Net assets – this is a production capacity measure; and is usually
denotes a lack of response to market situation in failing companies; however
some failed firms have a high value of this ratio due to an increased turnover by
over trading, usually at low margins.
• X4 = Short term loans/Profit before tax and interest – this is a measure of
liquidity and shows the relative safety of short-term loans compared to earnings.
• X5 = Tax trend over three years – this can be viewed as a portion of the profits
and as the company heads towards failure, this value will decease and when it in
a loss no tax is paid.
• X6 = Profit after tax trend over three years – this trend turns towards the
negative in failing companies and the trend increases as a company is in
recovery
• X7 = Short term loan trend over three years – this measures the liquidity over a
period; generally failed companies are highly dependent on short term loans and
the trend increases as the company spirals towards collapse.”
Table 3.1: The constituent ratios of the model
Source: Abidali 1995
28
Figure 3.1: The cut-off between non-failed 20 and failed 11 groups
Source: Abidali 1995
The model produced a histogram of Z-scores as shown in Figure 3.1; an overlap occurs
and a region of ± 2.94 has been recommended to deal with the overlap areas where
misclassification can occur. From the above figure it is observed that 100 % of the
failed firms and 90% of the non-failed were classified correctly.
The Z-score model on its own cannot predict the insolvency of a company and merely
indicates that it has similar characteristics of a failed company and therefore has a high
chance of failure.
3.4 Analysis by surety providers
According to the Surety Information Office, construction is a high enterprise, and even
capable and well-established contractors can ultimately fail. According to BizMiner
(2010), out of the 1,155,245 contractors operating in 2006 in the U.S., only 919,848
were still in business in 2008 - a 20.37% failure rate. Despite rigorous prequalification
process and best judgment about the qualifications of the contractor, sometimes
contractor default is unavoidable. However, when a contractor fails on a bonded
project, it is the surety company that remedies the default. (Surety Information Office
(SIO 2010)
29
Figure 3.2: Construction failure rates 2006-2008
Source: http://www.sio.org/html/importance.html
Taha (1995), in his paper presents a development of a Knowledge Based Decision

Support System (KBDSS) to assist in predicting construction contractors’ bond claims
using the contractors’ financial statements.
Surety bonds are used in construction as Bid Bonds, Performance Bonds, etc. They
provide a mechanism whereby clients can encash a certain amount in case the contractor
defaults on his obligations. These are provided by financial institutions which may be
backed by insurance or surety underwriters. To enable the underwriters to access a
contractor and predict his ability to perform, it requires the underwriters to make
judgements about the current state of the contracting company. These judgements may
be based on financial statement analysis by means of ratio analysis and also other
parameters of management performance.
Currently the evaluation of financial ratio analysis is done subjectively with a large
dependence on the accumulated experience of the underwriter; as the relationships
between the various data elements are not clearly understood (Taha 1995).
Taha (1995) has provided a means to develop a logical system of making conclusions
based on results of the different systems currently available to reduce the dependence on
30
only one measurement by using artificial intelligence techniques like induction of
decision trees or production rules and neural networks to help in decision making.
Relevant existing statistical models

A review of past studies reveals that Multiple Discriminate Analysis (MDA),
regression, and logistic regression models have been employed in the analysis of
financial ratio data by Fillippone in 1976, Kangari, in 1992 and in 1993 by Severson.
Taha (1995) has collected data from five surety companies on 57 claim and 71 non
claim contractors, these were categorised by construction types as per the Standard
Industrial Classification Manual (SIC 1987). He has used 12 financial ratio (based on
14 financial ratio commonly used by Dun and Bradstreet) and one variable to check if
the contractor had a cost monitoring system.
Table 3.2: Description of variables used in the study
Source: Taha (1995)
The system integrates fragmented statistical models and knowledge into a DSS so
sureties can analyse the outcome of each model and knowledge in a coordinated manner
rather than relying on a single model and compare the outcomes.
Also, as the DSS is equipped with meta-knowledge to intelligently select most suitable
model it thereby provides peer-opinion too. If the data contains missing values which
are to be predicted or where multiple dependent variables are present, the knowledge
from machine learning has distinct advantages over statistical models. Also, this
31
acquired knowledge is continuously updated to include recent additional info and
augments existing statistic models.
3.5 Construction industry in Malaysia
The construction industry in Malaysia is championed by the Construction Industry

Development Board (CIDB 2007). In 2007, the CIBC formulated a 10 year master plan
to refocus the strategic plan and chart the future direction of the industry. This was due
to the concern that the construction industry, recorded a mere 0.7 % average annual
growth between 2000 and 2007.
The objective of Chan (2009) was to develop performance measures to gauge
performance over a range of activities and for stakeholders to monitor its progress
towards the goals.
An analysis of the 39 publicly listed construction companies on the main board of Bursa
Malaysia (Hiap 2008) reported mean and median Profits before interest and tax (PBIT)
of 9.8% and 9.0 % respectively and the Return on equity (ROE) was 7.7 % for 2006. It
was envisaged that the large companies had healthy profits and the low profits (CIDB
2007) were for smaller companies involved in subcontracting...
In comparison, the U.K. (TSO 2007) median PBIT ranged from 3.2 % to 8.2% between
1999, and 2007 and for Australia (Building Commissions 2009a) the profit margins
were 12.6% in 2007, and an average of 9.5% between 2001 and 2007. Accordingly, a
value of 10 to 15 % was proposed as the 2015 target.
It was also noted that the stock exchange represented a small proportion of the entire
industry. In conclusion, Chan (2009) notes that the measures in financial perspectives
are lagging measures or outcomes and that a performance measurement system is of
little value if it is not used as a guide to management decisions. “Feedback loop and
consequent decision making base on these measurements are necessary to “convert
measurement systems into management systems” (Chan 2009).
32
3.6 Health of contractors in Hong Kong
In Hong Kong, in the aftermath of the 1997 Asian economic crisis, home prices fell by
60% and then in 2003 the government stopped construction through the Home
Ownership Scheme (HOS) and Private Sector Participation Scheme (PSPS) resulting in
drastic reduction in demand in addition to other problems of liquidity of private
developers, over competition, etc. It was foreseen that some local contractors might not
be able to survive the deflation pressures and therefore a need for financial monitoring
was sensed by Chan (2005).
Merwin (1942) concluded three ratios to be very sensitive predictors of discontinuance
up to even 5 years in advance; these were net working capital to total assets, current
ratio, and net worth. Beaver (1966) also suggested that ratio analysis could predict
failure 5 years before; suggested that cash flow to total debt ratio had excellent
discriminatory power; and that the predictive power of liquid assets ratios was much
lower. He also cautioned that the most popular ratios might be the ones most
susceptible to manipulation by management! It is widely reported in literature that
liquidity and net working capital ratios are most important indicators of solvency (Chan
2005).Beaver (1968) found in his later studies that non-liquid asset ratios like net
income over total assets, cash flow over total debts predicted better than liquidity ratios,
even in the years preceding failure.
Gupta (1985) has opined that profitability ratios are better than balance sheet ratios in
reflecting financial health, and that the MDA analysis in monitoring sickness was of
limited value; therefore in his research, Chan (2005) has used all essential ratios
together with the Z-score to access the health of contractors.
The Hong Kong Society of Accountants (2001), in its Statement of Auditing Standard,
lists examples that may indicate that the company has problems in continuing its
business:
• net liability or net current liability;
• excessive reliance on short-term borrowings to finance long-term assets;
• negative operating cash flows;
• adverse key financial ratios;
• substantial operating losses or significant deterioration in the value of assets
used to generate cash flows; and
• arrears or discontinuance of dividend payments
33
The contractor selected for case study was typical of the big six in Hong Kong. The
data for period 1997 to 2004 was collected for analysis of financial ratios and Altman’s
distress models and the results are presented below.
Table 3.3: Trend of changing ratios of the selected contractor
Source: Chan 2005
Chan (2005) reflects that the ranges of Z-scores proposed by Altman (1968) may not
accurately describe the construction industry scenario. In the selected company, the
trend of Z-score did not show deteriorating conditions of financial performance; the
value of 1997 of 1.6 should have shown a warning to the company that financial
problems did exist and early action needed to be taken to prevent collapse.
Other indications were that the profit and return of assets; which is a measure of true
productivity had remained steady, the total assets turnover had a declining trend; this
was due to assets being idle due to reduced business, current and quick ratio were found
to be in the acceptable region of 1.0, and the debt financing were found to be in a
decreasing trend in line with company’s conservative policies, and it had net cash over
equity for the past four years.
Based on the above analysis, the financial health of the selected contractor was found to
be sound with some warning signs in 2001/02 and it was suggested that this was a
critical time for the contractor to review his business strategies in the region.
34
3.7 A model for the Egyptian construction market
The research by Basha (2007) introduces a performance evaluation model for

contracting companies based on financial performance, effects of company size, macro-
economic, and industry related factors. It considers four construction categories:
general building, heavy engineering, special trade, and real estate. The research uses
the Egyptian market as case study, but asserts that it could be used generically on any
company in any market (Basha 2006).
Previous models by Kangari (1992) used multiple regression analysis to develop a
performance curve in which financial positions of any company satisfying the model
limitations could be determined. Goda (1999) produced a quantitative model with an
objective to develop ‘standard’ financial ratios that reflected the performance of the
entire Egyptian construction industry and to compare these with similar indexes
produced internationally. The results obtained from his regression analysis were more
reliable than ones produced with supervised neural network (Basha 2006).Both of them
focussed on evaluating performance using financial ratios only; also Goda (1999) did
not consider size effects (Basha 2007).
The data for 1992-2000 was collected from Authority for Money Markets; Egyptian
Government for 112 companies registered with authority and involved study of 415
financial statements for the 9 year period.
Financial ratios were selected on the basis of ones which reflected the various aspects of
company management, many were used in previous studies, strongly correlated to the
performance of the construction companies; and also were included in the International
Standard Industry Classification (SIC), to enable comparison of the performance at
international levels.
Normalizing financial data – As some ratios are expressed as times and others in
percentage, mathematical formulation of this mixed type gives bias to larger values of
ratios (Kangari 1992); and to overcome this problem, all data was ‘normalised’ with an
appropriate co-efficient.
Company size effect – Comparing large and small companies with same average
industry value is unsuitable as financial structures and managements are different
(Kangari 1992). This is overcome by adjusting the normalised ratio with a size factor,
obtained by dividing the median of the ratio for the overall industry by its counterpart
median for the subgroup size; the size is based on the total assets rather than turnover.
35
Figure 3.3: Model development steps
Source: Basha 2007
Hasabo (1996) reported that company failure was caused by three factors: macro-
economic (35-40%), industry (10-15%), and company related (40-45%). Accordingly
the research developed a Performance Index (PI) using three scores of Financial(SC),
Economic(Se) and Industrial (Si)scores; also a company Grade Index (G) using
cumulative distribution of PI, which shows the percentage of companies below the
industry average and the selected company situation.
Figure 3.4: Performance Grades (G) for different Construction Sectors
Source: Basha 2007
36
The model was validated and showed that the top position belonged to the heavy
construction sector with 65% of the companies below the median (PI=0). One company
was analysed using the model for the years 1992 to 2000, showing grades obtained for
every year and a list of management actions relating to the grades has been proposed.
Figure 3.5: Performance Grades of the selected company over a period
Source: Basha 2007
Table 3.4: Management action required based on grade obtained
Source: Basha 2007
37
3.8 Analysis of Indonesian construction firms
Pamulu, in 2008 conducted a pilot study to evaluate the financial ratios of the
Indonesian construction industry, which was to be an extension of a larger study aimed
at identification of problems within the industry and to propose areas for strategic
management decisions. Financial ratio analysis was carried out on all the six private
and state owned construction firms listed on Surabaya Stock Exchange, using five years
data from 2003 to 2007.
According to Pamulu (2008), relevant research in financial ratios in construction has
been carried out by Fadel (1977), Akintoye (1991), Langford (1993), Edum-Fotwe
(1996), Pilateris (2003), Cheah (2004), Chan (2005), Yee (2006), Singh (2006), and
Ocal (2007). But one of the issues not covered have been the lack of any specific
benchmark values for each ratio.
The study uses modified traditional ratios adapted from the U.S. based Construction
Financial Management Association’s (CFMA) annual financial survey to support
analysis (Ellis 2006). In 1999, the CFMA has introduced construction industry
benchmarks for nineteen financial ratios used by it. As the specific financial ratios
standards (benchmarks) for Indonesia were not available, the study compares the
derived ratios with the U.S. industry standards.
The results of the analysis are presented as Median values for all the financial ratios for
each year below.
Table 3.5: Revenue and profitability ratios
Source: Pamulu 2008
38
Very profitable firms in the U.S. achieved highest value for Return on Equity (ROE)
47%, and Return on Assets (ROA) of 7.7% and ROE 21.6% (Ellis 2007), whereas
Walsh (2003) considers that 15% is a satisfactory return
Table 3.6: Cash flow and liquidity ratio
Source: Pamulu 2008
A value between 1 & 2 is considered acceptable for the Current Ratio (CR) and Quick
Ratio (QR) (Pamulu 2008) though a value above 1.2 is considered by others as the
upper limit and anything above that means the resources are not being utilized properly.
In the same periods, U.S. firms CR average was 1.3, QR was 1.2, and Working Capital
Turnover (WCT) was between 8.4 and 14.0.
Table 3.7: Leverage ratios
Source: Pamulu 2008
A Debt to Equity Ratio (DER) of 3 to 1 is considered acceptable by most sureties

(Pamulu 2008). UTE shows the unbilled work as a percentage of equity; a ratio in
excess of 20% is considered unusual by most sureties (Pamulu 2008). U.S. companies
39
seem to take lesser financial risks to generate better performance. (Ellis 2006) with an
average DER of 2.4
Table 3.8: Efficiency ratios
Source: Pamulu 2008
A Backlog to Working Capital (BWC) of 20 or less considered acceptable, higher ratio

indicates need for permanent working capital injection (Pamulu 2008); the average
value for U.S. firms is 10 and Indonesian firms is 3.
The analysis revealed firms were financially sound (Pamulu 2008).
40
CHAPTER 4: RESEARCH DESIGN AND METHODOLOGY
4.1 Introduction
This aim of this chapter is to propose a research design and methodology that will
address the objectives of the research, as defined in chapter 1. The literature review has
served to find some interesting papers; some of the literature found outside of
construction but deemed useful for incorporation in this chapter was adoption of
benchmarks for financial performance for Toronto hospitals (Pink 2007), another one
for the Australian wine industry, and research done by Pamulu (2008) on financial ratios
of construction firms of Indonesia.
Data from 30 companies have been used; a figure which is just sufficient to create pilot
benchmarks on the lines of similar industry benchmarks available with data providing
companies. (RMA, 2009)
A literature review was undertaken to identify suitable financial ratios, views on
financial ratios, benchmarking methods, statistical methods within journals, industry
publications, and articles in practitioner journals.
To identify literature, searches of Athens, Jstor, Emerald, and others were undertaken
using keywords such as ‘financial performance’, ‘financial ratios’, ‘real estate
performance’, ‘statistical analysis’, ‘non-parametric analysis’, ‘GCC real estate’.
Articles published prior to 1990 were generally excluded in the searches because of
their lower relevance, except when a history was required to be studied. (Pink 2007).
Selections of financial ratios relevant to real estate was tried, but no data was available –
mostly it was related to REIT’s; some blogs were also accessed and questions posted,
but the results were not very encouraging; most responses were relating to non-financial
parameters relating to performance benchmarks and production and sales benchmarks;
e.g. ‘sq m of production per week’, ‘length of roads per day’, ‘height per day on
buildings’, etc.
41
4.2 Research Goals
The research goals from chapter 1 are redefined here to maintain focus on the
objectives.
Aim
To create benchmarks for select financial ratios for three years 2006 to 2008 and
statistically test if sufficient similarities exist in the underlying data to justifiably enable
the usage of data for the whole GCC listed companies to be used together with
confidence as a group.
Objectives
1. Identification of financial ratios which would be useful, especially for the real
estate and construction industry.
2. Creation of benchmarks for each of the selected financial ratios for each of the
three study periods 2006-08.
4. Observation of patterns and variance for the selected ratio in year-based group
data for all companies.
6. Observation of patterns and variance for the selected ratio in size-based group
data.
Hypothesis
This research is designed to test the Hypothesis that:
H0 = There is no difference between financial ratio data across the GCC countries at
α =0.05 level.
The hypothesis is tested for the selected ratio and the results of the hypothesis are
This was achieved by performing a KW test on the selected ratio and examination of the
results and the P values.
42
4.3 Data collection
The only way to legitimately get financial statements was to get ones available in public
domain. It was envisaged that only the real estate companies listed on the respective
stock exchanges would provide access to their financial statements. Or they could be
available from the bourses or some governmental agencies.
Therefore compilation was made of the companies listed under real estate in all the
bourses of the six GCC countries. These were found to be 30 in all: .6 from the UAE, 6.
from Saudi Arabia, .5 from Qatar, 12 from Kuwait, 1 from Bahrain, and none in Oman.
The number of companies found is just enough to form a base for statistical
calculations. According to RMA, when there are fewer than 30 financial statements, the
composite data are not shown because such a small sample is not considered
representative and could be misleading (RMA, 2009.).
The websites of these firms were found from the respective stock exchanges, and the
financial statements downloaded for the years 2006, 2007 and 2008, where available.
Some statements were available in Arabic language only, and the figures from these
were translated. Some companies had not provided data for certain years, and some
financial data on these companies was downloaded online from the stock exchange or
third party company data providers; mainly Arab Capital Markets Research Centre
(ACMRC).
4.4 Objective 1: Identification of financial ratios
The objective was to define and shortlist a few ratios which are relevant to the topic of
the dissertation among the abundance of financial ratios available in literature and
practice.
Literature Review and Consultation

Different sources were considered, literature, books, professional analysts and database
companies and lists of ratios recommended by them were viewed, notably
• RMA Annual Statement Studies (2009)
• International Financial Reporting and Analysis (Alexander 2007.)
43
• Company Accounts: Analysis, Interpretation, and Understanding (Pendelbury
2004.)
• Key Management Ratios (Walsh 2003).
• Introduction to Financial Accounting (Horngren 2004).
• Introduction to Finance: Markets, Investments, and Financial Management
(Melicher 2008).
• Selection of Key Financial Indicators: A Literature, Panel, and Survey Approach
(Pink 2007).
Various authors and analysts have put forward their own interpretations on the ratios
and the methods of calculations, some require average values for the whole year, taken
at intervals, some require the closing value of a previous year and the current year to be
averaged, etc.
Some professionals in the field of financial analysis, blogs were consulted on which
ratios were really relevant to the real estate companies; many of the responses received
were ratios related not to the financial statements. Conclusive answers were not found
and finally 30 ratios were selected from Walsh (2003) and Pendelbury (2004).
The following is a list of the selected financial ratios and the formulae adopted shown as
numerator and denominator.
Table 4.1 Schedule of Financial Ratios Selected
Sr.
No. Ratio Numerator Denominator
Profitability And Performance Ratios

ROCE - Return On Capital Earnings Before Interest Capital
1 Employed And Taxes Employed
Earnings Before Interest
2 ROTA - Return On Total Assets And Taxes Total Assets
3 ROE - Return On Equity Earnings Before Taxes Owners Funds

ROS - Return On Sales (Profit
4 Margin) Earnings Before Taxes Sales
Investors Ratios
5 EPS - Earnings Per Share Earnings After Taxes Shares Issued

Earning Per
6 PE Ratio - Price / Earnings Ratio Market Price Per Share Share
Market Price Per
7 Dividend Yield Dividend Per Share Share
Market Price Per
8 Earnings Yield Earning Per Share Share
44
Sr.
No. Ratio Numerator Denominator
9 Market To Book Ratio Market Capitalisation Owners Funds
Efficiency And Effectiveness

Net Assets
10 Net Assets Turnover Sales (Owners Funds)
11 Fixed Assets Turnover Sales Fixed Assets
12 Debtors Turnover Sales Debtors
13 Average Collection Period Debtors X 365 Sales
14 Creditors Turnover Sales Creditors
15 Stock Turnover Sales Stock

Net Working Capital To Sales Stock + Debtors -
16 Ratio Creditors Sales
17 Sales To Working Capital Ratio Sales Working Capital
18 Inventory Days Stock x 365 Sales
Liquidity And Stability Ratios

Current Ratio (Working Capital Current
19 Ratio) Current Assets Liabilities
Current
20 Quick Ratio (Acid Test Ratio) Current Assets - Stock Liabilities
Capital Structure, Investment And Financial Risk Ratios
21 Long-Term Debt To Equity Ratio Long-Term Loans Owners Funds

Long-Term Debt To Total Long- Capital
22 Term Finance Ratio Long-Term Loans Employed
23 Total Debt To Total Assets Ratio Interest Bearing Debt Total Assets
Earnings Before Interest
24 Interest Cover And Taxes Interest
Dividend Per
25 Dividend Cover Earning Per Share Share
Fixed Assets To Total Assets
26 Ratio Fixed Assets Total Assets
Long-Term Funds To Total
27 Assets Ratio Capital Employed Total Assets
Total Owing To Total Assets
28 Ratio Creditors Total Assets
Earnings Before Interest Earnings Before
29 Capital Gearing And Taxes Taxes
30 Gearing Ratio Interest Bearing Debts Owners Funds

Source: Created for this research
45
4.5 Objective 2: Creation of benchmarks
Data collection
The balance sheets, profit and loss statements, and cash flow statement of the selected
30 companies were extracted from the financial statements. The data in them was a mix
of different terms, some did not have a breakdown of assets, and liabilities into long-
term and current, others have used Islamic financing and terminologies, each was
prepared by different auditors all certain following local and international standards.
As the various statements did not follow a standard format, therefore the various bits of
data had to be clubbed / split into a standard format (Tables 4.2, 4.3 and 4.4) described
below to enable the ratios to be calculated.
Problems in data
Some of the companies selected had current and fixed assets clubbed as assets and
similarly the liabilities were clubbed together. It was through identifying similarities in
different statements that the bifurcation was made, but some errors could have crept in
here.
Also, some of the land owned by the companies is split up into land for investment, land
for development, and land under development – work in progress. Again various
accounting standards allow for different ways in which these lands, a huge asset are
treated; in some balance sheets, some of these headings appeared in both current as well
as fixed assets. This controversy is an entire subject in itself, and beyond the scope of
this research. Without knowledge of the accounting standards, and the exact bifurcation
details, it was not possible to pinpoint the exact nature of the assets. Best judgement has
been used in collusion with consultation with financial analysts on forums and
necessary assumptions have been made.
There are companies using Islamic finance, and the finance costs have been clubbed
with interest wherever shown clearly as such. In other cases, it may have been clubbed
under operating costs and cannot be easily known without investigating further.
Normalising the data

Therefore all the data from the three sheets was translated into standard template Profit
and Loss Statement (Table 4.2), and Balance Sheet (Table 4.3) as appended below.
Some additional calculations required for the financial ratios along with data on
46
dividends was derived from the Cash Flow Statement and the share prices for the past
year high and low were taken from the stock exchanges and put in a separate table, as
appended below (Table 4.4).
The Profit and Loss Statement

Table 4.2: Template of Profit and Loss statement
CALCULATIONS FOR FINANCIAL RATIO'S
COMPANY : EMMAR PROPERTIES PJSC AND SUBSIDIARIES

COUNTRY : UAE
ACTIVITIES :
CURRENCY, UNITS : AED' MILLION
Sr. No. REFERENCE Notes 2008 2007 2006

PROFIT & LOSS STATEMENT
1 Revenue/Turnover / Income / Total Income Sales 15,014 20,001 15,142
2 Cost Of Income Costs (11,850) (13,296) (8,646)
3 Profit Before Interest & Tax / Gross Profit EBIT 3,164 6,705 6,496
4 Interest Int (87) (154) (93)
5 Profit Before Tax EBT 3,077 6,551 6,403
6 Tax Credit Tax 3 (14) (47)
7 Net Profit for the year EAT 3,080 6,537 6,356
8 Minority Interest Min
9 Retained Profit Net Earning 3,080 6,537 6,356
10 Crosscheck Calc With Original Values 3,081 6,536 6,356
11 Basic & Diluted EPS EPS 0.50 1.08 1
The details of each of the items of the Profit and Loss statement are explained below:
• Revenue/Turnover / Income / Total Income: Total income from main operations,
interest, and other income has all been clubbed under this head to arrive at the
gross income
• Cost of Income: All the costs relating directly to the operations as well as
overheads and all other costs except interest and tax are clubbed under this head
• Profit before Interest & Tax / Gross Profit: This is the difference of the above
income minus expenses
• Interest: This is the interest, and in certain cases, the finance costs related to
Islamic finance have all been clubbed under this category
• Profits before Tax: This is the PBIT minus the interest
• Tax: There is no income tax and very little corporate tax, and is put here,
wherever shown as such in the statement
47
• Net Profit for the year : This is the balance amount after deduction of tax
• Dividend Distributed: A part of the profit is distributed, wherever shown as
such, is put here
• Retained Profit: This is the profit retained by the company and ploughed back
into the business, which adds to the value of the company and the capital of the
company
• Crosscheck Calc with Original Values: This figure is used to crosscheck whether
the balances calculated tally with the balances in the company’s printed
accounts, and is a reconciliation of the statement.
• Basic & Diluted EPS: This is separately shown in the statement, wherever
shown is put here, or calculated later on.
The Balance Sheet

Table 4.3: Template of Balance Sheet
BALANCE SHEET 2008 2007 2006

1 Fixed / Long Term Assets
2 General 17,158 24,601 18,579
3 Investment Properties These make working capital negative 13,248 5,636 6,971
4 Development Properties 19,178 16,194 11,121
5 Total FA FA 49,584 46,431 36,671
6 Current Assets
7 General 5,393 4,727 2,329
8 Stock - - -
9 Debtors 5,714 3,633 2,690
10 Total CA CA 11,107 8,360 5,019
11 Total Assets 60,691 54,791 41,690
12 Non Current/ Long Term Liabilities LT+C Mixed in 2008
13 General Preference to Long Term 1,115 1,073 888
14 Long Term Loans 9,174 7,704 3,992
15 Total LL LTL 10,289 8,777 4,880
16 Current Liabilities
17 General - - -
18 Creditors 13,839 8,826 6,265
19 Short Term Loans - - -
20 Total CL CL 13,839 8,826 6,265
21 Total Liabilities TL 24,128 17,603 11,145
22 Equity/Shareholders Funds
23 Share Capital 6,091 6,091 6,076
24 General 30,471 31,097 24,470
25 Total Equity OF 36,562 37,188 30,546
26 Crosscheck, Total Equity & Liability = Total Assets 60,690 54,791 41,691
48
The details of each of the items of the Balance Sheet are explained below:
• Fixed / Long Term Assets: This is a heading only – meaning the assets which
are intended to be retained for at least one year or more
• General: Every fixed asset not shown elsewhere is put here
• Investment Properties: These make working capital negative. These are the
properties procured for investment
• Development Properties: These are the properties earmarked for development or
under development, and are transferred to current assets only after partial sale or
state of readiness- again different auditors have different viewpoints on this, but
if this heading is clearly indicated in the statement, it has been put here
• Total FA: This is the sum of all the fixed assets – that is the assets which will
not be disposed off within one year
• Current Assets : This is a heading only – meaning the assets which will be
disposed off within a period of one year / and converted into cash / sold /
sellable properties
• General: All assets not listed under stock and debtors are put here – include
advances paid, etc.
• Stock: The stock is the goods / raw materials / materials supplied to the
contractors/ and included the ready possession properties/ work in progress
shown in some statements, which are involved in contracting too along with real
estate operations
• Debtors: The amounts to be collected from various parties for properties sold or
advances or instalments due are clubbed under this head
• Total CA: This is the total of all the current assets mentioned above
• Total Assets: This is the total of all current and fixed assets. Some companies
have not split the assets into current and fixed. Some of the bifurcation had to
be done using judgement and analysis of other companies’ balance sheets.
• Non Current/ Long Term Liabilities: This is a heading, meaning liabilities,
monies to be paid after a period of one year or more.
• General: Any long term liability not listed in long term loans is added here
• Long Term Loans: All term loans and Sukuks – Islamic bonds which are due for
payment after one year are listed here
• Total LL: This is the total of all long term liabilities listed above
49
• Current Liabilities: This is a heading. Meaning all amounts payable within one
year
• General: All other current liabilities are clubbed here
• Creditors: All amounts payable to suppliers of goods and services, contractors,
consultants
• Short Term Loans: Loans payable within a year, including Islamic loans
• Total CL: This contains the total of all above current liabilities
• Total Liabilities: The total of long term and current liabilities is all the monies
owed by the company
• Equity/Shareholders Funds: Heading. This is the total of all share capital,
retained profits over the years
• Share Capital: This is the amount of money invested by the owners/shareholders.
It is also the face value of the shares issued to date
• General: All other amounts are clubbed here
• Total Equity: Total funds belonging to the shareholders
• Crosscheck, Total Equity & Liability = Total Assets
The total equity and total liabilities should equal the net assets; this is what should
balance in the balance sheet; because the net assets minus net liabilities are the amount
left for the owners/shareholders of the company. In a way, the equity is also a liability
of the company, therefore equity and liability are clubbed together to check with their
net asset value.
Calculation for additional items

Table 4.4: Template of Additional items
Additional Items required for Financial Ratios 2008 2007 2006

1 Capital Employed (Shareholder's Funds) + Long Term Loans) 45,736 44,892 34,538
2 Working Capital (Current Assets - Current Liabilities) (2,732) (466) (1,246)
3 Interest Bearing Debts (Long Term & Current) 9,174 7,704 3,992
4 Dividend Paid 1,199 2,355
5 Dividend Per Share - 0.20 0.39
6 Market Price Per Share (Average of 52 Week High & Low) 8.84 12.68 18
7 52 Week High 15.85 15.60 25
8 52 Week Low 1.82 9.75 10
9 Earnings Per Share (Net Profit / Shares Issued) 0.51 1.07 1.05
10 Total Shares Issued (Assume =ShareCapital @ 1 / Share) No 6,096 6,096 6,081
11 Market Capitalisation (Total Shares * Market Value per share) 53,858 77,267 108,090
12 Net Working Capital (Stock + Debtors - Creditors) (8,125) (5,193) (3,575)
50
These are some additional pre-calculations required to calculate the financial ratios
under consideration.
• Capital Employed – This is the Shareholder's Funds plus Long Term Loans
• Working Capital – This is calculated as Current Assets minus Current Liabilities
• Interest Bearing Debts – This is the total of all loans taken by the company; both
Long Term & Current.
• Dividend per Share – This is the Total Dividend declared divided by the number
of ordinary shares issued
• Market Price per Share – Since the price is dynamic, it is calculated as the
Average of 52 Week High & Low from below.
• 52 Week High – This is found from the relevant stock market data and is the
highest price quoted for the shares of the company in the preceding one year
• 52 Week Low – Similar to the above, but the lowest price quoted
• Earnings per Share (Net Profit / Share Capital)
Calculations for Financial Ratios

As a next step, using the formulae from the above mentioned literature, the 30 Financial
Ratios were calculated for the years 2006, 2007 and 2008 on separate spreadsheets for
each of the 30 companies. This provided a chunk of secondary data of 90 figures for
each Financial Ratio.
Tabulation
A spreadsheet was made for each of the three years with the Financial Ratios as rows
and the company names as columns and all the data was linked from the individual
company calculation sheet to the main spreadsheets. These master spread-sheets
contained approximately 30 bits of data for each ratio for each year.
Statistical calculations
The RMA in their publication Annual Statement Studies (2009) advocate the use of
medians and quartiles as a means to display the Financial Ratios data. Based on other
literature review also, it was decided to use medians and quartiles in lieu of arithmetic
mean and standard deviation as the former is not susceptible to outliers.
51
Calculation of Quartiles, Outliers, Median
Using built in excel formulae, the Mean, Number of Data bits, Standard Deviation,
Quartiles (Q0=Lowest, Q1 = 25th percentile, Q2=Median, Q3=75th percentile &
Q4=Highest) were calculated for each ratio in each of the master spreadsheets. Also
were calculated other values which would be useful in creating of a Box-whisker plot to
graphically represent the data. These were:
• Inter Quartile Range(IQR), which is the difference between the 1st and 3rd
quartile and represents 50% of all the central values; this is different from
Range, which is the difference between the highest and the lowest data bit,
• Step(S), which is 1.5 times the IQR and represents the maximum length of the
whiskers,
• Inner Fence Low , which is Q1 – S,
• Inner Fence High, which is Q3+1,
• Outer Fence Low , being Q1-2S ; some analysts also use 3S as the cut-off value
for Outer fence, and
• Outer Fence High, being Q3+2S
• Calculations to check for Outliers, which could be Low or High, Mild or Severe
depending on their position with respect to the Inner & Outer Fences; this is
described in detail further ahead.
Treatment of Outliers
Outliers are the data bits of abnormal values that do not fit the norm and are extreme
values far away from the chunk of the data. Depending on the field of statistics, these
could be very valuable observation and require detailed investigation or could be some
mistakes in reading and ignored. Accordingly, some analysts tend to ignore these and
there are controversies on how outliers should be treated. In this research, outliers have
been described as Mild or Severe. The outliers falling between the inner and outer
fences on both extremes of Low and High values are termed as Mild outliers and the
ones beyond as severe outliers. In this research all the outliers have been retained;
though extreme outliers have been removed from the graphs for the sake of clarity
Box-whisker plots
For data which is not normally distributed – the nonparametric data of the type
encountered in financial ratios, the statistics textbooks have prescribed descriptive
52
statistics to be presented in the form of a graph known as the Box-Whisker plot. The
sides of the box represent the Q1 and Q3 values, which enclose 50% of the central data
and somewhere between these values is the Median of all data, the Q2 value which is
represented by a line inside the box. From the ends of the box, lines, or whiskers are
drawn on either side up to the Inner Fence as mentioned above. These ends represent
the ‘allowable’ limits of data based on the 1.5 times the value of the IQR, which is 50 %
of the central data, as mentioned above. In many cases the last bit of data within the
limits of the inner fence is made the end point, which is what has been adopted in this
method. Therefore, it was mentioned earlier that the Step is the ‘maximum’ value of the
whisker. Outlier data points beyond the inner fence up to the outer fence are shown as
small dots, and the outliers beyond the outer fence, the severe outliers are ignored in the
plot to present the central data more clearly.
Figure 4.1: Sample of Box-Whisker plot
BOX-WHISKER PLOTS FOR FINANCIAL RATIOS OF GCC REAL ESTATE

COMPANIES
MEDIANS AND MEANS FOR 2006, 2007 & 2008
( Legend : Red = Median; Green = Mean
40% Note: Extreme Outliers >3*IQR are not shown in this Plot )
35%
30%
25%
VALUES_
20%
16%
15%
14%
10%
5%
0% 2007
FINANCIAL RATIO : RETURN ON CAPITAL EMPLOYED
Presentation of results
Box whisker plots are presented for the 3 years of 2006, 2007, and 2008 along with their
medians as the proposed benchmark values for the particular financial ratios. The
arithmetic means are also shown on the same plot for comparison. A table showing all
the above statistical values including the mean values for every year and standard
deviation are presented to show the differences between the median and the mean.
53
Figure 4.2: Sample of Box Whisker plot for 3 years with median and mean
BOX-WHISKER PLOTS FOR FINANCIAL RATIOS OF GCC REAL ESTATE COMPANIES

70% ( Legend : Red = Median; Green = Mean
Note: Extreme Outliers >3*IQR are not shown in this Plot )
60%
50%
40%
30%
VALUES_
20%
16%
15%
14%
10% 10% 11%
0% 0%
2008 2007
2006
-10%
-20%
-30% FINANCIAL RATIO : RETURN ON CAPITAL EMPLOYED
Table 4.5: Sample of data sheet for each financial ratio

RETURN ON CAPITAL EMPLOYED
STATISTICAL DATA
Sr No Statistic 2008 2007 2006

1 Mean 0% 16% 15%
2 N 29 29 27
3 Standard Deviation 35% 9% 13%
Quartiles
4 Q0=Minimum -157% 0% -7%
5 Q1-25% 5% 9% 7%
6 Q2=Median 10% 14% 11%
7 Q3=75% 14% 23% 19%
8 Q4=Max 26% 36% 60%
9 Range 183% 36% 67%
Outliers
10 IQR 9% 14% 13%
11 Step = 1.5 IQR 14% 21% 19%
12 Inner Low Fence -9% -12% -12%
13 Inner High Fence 27% 44% 38%
14 Outer Low Fence -23% -33% -31%
15 Outer High Fence 41% 65% 57%
Whisker Limits
16 Lower Whisker end -6% 0% -7%
17 Upper Whisker end 26% 36% 38%
54
4.6 Objective 3: Selection of ratio for detailed analysis
One ratio, the Return on Capital Employed (ROCE) is selected for detailed analysis.
The initial assumption was that the economies of the GCC were similar so common
benchmarks for Financial Ratios could be used for the entire region. ROCE seems to be
a good comparator across countries which share the same peg to the US Dollar, thereby
the interest rates for lending would be similar (except Kuwait), and it is assumed that a
large part of the capital is borrowed funds. Therefore the companies would have to
have a minimum return to cover the interest payments.
ROCE has been used by both Mason & Harris (1979) and Abidali (1995) in their
versions of the Z-score as one of the variables for insolvency predictions as X2 and X1
respectively in their models.
ROCE reflects a company’s ability to earn a return on all of the capital that the
company employs. It can help investors see through growth forecasts, and it can often
serve as a reliable measure of corporate performance. But ROCE is also an efficiency
measure of sorts; ROCE doesn’t just gauge profitability as profit margin ratios do, it
measures profitability after factoring in the amount of capital used. Because ROCE
measures profitability in relation to invested capital, ROCE is important for capital-
intensive companies, or firms that require large upfront investments to start producing
goods.
A company’s ROCE should always be compared to the current cost of borrowing.
ROCE is therefore a better measure of the return of a real estate company as it considers
leverage, which is an integral source of funding in this sector. As real estate companies
are traditionally highly leveraged, it is essential to ensure that any company generates
adequate returns to cover its high cost of capital.
Statistical Analysis
To test this theory, the ROCE ratios were subjected to statistics checks for variance. It
was originally proposed to use Anova test, but this was ruled our in favour of the
Kurskal-Wallis (KW) test being more oriented for nonparametric tests. Some authors
propose the use of Anova if the number of data is sufficiently large. .
The Kruskal-Wallis test is a nonparametric test for the comparison of 3 or more
treatment groups, which are independent; it is the nonparametric equivalent to analysis
of variance (Anova). All observations are ranked from smallest to largest, the sum of
55
the ranks is determined for each treatment, and a test statistic H is calculated. For all
combinations of n up to five of 3 treatment groups, testing H requires the use of a
special table; for greater n and more groups (k), H is distributed as c2 with k-1 degrees
of freedom.
The procedure to set up the hypothesis and interpretation is as follows:
H0: There is no difference(s) in medians between the groups.
Ha: There is a difference in at least one of the groups.
The test will produce a p-value. If the p-value is less than 0.05 (assuming a 5 %
significance level), the null hypothesis is rejected and it can be inferred that there is a
difference. If the p-value is greater than 0.05, the null hypothesis is not rejected and it is
concluded that there is no difference between the test groups. (Vassar 2010.)
4.7 Objective 4: Observation of data grouped by year
The ROCE data has been grouped according to the country for each year and the
patterns are discussed. The variances are checked between country groups for each year
with the help of the KW test. As mentioned above, a P value > 0.05 will mean that the
hypothesis is accepted.
The details are presented as column charts and BW plots and tables, showing the
medians as well as the means.
4.8 Objective 5: Observation of data grouped by country
The ROCE data has been grouped according to the data period for all GCC data and
patterns are discussed. The variances are checked between years 2006, 2007 and 2008
The details are presented as column charts, web charts, BW plots, and tables, showing
the medians as well as the means. The trends in yearly medians are discussed.
56
4.9 Objective 6: Observation of data grouped by company size
The company turnovers have been used as measures of size: the companies were
classified as small, medium, big, and large based on a quartile criterion, and checked for
variance between the group sizes for every year.
The ROCE data has been grouped according to the size data for all GCC data and
patterns are discussed. The variances are checked between years 2006, 2007 and 2008
The details are presented as column charts, BW plots and tables, showing the medians
as well as the means. The trends in yearly medians are checked for any observable
pattern.
4.10 Hypothesis
As details and the objectives clearer, the hypothesis is modified as follows:
H0 = There is no difference between ROCE medians of the five GCC countries at α

=0.05 level.
The hypothesis is tested for the ROCE ratio and the results of the hypothesis are
57
CHAPTER 5: ANALYSIS OF RESULTS
5.1 Introduction
The purpose of this chapter is to present the results of the study and analyse the results
in line with the aims, objectives, and hypothesis of the research. As explained earlier,
this study did not involve any questionnaire based survey, but is based on study of the
literature, online discussions with finance and real estate professionals, collection of
data online, calculations of financial ratios including medians and means, and
presentation in data-tables and graphical formats. The format was chosen to be the
Box-whisker format popularised by Tukey (1977), and are attached in the appendix.
The first section provides the list of companies selected for the study followed by a five
box graphic of the balance sheet profiles of all the thirty companies selected, which is
adapted from Walsh (2008).
Further on, each of the 30 Financial Ratios is results are shown in a table and a box-
whisker plot showing the quartiles, median, mean, and mild outliers for each of the
years 2006, 2007, and 2008. It was not possible to include the data for 2009 (a very
crucial year for real estate industry in the GCC, especially Dubai) as the annual results
are just beginning to emerge and the data was collected in August 2008.
The effects of size (Cinca 2001) must not be ruled out as a lot of literature points out,
also the RMA lists a lot of different companies under real estate and each has different
business profiles, these are shown and classified differently as per the NAICS
guidelines and the ratios are presented separately in the RMA and other data providers.
It must be noted that the data in this study and hence the results are for the entire group
of companies, which are really a mixed bag, they are small, medium and large
companies, some are involved in subdivision of land, others in property buy and sell,
others in development and sale, some in renting, some in commercial, others in
residential or retailing. It was not possible to make a separation as the number of
companies is so limited. It was only possible to get 30 companies because that is the
total number of all the companies in the whole GCC listed under real estate in the stock
exchanges. It is possible some other companies aspiring to go public or show
transparency will have the data available on their websites, but this aspect was not
looked into for this study. Collecting financial information for 30 companies for 3 years
58
and presenting 30 ratios already seemed like a daunting task for the purpose of the
dissertation.
No dissertation could be complete without statistical validity and, the assumption made
was that the economies of GCC are similar; therefore the construction industry would
also follow the same patterns. To verify the assumption, one particular popular ratio,
the ROCE was chosen for detailed analysis, to test the hypothesis.
The results for the ratio ROCE have been 90 in number, 30 from each year. The
distribution patterns are presented followed by the box-plots and tables based on groups
made on basis of country, year, and size to study the patterns and an analysis is
presented.
The same groups are analysed for similarity based on country group to support or reject
the null hypothesis of similarity of ratios in the GCC. Analysis is also done for size
groups and results presented. The analyses are done on the K-W test and also a one way
Anova in some cases.
The research objectives have been presented again for focus

1. Identification of financial ratios which would be most useful, especially for
the real estate and construction industry.
2. Creation of benchmarks for each of the selected financial ratios for each of
the three study periods 2006-08.
4. Observation of patterns and variance for the selected ratio in year-based
group data for all companies.
6. Observation of patterns and variance for the selected ratio in size-based
group data.
Hypothesis
=0.05 level.
The hypothesis is tested for the ROCE ratio and the results of the hypothesis are
59
5.2 Companies included in the Study
The entire list of companies listed in the GCC stock exchanges under real estate have
been included in the study and are listed herein.
Table 5.1: List of companies selected for the study

Sr Company
No. Country codes used Company Name - Stock Exchange Code - Stock Exchange
1 UNP UNION PROPERTIES PJSC
2 DYR DEYAAR DEVELOPMENT PJSC AND SUBSIDIARIES
UAE
3 EMR EMMAR PROPERTIES PJSC AND SUBSIDIARIES

4 SOR SOROUH REAL ESTATE PJSC
5 ALD ALDAR PROPERTIES PJSC
6 RAK RAK PROPERTIES PJSC
TAIBA INVESTMENT & REAL ESTATE DEV. CO.
7 TIR (TIRECO-TASI)
SAUDI ARABIA
8 SRE SAUDI REAL ESTATE CO. (SRECO-TASI)

MAKKAH CONSTRUCTION & DEVELOPMENT CO.
9 MCD (MCDC0-TASI)
10 JBL JABAL OMAR DEVELOPMENT CO. (JABALOMAR-TASI)

DAR AL ARKAN REAL ESTATE DEVELOPMENT
11 DAR COMPANY (DARALARKAN-TASI)
12 ADC ARRIYADH DEVELOPMENT CO. (ADCO-TASI)
13 UDC UNITED DEVELOPMENT CO (UDCD-QE)
QATAR
14 SAL SALAM INTERNATIONAL INVESTMENT CO (SIIS-QE)

15 QRE QATAR REAL ESTATE INVESTMENT CO. (QRES-QE)
16 BAR BARWA REAL ESTATE CO (BRES-QE)
17 EZD EZDAN REAL ESTATE (ERES-QE)
BAHRAIN
18 SEE SEEF PROPERTIES CO. (SEEF-BSE)

GRAND REAL ESTATE & TOURISTIC DEVELOPMENT
19 GRA CO. (TOURISTIC-KSE)
20 KRE KUWAIT REAL ESTATE CO. (KRE-KSE)
21 DAM DAMAC KUWAIT HOLDING CO. (DAMACKWT-KSE)
22 ABY ABYAAR REAL ESTATE CO. (ABYAAR-KSE)
23 MAS Al MASSALEH REAL ESTATE CO. (MREC-KSE)
KUWAIT
24 KCM KUWAIT COMMERCIAL MARKETS CO. (SHOP-KSE)

25 MAB AL MABANEE CO. (MABANEE-KSE)
26 NRE NATIONAL REAL ESTATE CO. (NRE-KSE)
THE COMMERCIAL REAL ESTATE CO. (ALTIJARIA-
27 TIJ KSE)
28 MAZ MAZAYA HOLDING CO. (MAZAYA-KSE)
29 TAM TAMDEEN REAL ESTATE CO. (TAM-KSE)
30 GRP GRAND REAL ESTATE PROJECTS CO. (GRAND-KSE)
Source: Created for the study
60
5.3 Collective balance sheet profile of the companies
The following is a graphical representation of the collective values of the Balance Sheet
Profile for 2008, of all the Companies included in the study.
The graphic is a basic five box layout of the balance sheet items and is adapted from
Walsh (2008). The five balance sheet headings are fixed assets (FA), current assets
(CA), owner’s funds (OF), long term liabilities (LTL), and current liabilities (CA). All
values in local GCC currencies have been converted into Pounds Sterling (GBP) at the
rate of exchange prevailing on 09 august 2009.
The first chart shows the combined values of all the 30 companies included in the study
for the year 2008. The second chart shows the 5 box layouts for each of the 5 countries
of the GCC to show the representation from each country in the study. The last chart
shows the 5 box layout for the size groups (small, medium, & large based on total
assets) to show the relative representations of each size based group in the study.
Table 5.2: Collective Balance sheet profile of the selected companies for 2008
BALANCE SHEET PROFILE OF LISTED REAL ESTATE COMPANIES
All figures in Million GBP UAE SAUDI ARABIA QATAR BAHRAIN KUWAIT ALL GCC
AED SAR QAR BHD KWD GBP
Conversion Rate of Exchange 0.162 0.159 0.164 1.580 2.073 1.000
Fixed Assets FA 16,578 5,026 3,479 144 4,531 29,758
Current Assets CA 9,677 1,307 4,269 24 1,155 16,432
Long Term LiabilitiesLTL 6,603 1,031 3,652 - 1,215 12,501
Current Liabilities CL 7,508 531 1,260 13 2,081 11,393
Owners Funds OF 12,144 4,771 2,836 155 2,390 22,296
61
Figure 5.1: Collective Balance sheet profile for 2008 of all 30 companies
GCC Real Estate Companies

Collective Balance Sheet Profile : Five Box Layout of the
50,000 30 Listed GCC Real Estate Companies Selected
45,000
Value in Million GBP 40,000
35,000 OF
FA
30,000
25,000
20,000
LTL
15,000
10,000
CA
5,000 CL
Source: Adapted from Walsh, 2008
Figure 5.2: Collective Balance sheet profile of all 30 companies
62
Figure 5.3: Collective Balance sheet profile of all 30 companies
As can be seen in the first graphic of the combined values, the fixed assets are twice the
current assets; the owner’s funds are 50% of the total assets; the current liabilities are as
much as the long term liabilities; and the current liabilities are lower than the current
assets – overall a healthy picture for 2008.
The next graphic is the combined values based on the home countries of the companies
and shows the representation of each country in the study. Based on assets, the highest
representation is from the UAE, followed by Qatar, Saudi Arabia, Kuwait, and Bahrain.
The ratio of fixed to current assets seems highest Kuwait and Saudi Arabia, lower in
UAE and less than one in Qatari companies. Possibly the Qatari companies have valued
more of their land banks under current assets. The proportion of owner’s funds to total
63
assets seems to be highest in Saudi Arabia and lowest in Qatar. The debt equity ratio
seems to be lowest in Saudi Arabia and highest in Qatar with debt greater than equity.
Also, the current asset to current liabilities ratio seems highest in Qatar and lowest in
Kuwaiti companies at 50%.
The next graphic is based on company sizes with respect to total assets and denotes the
total values under each category. The proportion of fixed assets to current assets is
highest in the small companies and lowest in the large companies. The proportion of
owners funds to total assets also follows the same pattern, with small companies having
higher proportion of owners funds than the large companies; possibly the large
companies have easier access to borrowed funds. The current assets to current liabilities
seem to be less than one in small companies, roughly equal in the medium companies
and greater than one in the large companies, exposing this vulnerability of the smaller
firms.
5.4 Objective 1: Identification of financial ratios
The objective was to identify which financial ratios were relevant for analysis of real
estate companies. Literature and books listed in chapter 4 were reviewed; professionals
in the field of financial analysis were consulted on forums, namely LinkedIn,
Finance30.com, and Allexperts.com. The answers were many and vary; many of the
responses received were of performance ratios not related not to the financial
statements. Finally, conclusive answers were not found and 30 ratios were selected
from Walsh (2008), Pendelbury (2008). The financial ratios selected are listed in table
appended in next section.
5.5 Objective 2: Creation of benchmarks
The financial ratios have been calculated, the medians found and proposed as
benchmark values for the study years, as per appended table 5.2. Also appended is
another table 5.3 showing similar medians for all the countries individually, but these
are based on scant data and may be used for reference only.
64
Table 5.3: Proposed benchmark values for financial ratios for 2006 to 2008
Sr. 2008 2007 2006
Description Of Ratio Unit
No. Benchmark Values
Profitability and Performance Ratios
1 ROCE - Return on Capital Employed % 10.1% 13.8% 11.3%
2 ROTA - Return on Total Assets % 5.4% 10.6% 8.7%
3 ROE - Return on Equity % 10.7% 17.1% 14.1%
4 ROS - Return on Sales (Profit Margin) % 47.2% 62.3% 49.1%
Investors Ratios
5 EPS - Earnings Per Share - Local Var. N/A N/A N/A
EPS - Earnings Per Share - Converted to
5a GBP GBP N/A N/A N/A
6 PE - Price / Earnings Ratio Times 12.24 10.81 11.12
7 Dividend Yield % 4.1% 3.3% 2.3%
8 Earnings Yield % 5.7% 9.0% 8.1%
9 Market to Book Ratio Times 1.47 1.79 2.16
Efficiency and Effectiveness Ratios
10 Net Assets Turnover Times 0.28 0.31 0.28
11 Fixed Assets Turnover Times 0.22 0.25 0.28
12 Debtors Turnover Times 5.53 5.00 6.26
13 Average Collection Period Days 66 73 59
14 Creditors Turnover Times 5.83 3.64 5.52
15 Stock Turnover Times 1.75 2.74 3.40
16 Net Working Capital to Sales Ratio Times 0.23 0.24 0.20
17 Sales to Working Capital Ratio Times 0.62 0.29 0.56
18 Inventory Days Days 209 135 114
Liquidity and Stability Ratios
19 Current Ratio Times 1.25 1.13 1.53
20 Quick Ratio (Acid Test Ratio) Times 0.92 0.86 0.94
Capital Structure, Investment and Financial Risk Ratios
21 Long-Term Debt to Equity Ratio Times 0.38 0.41 0.13
Long-Term Debt to Total Long-Term
22 Finance Ratio Times 0.28 0.29 0.12
23 Total Debt to Total Assets Ratio Times 0.32 0.27 0.13
24 Interest Cover Times 8.97 8.67 19.90
25 Dividend Cover Times 2.74 3.73 1.84
26 Fixed Assets to Total Assets Ratio Times 0.82 0.78 0.68
27 Long-Term Funds to Total Assets Ratio Times 0.72 0.69 0.77
28 Total Owing to Total Assets Ratio Times 0.04 0.03 0.04
29 Capital Gearing Times 1.01 1.02 1.00
30 Gearing Ratio Times 0.73 0.50 0.20
N/A: Data unavailable in order to calculate ratio
Z: Data equals zero in ratio denominator
65
Table 5.4: Financial ratio medians for selected GCC countries
2008 2007 2006 2008 2007 2006 2008 2007 2006 2008 2007 2006 2008 2007 2006
Sr.
No. Description Of Ratio UAE SAUDI ARABIA QATAR BAHRAIN KUWAIT
ROCE - Return on Capital

1 Employed % 11.4% 14.3% 19.9% 5.2% 6.0% 5.1% 10.1% 10.9% 10.5% 16.3% 26.1% 10.3% 7.7% 20.8% 12.7%
2 ROTA - Return on Total Assets % 8.4% 11.4% 16.6% 4.7% 5.7% 4.5% 6.3% 7.8% 6.7% 15.1% 24.5% 9.6% 2.5% 11.4% 8.1%
3 ROE - Return on Equity % 14.1% 17.3% 21.0% 5.2% 6.0% 5.1% 15.3% 11.9% 14.1% 16.3% 26.1% 10.3% 6.0% 20.3% 12.2%
ROS - Return on Sales (Profit
4 Margin) % 39.0% 44.9% 49.2% 53.9% 62.0% 56.1% 29.2% 55.6% 21.1% 80.0% 88.5% 70.0% 43.8% 70.8% 43.8%
Investors Ratios
EPS - Earnings Per Share - Local

5 Currencies Var. 0.37 0.38 0.37 1.03 1.43 0.95 2.97 2.81 2.41 0.03 0.05 0.02 0.01 0.04 0.03
EPS - Earnings Per Share -
5a Converted to GBP GBP 0.06 0.06 0.06 0.16 0.23 0.15 0.49 0.46 0.39 0.05 0.08 0.02 0.02 0.09 0.06
6 PE - Price / Earnings Ratio R 9.33 11.44 11.21 24.05 27.91 83.18 13.92 11.08 13.08 5.61 3.20 10.51 9.33 8.41 10.03
7 Dividend Yield % 1.8% 2.2% 2.0% 5.6% 5.1% Z 4.2% 3.3% 3.6% 5.1% 3.8% 3.1% 0.4% 0.5% 4.1%
8 Earnings Yield % 10.7% 8.8% 8.9% 3.6% 3.6% 1.2% 7.2% 9.0% 7.6% 17.8% 31.3% 9.5% 2.9% 10.8% 9.1%
9 Market to Book Ratio Times 1.43 2.17 3.15 1.42 2.18 3.58 2.13 1.49 1.99 0.92 0.84 1.08 1.76 1.31 1.62
66
2008 2007 2006 2008 2007 2006 2008 2007 2006 2008 2007 2006 2008 2007 2006
Sr.
10 Net Assets Turnover Times 0.46 0.49 0.51 0.10 0.10 0.09 0.79 0.33 0.60 0.20 0.30 0.15 0.28 0.34 0.20
11 Fixed Assets Turnover Times 0.29 0.43 0.59 0.11 0.11 0.12 0.62 0.13 0.70 0.22 0.33 0.17 0.12 0.19 0.21
12 Debtors Turnover Times 1.58 1.53 6.26 15.60 10.27 8.18 17.11 5.38 35.66 1.43 1.86 0.83 5.90 4.63 2.80
13 Average Collection Period Days 231 239 59 28 36 45 35 68 16 256 197 438 62 79 130
14 Creditors Turnover Times 1.01 1.31 2.74 24.77 47.34 44.80 15.86 7.45 6.93 2.50 26.00 5.00 5.83 7.57 2.20
15 Stock Turnover Times 1.41 1.17 4.20 3.68 9.39 3.42 1.58 3.04 15.48 Z Z Z 3.33 2.61 1.51
Net Working Capital to Sales
16 Ratio Times (0.27) 0.44 0.15 0.23 0.13 0.26 0.61 0.42 0.01 0.30 0.50 1.00 0.15 0.13 0.44
17 Sales to Working Capital Ratio Times 0.63 0.40 0.78 0.99 0.56 0.20 1.80 (0.26) 0.99 2.86 2.89 1.25 (0.39) (0.75) 0.38
18 Inventory Days Days 258 336 87 99 39 181 231 120 24 Z Z Z 141 159 243
Liquidity And Stability Ratios
19 Current Ratio Times 1.47 2.20 2.16 3.16 4.89 1.07 1.61 0.84 1.26 1.88 2.50 2.60 0.39 0.66 1.48
20 Quick Ratio (Acid Test Ratio) Times 1.17 1.10 0.88 2.64 3.64 1.07 1.34 0.81 0.94 1.88 2.50 2.60 0.29 0.53 0.91
67
2008 2007 2006 2008 2007 2006 2008 2007 2006 2008 2007 2006 2008 2007 2006
Sr.
Capital Structure, Investment And Financial Risk Ratios
21 Long-Term Debt to Equity Ratio Times 0.33 0.21 0.02 0.26 0.27 0.03 0.81 0.40 0.31 Z Z Z 0.42 0.49 0.49
Long-Term Debt to Total Long-
22 Term Finance Ratio Times 0.25 0.17 0.02 0.17 0.18 0.03 0.45 0.29 0.23 Z Z Z 0.29 0.33 0.33
23 Total Debt to Total Assets Ratio Times 0.24 0.14 0.10 0.20 0.17 0.03 0.28 0.20 0.12 Z Z Z 0.37 0.29 0.17
24 Interest Cover Times 29.83 91.60 69.85 Z Z Z 9.63 6.56 44.00 Z Z Z 3.38 7.83 6.21
25 Dividend Cover Times 5.95 4.19 4.50 1.45 1.24 1.12 2.26 2.25 3.49 3.48 8.33 3.04 (4.80) 2.20 1.65
26 Fixed Assets to Total Assets Ratio Times 0.55 0.44 0.52 0.81 0.80 0.88 0.58 0.64 0.66 0.86 0.84 0.82 0.87 0.81 0.69
Long-Term Funds to Total Assets
27 Ratio Times 0.72 0.72 0.75 0.90 0.90 0.91 0.72 0.66 0.70 0.92 0.94 0.93 0.53 0.61 0.72
28 Total Owing to Total Assets Ratio Times 0.21 0.15 0.13 0.00 0.01 0.00 0.03 0.03 0.04 0.08 0.01 0.03 0.03 0.02 0.07
29 Capital gearing Times 1.04 1.02 1.00 1.00 1.00 1.00 1.11 1.14 1.01 1.00 1.00 1.00 1.00 1.06 1.03
30 Gearing Ratio Times 0.69 0.21 0.13 0.34 0.28 0.03 0.82 0.40 0.20 Z Z Z 0.78 0.66 0.32

68
Comments on the results
The above financial ratios are presented as box-whisker plots showing the Interquartile
ranges, outliers, median and means; and these are appended in the appendix.
Some financial ratios relating to the real estate in other countries have been procured
from the websites of Bizminer from US under the category “Land Subdivision”; and
from Ventureline, under the category ‘ SIC Code 6552: Real estate – Land sub-dividers
and developers except cemeteries’ and these have been presented where possible in the
analysis on financial ratio benchmarks below.
1 ROCE - Return on capital employed

The GCC Benchmarks proposed are 11 %, 14 %, 10% for 2006, 07, & 08 respectively.
Capital employed represents the total funds employed in the company – the
shareholders funds (equity) plus long term debts. A company in the UK should achieve
a ROCE of 20%. The higher value means efficient usage of assets efficiently; ideally
it should be rising year on year. US companies had a benchmark Return on net worth of
24.85% in 2006 (Bizminer, 2010)
2 ROTA - Return on total assets

The GCC Benchmarks proposed are 9%, 11%, 5% for 2006, 07, & 08 respectively.
These are expected to be lower than other industries due to the high level of investment
properties on real estate company balance sheets. US companies had a benchmark
value of 9.57% in 2006 (Bizminer, 2010)
3 ROE - Return on equity

These values indicate that the industry gives very little scope for the investor to be
worried about opportunity cost. A ROE of 20% or more generally represents a good
performance. US companies had benchmark values of -12%, 3%, & -30.2 % in 2006,
07 & 08 (Ventureline 2010)
69
4 ROS - Return on sales (Profit margin)
US companies had net-profit margins (pre-tax) benchmark values of -3.3%, 7.1%, & -
22% in 2006, 07 & 08 respectively (Ventureline 2010)
Investors Ratios
5 EPS - Earnings per share - Local currencies

5a EPS - Earnings per share - Converted to GBP
These are not ratios and were calculated for use in other ratios.
6 PE ratio - Price earnings ratio

This average could be skewed due to the unrealistic price levels seen in RE stock in the
boom years. The GCC Benchmarks proposed are 11.12, 10.81, 12.24 for 2006, 07, &
08 respectively. A high value indicates a popular share or overvalued. US companies
had benchmark values of 21.2, 87.7 & 5.5 in 2006, 07 & 08 (Ventureline 2010)
7 Dividend yield
The GCC Benchmarks proposed are 2.3%, 3.3%, 4.1% for 2006, 07, & 08 respectively.
This evaluates how investors are rewarded over time. The values show a low yield and
therefore the opportunity cost seems rather high.
8 Earnings yield
The GCC Benchmarks proposed are 8%, 9%, 6 % for 2006, 07, & 08 respectively.
This is the EPC / average share price for the year.
9 Market to book ratio

The GCC Benchmarks proposed are 2.16, 1.79, 1.47 for 2006, 07, & 08 respectively.
This is ratio of market capitalisation / owners funds
70
10 Net assets turnover

This evidently will be low due to the high value fixed assets in the company. The GCC
Benchmarks proposed are 0.28, 0.25, 0.22 for 2006, 07, & 08 respectively. This is the
number of times the assets are covered by sales, and a falling value indicates falling
sales turnover for every Pound invested. US companies had benchmark values of 0.2,
0.1, & 0.2 in 2006, 07 & 08 (Ventureline 2010)
11 Fixed assets turnover

A lower value means reduction in the use of fixed assets and suggests that some assets
be disposed and converted to working capital or repayment of debts. US companies had
benchmark values of 0.6, 0.3 & 0.4 in 2006, 07 & 08 (Ventureline 2010).
12 Debtors turnover
US companies had benchmark values of 5.2, 4.3, & 7.0 in 2006, 07 & 08 (Ventureline
2010). This ratio is not very important for real estate analysts.
13 Average collection period

Their collections are not very large when considered as a percentage of total assets as
such I’m not sure how much we would give importance to the above 2 ratios in an RE
analysis. The GCC Benchmarks proposed are 59, 73, 66 days for 2006, 07 & 08
respectively. US companies had benchmark values of 97, 87, & 57 in 2006, 07 & 08
(Ventureline 2010) .This ratio is not very important for real estate analysts
14 Creditors turnover
Low values indicate late payments.
15 Stock turnover
Much lowers than other industries and is expected to get lower. The GCC Benchmarks
proposed are 3.40, 2.74, 1.75 for 2006, 07, & 08 respectively. US companies had
71
benchmark values of 1.5, 1.1, & 1.1 in 2006, 07 & 08 (Ventureline 2010). This ratio is
not very important for real estate analysts.
16 Net working capital to sales ratio

The GCC Benchmarks proposed are 0.20, 0.24, 0.23 for 2006, 07, & 08 respectively
.RE companies generally have a low NWC only due to the high levels of accounts
payables they carry in comparison to their current assets so how good a benchmark this
would be is debatable.
17 Sales to working capital ratio - Working capital ratio

18 Inventory days
The GCC Benchmarks proposed are 114, 135, 209 days for 2006, 07 & 08 respectively.
US companies had benchmark values of 249, 342 & 328 days in 2006, 07 & 08
(Ventureline 2010). Low values indicate lower sales. This ratio is not useful for real
estate analysts.
Liquidity and Stability Ratios
19 Current ratio
The value is very low and indicates that the companies would always depend on some
form of short term bank financing. The GCC Benchmarks proposed are 1.53, 1.13, 1.25
for 2006, 07, & 08 respectively. An organisation can run into a lot of difficulties if
there is shortage of cash to pay creditors or employees, liquidity ratios are measure of
short term health, used to compare assets which will be turned into cash to pay liabilities
within the same cycle. Ideally this ratio should be 2:1, CA: CL or an organisation will
not be able to meet its current liabilities at a short notice. US companies had benchmark
values of 0.6, 0.5, & 0.8 in 2006, 07 & 08 (Ventureline 2010)
20 Quick ratio (Acid test ratio)

More severe measure of short term liquidity than the current ratio should be 1:1. US
companies had benchmark values of -0.1, -1.4, & -0.8 in 2006, 07 & 08 (Ventureline
2010)
72
Capital Structure, Investment, and Financial Risk Ratios
21 Long-term debt to equity ratio

This seems to be very low in comparison with other industries indicating that they have
high equity levels. It would imply that debt is low, but investment properties in this
region are sometimes highly levered up to 70-80% and depend fully on their revenues
for repayment as these companies are not cash rich or have high liquid funds
immediately available. The GCC Benchmarks proposed are 0.13, 0.41, 0.38 for 2006,
07, & 08 respectively. US companies had benchmark values of 1.3, 1.7 & 2.8 in 2006,
07 & 08 (Ventureline 2010)
22 Long-term debt to total long-term finance ratio

This is another view of the debt equity ratio but with the total long term finance
including equity.
23 Total debt to total assets ratio

This implies that its debt levels are not to be worried about but this ratio is skewed due
to the high level of investment assets bringing it down.
24 Interest cover
Extremely high value indicates that the operating profits are more than sufficient to
cover their interest obligations. The GCC Benchmarks proposed are 19.90, 8.67, 8.97
for 2006, 07, & 08 respectively. This ratio shows the amount of cover available before
interest payments are defaulted. US companies had benchmark values of 0.8, 1.3 & 0.3
in 2006, 07 & 08 (Ventureline 2010)
25 Dividend cover
Due to these companies generally being large cap with generous dividends, coverage
may be stretched even more to keep market sentiments high. The GCC Benchmarks
proposed are 1.84, 3.73, 2.74 for 2006, 07, & 08 respectively. Shows how much of the
profits are removed and how much are ploughed back in. A low ratio of 1:2.5 means
73
that the firm may not be ploughing back enough money for growth, possibly because
the earnings are low or too much is paid out to please investors.
26 Fixed assets to total assets ratio

27 Long-term funds to total assets ratio

28 Total owing to total assets ratio

29 Capital gearing
30 Gearing ratio – debt: equity ratio

A high ratio implies a high financial risk, but can be tolerated if the profitability is high
and consistent. A high profit can support a high debt, but when ROCE starts dropping,
it would be time to restructure debt. US companies had benchmark values of 0.57, 0.63
& 0.73 in 2006, 07 & 08 (Ventureline 2010)
74
5.6 Objective 3: Selection of ratio for detailed analysis
The logic in selecting ROCE has already been described in chapter 4. A company’s
ROCE should always be compared to the current cost of borrowing. ROCE is a better
measure of the return of a real estate company as it considers leverage, which is an
integral source of funding in this sector. As real estate companies are traditionally
highly leveraged, it is essential to ensure that any company generates adequate returns
to cover its high cost of capital.
Table 5.5: ROCE medians for all countries and ROCE benchmarks for the study period
SAUDI
Year UAE ARABIA QATAR BAHRAIN KUWAIT GCC
2008 11.4% 5.2% 10.1% 16.3% 7.7% 10.1%
2007 14.3% 6.0% 10.9% 26.1% 20.8% 13.8%
2006 19.9% 5.1% 10.5% 10.3% 12.7% 11.3%

Source : Created for this study
75
Figure 5.4: Frequency distribution of ROCE in study period
GCC REAL ESTATE COMPANIES
2006 TO 2008
FREQUENCY DISTRIBUTION
12
FREQUENCY DISTRIBUTION_ 10
2008
6 2007
2006
0
-160%
-150%
-140%
-130%
-120%
-110%
-100%
-90%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
ROCE %

Figure 5.5: Expanded frequency distribution of ROCE

2006 TO 2008
FREQUENCY DISTRIBUTION
10
8
FREQUENCY DISTRIBUTION_
6
2008
5 2007
2006
4
0
<=0% 5% 10% 15% 20% 25% 30% 35% >=35%
ROCE %
The ROCE data shows a non parametric distribution for all the study years as expected
and therefore the nonparametric statistical testing of variance known as the Kruskal –
Wallis test is proposed to be applied for the analyses.
76
5.7 Objective 4: Observations of data grouped by year
Figure 5.6: BW plot of ROCE for all GCC companies

TREND ANALYSIS OF FINANCIAL RATIO : RETURN ON CAPITAL EMPLOYED
BOX-WHISKER PLOT ( Legend : Red = Median; Green = Mean
70%
60%
50%
40%
30%
VALUES_
20% 16% 15%
10% 10% 11%

14%
0% 0%
-10%
2008 2007 2006
-20%
-30%
GROUP : ALL SELECTED GCC COMPANIES FOR YEARS 2006 TO 2008
Source: Created for this study
The BW plot shows the ROCE median rising from 2006 values and coming back in
2008, whereas the mean has slipped considerably between 2007 and 2008.
The KW test conducted to test the similarity of all yearly data against each other gives a
value of 0.041, which is <0.05, and hence the variance is statistically significant. Since
the data is considerable, an Anova test is also conducted in this case only and the results
are a P value of 0.015, which is also <0.05, but the post-hoc Tukey test gives P values
of 0.023 and 0.042 between years 2008/07 and 2008/06, but a very high value of 0.981
for years 2007/06, indicating a low level of variance between the data for these two
years.
77
Table 5.6: KW test for ROCE of all GCC companies 3 years data
Kruskal-Wallis Test Results for: ROCE: ALL GCC 2006, 07, 08
Data Range = Sheet4!$I$2:$K$32
Descriptive Statistics
Value Rank
2008 2007 2006 2008 2007 2006
0.103 0.099 0.128 38.0 35.0 47.0
0.140 0.067 0.211 53.0 22.0 68.0
0.069 0.149 0.188 23.0 54.0 64.0
0.235 0.263 0.277 71.0 76.0 79.0
0.106 0.137 0.380 42.0 51.0 84.0
0.122 0.171 0.185 46.0 60.0 63.0
0.066 0.138 0.038 21.0 52.0 11.0
0.045 0.060 0.040 13.0 20.0 12.0
0.045 0.056 0.080 14.0 18.0 26.0
-0.005 0.120 0.196 7.0 45.0 67.0
0.136 0.053 0.051 50.0 17.0 16.0
0.058 0.082 0.092 19.0 28.0 31.0
0.129 0.094 0.096 48.0 32.0 33.0
0.101 0.191 0.105 36.0 65.0 40.0
0.081 0.194 0.113 27.0 66.0 44.0
0.072 0.109 0.595 24.0 43.0 85.0
0.211 0.261 0.103 69.0 74.0 39.0
0.163 0.106 0.000 57.0 41.0 8.5
-0.255 0.000 -0.072 4.0 8.5 5.0
-0.370 0.357 0.023 3.0 83.0 10.0
-1.571 0.266 0.160 1.0 77.0 56.0
-0.062 0.091 0.097 6.0 30.0 34.0
0.258 0.322 0.170 73.0 82.0 59.0
0.245 0.165 0.157 72.0 58.0 55.0
0.129 0.184 0.273 49.0 62.0 78.0
0.102 0.231 0.046 37.0 70.0 15.0
0.077 0.321 0.284 25.0 81.0 80.0
0.179 0.084 61.0 29.0
-0.594 0.263 2.0 75.0
Median 0.101 0.138 0.113 36.0 52.0 44.0

Sum 1.587 4.635 4.088 991.0 1454.5 1209.5
N 29 29 27 29 29 27
Test Results
Statistic Value DF 1 DF 2 P
Chi-Square 6.290 2 - 0.043
F 3.319 2 81 0.041
Source: Output from software StatistiXL
Table 5.7: Anova test for ROCE for 3 year data

Analysis of Variance results for: ROCE: ALL GCC 2006, 07, 08
Y Variable Range = $I$2:$K$32
Group Mean Std Dev. Std Err N
2008 0.001 0.352 0.065 29
2007 0.160 0.093 0.017 29
2006 0.149 0.133 0.026 27
Analysis of Variance
Source Type III SS Df Mean Sq. F Prob.
Model 0.454 2 0.227 4.458 0.015
Error 4.180 82 0.051
Total 4.634 84
Post Hoc tests

Test Group 1 Group 2 Mean Diff. SE q Prob.
Tukey 2008 2007 -0.159 0.042 3.800 0.023
2006 -0.148 0.043 3.470 0.042
2007 2006 0.011 0.043 0.261 0.981
Source: Output from software StatistiXL
78
5.8 Objective 5: Observation of data grouped by country
Fig 5.7: BW plot of ROCE grouped country wise 2006

45%
40%
35%
30%
25% 23%
20%
VALUES_
20%
20%
15%
11%
10%
10% 11% 13%
UAE 8% 10%
5% QATAR
5%
BAHRAIN
0%
SAUDI
-5% KUWAIT
-10% GROUP : COUNTRYWISE FOR YEAR 2006

40% TREND ANALYSIS OF FINANCIAL RATIO : RETURN ON CAPITAL EMPLOYED
35%
30%
26%
25% 26%
VALUES_
20%
20% BAHRAIN
21%
15% 13%
15%
14%
10% 11%
9%
KUWAIT
5% 6% QATAR
UAE
SAUDI
0%
GROUP : COUNTRYWISE FOR YEAR 2007
79

40% BOX-WHISKER PLOT ( Legend : Red = Median; Green = Mean
30%
20% 16%
12%
13%
10% 16%
11% 6%
10%
5% 8%
0% UAE BAHRAIN
VALUES_
-10%
QATAR -17%
SAUDI
-20%
-30%
-40% KUWAIT
-50%
-60%
-70%
The country wise groups shown for each of the 3 study years indicate that in 2006, the
Kuwaiti companies had a large range of 36 %; some companies had negative ROCE;
even though the median and mean are reasonable at 13% and 11 % and the median is
similar to the overall median for 2006. Also the numbers of Kuwaiti companies are
highest in the study, at 13% twice the group sizes from other countries. The lowest
performer is Saudi at median 8%, the Qatar, Bahrain and Kuwait companies are in the
10-11% range, lesser than the overall median of 13% , the top performers are UAE
companies with 23 % median and 20% mean, which by far outweigh the others by 2
times.
In 2007, Kuwaiti companies still have a high range of 36 similar to 2006, the lowest is
improved at zero from negative last year and Saudi companies remain poor performers
at 6% followed by Qatar at 11 and UAE 14, the sole Bahrain company is the best
performer with a median of 26% . Saudi and Qatar companies have smallest whiskers
showing consistency of ROCE values mostly within the central region inter quartile
range.
Come 2008, Kuwaiti companies still show high volatility in the range, 183 from -157 to
26 %this time because they are a good mix of all smell, medium and large. Saudi
80
companies still lowest performance at 5%, UAE and Qatar similar like last year at 10-11
%, which is also the overall median, with the Bahrain company as the top performer
consistent with last year at16 down from 26 of last year .similar to last most of the data
is contained in the box for Saudi and Qatar with one outlier each on the higher side.
Year-wise for countries -
UAE companies show a declining in ROCE steadily from 20 to 14 to 11 in 2008. This
is due to the rising costs during the boom presumably or management problems and
skills shortages in all fields of construction. All data have at least one outlier each
showing some did make exceptional profits between 40 and down to 25% in 2008, these
peaks have also come down. Saudi companies show a slight increase fro m5 to 6 % and
back to 5 % in 2008 - slow and steady is the name of the game.
Qatar companies show large range 14 % in 08, but the medians are consistent at 10-
11%.- the means for 2007 and 2008 are also close to medians but 2006 is far because of
a severe outlier at 60%.
Bahrain co recorded the general trend also of low high low from 2006 to 08 from 10 to
26 to 16 in 2008. It followed the general trends of the Saudi, But with more
fluctuations.
Kuwait too followed the trend of low-high -low from 13 to 20 to 8 % in 2008
Fig 5.10: Column chart ROCE grouped country wise 2006-08

MEDIAN VALUES FOR COUNTRY GROUPS
FOR SAMPLE PERIOD 2006 TO 2008
2008
30.0%
2007
2006
25.0%
20.0%
ROCE %
15.0%
10.0%
5.0%
0.0%
UAE SAUDI QATAR BAHRAIN KUWAIT GCC
GCC COUNTRIES
81
Fig 5.11: Column chart ROCE grouped year wise 2006-08

MEDIAN VALUES FOR FOR SAMPLE PERIOD 2006 TO 2008
FOR COUNTRY BASED GROUPS
UAE SAUDI QATAR BAHRAIN KUWAIT GCC
30.0%
25.0%
20.0%
ROCE %
15.0%
10.0%
5.0%
0.0%
2008 2007 2006
SAMPLE PERIODS
In the first chart above, the patterns which emerge are that UAE companies show a
steady decline whereas all others have a rise and fall; Saudi is low and steady not much
effected by the 2007/08 rise and fall, Qatar too steady like Saudi but with higher
margins; Bahrain and Kuwait show higher volatility; Qatar is overall closest to the
benchmarks for all the three years.
The next chart shows that in 2006, Kuwait, Bahrain, & Qatar are close to the
benchmark, Saudi underperformed and UAE is almost twice the benchmark. In 2007,
the boom year, all countries have done better than the 2006 except UAE which has
declined to the benchmark level, Kuwait and Bahrain have outperformed, Qatar and
UAE close and Saudi following its low and steady profit. In 2008, all countries are
lower than 2007, Saudi and Qatar have remained steady.
82
Fig 5.12: Web chart ROCE 2006

ROCE 2006
COUNTRIES V/S GCC BENCHMARK
UAE
20.0%
15.0%
10.0%
KUWAIT SAUDI ARABIA

5.0%
2006
0.0%
GCC BM
BAHRAIN QATAR

ROCE 2007
UAE
30.0%
25.0%
20.0%
15.0%
KUWAIT 10.0% SAUDI ARABIA

5.0%
2007
0.0%
GCC BM
BAHRAIN QATAR
83

ROCE 2008
UAE
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
KUWAIT 6.0% SAUDI ARABIA
4.0%
2.0%
2008
0.0%
GCC BM
BAHRAIN QATAR
Fig 5.15: Web chart ROCE 2006-08

ROCE 2006, 2007 & 2008
COUNTRY MEDIANS
UAE
30.0%
25.0%
20.0%
GCC 15.0% SAUDI ARABIA
10.0%
5.0%
2008
0.0% 2007
2006
KUWAIT QATAR
BAHRAIN
84
The first 3 web charts show the yearly values with the benchmark, the 2006 chart shows
Saudi at half the benchmark, Qatar, Bahrain and Kuwait close and UAE at twice the
benchmark.
In 2007, Saudi is still close to half the benchmark, Qatar, and UAE close, Kuwait and
Bahrain outside the envelope.
In 2008, Saudi is still halfway, Qatar and UAE close, Kuwait under and Bahrain over
the benchmark.
In the last combined chart, the patterns show 2007 as the outermost envelope, with UAE
breaking it for 2006 and 2008 completely within the envelope of 2007. The Saudi
companies are close every year, and UAE shows the declining trend.
The variances in data based on KW test are discussed separately below.
5.9 Objective 6: Observation of data grouped by company size
Some analysts prefer to use the total assets of a company as a measure of size; which
has been used in the grouping of the balance sheet profiles graphic earlier on.
The company sizes for the current analysis are made with respect to turnover as it is
found to be more relevant here. The turnover figures for 2008 are used and converted to
GBP, this ranged from zero to 2500 million GBP. The separation was done with respect
to quartiles, for want of a better method. The list of 30 companies is sorted according to
turnover, and the quartiles calculated and grouped accordingly into 4 groups which have
companies from zero to q1, q1 to median, median to q3 and q3 to maximum value.
These worked out to the four ranges zero to 25m, 25 to 75m, 75m to 375m, and 375 to
2500 m GBP.
85
Fig 5.16: BW chart ROCE grouped size wise 2006

60%
50%
40%
VALUES_
30%
20% 21%
20%
20%
11%
10%
6%
2% 10% 10%
0%
375 to 2500 M GBP
-10% 0 to 25 M GBP
25 to 75 M GBP 75 to 375 M GBP
-20%
GROUP : SIZEWISE FOR YEAR 2006

35%
30%
25%
VALUES_
20%
18%
15%
16% 15%
15% 18%
14%
10% 11%
11%
5%
75 to 375 M GBP
0% 375 to 2500 M GBP
86

15%
12%
11%
0% 11%
9% 13%
-26%
75 to 375 M GBP 375 to 2500 M GBP
-40% 25 to 75 M GBP
-50%
VALUES_
0 to 25 M GBP
-100%
-150%

-200%
The 1st graphic shows the overall trend of all the 30 companies; the ROCE was
reasonable at a median of 11% jumped to 14% in the boom of 2007 and slumped to 10
%, possibly due to the sharp increases in costs of all construction materials and
shortage of contractors and manpower.
In the next 3 graphics, the companies are grouped into four size groups based on
quartiles of the turnover. The 2006 graphic shows a pattern of overall increase of
ROCE with respect to the turnover. the low turnover companies have a median ROCE
of just 2 % showing their vulnerability, the medium companies in both ranges 25-to
75 and 75 to 375 M GBP have the same median showing they are from the same
group, these are actually the companies with turnovers in the central 25th to 75th
percentile, though the means are substantially different, mainly due to one High outlier
which is visible at 60%.
The High range has twice the median ROCE of the medium turnover companies at 20%,
showing the strength in size and management structures in a booming economy. The
overall median was 11 % in 2006.
As we progress into 2007, the smaller companies show huge volatility in ROCE values
with a range of 36 % and a central Interquartile range of 19%, the ROCE has jumped to
a healthy 11% from 2% in 2006, which is what the medium companies were making in
87
2006 and they have caught up. the lower-medium companies have fared best at mean
and median both at 18%, showing very reliable figures and they have also a
considerably big range of 27% and an inter quartile range of 12%.the large companies
have also the means and median close at 15% and seem to have the lowest range of 20
% signifying reliability of data and possibility of using these as benchmark values.
The median also compares with the overall median for 2007 of 14%. The overall
median is 10 % in 2008, and mean of zero, signifying volatility of returns due to adverse
market conditions. The small companies have recorded a high volatility and their
ROCE are mostly in the negative from 6 % up to a max of -157%.
The inter quartile range is also fully in the negative from -3 to -48% and this has been a
bad year for this group. the upper medium has done best at In 2008,also shows a
general trend of ROCE increasing with 13% company size except the large group, the
small, medium and high have steadily increasing ROCE medians of -29, 9 and 13 with
large ones at 11 %. The medians are in the range 9 to 13 for all except the small
companies. The means are also in a narrow range of 11 to 15 % for this group.
And all higher then the overall median of 10 which ahs been pushed down by the losses
in the smaller r companies.
Fig 5.19: Column chart ROCE grouped size wise 2006-08

MEDIAN VALUES FOR YEARS 2006 TO 2008
BASED ON COMPANY SIZE GROUP
40.0% 2008
2007
2006
30.0%
20.0%
10.0%
ROCE %
0.0%
Small - 0 to 25 M GBP Medium - 25 to 75 M GBP Big - 75 to 375 M GBP Large - 375 to 2500 M GBP
-10.0%
-20.0%
-30.0%
SIZE GROUPS
88
Fig 5.20: BW chart ROCE grouped year wise 2006-08

MEDIAN VALUES FOR COMPANY SIZE GROUP
FOR SAMPLE PERIOD 2006 TO 2008
40.0%
30.0%
20.0%
10.0%
ROCE %
0.0%
2008 2007 2006
-10.0%
-20.0%
-30.0%
SAMPLE PERIODS
Small - 0 to 25 M GBP Medium - 25 to 75 M GBP Big - 75 to 375 M GBP Large - 375 to 2500 M GBP
The trends which can be noticed for the size groups show that the large, big, and
medium companies exhibited the rise and fall in 2008, whereas the small companies
exhibit a meteoric rise and crash through the floor exposing their vulnerability and the
big and medium show similar values meaning they could be clubbed together, in fact
these two groups form the 50 % inner values, and it is not a wonder they are close.
The next graph shows a pattern of profitability increasing with size, again the medium
and big companies have nearly same values; in 2007, the pattern has totally reversed
remarkably, and all groups are in a close range, the big and medium groups are exactly
the same; in 2008, the large, big, medium are close and the small companies are in the
negative zone.
The variances in data based on KW test are discussed separately below.
89
5 . 10 Results of Kruskal -Wallis tests
The following was the results of the Kruskal-Wallis test for data for ROCE for 5 GCC
countries in 30 firms for years 2006, 07 & 08.
Table 5.8: Kruskal-Wallis test results

Kruskal-Wallis Test Results
Sr.
Grouped data Chi- Remarks
No. P F P
Square
1 Entire GCC firms tested P < 0.05
for similarities between Variance is
2006, 2007 & 2008 6.290 0.043 3.319 0.041 Significant
2 All 5 countries tested 7.257 0.123 2.130 0.113 P > 0.05
against each other for Variance is
2008 Insignificant
2007 Insignificant
2006 Insignificant
5 The 4 size based groups 8.365 0.039 3.637 0.029 P < 0.05
tested for similarities in Variance is
2008 Significant
6 The 4 size based groups 0.451 0.930 0.136 0.937 P > 0.05
2007 Insignificant
7 The 4 size based groups 16.043 0.001 11.181 0.000 P < 0.05
2006 Significant
90
The outputs of the different KW tests are attached in appendix D.
Result 1 is the variance based on yearly data, which has been discussed in section 5.7;
the test result shows significant variance. However, a post-hoc Anova performed on the
same data showed high similarities between 2006 and 2007.
The results 2 to 4 for country-based groups show P > 0.05, for all the study years;
therefore the data for ROCE is similar across the GCC based on country.
The results 5 to 7 show variances between size-based groups as high in 2006 and 2008
and insignificant in 2007, which was the boom year.
5 . 11 Testing the hypothesis

=0.05 level.
The KW tests on country-based groups have yielded P values of 0.113, 0.143, and
0.280, for the years 2006, 2007, and 2008 respectively. The values are all above 0.05,
and therefore the null hypothesis is not rejected.
Therefore the medians are for all 5 country groups of the GCC are similar statistically;
and it may be inferred that all the ROCE data is from the same population.
The results of the hypothesis are extended to assume that the benchmarks created with
the combined data of the selected GCC companies may be confidently used throughout
the region.
It may also be concluded that the other benchmarks for financial ratios presented in this
study can be used throughout the GCC with reasonable prudence.
91
5 . 12 Summary
The objectives have been listed and discussed. A list of companies has been selected
for the study and presented. Collective balance sheet profiles of all the companies
included in the study are presented graphically to show the representation from each
country and also each size.
Objective 1 to identify the financial ratios has been achieved with limited success; 30
ratios were selected and a list presented along with the formulae proposed to be used.
Objective 2 to create benchmarks has been achieved with a reasonable degree of
accuracy and the methodology to calculate, tabulate individual company ratios and
calculate the quartiles and present them as a box whisker plot are discussed. The
resulting medians for each year are presented as the benchmarks and also schedule
showing medians for each country for each ratio for the years 2006 to 2008 are
presented. The values of each of the ratios are discussed briefly along with comparison
of medians in the US are also shown where available.
Objective 3 has been achieved with the selection of ROCE as for detailed analysis and a
justification for selection has been provided. The values, frequency distributions, of
ROCE are also presented, which show clearly the non parametric nature of the value set,
and the use of Kruskal-Wallis test, a non-parametric test, is also discussed.
Objective 4 has been to examine the variance in yearly data. The data is presented as
BW plots for each year and results are discussed. The median has moved from 11% in
2006 to 14% in 2007 and 10% in 2008. A KW test is done taking each year data as one
group and significant differences are noted. An Anova post hoc Tukey test shows high
similarities between 2006 and 2007 data.
Objective 5 has been to observe variance in country data and BW plots, column charts
and web charts are presented for each year showing the country-wise plots and the
trends and patterns discussed.
Objective 6 has been to examine variance due to size. Clear differences in size effects
on the ROCE are observed. The data is presented as BW plots and column charts a d
the trends discussed. The large companies have their own trends; the big and medium
generally follow the same trends and the smaller companies show a lot of volatility.
The hypothesis of similarity of ROCE medians across the GCC is tested with the KW
test and the results show P values above 0.05 in all the study years and the results of all
the KW tests are presented.
92
CHAPTER 6: CONCLUSION
6.1 Introduction
The aim of this research was to create benchmarks for select financial ratios during the
period 2006 to 2008 for the selected mix of GCC real estate companies; and to
statistically test if sufficient similarities existed in the underlying data to justify usage of
data as one group, with reasonable confidence. It was also decided to establish the
extent to which similarities exist in the data by examining the variance of one selected
ratio – the ROCE.
In order to achieve this aim, seven objectives emerged for research:
1. Identification of financial ratios which would be useful, especially for the real estate
and construction industry.
2. Creation of benchmarks for each of the selected financial ratios for each of the three
study periods 2006-08.
4. Observation of patterns and variance for the selected ratio in year-based group data
for all companies.
5. Observation of patterns and variance for the selected ratio in country-based group
data for each of the years of the study, to test the hypothesis.
6. Observation of patterns and variance for the selected ratio in size-based group data.
The literature review served to translate these objectives into specific methods relating
to ratio calculations, statistical calculation, and presentation of results as well as the
correct interpretation of the statistical results.
Based on the analysis of the results, the conclusions of the research are presented below
for the objectives.
Thereafter, the chapter considers whether the research hypothesis has been proved or
contradicted, highlights the limitations of the research and identifies areas for further
research.
93
6.2 Objectives
Objective 1: Variable selection

Different sources were considered, journal literature, books, forums of professional
analysts and database companies and lists of ratios recommended by them were viewed,
notably. Conclusive answers were not found and finally 30 ratios were selected from
Walsh (2003) and Pendelbury (2004).
The following is a classification of the selected financial ratios:
• Profitability and performance ratios - 4
• Investors ratios - 5
• Efficiency and effectiveness ratios- 10
• Liquidity and stability ratios - 2
• Capital structure, investment and financial risk ratios - 10
Objective 2: Creating benchmarks

A sheet showing the 30 financial ratios and the medians as benchmarks are proposed for
the GCC. The medians are proposed as rudimentary benchmark values for each of the
ratios for that particular year. Also consolidated sheet detailing the medians for each
country for each ratio for the years 2006, 2007, and 2008 is presented in the earlier
chapter, but these are based on scant data
Objective 3: Selection of one ratio for detailed analysis.

It has been proposed to use Return on Capital Employed (ROCE) for detailed analysis.
ROCE is also an efficiency measure of sorts; it doesn’t just gauge profitability as profit
margin ratios do, it measures profitability after factoring in the amount of capital used.
Because ROCE measures profitability in relation to invested capital, ROCE is important
for capital-intensive companies, or firms that require large upfront investments to start
producing goods. The justifications provided from various opinions seem reasonable to
establish this as a good measure of comparison. A frequency distribution of the ROCE
is presented, which shows the skewness on the data and the non-normality of data.
Hence it was proposed to use the Kruskal-Wallis test for the analysis of variance
between groups based on period, country, and size.
94
Objective 4: Gauging the variance in yearly data for all companies.
The ROCE data was grouped according to the data period for all GCC data and the
variances checked between years 2006, 2007 and 2008 with the help of the KW test.
The KW test gave a P value of 0.041, which is < 0.05 and hence it is confirmed that the
data for the years 2006, 2007, and 2008 have no similarity with each other. An Anova
test with post-hoc test done separately showed that there was a high similarity of 0.98
between the ROCE data for 2006 and 2007.
Objective 5: Variance in country-grouped data

The ROCE data was grouped according to the country for each year and the variances
checked between country groups for each year with the help of the KW test. The details
are presented as BW plots and tables, showing the medians as well as the means. Spider
diagrams and column charts have been provided for clarity and observation of trends
and patterns. The KW tests proved that the country data for all GCC for the study years
is similar. Other interesting observations relating to individual countries are as follows:
• Saudi Arabian companies have the lowest and steadiest values throughout the
study period; a little more than 5 %, and this may be compared with the finance
costs.
• The single Bahraini company has high values throughout the study period and
has had the up-down pattern exhibited by all except the UAE companies.
• Qatari companies have steady returns with all the ups and downs and are
generally closest to the GCC benchmarks proposed through the research.
• UAE companies have shown a steady decline through the period; whereas all the
others have had an upswing in 2007 and back to 2006 or nearby values.
• Kuwaiti companies were close to the benchmark in 2006, have moved up in
2007 and in 2008 are below the 2006 values.
• Generally, all the companies exhibit a rise in 2007 and a fall to 2006 or lower
levels of returns ; except UAE companies, which have steadily declined from
20% to 15% and 11% in 2007 and 2008 respectively.
95
Objective 6: Examination of the variance in data due to size effects.
The company turnover was used as a measure of size: the companies were classified as
Small, Medium, Big and Large based on a quartile criterion, and checked for variance
between the group sizes for every year.
The ROCE data was grouped according to the size data for all GCC data and the
variances checked between years 2006, 2007 and 2008 with the help of the KW test.
The KW analysis showed no similarity in medians in 2006, a very high similarity in
2007, the dizzy period, where everybody did well, and no similarity in 2008 again. This
proves that the size groups follow different patterns, as is exhibited below.
The details are presented as BW plots and tables, showing the medians as well as the
means. The trends in yearly medians are examined for any observable patterns and the
results are:
• In 2006, the large companies were showing highest gains, the big and medium
companies had similar figures lower than large companies, and small companies
had very low returns.
• In 2007, the whole pattern was reversed, albeit with a smaller range and the big
and medium companies again with similar figures with small companies
showing the highest gains with phenomenal increase over 2006 figures.
• In 2008, the large companies had fallen below the 2006 levels, the big and
medium are close and close also to their 2006 levels, whereas the small
companies have gone through the floor in a meteoric rise and fall pattern
exposing their vulnerability to the economic cycles in the region.
• Overall 2007 seems to have brought windfalls to all real estate companies in the
region.
96
6.3 The research hypothesis

=0.05 level.
The KW tests on country-based groups have yielded P values of 0.113, 0.143, and
0.280, for the years 2006, 2007, and 2008 respectively. The values are all above
0.05and therefore the null hypothesis is not rejected.
Therefore the medians are for all 5 country groups of the GCC are similar statistically;
and it may be inferred that all the ROCE data is from the same population.
The results of the hypothesis are extended to assume that the benchmarks created with
the combined data of the selected GCC companies may be confidently used throughout
the region.
It may also be concluded that the other benchmarks for financial ratios presented in this
study can be used throughout the GCC with reasonable prudence.
6.4 Research limitations
The following limitations have been observed during the process of this research:
1. The research is limited by the research sample in terms of number of companies
and the period of study. A minimum 5 year study period has been proposed by
Alexander (2007).
2. There is no comparable data to check if the results are reasonable as there has
been no earlier work in this area for the GCC region.
3. Some outliers which may have affected the values have not been given any
consideration, as medians have been used; this may have led to some level of
inaccuracies, especially in the smaller companies data.
4. Companies selected are not purely real estate developers, some are into other
allied businesses too including rentals, shopping malls, contracting, etc.; some
are semi-government receiving grants and subsidies , others are privately held,
these require to be analysed separately.
5. Some of the data has been adjusted as details were not available. Especially
since confusion prevails over split of land assets into current or long term assets,
97
some companies have clubbed current and long term assets as one item, and
liabilities have also been clubbed; some have had no turnover in one year, and
best judgement has been used in these cases to normalise the data. But no data
has been removed, however strange.
6. Size effects have not been considered due to limitation of data and the
benchmarks proposed are based on a mix of all sizes of companies.
6.5 Areas of further research
Being a pilot study, this research has opened doors for a lot of further investigation and
some of these are listed below:
1. It would be interesting to see the directions the ratios take when the current data
from the 2009 statements is put into the study; as the fortunes of the real estate
and construction have drastically changed as part of a larger cycle.
2. Only one ratio has been examined in detail for variance, others could be
examined and a general view made later for compatibility of data across the
GCC.
3. Research is also required on which financial ratios are really important to
various stakeholders in these companies.
4. Older data from some of the well entrenched companies can be added and the
research enhanced. Finance data may also be procured legitimately from willing
non-listed companies to increase the base for a detailed study.
5. Data can be enhanced and a study of insolvency factors can be created for the
region based on research by Altman (1983), Abidali (1995), and Basha (2007)
and others.
6.6 Contact
This is a pilot study based on scant data and subject to corrections. Any suggestions
will be thankfully acknowledged and may be sent to the author at mnb4@hw.ac.uk
Or maheshbutani@hotmail.com or mahesh.butani@euch.ae
98
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104
APPENDIX A – BOX-WHISKER PLOTS AND STATISTICAL
DATA OF FINANCIAL RATIOS
The box is 50 % of the central values , the last and first value of the box is the 25th and
75th percentile, the difference in values is the IQR, a value considered ok is 1.5 times the
IQR on either sides of the box, and beyond are outliers, the max value for the whiskers is
the 1.5 IQR –step - the last data point just within this step limit is considered the end of
the data within the acceptable limits, this may be a lot lower than the step or just that
value. The outliers are marked as dots – up to a value of 3 IQR, the ones beyond that are
termed severe and not shown in this plots, but they are available in the data in the
appendix. These in our study are mostly due to incorrect or severe data from some of the
balance sheets, some have received grants showing very high turnover without any
corresponding costs, others have very limited or negligible turnover, etc, also a mean
reflecting all these outliers is also shown as a green line, the median is the central data
and shown in red and the values of the median and mean are presented for each year of
the study. The corresponding table also shows similar data for all the quartiles, mean,
SD, number of data points, limits of whiskers, outlier identification data.
105
1 RETURN ON CAPITAL EMPLOYED

70% ( Legend : Red = Median; Green = Mean
60%
50%
40%
30%
VALUES_
20%
16%
15%
14%
10% 10% 11%
0% 0%
2008 2007
2006
-10%
-20%
-30% FINANCIAL RATIO : RETURN ON CAPITAL EMPLOYED

STATISTICAL DATA

1 Mean 0% 16% 15%
2 N 29 29 27
Quartiles
4 Q0=Minimum -157% 0% -7%
5 Q1-25% 5% 9% 7%
6 Q2=Median 10% 14% 11%
7 Q3=75% 14% 23% 19%
8 Q4=Max 26% 36% 60%
9 Range 183% 36% 67%
Outliers
10 IQR 9% 14% 13%
11 Step = 1.5 IQR 14% 21% 19%
14 Outer Low Fence -23% -33% -31%
Whisker Limits
106
2 RETURN ON TOTAL ASSETS

30%
25%
20%
15%
VALUES_
11% 11%
10%
10% 9%
5% 5%
0% 0%
2007
-5% 2006
2008
-10%
FINANCIAL RATIO : RETURN ON TOTAL ASSETS
RETURN ON TOTAL ASSETS

STATISTICAL DATA

1 Mean 0% 10% 11%
2 N 29 29 27
Quartiles
4 Q0=Minimum -92% 0% -5%
5 Q1-25% 2% 6% 5%
6 Q2=Median 5% 11% 9%
7 Q3=75% 9% 12% 15%
8 Q4=Max 20% 27% 59%
9 Range 111% 27% 64%
Outliers
10 IQR 7% 7% 10%
11 Step = 1.5 IQR 10% 10% 14%
14 Outer Low Fence -18% -14% -24%
Whisker Limits
107
3 RETURN ON EQUITY

60%
50%
40%
30%
VALUES_
20% 16% 15%
10% 11% 15% 14%
0% 1%
2008 2007
2006
-10%
-20%
-30%
FINANCIAL RATIO : RETURN ON EQUITY
RETURN ON EQUITY
STATISTICAL DATA

1 Mean 1% 15% 15%
2 N 29 29 27
Quartiles
4 Q0=Minimum -157% 0% -7%
5 Q1-25% 5% 8% 7%
6 Q2=Median 11% 16% 14%
7 Q3=75% 16% 20% 20%
8 Q4=Max 30% 36% 59%
9 Range 187% 36% 66%
Outliers
10 IQR 12% 12% 14%
11 Step = 1.5 IQR 18% 18% 20%
12 Inner Low Fence -13% -10% -13%
14 Outer Low Fence -31% -28% -34%
Whisker Limits
16 Lower Whisker end 0% 0% -7%
108
4 RETURN ON SALES – PROFIT MARGIN

100%
62%
49%
50%
VALUES_
47% 59%
47%
21%
0% 2007
2006
2008
-50%
-100%
FINANCIAL RATIO : RETURN ON SALES - PROFIT MARGIN
RETURN ON SALES - PROFIT MARGINS

STATISTICAL DATA

1 Mean 21% 59% 47%
2 N 26 28 27
Quartiles
4 Q0=Minimum -427% 9% -77%
5 Q1-25% 19% 45% 27%
6 Q2=Median 47% 62% 49%
7 Q3=75% 62% 76% 77%
8 Q4=Max 94% 93% 98%
9 Range 521% 84% 175%
Outliers
10 IQR 43% 31% 50%
11 Step = 1.5 IQR 64% 47% 75%
14 Outer Low Fence -110% -49% -123%
Whisker Limits
109
6 PRICE EARNING RATIO

60
50
40
VALUES_
30
23.07
20
11.12
12.24
10 10.81
10.21
2006
1.71
0
2008 2007
-10
FINANCIAL RATIO : PRICE EARNINGS
PRICE EARNING RATIO

STATISTICAL DATA

1 Mean 1.71 23.07 10.21
2 N 29 28 24
3 Standard Deviation 59.79 34.80 85.39
Quartiles
4 Q0=Minimum (296.43) - (358.16)
5 Q1-25% 5.95 7.20 9.55
6 Q2=Median 12.24 10.81 11.12
7 Q3=75% 17.49 21.68 17.99
8 Q4=Max 48.81 163.51 110.97
9 Range 345.24 163.51 469.12
Outliers
10 IQR 11.54 14.49 8.44
11 Step = 1.5 IQR 17.31 21.73 12.67
12 Inner Low Fence (11.37) (14.53) (3.12)
13 Inner High Fence 34.80 43.41 30.66
14 Outer Low Fence (28.68) (36.26) (15.79)
15 Outer High Fence 52.11 65.14 43.33
Whisker Limits
16 Lower Whisker end (3.02) - 4.04
17 Upper Whisker end 30.44 40.70 18.15
110
7 DIVIDEND YIELD

25%
20%
15%
VALUES_
10%
7.5%
8.1%
5% 4.1% 3.3%
3.4% 3.2%
0%
2008
2007
-5% 2006
-10%
FINANCIAL RATIO : DIVIDEND YIELD
DIVIDEND YIELD
STATISTICAL DATA

1 Mean 3.4% 3.2% 7.5%
2 N 10 11 24
Quartiles
4 Q0=Minimum 0% 0% -5%
5 Q1-25% 1% 1% 2%
6 Q2=Median 4.1% 3.3% 8.1%
7 Q3=75% 5% 4% 10%
8 Q4=Max 7% 10% 25%
9 Range 7% 10% 30%
Outliers
10 IQR 4% 3% 8%
11 Step = 1.5 IQR 5% 4% 12%
14 Outer Low Fence -10% -7% -23%
Whisker Limits
16 Lower Whisker end 0% 0% -5%
111
8 EARNINGS YIELD

35%
30%
25%
20%
VALUES_
15%
11.9%
10% 8.1%
9.0%
5% 5.7%
7.5%
0% -0.3%
2008 2007
-5% 2006
-10% FINANCIAL RATIO : EARNINGS YIELD
EARNING YIELD
STATISTICAL DATA

1 Mean 0% 12% 8%
2 N 29 29 24
Quartiles
4 Q0=Minimum -71% 0% -5%
5 Q1-25% 3% 4% 2%
6 Q2=Median 5.7% 9.0% 8.1%
7 Q3=75% 11% 12% 10%
8 Q4=Max 18% 60% 25%
9 Range 89% 60% 30%
Outliers
10 IQR 8% 8% 8%
11 Step = 1.5 IQR 12% 12% 12%
14 Outer Low Fence -20% -21% -23%
Whisker Limits
112
9 MARKET TO BOOK RATIO

10 Note: Extreme Outliers >3*IQR are not shown in this Plot )
6
VALUES_
3
2.79
2.21 2.23 2.16
2
1.79
1.47
1
2008 2006
0 2007
FINANCIAL RATIO : MARKET TO BOOK RATIO
MARKET TO BOOK RATIO

STATISTICAL DATA

1 Mean 2.21 2.23 2.79
2 N 29.00 29.00 25.00
Quartiles
4 Q0=Minimum 0.77 0.59 0.57
5 Q1-25% 1.15 1.16 1.32
6 Q2=Median 1.47 1.79 2.16
7 Q3=75% 2.46 2.73 3.54
8 Q4=Max 7.55 7.43 9.41
9 Range 6.78 6.84 8.84
Outliers
10 IQR 1.31 1.57 2.22
11 Step = 1.5 IQR 1.96 2.35 3.33
12 Inner Low Fence (0.82) (1.19) (2.01)
13 Inner High Fence 4.42 5.08 6.87
14 Outer Low Fence (2.78) (3.54) (5.34)
15 Outer High Fence 6.39 7.43 10.20
Whisker Limits
16 Lower Whisker end 0.77 0.59 0.57
113
10 NET ASSET TURNOVER

1.20 Note: Extreme Outliers >3*IQR are not shown in this Plot )
1.00
0.80
VALUES_
0.60
0.40
0.31
0.31 0.29
0.28
0.22 0.25
0.20
2008 2007
- 2006
FINANCIAL RATIO : NET ASSET TURNOVER
NET ASSET TURNOVER

STATISTICAL DATA

1 Mean 0.31 0.29 0.31
2 N 26.00 28.00 27.00
Quartiles
4 Q0=Minimum 0.01 0.09 0.05
5 Q1-25% 0.11 0.18 0.12
6 Q2=Median 0.22 0.25 0.28
7 Q3=75% 0.40 0.37 0.47
8 Q4=Max 1.38 0.92 0.87
9 Range 1.37 0.83 0.82
Outliers
10 IQR 0.30 0.19 0.35
11 Step = 1.5 IQR 0.44 0.29 0.52
12 Inner Low Fence (0.33) (0.11) (0.40)
14 Outer Low Fence (0.78) (0.40) (0.93)
Whisker Limits
114
11 FIXED ASSET TURNOVER

1.40
1.20
1.00
VALUES_
0.80
0.60
0.40
0.34
0.31
0.28
0.25
0.20 0.22
0.00 2008 2007

2006
FINANCIAL RATIO : FIXED ASSET TURNOVER
FIXED ASSET TURNOVER

STATISTICAL DATA

1 Mean 0.31 0.34 4.25
2 N 26.00 28.00 27.00
Quartiles
4 Q0=Minimum 0.01 0.09 0.05
5 Q1-25% 0.11 0.12 0.13
6 Q2=Median 0.22 0.25 0.28
7 Q3=75% 0.35 0.41 0.61
8 Q4=Max 1.18 1.48 88.08
9 Range 1.17 1.39 88.03
Outliers
10 IQR 0.24 0.28 0.48
11 Step = 1.5 IQR 0.37 0.42 0.72
12 Inner Low Fence (0.26) (0.30) (0.59)
14 Outer Low Fence (0.63) (0.72) (1.31)
Whisker Limits
115
12 DEBTORS TURNOVER

35.00
30.00
26.59
25.00
VALUES_
20.00
15.00 14.74
10.00 10.08
6.26
5.00 5.53 5.00
0.00 2008 2007 2006
FINANCIAL RATIO : DEBTORS TURNOVER
DEBTORS TURNOVER
STATISTICAL DATA

1 Mean 26.59 10.08 14.74
2 N 20.00 22.00 20.00
Quartiles
4 Q0=Minimum 0.82 1.11 0.83
5 Q1-25% 1.61 1.53 3.73
6 Q2=Median 5.53 5.00 6.26
7 Q3=75% 13.96 10.36 11.29
8 Q4=Max 362.50 60.70 67.94
9 Range 361.68 59.59 67.11
Outliers
10 IQR 12.35 8.82 7.57
11 Step = 1.5 IQR 18.52 13.24 11.35
12 Inner Low Fence (16.91) (11.70) (7.63)
13 Inner High Fence 32.48 23.59 22.65
14 Outer Low Fence (35.43) (24.94) (18.98)
15 Outer High Fence 51.00 36.83 34.00
Whisker Limits
116
13 AVERAGE COLLECTION PERIOD

450.00
400.00
350.00
300.00
VALUES_
250.00
200.00
150.00
122.66 127.96
100.00 100.44
66.25 73.41
58.90
50.00
0.00 2008
2007 2006
FINANCIAL RATIO : AVERAGE COLLECTION PERIOD
AVERAGE COLLECTION PERIOD

STATISTICAL DATA

1 Mean 122.66 127.96 100.90
2 N 20.00 22.00 20.00
Quartiles
4 Q0=Minimum 1.01 6.01 5.37
5 Q1-25% 28.47 35.25 32.99
6 Q2=Median 66.25 73.41 58.90
7 Q3=75% 226.71 238.23 100.44
8 Q4=Max 447.64 327.90 438.00
9 Range 446.63 321.89 432.63
Outliers
10 IQR 198.24 202.98 67.46
11 Step = 1.5 IQR 297.37 304.47 101.18
12 Inner Low Fence (268.90) (269.23) (68.20)
13 Inner High Fence 524.07 542.70 201.63
14 Outer Low Fence (566.27) (573.70) (169.38)
15 Outer High Fence 821.44 847.18 302.81
Whisker Limits
117
14 CREDITORS TURNOVER

50.00
45.00
40.00
35.00
33.13
30.00
VALUES_
25.00
22.34
20.00 20.65
15.00
10.00
5.00 5.83 5.52

3.64
0.00
2008 2007 2006
FINANCIAL RATIO : CREDITORS TURNOVER
CREDITORS TURNOVER
STATISTICAL DATA

1 Mean 33.13 22.34 20.65
2 N 21.00 25.00 22.00
Quartiles
4 Q0=Minimum 0.40 0.38 0.86
5 Q1-25% 1.75 2.50 2.36
6 Q2=Median 5.83 3.64 5.52
7 Q3=75% 17.85 18.67 12.67
8 Q4=Max 265.00 139.50 182.00
9 Range 264.60 139.12 181.14
Outliers
10 IQR 16.10 16.17 10.31
11 Step = 1.5 IQR 24.15 24.25 15.47
12 Inner Low Fence (22.40) (21.75) (13.12)
13 Inner High Fence 42.00 42.92 28.14
14 Outer Low Fence (46.55) (46.00) (28.59)
15 Outer High Fence 66.14 67.17 43.61
Whisker Limits
118
15 STOCK TURNOVER

35.00
30.00
28.36
25.00
VALUES_
20.00
18.74
15.00
13.55
10.00
5.00
2.74 3.40
1.75
0.00
2008 2007 2006
FINANCIAL RATIO : STOCK TURNOVER
STOCK TURNOVER
STATISTICAL DATA

1 Mean 13.55 28.36 18.74
2 N 21.00 22.00 22.00
Quartiles
4 Q0=Minimum 0.47 0.20 0.07
5 Q1-25% 1.08 1.34 1.27
6 Q2=Median 1.75 2.74 3.40
7 Q3=75% 7.23 8.65 11.23
8 Q4=Max 146.00 303.50 130.38
9 Range 145.53 303.30 130.31
Outliers
10 IQR 6.15 7.31 9.95
11 Step = 1.5 IQR 9.22 10.96 14.93
12 Inner Low Fence (8.14) (9.63) (13.66)
13 Inner High Fence 16.45 19.61 26.16
14 Outer Low Fence (17.36) (20.59) (28.59)
15 Outer High Fence 25.66 30.57 41.09
Whisker Limits
119
16 NET WORKING CAPITAL TO SALES RATIO

2.50
2.00
1.50
VALUES_
1.00 0.95
0.50 0.37 0.49
0.24 0.20
0.23
0.00
2007
-0.50 2008
2006
-1.00
FINANCIAL RATIO : NET WORKING CAPITAL TO SALES
NET WORKING CAPITAL TO SALES RATIO

STATISTICAL DATA

1 Mean 0.37 0.49 0.95
2 N 26.00 28.00 27.00
Quartiles
4 Q0=Minimum (0.55) (0.26) (0.56)
5 Q1-25% - 0.00 (0.05)
6 Q2=Median 0.23 0.24 0.20
7 Q3=75% 0.73 0.63 0.81
8 Q4=Max 1.61 3.05 15.00
9 Range 2.16 3.31 15.56
Outliers
10 IQR 0.73 0.62 0.86
11 Step = 1.5 IQR 1.09 0.93 1.29
12 Inner Low Fence (1.09) (0.93) (1.33)
14 Outer Low Fence (2.18) (1.86) (2.62)
Whisker Limits
16 Lower Whisker end (0.55) (0.26) (0.56)
120
17 SALES TO WORKING CAPITAL RATIO

10.00
8.00
6.00
4.00
2.00
VALUES_
1.33
0.29 0.56
0.00 0.62
2008
-2.00
2007 2006
-4.00 (3.86)
(5.29)
-6.00
-8.00
-10.00 FINANCIAL RATIO : SALES TO WORKING CAPITAL
SALES TO WORKING CAPITAL RATIO

STATISTICAL DATA

1 Mean 1.33 (5.29) (3.86)
2 N 26.00 28.00 27.00
Quartiles
4 Q0=Minimum (5.50) (67.50) (114.08)
5 Q1-25% (0.24) (0.92) (0.96)
6 Q2=Median 0.6 0.29 0.56
7 Q3=75% 1.74 1.47 1.44
8 Q4=Max 11.43 12.43 13.14
9 Range 16.93 79.93 127.23
Outliers
10 IQR 1.98 2.38 2.40
11 Step = 1.5 IQR 2.98 3.58 3.60
12 Inner Low Fence (3.22) (4.50) (4.56)
14 Outer Low Fence (6.19) (8.07) (8.16)
Whisker Limits
16 Lower Whisker end (1.37) (1.76) (1.85)
121
18 INVENTORY DAYS

800.00
700.00
600.00
VALUES_
500.00
450
400.00
300.00
231
253
200.00
209
135
100.00 114
0.00 2008
2007 2006
FINANCIAL RATIO : INVENTORY DAYS
INVENTORY DAYS
STATISTICAL DATA

1 Mean 231 253 450
2 N 21 22 22
3 Standard Deviation 220 387 1,150
Quartiles
4 Q0=Minimum 3 1 3
5 Q1-25% 51 43 33
6 Q2=Median 209 135 114
7 Q3=75% 338 274 288
8 Q4=Max 780 1,804 5,475
9 Range 778 1,803 5,472
Outliers
10 IQR 288 231 255
11 Step = 1.5 IQR 431 346 382
12 Inner Low Fence (381) (303) (349)
13 Inner High Fence 769 620 670
14 Outer Low Fence (812) (649) (731)
15 Outer High Fence 1,201 966 1,051
Whisker Limits
16 Lower Whisker end 3 1 3
17 Upper Whisker end 586 589 664
122
19 WORKING CAPITAL RATIO – CURRENT RATIO

8.00
7.00
6.00
5.00
VALUES_
4.00
3.00
2.60
2.40
2.00
1.77
1.53
1.25 1.13
1.00
0.00 2008 2006

2007
FINANCIAL RATIO : CURRENT RATIO
CURRENT RATIO
STATISTICAL DATA

1 Mean 2.40 1.77 2.60
2 N 28.00 28.00 27.00
Quartiles
4 Q0=Minimum 0.12 0.14 0.32
5 Q1-25% 0.43 0.68 0.88
6 Q2=Median 1.25 1.13 1.53
7 Q3=75% 1.97 2.51 2.52
8 Q4=Max 22.02 6.58 14.33
9 Range 21.91 6.44 14.01
Outliers
10 IQR 1.55 1.82 1.64
11 Step = 1.5 IQR 2.32 2.73 2.47
12 Inner Low Fence (1.89) (2.05) (1.59)
14 Outer Low Fence (4.21) (4.78) (4.05)
Whisker Limits
123
20 QUICK RATIO – ACID TEST RATIO

5.00
4.00
VALUES_
3.00
2.00 2.03
1.89
1.44
1.00 0.92 0.94

0.86
0.00
2008 2007 2006
FINANCIAL RATIO : QUICK (ACID TEST) RATIO
QUICK (ACID TEST) RATIO

STATISTICAL DATA

1 Mean 2.03 1.44 1.89
2 N 28.00 28.00 27.00
Quartiles
4 Q0=Minimum 0.07 0.07 0.06
5 Q1-25% 0.36 0.52 0.65
6 Q2=Median 0.92 0.86 0.94
7 Q3=75% 1.36 1.75 2.13
8 Q4=Max 22.02 6.36 14.22
9 Range 21.96 6.29 14.16
Outliers
10 IQR 1.00 1.22 1.48
11 Step = 1.5 IQR 1.51 1.83 2.22
12 Inner Low Fence (1.15) (1.31) (1.57)
14 Outer Low Fence (2.65) (3.15) (3.79)
Whisker Limits
124
21 LONG TERM DEBT TO EQUITY

1.40
1.20
1.00
VALUES_
0.80
0.60
0.50
0.41
0.40 0.38
0.38
0.22
0.20
0.13
0.00 2008 2007

2006
FINANCIAL RATIO : LONG TERM DEBT TO EQUITY
LONG TERM DEBT TO EQUITY RATIO

STATISTICAL DATA

1 Mean 0.50 0.38 0.22
2 N 16.00 12.00 14.00
Quartiles
4 Q0=Minimum 0.00 0.00 0.00
5 Q1-25% 0.20 0.14 0.03
6 Q2=Median 0.38 0.41 0.13
7 Q3=75% 0.78 0.48 0.38
8 Q4=Max 1.24 1.27 0.67
9 Range 1.24 1.27 0.67
Outliers
10 IQR 0.58 0.34 0.35
11 Step = 1.5 IQR 0.87 0.51 0.53
12 Inner Low Fence (0.66) (0.37) (0.50)
14 Outer Low Fence (1.53) (0.87) (1.03)
Whisker Limits
125
22 LONG TERM DEBT TO TOTAL LONG TERM FINANCE

0.60
0.50
0.40
VALUES_
0.29
0.30 0.29
0.28
0.24
0.20
0.16
0.12
0.10
0.00 2008
2007 2006
FINANCIAL RATIO : LONG TERM DEBT TO TOTAL LONG TERM FINANCE RATIO
LONG TERM DEBT TO TOTAL LONG TERM FINANCE RATIO

STATISTICAL DATA

1 Mean 0.29 0.24 0.16
2 N 16.00 12.00 14.00
Quartiles
4 Q0=Minimum 0.00 0.00 0.00
5 Q1-25% 0.17 0.12 0.02
6 Q2=Median 0.28 0.29 0.12
7 Q3=75% 0.44 0.32 0.27
8 Q4=Max 0.55 0.56 0.40
9 Range 0.55 0.56 0.40
Outliers
10 IQR 0.27 0.20 0.25
11 Step = 1.5 IQR 0.40 0.30 0.37
12 Inner Low Fence (0.24) (0.18) (0.35)
14 Outer Low Fence (0.64) (0.48) (0.72)
Whisker Limits
126
23 TOTAL DEBTS TO TOTAL ASSETS

0.50
0.40
VALUES_
0.32
0.30
0.27
0.29
0.24
0.20
0.15
0.10 0.13
2008
0.00
2007 2006
FINANCIAL RATIO : TOTAL DEBTS TO TOTAL ASSETS
TOTAL DEBTS TO TOTAL ASSETS RATIO

STATISTICAL DATA

1 Mean 0.29 0.24 0.15
2 N 20.00 21.00 21.00
Quartiles
4 Q0=Minimum 0.03 0.00 0.00
5 Q1-25% 0.15 0.13 0.05
6 Q2=Median 0.32 0.27 0.13
7 Q3=75% 0.43 0.33 0.23
8 Q4=Max 0.53 0.50 0.38
9 Range 0.51 0.50 0.38
Outliers
10 IQR 0.28 0.20 0.19
11 Step = 1.5 IQR 0.42 0.30 0.28
12 Inner Low Fence (0.27) (0.17) (0.23)
14 Outer Low Fence (0.68) (0.46) (0.51)
Whisker Limits
127
24 INTEREST COVER

100.00
80.00
60.00
57.56
42.88
VALUES_
40.00
31.78
20.00 19.90
8.97 8.67
0.00
2007 2006
-20.00 2008
-40.00 FINANCIAL RATIO : INTEREST COVER
INTEREST COVER
STATISTICAL DATA

1 Mean 31.78 57.56 42.88
2 N 17.00 17.00 12.00
Quartiles
4 Q0=Minimum (19.00) 2.00 0.50
5 Q1-25% 3.38 5.28 7.98
6 Q2=Median 8.97 8.67 19.90
7 Q3=75% 23.30 26.00 50.46
8 Q4=Max 190.50 420.00 209.33
9 Range 209.50 418.00 208.83
Outliers
10 IQR 19.93 20.72 42.48
11 Step = 1.5 IQR 29.89 31.09 63.72
12 Inner Low Fence (26.51) (25.81) (55.75)
13 Inner High Fence 53.19 57.09 114.19
14 Outer Low Fence (56.40) (56.90) (119.47)
15 Outer High Fence 83.08 88.17 177.91
Whisker Limits
16 Lower Whisker end (19.00) 2.00 0.50
128
25 DIVIDEND COVER

20
15
10
VALUES_
5 4.38
3.69
2.74 3.73
1.13 1.84
0
2008 2007 2006
-5
-10
FINANCIAL RATIO : DIVIDEND COVER
DIVIDEND COVER
STATISTICAL DATA

1 Mean 1.13 4.38 3.69
2 N 10.00 11.00 13.00
Quartiles
4 Q0=Minimum (26.32) 0.74 (1.63)
5 Q1-25% 1.54 2.10 1.55
6 Q2=Median 2.74 3.73 1.84
7 Q3=75% 5.33 4.82 4.50
8 Q4=Max 14.86 14.07 16.45
9 Range 41.17 13.32 18.08
Outliers
10 IQR 3.79 2.72 2.94
11 Step = 1.5 IQR 5.68 4.08 4.42
12 Inner Low Fence (4.14) (1.99) (2.86)
14 Outer Low Fence (9.83) (6.07) (7.28)
15 Outer High Fence 16.70 12.99 13.33
Whisker Limits
16 Lower Whisker end 1.45 0.74 (1.63)
129
26 FIXED ASSETS TO TOTAL ASSETS

1.00
0.80 0.82
0.78
0.73
VALUES_
0.69 0.68
0.60 0.62
0.40
0.20 2008
2007
0.00
2006
FINANCIAL RATIO : FIXED ASSET TO TOTAL ASSETS
130
FIXED ASSET TO TOTAL ASSETS RATIO
STATISTICAL DATA

1 Mean 0.73 0.69 0.62
2 N 29.00 29.00 27.00
Quartiles
4 Q0=Minimum 0.20 0.16 0.00
5 Q1-25% 0.60 0.52 0.42
6 Q2=Median 0.82 0.78 0.68
7 Q3=75% 0.87 0.85 0.86
8 Q4=Max 0.98 0.99 0.99
9 Range 0.78 0.83 0.99
Outliers
10 IQR 0.27 0.33 0.43
11 Step = 1.5 IQR 0.40 0.50 0.65
12 Inner Low Fence 0.20 0.02 (0.23)
14 Outer Low Fence (0.20) (0.48) (0.88)
Whisker Limits
131
27 LONG TERM FUNDS TO TOTAL ASSETS

1.00
0.77
0.80
0.72 0.70 0.76
VALUES_
0.67 0.69
0.60
2006
0.40
2008
0.20 2007
0.00 FINANCIAL RATIO : LONG TERM FUNDS TO TOTAL ASSETS
LONG TERM FUNDS TO TOTAL ASSETS RATIO

STATISTICAL DATA

1 Mean 0.67 0.70 0.76
2 N 29.00 29.00 27.00
Quartiles
4 Q0=Minimum 0.32 0.27 0.51
5 Q1-25% 0.50 0.58 0.66
6 Q2=Median 0.72 0.69 0.77
7 Q3=75% 0.88 0.89 0.88
8 Q4=Max 0.99 0.99 0.99
9 Range 0.67 0.72 0.48
Outliers
10 IQR 0.38 0.31 0.22
11 Step = 1.5 IQR 0.58 0.47 0.33
12 Inner Low Fence (0.08) 0.11 0.34
14 Outer Low Fence (0.65) (0.36) 0.01
Whisker Limits
132
28 TOTAL OWING TO TOTAL ASSETS

0.40
0.35
0.30
VALUES_
0.25
0.20
0.15
0.10
0.09
0.06
0.06
0.05
0.04 0.03 0.04
0.00
2008 2007 2006
FINANCIAL RATIO : TOTAL OWING TO TOTAL ASSETS
TOTAL OWING TO TOTAL ASSETS RATIO

STATISTICAL DATA

1 Mean 0.09 0.06 0.06
2 N 22.00 25.00 22.00
Quartiles
4 Q0=Minimum 0.00 0.00 0.00
5 Q1-25% 0.01 0.01 0.01
6 Q2=Median 0.04 0.03 0.04
7 Q3=75% 0.17 0.11 0.11
8 Q4=Max 0.40 0.30 0.18
9 Range 0.40 0.30 0.18
Outliers
10 IQR 0.16 0.10 0.09
11 Step = 1.5 IQR 0.23 0.15 0.14
12 Inner Low Fence (0.22) (0.14) (0.12)
14 Outer Low Fence (0.46) (0.29) (0.26)
Whisker Limits
133
29 CAPITAL GEARING

1.60
1.40
VALUES_
1.20
1.13 1.13
1.00 1.01 1.02

0.99
2007 2006
2008
0.80
0.60
FINANCIAL RATIO : CAPITAL GEARING
CAPITAL GEARING RATIO

STATISTICAL DATA

1 Mean 1.13 1.13 0.99
2 N 29.00 28.00 26.00
Quartiles
4 Q0=Minimum 0.67 1.00 (1.00)
5 Q1-25% 1.00 1.00 1.00
6 Q2=Median 1.01 1.02 1.00
7 Q3=75% 1.11 1.15 1.03
8 Q4=Max 2.29 2.00 1.71
9 Range 1.62 1.00 2.71
Outliers
10 IQR 0.11 0.15 0.03
11 Step = 1.5 IQR 0.16 0.22 0.04
12 Inner Low Fence 0.84 0.78 0.96
14 Outer Low Fence 0.68 0.56 0.92
Whisker Limits
134
30 GEARING RATIO

1.80
1.60
1.40
1.20
VALUES_
1.00
0.79
0.80
0.73
0.60 0.51
0.40 0.50
0.28
0.20
0.20
2008
0.00
2007 2006
FINANCIAL RATIO : GEARING
GEARING RATIO
STATISTICAL DATA

1 Mean 0.79 0.51 0.28
2 N 20.00 21.00 21.00
Quartiles
4 Q0=Minimum 0.03 0.00 0.00
5 Q1-25% 0.39 0.21 0.06
6 Q2=Median 0.73 0.50 0.20
7 Q3=75% 1.13 0.68 0.37
8 Q4=Max 1.73 1.37 0.78
9 Range 1.70 1.37 0.78
Outliers
10 IQR 0.74 0.47 0.31
11 Step = 1.5 IQR 1.11 0.71 0.46
12 Inner Low Fence (0.72) (0.50) (0.41)
14 Outer Low Fence (1.83) (1.21) (0.87)
Whisker Limits
135
APPENDIX B – BOX-WHISKER PLOT AND STATISTICAL
DATA SHEET FOR ROCE ANALYSIS
136
70%
60%
50%
40%
30%
VALUES_
20% 16% 15%
10% 10% 11%

14%
0% 0%
-10%
2008 2007 2006
-20%
-30%
GROUP : ALL SELECTED GCC COMPANIES FOR YEARS 2006 TO 2008
Trend Analysis: ROCE - Return on Capital Employed

Group: All GCC Companies for Years 2006 to 2008
Statistic 2008 2007 2006
Mean 0% 16% 15%
Mean
N 29 29 27
SD 35% 9% 13%
Minimum -157% 0% -7%
Quartiles
First Quartile 5% 9% 7%
Median 10% 14% 11%
Third Quartile 14% 23% 19%
Statistics
Maximum 26% 36% 60%

Range 183% 36% 67%
IQR 9% 14% 13%
Step 14% 21% 19%
Outlier Check
Inner Fence - Low -9% -12% -12%

Inner Fence - High 27% 44% 38%
Outer Fence - Low -23% -33% -31%
Outer Fence - High 41% 65% 57%
SLO NO NO
Check for Outliers
NO NO SHO
137
15%
12%
11%
0% 11%
9% 13%
-26%
75 to 375 M GBP 375 to 2500 M GBP
-40% 25 to 75 M GBP
-50%
VALUES_
0 to 25 M GBP
-100%
-150%

-200%
Outlier removed for clarity

40%
30%
15%
20%
12%
11%
10%
13% 11%
0% 9%
VALUES_
-10% 75 to 375 M GBP 375 to 2500 M GBP

25 to 75 M GBP
-20%
-26%
-30%
-40% -40%
-50%
-60% 0 to 25 M GBP
-70%
138
25%
20%
VALUES_
15%
15%
12%
11%
13%
10%
11%
9%
5%
25 to 75 M GBP 75 to 375 M GBP 375 to 2500 M GBP

0%

Group: Sizewise for Year 2008
25 to 75 M 75 to 375 M 375 to 2500
Statistic
0 to 25 M GBP GBP GBP M GBP
Mean -40% 11% 15% 12%
Mean
N 7 8 7 7
SD 56% 7% 6% 6%
Minimum -157% 4% 8% 7%
Quartiles
First Quartile -48% 6% 12% 9%

Median -26% 9% 13% 11%
Third Quartile -3% 13% 19% 14%
Statistics
Maximum 6% 26% 24% 23%

Range 163% 21% 17% 17%
IQR 45% 7% 8% 5%
Step 67% 11% 12% 8%
Outlier Check
Inner Fence - Low -116% -5% 0% 1%

Inner Fence - High 64% 24% 31% 21%
Outer Fence - Low -183% -15% -12% -7%
Outer Fence - High 131% 35% 43% 29%
MLO NO NO NO
Check for Outliers
NO MHO NO MHO
139
35%
30%
25%
VALUES_
20%
18%
15%
16% 15%
15% 18%
14%
10% 11%
11%
5%
75 to 375 M GBP
0% 375 to 2500 M GBP

25 to 75 M 75 to 375 M 375 to 2500
Statistic
0 to 25 M GBP GBP GBP M GBP
Mean 16% 18% 15% 15%
Mean
N 7 8 7 7
SD 13% 9% 9% 6%
Minimum 0% 6% 8% 7%
Quartiles
First Quartile 7% 12% 9% 11%

Median 11% 18% 11% 14%
Third Quartile 26% 24% 17% 17%
Statistics
Maximum 36% 32% 32% 26%

Range 36% 27% 24% 20%
IQR 19% 12% 9% 6%
Step 29% 18% 13% 9%
Outlier Check
Inner Fence - Low -22% -6% -4% 2%

Outer Fence - Low -50% -24% -17% -8%
NO NO NO NO
Check for Outliers
NO NO MHO NO
140
60%
50%
40%
VALUES_
30%
20% 21%
20%
20%
11%
10%
6%
2% 10% 10%
0%
375 to 2500 M GBP
-10% 0 to 25 M GBP
-20%

0 to 25 M 25 to 75 M 75 to 375 M 375 to 2500
Statistic
GBP GBP GBP M GBP
Mean 6% 11% 20% 21%
Mean
N 5 8 7 7
SD 13% 6% 19% 9%
Minimum -7% 4% 5% 11%
Quartiles
First Quartile 0% 7% 9% 16%

Median 2% 10% 10% 20%
Third Quartile 5% 16% 22% 24%
Statistics
Maximum 28% 19% 60% 38%

Range 36% 15% 55% 27%
IQR 5% 9% 13% 9%
Step 8% 13% 19% 13%
Outlier Check
Inner Fence - Low -8% -6% -10% 3%

Outer Fence - Low -15% -19% -29% -10%
NO NO NO NO
Check for Outliers
SHO NO MHO MHO
141
40% BOX-WHISKER PLOT ( Legend : Red = Median; Green = Mean
30%
20% 16%
12%
13%
10% 16%
11% 6%
10%
5% 8%
0% UAE BAHRAIN
VALUES_
-10%
QATAR -17%
SAUDI
-20%
-30%
-40% KUWAIT
-50%
-60%
-70%

25%
20%
16%
15% 13% 16%

12%
VALUES_
BAHRAIN
10% 11%
10%
UAE 6%
5%
5%
QATAR
0%
SAUDI
GROUP : COUNTRYWISE FOR YEAR 2008 (WITHOUT KUWAIT COMPANIES)

-5%
142
Group: Countrywise for Year 2008
Statistic UAE SAUDI QATAR BAHRAIN KUWAIT
Mean
Mean 13% 6% 12% 16% -17%
N 6 6 5 1 11
SD 6% 5% 6% NA 54%
Minimum 7% 0% 7% 16% -157%
Quartiles
First Quartile 10% 4% 8% 16% -31%

Median 11% 5% 10% 16% 8%
Third Quartile 14% 6% 13% 16% 15%
Statistics
Maximum 23% 14% 21% 16% 26%

Range 17% 14% 14% 0% 183%
IQR 3% 2% 5% 0% 47%
Step 5% 3% 7% 0% 70%
Outlier Check
Inner Fence - Low 6% 2% 1% 16% -101%

Inner Fence - High 18% 9% 20% 16% 85%
Outer Fence - Low 1% -1% -6% 16% -171%
Outer Fence - High 23% 12% 27% 16% 155%
NO MLO NO NO MLO
Check for Outliers
SHO SHO MHO NO NO
143
35%
30%
26%
25% 26%
VALUES_
20%
20% BAHRAIN
21%
15% 13%
15%
14%
10% 11%
9%
KUWAIT
5% 6% QATAR
UAE
SAUDI
0%

Mean 15% 9% 13% 26% 20%
Mean
N 6 5 5 1 12
SD 7% 4% 5% NA 11%
Minimum 7% 5% 8% 26% 0%
Quartiles
First Quartile 11% 6% 9% 26% 10%

Median 14% 6% 11% 26% 21%
Third Quartile 17% 12% 19% 26% 28%
Statistics
Maximum 26% 14% 19% 26% 36%

Range 20% 9% 11% 0% 36%
IQR 6% 6% 10% 0% 18%
Step 9% 10% 15% 0% 27%
Outlier Check
Inner Fence - Low 2% -4% -5% 26% -16%

Inner Fence - High 25% 22% 34% 26% 55%
Outer Fence - Low -6% -14% -20% 26% -43%
Outer Fence - High 34% 31% 48% 26% 81%
NO NO NO NO NO
Check for Outliers
MHO NO NO NO NO
144
45%
40%
35%
30%
25% 23%
20%
VALUES_
20%
20%
15%
11%
10%
10% 11% 13%
UAE 8% 10%
5% QATAR
5%
BAHRAIN
0%
SAUDI
-5% KUWAIT
-10% GROUP : COUNTRYWISE FOR YEAR 2006

Mean 23% 8% 20% 10% 11%
Mean
N 6 5 5 1 10
SD 9% 7% 22% NA 12%
Minimum 13% 4% 9% 10% -7%
Quartiles
First Quartile 19% 4% 10% 10% 3%

Median 20% 5% 11% 10% 13%
Third Quartile 26% 8% 11% 10% 17%
Maximum 38% 20% 60% 10% 28%
Statistics
Range 25% 16% 50% 0% 36%

IQR 7% 4% 2% 0% 14%
Step 11% 6% 3% 0% 21%
Outlier Check
Inner Fence - Low 7% -2% 7% 10% -18%

Inner Fence - High 37% 14% 14% 10% 38%
Outer Fence - Low -4% -8% 4% 10% -39%
Outer Fence - High
48% 20% 17% 10% 58%
NO NO NO NO NO
Check for Outliers
MHO MHO SHO NO NO
145
40%
35%
30%
25% 23%
VALUES_
20%
20%
15% 15%
13%
11% 14%
10%
2008 2006
5%
0% 2007
GROUP : YEARWISE FOR UAE GROUP

Group: Yearwise for UAE GROUP
Statistic 2008 2007 2006
Mean 13% 15% 23%
Mean
N 6 6 6
SD 6% 7% 9%
Minimum 7% 7% 13%
Quartiles

Median 11% 14% 20%
Statistics
Maximum 23% 26% 38%

Range 17% 20% 25%
IQR 3% 6% 7%
Step 5% 9% 11%
Outlier Check
Inner Fence - Low 6% 2% 7%

Outer Fence - Low 1% -6% -4%
NO NO NO
Check for Outliers
SHO MHO MHO
146
20%
15%
VALUES_
10%
9%
8%
6%
6%
5%
5% 5%
2008
0% 2007
2006
GROUP : YEARWISE FOR SAUDI ARABIA GROUP

-5%

Group: Yearwise for SAUDI ARABIAN GROUP
Statistic 2008 2007 2006
Mean 6% 9% 8%
Mean
N 6 5 5
SD 5% 4% 7%
Minimum 0% 5% 4%
Quartiles
Median 5% 6% 5%
Statistics
Maximum 14% 14% 20%

Range 14% 9% 16%
IQR 2% 6% 4%
Step 3% 10% 6%
Outlier Check
Inner Fence - Low 2% -4% -2%

Outer Fence - Low -1% -14% -8%
MLO NO NO
Check for Outliers
SHO NO MHO
147
20% 20%
15%
VALUES_
13%
12%
11%
10% 11%
10%
5% 2006
2008 2007
GROUP : YEARWISE FOR QATAR GROUP

0%

Group: Yearwise for QATAR GROUP
Statistic 2008 2007 2006
Mean 12% 13% 20%
Mean
N 5 5 5
SD 6% 5% 22%
Minimum 7% 8% 9%
Quartiles

Median 10% 11% 11%
Statistics
Maximum 21% 19% 60%

Range 14% 11% 50%
IQR 5% 10% 2%
Step 7% 15% 3%
Outlier Check
Inner Fence - Low 1% -5% 7%

Outer Fence - Low -6% -20% 4%
NO NO NO
Check for Outliers
MHO NO SHO
148
30%
26%
25%
26%
2007
20%
VALUES_
16%
15% 16%
2008 10%
10% 10%
5% 2006
GROUP : YEARWISE FOR BAHRAIN GROUP (1 COMPANY)

0%

Group: Yearwise for BAHRAIN GROUP (1 COMPANY)
Statistic 2008 2007 2006
Mean 16% 26% 10%
Mean
N 1 1 1
SD NA NA NA
Minimum 16% 26% 10%
Quartiles

Median 16% 26% 10%
Statistics
Maximum 16% 26% 10%

Range 0% 0% 0%
IQR 0% 0% 0%
Step 0% 0% 0%
Outlier Check
Inner Fence - Low 16% 26% 10%

Outer Fence - Low 16% 26% 10%
NO NO NO
Check for Outliers
NO NO NO
149
60%
40%
20% 11%
20%
21% 13%
VALUES_
0% 8%
-17%
-20%
2007
2006
-40%
2008
-60%
-80%
GROUP : YEARWISE FOR KUWAIT GROUP

Group: Yearwise for KUWAIT GROUP
Statistic 2008 2007 2006
Mean -17% 20% 11%
Mean
N 11 12 10
SD 54% 11% 12%
Minimum -157% 0% -7%
Quartiles
First Quartile -31% 10% 3%

Median 8% 21% 13%
Statistics
Maximum 26% 36% 28%

Range 183% 36% 36%
IQR 47% 18% 14%
Step 70% 27% 21%
Outlier Check
Inner Fence - Low -101% -16% -18%

Outer Fence - Low -171% -43% -39%
MLO NO NO
Check for Outliers
NO NO NO
150
APPENDIX C: KRUSKAL-WALLIS TEST RESULTS FOR ROCE
Kruskal-Wallis Test Results for: 2006

Data Range = Sheet8!$Z$5:$AD$17
Value Rank
UAE SAUDI ARABIA QATAR BAH KUWAIT UAE SAUDI ARABIA QATAR BAH KUWAIT
13.51% 3.78% 11.07% 10.29% 0.00% 13.0 4.0 12.0 11.0 3.0
21.09% 4.01% 10.08% -7.25% 22.0 5.0 10.0 1.0
20.96% 8.48% 14.09% -2.27% 21.0 8.0 14.0 2.0
28.13% 19.64% 18.39% 10.00% 25.0 20.0 18.0 9.0
38.21% 5.09% 58.83% 14.49% 26.0 7.0 27.0 15.0
18.52% 16.51% 19.0 16.0
17.59% 17.0
27.27% 24.0
4.52% 6.0
27.16% 23.0
Median 21.03% 5.09% 14.09% 10.29% 12.25% 21.5 7.0 14.0 11.0 12.0
Sum 140.42% 41.00% 112.46% 10.29% 117.54% 126.0 44.0 81.0 11.0 116.0
N 6 5 5 1 10 6 5 5 1 10
Test Results
Chi-Square 8.254 4 - 0.083
F 2.558 4 21 0.069
151
Data Range = Sheet8!$T$5:$X$17
Value Rank
6.63% 11.34% 7.82% 24.47% 10.40% 10.0 19.0 11.0 28.0 13.0
4.47% 5.69% 6.21% 0.00% 3.0 7.0 9.0 1.0
12.24% 5.00% 8.01% 26.79% 21.0 5.0 12.0 29.0
17.45% 11.09% 5.16% 13.08% 27.0 18.0 6.0 23.0
10.58% 4.63% 10.81% 3.51% 14.0 4.0 17.0 2.0
15.21% 12.75% 25.0 22.0
10.77% 16.0
10.61% 15.0
15.43% 26.0
13.11% 24.0
5.79% 8.0
11.98% 20.0
Median 11.41% 5.69% 7.82% 24.47% 11.38% 17.5 7.0 11.0 28.0 18.0
Sum 66.58% 37.75% 38.00% 24.47% 134.21% 100.0 53.0 55.0 28.0 199.0
N 6 5 5 1 12 6 5 5 1 12
Test Results
Chi-Square 5.414 4 - 0.247
F 1.438 4 23 0.253

Data Range = Sheet8!$N$5:$R$17
Value Rank
10.29% 6.62% 12.90% 16.33% -25.53% 17.0 10.0 20.0 24.0 4.0
14.05% 4.46% 10.10% -37.01% 23.0 7.0 15.0 3.0
6.92% 4.51% 8.13% -157.14% 11.0 8.0 14.0 1.0
23.46% -0.45% 7.20% -6.15% 27.0 6.0 12.0 5.0
10.62% 13.63% 21.12% 25.81% 18.0 22.0 26.0 29.0
12.18% 5.84% 24.46% 19.0 9.0 28.0
12.90% 21.0
10.15% 16.0
7.69% 13.0
17.87% 25.0
-59.38% 2.0
Median 11.40% 5.18% 10.10% 16.33% 7.69% 18.5 8.5 15.0 24.0 13.0
Sum 77.51% 35.05% 59.46% 16.33% -29.18% 115.0 62.0 87.0 24.0 147.0
N 6 6 5 1 11 6 6 5 1 11
Test Results
Chi-Square 5.160 4 - 0.271
F 1.355 4 23 0.280
152
APPENDIX D: SPREADSHEETS OF FINANCIAL RATIOS FOR
2006 TO 2008
Legend:
Conditional format to show outlier data
153
MAIN SCHEDULE OF 30 COMPANIES FIN.A.NCIAL RATIOS FOR 2006
Country UAE SAUDI ARABIA QATAR

Company codes UNP DYR EMR SOR ALD RAK TIR SRE MCD JBL DAR ADC UDC SAL
Sr No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Currency AED AED AED AED AED AED SAR SAR SAR SAR SAR SAR QAR QAR
Turnover in Million Local Currency 2,839 1,057 15,142 1,737 1,678 508 224 182 283 - 4,386 123 1,223 1,200
Rate of Exchange (09/08/09) 0.162 0.162 0.162 0.162 0.162 0.162 0.159 0.159 0.159 0.159 0.159 0.159 0.164 0.164
Equivalent GBP ' 000,000 460 171 2,453 281 272 82 36 29 45 - 697 20 201 197
Rank wrt Turnover 4 10 1 6 7 13 19 21 17 28 2 24 8 9
PROFITABILITY AND PERFORMANCE RATIOSS

1 ROCE - Return on Capital Employed % 13% 21% 19% 28% 38% 19% 4% 4% 8% N.A. 20% 5% 9% 10%
2 ROTA - Return on Total Assets % 9% 11% 16% 22% 25% 18% 4% 4% 7% N.A. 18% 4% 6% 7%
3 ROE - Return on Equity % 14% 21% 21% 28% 38% 19% 4% 4% 8% N.A. 20% 5% 11% 10%
4 ROS - Return on Sales (Profit Margin) % 22% 33% 42% 56% 74% 93% 49% 64% 65% N.A. 48% 56% 21% 11%
INVESTORS RATIOS
5 Currencies Various 0.25 0.34 1.05 0.39 0.72 0.24 0.86 0.95 1.28 N.A. 3.36 0.63 2.41 1.56
EPS - Earnings Per Share - Converted
5a to GBP GBP 0.04 0.06 0.17 0.06 0.12 0.04 0.14 0.15 0.20 N.A. 0.53 0.10 0.39 0.26
6 PE ratio - Price / Earnings Ratio R 10.27 N.A. 17.01 11.21 9.94 11.67 59.30 77.79 110.97 N.A. N.A. 88.57 17.94 13.08
7 Dividend Yield % N.A. N.A. 2% 2% 1% N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 5%
8 Earnings Yield % 10% N.A. 6% 9% 10% 9% 2% 1% 1% N.A. N.A. 1% 6% 8%
9 Market to Book Ratio Times 1.39 N.A. 3.54 3.15 3.80 2.16 2.16 3.04 9.41 N.A. N.A. 4.12 1.99 1.32
EFFICIENCY AND EFFECTIVENESS
10 Net Assets Turnover Times 0.62 0.65 0.50 0.50 0.51 0.20 0.08 0.06 0.13 N.A. 0.41 0.09 0.52 0.94
11 Fixed Assets Turnover Times 0.56 88.08 0.41 0.96 0.53 0.61 0.12 0.06 0.12 N.A. 17.13 0.09 0.70 0.92
12 Debtors Turnover Times 1.58 4.03 5.63 6.89 9.12 56.44 24.89 4.14 Z N.A. 9.12 7.24 67.94 5.38
13 Average Collection Period Days 231 90 65 53 40 6 15 88 N.A. N.A. 40 50 5 68
14 Creditors Turnover Times 2.23 28.57 2.42 2.33 3.06 23.09 44.80 182.00 8.58 N.A. 97.47 1.92 7.84 6.03
15 Stock Turnover Times 5.12 0.48 Z 4.20 1.96 36.29 5.60 45.50 1.23 N.A. 0.55 Z 15.48 6.98
16 Net Working Capital to Sales Ratio Times 0.38 2.30 (0.24) (0.04) 0.29 0.00 0.20 0.26 0.70 N.A. 1.92 (0.38) (0.05) 0.16
17 Sales to Working Capital Ratio Times 13.14 0.56 (12.15) 1.01 2.24 0.29 0.20 (1.48) (18.87) N.A. 0.42 10.25 0.99 8.63
18 Inventory Days Days 71 762 N.A. 87 186 10 65 8 297 N.A. 664 N.A. 24 52
LIQUIDITY AND STABILITY RATIO'S
19 Current Ratio (Working Capital Ratio) Times 1.10 2.68 0.80 3.08 1.63 14.33 7.53 0.35 0.95 N.A. 10.71 1.07 2.10 1.26
20 Quick Ratio (Acid Test Ratio) Times 0.85 0.72 0.80 2.58 0.91 14.22 7.29 0.32 0.16 N.A. 3.24 1.07 2.03 0.94
CAPITAL STRUCTURE, INVESTMENT AND FIN.A.NCIAL RISK RATIOS
21 Long-term Debt to Equity Ratio Times 0.13 0.00 0.13 0.02 0.01 N.A. 0.00 N.A. 0.06 N.A. N.A. N.A. 0.20 0.08
Long-term debt to total long-term

22 finance ratio NO 0.12 0.00 0.12 0.02 0.01 N.A. 0.00 N.A. 0.05 N.A. N.A. N.A. 0.17 0.07
23 Total debt to total assets ratio Times 0.18 0.00 0.10 0.03 0.13 N.A. 0.00 N.A. 0.05 N.A. N.A. N.A. 0.11 0.12
24 Interest Cover Times 15.30 N.A. 69.85 N.A. 209.33 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 44.00
25 Dividend Cover Times Z Z 2.70 4.50 16.45 Z Z Z Z N.A. 1.12 Z Z 1.55
26 Fixed assets to total assets ratio Times 0.67 0.00 0.88 0.42 0.62 0.31 0.59 0.98 0.89 N.A. 0.02 0.88 0.43 0.66
27 Long-term Funds to Total Assets Ratio Times 0.68 0.54 0.83 0.81 0.65 0.95 0.94 0.94 0.88 N.A. 0.91 0.88 0.68 0.70
28 Total owing to total assets ratio Times 0.17 0.01 0.15 0.17 0.11 0.01 0.00 0.00 0.01 N.A. 0.00 0.04 0.04 0.10
29 Capital gearing Times 1.07 1.00 1.01 1.00 1.00 1.00 1.00 1.00 1.00 N.A. 1.00 1.00 1.00 1.02
30 Gearing Ratio Times 0.30 0.00 0.13 0.04 0.20 N.A. 0.00 N.A. 0.06 N.A. N.A. N.A. 0.20 0.19
154
BAHKUWAIT STATISTICAL AVERAGE - BENCHMARK CALCULATIONS

QRE BAR EZD SEE GRA KRE DAM ABY MAS KCM MAB NRE TIJ MAZ TAM GRP STANDARD DEV
15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Mean N SD Minimum
QAR QAR QAR BHD KWD KWD KWD KWD KWD KWD KWD KWD KWD KWD KWD KWD Q-0
285 3,207 2,738 10 1 13 - - 6 14 12 72 44 27 18 26
0.164 0.164 0.164 1.580 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073
47 526 449 16 2 27 - - 12 29 25 149 91 56 37 54 215 30 459 -
16 3 5 25 27 22 28 28 26 20 23 11 12 14 18 15
11% 11% 60% 10% 0% -7% N.A. N.A. 2% 16% 10% 17% 16% 27% 5% 28% 15% 27 13% -7%
7% 9% 59% 10% 0% -5% N.A. N.A. 1% 8% 8% 13% 13% 14% 3% 18% 11% 27 12% -5%
14% 18% 59% 10% 0% -7% N.A. N.A. -2% 10% 14% 17% 18% 27% 5% 27% 15% 27 13% -7%
83% 14% 98% 70% 0% -77% N.A. N.A. -17% 36% 83% 49% 80% 89% 39% 85% 47% 27 39% -77%
3.95 2.27 5.88 0.02 - (0.01) N.A. N.A. (0.00) 0.04 0.03 0.05 0.03 0.08 0.00 0.09 Not Applicable as these are different Currencies - See below
0.65 0.37 0.96 0.02 - (0.03) N.A. N.A. (0.00) 0.08 0.06 0.11 0.05 0.17 0.01 0.18 Not Applicable as shares have different Face Values
8.31 13.89 8.38 10.51 N.A. (20.18) N.A. N.A. (358.16) 10.03 18.15 11.04 10.10 4.19 97.08 4.04 10.21 24 85.39 (358.16)
N.A. N.A. 2% 3% N.A. 13% N.A. N.A. 0% N.A. N.A. 6% N.A. 14% 1% 2% 4% 12 5% 0%
12% 7% 12% 10% N.A. -5% N.A. N.A. 0% 10% 6% 9% 10% 24% 1% 25% 8% 24 7% -5%
1.17 2.55 4.93 1.08 0.57 1.46 N.A. N.A. 8.14 1.00 2.63 1.82 1.78 1.14 4.38 1.05 2.79 25 2.16 0.57
0.17 1.30 0.60 0.15 0.05 0.09 N.A. N.A. 0.14 0.28 0.17 0.34 0.22 0.31 0.12 0.32 0.35 27 0.30 0.05
0.09 1.44 0.60 0.17 0.14 0.22 N.A. N.A. 0.10 0.21 0.13 0.28 0.20 0.60 0.05 0.31 4.25 27 17.06 0.05
57.00 14.32 Z 0.83 Z Z N.A. N.A. Z 2.80 Z 10.29 1.63 1.13 4.50 Z 14.74 20 20.56 0.83
6 25 N.A. 438 N.A. N.A. N.A. N.A. N.A. 130 N.A. 35 224 324 81 N.A. 101 20 116 5
3.17 14.00 Z 5.00 Z Z N.A. N.A. Z 7.00 Z 3.27 1.13 0.90 0.86 8.67 20.65 22 42.07 0.86
8.91 128.28 130.38 Z 0.07 2.60 N.A. N.A. 0.67 1.40 12.00 Z Z 0.46 2.57 1.63 18.74 22 37.62 0.07
(0.19) 0.01 0.01 1.00 15.00 0.38 N.A. N.A. 1.50 0.93 0.08 (0.21) (0.27) 1.96 (0.56) 0.50 0.95 27 2.91 (0.56)
(0.71) 1.81 (114.08) 1.25 0.07 0.17 N.A. N.A. (1.20) 1.56 1.00 (1.85) 1.33 0.59 (1.64) 2.17 (3.86) 27 22.79 (114.08)
41 3 3 N.A. 5,475 140 N.A. N.A. 548 261 30 N.A. N.A. 798 142 225 450 22 1,150 3
0.61 2.45 0.50 2.60 4.75 2.32 N.A. N.A. 0.81 1.39 1.57 0.32 1.53 1.61 0.66 1.43 2.60 27 3.27 0.32
0.58 2.42 0.06 2.60 1.00 2.24 N.A. N.A. 0.46 0.96 1.52 0.32 1.53 0.83 0.44 0.86 1.89 27 2.85 0.06
0.42 0.63 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 0.49 N.A. 0.25 N.A. 0.67 N.A. 0.22 14 0.24 0.00
0.30 0.39 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 0.33 N.A. 0.20 N.A. 0.40 N.A. 0.16 14 0.15 0.00
0.35 0.29 0.01 N.A. N.A. 0.17 N.A. N.A. 0.25 0.16 0.38 0.13 0.23 0.03 0.33 0.16 0.15 21 0.12 0.00
16.80 N.A. 85.00 N.A. N.A. N.A. N.A. N.A. 0.50 2.67 N.A. 36.00 9.75 N.A. 2.40 23.00 42.88 12 58.96 0.50
Z Z 5.43 3.04 Z (0.38) N.A. N.A. (1.63) Z Z 1.59 Z 1.71 1.84 10.00 3.69 13 4.79 (1.63)
0.83 0.43 0.99 0.82 0.27 0.30 N.A. N.A. 0.75 0.68 0.73 0.94 0.69 0.27 0.94 0.68 0.62 27 0.28 0.00
0.63 0.77 0.99 0.93 0.85 0.70 N.A. N.A. 0.52 0.51 0.84 0.76 0.80 0.53 0.74 0.65 0.76 27 0.14 0.51
0.02 0.04 N.A. 0.03 N.A. N.A. N.A. N.A. N.A. 0.02 N.A. 0.08 0.13 0.18 0.06 0.02 0.06 22 0.06 0.00
1.06 1.00 1.01 1.00 N.A. 1.00 N.A. N.A. (1.00) 1.60 1.00 1.03 1.11 1.00 1.71 1.05 0.99 26 0.44 (1.00)
0.78 0.63 0.01 N.A. N.A. 0.25 N.A. N.A. 0.48 0.32 0.68 0.17 0.37 0.06 0.74 0.25 0.28 21 0.25 0.00
155
GE - BENCHMARK CALCULATIONS
QUARTILES - FIVE POINT SUMMARY OUTLIERS
First Third Maximu Inner Inner Outer Outer Check for
Median Range IQR Step
Quartile Quartile m Fence - Fence - Fence - Fence - Outliers
Q-1 Q-2 Q-3 Q-4 R Fs S Low High Low High Low High
=Q4-Q0 =Q3-Q2 =Fs*1.5 =Q2-S =Q3+S =Q2-2S =Q3+2S Severe Severe
Mild Mild
25 50 200 2,453 2,453 174 261 (236) 461 (497) 722 NO SHO
Box end Box end Whisker ends
7% 11% 19% 60% 67% 13% 19% -12% 38% -31% 57% NO SHO
5% 9% 15% 59% 64% 10% 14% -9% 29% -24% 44% NO SHO
7% 14% 20% 59% 66% 14% 20% -13% 41% -34% 61% NO MHO
27% 49% 77% 98% 175% 50% 75% -48% 152% -123% 227% MLO NO
Not Applicable as these are different Currencies - See below
Not Applicable as shares have different Face Values
9.55 11.12 17.99 110.97 469.12 8.44 12.67 (3.12) 30.66 (15.79) 43.33 SLO SHO
2% 2% 5% 14% 14% 3% 5% -4% 10% -9% 16% NO MHO
2% 8% 10% 25% 30% 8% 12% -11% 22% -23% 35% NO MHO
1.32 2.16 3.54 9.41 8.84 2.22 3.33 (2.01) 6.87 (5.34) 10.20 NO MHO
0.13 0.28 0.51 1.30 1.26 0.37 0.56 (0.43) 1.07 (0.99) 1.63 NO MHO
0.13 0.28 0.61 88.08 88.03 0.48 0.72 (0.59) 1.33 (1.31) 2.04 NO SHO
3.73 6.26 11.29 67.94 67.11 7.57 11.35 (7.63) 22.65 (18.98) 34.00 NO SHO
33 59 100 438 433 67 101 (68) 202 (169) 303 NO SHO
2.36 5.52 12.67 182.00 181.14 10.31 15.47 (13.12) 28.14 (28.59) 43.61 NO SHO
1.27 3.40 11.23 130.38 130.31 9.95 14.93 (13.66) 26.16 (28.59) 41.09 NO SHO
(0.05) 0.20 0.81 15.00 15.56 0.86 1.29 (1.33) 2.10 (2.62) 3.39 NO SHO
(0.96) 0.56 1.44 13.14 127.23 2.40 3.60 (4.56) 5.05 (8.16) 8.65 SLO SHO
33 114 288 5,475 5,472 255 382 (349) 670 (731) 1,051 NO SHO
0.88 1.53 2.52 14.33 14.01 1.64 2.47 (1.59) 4.99 (4.05) 7.46 NO SHO
0.65 0.94 2.13 14.22 14.16 1.48 2.22 (1.57) 4.36 (3.79) 6.58 NO SHO
0.03 0.13 0.38 0.67 0.67 0.35 0.53 (0.50) 0.91 (1.03) 1.44 NO NO
0.02 0.12 0.27 0.40 0.40 0.25 0.37 (0.35) 0.64 (0.72) 1.02 NO NO
0.05 0.13 0.23 0.38 0.38 0.19 0.28 (0.23) 0.51 (0.51) 0.79 NO NO
7.98 19.90 50.46 209.33 208.83 42.48 63.72 (55.75) 114.19 (119.47) 177.91 NO SHO
1.55 1.84 4.50 16.45 18.08 2.94 4.42 (2.86) 8.91 (7.28) 13.33 NO SHO
0.42 0.68 0.86 0.99 0.99 0.43 0.65 (0.23) 1.51 (0.88) 2.16 NO NO
0.66 0.77 0.88 0.99 0.48 0.22 0.33 0.34 1.21 0.01 1.54 NO NO
0.01 0.04 0.11 0.18 0.18 0.09 0.14 (0.12) 0.24 (0.26) 0.38 NO NO
1.00 1.00 1.03 1.71 2.71 0.03 0.04 0.96 1.07 0.92 1.11 SLO SHO
0.06 0.20 0.37 0.78 0.78 0.31 0.46 (0.41) 0.83 (0.87) 1.29 NO NO
156
MAIN SCHEDULE OF 30 COMPANIES FINANCIAL RATIOS FOR 2007

Company codes UNP DYR EMR SOR ALD RAK TIR SRE MCD JBL DAR ADC UDC SAL
Sr No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Currency AED AED AED AED AED AED SAR SAR SAR SAR SAR SAR QAR QAR
Turnover in Million Local Currency 3,276 1,040 20,001 2,526 3,464 540 554 297 279 - 4,971 135 2,040 1,430
Rate of Exchange (09/08/09) 0.162 0.162 0.162 0.162 0.162 0.162 0.159 0.159 0.159 0.159 0.159 0.159 0.164 0.164
Equivalent GBP ' 000,000 531 168 3,240 409 561 87 88 47 44 - 790 21 335 235
Rank wrt Turnover 4 8 1 5 3 14 13 21 23 29 2 28 6 7

1 ROCE - Return on Capital Employed % 10% 7% 15% 26% 14% 17% 14% 6% 6% N.A. 12% 5% 8% 9%
2 ROTA - Return on Total Assets % 7% 4% 12% 17% 11% 15% 11% 6% 5% N.A. 11% 5% 8% 6%
3 ROE - Return on Equity % 13% 7% 18% 28% 25% 17% 14% 6% 6% N.A. 19% 5% 12% 10%
4 ROS - Return on Sales (Profit Margin) % 21% 40% 33% 50% 56% 92% 74% 63% 62% N.A. 41% 54% 17% 9%
INVESTORS RATIOS
5 Currencies Various 0.22 0.07 1.07 0.50 0.87 0.25 2.66 1.43 1.01 N.A. 3.72 0.71 3.21 1.56
5a to GBP GBP 0.04 0.01 0.17 0.08 0.14 0.04 0.42 0.23 0.16 N.A. 0.59 0.11 0.53 0.26
6 PE ratio - Price / Earnings Ratio R 15.84 33.28 11.82 11.06 9.76 7.66 10.56 27.91 40.70 N.A. 15.95 105.99 11.08 9.66
7 Dividend Yield % N.A. 4% 2% 2% 1% 4% N.A. N.A. N.A. N.A. 5% N.A. N.A. N.A.
8 Earnings Yield % 6% 3% 8% 9% 10% 13% 9% 4% 2% N.A. 6% 1% 9% 10%
9 Market to Book Ratio Times 2.08 2.26 2.08 3.11 2.46 1.31 1.41 1.54 2.18 N.A. 2.91 5.46 1.32 0.93
EFFICIENCY AND EFFECTIVENESS
10 Net Assets Turnover Times 0.63 0.17 0.54 0.57 0.45 0.19 0.19 0.10 0.09 N.A. 0.45 0.10 0.71 1.07
11 Fixed Assets Turnover Times 0.42 0.68 0.43 0.91 0.40 0.33 0.29 0.11 0.09 N.A. 0.45 0.10 1.48 0.94
12 Debtors Turnover Times 1.11 1.30 5.51 2.15 1.49 1.57 30.78 6.60 7.54 N.A. 10.27 10.38 13.16 5.38
13 Average Collection Period Days 328 281 66 170 245 233 12 55 48 N.A. 36 35 28 68
14 Creditors Turnover Times 2.50 0.38 2.27 1.16 1.11 1.46 138.50 14.85 139.50 N.A. 47.34 3.07 14.78 7.45
15 Stock Turnover Times 10.30 0.20 Z 1.49 0.86 Z 9.39 99.00 0.91 N.A. 2.21 135.00 2.44 6.41
16 Net Working Capital to Sales Ratio Times 0.60 3.05 (0.26) 0.28 0.94 (0.05) 0.13 0.09 1.23 N.A. 0.53 (0.22) 0.42 0.21
17 Sales to Working Capital Ratio Times 6.51 0.22 (42.92) 1.24 0.37 0.43 0.37 0.56 2.13 N.A. 0.85 (67.50) 1.23 12.43
18 Inventory Days Days 35 1,804 N.A. 245 426 N.A. 39 4 402 N.A. 165 3 149 57
LIQUIDITY AND STABILITY RATIO'S
19 Current Ratio (Working Capital Ratio) Times 1.18 2.57 0.95 1.84 3.06 4.39 6.58 4.89 1.37 N.A. 5.28 0.99 2.22 1.16
20 Quick Ratio (Acid Test Ratio) Times 1.06 0.88 0.95 1.14 2.18 4.39 6.36 4.87 0.50 N.A. 3.64 0.98 1.60 0.85
CAPITAL STRUCTURE, INVESTMENT AND FINANCIAL RISK RATIOS
21 Long-term Debt to Equity Ratio Times 0.42 0.02 0.21 0.07 1.27 N.A. 0.00 N.A. N.A. N.A. 0.55 N.A. 0.46 0.16

22 finance ratio Times 0.30 0.02 0.17 0.07 0.56 N.A. 0.00 N.A. N.A. N.A. 0.35 N.A. 0.31 0.14
23 Total debt to total assets ratio Times 0.30 0.04 0.14 0.08 0.46 N.A. 0.01 N.A. N.A. N.A. 0.33 N.A. 0.31 0.20
24 Interest Cover Times 14.46 139.67 43.54 420.00 5.28 249.00 N.A. N.A. N.A. N.A. N.A. N.A. N.A. 8.17
25 Dividend Cover Times Z 0.74 5.45 4.19 14.07 3.73 Z Z Z N.A. 1.24 Z Z Z
26 Fixed assets to total assets ratio Times 0.70 0.16 0.85 0.38 0.38 0.50 0.52 0.80 0.86 N.A. 0.61 0.88 0.31 0.64
27 Long-term Funds to Total Assets Ratio Times 0.67 0.67 0.82 0.66 0.77 0.89 0.82 0.95 0.90 N.A. 0.93 0.87 0.96 0.66
28 Total owing to total assets ratio Times 0.12 0.30 0.16 0.30 0.14 0.11 0.00 0.01 0.00 N.A. 0.01 0.03 0.03 0.08
29 Capital gearing Times 1.07 1.01 1.02 1.00 1.23 1.00 1.00 1.00 1.00 N.A. 1.00 1.00 1.00 1.14
30 Gearing Ratio Times 0.65 0.07 0.21 0.13 1.37 N.A. 0.01 N.A. N.A. N.A. 0.55 N.A. 0.47 0.35
157
BAHKUWAIT STATISTICAL AVERAGE - BENCHMARK CALCULATIONS

QRE BAR EZD SEE GRA KRE DAM ABY MAS KCM MAB NRE TIJ MAZ TAM GRP STANDARD DEV
15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Mean N SD Minimum
QAR QAR QAR BHD KWD KWD KWD KWD KWD KWD KWD KWD KWD KWD KWD KWD Q-0
404 1,011 607 26 14 - 18 24 12 22 30 56 58 38 35 37
0.164 0.164 0.164 1.580 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073
66 166 100 41 29 - 37 50 25 46 62 116 120 79 73 77 255 30 595 -
18 9 12 24 26 29 25 20 27 22 19 11 10 15 17 16
19% 19% 11% 26% 11% 0% 36% 27% 9% 32% 17% 18% 23% 32% 8% 26% 16% 29 9% 0%
8% 5% 11% 24% 10% 0% 27% 13% 4% 13% 11% 11% 15% 13% 6% 12% 10% 29 6% 0%
16% 18% 11% 26% 11% 0% 36% 27% 5% 24% 20% 18% 20% 30% 8% 25% 16% 29 9% 0%
74% 56% 92% 88% 93% N.A. 83% 71% 17% 64% 60% 71% 79% 87% 46% 68% 59% 28 24% 9%
4.17 2.81 1.23 0.05 0.01 - 0.08 0.04 0.00 0.10 0.05 0.05 0.03 0.10 0.01 0.08 Not Applicable as these are different Currencies - See below
0.68 0.46 0.20 0.08 0.03 - 0.17 0.07 0.00 0.21 0.10 0.11 0.06 0.21 0.02 0.17 Not Applicable as shares have different Face Values
9.19 13.37 40.15 3.20 8.41 N.A. 1.66 10.27 163.51 3.00 19.61 10.21 5.81 4.93 48.00 3.54 23.43 28 34.60 1.66
N.A. 3% N.A. 4% N.A. N.A. N.A. N.A. 0% N.A. N.A. N.A. N.A. 10% 1% N.A. 3% 11 3% 0%
11% 7% 2% 31% 12% 0% 60% 10% 1% 33% 5% 10% 17% 20% 2% 28% 12% 29 13% 0%
1.49 2.47 4.39 0.84 0.89 0.97 0.59 2.73 7.43 0.71 3.97 1.79 1.16 1.45 3.98 0.86 2.23 29 1.57 0.59
0.22 0.33 0.12 0.30 0.11 N.A. 0.43 0.38 0.27 0.37 0.34 0.25 0.26 0.35 0.18 0.37 0.34 28 0.22 0.09
0.12 0.13 0.12 0.33 0.12 N.A. 0.33 0.19 0.13 0.27 0.19 0.18 0.20 0.23 0.09 0.32 0.34 28 0.32 0.09
1.41 1.31 60.70 1.86 Z Z Z Z Z 3.14 15.00 Z Z 1.52 35.00 4.63 10.08 22 14.55 1.11
259 278 6 197 N.A. N.A. N.A. N.A. N.A. 116 24 N.A. N.A. 240 10 79 128 22 109 6
3.64 3.35 75.88 26.00 Z Z Z Z 12.00 3.14 15.00 18.67 19.33 1.31 2.92 2.85 22.34 25 39.00 0.38
3.04 0.62 303.50 Z Z Z Z Z 1.71 0.71 30.00 5.60 1.29 4.22 3.50 1.48 28.36 22 70.26 0.20
0.76 2.08 0.01 0.50 - N.A. - - 0.50 1.41 0.03 0.13 0.72 0.13 (0.03) 0.54 0.49 28 0.73 (0.26)
(0.26) (0.29) (60.70) 2.89 3.50 N.A. (1.64) (0.67) (0.33) 3.14 (1.76) (0.98) (8.29) (0.75) (0.90) 2.85 (5.29) 28 18.88 (67.50)
120 589 1 N.A. N.A. N.A. N.A. N.A. 213 514 12 65 283 86 104 247 253 22 387 1
0.38 0.70 0.84 2.50 Z 2.52 0.15 0.14 0.37 1.11 0.69 0.60 0.88 0.66 0.42 1.15 1.77 28 1.68 0.14
0.33 0.56 0.81 2.50 Z 2.52 0.15 0.14 0.25 0.61 0.67 0.53 0.07 0.60 0.27 0.86 1.44 28 1.59 0.07
N.A. 0.40 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 0.43 N.A. N.A. N.A. 0.54 N.A. 0.38 12 0.34 0.00
N.A. 0.29 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 0.30 N.A. N.A. N.A. 0.35 N.A. 0.24 12 0.16 0.00
0.50 0.08 0.00 N.A. N.A. 0.13 0.23 0.32 0.35 0.27 0.36 0.29 N.A. 0.21 0.36 N.A. 0.24 21 0.14 0.00
6.56 3.14 N.A. N.A. N.A. N.A. N.A. N.A. 2.00 3.80 7.00 21.00 8.67 17.50 2.78 26.00 57.56 17 113.30 2.00
Z 2.25 Z 8.33 Z Z Z Z 2.20 Z Z Z Z 2.00 4.00 Z 4.38 11 3.86 0.74
0.78 0.50 0.99 0.84 0.97 0.44 0.96 0.95 0.82 0.54 0.81 0.78 0.85 0.63 0.94 0.53 0.69 29 0.22 0.16
0.42 0.27 0.99 0.94 0.98 0.78 0.75 0.49 0.39 0.40 0.65 0.58 0.67 0.41 0.69 0.46 0.70 29 0.21 0.27
0.03 0.02 0.00 0.01 N.A. N.A. N.A. N.A. 0.01 0.05 0.01 0.01 0.01 0.11 0.03 0.06 0.06 25 0.09 0.00
1.18 1.47 1.00 1.00 1.00 N.A. 1.00 1.00 2.00 1.36 1.17 1.05 1.13 1.06 1.56 1.04 1.13 28 0.23 1.00
1.19 0.40 0.00 N.A. N.A. 0.17 0.31 0.66 0.91 0.68 0.80 0.50 N.A. 0.50 0.80 N.A. 0.51 21 0.37 0.00
158
- BENCHMARK CALCULATIONS
QUARTILES - FIVE POINT SUMMARY OUTLIERS
First Third Maximu Inner Inner Outer Outer Check for
Median Range IQR Step
Quartile Quartile m Fence - Fence - Fence - Fence - Outliers
Q-1 Q-2 Q-3 Q-4 R Fs S Low High Low High Low High
Mild Mild
45 78 168 3,240 3,240 123 185 (140) 353 (325) 537 NO SHO
Box end Box end Whisker ends
9% 14% 23% 36% 36% 14% 21% -12% 44% -33% 65% NO NO
6% 11% 13% 27% 27% 7% 10% -5% 23% -15% 34% NO MHO
10% 17% 24% 36% 36% 14% 21% -12% 45% -33% 66% NO NO
45% 62% 76% 93% 84% 31% 47% -2% 122% -49% 169% NO NO
8.22 10.81 21.68 163.51 161.85 13.46 20.19 (11.97) 41.88 (32.16) 62.07 NO SHO
1% 3% 4% 10% 10% 3% 4% -3% 8% -7% 12% NO MHO
4% 9% 12% 60% 60% 8% 12% -9% 24% -21% 37% NO SHO
1.16 1.79 2.73 7.43 6.84 1.57 2.35 (1.19) 5.08 (3.54) 7.43 NO SHO
0.18 0.31 0.43 1.07 0.98 0.25 0.37 (0.19) 0.81 (0.56) 1.18 NO MHO
0.12 0.25 0.41 1.48 1.39 0.28 0.42 (0.30) 0.83 (0.72) 1.25 NO SHO
1.53 5.00 10.36 60.70 59.59 8.82 13.24 (11.70) 23.59 (24.94) 36.83 NO SHO
35 73 238 328 322 203 304 (269) 543 (574) 847 NO NO
2.50 3.64 18.67 139.50 139.12 16.17 24.25 (21.75) 42.92 (46.00) 67.17 NO SHO
1.34 2.74 8.65 303.50 303.30 7.31 10.96 (9.63) 19.61 (20.59) 30.57 NO SHO
0.00 0.24 0.63 3.05 3.31 0.62 0.93 (0.93) 1.56 (1.86) 2.50 NO SHO
(0.92) 0.29 1.47 12.43 79.93 2.38 3.58 (4.50) 5.04 (8.07) 8.62 SLO SHO
43 135 274 1,804 1,803 231 346 (303) 620 (649) 966 NO SHO
0.68 1.13 2.51 6.58 6.44 1.82 2.73 (2.05) 5.24 (4.78) 7.97 NO MHO
0.52 0.86 1.75 6.36 6.29 1.22 1.83 (1.31) 3.58 (3.15) 5.41 NO SHO
0.14 0.41 0.48 1.27 1.27 0.34 0.51 (0.37) 0.99 (0.87) 1.50 NO MHO
0.12 0.29 0.32 0.56 0.56 0.20 0.30 (0.18) 0.63 (0.48) 0.93 NO NO
0.13 0.27 0.33 0.50 0.50 0.20 0.30 (0.17) 0.62 (0.46) 0.92 NO NO
5.28 8.67 26.00 420.00 418.00 20.72 31.09 (25.81) 57.09 (56.90) 88.17 NO SHO
2.10 3.73 4.82 14.07 13.32 2.72 4.08 (1.99) 8.91 (6.07) 12.99 NO SHO
0.52 0.78 0.85 0.99 0.83 0.33 0.50 0.02 1.36 (0.48) 1.86 NO NO
0.58 0.69 0.89 0.99 0.72 0.31 0.47 0.11 1.35 (0.36) 1.82 NO NO
0.01 0.03 0.11 0.30 0.30 0.10 0.15 (0.14) 0.26 (0.29) 0.41 NO MHO
1.00 1.02 1.15 2.00 1.00 0.15 0.22 0.78 1.37 0.56 1.59 NO SHO
0.21 0.50 0.68 1.37 1.37 0.47 0.71 (0.50) 1.38 (1.21) 2.09 NO NO
159

Company codes UNP DYR EMR SOR ALD RAK TIR SRE MCD JBL DAR ADC
Sr No. 1 2 3 4 5 6 7 8 9 10 11 12
Currency AED AED AED AED AED AED SAR SAR SAR SAR SAR SAR
Turnover in Million Local Currency 4,249 3,445 15,014 3,923 7,038 424 322 265 273 76 5,638 146
Rate of Exchange (09/08/09) 0.162 0.162 0.162 0.162 0.162 0.162 0.159 0.159 0.159 0.159 0.159 0.159
Equivalent GBP ' 000,000 688 558 2,432 636 1,140 69 51 42 43 12 896 23
Rank wrt Turnover 4 7 1 5 2 17 18 21 20 26 3 23

1 ROCE - Return on Capital Employed % 10% 14% 7% 23% 11% 12% 7% 4% 5% 0% 14% 6%
2 ROTA - Return on Total Assets % 4% 10% 5% 11% 8% 9% 5% 4% 4% 0% 12% 5%
3 ROE - Return on Equity % 13% 15% 8% 30% 22% 12% 7% 4% 5% 0% 21% 6%
4 ROS - Return on Sales (Profit Margin) % 18% 33% 20% 45% 49% 89% 60% 52% 70% -39% 43% 56%
INVESTORS RATIOS
5 Currencies Various 0.23 0.19 0.51 0.71 1.34 0.19 1.15 0.98 1.08 (0.08) 3.27 0.79
5a to GBP GBP 0.04 0.03 0.08 0.12 0.22 0.03 0.18 0.16 0.17 (0.01) 0.52 0.13
6 PE ratio - Price / Earnings Ratio R 14.08 9.14 17.49 9.51 5.95 8.55 22.00 35.77 30.44 (296.43) 12.24 26.11
7 Dividend Yield % N.A. N.A. N.A. 2% 1% 4% N.A. N.A. N.A. N.A. 6% N.A.
8 Earnings Yield % 7% 11% 6% 11% 17% 12% 5% 3% 3% 0% 8% 4%
9 Market to Book Ratio Times 1.80 1.38 1.47 2.85 1.28 1.04 1.31 1.36 1.28 2.36 2.46 1.47
EFFICIENCY AND EFFECTIVENESS RATIOS
10 Net Assets Turnover Times 0.71 0.47 0.41 0.66 0.44 0.14 0.11 0.09 0.06 0.01 0.48 0.10
11 Fixed Assets Turnover Times 0.27 0.76 0.30 0.80 0.28 0.17 0.12 0.11 0.07 0.01 0.37 0.11
12 Debtors Turnover Times 1.53 3.00 2.63 1.64 1.25 0.82 23.00 22.08 Z Z 5.94 9.13
13 Average Collection Period Days 239 122 139 223 293 448 16 17 N.A. N.A. 61 40
14 Creditors Turnover Times 1.16 1.77 1.08 0.58 0.94 0.40 24.77 265.00 Z 12.67 32.97 5.84
15 Stock Turnover Times 14.02 0.81 Z 1.42 0.99 1.41 7.00 3.68 0.62 Z 2.02 146.00
16 Net Working Capital to Sales Ratio Times (0.14) 1.00 (0.54) (0.40) 0.76 (0.55) 0.15 0.31 1.60 (0.08) 0.63 (0.05)
17 Sales to Working Capital Ratio Times (0.84) 0.72 (5.50) 1.23 0.56 0.70 0.43 0.37 1.56 0.08 2.44 6.64
18 Inventory Days Days 26 449 N.A. 257 370 258 52 99 586 N.A. 181 3
LIQUIDITY AND STABILITY RATIOS
19 Current Ratio (Working Capital Ratio) Times 0.40 3.48 0.80 1.36 2.02 1.57 4.36 9.00 1.46 22.02 1.95 1.12
20 Quick Ratio (Acid Test Ratio) Times 0.36 1.30 0.80 1.05 1.44 1.29 4.16 8.19 0.31 22.02 0.80 1.11
CAPITAL STRUCTURE, INVESTMENT AND FINANCIAL RISK RATIOS
21 Long-term Debt to Equity Ratio Times 0.35 0.11 0.25 0.33 1.24 N.A. 0.001 N.A. N.A. N.A. 0.51 N.A.

22 finance ratio Times 0.26 0.10 0.20 0.25 0.55 N.A. 0.001 N.A. N.A. N.A. 0.34 N.A.
23 Total debt to total assets ratio Times 0.33 0.07 0.15 0.24 0.45 N.A. 0.03 N.A. N.A. N.A. 0.38 N.A.
24 Interest Cover Times 12.56 75.80 36.37 23.30 10.29 190.50 N.A. N.A. N.A. N.A. N.A. N.A.
25 Dividend Cover Times Z Z Z 5.95 14.86 2.75 Z Z Z Z 1.45 Z
26 Fixed assets to total assets ratio Times 0.83 0.40 0.82 0.29 0.50 0.60 0.73 0.75 0.88 0.86 0.77 0.87
27 Long-term Funds to Total Assets Ratio Times 0.42 0.72 0.75 0.47 0.72 0.75 0.81 0.97 0.92 0.99 0.88 0.88
28 Total owing to total assets ratio Times 0.19 0.17 0.23 0.40 0.15 0.25 0.00 0.0003 N.A. 0.001 0.01 0.02
29 Capital gearing Times 1.09 1.01 1.03 1.04 1.11 1.01 1.00 1.00 1.00 1.00 1.00 1.00
30 Gearing Ratio Times 1.07 0.11 0.25 0.69 1.41 N.A. 0.03 N.A. N.A. N.A. 0.65 N.A.
160
QATAR BAHKUWAIT STATISTICAL AVERAGE - BENCHMARK CALCULATIONS

UDC SAL QRE BAR EZD SEE GRA KRE DAM ABY MAS KCM MAB NRE TIJ MAZ TAM GRP
13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
QAR QAR QAR QAR QAR BHD KWD KWD KWD KWD KWD KWD KWD KWD KWD KWD KWD KWD
2,356 1,886 442 3,506 1,450 20 - 11 - - 7 21 45 45 35 162 59 -
0.164 0.164 0.164 0.164 0.164 1.580 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073 2.073
386 309 72 575 238 32 - 23 - - 15 44 93 93 73 336 122 -
8 10 16 6 11 22 27 24 27 27 25 19 13 13 15 9 12 27
13% 10% 8% 7% 21% 16% -26% -37% -157% N.A. -6% 26% 24% 13% 10% 8% 18% -59%
9% 6% 6% 2% 20% 15% -24% -26% -92% N.A. -3% 8% 15% 5% 7% 2% 9% -24%
24% 11% 15% 6% 21% 16% -26% -37% -157% N.A. -15% 11% 29% 13% 9% 6% 28% -63%
29% 8% 70% 8% 94% 80% N.A. -427% N.A. N.A. -86% 33% 62% 62% 54% 4% 56% N.A.
6.41 1.70 3.60 1.17 2.97 0.03 (0.02) (0.05) (0.06) N.A. (0.00) 0.04 0.07 0.03 0.01 0.02 0.02 (0.11)
1.05 0.28 0.59 0.19 0.49 0.05 (0.05) (0.11) (0.13) N.A. (0.01) 0.08 0.14 0.07 0.02 0.03 0.04 (0.23)
7.78 8.36 13.92 48.81 16.60 5.61 (3.02) (2.59) (2.26) N.A. (49.11) 9.33 17.41 13.23 13.24 35.03 23.93 (1.41)
N.A. 4% 4% N.A. N.A. 5% 7% N.A. N.A. N.A. 0% N.A. N.A. N.A. N.A. N.A. 0% N.A.
13% 12% 7% 2% 6% 18% -33% -39% -44% N.A. -2% 11% 6% 8% 8% 3% 4% -71%
1.88 0.89 2.13 3.36 3.47 0.92 0.77 0.96 3.55 N.A. 7.55 1.05 4.97 1.76 1.15 2.10 6.60 0.88
0.83 1.28 0.22 0.79 0.22 0.20 N.A. 0.09 N.A. N.A. 0.18 0.34 0.46 0.21 0.16 1.38 0.51 N.A.
0.62 1.18 0.11 0.71 0.22 0.22 N.A. 0.10 N.A. N.A. 0.06 0.28 0.23 0.09 0.10 0.60 0.14 N.A.
27.72 5.17 Z 6.50 362.50 1.43 Z Z Z N.A. Z 1.40 11.25 Z 35.00 3.86 5.90 N.A.
13 71 N.A. 56 1 256 N.A. N.A. N.A. N.A. N.A. 261 32 N.A. 10 95 62 N.A.
17.85 13.87 1.90 Z 241.67 2.50 Z Z Z N.A. 1.75 1.91 45.00 Z 5.83 16.20 Z N.A.
1.58 7.23 0.47 1.08 53.70 Z Z Z Z N.A. 1.75 1.40 22.50 11.25 0.64 Z 4.92 Z
0.61 0.26 1.61 1.08 0.02 0.30 N.A. - N.A. N.A. - 0.90 0.11 0.09 1.43 0.20 0.37 N.A.
0.99 11.43 1.80 0.48 9.73 2.86 N.A. 0.69 N.A. N.A. (0.18) 2.33 (0.87) (0.26) (0.51) (1.37) (0.88) N.A.
231 51 780 338 7 N.A. N.A. N.A. N.A. N.A. 209 261 16 32 574 N.A. 74 N.A.
2.89 1.17 1.18 1.61 3.98 1.88 Z 1.32 0.40 N.A. 0.26 1.08 0.37 0.12 0.48 0.44 0.35 0.22
1.70 0.90 0.50 1.34 3.44 1.88 Z 1.32 0.40 N.A. 0.19 0.95 0.35 0.10 0.07 0.44 0.23 0.22
0.87 0.17 1.11 0.75 N.A. N.A. N.A. N.A. N.A. N.A. 0.67 N.A. 0.42 0.03 0.21 N.A. 1.03 N.A.
0.47 0.15 0.53 0.43 N.A. N.A. N.A. N.A. N.A. N.A. 0.40 N.A. 0.29 0.03 0.18 N.A. 0.51 N.A.
0.34 0.23 0.53 0.14 N.A. N.A. N.A. 0.21 0.42 N.A. 0.37 0.49 0.46 0.31 0.12 0.14 0.45 N.A.
N.A. 10.29 8.97 1.94 171.25 N.A. N.A. N.A. N.A. N.A. (2.00) 1.78 5.67 N.A. 3.38 4.50 4.67 (19.00)
Z 2.72 1.80 Z Z 3.48 (4.80) Z Z N.A. (26.32) Z Z Z Z Z 9.44 Z
0.51 0.58 0.72 0.20 0.97 0.86 0.98 0.63 0.83 N.A. 0.89 0.38 0.87 0.96 0.84 0.75 0.92 0.91
0.72 0.63 0.74 0.32 0.94 0.92 0.94 0.71 0.58 N.A. 0.50 0.32 0.60 0.41 0.67 0.32 0.53 0.41
0.02 0.05 0.04 N.A. 0.00 0.08 N.A. N.A. N.A. N.A. 0.03 0.06 0.00 N.A. 0.02 0.03 N.A. 0.27
1.00 1.11 1.13 2.06 1.01 1.00 1.00 1.00 1.00 N.A. 0.67 2.29 1.21 1.00 1.42 1.29 1.27 0.95
0.88 0.43 1.53 0.75 N.A. N.A. N.A. 0.29 0.71 N.A. 1.26 1.52 1.09 0.78 0.21 0.43 1.73 N.A.
161
STATISTICAL AVERAGE - BENCHMARK CALCULATIONS

STANDARD DEV QUARTILES - FIVE POINT SUMMARY OUTLIERS
First Third Inner Inner Outer Outer Check
Mean N SD Minimum Median Maximum Range IQR Step
Quartile Quartile Fence - Fence - Fence - Fence - for
Q-0 Q-1 Q-2 Q-3 Q-4 R Fs S Low High
Mild Mild
300 30 502 - 25 73 374 2,432 2,432 348 523 (497) 896 (1,020) 1,419 NO SHO
Box end Box end Whiske
0% 29 35% -157% 5% 10% 14% 26% 183% 9% 14% -9% 27% -23% 41% SLO NO
0% 29 21% -92% 2% 5% 9% 20% 111% 7% 10% -8% 19% -18% 30% SLO MHO
1% 29 36% -157% 5% 11% 16% 30% 187% 12% 18% -13% 34% -31% 52% SLO NO
21% 26 99% -427% 19% 47% 62% 94% 521% 43% 64% -46% 126% -110% 191% SLO NO
1.71 29 59.79 (296.43) 5.95 12.24 17.49 48.81 345.24 11.54 17.31 (11.37) 34.80 (28.68) 52.11 SLO MHO
3% 10 2% 0% 1% 4% 5% 7% 7% 4% 5% -4% 10% -10% 16% NO NO
0% 29 20% -71% 3% 6% 11% 18% 89% 8% 12% -9% 22% -20% 34% SLO NO
2.21 29 1.68 0.77 1.15 1.47 2.46 7.55 6.78 1.31 1.96 (0.82) 4.42 (2.78) 6.39 NO SHO
0.41 26 0.36 0.01 0.14 0.28 0.50 1.38 1.37 0.36 0.54 (0.40) 1.04 (0.94) 1.58 NO MHO
0.31 26 0.29 0.01 0.11 0.22 0.35 1.18 1.17 0.24 0.37 (0.26) 0.72 (0.63) 1.08 NO SHO
26.59 20 79.69 0.82 1.61 5.53 13.96 362.50 361.68 12.35 18.52 (16.91) 32.48 (35.43) 51.00 NO SHO
123 20 123 1 28 66 227 448 447 198 297 (269) 524 (566) 821 NO NO
33.13 21 74.27 0.40 1.75 5.83 17.85 265.00 264.60 16.10 24.15 (22.40) 42.00 (46.55) 66.14 NO SHO
13.55 21 32.66 0.47 1.08 1.75 7.23 146.00 145.53 6.15 9.22 (8.14) 16.45 (17.36) 25.66 NO SHO
0.37 26 0.61 (0.55) - 0.23 0.73 1.61 2.16 0.73 1.09 (1.09) 1.81 (2.18) 2.90 NO NO
1.33 26 3.39 (5.50) (0.24) 0.62 1.74 11.43 16.93 1.98 2.98 (3.22) 4.72 (6.19) 7.70 MLO SHO
231 21 220 3 51 209 338 780 778 288 431 (381) 769 (812) 1,201 NO MHO
2.40 28 4.25 0.12 0.43 1.25 1.97 22.02 21.91 1.55 2.32 (1.89) 4.29 (4.21) 6.61 NO SHO
2.03 28 4.25 0.07 0.36 0.92 1.36 22.02 21.96 1.00 1.51 (1.15) 2.87 (2.65) 4.38 NO SHO
0.50 16 0.40 0.00 0.20 0.38 0.78 1.24 1.24 0.58 0.87 (0.66) 1.65 (1.53) 2.52 NO NO
0.29 16 0.18 0.00 0.17 0.28 0.44 0.55 0.55 0.27 0.40 (0.24) 0.84 (0.64) 1.25 NO NO
0.29 20 0.15 0.03 0.15 0.32 0.43 0.53 0.51 0.28 0.42 (0.27) 0.84 (0.68) 1.26 NO NO
31.78 17 59.67 (19.00) 3.38 8.97 23.30 190.50 209.50 19.93 29.89 (26.51) 53.19 (56.40) 83.08 NO SHO
1.13 10 10.96 (26.32) 1.54 2.74 5.33 14.86 41.17 3.79 5.68 (4.14) 11.01 (9.83) 16.70 SLO MHO
0.73 29 0.21 0.20 0.60 0.82 0.87 0.98 0.78 0.27 0.40 0.20 1.27 (0.20) 1.67 MLO NO
0.67 29 0.21 0.32 0.50 0.72 0.88 0.99 0.67 0.38 0.58 (0.08) 1.45 (0.65) 2.03 NO NO
0.09 22 0.11 0.00 0.01 0.04 0.17 0.40 0.40 0.16 0.23 (0.22) 0.40 (0.46) 0.64 NO NO
1.13 29 0.32 0.67 1.00 1.01 1.11 2.29 1.62 0.11 0.16 0.84 1.27 0.68 1.43 SLO SHO
0.79 20 0.51 0.03 0.39 0.73 1.13 1.73 1.70 0.74 1.11 (0.72) 2.24 (1.83) 3.36 NO NO
162
End of File
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Pilot Study - Financial Ratio Benchmarks For Real Estate Companies of The G.C.C. - Mahesh N Butani

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PILOT STUDY: FINANCIAL RATIO BENCHMARKS FOR REAL

ESTATE COMPANIES OF THE G.C.C.

Mahesh Narain Butani

A dissertation submitted in partial fulfilment of the requirements for the degree

Master of Science in Quantity Surveying.

Dissertation supervisor: Prof. Ammar Kaka

Sr. No. Contents Page No.

1.1 Rationale for the research 1

1.2 Research goals 3

1.3 Outline methodology 4

Chapter 2: Literature review: Financial performance 6

2.2 Purpose of financial ratios 6

2.3 Categories of financial ratios 8

2.4 Evaluating financial statements 8

2.5 Evaluating financial ratios 9

2.6 Research trends and opinions 9

2.7 Typical user profiles 11

2.8 Sources of financial ratio statistics 12

2.9 Special financial ratios 13

2.10 Limitations of financial ratio analysis 14

2.12 Case study: Financial performance of hospitals 16

Chapter 3: Literature review: Financial ratios in construction 21

3.2 Contractor insolvency models 21

3.3 Construction specific insolvency models 24

3.4 Analysis by surety providers 29

3.5 Construction industry in Malaysia 32

3.6 Health of contractors in Hong Kong 33

3.7 A model for the Egyptian construction market 35

3.8 Analysis of Indonesian construction firms 38

Chapter 4: Research design and methodology 41

4.2 Research goals 42

4.3 Data collection 43

4.4 Objective 1: Identification of financial ratios 43

4.5 Objective 2: Creation of benchmarks 46

4.6 Objective 3: Selection of ratio for detailed analysis 55

4.7 Objective 4: Observation of data grouped by year 56

4.8 Objective 5: Observation of data grouped by country 56

4.9 Objective 6: Observation of data grouped by company size 57

Chapter 5: Analysis of Results 58

5.2 Companies included in the study 60

5.3 Collective balance sheet profile of the companies 61

5.4 Objective 1: Identification of financial ratios 64

5.5 Objective 2: Creation of benchmarks 64

5.6 Objective 3: Selection of ratio for detailed analysis 75

5.7 Objective 4: Observation of data grouped by year 77

5.8 Objective 5: Observation of data grouped by country 79

5.9 Objective 6: Observation of data grouped by company size 86

5.10 Results of Kruskal-Wallis tests 91

5.11 Testing the hypothesis 92

6.3 The research hypothesis 98

6.4 Research limitations 98

6.5 Areas of further research 99

6.6 Contact details 99

Appendix A: BW plot and stat data for financial ratios 106

Appendix B: BW plot and stat data for ROCE 137

Appendix C: KW test results for ROCE 152

Appendix D: Main spreadsheets for financial ratios 154

Ref Details Page

Table 2.1 Users of financial ratios 11

Table 3.1 The constituent ratios of the model 28

Table 3.2 Description of variables used in the study 32

Table 3.3 Trend of changing ratios of the selected contractor 34

Table 3.4 Management action required based on grade obtained 37