Question

There are two important questions financial managers should ask:

• What level of assets are needed to operate?
• How to finance those assets or raise capital? (The firm can use equity or debt financing or combination of both.)

Select a publicly traded company (make sure your selected company is different than your classmates’) based in KSA and look (in terms of percentage) how it finances its operations using equity or debt financing.

In addition, in Saudi Arabia Vision 2030 stated SMEs (Small-Medium Size Enterprises) struggles to access adequate funding from the financial institutions. Offer two recommendations how this struggle is addressed and be in alignment with Saudi Vision 2030.

Answer 1

Company chosen: Etihad Etisalat Co. (7020)

	AED billion	%age
Total Assets	128.266	100.00%
Debt	70.499	54.96%
Equity	57.767	45.04%

The compnay finances its operations with a healthy mix of debt and equity. The proportion funded by debt is 55% while that funded by equity is 45%.

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In Saudi Arabia Vision 2030 stated SMEs (Small-Medium Size Enterprises) struggles to access adequate funding from the financial institutions. Offer two recommendations how this struggle is addressed and be in alignment with Saudi Vision 2030.

Two recommendations:

• The banks and financial institutions must be mandated to allocate a higher proportion of their lendings to SMEs. Currently this limit is on a lower side. This will ensure sufficient availability of funds to SMEs.
• Additiona incentives should be given to the financial institutions on granting capital to SMEs. This incentive can be tax breaks, lower tax regime, interest free capital etc.