Aitken Spence PLC

Financial Report Analysis

Aitken Spence PLC

Introduction to Company

Aitken Spence PLC (here in referred to as ASP) is one of the largest blue chip conglomerates in Sri Lanka with a very proud history spanning back to over 140 years. It was incorporated way back in 1868 by Patrick Spence, Gordon Clark, Edward Aitken and S.R Aitken. It has been listed in the Colombo Stock exchange since 1983. It can be proud of the 7000 plus employees that work under its many diversified fields.

Leisure arm of ASP comprises of a myriad of hotels, 22 to be precise located at various locations around the Asian region, Sri Lanka Maldives, Oman and India. These are categorized under several brands which include, Heritance Hotels and Resorts", "Turyaa by Heritance", "Aitken Spence Hotels and Resorts" and "Adaaran Hotels and Resorts". Heritance Kandalama designed by Geofrey Bawa was the first hotel to be awarded with LEED certification. It was also the first in Asia to be Green Globe certified for its ecotourism best practices. ASP is the largest foreign resort operator in Maldives with its Adaaran brand.

ASP is a leading player in the logistics industry of Sri Lanka, providing a full array of logistics related services. They are involved with freight forwarding, container handling, cargo consolidations and providing storage facilities. ASP handles cargo sales agencies with Singapore Airlines, Qatar airlines and Air Italy to name a few. TNT express is represented in Sri Lanka by ASP.

Destination management of ASP is handles by Aitken Spence Travels can boast of itself as the largest destination management company in the island. It has secured the presidential award for being the best destination management company stamping its superiority amongst the rest. Singapore airlines is represented in Sri Lanka by ASP.

ASP has their stakes in the plantation sector of Sri Lanka as well. They currently manage 13 estates in which low grown tea are grown and processed. Add to this, they hold majority of the shares of Elpitiya Plantation PLC.

Some of the other ventures they have their stakes are, power generation, apparel manufacturing, information technology, event management to name a few.

This report is aimed at studying the financial statements of ASP for the past five years. It aims to particular look in to the horizontal analysis, vertical analysis, ratio analysis and Z score analysis.

Horizontal Analysis

This is a method of comparing the historical financial information over a series of reporting periods. It can be used as a method to see if there are any unusual increases or decreases in the financial information over a certain year in comparison to a base year. Then, detailed investigation could be carried to ascertain the cause of this variance. Analysis can be done as a simple comparison of values in statement of financial position and/or income statement over the period in review. On the other hand, a base year could be selected and the financial values in succeeding periods can be compared to the base year values. In the analysis below the latter method is used.

One problem with this method is that, some of the financial values tend to be absent for certain periods but appear in some other. Hence the comparison of those financial values does not apply.

Horizontal Analysis - Statement of Financial Position

Analysis of Statement of financial Position between 2011 and 2012.

	2012	2011	Dollar Change 2012	% change 2012
Assets
Non- Current Assets
Property, Plant & Equipment	27893497	23925653	3967844	16.58
Leasehold properties	2549265	1359483	1189782	87.51
Intangible assets	528857	134026	394831	294.59
Investment property	102156	102799	-643	-0.63
Investment in associates	1470157	1335002	135155	10.12
Long-term investments	383495	473945	-90450	-19.08
Deferred tax assets	210468	138314	72154	52.17
	33137895	27469222	5668673	20.64
Current Assets
Inventories	1788467	1607724	180743	11.24
Trade and other receivables	8953827	4148373	4805454	115.85
Amounts due from associates	6100	23326	-17226	-73.85
Current investments	241542	261436	-19894	-7.61
Deposits and prepayments	755758	547022	208736	38.16
Current tax receivables	158172	122298	35874	29.33
Cash and short term deposits	6539959	5783935	756024	13.07
	18443825	12494114	5949711	47.620
Assets classified as held for sale	149125	181489	-32364	-17.83
Total Assets	51730845	40144825	11586020	28.86
Equity and Liabilities
Equity attributable to equity holders of the company
Stated capital	2135140	2135140	0	0
Reserves	12557127	11071652	1485475	13.417
Retained Earnings	10855377	8309395	2545982	30.64
	25547644	21516187	4031457	18.74
Minority interest	5700409	5129687	570722	11.13
Total Equity	31248053	26645874	4602179	17.27
Non-Current Liabilities
Interest-bearing liabilities	5742548	4143648	1598900	38.59
Deferred tax liabilities	444582	267078	177504	66.46
Employee benefits	387984	335637	52347	15.6
	6575114	4746363	1828751	38.53
Current Liabilities
Trade and other payables	6604061	3942187	2661874	67.52
Interest-bearing liabilities repayable within one year	2135469	1718328	417141	24.28
Amounts due to associates	14088	482	13606	2822.82
Current tax payable	286567	179647	106920	59.52
Short-term bank borrowings	4867493	2911944	1955549	67.16
	13907678	8752588	5155090	58.9
Total Equity and Liabilities	51730845	40144825	11586020	28.86

Analysis of Statement of financial Position between 2011 and 2013.

	2013	2011	Dollar Change 2013	% change 2013
Assets
Non-Current Assets
Property, Plant & Equipment	24,041,780	23925653	116127	0.49
Leasehold properties	1,463,930	1359483	104447	7.68
Intangible assets	654,056	134026	520030	388.01
Investment property	1,661,596	102799	1558797	1516.35
Prepaid operating leases	980,731	0	980731
Finance lease receivables	2,325,091	0	2325091
Investment in associates	1,931,205	1335002	596203	44.66
Long-term investments	462,117	473945	-11828	-2.50
Deferred tax assets	222,147	138314	83833	60.61
	33,742,653	27469222	6273431	22.84
Current Assets
Inventories	1,824,723	1607724	216999	13.50
Trade and other receivables	9,972,627	4148373	5824254	140.40
Amounts due from associates	168,964	23326	145638	624.36
Current investments		261436	-261436	-100.00
Deposits and prepayments	1,129,843	547022	582821	106.54
Current tax receivables	180,918	122298	58620	47.93
Cash and short term deposits	2,217,994	5783935	-3565941	-61.65
Other financial assets	6,764,163		6764163
	22,259,232	12494114	9765118	78.16
Assets classified as held for sale	149,125	181489	-32364	-17.83
Total Assets	56,151,010	40144825	16006185	39.87
Equity and Liabilities
Equity attributable to equity holders of the company
Stated capital	2,135,140	2135140	0	0.00
Reserves	12,695,793	11071652	1624141	14.67
Retained Earnings	13,222,324	8309395	4912929	59.12
	28,053,257	21516187	6537070	30.38
Minority interest	5,449,444	5129687	319757	6.23
Total Equity	33,502,701	26645874	6856827	25.73
Non-Current Liabilities
Interest-bearing liabilities	6,245,351	4143648	2101703	50.72
Deferred tax liabilities	504,743	267078	237665	88.99
Employee benefits	447,390	335637	111753	33.30
	7,197,484	4746363	2451121	51.64
Current Liabilities
Trade and other payables	7,713,638	3942187	3771451	95.67
Interest-bearing liabilities repayable within one year	1,370,093	1718328	-348235	-20.27
Amounts due to associates	0	482	-482	-100.00
Current tax payable	501,238	179647	321591	179.01
Short-term bank borrowings	5,588,753	2911944	2676809	91.93
Provisions	277,103	0	277103
	15,450,825	8752588	6698237	76.53
Total Equity and Liabilities	56,151,010	40144825	16006185	39.87

Analysis of Statement of financial Position between 2011 and 2014.

	2014	2011	Dollar Change 2014	% change 2014
Assets
Non-Current Assets
Property, Plant & Equipment	25220920	23925653	1295267	5.41
Leasehold properties	1461100	1359483	101617	7.47
Intangible assets	902600	134026	768574	573.45
Investment property	1737575	102799	1634776	1590.26
Investment in associates	2094496	1335002	759494	56.89
Long-term investments	387248	473945	-86697	-18.29
Deferred tax assets	220021	138314	81707	59.07
	35280093	27469222	7810871	28.43
Current Assets
Inventories	1639400	1607724	31676	1.97
Trade and other receivables	9312667	4148373	5164294	124.49
Amounts due from associates	146948	23326	123622	529.98
Current investments	0	261436	-261436	-100.00
Deposits and prepayments	1059688	547022	512666	93.72
Current tax receivables	241230	122298	118932	97.25
Cash and short term deposits	2728514	5783935	-3055421	-52.83
	25716019	12494114	13221905	105.83
Assets classified as held for sale	149125	181489	-32364	-17.83
Total Assets	61145237	40144825	21000412	52.31
Equity and Liabilities
Equity attributable to equity holders of the company
Stated capital	2135140	2135140	0	0.00
Reserves	13884656	11071652	2813004	25.41
Retained Earnings	16238762	8309395	7929367	95.43
	32258558	21516187	10742371	49.93
Minority interest	6519706	5129687	1390019	27.10
Total Equity	38778264	26645874	12132390	45.53
Non-Current Liabilities
Interest-bearing liabilities	7334466	4143648	3190818	77.01
Deferred tax liabilities	639486	267078	372408	139.44
Employee benefits	576416	335637	240779	71.74
	8550368	4746363	3804005	80.15
Current Liabilities
Trade and other payables	6576453	3942187	2634266	66.82
Interest-bearing liabilities repayable within one year	1622421	1718328	-95907	-5.58
Amounts due to associates	0	482	-482	-100.00
Current tax payable	597793	179647	418146	232.76
Short-term bank borrowings	4557167	2911944	1645223	56.50
	13816605	8752588	5064017	57.86
Total Equity and Liabilities	61145237	40144825	21000412	52.31

Analysis of Statement of financial Position between 2011 and 2015.

	2015	2011	Dollar Change 2015	% change 2015
Assets
Non -Current Assets
Property, Plant & Equipment	28696631	23925653	4770978	19.94
Leasehold properties	1906527	1359483	547044	40.24
Intangible assets	507171	134026	373145	278.41
Investment property	1648301	102799	1545502	1503.42
Investment in associates	5403518	1335002	4068516	304.76
Long-term investments	279346	473945	-194599	-41.06
Deferred tax assets	215907	138314	77593	56.10
	39729771	27469222	12260549	44.63
Current Assets
Inventories	1484504	1607724	-123220	-7.66
Trade and other receivables	7770650	4148373	3622277	87.32
Amounts due from associates	1333200	23326	1309874	5615.51
Current investments		261436	-261436	-100.00
Deposits and prepayments	799353	547022	252331	46.13
Current tax receivables	229366	122298	107068	87.55
Cash and short term deposits	2911135	5783935	-2872800	-49.67
	25476394	12494114	12982280	103.91
Assets classified as held for sale	226923	181489	45434	25.03
Total Assets	65433088	40144825	25288263	62.99
Equity and Liabilities
Equity attributable to equity holders of the company
Stated capital	2135140	2135140	0	0.00
Reserves	13864351	11071652	2792699	25.22
Retained Earnings	19022310	8309395	10712915	128.93
	35021801	21516187	13505614	62.77
Minority interest	7257649	5129687	2127962	41.48
Total Equity	42279450	26645874	15633576	58.67
Non-Current Liabilities
Interest-bearing liabilities	9436495	4143648	5292847	127.73
Deferred tax liabilities	655224	267078	388146	145.33
Employee benefits	635684	335637	300047	89.40
	10727403	4746363	5981040	126.01
Current Liabilities
Trade and other payables	7074023	3942187	3131836	79.44
Interest-bearing liabilities repayable within one year	2723741	1718328	1005413	58.51
Amounts due to associates	639	482	157	32.57
Current tax payable	538103	179647	358456	199.53
Short-term bank borrowings	2089729	2911944	-822215	-28.24
	12426235	8752588	3673647	41.97
Total Equity and Liabilities	65433088	40144825	25288263	62.99

Trend Analysis - Income Statement

Year	2011	2012	2013	2014	2015
Revenue after tax (Rs)	24728991	30191898	36606286	36108370	34930493
Cost of Sales (Rs)	6621234	9862472	12925255	10377394	8964702
Gross Profit (Rs)	18107757	20329426	23681031	25730976	25965791

Year	2011	2012	2013	2014	2015
Revenue after tax (%)	100.00	122.09	148.03	146.02	141.25
Cost of Sales (%)	100.00	148.95	195.21	156.73	135.39
Gross Profit (%)	100.00	112.27	130.78	142.10	143.40

Cost of sales has had a haphazard movement over the last five years. It has recorded a very high value in 2013. However, the revenue after tax has been high in the same year compensating it. Gross profit has seen a continuous rise over the last five years, initially at a much faster pace but gradually diminishing its percentage increase. Cost of sales would have probably risen from 2011 to 2013 because of the continuous stock pillage at ASP.

Non -current assets has contributed to major portion of the asset base aver the last five years. We can observe a significant increase in the ‘Property plant and Equipment’ category. This means the company has invested to acquire land and equipment over the past few years which could mean they are expanding.  Percentage contribution of ‘Cash’ over the years has been on the rise, which could infer the liquidity position is in a better state. Furthermore, the receivable contribution to total assets last year has significantly dropped which goes to show that management of receivables has particularly been good.

Major contribution to ‘Total Equity and Liabilities’ has been from Equity section. Reserves of the company have seen a continuous growth. However, the retained earnings have seen a drop. This may be due to the fact that management has given more dividends in the recent years. Trade payables that contributed to around 12-13 percent in 2013 and 2014 has seen a drop in 2015. This could be as a result of the better cash position company had. Interest bearing liabilities or the long term loans which saw a higher percentage of 14.42 has gradually decreased to 10.32 in 2015.

Ratio Analysis

Presentation of the relationship between one mathematical quantity and another is represented by ratios. If this is applied to financial statements, it becomes financial ratio analysis. These ratios use different components from financial statements and determines their relationship. Depending on the ratio, analysts could determine the position the company is at during the evaluation period. Ratios can be categorized in to four types.

·         Liquidity Ratios

·         Profitability Ratios

·         Solvency Ratios

·         Market Ratios

Liquidity Ratios

Liquidity reflects the ability of the company to fulfill its short term obligations with the assets that are readily converted in to cash. These type of assets are classified as ‘Liquid Assets’ and in financial statements these are categorized under ’Current Assets’. These current assets are used to fulfill the short term obligations of the company more prominently known as ‘Current Liabilities’.

Several ratios can be categorised under liquidity ratios and they are given below in the perspective of Aitken Spence PLC over the span of last five years.

Current Ratio

This ratio indicates the ability of the company to meet its current liabilities with its current assets.

Year	2011	2012	2013	2014	2015
Current Ratio	1.43	1.33	1.44	1.86	2.05

Higher current ratio is always desirable. Higher ratio indicates that there is a larger gap between the current assets and current liabilities. Other than the slump in 2012, generally the current ratio has been on the rise at ASP. Company could be satisfied with their current ratio position of last year specifically, which indicate that as an average, there are more than two current assets per each current liability of the company. This is a very good sign.

Quick Ratio

Most liquid asset a company possesses is cash. On the flip side, inventories are not easily transferred to cash. Quick ratio is a means of measuring how well a company can fulfill its current liabilities with its most liquid assets.

Year	2011	2012	2013	2014	2015
Quick Ratio	1.24	1.20	1.32	1.74	1.93

Analyzing the quick ratios between 2011 and 2013 we can see that there is a considerable difference. However, the current ratios were almost the same between these two years. This tells us that in 2011, there was a larger build- up of inventory and in 2013 they have managed it well.

Accounts Receivable Turnover

This ratio measures how successful a company is in collecting its outstanding receivables. It determines the number of times receivable turnover is for a company. Higher value indicates that cash collection is very efficient and within a shorter period of time receivables are collected..

Year	2011	2012	2013	2014	2015
Accounts Receivables Turnover (Times per year)	6	4.7	3.9	3.8	4.1

If we analyse the above table, we can see that generally the number of times receivables are collected has gone down over the years. In 2015 however, there is an increase which is a good sign for the company. 

Debtors Collection Period

This is another method of measuring the receivables turnover. Here, the focus is on the numberof days it takes to collect cash from the receivables. Lower the number of days it is preferable since the cash is collected from debtors early.

Year	2011	2012	2013	2014	2015
Debtors collection Period (Days)	60	78	93	96	88

As said before, the debtor’s period has gone up from two months to more than three over the period from 2011 to 2014. In 2015 it has come down and from the companies’ perspective it should come down further so that payments are not held with debtors for a long period of time unnecessarily.  Longer debtors collection period could even result in unfavorable bad debts from occurring. Generally, credit periods given for payment is one month. Here at ASP, it is a very long time in my view.

Total Assets Turnover

This ratio is a measure of the effectiveness of the asset base of the company in generating sales. Higher turnover is preferred since it indicates the company is efficiently using its asset base to make more sales. This ratio however does not take in to account the depreciation method that is employed by each company. Hence it should not be the sole measure of effectiveness of a company in this regard.

Year	2011	2012	2013	2014	2015
Total assets turnover	0.626	0.668	0.689	0.624	0.558

Highest total assets turnover was recorded in 2013 within the last five years. In 2015, it has slumped to the lowest. ASP would ideally want it to be higher than before. This could indicate the assets available are not generating incremental sales.

Stock Turnover Ratio

What this ratio measures is how well the inventory is managed with respect to the sales level of the company. Analysts can determine if money spent on inventory is efficiently utilized with relation to the sales. Has there been any unexpected sales drops or poor inventory planning can be evaluated using this ratio. Generally a higher ratio is preferred owing to larger sales. Higher inventory turnover could mean that purchasing function was very tight leading to lower inventory purchases.  This also could infer that not enough inventories were available to make up valuable sales leading to loss of opportunities. Lower ratio could mean no proper control on inventory management.

Year	2011	2012	2013	2014	2015
Stock Turnover Ratio	4.144	5.801	7.142	6.058	5.815

Highest inventory turnover has recorded in 2013. In the last couple of years it has been coming down. This is not particularly desirable for the company. It could infer larger build up inventory due to poor planning.

Stock Residence Time

This is another form of illustrating inventory turnover ratio. In this case, the number of days it takes for the replenishment of stocks in a company is determined. Higher the number of days it is a sign that there is a lot of inventory built up in the firm, which could lead to obsolescence. Lower number of days indicates that stock management is much more efficient. Hence a lower stock residence time is preferred.

Year	2011	2012	2013	2014	2015
Stock Residence Period (Days)	88	63	51	60	63

As in the previous case with stock turnover ratio, number of days has been minimal in the year 2013. In 2011, inventory built up has been for almost three months’ worth of stock which could deem to be very long.

Profitability Ratios

Extent to which a company can use its capital and assets to generate profits is determined by profitability ratios. Companies strive hard and face continuous challenges to improve the profitability. These ratios are key figures when determining the success of the particular company in analysis.

Gross Profit Margin

How much of gross profit earned on sales is given by this ratio. Higher the value it is more desirable, which indicate there is a higher gross profit to cover up the expenses that would ultimately result in higher net profits.

                         

Year	2011	2012	2013	2014	2015
Gross profit Margin (%)	73.06	67.37	64.75	70.94	74.00

After the slump back in 2013, ASP has shown a continuous improvement in its gross margin. It has gone on to record the highest gross margin in the last five years in 2015. ASP could be happy on this regard.

Net Profit Margin

How much of each dollar of sales is left after all expenses is determined by this ratio. Here too, a higher value indicates the company has managed its expenses well to retain a profit to itself.

Year	2011	2012	2013	2014	2015
Net Profit Margin (%)	13.86	15.60	11.62	12.49	13.98

Over the years from 2013 to 2015, the net profit has shown an improvement. The most significant point to note is the gross margin and net margin differences between 2011 and 2012. Even though the gross margin of 2011 was higher than that of 2012, the net margin was not. This indicates that company has managed its expenses considerably better in 2012 than in 2011.

Return on Assets

The extent to which a company effectively uses its asset base to generate profits is determined by this ratio. Higher value is a good sign which infers that the company is well managed. When evaluating the success of a business this is one of the most important assets to consider. However, a large number of intangible assets, assets that are heavily depreciated and any unusual incomes or expenses could distort this ratio calculation.

Year	2011	2012	2013	2014	2015
Return on Assets (%)	5.93	7.26	4.04	4.20	5.14

General trend has been somewhat haphazard. In 2012, the largest percentage has been recorded. Considering the drop in 2013 and 2014, company can be happy that the return on asset ratio has increased.

Return on Equity

The rate of return on the equity capital invested by the owners of the company is determined by this ratio. Higher rate is preferred and it encourages the owners to invest in the company. At the end of the day, reason that owners invest money in companies is to get a better return on what they have invested. So when investing, this is a very common ratio that is looked in to.

Year	2011	2012	2013	2014	2015
Return on Equity (%)	12.87	15.07	12.70	11.63	11.55

Last few years has seen a continuous decline in the return on equity ratio. This could be a worrying sign for the owners as they get lesser returns. Company will have to look in to this more seriously to attract more investors.

Solvency Ratios/ Coverage Ratios

These ratios assess the extent to which a company can meet the long term obligations, avoid bankruptcy and remain solvent.  Lenders always look in to these ratios because they want to know if the company would become vulnerable when confronted by economic slumps. Higher debts means the company is at risk to investors and long term creditors alike.

Debt to Total Assets Ratio

This ratio determines the debt carried by a company with relation to the assets it possesses. If the percentage is greater than 100, it means the company is carrying more debt than the assets it has, which could be risky. Always, a lower ratio is expected by creditors.

Year	2011	2012	2013	2014	2015
Debt to Total Assets (%)	33.63	39.59	40.33	36.58	35.39

Generally, the debt to total asset percentages are quiet low and it is a good sign for the creditors. Considering the high values in 2012 and 2013, company can be happy that the values have come down over the last two years.

Debt to Equity Ratio

This ratio measures the financial leverage of a company by indicating what proportion of debt and equity a company is using to finance its assets. A lower number suggests there is both a lower risk involved for creditors and strong, long-term, financial security for a company

Year	2011	2012	2013	2014	2015
Debt to Equity Ratio (%)	22.00	25.21	22.73	23.10	28.76

Debt to equity ratio has seen a slight growth in the last couple of years from 2013 to 2014. This indicates that the percentage growth of equity is lesser than the increase of debt in the company. Creditors would have to take note of this fact as higher debt to equity values are undesirable for them.

Interest Cover

This is a measure of the number of times a company could pay its interests with the earnings it makes. Higher ratio value is desirable since it gives a higher assurance to the creditors that the company could settle the interest liabilities with ease. If the interest cover ratio starts to decline, company would either have to use its cash reserves which could otherwise be used as reserves during emergencies or invested on capital assets. In the worst case it would have to borrow more to cover up the interest which is undesirable.

Year	2011	2012	2013	2014	2015
Interest Cover	3.60	5.38	1.64	2.15	4.04

Other than the dip in 2013 which recorded an interest cover ratio of 1.64, generally ASP has maintained a fair value of this ratio. Lenders by looking at the figures in 2015 would be encouraged to lend their money without much hesitation.

Market Ratios

Earnings per Share

This is a market prospect ratio that measures the amount of money each stock would receive if the company distributed all of its net profits to the outstanding shares at the end of the financial year. Higher the value, it indicates that the company is in a good position in relation to profitability.

Year	2011	2012	2013	2014	2015
EPS (Rs)	6.25	9.14	8.05	9.04	12.02

The general trend is that the EPS has gradually risen over the past few years. In 2015, ASP has recorded the highest EPS. This is a good sign for the shareholders as they can expect a higher return for the money invested.

Dividends per Share

This is the actual amount of money per share that shareholders receive from the profits made by the company. Higher the DPS, shareholders can expect a higher price per the shares they have bought. It is a sign that the management feels continuous sustainability can be maintained in the future.

Year	2011	2012	2013	2014	2015
DPS (Rs)	1	1.40	1.5	2	2

As you can observe, the DPS has had a continuous growth over the last five years. This is a very encouraging sign for any investor. However, considering the EPS and DPS of 2014 and 2015, one might feel the dividends paid should have been much more in 2015.

Price Earnings Ratio (P/E)

This is another method of measuring the profitability of a company.  P/E is a measure of how many times a shareholder is willing to pay for a stock relative to the earnings of the company. Lower value is preferred since for a one dollar of earnings, the amount that needs to be paid is less in this case. This ratio is particularly useful when comparing firms in the same industry.

Year	2011	2012	2013	2014	2015
Price Earnings Ratio (times)	25.97	12.33	14.86	10.83	8.28

P/E ratio has continuously dropped over the past couple of years. This is a desirable indicator for the shareholders. With lesser amount of pay they can secure a share in 2015 than it was in preceding years.

Dividend Yield

This ratio is used to determine how much of earnings are received by an investor for every rupee paid for a share. Higher the ratio it indicates that the investor receives more for what he has invested in.

Year	2011	2012	2013	2014	2015
Dividend Yield (%)	0.62	1.24	1.25	2.04	2.01

General trend is that the ratio has risen in the past two years comparative to the earlier years. This is a good sign for the investors. In 2011 -2013, market value of a share was very high. This was specially observed in 2011. This has led to the low dividend yields in those few years.

Earnings Yield

Firms’ earnings as a percentage of the market price of a share is measured by earnings yield. This is in fact the inverse of P/E ratio. Higher earnings yield is desirable. When comparing earnings yield and P/E, latter has an upper hand as a better valuation measure. Potential returns to be made can be intuitively gauged from earnings yield; however it has number of drawbacks. It is more volatile, degree of uncertainty is high and it indicates returns only.

Year	2011	2012	2013	2014	2015
Earnings Yield	3.85	8.11	6.73	9.23	12.08

Higher earnings yield is observed over the last couple of years which is encouraging for the investors.  It should be noted that, just one ratio should not be the deciding factor for any investor to opt for investing in a firm. Several factors have to be studied to gauge the performance of the firm before going forward with the investment decision.

                                                                                                                           

Z Score

The Altman Z-score is the output of a credit-strength test that gauges a publicly traded manufacturing company's likelihood of bankruptcy. The Altman Z-score, is based on five financial ratios that can be calculated from data found on a company's annual report. It is a very powerful tool in gauging the solvency of a firm twelve months prior, with an accuracy level of 95%.

The Altman Z-score is calculated as follows:

  

From the Z values thus obtained, there has been a correlation that was proposed by Altmen after considerable research on to these values.

As per his proposition, Z < 1.80 means the likelihood the company is heading towards bankruptcy is high.  They are said to be in the ‘Distress Zone’. Z value in between 1.80 and 2.99 (1.8 < Z < 2.99) means the company is in ‘Grey Zone’. The future outcome of the firm cannot be assured with certainty. Firms in this zone have to try and improve on their Z value. If the Z value is greater than 2.99 (Z > 2.99) they are said to be in the ‘Safe Zone’.

Year	2011	2012	2013	2014	2015
X1	0.093	0.088	0.121	0.195	0.199
X2	0.207	0.210	0.235	0.266	0.291
X3	0.059	0.065	0.039	0.040	0.050
X4	4.881	2.234	2.144	1.777	1.745
X5	0.616	0.584	0.652	0.591	0.534
Z	4.136	2.530	2.535	2.389	2.386

Apart from 2011 where the Z value was very high, generally ASP has remained in the ’Grey Zone’ for the past couple of years. Their average stock market value per share has declined over the years from Rs. 163 back in 2011 to Rs. 97 in 2015.