Blue Diamonds Jewellery Worldwide PLC

Blue Diamonds Jewellery Worldwide PLC

Introduction

This comprehensive analysis of financial statements for “Blue Diamonds Jewellery Worldwide PLC” that specifically looks at the statement of financial position and the income statement from 2013 to 2017 . Trend analysis, Vertical analysis, Horizontal analysis and a ratio analysis has conducted from 2013 to 2017 by highlighting the specific standalone elements and specific behavioral trends within the five years period.

In the end of the analysis it gives an insight about how the organization manages its liquidity and efficiency, solvency, profitability and market behavior along with important behavioral patterns and trends which provides key details regarding organizations assets, equity, liabilities and profits or losses.

Important: - #DIV/0! Items have removed and left them with empty cages.

About “Blue Diamonds Jewellery Worldwide PLC

“Blue Diamonds Jewellery Worldwide PLC, is an internationally reputed company that manufactures specialized ‘floating diamonds’ jewellery. As an internationally renowned company amongst the Gem & Jewellery exporters in Sri Lanka, Blue Diamonds Jewellery Worldwide has won several accolades such as the Presidential Export Awards in 2006 & 2007” (Blue Diamonds Jewellery Worldwide PLC, 2016/2017)

“Being established in 1991, Blue Diamonds Jewellery Worldwide is a pioneer in the industry, and to date the only public quoted diamond jewellery company listed in the Colombo Stock Exchange. It is also the first company in Sri Lanka to export quality jewellery, under an international brand name.” (Blue Diamonds Jewellery Worldwide PLC, 2016/2017).

Trend Analysis

	2013	2014	2015	2016	2017
ASSETS
Non-current assets
Property, plant and equipment	100	92.9766029	87.39218224	79.3178092	73.60893083
Leasehold property	100	98.6692819	97.33856373	96.0078456	94.66658148
Intangible assets	100	68.2720811	36.54416223	14.3572236	0
Financial assets - Available-for-sale	100	4505.85504	107.508432	102.828131	95.81270183
Investment in subsidiary	100	0	7.566425651	7.56642565	0
Financial assets - loans and receivables	100	104.12858	117.080501	131.906455	134.9775631
Loan receivable
Related part receivable	100	0	0	0	0
Total non-current assets	100	96.700333	91.65544454	91.8815339	88.66777549
Current assets
Inventories	100	120.415667	114.9802058	95.7618032	78.45250051
Amounts due from related parties	100	0	0	753.032582	0
Loan receivable
Trade and other receivables	100	93.3013724	27.5734575	127.922019	124.7556253
Short term investments	100	108.795391	120.1668534	127.174639	137.1795766
Cash and cash equivalents	100	58.2977279	179.8910282	70.6456539	32.84840606
Total current assets	100	100.798226	123.5658474	94.7469501	72.18665085
Total assets	100	99.650449	114.6280779	93.944377	76.80284117

·         In the trend analysis 2013 considers as the base period. The fluctuations of other years are explained by considering 2013 as the base period. 

When referring to the company’s statement of financial position within the period of 2013 to 2017 it’s important to identify the trends in each important element.

·         When referring to the financial assets available for sale it demonstrates an unusual trend. In 2014 it starts with 4506% of increase and it starts to decline year by year gradually. The key reason for this is concerned as according to the financial statements in 2013, the inclusion of unquoted investments. It’s a onetime investment took place with Fior Drissage Jewelers Ltd

·         Total none current assets demonstrate in overall a declining trend but when it comes to total current assets it demonstrates a increasing pattern up to 2015 then it illustrates a decreasing pattern. Eventually in total assets until 2015 it shows a gradual increment, then it show a decline in trend. Since the representation of current assets in total assets are significantly high. The changes of current assets reflects on total assets.

·         As a whole when concerning about the trend in total assets it indicates an adverse trend for “Blue Diamonds Jewellery Worldwide PLC”.

	2013	2014	2015	2016	2017
EQUITY AND LIABILITIES
Equity
Stated capital	100	100	179.2887728	179.288773	179.2887728
General reserves	100	100	95.90582148	95.9058215	95.90582148
Revaluation reserve	100	100.928073	100.9280729	100.928073	100.9280729
Financial assets available-for-sale reserve	100	35.5290721	93.25616021	97.4598612	103.7609008
Accumulated losses	100	161.243752	310.8688675	438.420349	557.8884218
Total equity	100	87.9622348	111.3429367	86.088198	62.4327278
Non-current liabilities
Employee benefits	100	106.335933	140.8941407	120.065695	115.0627098
Bimputh Loan payable				0
Total non-current liabilities	100	106.335933	140.8941407	120.065695	373.7274487
Current liabilities
Trade payables	100	1030.29399	100.629957	110.789603	116.1713205
Current taxation	100	47.7612108	199.5705662	255.771313	434.5945298
Other payables and accruals	100	90.9725196	117.8297027	160.664117	135.8607381
Bank overdraft	100	0	0	22954890.8	29953735.38
Related party payables	100	0	4868.787601	0	0
Total current liabilities	100	354.793872	177.2348668	257.363092	282.700995
Total liabilities	100	287.249388	167.3554659	220.038135	307.4469736
Total equity and liabilities	100	99.650449	114.6280779	93.944377	76.80284117

·         When it comes to the equity and liabilities. With comparing the base year stated capital and general reserves from 2015 to 2017 illustrate a constant and static trend. But revaluation reserve demonstrate a static trend from the 2014 onwards.

·         Accumulated losses demonstrate an infrequent trend in its behavior. From 2015 to 2017 it demonstrate that accumulated losses increased unexpectedly enormous amounts. This represents the losses that the organization incurred annually as an accumulated amount.

·         Total equity show an increment until 2015. From 2015 to 2017 it demonstrates a decline. This explains the company started to lose their equity share holders gradually. This could be sue to the continuous lose making in an increasing pattern consecutively.

·         When referring to the total none current liabilities it shows a fluctuating trend. But from 2016 to 2017 it shows a significant escalation.

·         When referring to the bank overdraft it demonstrate a highly unusual increment in the trend. With comparing to 2013 in 2016 and 2017 it shows a gigantic increment

·         Total current liabilities in the other hands decreases up to 2015 but then demonstrate a gradual increase. As a result total liabilities replicates the same trend. It’s clear that since equity capital started to get decreased they have decided to pay more attention to short and long term liabilities. Taking bank overdraft facility could demonstrate as a example

	2013	2014	2015	2016	2017
Revenue	100	61.0082294	50.06570177	78.9339517	32.77663746
Cost of sales	100	87.1049029	90.67113967	143.109456	82.89656643
Gross loss	100	10.4823303	61.1709081	96.8717015	104.524455
Selling and distribution expenses	100	63.5536363	168.3856405	101.254181	111.1968559
Administrative expenses	100	83.8770739	134.8274211	118.213529	86.70329549
Other Income	100	326.206321	83.02062585	0	0
Loss from operations	100	134.059601	286.1960742	263.590175	231.9555778
Net finance income	100	108.774754	96.5239277	137.074632	54.80241262
Share of profit of associate (net of tax)	100	69.2434528	0	0	0
Loss/Profit before income tax	100	140.797292	334.320108	296.568805	276.475882
Income tax expense	100	47.7068392	270.9901035	203.305647	157.0726221
Loss/Profit for the year	100	138.900105	333.0294402	294.668098	274.0424393

·         When referring to the income statement it shows fluctuations throughout the period as a trend but highest sale increment recorded in 2016 as per the chairman’s’ report company has opened a new show room in 2016 .

·         Other income shows a significant trend since it demonstrate a significant increment in 2014 and it demonstrates a drastic drop down from 2015 to 2017. In 2014 the company gain a profit from disposal of property, plant and equipment along with the income generated from selling of sand dust and wasted iron. 

·         When it comes to loss from operations it illustrates an increase up to 2015 and then it gradually decreases. The major reasons can be identified that in 2015 since it shows the peak of the trend, a higher proportion of director’s remunerations and salaries and wage costs are incurred.

·         Other than that when it comes to income tax expenses up it demonstrate a fluctuating trend but from 2015 in reach at its peak in the trend within the period.

·         As a whole from 2013 to 2017 loss for the year has increased from a 2013 to 2015 but 2015 onward it shows a gradual decline in trend.

Trend analysis able to provide significant information about the organization by looking at its past trends. When looking at the statement of financial position from 2013 to 2017 even id demonstrated an increment in the asset base within first three years 2015 onwards it shows a decline in the asset base from 2015 onwards. Liabilities and equity as a whole while equity base gradually declining from 2015 liabilities demonstrate an increase in the trend from 2014 onwards. In the income statement it shows the revenue is declining. But it demonstrates a declining trend in loses.

Horizontal analysis

	2013	2014	2015	2016	2017
ASSETS
Non-current assets
Property, plant and equipment	-3.00364768	-7.023397117	-6.006264447	-9.239239483	-7.19747363
Leasehold property	15.10940982	-1.330718135	-1.348665066	-1.367102702	-1.397035949
Intangible assets	934.6481065	-31.72791889	-46.47275778	-60.71267538	0
Financial assets - Available-for-sale	32.17425945	44.05855041	-0.976140282	-0.043534273	-0.068224801
Investment in subsidiary	0.04930685	0	0	0	0
Financial assets - loans and receivables		4.128580435	12.43839157	12.6630425	2.328247349
Loan receivable			-5.425026197	-17.47657138	-21.84911729
Related part receivable	-4.039621556	-100
Total non-current assets	52.27191367	-3.299667026	-5.217033158	0.246673171	-3.497719616
Current assets
Inventories	-17.1935747	20.41566696	-4.513915288	-16.71453137	-18.07537255
Amounts due from related parties	-9.869879468	-100	0	0	0
Loan receivable			34.35340387	72.54899521	14.50441339
Trade and other receivables	9.127379597	-6.698627611	-70.44688969	363.9317336	-2.475253396
Short term investments		8.795390907	10.45215467	5.831712415	7.867085757
Cash and cash equivalents	-45.28650728	-41.70227208	208.572966	-60.72863965	-53.50258049
Total current assets	-24.58756505	0.798225825	22.58732369	-23.32270438	-23.81110865
Total assets	-12.17063501	-0.349551025	15.03016702	-18.04418362	-18.2464735

·         Within the horizontal analysis it demonstrate the percentage change in a particular number with comparison to the previous year. Within the period of 2013 to 2017 in the income statement the intangible assets have risen significantly in 2013. Compared to 2012 it is 934% .the major reason for that is during the year of 2013 they have invested more money in additional computer software.

·         In 2016 the trade and other receivables increased from 364% comparing to 2015. According to the organizations’ financial reports the main reason is 2015 trade receivables demonstrate the lowest within the five years period whereas in 2016 it demonstrates the highest.

·         Apart from the above standalone difference in 2015 with comparison to 2014 in cash and cash equivalents it demonstrate a 208% of increment. Comparing to 2014 in 2015 the inclusion of repo has increased where there is no inclusion in 2014. Since repo simply means a repurchase agreement it should be in a form of short term loan. It’s a questionable are where it should be under current assets or current liabilities.

	2013	2014	2015	2016	2017
EQUITY AND LIABILITIES
Equity
Stated capital	-80.42908864	0	79.28877283	0	0
General reserves	0	0	-4.094178519	0	0
Revaluation reserve	0	0.92807287	0	0	0
Financial assets available-for-sale reserve	96.2147943	-64.47092795	162.4784573	4.50769252	6.465266388
Accumulated losses	-93.29976323	61.24375208	92.79436471	41.03063874	27.24966407
Total equity	-8.03003604	-12.03776523	26.58038644	-22.68194055	-27.47818021
Non-current liabilities
Employee benefits	-36.28393454	0.063359326	0.324990879	-0.147830463	-0.041668728
Bimputh Loan payable	0			0	0
Total non-current liabilities	-36.28393454	0.063359326	0.324990879	-0.147830463	2.112691347
Current liabilities
Trade payables	-2.768032166	930.2939851	-90.23288901	10.09604509	4.857601678
Current taxation	-80.2410131	-52.23878919	317.8507261	28.16083969	69.91527472
Other payables and accruals	-58.94898811	-9.027480379	29.52230323	36.3528151	-15.43803254
Bank overdraft	3.174603175	-100	0	0	30.48955748
Related party payables		0	0	-100	0
Total current liabilities	-52.55269336	254.7938723	-50.04567987	45.21019298	9.845196787
Total liabilities	-49.01355788	187.2493882	-41.73861712	31.47950327	39.72440425
Total equity and liabilities	-12.17063501	-0.349551025	15.03016702	-18.04418362	-18.2464735

·         In 2015 with comparison to 2014 financial assets available-for-sale reserve has increased by 162%. Referring to the exact values this reserve represent negative value which represent a loss. It demonstrates the loss has been significantly increased from 2014 to 2015. But it does not provide any explanation for that in a note.

·         Trade payables in 2014 with comparison to 2013 indicates 930% of increment. The company obtained a credit facility of USD 2,750,000 from Seylan Bank PLC by previous years by pledging inventory of jewelry as security is the key reason for this.  As a final result of lots of procedures that they have recognized their final liability of 36,160,377 to the Seylan Bank PLC.

·         Total current liabilities from 2013 to 2014 has increased by 255% which is another standalone factor to be looked at. The main reason can be described as the liability that has recognized in 2014. It has significantly effected in current liabilities to rise in 2014.

	2013	2014	2015	2016	2017
Revenue	16.76969091	-38.99177055	-17.93615022	57.66073171	-58.47586909
Cost of sales	14.81400487	-12.89509709	4.094186025	57.83352515	-42.0747107
Gross loss	22.48515185	-110.4823303	483.5621126	58.36237271	7.899885593
Selling and distribution expenses	-3.499549921	-36.44636369	164.9504424	-39.86768653	9.819520122
Administrative expenses	-24.73855594	-16.12292611	60.74406845	-12.32233943	-26.6553528
Other Income	-97.94107295	226.206321	-74.54965753	-100
Loss from operations	312.9004873	34.0596006	113.4842062	-7.898745413	-12.00143257
Net finance income	-72.52746614	8.774753709	-11.26256378	42.01103875	-60.02001853
Share of profit of associate (net of tax)	-15.5967991	-30.75654717	-100
Loss/Profit before income tax	-275.6474448	40.79729156	137.4478261	-11.29196305	-6.775130273
Income tax expense	-80.22311949	-52.29316076	468.0319798	-24.97672613	-22.74064985
Loss/Profit for the year	-319.9399058	38.9001048	139.7618351	-11.51890409	-6.999624058

·         When referring to the income statement it within the 2013 to 2017 period of time even the gross loss demonstrates a significant decline in 2014 in 2015 it shows a steep increase of 483% with regarding to the previous year. This is due to in 2014 it demonstrate higher revenue and lower cost of sale with comparing to 2015. 

·         Loss from operation in 2013 shows a significant increment with comparing to 2012 due to the low amount of losses has recorded in 2012 with comparing to 2013. But it shows losses are gradually declining from 2015 to 2017. 

·         When it comes to income tax expenses in 2015 it demonstrate a sudden increment compared to the 2014.the key reason for that as per the income statement of 2015 it explains that current tax on none business income for the year the rate has changed from  12% to 28% . in 2015 onwards it records as 28%

·         Loss for the year seems to be gradually decline from 2015 onwards.

Within the Horizontal analysis it’s clear that total asset base of the organization seems to be declining from 2015 onwards when concerning about the year by year percentage change.  From 2015 onward it demonstrates total equity base starts declining whereas the total liabilities starting to get increase. But at the same time it demonstrates from 2015 onwards the losses are gradually in a declining pattern. Organization at this plat form demonstrates a higher uncertainty

Vertical analysis

	2013	2014	2015	2016	2017
ASSETS
Non-current assets
Property, plant and equipment	13.80264	12.878244	10.523102	11.65365	13.228648
Leasehold property	0.812128	0.8041322	0.689634	0.829967	1.0010232
Intangible assets	0.195392	0.1338658	0.0622921	0.029861	0
Financial assets - Available-for-sale	0.043558	1.9695459	0.0408526	0.047677	0.0543393
Investment in subsidiary	2.065572	0	0.1363453	0.166364	0
Financial assets - loans and receivables	9.709658	10.145994	9.9173922	13.63324	17.06429
Loan receivable	0	1.2479753	1.0260546	1.033161	0.9876324
Related part receivable	1.380002	0	0	0	0
Total non-current assets	28.00895	27.179757	22.395673	27.39393	32.335932
Current assets
Inventories	44.18751	53.39533	44.323251	45.04235	45.136621
Amounts due from related parties	0.163944	0	0	1.314132	0
Loan receivable	0	0.1501033	0.1753182	0.369113	0.5169821
Trade and other receivables	7.314508	6.8484752	1.759484	9.960007	11.88141
Short term investments	1.057149	1.1541634	1.1082296	1.431086	1.8882011
Cash and cash equivalents	19.26794	11.272171	30.238044	14.48938	8.2408538
Total current assets	71.99105	72.820243	77.604327	72.60607	67.664068
Total assets	100	100	100	100	100

·    In the vertical analysis above, from 2013 to 2017 income statements have been considered. Within the first part of the vertical analysis none current assets and current assets have demonstrated a higher representation as a percentage of total assets. Since current assets represents a higher volume it demonstrates most of the organizational assets are liquid and the company is able to reinvest or purchase plant assets. 

·    The major reason for current assets demonstrate a higher representation than the total none current assets could be since “Blue Diamonds Jewellery Worldwide PLC” is a manufacturing company they tend to maintain different types of inventories. In 2015 cash and cash equivalents has significantly gone up as a percentage of total assets. The main reason for this is, unlike in other years within 2013 to 2017 period in 2015 specifically there’s repo inclusion in the cash and cash equivalents. And there’s no bank overdraft amount for 2015.  

	2013	2014	2015	2016	2017
EQUITY AND LIABILITIES
Equity
Stated capital	65.14215	65.370658	101.88827	124.32098	152.068
General reserves	42.1983	42.346322	35.306032	43.079349	52.69418
Revaluation reserve	5.479825	5.5500818	4.8248924	5.8871873	7.201142
Financial assets available-for-sale reserve	-0.0485	-0.017291	-0.039455	-0.050311	-0.06552
Accumulated losses	-18.6368	-30.15608	-50.54258	-86.97433	-135.376
Total equity	94.13499	83.093695	91.437162	86.26287	76.52196
Non-current liabilities
Employee benefits	1.594432	1.7014009	1.9597821	2.0377646	2.388709
Bimputh Loan payable	0	0	0	0	5.369895
Total non-current liabilities	1.594432	1.7014009	1.9597821	2.0377646	7.758604
Current liabilities
Trade payables	1.212447	12.535582	1.0643853	1.4298511	1.833936
Current taxation	0.166832	0.0799605	0.2904591	0.4542141	0.944032
Other payables and accruals	2.836363	2.5893618	2.915584	4.850761	5.017397
Bank overdraft	2.03E-05	0	0	4.9645396	7.924069
Related party payables	0.054918	0	2.3326279	0	0
Total current liabilities	4.27058	15.204905	6.6030563	11.699366	15.71943
Total liabilities	5.865011	16.906305	8.5628384	13.73713	23.47804
Total equity and liabilities	100	100	100	100	100

·    In Equity and liabilities as a percentage stated capital, general reserves and total equity represent a higher percentage. More importantly financial assets available for sale reserve and accumulated reserves demonstrate negative values. According to the annual report they haven’t provided any important information regarding this significant amount of accumulated losses specially. From 2013 to 2017 each year accumulated losses as a percentage of total equity and liability illustrate a gradually increasing pattern.

·    From 2013 to 2017 it demonstrates an increment in current liabilities than none current liabilities in each year as a percentage of total equity and liabilities. This simply could illustrates the company have to pay more interest than if the company has refinanced with the business.   

·    As a percentage of total equity and liability, financial assets available-for-sale reserve from 2014 onward each year demonstrates a increasing pattern. This represents an uncertain condition in terms of finance to “Blue Diamonds Jewellery Worldwide PLC”

	2013	2014	2015	2016	2017
Revenue	100	100	100	100	100
Cost of sales	73.2581	104.5947	132.6736	132.819	185.2797
Gross loss	26.74189	4.594747	32.67358	32.819	85.2797
Selling and distribution expenses	16.094	16.76551	54.12895	20.645	54.60004
Administrative expenses	50.2884	69.13894	135.4272	75.3132	133.0268
Other Income	1.077305	5.7602653	1.7864227	0	0
Loss from operations	38.5632	84.73893	220.4433	128.777	272.9065
Net finance income	7.278841	12.977824	14.033205	12.64024	12.170194
Share of profit of associate (net of tax)	0.373708	0.4241528	0	0	0
Loss/Profit before income tax	30.9107	71.33695	206.4101	116.137	260.7363
Income tax expense	0.64307	0.502861	3.48072	1.65631	3.081712
Loss/Profit for the year	31.5538	71.83981	209.8908	117.793	263.818

·         In the vertical analysis of income statement the base as a norm considers as the revenue. Within the five years period it can be seen that cost of sales as a percentage of revenue demonstrates an increasing pattern.  

·         When concerning about the gross loss it can be seen that 2014 onwards it demonstrates a significantly increasing pattern. This explains direct costs that are related to manufacturing are increased within the period significantly.

·         Except for the decline in 2015 to 2016 the selling and distribution expenses demonstrate an increasing pattern as a percentage of sales in each consecutive year within the five years period. This indicates money invested in selling and distribution is not much effective in driving the sales growth.

·         The loss from operations from 2013 to 2015 demonstrates a significant increment as a percentage of revenue in each year then it shows a slight decline then again it increases. Loss for the year demonstrates the same type of behavior since loss from operations reflects directly on the loss for the year.  

Within the vertical analysis of financial statements when we referring to the statement of financial position it clearly demonstrate that total none current assets from 2015 onwards demonstrate an increase whereas total asset demonstrate a gradual decline since current asset represent the highest presentation out of assets it shows a gradual decline in organization’s asset base. When referring to the total equity and liabilities it clearly demonstrate that out of total equity and liabilities from 2015 onward equity base illustrate a decline parallel to that total liabilities from 2015 onwards demonstrate an increase. It clearly visible that organization is losing its main back bone of financial structure which happens to the equity share holders. But the company is unable to stop their resistance due highly increasing accumulated loss within the period. When referring to the organizations income statement cost of production is gradually increasing as a percentage of revenue. And the overall loss within the period pictures organizations high level of uncertainty.

Ratio Analysis

Within the ratio analysis “Blue Diamonds Jewellery Worldwide PLC” performance is going to be measured by using four specific types of ratios.

1.       Liquidity and Efficiency ratios.

2.       Solvency ratios

3.       Profitability ratios

4.       Market ratios.

Liquidity and efficiency ratios

Efficiency ratios simply measures how well organization utilize its resources to make a profit. Business managers use this ratios to measure how well the organization is operating within the business and achieving predetermined goals. At the same time they use it as a bench mark to measure how well they are able to face the competition and against the industry standards. Investors use this ratios to identify the weather or not the business is a profitable investment.

Liquidity ratios measures the companies’ ability to pay its short term obligations.  Organizations focusing on comparing their most liquid assets or those that can be easily converted in to cash against the its short term liabilities.

Under Liquidity and efficiency ratios following ratios are being used to measure the organizations performance from 2013 to 2017.

1.       Current ratio

Current Ratio =	Current Assets
	Current Liabilities

                                                                                                                                                           

This demonstrates the company’s ability to pay its short obligations. Current ratio of 2:1 considers as financially healthy. But it varies according to the Industry that the company functions. If a company’s ratio is less than 1 it illustrates the company may have problems in paying its short term obligations. Which show that the company is not financially healthy. If the current ratio if too high it may demonstrates the inefficiency of managing short term finance or current assets.

	2013	2014	2015	2016	2017
Total current assets	230,312,393	232,150,806	284,587,460	218,213,968	166,254,803
Total current liabilities	13,662,358	48,473,209	24,214,462	35,161,867	38,623,622
Current ratio	16.85744093	4.789260104	11.75278889	6.205983545	4.304485038
	16.86:1	4.79:1	11.75:1	6.21:1	4.30:1

When referring to the current ratio of “Blue Diamonds Jewellery Worldwide PLC” from 2013 to 2014 it demonstrates a significant drop down from 16.86 to 4.79 yet the company manages to maintain above the industry standards which is financially healthy. From 2014 to 2015 it shows a significant increment in the current ratio. Since the current ratio is significantly high this may illustrates inefficient management of short term financing. Eventually from 2015 to 2017 it shows a gradual drop down yet the company manages to maintain the ratio in financially healthy level.

2.       Acid Ratio

Acid-Test Ratio =	Quick  Assets
	Current Liabilities

Acid ratio or the quick ratio demonstrates the firms’ ability to pay its immediate liabilities. This measures the organizations’ most liquid assets in comparison to its short term obligations. If this ratio is less than 1 cannot pay their current liabilities. Since current ratios’ numerator consists of inventories it takes significant time to become cash. Therefore acid ratio illustrates a strong indication of companies’ ability to pay its short term obligations

	2013	2014	2015	2016	2017
Total current assets	230,312,393	232,150,806	284,587,460	218,213,968	166,254,803
Total current liabilities	13,662,358	48,473,209	24,214,462	35,161,867	38,623,622
Inventories	141,363,846	170,224,218	162,540,441	135,372,568	110,903,472
Acid ratio	6.510482817	1.27754257	5.040253176	2.356001176	1.433095296
	6.51:1	1.28:1	5.04:1	2.36:1	1.43:1

From 2013 to 2014 it demonstrates severe drop down from 6.51 to 1.28. Yet from 2014 to 2015 it bounces back to a closer proximity. From 2015 to 2017 the ratio is beginning to gradually decline. However regardless of the fluctuations the firm manages to maintain above the industry standards. That demonstrates a financially healthy environment.

3.       Account Receivable Turnover

Accounts Receivable Turnover =	Sales on Account
	Average Accounts Receivable

This ratio measures the firms’ ability of extending credits and collecting debts. Within the year how many times the firm is able to convert its receivables to cash. Generally higher the number of the ratio is better for an organization

	2012	2013	2014	2015	2016	2017
Revenue		83,090,610	50,692,110	41,599,897	65,586,702	27,234,308
Trade and other receivables	21,443,230	23,400,435	21,832,927	6,452,309	29,934,309	29,193,359
Average Accounts Receivable		22,421,833	22,616,681	14,142,618	18,193,309	29,563,834
Accounts Receivable Turnover		3.71	2.24	2.94	3.60	0.92

It demonstrates that the ratio fluctuates over the five years period. But from 2016 to 2017 it illustrates a drastic drop in the ratio from 3.6 to 0.92. This shows that the firm started facing difficulties in collecting debts and facing problem with its debt policies by not able to extend its credits. The firm maintained the highest ratio in 2013 and lowest in 2017.

4.       Merchandise Turnover

Merchandise Turnover =	Cost of Goods Sold
	Average Inventory

This is an efficiency ratio that measures up how quickly a firm uses its supply of good over a given period of time. The firms’ ability to sold and replace the inventories changes according to the industry a firm functions. Higher the ratio the better a firm able to manage its inventories over a given period of time. 

	2012	2013	2014	2015	2016	2017
Cost of sales		60,870,608	53,021,284	55,192,074	87,111,596	50,459,644
Inventories	170,716,035	141,363,846	170,224,218	162,540,441	135,372,568	110,903,472
Average inventories		156,039,941	155,794,032	166,382,330	148,956,505	123,138,020
Merchandise Turnover		0.39	0.34	0.33	0.58	0.41

Overall it demonstrates a very low level rate within the five years period. The main reason for this could be the nature of inventories that the firm has. Unlike in the retail sectors it takes time to build a demand for floating diamonds jewellery and to replace inventories like diamonds, gems and gold. From 2013 to 2015 it demonstrates a gradual fall in the ratio. 2016 illustrates the highest ratio within the five years’ time period which is 0.58. 

5.       Days' Sales Uncollected

Days' Sales Uncollected =	Accounts Receivable	x 365
	Net Sales

This ratio helps to determine the length of time outstanding balances are carried within the firms’ receivables. The measures the length of time it takes a business to receive payments on an invoice after the sales made. This shows the amounts of sales made during the period, how quickly your customers are paying back, how efficient is your collection department, average time it take to collect  on your invoices.

	2013	2014	2015	2016	2017
Net Sales	83,090,610	50,692,110	41,599,897	65,586,702	27,234,308
Trade and other receivables	23,400,435	21,832,927	6,452,309	29,934,309	29,193,359
Days' Sales Uncollected	102.793309	157.2043136	56.6129475	166.5889952	391.255619

From 2013 to 2017 the number of days’ sales uncollected fluctuates. In 2015 it illustrates a higher liquidity of receivables which is 56 days. But in 2017 it demonstrates a significant reduction on the liquidity of the receivables, which is 391 days. That demonstrates a highly unfavorable condition for the organization. 

6.       Days' Sales in Inventory

Days' Sales in Inventory =	Ending Inventory	x 365
	Cost of Sale

This ratios explains how many day it will take to sell off its inventory. This is a critical ratio when it comes to inventory management of a firm. Low days’ sales of inventory indicates that management is effectively handling inventory. High days’ sales inventory indicates that the firm is not able to easily sell its inventory or the firm has obsolete inventory. But this ratio varies with the industry.

	2013	2014	2015	2016	2017
Cost of sales	60,870,608	53,021,284	55,192,074	87,111,596	50,459,644
Ending inventory	141,363,846	170,224,218	162,540,441	135,372,568	110,903,472
Days' Sales in Inventory	847.6636834	1171.828271	1074.923565	567.2148094	802.2206276

From 2013 to 2017 days’ sales in inventory fluctuates. Since Blue Diamonds Jewellery Worldwide PLC represents the Manufacturing industry depending on the nature of the product it could be possible that in average it’ll take significantly high number of days to turn in to cash. Comparing individual years across the five years period, 2016 illustrates the highest liquidity of inventory (lowest days’ sales in inventory). Whereas 2014 illustrates the lowest liquidity of inventory (highest days’ sales in inventory). Since these figures demonstrates unusually high figure as an overall impact it creates an unfavorable condition.

7.       Total Asset Turnover

Total Asset Turnover =	Revenues
	Average Total Assets

This ratio measures the firms’ ability to use its assets to generate sale or revenue. Higher asset turnover ratio is preferable. If a firm has got a lower asset turnover ratio it demonstrates inefficient use of assets to generate revenue. It make convince to try other methods to increase the efficiency of assets.

	2012	2013	2014	2015	2016	2017
Total assets	364,249,589	319,918,101	318,799,824	366,715,970	300,545,067	245,706,191
Average total assets		342,083,845	319,358,963	342,757,897	333,630,519	273,125,629
Revenue		83,090,610	50,692,110	41,599,897	65,586,702	27,234,308
Total Asset Turnover		0.242895	0.158731	0.121368	0.196585	0.099713

Concerning about the overall behavior of the ratio it demonstrates significantly lower amounts across the time period from 2013 to 2017. For every 1 RS it illustrates a lower amount of sales. This could be possible since the firm has got a significantly large asset base. In 2017 it shows a significant decline of the ratio from 0.19 to 0.09. This is a crucial situation where firms’ assets are not managed very well to create enough sales.

Solvency ratios

1.       Debt Ratio

Debt Ratio =	Total Liabilities	x 100
	Total Assets

Debt ratio describes to extent to which the company is leveraged or it explains how much of assets are finance by debt. The lower the debt ratio it’s better for an organization. However this ratio changes according to the industry it operates.

	2013	2014	2015	2016	2017
Total Liabilities	18,763,233	53,897,272	31,401,296	41,286,268	57,686,992
Total assets	319,918,101	318,799,824	366,715,970	300,545,067	245,706,191
Debt Ratio	5.865011	16.906305	8.562838	13.73713	23.478038

From 2014it show a significant increment in the ratio. From2015 to 2017 it illustrates an increasing pattern of the ratio which is not good for the organization. This shows that portion of company assets are contributed by creditors significantly getting increase. This could happen when manufacturing organizations increasing the utilities. However it doesn’t demonstrate a favorable pattern for the organization 

2.       Equity Ratio

Equity Ratio =	Total Shareholders’ Equity	x 100
	Total Assets

Equity ratio explains how much of company assets are contributed by its owners.

	2013	2014	2015	2016	2017
Total equity	301,154,868	264,902,552	335,314,674	259,258,799	188,019,199
Total assets	319,918,101	318,799,824	366,715,970	300,545,067	245,706,191
Equity Ratio	94.13498863	83.09369456	91.43716157	86.26286952	76.52196236

In 2013 it demonstrates the highest contribution of owners within the company assets which is 94.13. Then from 2015 to 2017 it shows a decrease in the equity capital within the organizational assets. It explains the firm increases giving priority for debt financing rather than equity financing. Lack of investor contribution for the company creates an unfavorable condition.

3.       Times Interest Earned

Times Interest Earned =	Net Income Before Interest Expense and Income Tax
	Interest Expense

This ratio measures the company’s’ ability to pay its debts. A low ratio explains that the company struggles to pay debts or may have to face bankruptcy if it is unable to meet its obligations. A higher ratio indicates the company is able to settle off its obligations by cover up its expenses. Lenders and bond holders have much interest towards companies which has got a higher times interest earned ratio.

	2013	2014	2015	2016	2017
Loss/Profit before income tax	-25,683,879	-36,162,206	-85,866,372	-76,170,373	-71,009,731
Interest Expense	2,118,826	0	689,481	784,553	2,728,973
Net income Before Interest Expense and Income Tax	-23,565,053	-36,162,206	-85,176,891	-75,385,820	-68,280,758
Times Interest Earned	-11.12174997	0	-123.5376914	-96.08760657	-25.02067921

Here in “Blue Diamonds Jewellery Worldwide PLC” the times interest earned is becoming negative since the company has reported losses from 2013 to 2017. However in 2014 it indicates the company is in a condition where it’s not able to settle off its obligations. Which leads explain the fact this company’s’ operations not able to provide protection to its long-term creditors. This replicates a highly unfavorable condition. But it demonstrates it’s reducing its negative times interest earned from 2015 to 2017. 

Profitability ratios

1.       Profit Margin

Profit Margin =	Net Income	x 100
	Net Sales

This is a profitability measure that explains how much income is kept with the company compared to its total revenue. This ratio able to compare the firms that are in the same industry. Higher the profit margin better for an organization.

	2013	2014	2015	2016	2017
Loss/Profit for the year	-26,218,207	-36,417,117	-87,314,348	-77,256,692	-71,849,014
Revenue	83,090,610	50,692,110	41,599,897	65,586,702	27,234,308
Profit Margin	-31.55375	-71.83981	-209.89078	-117.79323	-263.81803

From 2013 to 2017 it demonstrates a highly unfavorable condition due to continuous reporting of losses within the five years period. Even if the ratio fluctuates with the period it indicates a growing negative profit margin. In 2017 it shows the highest negative profit margin of -263.81%. Which explains 264% of every rupee in revenue is a loss.

2.       Gross Margin

Gross Margin =		Net sales - Cost of sales	x 100
		Net Sales

This ratio explains the revenue that a firm able to retain after paying off its direct costs that are related to producing products or providing services. Higher the gross margin better for an organization.

	2013	2014	2015	2016	2017
Revenue	83,090,610	50,692,110	41,599,897	65,586,702	27,234,308
Cost of sales	60,870,608	53,021,284	55,192,074	87,111,596	50,459,644
Gross profit	22220002	-2329174	-13592177	-21524894	-23225336
Gross margin	26.74189298	-4.594746599	-32.6735833	-32.81899126	-85.27969941

In “Blue Diamonds Jewellery Worldwide PLC” the highest gross margin shows in 2013 which is 26.74%. But from 2013 onwards due to the rising of gross losses and fluctuations in revenues gross margin starting to get decreased. From 2014 to 2017 the gross margin demonstrates as rising in a percentage of loss. In 2017 the gross margin is -85.27% which indicates a highly unfavorable condition.