DANKOTUWA PORCELAIN PLC

Ratio Analysis

A ratio analysis is a quantitative analysis of information contained in a company’s financial statements. Ratio analysis is used to evaluate various aspects of a company’s operating and financial performance such as its efficiency, liquidity, profitability and solvency.

It helps to quick indication of a firm's financial performance in several key areas. Ratio Analysis as a tool possesses several important features. The data, which are provided by financial statements. In addition, ratios can be used in a form of trend analysis to identify areas where performance has improved or deteriorated over time.

1.       Liquidity Ratio Analysis

2.       Solvency Ratio Analysis

3.       Profitability Ratio Analysis

4.       Market Ration Analysis

(1). Liquidity Ratio Analysis

This helps to measure a company's ability to pay off its short-term debts as they come due using the company's current or quick assets. Liquidity ratios include current ratio, quick ratio, and working capital ratio.

(1) Working Capital

Base on this, company doesn’t have any working capital issue.

(2) Current Ratio

This measures the short term solvency of the company using the balance sheet. Also known as the working capital ratio, it tells if a firm has sufficient funds to pay its liabilities over the period of next 12 months. The current ratio can also give a sense of the efficiency of a company’s operating cycle or its ability to turn its product into cash.

The company’s current ratios were above one during last five years which is showing company was in good to turn its product into cash. Even the company had a negative profit in the year 2015, the current ratio were more than one.

(1) Acid-test Ratio

Acid test measures Company’s short-term debt paying ability (short term bills like electricity bills & telephone bills of the company)  

Generally, the acid test ratio should be 1:1 or higher. But, in 2013 to 2015, the company's acid test ratios were in low level. That means, it is less than 1. Although 2016/17, its increased more than one, that means Dankotuwa Porcelain PLC obtaining very good ability to pay short term debts.