FINANCIAL STATEMENT ANALYSIS OF Ceylon Cold Stores PLC (2015 – 2019)

 

1.      Introduction

This report provides a comparative analysis of financial performances over five years of one selected company, namely Ceylon Cold Stores PLC. Business organizations can use various analytical techniques such as horizontal analysis, vertical analysis, trend analysis, common size analysis, ratio analysis and cash flow analysis to figure out financial strengths and weaknesses. Similarly, this financial information can be compared with past years budgeted or benchmarked values, intra company (divisional) and inter company (industry) and with competitor company to get a relative understanding. This assignment task intends to carry out horizontal, vertical, trend analysis and intra company analysis. This comparison enables financial users to make their decisions and ratio analysis provides the items of the financial statements as comparative figures as ratios. Mainly this assignment has used Liquidity and Efficiency ratios, Profitability ratios and Solvency ratios, Market ratios with a relative analysis for Ceylon Cold Stores PLC over past five-year time period.

 

1.1 BUILDING BLOCKS OF ANALYSIS

 

      

1.2 ADVANTAGES OF ANALYSING FINANCIAL STATEMENT

·         Financial statement analysis is a useful tool that has many advantages to Internal users and External users to make better decisions.

·         It provides investors with information about deciding to invest their funds in an organization.

·         Governments and regulatory authorities will be provided with an insight into whether the organization meets the accounting principles.

·         Government agencies can analyze what the organization’s tax liabilities are.

 

2.      Overview of the Company

CCS is a leader in Sri Lanka’s carbonated soft drinks and frozen confectionery markets, offering an exciting array of products to discerning customers, through its heritage brand ‘Elephant House’ and several emerging brands. Deep industry insights gained over 15 decades of market strength have sharpened the Company’s understanding of evolving customer preferences, enabling it to consistently deliver great products through convenient and accessible channels. CCS’s retail arm, Jaykay Marketing Services (Pvt) Ltd (JMSL) operates the "Keells" Supermarkets chain, which has rapidly captured market share through an expanding network of 96 outlets which have redefined industry standards in customer convenience and service quality. The Group employs 5,849 personnel in its operations. CCS is part of John Keells Holdings PLC, Sri Lanka’s premier diversified conglomerate and one of the most valuable entities in the country in terms of market capitalization.

CCS’s new state-of-the-art impulse-range ice cream factory is the largest ice cream manufacturing facility in Sri Lanka and one of the most modern and sophisticated in Asia. The facility features advanced technology, sophisticated systems and environmentally-friendly manufacturing methods. In recent years we have also directed concerted efforts towards driving operational efficiencies across our manufacturing operations. In Retail, we have focused on enhancing our overall customer experience through a holistic brand transformation which comprised upgrading store layouts, introducing Prepared Food options, and increased emphasis on freshness and value for money.

 

Financial Capital

The Group’s Financial Capital consists of the pool of funds available for its utilization including shareholders’ equity, cash generated from operations and borrowings. These financial resources are vital in funding our ambitious growth plans, driving our strategic aspirations and creating sustainable value for all our stakeholders.

 

 

 

 

3.      Financial Statement Analysis

Financial statement analysis is an evaluative method of determining the past, current and projected performance of a company. Several techniques are commonly used as part of financial statement analysis including horizontal analysis, which compares two or more years of financial data in both dollar and percentage form; vertical analysis, where each category of accounts on the balance sheet is shown as a percentage of the total account; and ratio analysis, which calculates statistical relationships between data.

The first method is the use of horizontal and vertical analysis. Horizontal analysis is the comparison of financial information over a series of reporting periods, while vertical analysis is the proportional analysis of a financial statement, where each line item on a financial statement is listed as a percentage of another item. Typically, this means that every line item on an income statement is stated as a percentage of gross sales, while every line item on a balance sheet is stated as a percentage of total assets. Thus, horizontal analysis is the review of the results of multiple time periods, while vertical analysis is the review of the proportion of accounts to each other within a single period.

The second method for analyzing financial statements is the use of many kinds of ratios. We use ratios to calculate the relative size of one number in relation to another. After we calculate a ratio, we can then compare it to the same ratio calculated for a prior period, or that is based on an industry average, to see if the company is performing in accordance with expectations. In a typical financial statement analysis, most ratios will be within expectations, while a small number will flag potential problems that will attract the attention of the reviewer.

 

3.1 Horizontal Analysis

Horizontal analysis is a financial statement analysis technique that shows changes in the amounts of corresponding financial statement items over a period of time. It is a useful tool to evaluate the trend situations. The statement for two or more periods are used in horizontal analysis. The earliest period is usually used as the base period and the items on the statements for all later periods are compared with items on the statements of the base period. The changes are generally shown both in Dollars and percentage.

Horizontal analysis allows investors and analysts to see what has been driving a company’s financial performance over a number of years, as well as spotting trends and growth patterns such as seasonality. By looking at the income statement, balance sheet and cash flow statement at the same time, one can create a complete picture of operational results and see what has been driving a company’s performance and whether it is operating efficiency and profitability.

 

In considering the Ceylon Cold Stores PLC the historical analysis as shown in the following table,

Dollar change=Analysis period amount - Based period Amount

Percentage change=Dollar change/Based period amount *100

Base year – 2014

 

	Dollar Change
	2015	2016	2017	2018	2019
ASSETS
Non-current assets
Property, plant and equipment	-280,894	-86,164	320,943	320,325	334,876
Lease rentals paid in advance	-	-	-	-	-
Investment property	8,975	25,922	121,560	143,119	168,552
Intangible assets	(3,250)	(6,187)	(5,119)	(8,071)	(10,146)
Investments in subsidiaries	0	0	270,000	1,256,890	1,719,390
Investment in equity accounted investees	0	0	0	0	0
Non-current financial assets	17,464	33,311	44,025	5,474,823	7,105,752
Other non-current assets	327	-599	5,933	35,762	42,244
Total non-current assets	-257,378	(33,717)	757,342	1,829,985	3,967,805
Current assets
Inventories	118,888	307,627	664,020	551,289	590,884
Trade and other receivables	171,169	332,296	637,895	629,915	533,982
Amounts due from related parties	(14,460)	(6,527)	(10,172)	(6,689)	9,515
Other current assets	50,152	50,542	92,614	83,662	27,268
Short-term investments	549,011	1,123,660	180,501	307,820	(129,235)
Cash in hand and at bank	(203,999)	(143,763)	(173,107)	(34,794)	2,757
Total current assets	670,761	1,663,835	1,391,751	1,531,203	1,035,171
Total assets	413,383	1,630,118	2,149,093	3,361,188	5,002,976
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Stated capital	0	0	0	0	0
Revenue reserves	147,225	624,759	738,552	1,701,310	1,966,445
Other components of equity	39,053	128,282	287,742	233,439	1,990,648
Total equity	186,278	753,041	1,026,294	1,934,749	3,957,093
LIABILITIES
Non - current liabilities
Interest bearing loans and borrowings	(101,264)	(170,337)	-	-	-
Deferred tax liabilities	74,969	118,392	172,293	404,831	428,102
Employee benefit liabilities	1,605	17,635	67,031	77,522	79,326
Other non-current liabilities	(24,644)	(11,155)	50,381	29,837	(5,494)
Total non-current liabilities	(49,334)	(45,465)	104,368	326,853	316,597
Current liabilities
Trade and other payables	7,430	339,009	369,986	521,311	514,000
Amounts due to related companies	(4,915)	(11,757)	(9,738)	(11,927)	(7,600)
Income tax liabilities	287,028	496,955	387,655	110,236	117,074
Short-term borrowings	-	-	-	-	-
Interest bearing loans and borrowings	(38,334)	(70,525)	(124,598)	-	-
Other current liabilities	8,990	89,947	256,046	560,632	94,339
Bank overdrafts	16,240	78,913	139,080	58,932	151,071
Total current liabilities	276,439	922,542	1,018,431	1,099,586	729,286
Total equity and liabilities	413,383	1,630,118	2,149,093	3,361,188	5,002,976

 

Table 01: Dollar change analysis of Balance Sheet (2015-2019)

 

 

 

 

 

 

 

 

	Percent Change
	2015	2016	2017	2018	2019
	%	%	%	%	%
ASSETS
Non-current assets
Property, plant and equipment	-7.39	-2.27	8.44	8.43	8.81
Lease rentals paid in advance	-	-	-	-	-
Investment property	10.50	30.32	142.21	167.43	197.18
Intangible assets	-23.47	-44.68	-36.97	-58.29	-73.28
Investments in subsidiaries	0.00	0.00	22.08	102.78	140.60
Investment in equity accounted investees	0.00	0.00	0.00	0.00	0.00
Non-current financial assets	37.12	70.79	93.56	11635.44	15101.59
Other non-current assets	2.23	-4.09	40.49	244.08	288.32
Total non-current assets	-2.43	-0.32	7.16	17.30	37.51
Current assets
Inventories	22.49	58.19	125.60	104.28	111.77
Trade and other receivables	15.81	30.70	58.93	58.19	49.33
Amounts due from related parties	-29.48	-13.31	-20.74	-13.64	19.40
Other current assets	79.75	80.37	147.27	133.04	43.36
Short-term investments	302.91	619.97	99.59	169.84	-71.30
Cash in hand and at bank	-82.64	-58.24	-70.12	-14.09	1.12
Total current assets	31.18	77.35	64.70	71.18	48.12
Total assets	3.25	12.81	16.88	26.41	39.30
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Stated capital	0.00	0.00	0.00	0.00	0.00
Revenue reserves	1.68	7.15	8.45	19.47	22.50
Other components of equity	5.04	16.54	37.11	30.11	256.74
Total equity	1.79	7.22	9.84	18.55	37.93
LIABILITIES
Non - current liabilities
Interest bearing loans and borrowings	-54.64	-91.91	-	-	-
Deferred tax liabilities	17.08	26.97	39.24	92.21	97.51
Employee benefit liabilities	0.54	5.94	22.59	26.13	26.74
Other non-current liabilities	-17.22	-7.80	35.21	20.85	-3.84
Total non-current liabilities	-4.64	-4.27	9.81	30.72	29.75
Current liabilities
Trade and other payables	1.17	53.17	58.03	81.77	80.62
Amounts due to related companies	-37.77	-90.34	-74.83	-91.65	-58.40
Income tax liabilities	840.10	1454.53	1134.62	322.65	342.66
Short-term borrowings	-	-	-	-	-
Interest bearing loans and borrowings	-27.46	-50.52	-89.25	-	-
Other current liabilities	2.82	28.18	80.22	175.65	29.56
Bank overdrafts	18.18	88.36	155.73	65.99	169.16
Total current liabilities	22.42	74.83	82.61	89.19	59.16
Total equity and liabilities	3.25	12.81	16.88	26.41	39.30

Table 02: Percent change analysis of Balance Sheet (2015-2019)

The horizontal analysis shows that the significant increase of Property, plant and equipment from 2015 to 2019. However, it recorded a negative amount in 2015 and 2016. Then it is continuously increase in 2018 and 2019. In considering the Investment property, it shows the significant increasing from 2015 to 2019. It recorded high amount in 2019. Investments in subsidiaries is increase in 2017 and drastically increases in 2018 and 2019. However, considering the total asset it shows that it increases considerably the study period. It is good sign of the company. Almost all type of assets is increasing and some assets are decreasing throughout the study period however the total assets show positive increase compared with the base year.

Then it is needed to analysis the nature of the liabilities throughout the period. Payable plays a significant increase during the study period. It recorded 1.17 value in 2015 however it is sharp increase after 2015. It shows that Employee benefit liabilities increases compared with the based year. It increases from 0.54 to 26.74. Income tax liabilities shows high percentages up to 2017 and in 2018 it shows the least amount. If we consider about the Bank overdrafts from 2015 to 2017 it shows high increment but it decreases in 2018 and again show the highest percentage in 2019.

However, the overall figure show that total equity and liabilities increase gradually from 2015 to 2019 compared with the base year.

 

 

 

 

 

3.2 Trend Analysis

Trend analysis is the process of comparing business data over time to identify any consistent results or trends. Trend analysis helps to understand how the business has performed and predict where current business operations and practices. It will give the ideas about how might change things to move business in the right direction.

Trend analysis to help improve business by:

·         identifying areas where your business is performing well

·         identifying areas where the business is underperforming

·         providing evidence to decision making.

Trend Period= (Analysis period amount /Base period amount) *100

1.2.1        Trend analysis of Balance Sheet

 

	Trend Analysis
		2015	2016	2017	2018	2019
		%	%	%	%	%
ASSETS
Non-current assets
Property, plant and equipment	100	93	98	108	108	109
Lease rentals paid in advance	-	-	-	-	-	-
Investment property	100	110	130	242	267	297
Intangible assets	100	77	55	63	42	27
Investments in subsidiaries	100	100	100	122	203	241
Investment in equity accounted investees	100	100	100	100	-	-
Non-current financial assets	100	137	171	194	11,735	15,202
Other non-current assets	100	102	96	140	344	388
Total non-current assets	100	98	100	107	117	138
Current assets
Inventories	100	122	158	226	204	212
Trade and other receivables	100	116	131	159	158	149
Amounts due from related parties	100	71	87	79	86	119
Other current assets	100	180	180	247	233	143
Short-term investments	100	403	720	200	270	29
Cash in hand and at bank	100	17	42	30	86	101
Total current assets	100	131	177	165	171	148
Total assets	100	103	113	117	126	139
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Stated capital	100	100	100	100	100	100
Revenue reserves	100	102	107	108	119	123
Other components of equity	100	105	117	137	130	357
Total equity	100	102	107	110	119	138
LIABILITIES
Non - current liabilities
Interest bearing loans and borrowings	100	45	8	-	-	-
Deferred tax liabilities	100	117	127	139	192	198
Employee benefit liabilities	100	101	106	123	126	127
Other non-current liabilities	100	83	92	135	121	96
Total non-current liabilities	100	95	96	110	131	130
Current liabilities
Trade and other payables	100	101	153	158	182	181
Amounts due to related companies	100	62	10	25	8	42
Income tax liabilities	100	940	1,555	1,235	423	443
Short-term borrowings	-	-	-	-	-	-
Interest bearing loans and borrowings	100	73	49	11	-	-
Other current liabilities	100	103	128	180	276	130
Bank overdrafts	100	118	188	256	166	269
Total current liabilities	100	122	175	183	189	159
Total equity and liabilities	100	103	113	117	126	139

Table 03: Trend analysis of Balance Sheet (2015-2019)

Trend Analysis- Assets

The following figures show the behavior of the assets throughout of the study period. Property, plant and equipment recorded same percentage in 2015 and 2016 also 2017 and 2018. Intangible assets drastically decrease in 2015, 2016 and then increase in 2017, then it again decreases in 2018 to 2019.

In considering the Receivables, increase up to 2017 and loan and decrease in 2018 and 2019. Investment property and Cash in hand and at bank also increase throughout the study period. It considering the total asset it recorded the increment throughout the period.

Trend Analysis- Liabilities

In considering the deferred tax liabilities and employee benefit liabilities are increase slightly. However, the trade and other payables increase till 2018 then decrease slightly in 2019. Bank overdrafts is increase till 2017 then it decreases in 2018 and again increase in 2019. The total equity and liabilities figure shows that slight increase during the study period.

 

 

 

 

 

Graph 01: Trend analysis of Ceylon Cold Stores PLC total non-current assets and total current assets (2014-2019)

The above graph shows that the trend of change of total non-current assets of Ceylon Cold Stores PLC during past six years. This also indicate the same pattern of the company’s change where year 2016 has the lowest amount of total non-current assets and highest amount of total current assets when compared to other years.

 

 

 

 

 

 

 

Graph 02: Trend analysis of Ceylon Cold Stores PLC total assets, total equity and total liabilities (2014-2019)

Graph 02 shows the total change of the trend of the total assets, total equity, total liabilities on Ceylon Cold Stores PLC during 2014 to 2019. The graph depicts that the same pattern of change in assets and equity during 2014 to 2019. Total liabilities shown large percentage in 2018.

 

 

3.2.2 Trend analysis of Income Statement

	Trend Analysis (%)
Year	2014	2015	2016	2017	2018	2019
Total revenue	100.00	110.25	137.59	157.69	154.05	131.21
Cost of sales	100.00	104.79	122.53	139.48	148.10	127.58
Gross profit	100.00	122.96	172.69	200.11	167.91	139.66

 

Table 03: Trend analysis of Income Statement – Revenue, Cost of sales and Gross profit

 (2015-2019)

The trend analysis is analyzing series of account data over the period of time, baselining 100 as a selected year. This method is useful to graph the changes in absolute cost and values shown in financial statement. In this study, revenue, cost of sales and gross profit of the Ceylon Cold Stores PLC was analyzed using trend analysis which was used company’s financial statements of last five years such as 2015, 2016, 2017, 2018, 2019 as got 2014 the baselining for 100%.

 

 

 

 

 

 

 

Graph 03: Trend analysis of Ceylon Cold Stores PLC total revenue, cost of sales and gross profit (2014-2019)

 

The Revenue trends are shown in table 03, increased in years 2015, 2016, 2017, 2018 and 2019 by 10, 38, 58,54 and 31 respectively while Gross profit trends have increased in 2015, 2016 2017, 2018 and 2019 by 23, 73, 100, 68 and 40 respectively. In 2017 reported the highest gross profit throughout the period.

 

3.3 Vertical Analysis

Vertical analysis is a method of financial statement analysis in which each line item is listed as a percentage of a base figure within the statement. Thus, line items on an income statement can be stated as a percentage of gross sales, while line items on a balance sheet can be stated as a percentage of total assets or liabilities, and vertical analysis of a cash flow statement shows each cash inflow or outflow as a percentage of the total cash inflows. Vertical analysis makes it easier to understand the correlation between single items on a balance sheet and the bottom line, expressed in a percentage. Vertical analysis can become a more potent tool when used in conjunction with horizontal analysis, which considers the finances of a certain period of time.

3.3.1        Vertical analysis of Balance Sheet-Assets

	2015	2016	2017	2018	2019
	(%)	(%)	(%)	(%)	(%)
ASSETS
Non-current assets
Property, plant and equipment	26.8	25.9	27.7	25.6	23.3
Lease rentals paid in advance	-	-	-	-	-
Investment property	0.7	0.8	1.4	1.4	1.4
Intangible assets	0.1	0.1	0.1	0.0	0.0
Investments in subsidiaries	9.3	8.5	10.0	15.4	16.6
Investment in equity accounted investees	41.0	37.6	36.2	-	-
Non-current financial assets	0.5	0.6	0.6	34.3	40.3
Other non-current assets	0.1	0.1	0.1	0.3	0.3
Total non-current assets	78.5	73.4	76.2	77.1	82.0
Current assets
Inventories	4.9	5.8	8.0	6.7	6.3
Trade and other receivables	9.5	9.9	11.6	10.6	9.1
Amounts due from related parties	0.3	0.3	0.3	0.3	0.3
Other current assets	0.9	0.8	1.0	0.9	0.5
Short-term investments	5.6	9.1	2.4	3.0	0.3
Cash in hand and at bank	0.3	0.7	0.5	1.3	1.4
Total current assets	21.5	26.6	23.8	22.9	18.0
Total assets	100.0	100.0	100.0	100.0	100.0

Table 04: Vertical analysis of Balance Sheet-Assets (2015-2019)

In considering the vertical analysis the property, plant and equipment represent the 26.8 from the total assets. But it shows a slightly decrease in 2016, increase in 2017 and again decrease in 2018 and 2019.  In considering the amount of investment in subsidiaries increase throughout the period. Investment in equity accounted investees reported the highest value compared with the total value in 2015 to 2017 and non-current financial assets indicates the highest percentage in assets in 2018-2019.

Graphical analysis of common size assets for 2019-2015

Graph 04: Graphical analysis of common size assets for 2019

Graph 05: Graphical analysis of common size assets for 2018

 

 

Graph 06: Graphical analysis of common size assets for 2017

 

 

Graph 07: Graphical analysis of common size assets for 2016

Graph 08: Graphical analysis of common size assets for 2015

 

	Common-size percent (%)
EQUITY AND LIABILITIES	2015	2016	2017	2018	2019
Equity attributable to equity holders of the parent
Stated capital	7.0	6.4	6.2	5.7	5.2
Revenue reserves	67.6	65.2	63.7	64.9	60.4
Other components of equity	6.2	6.3	7.1	6.3	15.6
Total equity	80.8	77.9	77.0	76.9	81.1
LIABILITIES
Non - current liabilities
Interest bearing loans and borrowings	0.6	0.1	-	-	-
Deferred tax liabilities	3.9	3.9	4.1	5.2	4.9
Employee benefit liabilities	2.3	2.2	2.4	2.3	2.1
Other non-current liabilities	0.9	0.9	1.3	1.1	0.8
Total non-current liabilities	7.7	7.1	7.9	8.6	7.8
Current liabilities
Trade and other payables	4.9	6.8	6.8	7.2	6.5
Amounts due to related companies	0.1	0.0	0.0	0.0	0.0
Income tax liabilities	2.4	3.7	2.8	0.9	0.9
Short-term borrowings	-	-	-	-	-
Interest bearing loans and borrowings	0.8	0.5	0.1	-	-
Other current liabilities	2.5	2.8	3.9	5.5	2.3
Bank overdrafts	0.8	1.2	1.5	0.9	1.4
Total current liabilities	11.5	15.0	15.1	14.5	11.1
Total equity and liabilities	100.0	100.0	100.0	100.0	100.0

Table 05: Vertical analysis of Balance Sheet- Equity and Liabilities (2015-2019)

In considering the liability, deferred tax liabilities represent 3.9 in 2015, 2016 and it increase 4.1, 5.2 in 2017, 2018 and again decrease to 4.9 in 2019. Interest bearing loans and borrowings is quite low amount compared with the other liability. Payables also giving a considerable amount of percentage.

In considering the stated capital represents the 7% of the total equity while revenue reserves represented 67.6% from the total equity. However, the both decreasing throughout the period. The payable amount is quite low it is good remark of the company.

 

 

3.3.2        Vertical analysis of Income

	Common-size percent
	2019	2018	2017	2016	2015
	(%)	(%)	(%)	(%)	(%)
Total revenue	100.0	100.0	100.0	100.0	100.0
Cost of sales	-68.0	-67.3	-61.9	-62.3	-66.5
Gross profit	32.0	32.7	38.1	37.7	33.5
Dividend income	6.1	5.5	5.3	2.4	-
Other operating income	2.4	0.5	0.8	0.5	1.0
Selling and distribution expenses	-14.2	-10.3	-9.3	-10.2	-11.2
Administrative expenses	-5.8	-4.7	-4.1	-3.8	-4.3
Other operating expenses	-2.8	-2.4	-2.8	-2.4	-2.6
Results from operating activities	17.7	21.3	28.0	24.2	16.4
Finance cost	-0.1	0.0	0.0	-0.1	-0.2
Finance income	0.4	0.8	1.0	0.8	0.4
Net finance income/(cost)	0.3	0.8	1.0	0.7	0.2
Change in fair value of investment property	0.2	0.2	0.7	0.1	0.1
Share of results of equity accounted investees	-	-	-	-	-
Profit before tax	18.2	22.2	29.7	25.0	16.7
Tax expense	-3.7	-4.7	-6.9	-6.3	-4.6
Profit for the year	14.5	17.4	22.7	18.7	12.0

Table 06: Vertical analysis of Income Statement (2015-2019)

Graphical analysis of common size income statement for 2019-2015

Graph 08: Graphical analysis of common size income statement for 2019

 

Graph 09: Graphical analysis of common size income statement for 2018

Graph 10: Graphical analysis of common size income statement for 2017

Graph 11: Graphical analysis of common size income statement for 2016

 

 

Graph 12: Graphical analysis of common size income statement for 2015

 

3.4 Ratio Analysis

3.4.1 LIQUIDITY AND EFFICIENCY RATIOS

Liquidity ratios measure a company’s ability to meet its maturing short-term obligations. In other words, can a company quickly convert its assets to cash without a loss in value if necessary, to meet its short-term obligations. Favorable liquidity ratios are critical to a company and its creditors within a business or industry that does not provide a steady and predictable cash flow. They are also a key predictor of a company’s ability to make timely payments to creditors and to continue to meet obligations to lenders when faced with an unforeseen event.

Working Capital

Working capital is the money used to cover all of a company's short-term expenses, including inventory, payments on short-term debt, and day-to-day expenses called operating expenses. Working capital is critical since it is used to keep a business operating smoothly and meet all its financial obligations within the coming year.

Year	2015	2016	2017	2018	2019
Current Assets (Rs. '000)	2,821,927	3,815,001	3,542,917	3,682,369	3,186,337
Current Liabilities (Rs. '000)	1,509,265	2,155,368	2,251,257	2,332,412	1,962,112
Working Capital (Rs. '000)	1,312,662	1,659,633	1,291,660	1,349,957	1,224,225

Table 07: Working capital of Ceylon Cold Stores PLC from 2015 to 2019

 

 

         I.            CURRENT RATIO

This ratio reflects the number of times short-term assets cover short-term liabilities and is a fairly accurate indication of a company's ability to service its current obligations. A higher number is preferred because it indicates a strong ability to service short-term obligations. The composition of current assets is a key factor in the evaluation of this ratio.

Year	2015	2016	2017	2018	2019
Current Assets (Rs. '000)	2,821,927	3,815,001	3,542,917	3,682,369	3,186,337
Current Liabilities (Rs. '000)	1,509,265	2,155,368	2,251,257	2,332,412	1,962,112
Current Assets/Current Liabilities	1.87	1.77	1.57	1.58	1.62
Current Ratio	1.87 : 1	1.77 : 1	1.57 : 1	1.58 : 1	1.62 : 1

Depending on the type of business or industry, current assets may include slow-moving inventories that could potentially affect analysis of a company's liquidity how long could it potentially take to convert raw materials and inventory into finished products.  (For this reason, the acid test ratio may be preferable to the current ratio because it eliminates inventory and prepaid expenses from this ratio for a more accurate gauge of a company's liquidity and ability to meet short-term obligations.)

 Table 08: Current ratio of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

Graph 13: Current ratio of Ceylon Cold Stores PLC from 2015 to 2019

In 2015 the Ceylon Cold Stores PLC’s current ratio was the highest which was 1.87. We can see from graph the current ratio is fluctuated over the year. At 2017 current ratio was lowest.

 

 

 

 

 

 

     II.            ACID-TEST RATIO

This ratio, also known as the quick ratio, measures immediate liquidity - the number of times cash, accounts receivable, and marketable securities cover short-term obligations. A higher number is preferred because it suggests a company has a strong ability to service short-term obligations. This ratio is a more reliable variation of the current ratio because inventory, prepaid expenses, and other less liquid current assets are removed from the calculation.

Year	2015	2016	2017	2018	2019
Current Assets	2,821,927	3,815,001	3,542,917	3,682,369	3,186,337
Inventories	647,564	836,303	1,192,696	1,079,965	1,119,560
Quick Assets	2,174,363	2,978,698	2,350,221	2,602,404	2,066,777
Current Liabilities	1,509,265	2,155,368	2,251,257	2,332,412	1,962,112
Quick Assets / Current Liabilities	1.44	1.38	1.04	1.12	1.05
Acid Test Ratio	1.44 : 1	1.38 : 1	1.04 : 1	1.12 : 1	1.05 : 1

 

Table 09: Acid test ratio of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

Graph 14: Acid test ratio of Ceylon Cold Stores PLC from 2015 to 2019

The Acid test ratios are changing slightly in 2015 to 2019. In 2015 shows the highest acid test ratio as well as the current ratio. When there is considerable difference between acid test ratio and current ratio, can create cash flow problems.

 

 

  III.            ACCOUNT RECIEVABLE TURNOVER

This ratio measures the number of times receivables turn over in a year and reveals how successful a company is in collecting its outstanding receivables. A higher number is preferred because it indicates a shorter time between sales and cash collection.

Year	2015	2016	2017	2018	2019
Sales (Rs. '000)	9,768,129	12,190,925	13,971,391	13,649,255	11,625,320
Account Receivables (Rs. '000)	1,253,607	1,414,734	1,720,333	1,712,353	1,616,420
Average receivables (Rs. '000)	1168022.5	1334170.5	1567533.5	1716343	1664386.5
Sales/Average Receivables	8.36	9.14	8.91	7.95	6.98
Accounts Receivable Turnover	8.36 times	9.14 times	8.91 times	7.95 times	6.98 times

Table 10: Accounts receivable turnover of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

Graph 15: Accounts receivable turnover of Ceylon Cold Stores PLC from 2015 to 2019

 

According to the table which depicts that the rate which company converts its receivables into cash is preferred. Because it shows continuous decrease during past four years.

 

 

 

 

 

  IV.            MERCHANDISE TURNOVER

This ratio measures the number of times merchandise is sold and replaced during the year. A higher number is preferred because it indicates a shorter time between merchandise sold and replaced during the year.

Year	2015	2016	2017	2018	2019
Cost of sales (Rs. '000)	6,495,652	7,595,030	8,645,685	9,180,421	7,908,379
Inventories (Rs. '000)	647,564	836,303	1,192,696	1,079,965	1,119,560
Average Inventory (Rs. '000)	588120	741933.5	1014499.5	1136330.5	1099762.5
cost of sales / average inventory	11.04	10.24	8.52	8.08	7.19
Merchandise Turnover	11.04 times	10.24 times	8.52 times	8.08 times	7.19 times

Table 11: Merchandise turnover of Ceylon Cold Stores PLC from 2015 to 2019

 

Graph 16: Merchandise turnover of Ceylon Cold Stores PLC from 2015 to 2019

 

In 2015, Merchandise turnover was 11.04 times. It seen that the company’s merchandise turnover gradually decreased and reached its lowest point at 2019.

 

 

 

 

 

    V.            DAY’S SALES UNCOLLECTED

This ratio indicates that the average how many days it takes to collect an accounts receivable or number of times debtors will pay money. If the days are high this indicates that there is poor credit control by the management of the company.

Year	2015	2016	2017	2018	2019
Account Receivables (Rs. '000)	1,253,607	1,414,734	1,720,333	1,712,353	1,616,420
Net Sales (Rs. '000)	9,768,129	12,190,925	13,971,391	13,649,255	11,625,320
Account Receivable/Net Sales*365	46.84	42.36	44.94	45.79	50.75
Days' Sales    Uncollected	46.84 Days	42.36 Days	44.94 Days	45.79 Days	50.75 Days

Table 12: Day’s sales uncollected of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

Graph 17: Day’s sales uncollected of Ceylon Cold Stores PLC from 2015 to 2019

 

Day’s sales uncollected period is decreased in 2016 and after 2016 average day’s sales uncollected period increased which can create cash flow problem. In 2019 it shows the highest days and it will be not good for the company,

 

 

 

 

  VI.            DAY’S SALES IN INVENTORY

This ratio measures the average number of days a company's receivables are outstanding. A lower number of days is desired. An increase in the number of days’ receivables is outstanding indicates an increased possibility of late payment by customers. Companies should attempt to reduce the number of days’ sales in Inventory in order to increase cash flow. The general rule used is that the time allowed for payment by the selling terms should not be exceeded by more than 10 or 15 days.

Year	2019	2018	2017	2016	2015
Ending Inventory	1,119,560	1,079,965	1,192,696	836,303	647,564
Cost of sales	7,908,379	9,180,421	8,645,685	7,595,030	6,495,652
Ending Inventory/Cost of Sales*365	51.67	42.94	50.35	40.19	36.39
Days Sales in Inventory	51.67 Days	42.94 Days	50.35 Days	40.19 Days	36.39 Days

 

Table 13: Day’s sales in inventory of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

Graph 18: Day’s sales in inventory of Ceylon Cold Stores PLC from 2015 to 2019

This shows that Ceylon Cold Stores PLC is having highest number in 2019 and lowest number is on 2015. According to above figures, Ceylon Cold Stores PLC has taken average 44.3 days to company’s receivables are outstanding. It shows unfavorable condition for the company.

 

 

VII.            TOTAL ASSETS TURNOVER

This ratio measures the firm’s ability to generate sales from its assets. This includes all assets company has and if higher this value is the more efficiently the company is producing sales.

 

Year	2019	2018	2017	2016	2015
Revenue (Rs. '000)	11,625,320	13,649,255	13,971,391	12,190,925	9,768,129
Total assets (Rs. '000)	17,732,291	16,090,503	14,878,408	14,359,433	13,142,698
Average Total Assets (Rs. '000)	16911397	15484455.5	14618920.5	13751065.5	12936006.5
Revenue/Average Total Assets	0.69	0.88	0.96	0.89	0.76
Total Assets Turnover	0.69 times	0.88 times	0.96 times	0.89 times	0.76 times

Table 13: Total assets turnover of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

 

 

Graph 18: Total assets turnover of Ceylon Cold Stores PLC from 2015 to 2019

 

The highest total asset turnover was at 2017 and which depicts every 1rp spent generated 0.83rps of sales. Ceylon Cold Stores PLC is having total assets turnover less than 1, which can be identified as company is not having much efficiency. It shows that total assets turnover has reduced from 2017 to 2019. The company should give special attention for the total assets turnover of the company during future years.

 

3.4.2 SOLVENCY RATIOS

Solvency ratios measure an organization’s ability to meet their long-term interest expenses and repayment obligations.

I.                    DEBT RATIO

This ratio measures what proportion of debt a company is carrying relative to its assets. A ratio value greater than one indicates a company has more debt than assets. Naturally, companies and creditors prefer a lower number.

Year	2015	2016	2017	2018	2019
Total Liabilities (Rs. '000)	2,524,052	3,174,024	3,419,746	3,723,386	3,342,830
Total assets (Rs. '000)	13,142,698	14,359,433	14,878,408	16,090,503	17,732,291
Total Liabilities/Total Assets*100	19.20	22.10	22.98	23.14	18.85
Debt Ratio	19.20%	22.10%	22.98%	23.14%	18.85%

Table 14: Debt ratio of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

Graph 19: Debt ratio of Ceylon Cold Stores PLC from 2015 to 2019

 

From 2015 to 2018 Debt ratio increased every year. But at 2019 it decreased; it was a good sign to company. The highest debt ratio was 23.14% in the year 2018.

 

 

 

 

II.                 EQUITY RATIO

This ratio measures what proportion of total assets was provided by the owner’s equity. The higher the number the more total capital has been contributed by owners and the less by creditors.

 

Year	2015	2016	2017	2018	2019
Total Shareholders' Equity (Rs. '000)	10,618,646	11,185,409	11,458,662	12,367,117	14,389,461
Total assets (Rs. '000)	13,142,698	14,359,433	14,878,408	16,090,503	17,732,291
Total Equity/Total Assets*100	80.80	77.90	77.02	76.86	81.15
Equity Ratio	80.80%	77.90%	77.02%	76.86%	81.15%

Table 15: Equity ratio of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

Graph 19: Equity ratio of Ceylon Cold Stores PLC from 2015 to 2019

 

As per above details it shows that Equity ratio was decrease from 2015 to 2018 and it shows that Equity ratio has increased by high percentage during 2019, so it shows unfavorable condition in 2016-2018 and favorable in 2019 for the investment in company shares.

 

 

 

III.              TIMES INTEREST EARNED

This is the most common measure of the ability of a firm’s operations to provide protection to the long-term creditors. A higher number is preferred.

Year	2015	2016	2017	2018	2019
Net Income before interest expense and income tax (Rs. '000)	1,600,990	2,948,822	3,916,707	2,900,770	2,053,472
Interest Expense (Rs. '000)	18,438	87,417	134,745	102,815	35,457
Times Interest Earned	86.83	33.73	29.07	28.21	57.91

Table 16: Times interest earned of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

 

Graph 20: Times interest earned of Ceylon Cold Stores PLC from 2015 to 2019

 

Times Interest Earned ratio lowest point is 28.21 times in 2018. In 2016 ratio was decreased suddenly and after 2018 it was increased again.

 

 

 

 

 

 

 

3.4.3 PROFITABILITY RATIOS

Profitability ratios measure a company’s ability to use its capital or assets to generate profits. Improving profitability is a constant challenge for all companies and their management. Evaluating profitability ratios is a key component in determining the success of a company.

 

I.                    PROFIT MARGIN

This ratio measures how much profit a company makes on each sales dollar received and how well a company could potentially deal with higher costs or lower sales in the future.

Year	2015	2016	2017	2018	2019
Net Income (Rs. '000)	1,176,398	2,281,013	3,177,141	2,376,870	1,686,554
Net Sales (Rs. '000)	9,768,129	12,190,925	13,971,391	13,649,255	11,625,320
Net Income/Net Sales*100	12.04	18.71	22.74	17.41	14.51
Profit Margin	12.04%	18.71%	22.74%	17.41%	14.51%

Table 17: Profit margin of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

Graph 21: Profit margin of Ceylon Cold Stores PLC from 2015 to 2019

 

From the graph we can see the company’s profit increased up to 2015 to 2017 and decreased again. So, it is not good condition to company.

 

 

II.                 GROSS MARGIN

This ratio measures the gross profit earned on sales and reports how much of each sales dollar is available to cover operating expenses and contribute to profits.

Year	2015	2016	2017	2018	2019
Net Sales (Rs. '000)	9,768,129	12,190,925	13,971,391	13,649,255	11,625,320
Cost of Sales (Rs. '000)	6,495,652	7,595,030	8,645,685	9,180,421	7,908,379
Gross Profit (Rs. '000)	3,272,477	4,595,895	5,325,706	4,468,834	3,716,941
Gross Profit/Net Sales*100	33.50	37.70	38.12	32.74	31.97
Gross Margin	33.50%	37.70%	38.12%	32.74%	31.97%

Table 18: Gross margin of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

Graph 22: Gross margin of Ceylon Cold Stores PLC from 2015 to 2019

 

According to the data of the above table which depicts that the gross profit margin has several fluctuations from 2015 to 2019 and year 2017 marked the highest gross profit margin. During 2019 the gross profit margin was the lowest profit margin of these five years.

There is a fluctuation in gross profit margin which can be considered as the increased cost of the company not passed on proportionately to customers by an increase price. This can be concluded that the company is not in a favorable situation sale its inventory or merchandise.

 

 

 

III.              RETURN ON TOTAL ASSETS

This ratio measures how effectively a company's assets are being used to generate profits. It is one of the most important ratios when evaluating the success of a business. A higher number reflects a well-managed company with a healthy return on assets. Heavily depreciated assets, a large number of intangible assets, or any unusual income or expenses can easily distort this calculation.

 

Year	2015	2016	2017	2018	2019
Net Income (Rs. '000)	1,176,398	2,281,013	3,177,141	2,376,870	1,686,554
Average Total Assets (Rs. '000)	588199	1728705.5	2729077	2777005.5	2031712
Net Income/Average total Assets*100	17.90	16.59	21.73	15.35	9.97
Return on Total Assets	17.90%	16.59%	21.73%	15.35%	9.97%

Table 19: Return on total assets of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

Graph 23: Return on total assets of Ceylon Cold Stores PLC from 2015 to 2019

 

According to the above table, overall profitability of the company has changes over five-year period. The dramatic increment at 2017 and decrease the return on total assets from 21.73% to 9.97% suggests that the transfer of funds from investment to a portfolio of operating assets has been more than successful.

 

 

IV.              RETURN ON COMMON SHAREHOLDERS EQUITY

This ratio expresses the rate of return on equity capital employed and measures the ability of a company's management to realize an adequate return on the capital invested by the owners in a company. A higher number is preferred for this commonly analyzed ratio.

Year	2015	2016	2017	2018	2019
Net Income (Rs. '000)	1,176,398	2,281,013	3,177,141	2,376,870	1,686,554
Preferred Dividends	0	0	0	0	0
Average Shareholder's Equity (Rs. '000)	10525507	10902027.5	11322035.5	11912889.5	13378289
(Net Income-Preferred Dividends)/ Average Shareholder's Equity*100	11.18	20.92	28.06	19.95	12.61
Return on Common shareholder's equity	11.18%	20.92%	28.06%	19.95%	12.61%

Table 20: Return on common shareholders equity of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

Graph 23: Return on common shareholders’ equity of Ceylon Cold Stores PLC from 2015 to 2019

 

According to above table, which indicate that due to increasing ratio from 2015 to 2017 the way that the company used owner’s investment to earn income was favorable. But from 2017 to 2019 it showed decrease in ratio which can be unfavorable for the investors to invest on this company in future.

 

 

V.                BOOK VALUE FOR COMMON SHARE

This ratio measures liquidation at reported amount.

 

Year	2015	2016	2017	2018	2019
shareholders equity applicable to common shares (Rs. '000)	10,656,336	12,345,731	13,189,398	13,682,773	15,399,958
Number of Common Shares Outstanding ('000)	95,040	95,040	95,040	95,040	95,040
Book Value per Common Share	112.12	129.90	138.78	143.97	162.04

Table 21: Book value for common share of Ceylon Cold Stores PLC from 2015 to 2019

 

Graph 24: Book value for common share of Ceylon Cold Stores PLC from 2015 to 2019

 

The Book value for common share ratio attempts to identify undervalued or overvalued securities. From 2015 to 2019 book value for common share ratios were increased gradually.

 

 

 

 

 

 

VI.              BASIC EARNINGS PER SHARE

This measure indicates how much income was earned for each share of common stock outstanding.

 

Year	2015	2016	2017	2018	2019
Net Income (Rs. '000)	1,525,495	2,874,873	3,552,903	2,567,455	1,310,165
Weighted Average Common Shares Outstanding ('000)	95,040	95,040	95,040	95,040	95,040
Net Income/ Weighted Average Common Shares	16.05	30.25	37.38	27.01	13.79
Basic Earnings per share	16.05 per share	30.25 per share	37.38 per share	27.01 per share	13.79 per share

Table 22: Basic earnings per share of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

 

Graph 25: Basic earnings per share of Ceylon Cold Stores PLC from 2015 to 2019

 

From the view of time series analysis, Basic earnings per share of Ceylon Cold Stores PLC was increased gradually for 2015 to 2017, but after 2017 to now it was decreased, so it is a not good sign to company.

 

 

 

 

3.4.4        MARKET RATIOS

I.                    PRICE EARNINGS RATIO

This measure is often used by investors as a general guideline in gauging stock values. Generally, the higher the price-earnings ratio, the more opportunity a company has for growth.

 

Year	2015	2016	2017	2018	2019
Market Price Per Share (Rs.)	298.20	430.00	811.00	950.00	575.00
Earnings Per Share (Rs.)	16.05	30.25	37.38	27.01	13.79
Market Price Per Share/ Earnings Per Share	18.58	14.22	21.69	35.17	41.71
Price -Earnings Ratio	18.58 times	14.22 times	21.69 times	35.17 times	41.71 times

Table 23: Price earnings ratio of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

 

Graph 26: Price earnings ratio of Ceylon Cold Stores PLC from 2015 to 2019

 

From 2016 to 2019 Price earnings ratios were increasing gradually, so it is good sign for the company.

 

 

 

 

 

II.                 DIVIDEND YIELD

This ratio identifies the return, in terms of cash dividends on the current market price of the stock.

 

Year	2015	2016	2017	2018	2019
Annual Dividends Per Share (Rs.)	11.00	18.00	32.00	15.00	15.00
Market Price Per Share (Rs.)	298.20	430.00	811.00	950.00	575.00
Annual Dividends Per Share/Market Price Per Share*100	3.69	4.19	3.95	1.58	2.61
Dividend yield	3.69%	4.19%	3.95%	1.58%	2.61%

Table 24: Dividend yield of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

 

Graph 27: Dividend yield of Ceylon Cold Stores PLC from 2015 to 2019

 

 

 

 

 

 

 

 

 

4.      Conclusion

After the 2017 the Ceylon Cold Stores recorded not much good performance and decreased the profitability up to 2019. The return on total assets and return on common shareholders’ equity ratios showed the same pattern. In considering the account of the EPS decreased from 37 to 14 between 2017 to 2019. It is a considerable decrement. The total revenue and net interest income are considerable increase up to 2017 and decrease up to 2019. Total revenue decreases 2 million from 2018 to 2019.However net income is decrease by Rs. 690,316 in 2019 compared with the 2018. However, from 2016 to 2019 Price earnings ratios were increasing gradually, so it is good sign for the company.

Ceylon Cold Stores PLC has come up with a fluctuating current ratio in the last five years. So, the company should improve and maintain its current ratio so that it can meet the short-term obligations smoothly. The firms do not maintain a stable liquidity position over the last five years. Therefore, maintaining proper liquidity funds like cash and bank balance is suggested. The firm should enhance employee’s efficiency, more training to its employees in order to increase their production capacity and minimize mistakes while doing tasks. The firms should have a check in the manufacturing process to provide better products.

This study can be concluded that the company should give special attention on company’s existing credit policy and as well as market strategies to develop the profit of the company.