Examines the financial performance and financial condition of the Ceylon Cold Stores PLC

 

1.     Introduction

Financial statements of a company have been evaluated with a comparison annually for the purpose of obtaining a clear picture of its performance and growth forward. Financial Health which is a main tool for its stake holders to have an understanding of the business since these statements gives a summary of important financial data of the company run throughout the year. In practice, statement of income, statement of financial position, statement of changes in equity and statement of cash flows in annual reports are published in annual reports for public limited companies.

 

With the use of financial statement analysis both external stakeholders and internal stakeholders are interested to reach their objectives. While external parties ascertaining the financial performance and overall picture of the business such as shareholders,, investors, suppliers, customers, creditors, government , the internal parties such as managers, directors, auditors , employees are aiming to use these information for monitor and manage the business in a right path.

 

Financial Statements can be analyzed and evaluated for three tenses such as past, present and future. It can be done between year to year in same company with base data or comparative data and between a competitive company or a company in the same group. Therefore it can be used horizontal analysis, vertical analysis, trend analysis, ratio analysis, Z score calculation. The following report consists of those mentioned techniques to analysis the financial performance and growth of Ceylon Cold Stores PLC.

 

 

 

 

 

 

 

2.     Financial Statement Analysis

Analyzing financial statements can be done by several tools and can be interpreted and described the financial health of the company. Among them horizontal analysis is used for comparing a company’s financial condition and performance across time with using two or more years.  In the vertical analysis it is comparing a company’s financial condition and performance to a base amount. It used to analyze the effect on other items of the financial statements on the selected base item such as revenue, total assets. Same as that, there is a technique called trend analysis which compare the effect on other values with the use of a base year.

In addition to these techniques, ratio analysis is the most famous method to measure and compare the statistical relationship between financial values with a practical evaluation.

Therefore it can be interpreted the financial statements with several standards of comparison such as Intra company, Competitor, Industry and Guidelines.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.     Background of the Company

Ceylon Cold Stores PLC is a leading manufacturer and distributor of Beverages and Frozen Confectionery products, offering an array of exciting portfolio of products ( beverages: Over 24 products in Carbonated Soft Drinks (CSD), plain and flavored milk, fruit drinks, fruit-flavored tea, energy drinks and water ) ( frozen confectionery: 54 products offered in bulk containers, cups, sticks, cones and bite formats ) catering to customers’ diverse occasions and evolving preferences through both channels in home consumption such as general trade, modern trade, e commerce platforms as well as out-of-home consumption such as hotels, restaurants, cafés, other establishments serving food and beverages.

Through Elephant House, one of Sri Lanka’s most iconic beverage and ice cream brands, Ceylon Cold Stores PLC reaches millions of households across the country and is frequently recognized among the country’s most loved brands. The Group’s retail arm, JMSL operates the Keells supermarkets chain, the leading player in Sri Lanka’s modern trade industry, with a network of 128 outlets across 12 districts and industry-leading standards in convenience and service quality.

The Ceylon Cold Stores PLC family of 7,086 employees bring unique skills and competencies to the business, driving innovation and facilitating the customer experience.

The Group generates significant direct and indirect economic value across its operations, having nurtured extensive relationships with suppliers, farmers, private label manufacturers, distributors and retail outlets.

 

 

 

 

 

 

 

 

4.     Analysis Overview

 

4.1 Horizontal Analysis

Horizontal Analysis is used for comparing a company’s financial condition and performance across time with using two or more years.

This method used to identify the variation between the each year with comparing to the previous year.

The Rupee Value Change and Percentage Change are calculated under this method as follows.

 

Rupee Change = Amount in analyzing period – Amount in previous year

 

Percentage Change = ( Rupee Change / Amount in previous year ) X 100%

 

Table 01 – Rupee change for Statement of Financial Position

Table 02 – Percentage change for Statement of Financial Position

Table 03 – Rupee change for Income Statement

Table 04 – Percentage change for Income Statement

 

 

 

 

 

 

 

Rupee Change :-

Statement of Financial Position

As at 31^st March

Year	2022	2021	2020	2019	2018
	Rs.’000	Rs.’000	Rs.’000	Rs.’000	Rs.’000
ASSETS
Non-current assets
Property, plant and equipment	522,851	(5,513)	222,880	14,551	(618)
Right-of-use assets	-	-	-	-	-
Investment property	16,955	3,873	42,388	25,433	21,559
Intangible assets	212,970	201,650	(236)	(2,075)	(2,952)
Investment in Subsidiaries	5,304	7,838	9,625	462,500	986,890
	-	-	-	-	(5,392,863)
Non-current financial assets	188,806	1,470	14,751	1,630,929	5,430,798
Other non-current assets	(9,897)	(12,823)	4,207	6,482	29,829
	984,391	196,495	293,615	2,137,820	1,072,643
Current assets
Inventories	992,894	(108,030)	187,317	39,595	(112,731)
Trade and other receivables	499,558	201,100	(88,536)	(95,933)	(7,980)
Amounts due from related parties	35,249	117,832	(4,407)	16,204	3,483
Other current assets	185,538	(151,880)	143,933	(56,394)	(8,952)
Short-term investments	-	-	(39,099)	(437,055)	127,319
Cash in hand and at bank	284,226	63,443	(149,742)	37,551	138,313
	1,997,465	109,554	49,466	(496,032)	139,452
Total assets	2,981,856	306,049	343,081	1,641,788	1,212,095
EQUITY AND LIABILITIES
Stated capital	-	-	-	-	-
Revenue reserves	310,603	(22,606)	20,777	265,135	962,758
Other components of equity	273,575	139,401	108,943	1,757,209	(54,303)
Total equity	584,178	116,795	129,720	2,022,344	908,455
Non-current liabilities
Interest-bearing loans and borrowings	-	-	-	-	-
Lease liabilities	-	-	-	-	-
Deferred tax liabilities	64,651	(270,461)	(33,323)	23,271	232,538
Employee benefit liabilities	23,925	89,522	65,834	1,804	10,491
Other non-current liabilities	(4,871)	(16,886)	(19,650)	(35,331)	(20,544)
	402,580	(197,825)	12,861	(10,256)	222,485
Current liabilities
Trade and other payables	1,257,546	360,115	(54,226)	(7,311)	151,325
Amounts due to related parties	(172,215)	185,813	31,121	4,327	(2,189)
Income tax liabilities	(6,277)	(54,126)	123,323	6,838	(277,419)
Short-term borrowings	-	-	-	-	-
Interest-bearing loans and borrowings	-	-	-	-	-
Lease liabilities	-	-	-	-	-
Other current liabilities	110,856	31,661	(156,972)	(466,293)	304,586
Bank overdrafts	749,288	(136,384)	257,254	92,139	(80,148)
	1,995,098	387,079	200,500	(370,300)	81,155
Total equity and liabilities	2,981,856	306,049	343,081	1,641,788	1,212,095

Table 01

 

Percentage Change :-

Statement of Financial Position

As at 31^st March

Year	2022		2021		2020		2019		2018
	%		%		%		%		%
ASSETS
Non-current assets
Property, plant and equipment	12%		0%		5%		0%		0%
Right-of-use assets	-		-		-		-		-
Investment property	6%		1%		17%		11%		10%
Intangible assets	104%		5821%		-6%		-36%		-34%
Investment in Subsidiaries	0%		0%		0%		19%		66%
	-		-		-		-		-100%
Non-current financial assets	3%		0%		0%		30%		5963%
Other non-current assets	-20%		-21%		7%		13%		145%
	7%		1%		2%		17%		9%
Current assets
Inventories	83%		-8%		17%		4%		-9%
Trade and other receivables	29%		13%		-5%		-6%		0%
Amounts due from related parties	20%		218%		-8%		38%		9%
Other current assets	226%		-65%		160%		-38%		-6%
Short-term investments	-		-		-75%		-89%		35%
Cash in hand and at bank	174%		64%		-60%		18%		188%
	60%		3%		2%		-13%		4%
Total assets	16%		2%		2%		10%		8%
EQUITY AND LIABILITIES
Stated capital	-		-		-		-		-
Revenue reserves	3%		0%		0%		3%		10%
Other components of equity	9%		5%		4%		174%		-5%
Total equity	4%		1%		1%		16%		8%
Non-current liabilities
Interest-bearing loans and borrowings	-		-		-		-		-
Lease liabilities	-		-		-		-		-
Deferred tax liabilities	11%		-32%		-4%		3%		38%
Employee benefit liabilities	5%		20%		18%		0%		3%
Other non-current liabilities	-5%		-14%		-14%		-20%		-11%
	34%		-14%		1%		-1%		19%
Current liabilities
Trade and other payables	86%		33%		-5%		-1%		15%
Amounts due to related parties	-77%		509%		575%		398%		-67%
Income tax liabilities	-3%		-20%		82%		5%		-66%
Short-term borrowings	-		-		-		-		-
Interest-bearing loans and borrowings	-		-		-		-		-
Lease liabilities	-		-		-		-		-
Other current liabilities	38%		12%		-38%		-53%		53%
Bank overdrafts	207%		-27%		107%		62%		-35%
	78%		18%		10%		-16%		4%
Total equity and liabilities	16%		2%		2%		10%		8%

Table 02

When comparing the Property, plant and equipment over the years, it has been increased in the year 2022 by 12%.Investment Property has been increased in the year 2020 by 17% and it has become down in the 2022 year as 6%.It is specially noticed that, the Intangible assets had been decreased from 2018 to 2020 and increased over 100% in 2021 and 2022. Other non current assets and non current financial assets slightly decreased over the period.

Overall non current assets have been decreased after 2019 year to 2022 year.

Inventories has increased by 83% as the company has purchased more raw materials than the past. Trade and other receivables and due from related parties has increased while other current assets fluctuated over the years.

Cash and cash equivalent amount has increased in 2021 and 2022 by 63.52% and 174% respectively, which was plummeted to a negative amount in 2020. Total current assets have fluctuated over the years with a maximum in 2022 and a minimum in 2019.

Even though the drastically decrement of the total assets in the year 2020 and 2021, it has been increased in the year 2022 by 16%. Therefore, this shows a positive sign of the financial growth of the company.

Stated capital has not changed and revenue reserves also slightly fluctuated while other components of equity reported a increase by 174% in the year 2019.

Non current liabilities have fluctuated over the years with a maximum in 2022 and a minimum in 2021.

Trade and other payables have been increased after the year 2020 while amount due to related parties fluctuated over the years with a rapid increase from 2019 to 2021 and reported a sudden drop in 2022 year.

Income tax liabilities have been fluctuated over the years with a maximum amount in 2020 and minimum amount in 2018.

While other current liabilities fluctuated during the period, bank overdraft increased rapidly in the year 2020 and 2022 by 107% and 207% respectively.

Total current liabilities have increased after 2019 year up to 2022 year. 

 

 

 

 

 

 

 

 

 

 

Rupee Change :-

Income Statement

For the year ended 31^st March

Year	2022	2021	2020	2019	2018
	Rs.’000	Rs.’000	Rs.’000	Rs.’000	Rs.’000
Goods transferred at a point in time	2,252,217	(1,050,949)	10,476	(2,023,935)	(322,136)
Total revenue from contracts with customers	2,252,217	(1,050,949)	10,476	(2,023,935)	(322,136)
Cost of sales	2,110,275	(400,955)	348,586	(1,272,042)	534,736
Gross profit	141,942	(649,994)	359,062	(751,893)	(856,872)
Dividend income	82,799	(273,686)	70,784	(33,158)	-
Other operating income	123,532	98,689	81,434	208,591	(50,040)
Selling and distribution expenses	251,273	(60,535)	(282,003)	241,283	105,738
Administrative expenses	97,201	25,867	(21,327)	31,409	65,643
Other operating expenses	(6,165)	(111,726)	64,489	(1,854)	(62,356)
Results from operating activities	5,964	(678,597)	272,439	(847,298)	(1,015,937)
Finance cost	44,851	13,720	9,825	10,773	(4,220)
Finance income	(6,361)	(11,030)	4,172	(56,585)	(36,150)
Net finance income/(cost)	(51,212)	(24,750)	13,997	(67,358)	(31,930)
Change in fair value of investment property	13,082	(38,515)	16,955	3,874	(70,446)
Profit before tax	(32,166)	(741,862)	303,391	(910,782)	(1,118,313)
Tax expense	161,201	438,843	(58,886)	(220,466)	(318,042)
Profit for the year	(193,367)	(303,019)	244,505	(690,316)	(800,271)

Table 03

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage Change :-

Income Statement

For the year ended 31^st March

Year	2022		2021		2020		2019		2018
	%		%		%		%		%
Goods transferred at a point in time	21%		-9%		0.09%		-15%		-2%
Total revenue from contracts with customers	21%		-9%		0.09%		-15%		-2%
Cost of sales	29%		-5%		-4%		-14%		6%
Gross profit	4%		-16%		10%		-17%		-16%
Dividend income	16%		-35%		10%		-4%		-
Other operating income	27%		28%		30%		318%		-43%
Selling and distribution expenses	13%		-3%		17%		17%		8%
Administrative expenses	13%		4%		3%		5%		11%
Other operating expenses	-4%		-43%		-20%		-1%		-16%
Results from operating activities	0%		-29%		13%		-29%		-26%
Finance cost	292%		846%		-86%		1601%		-86%
Finance income	-16%		-22%		9%		-55%		-26%
Net finance income/(cost)	-207%		-50%		39%		-66%		-24%
Change in fair value of investment property	338%		-91%		67%		18%		-77%
Profit before tax	-2%		-31%		14%		-30%		-27%
Tax expense	337%		-90%		14%		-34%		-33%
Profit for the year	-12%		-16%		14%		-29%		-25%

Table 04

 

Total Revenue has decreased from 2018 to 2021 and rapidly increased in the year 2022 by 21%.

Cost of sales has fluctuated over the years with a maximum value in 2022 and minimum value in 2019.

Therefore, gross profit also performed in accordance with them.

Dividend income fluctuated over the years while other operating income has been increased with a maximum value in 2019 by 318%.

Even though the finance income reported in lesser value, finance cost of the company has been increased in higher values over 1005 in 2019, 2021 and 2022 years.

Both profit before tax and profit for the year have been decreased after 2019 year with the rapid increase of income tax the year 2022 by 337%.

 

 

 

 

 

 

 

 

 

4.2 Vertical Analysis

Vertical Analysis is a method of comparing a company’s financial condition and performance to a base amount. It used to analyze the effect on other items of the financial statements on the selected base item such as revenue, total assets.

Vertical Analysis can be done as follows.

Amount of the selected item of the financial statement     X 100%

Amount of the Base Item

 

Table 05 – Percentage change for Statement of Financial Position

-          Basis :- Total  Assets

Table 06 – Percentage change for Income Statement

-          Basis :- Total  Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statement of Financial Position

As at 31^st March

Basis :- Total  Assets

Year	2022		2021		2020		2019		2018
	%		%		%		%		%
ASSETS
Non-current assets
Property, plant and equipment	23%		24%		24%		23%		26%
Right-of-use assets	0.22%		-		-		-		-
Investment property	1%		2%		2%		1%		1%
Intangible assets	2%		1%		0.02%		0.02%		0.04%
Investment in Subsidiaries	14%		16%		16%		17%		15%
Non-current financial assets	34%		39%		40%		40%		34%
Other non-current assets	0.18%		0.26%		0.34%		0.32%		0.31%
	75%		82%		82%		82%		77%
Current assets
Inventories	10%		7%		7%		6%		7%
Trade and other receivables	10%		9%		8%		9%		11%
Amounts due from related parties	1%		1%		0.30%		0.33%		0.26%
Other current assets	1%		0.45%		1%		1%		1%
Short-term investments	-		-		0.07%		0.29%		3%
Cash in hand and at bank	2%		1%		1%		1%		1%
	25%		18%		18%		18%		23%
Total assets	100%		100%		100%		100%		100%
EQUITY AND LIABILITIES
Stated capital	4%		5%		5%		5%		6%
Revenue reserves	52%		58%		59%		60%		65%
Other components of equity	15%		16%		16%		16%		6%
Total equity	71%		80%		80%		81%		77%
Non-current liabilities
Interest-bearing loans and borrowings	1%		-		-		-		-
Lease liabilities	0.01%		-		-		-		-
Deferred tax liabilities	3%		3%		5%		5%		5%
Employee benefit liabilities	3%		3%		2%		2%		2%
Other non-current liabilities	0.45%		1%		1%		1%		1%
	7%		7%		8%		8%		9%
Current liabilities
Trade and other payables	13%		8%		6%		6%		7%
Amounts due to related parties	0.23%		1%		0.20%		0.03%		0.01%
Income tax liabilities	1%		1%		2%		1%		1%
Short-term borrowings
Interest-bearing loans and borrowings	0.26%		-		-		-		-
Lease liabilities	0%		-		-		-		-
Other current liabilities	2%		2%		1%		2%		5%
Bank overdrafts	5%		2%		3%		1%		1%
	21%		14%		12%		11%		14%
Total equity and liabilities	100%		100%		100%		100%		100%

Table 05

 

Graph 01

As per the calculated percentage, Property, plant and equipment is about 1/4 of the total assets over the years approximately. It is not good for a manufacturing company.

Total non current assets are under the ceiling of 82% of total assets for through the five year period. Same as the inventory is not more than 10% of total assets over the prod and it is not a good sign for a manufacturing company.

Total current assets percentage decreased after 2018 year and remained constant for next three years and has increased in 2022 year.

Cash and cash equivalent percentage from 2018 to 2021 has remained unchanged and increased in the year 2022.

Total equity percentage has remained more than 70% while total non current liabilities continued between a range of 7% to 8%.

But, current liabilities percentage has been gradually increased throughout the years.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Statement

For the year ended 31^st March

Basis :- Total  Revenue

Year	2022		2021		2020		2019		2018
	%		%		%		%		%
Goods transferred at a point in time	100%		100%		100%		100%		100%
Total revenue from contracts with customers	100%		100%		100%		100%		100%
Cost of sales	-72%		-68%		-65%		-68%		-67%
Gross profit	28%		32%		35%		32%		33%
Dividend income	5%		5%		7%		6%		5%
Other operating income	5%		4%		3%		2%		0.5%
Selling and distribution expenses	-17%		-18%		-17%		-14%		-10%
Administrative expenses	-6%		-7%		-6%		-6%		-5%
Other operating expenses	-1%		-1%		-2%		-3%		-2%
Results from operating activities	13%		16%		20%		18%		21%
Finance cost	-0.47%		-0.14%		-0.01%		-0.10%		-0.005%
Finance income	0.26%		0.38%		0.44%		0.40%		1%
Net finance income/(cost)	-0.21%		0.23%		0.43%		0.30%		1%
Change in fair value of investment property	0.13%		0.04%		0.36%		0.22%		0.16%
Profit before tax	13%		16%		21%		18%		22%
Tax expense	-2%		-0.45%		-4%		-4%		-5%
Profit for the year	11%		15%		17%		15%		17%

Table 06

 

 

Graph 02

 

 

 

 

 

 

Cost of sales percentage of total revenue has remained around 70% over five years with the gross profit percentage remained near 32%.

Both Selling and distribution expenses and administrative expenses fluctuated within a smaller range.

Profit before tax percentage has been fluctuated over the period with a highest value in 2018 and lowest value in 2022.

Profit for the year is shown a same behavior in the percentage change while reporting the highest change in 2020 and 2018 and lowest in 2022.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.3 Trend Analysis

Trend Analysis is an evaluation technique which compares the effect on other values with the use of a base year.

Trend Analysis can be done as follows.

Amount of the selected item of the financial statement     X 100%

Amount of the Base Year

 

Table 07 – Percentage change for Statement of Financial Position

Table 08 – Percentage change for Income Statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statement of Financial Position

As at 31^st March

Base Year :- 2017

Year	2022		2021		2020		2019		2018		2017
	%		%		%		%		%		%
ASSETS
Non-current assets
Property, plant and equipment	118%		106%		106%		100%		100%		100%
Right-of-use assets	-		-		-		-		-		-
Investment property	153%		145%		143%		123%		110%		100%
Intangible assets	4791%		2350%		40%		42%		66%		100%
Investment in Subsidiaries	199%		198%		198%		197%		166%		100%
Non-current financial assets	8079%		7871%		7870%		7853%		6063%		100%
Other non-current assets	186%		235%		297%		276%		245%		100%
	141%		133%		131%		128%		109%		100%
Current assets
Inventories	184%		101%		110%		94%		91%		100%
Trade and other receivables	130%		101%		89%		94%		100%		100%
Amounts due from related parties	533%		442%		139%		151%		109%		100%
Other current assets	172%		53%		151%		58%		94%		100%
Short-term investments	-		-		4%		14%		135%		100%
Cash in hand and at bank	607%		221%		135%		338%		288%		100%
	151%		94%		91%		90%		104%		100%
Total assets	144%		124%		121%		119%		108%		100%
EQUITY AND LIABILITIES
Stated capital	100%		100%		100%		100%		100%		100%
Revenue reserves	116%		113%		113%		113%		110%		100%
Other components of equity	309%		284%		270%		260%		95%		100%
Total equity	133%		128%		127%		126%		108%		100%
Non-current liabilities
Interest-bearing loans and borrowings	-		-		-		-		-		-
Lease liabilities	-		-		-		-		-		-
Deferred tax liabilities	103%		92%		136%		142%		138%		100%
Employee benefit liabilities	153%		146%		121%		103%		103%		100%
Other non-current liabilities	50%		52%		61%		71%		89%		100%
	137%		102%		119%		118%		119%		100%
Current liabilities
Trade and other payables	269%		145%		109%		114%		115%		100%
Amounts due to related parties	1530%		6787%		1115%		165%		33%		100%
Income tax liabilities	51%		52%		65%		36%		34%		100%
Short-term borrowings	-		-		-		-		-		100%
Interest-bearing loans and borrowings	-		-		-		-		-		-
Lease liabilities	-		-		-		-		-		-
Other current liabilities	69%		50%		45%		72%		153%		100%
Bank overdrafts	486%		158%		218%		105%		65%		100%
	202%		113%		96%		87%		104%		100%
Total equity and liabilities	144%		124%		121%		119%		108%		100%

Table 07

 

Non current assets have been gradually increased over the years. Current assets have been fluctuated from 2019year to 2021 year and increased in a good manner in the year 2022.

Therefore, the total asset also gradually increased over the years.

Total equity has been slightly increased with the impact of revenue reserves and other components of equity.

Non current liabilities has been increased with the increase of employee benefit liabilities while current liabilities has been increased with the increase of trade and other payable, amount due to related parties and bank overdraft.

Therefore, total liabilities has been gradually increased over the years.

 

Income Statement

For the year ended 31^st March

Base Year :- 2017

Year	2022		2021		2020		2019		2018		2017
	%		%		%		%		%		%
Goods transferred at a point in time	92%		76%		83%		83%		98%		100%
Total revenue from contracts with customers	92%		76%		83%		83%		98%		100%
Cost of sales	107%		83%		87%		91%		106%		100%
Gross profit	67%		64%		77%		70%		84%		100%
Dividend income	79%		68%		105%		96%		100%		100%
Other operating income	500%		393%		308%		237%		57%		100%
Selling and distribution expenses	163%		144%		148%		127%		108%		100%
Administrative expenses	142%		125%		120%		117%		111%		100%
Other operating expenses	37%		38%		67%		83%		84%		100%
Results from operating activities	42%		42%		59%		52%		74%		100%
Finance cost	1230%		314%		33%		234%		14%		100%
Finance income	24%		29%		37%		34%		74%		100%
Net finance income/(cost)	-20%		18%		37%		26%		76%		100%
Change in fair value of investment property	18%		4%		46%		28%		23%		100%
Profit before tax	40%		40%		58%		51%		73%		100%
Tax expense	22%		5%		50%		44%		67%		100%
Profit for the year	45%		51%		61%		53%		75%		100%

Table 08

 

Total revenue and cost of sales have been decreased in first four years ( 2018 -2021 ) and started to increase in the year 2022.

Therefore, the gross profit also performed similarly.

Other operating income has been increased while the other operating expenses were decreasing over the years.

Selling and distribution expenses, administration expenses and finance cost have been rapidly increased throughout the years while finance income gradually decreased.

Profit before tax and profit for the year has been gradually decreased except the year 2020.

 

 

 

 

 

 

 

 

 

 

 

 

4.4 Ratio Analysis

Ratio analysis is the most famous method to measure and compare the statistical relationship between financial values with a practical evaluation.

Ratios can be calculated under several categories as follows.

ü  Liquidity Ratios

ü  Efficiency Ratios

ü  Solvency Ratios

ü  Profitability Ratios

ü  Market Ratios

 

 

Liquidity Ratios :-

Ratio	2022	2021	2020	2019	2018
Working Capital	798,033	795,666	1,073,191	1,224,225	1,349,957
Current Ratio	1.18	1.31	1.50	1.62	1.58
Acid Test Ratio	0.69	0.84	0.89	1.05	1.12

Table 09

Working Capital

Working capital represents current assets financed from long-term capital sources that do not require near-term repayment.

 

Working Capital =  Current Assets - Current Liabilities

 

Hence, Working Capital is the difference between current assets and current liabilities and it should have adequate cash to pay day to day business activities and operations. It has been decreased the working capital from 2018 to 2021 and slightly increased in 2022.

 

Current Ratio

This ratio measures the short-term debt-paying ability of the company.

      Current Assets

Current Ratio   =   ____________

 

                            Current Liabilities

 

 

Current Ratio is above 1.00 over the years and it is good sign for the company. It has been decreased from 2019 to 2022.

 

Acid Test Ratio  

This ratio is like the current ratio but excludes current assets such as inventories that may be difficult to quickly convert into cash.

           Quick Assets

Acid Test Ratio   =  _____________

                                 Current Liabilities

 

Acid Test Ratio / Quick Ratio also been decreased gradually from 2018 to 2022 below 1.00. Therefore, it is not a good sign for the company from 2020 to 2022.

 

 

 

 

 

 

 

 

 

Efficiency Ratios :-

Ratio	2022	2021	2020	2019	2018
Accounts Receivable Turnover	6.85 Times	6.94 Times	7.82 Times	7.25 Times	8.25 Times
Merchandise Turnover	5.47 Times	5.71 Times	6.23 Times	7.19 Times	8.08 Times
Days' Sales Uncollected	60 Days	56 Days	45 Days	49 Days	44 Days
Days' Sales in Inventory	86 Days	61 Days	63 Days	52 Days	43 Days
Total Asset Turnover	0.65 Times	0.58 Times	0.65 Times	0.69 Times	0.88 Times

Table 10

 

Accounts Receivable Turnover

This ratio measures how many times a company converts its receivables into cash each year.

         Sales on Account ( Credit Sales )

Accounts Receivable Turnover   =  __________________________

 

                                                          Average Accounts Receivable

 

 

From 2018 to 2022 it has been gradually decreased and it is not a good performance.

 

Merchandise Turnover

This ratio measures the number of times merchandise is sold and replaced during the year. This also referred as Inventory Turnover.

     Cost of Goods Sold

Merchandise Turnover = _________________

                                           Average Inventory

 

It has been continuously decreased from 2018 to 2022 and it is not a good sign to the company.

Days’ Sales Uncollected

This ratio measures the liquidity of receivables. That means the time take to recover from debtors.

       Accounts Receivable 

Days' Sales Uncollected = _________________   X  365

                                                  Net Sales

 

In practice, 30 days can be considered as the optimal number. But, it has been gradually increased the number of days from the year 2018 to 2022. Therefore, company shows an average performance.

 

Days’ Sales in Inventory

This ratio measures the liquidity of inventory. That means the time takes to turn the inventory into sales.

        Ending Inventory

Days' Sales in Inventory = ______________  X  365

                                                Cost of Sales

 

In practice, the lower number of days is better. But, it has been gradually increased the number of days from the year 2018 to 2022. Therefore, company shows an average performance.

 

 

 

 

 

 

 

Total Asset Turnover

This ratio measures the efficiency of assets in producing sales.

            Revenue

Total Asset Turnover  =  _____­­__________

                                      Average Total Assets

 

In practice, this should be higher than the 1.00 to indicate an efficiency rate. But, all five values are lesser than 1.00 which implies the average total assets are more than total revenue. Therefore, the company is less efficient.

 

Solvency Ratios :-

Ratio	2022	2021	2020	2019	2018
Debt Ratio	29%	20%	20%	19%	23%
Equity Ratio	4%	5%	5%	5%	6%
Time Interest Earned	28 Times	110 Times	1493 Times	186 Times	4496 Times

Table 11

Debt Ratio

This ratio measures what portion of a company’s assets are contributed by creditors.

          Total Liabilities

Debt Ratio =  _____________   X  100 %

                       Total Assets

 

From the year 2018 to 2021 it has been continued around 20% and increased in the year 2022. But, it is good when at a lower rate.

 

 

 

Equity Ratio

This ratio measures what portion of a company’s assets are contributed by owners.

  Total Shareholders' Equity 

Equity Ratio =   ______________________  X  100 %

                                  Total Assets

 

From the year 2018 to 2021 it has been continued around 05% and decreased in the year 2022. Therefore, it is not a god sign.

 

Times Interest Earned

This is the most common measure of the ability of a firm’s operations to provide protection to the long-term creditor.

The higher value of this ratio indicated the higher ability of paying interest and it is fluctuated year to year due to the changes in finance cost.

 

  Net Income before Interest and Tax

Time Interest Earned = _____________________________

                                                 Interest Expense

 

It has been fluctuated over the years with maximum in 2018 and minimum in 2022.

 

 

 

 

 

 

 

Profitability Ratios :-

Ratio	2022	2021	2020	2019	2018
Profit Margin	11%	15%	17%	15%	17%
Gross Profit	28%	32%	35%	32%	33%
Return on Total Assets	0.07	0.09	0.11	0.10	0.15
Return on Shareholders' Equity	1.56	1.77	2.10	1.84	2.59
Basic Earning per Share (EPS)	1.51	17.13	20.32	17.75	25.01
Book Value per Common Share	0.97	9.66	9.66	9.66	9.66

Table 12

 

Profit Margin

This ratio describes a company’s ability to earn a net income from sales.

 

  Net Income 

Profit Margin = __________  X  100 %

                          Net Sales

 

In here profit margin has been fluctuated yearly and decreased to 11% in the year 2022. Therefore, it is not a good sign for the company.

 

 

 

 

Gross Profit

This ratio measures the amount remaining from Rs.1 in sales that is left to cover operating expenses and a profit after considering cost of sales.

Gross Profit 

Gross Profit = __________  X  100 %

                        Net Sales

 

The Gross Profit margin also has been fluctuated yearly and decreased to 28% in the year 2022. Therefore, it is not a good sign for the company.

 

Return on Total Assets

This ratio is generally considered the best overall measure of a company’s profitability.

   Net Income

Return on Total Assets  =   __________________

                                            Average Total Assets

 

In here, this has been gradually decreased from 2020 to 2022 and it is not indicates a good sign for the company.

 

 

Return on Shareholders’ Equity

This measure indicates how well the company employed the owners’ investments to earn income.

      Net Income - Preference Dividends

Return on Shareholders' Equity = ____________________________

                                                        Average Shareholders' Equity

 

This also has been fluctuated over the years with highest value in 2018 and lowest value in 2022.

Basic Earnings per Share

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

Net Income - Preference Dividends

Basic Earning per Share (EPS) =  __________________________________________

                                                           Weighted Average Common Shares Outstanding

                                                                                 ( Number of Shares )

 

From the year 2018 to 2021 it was good to invest in due to the favorable value. But, as it has been decreased in the year 2022 it is not suitable to buy shares.

 

Book Value per Common Share

This ratio measures liquidation at reported amounts.

                                                           Shareholders' Equity Applicable to Common Shares

Book Value per Common Share   =   __________________________________________

                                                                     Number of Common Shares Outstanding

 

 

Even though this value has been continued from 2018 to 2021 at a good level, it plummeted in the year 2022 and it is not a good indication for the company.

 

 

 

 

 

 

 

Market Ratios :-

Ratio	2022	2021	2020	2019	2018
Price Earning Ratio	25.77 Times	36.30 Times	32.24 Times	32.40 Times	37.99 Times
Dividend Yeild Ratio	3.1%	0.27%	3.1%	2.6%	1.6%

Table 13

 

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.

Market Value per Share (MPS)

Price Earning Ratio = __________________________

                                        Earning per Share (EPS)

 

This value has been fluctuated over the years with reporting highest in 2018 and lowest in 2022. Even though it has increased in 2021, again it declined in the year 2022. If the decline continue, stock value will be undervalued in the market.

 

Dividend Yield Ratio

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

   Annual Dividend per Share (DPS) 

Dividend Yeild Ratio = ____________________________   X  100 %

                                         Market Value per Share (MPS)

 

This value has been fluctuated over the years and highest value recorded in the year 2022 and 2020 and the lowest in 2021.

5.     Evidential Matter

Assumptions

Assumption (01) :- All Sales are Credit Sales.

 

6.     Important Factors :-

 

Note (01)  :- Market Value per Share (MPS) has been considered for the Group, since there are no information for the Company.

Note (02)  :- Dividend Yeild Ratio has been calculated for the Group, since there are no information for the Company.

Note (03)  :- Subdivision of Shares

The Company received approval to subdivide 1 ordinary share in existence into 10 ordinary shares at the Extraordinary General Meeting held on 22 February 2022.

On this basis, the 95,040,000 shares in issue as at 25 February 2022 were subdivided into 950,400,000 shares.

 

 

 

 

 

 

 

 

 

 

7.     Inferences

Z - Score model is used to make out the zone ( current situation / status of the company ) which the company currently existing on.

This is evaluated as follows.

 

Definition	Weighting Factor	Year 2022		Year 2021		Year 2020		Year 2019		Year 2018
Working Capital	1.2	0.04	0.04	0.04	0.05	0.06	0.07	0.07	0.08	0.08	0.10
Total Assets
Retained Earnings	1.4	0.52	0.72	0.58	0.82	0.59	0.83	0.60	0.85	0.65	0.91
Total Assets
EBIT	3.3	0.08	0.26	0.09	0.30	0.13	0.44	0.12	0.40	0.19	0.62
Total Assets
Market Value of Equity	0.6	6.02	3.61	15.78	9.47	17.51	10.50	16.35	9.81	24.25	14.55
Book Value of Total Liabilities
Sales	1.0	0.60	0.60	0.58	0.58	0.64	0.64	0.66	0.66	0.85	0.85
Total Assets
TOTAL  ( Z Score )			5.24		11.21		12.49		11.79		17.03
Z Score	>	2.99	Safe Zone		Safe Zone		Safe Zone		Safe Zone		Safe Zone

Table 14

 

According to the above calculation, Z Score value has been decreased from the year 2018 to year 2022. But, it is indicated that the company still in the “ Safe Zone “ since the Z Score value is more than 2.99 value.

 

Table 15

 

 

Graph 03

 

 

 

 

 

8.     Comparison with a Intra Company in the Group :-

Keells Food Products PLC

 

Ratio Analysis :-

 

Liquidity Ratios :-

Ratio	2022	2021	2020	2019	2018
Working Capital	723,179	597,351	471,316	652,881	593,235
Current Ratio	1.81	1.97	1.90	2.78	2.66
Acid Test Ratio	1.15	1.09	1.14	1.86	1.79

Table 16

Working capital for the company has fluctuated over the years and highest in 2022 and lowest in 2020.

Current ratio is positive for all five years and acid test ratio also performed similary.

Efficiency Ratios :-

Ratio	2022	2021	2020	2019	2018
Accounts Receivable Turnover	8.80 Times	8.85 Times	9.17 Times	9.55 Times	9.79 Times
Merchandise Turnover	6.13 Times	5.62 Times	7.13 Times	7.53 Times	7.33 Times
Days' Sales Uncollected	48 Days	44 Days	39 Days	43 Days	37 Days
Days' Sales in Inventory	62 Days	75 Days	56 Days	51 Days	51 Days
Total Asset Turnover	1.41 Times	1.23 Times	1.32 Times	1.37 Times	1.29 Times

Table 17

Accounts receivable turnover is not indicates a good sign as it has been gradually decreased from 2018 to 2022.

Merchandise turnover also decreased from 2018 to 2021 and increased again in the year 2022 and it is good sign ultimately.

Both days’ sales uncollected and days’ sales in inventory have been increased from 2018 to 2022 and it os not a good sign.

Total asset turnover is more than 1.00 and it indicates an efficiency rate.

 

Solvency Ratios :-

 

Ratio	2022	2021	2020	2019	2018
Debt Ratio	36%	32%	35%	28%	28%
Equity Ratio	38%	42%	45%	50%	53%
Time Interest Earned	33 Times	27 Times	18 Times	240 Times	45 Times

Table 18

 

In here, debt ratio has been increased and equity ratio has been decreased. Therefore it shows a bad sign for the company.

Ability of paying interest is low since the time interest earned is at a lower level.

 

 

 

 

 

 

 

Profitability Ratios :-

Ratio	2022	2021	2020	2019	2018
Profit Margin	7%	9%	4%	8%	8%
Gross Profit	25%	28%	27%	29%	29%
Return on Total Assets	0.10	0.11	0.05	0.11	0.10
Return on Shareholders' Equity	0.26	0.25	0.12	0.21	0.19
Basic Earning per Share (EPS)	12.99	12.62	5.87	10.46	9.49
Book Value per Common Share	50.78	50.78	50.78	50.78	50.78

Table 19

Profitability of this company has been fluctuated over the years with reporting a highest value in 2021as 9% and it has decreased in 2022 year.

Gross profit margin has reported a higher value in both 2018 and 2019 years. But, it has been decreased to 25% in the year 2022.

Return on total assets and return on shareholders’ equity have been fluctuated over the years.

Basic earning per share (EPS) is favorably increased over the years and it is good to invest in this company.

Book value per common share has remained unchanged over the years from 2018 to 2022.

 

 

 

 

 

Market Ratios :-

Ratio	2022	2021	2020	2019	2018
Price Earning Ratio	12.80 Times	12.87 Times	18.42 Times	11.93 Times	13.69 Times
Dividend Yeild Ratio	6%	4%	6%	6%	5%

Table 20

 

Price earning ratio value has been decreased from 20120 to 2022 and it indicates stock value going to undervalue in the market.

Dividend yield ration value is fluctuated around 5% over the years.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9.     Conclusion

Analysis of financial statements have done with the objective of understanding and evaluating the performance and financial health of Ceylon Cold Stores PLC.

Using financial information for five years of the company, it has performed horizontal, vertical, trend, ratio analysis and Z score calculation.

As per the ratio analysis, the liquidity of the company is not in a good position due to decreasing working capital, decreasing current ratio and acid test ratio less than 1 value.

The efficiency of the operations also is on an average condition since both account receivable turnover and merchandise turnover have been decreased and both days’ sales uncollected and days’ sales in inventory has been increased.

Not only that, since total asset turnover for all five values are lesser than 1.00 which implies the average total assets are more than total revenue. Therefore, the company is less efficient.

For this company debt ratio, equity ratio and time interest earned ratio are not indicating a good condition.

Profitability of the company also is not in a good situation since the average performance which was indicated by profit margin, gross profit margin, return on total asset and shareholders’ equity, EPS, book value per common share ratios.

When turn in to the share market share value may be declined due to the performance in price earning ratio. However, dividend yield ratio is in a favorably increase in the year 2022.

Hence, the Ceylon Cold Stores PLC is still in the safe zone as per the Z score calculation.

The selected intra company of the same group named Keells Food Products PLC, is in a good condition by some aspects such as liquidity, efficiency and profitability.

However that company also having poor conditions according to the ratio analysis.

Therefore, the company should more concentrate the special attention on to the key areas discussed in this report and evaluate growth options to increase net income and reduce the cost. In addition to that it is better to review the existing policies and revise them to stabilize the company performance in a good manner.