The Kingsbury PLC's performance

 

Executive Summary

A method for examining and examining financial statements to assess a company's past, present, or anticipated future performance. Better financial judgements are made possible by the financial statements review procedure. The main objective of financial statement analysis is to predict future performance of the organization using information about past performance. This report will discuss The Kingsbury PLC's performance during the preceding five years. Based on data from the company's 2018 through 2022 public financial reports, the analysis. The data was analyzed using ratio, trend, vertical, and horizontal analysis. The comments have been made using the calculations. Moreover, this report includes a comparative financial statement analysis of The Kingsbury PLC and The Lighthouse Hotel PLC.

According to The Kingsbury PLC's horizontal study of its income statement, the gross profit has consistently fluctuated in negative values while the net profit also fluctuates but has recently reported a positive number. The Kingsbury PLC has depended more on debt than The Lighthouse PLC during the analysis period, according to a comparison with the horizontal examination of the balance sheets in The Lighthouse Hotel PLC. Throughout the five years covered by the research, The Kingsbury Hotel PLC's gross profit common size percentage regularly outpaced its cost of sales percentage. Additionally, a bigger percentage of totals have been invested in short-term assets and liabilities in The Lighthouse Hotel, comparable to Kingsbury Hotel PLC, in the vertical examination of the balance sheet of The Lighthouse Hotel. Additionally, both firms' trend analyses revealed that the values tended to change more and less with time. However, it can be seen from comparing the data that The Kingsbury's figures somewhat outperformed those of The Lighthouse Hotel. Except for Day's sales uncollected and Day's sales inventory, both companies have not done well based on the liquidity ratios. As a result, there is a greater chance that both businesses will become insufficient in their ability to pay off short-term debt. The solvency ratios lead us to the conclusion that Kingsbury PLC has a bigger percentage of debt financing than The Lighthouse Hotel PLC. As a result, the Lighthouse Hotel has outperformed the Kingsbury Hotel PLC in terms of solvency and has a greater capacity to pay off long-term loans. The profitability ratios show a variety of ways in which the companies have fared. Kingsbury Hotel has outperformed Lighthouse Hotel PLC in terms of profit margin. Although both businesses are doing well in terms of gross margin ratio, the Lighthouse Hotel has outperformed the others. The Kingsbury has done better as measured by return on total assets. The fundamental earning-per-share ratio indicates that both companies' conditions need to be improved. According to Book Value per Common Share, both companies are doing well. The Lighthouse Hotel should, nevertheless, improve by making effective use of the owner's money, according to the return on shareholder equity ratio. Finally, according to market statistics, both firms' price-to-earnings ratios are not in a good place, and The Kingsbury's and The Lighthouse's dividend yields, respectively, are on the rise and decline.                                                 The Altman's Z score calculations show that The Kingsbury Hotel PLC has been in a safe zone between 2017 and 2019. The values in 2020–2022, however, have changed to the distress zone. This is supported by several factors, including the Easter attack, Covid-19, and Sri Lanka's economic difficulties. However, based on its values, the company is on the verge of insolvency.

 

 

 

 

 

 

 

 

 

 

 

1.     Introduction

1.1.          Company Overview

The Kingsbury is a nine-story 5-Star luxury hotel that operates as The Kingsbury PLC and is situated at 48, Janadhipathi Mawatha in the heart of Colombo, Sri Lanka (The Kingsbury, n.d.).

Previously, it was known as the Ceylon Continental Hotel Colombo and the Ceylon Inter-Continental Hotel. It was constructed by U. N. Gunasekera, and Hotel Services (Ceylon) PLC, a division of Hayleys PLC, is the owner. In January 2013, it reopened after being renovated (The Kingsbury, n.d.).

The quick addition of star-class lodging, and the growth of the informal sector changed the overall picture, making it competitive for The Kingsbury Hotel to operate as a City Hotel. Reduced demand resulted in lower occupancy rates and lower room revenue for the formal city hotel business, which is challenged by minimum room rates and fierce competition from the unorganized sector (The Kingsbury Colombo - Sri Lanka, n.d.).

The Kingsbury manage a 229-room inventory at The Kingsbury Hotel as well as 40 apartments under lease at Platinum One Residencies (The Kingsbury Colombo - Sri Lanka, n.d.).

The Kingsbury has quickly risen to the top of the hospitality industry and is well-known both locally and internationally as a top travel destination (The Kingsbury Colombo - Sri Lanka, n.d.).

1.2.          Sri Lankan Tourism Industry

Throughout its lengthy and rich history, Sri Lanka has gone by many various names, including "Pearl of the Indian Ocean" and "Emerald Isle." With its vast mix of cultures, stunning natural surroundings, and long history, this comparatively small island throws a powerful punch. Eight beautiful UNESCO World Heritage Sites can be found there. (Yoong, n.d.).

It is understandable why the nation has become a more popular travel destination, drawing up to 2.3 million visitors in 2018. But with a civil war that raged for nearly 26 years, Sri Lanka's journey to prominence has not been an easy one (1983-2009). Despite scoring highly on many human development metrics, the lower middle-income nation still has a lot of space to grow as a hub for international trade and tourism(Yoong, n.d.).

From where it was in 2009, just over thirteen years ago, the Sri Lankan tourist industry has greatly changed and will continue to do so. Regaining investor and consumer trust after COVID may take some time. Given the country's appeal as a vacation destination and its substantial growth potential, there is little doubt that the industry will recover; with the ongoing development and maturity of Sri Lanka's hotel and real estate markets, it will surely be a location to watch in the years to come. (Yoong, n.d.)

1.3.          How is the Tourism Industry Impacted by the Current Economic Crisis?

Sri Lanka has consistently ranked highly among the world's best tourism destinations. However, because of recent events, there are much fewer visitors coming to Sri Lanka.

Figure 1 Monthly Tourist Arrivals in Sri Lanka from July 2017 – June 2022

 

Source: Monthly Tourist Arrivals in Sri Lanka, CEIC (Sri Lanka Visitor Arrivals, n.d.)

Additionally, as seen in Figure 1, the March 2019 Easter bombing incident resulted in a 21 percent decrease in tourist arrivals. Due to the COVID-19 pandemic-related travel restrictions, it stabilized by January 2020, and by March 2020, tourist arrivals had completely stopped. Due to the current economic crisis, the number of tourists arriving is currently decreasing. Since there is a fuel shortage in the nation, many travelers must endure unpleasant situations and challenges. They are unable to locate the necessary transit options, and the planned power outages only worsen their circumstances. The tourist industry is severely threatened by financial difficulties, and the political, social, environmental, and wellness aspects of a place have a significant impact on tourism demand. The tourism sector has faced insurmountable obstacles throughout history, with the COVID-19 pandemic being the most recent instance that brought the sector almost entirely to a standstill. Beginning in September 2021 and continuing for two cycles, there was a gradual decline in foreign arrivals to Sri Lanka. Nevertheless, this recovery has begun to be impacted by the final beneficial conjuncture (SLTDA, 2022). As the impacts of the current economic climate start to permeate, Sri Lanka's tourism industry will face significant challenges in meeting visitor needs. The Sri Lankan tourism sector eventually faces yet another challenge because of the current foreign exchange crisis, price increases, and scarcity of essential supplies like gas and petrol. Businesses are finding it difficult to maintain their regular business operations as the entire supply chain of the industry has been affected. The supply chain and the ability of tourism firms to provide goods, services, and experiences to tourists have been further impacted by import restrictions imposed as a result of the present foreign exchange scenario. Because of the inadequate supply of commodities and the enormous consumer demand, inflation has taken hold and prices for necessities have significantly increased. Rolling power interruptions cause these problems to worsen more quickly (SLTDA, 2022). Despite having planned to designate 2022 as the "Visit Sri Lanka Year," as stated, the current economic crisis is undermining the goal. Countries like England and Canada have previously advised their nationals not to visit Sri Lanka in travel advisories (Anjana Kaluarachchi, 2022). According to Figure 2, England, along with India and Russia, has been a major tourist destination for Sri Lanka. In the period from 1 January to 24 April 2022, 40,955 English citizens visited Sri Lanka. However, when the warnings were given, this further fell. In addition, the 40,828 Russian tourists who came to Sri Lanka before the

Figure 2 Top 20 Tourist Markets to Sri Lanka from 1st January – 24th April 2022

present conflict between Russia and Ukraine has decreased.                                                                       

 

 

 

 

 

 

 

Source: Top Twenty Tourist Source Markets to Sri Lanka, SLTDA (SLTDA, 2022)

 

1.4.          Performance of The Kingsbury Hotel During the Crisis

Like tourist resorts, The Kingsbury PLC also experienced negative effects from decreasing hotel occupancy and decreased usage of its F&B outlets. The Kingsbury PLC kept its occupancy levels in check as a city business hotel with a loyal clientele of local clients and corporates and the reputation as a preferred banquet hotel. (The Kingsbury PLC | Annual Report 2021/22, n.d.). Throughout the lean periods, several actions were made to minimize expenses and maximize resources. The company ended the reviewed year with an overall loss of Rs. 427 Mn. on Rs. 2,022 Mn. in revenues as a result of the industry's and the economy's bad conditions. (The Kingsbury PLC | Annual Report 2021/22, n.d.).

The crew made sure that the hotel's banqueting operations, which are widely regarded as among the best in the nation, were upheld while following the most recent health regulations (The Kingsbury PLC | Annual Report 2021/22, n.d.). The team was in a confident and stoic mood, with optimism for a better future, because of staff motivating programs and close management and team talks. There is a pent-up demand for international travel, as is evident around the world, and with the continued depreciation of the rupee versus the US dollar, The Kingsbury is optimistic that Sri Lanka will draw a sizable portion of the market for tourists looking for value. Wellness tourism is becoming increasingly popular, and Sri Lanka is especially well-positioned to provide a relaxing wellness vacation with a wealth of natural beauty, cultural attractions, and Ayurveda spa experiences (The Kingsbury PLC | Annual Report 2021/22, n.d.).

Apart from the COVID-19 pandemic and the economic crisis, The Kingsbury Hotel was also directly affected by the Easter bomb attack back in 2019. They have taken the necessitated security measures to increase the protection of the hotel.

 

 

 

 

2.        Analysis Overview

A method for examining and analyzing a company's financial statements to judge its past, present, or expected future performance. It is possible to make better economic decisions thanks to this process of reviewing the financial data. (Belyh, 2018).

The main objective of financial statement analysis is to predict future performance of the organization using information about past performance. Finding potential issue areas and solving them is another crucial goal of financial statement analysis. Analyzing financial statements is one way to evaluate the past, present, and future performance of a business. One of the most widely used methods in financial statement analysis is horizontal analysis, which compares financial data from two or more years in both dollar and percentage form. Statistical correlations between data are quantified in ratio analysis, which also uses vertical analysis to interpret each balance sheet account as a percentage of the total account (Belyh, 2018).

The next strategy for assessing financial accounts involves the use of several ratios. To determine how huge one number contrasts with another, we use ratios. To determine whether the company is operating as anticipated, we can compare a ratio to one that was measured at a previous time, or one based on the industry average (Belyh, 2018).

Trend analysis aids in comprehension of past performance and forecasting of future business operations and practices (Belyh, 2018).

Advantages of Financial Statement Analysis (Belyh, 2018)

1.      Examining the budget report is a useful tool that can assist both internal and external clients make better decisions.

2.      It gives information to investors who are considering investing their money in a company.

3.      It will be made clear to governments and regulatory bodies whether the organization complies with accounting norms.

4.      Governmental bodies may examine the organization's tax obligations.

 

 

3.        Evidential Matter

Financial statement analysis has conducted for both The Kingsbury Hotel PLC and The Lighthouse Hotel PLC using the horizontal, vertical, trend and ratio analysis.

The complete data obtained from the income statements and the balance sheets of The Kingsbury ad The Lighthouse in all 5 years, are attached in Appendix 1-4.

3.1.          Horizontal Analysis

A technique called horizontal analysis compares specific financial data from one accounting period with data from other periods to examine financial statements. Such a method is used by analysts to study past trends. By contrasting the values of the current year with those of the base year, trends or changes are evaluated. Finding any rise or fall values is the aim. In a horizontal analysis, a percentage or an absolute comparison could be employed ( CFI Team, 2022).

To effectively compare and analyze businesses and their financial performance, financial statements must be consistent and comparable, as stated in the Generally Accepted Accounting Principles (GAAP). Here, the requirement for consistency means that while accounting principles and practices are constant across time, they must be applied annually ( CFI Team, 2022).

On the other hand, the comparability requirement mandates that a company's financial statements and other documentation be contrasted to those of other comparable enterprises in the same industry. During financial reporting, horizontal analysis is performed to strengthen and improve these limits. As a result, analysts and investors can pinpoint the variables that spur long-term financial growth for a company. They can also identify growth trends and patterns, including seasonality. The approach also permits future estimates and the examination of relative changes in various product lines ( CFI Team, 2022).

The horizontal analysis is conducted on the Income statements and Statement of Financial Position of The Kingsbury PLC, for the recent years of 2018-2022, taking 2017 as the base year as follows.

3.1.1. Summary Horizontal Analysis: Statement of Financial Position

3.1.1.1. The Kingsbury Hotel PLC.

The complete horizontal analysis conducted in attached in appendix 5.

Table 1 Summarized Horizontal Analysis: SOFP – The Kingsbury Hotel PLC

	2018		2019		2020		2021		2022
	$Δ	%Δ	$Δ	%Δ	$Δ	%Δ	$Δ	%Δ	$Δ	%Δ
Total Non - Current Asses	33,418	0.86%	-178,611	-4.60%	232,487	5.98%	-11,135	-0.29%	-117,455	-3.02%
Total Current Assets	-207,652	-25.19%	-219,599	-26.64%	-361,567	-43.86%	-583,384	-70.77%	-288,922	-35.05%
Total Assets	-174,234	-3.70%	-398,210	-8.45%	-129,080	-2.74%	-594,519	-12.62%	-406,377	-8.63%
Total Equity	143,327	6.00%	183,146	7.66%	-155,417	-6.50%	-905,622	-37.88%	-1,263,451	-52.85%
Total Non - Current Liabilities	-395,392	-33.27%	-301,937	-25.41%	-297,650	-25.05%	55,354	4.66%	20,173	1.70%
Total Current Liabilities	77,831	6.88%	-279,419	-24.69%	323,987	28.63%	255,749	22.60%	836,901	73.95%
Total Liabilities	-317,561	-13.69%	-581,356	-25.06%	26,337	1.14%	311,103	13.41%	857,074	36.94%
Total Liabilities and Equity	-174,234	-3.70%	-398,210	-8.45%	-129,080	-2.74%	-594,519	-12.62%	-406,377	-8.63%

The company's prior year's horizontal analysis results can be compared with the current year's outcomes. Results might also be compared to those of a comparable company during the same period. Both the total assets and the total equity and liabilities have the same dollar change and Percentage change values. The summarized percentage changes of the horizontal analysis can be graphically represented. The percentage rates demonstrate the growth rates of each element.

Figure 3 Summarized Horizontal Analysis: SOFP – The Kingsbury Hotel PLC

It is significant that, every elements except of current, non-current and total liabilities have declined negatively in the 2022 year compared to the first year, 2018. Thus, the firm has majorly financed on debt rather than equity in the last years. There can be many reasons behind this.

Total liabilities have started to increase from 2020. Then, in the next 2 years, the percentage difference has been increased in an increasing rate.

In the year, 2019-2020, The Kingsbury PLC was affected directly during the Easter attack. This inversely affected the confidence customers had about the safety in the venue, which decreased the guest arrivals into the premises. Moreover, the company had to close the hotel temporarily and compensate on the severe property damages which were resulted from the bomb blasts.

In the preceding year 2020-2021, even though the Sri Lankan hospitality sector showed a heads up after a big pause due to easter attacks, in March 2020, the whole world was affected by the Covid-19 pandemic. Because of the quick infection of the virus, travel restrictions were imposed in Sri Lanka. The global pandemic was a direct hit to the tourism and hospitality industry of Sri Lanka. Therefore, the total liabilities have grown up by nearly 13% in this year.

In the most recent 2021-2022, financial year, the liabilities of the company have spiked up by nearly 23%. The main reason behind this is the current economic depression in Sri Lanka. The economic crisis is backed up by many causes such as corrupted politics, drastic increase of money supply and the exaggerating consumer demand.

Alternatively, it should be observed that, in the corresponding years of 2020,2021, and 2022, the total Assets and Equity of The Kingsbury PLC has shown a declining trend in a growing rate.

3.1.1.2. The Lighthouse Hotel PLC.

 

The Light House Hotel PLC was chosen as the company to compare the values. The complete horizontal analysis is attached in the Appendix 6.

As per the table 2, it should be noted that the total assets of The Lighthouse PLC have remained positive in 2022, by almost 10% when compared to 2021. However, the total current assets have shown a higher percentage difference when compared to the total non-current assets. Thus, the company has financed on Short-term assets rather than long-term assets during the final year of this analysis.

On the other hand, corresponding to the current assets, current liabilities have also been increased by a proportion of 20.3366% when compared to 2021. Therefore, it means that most of the current assets are financed through debt rather than the equity.

However, on a comparative note, it should be noted that The Kingsbury PLC has relied more on debt than The Light House PLC.

The summary of the horizontal analysis of the balance sheet for the same years is given below.

 

Table 2 Summarized Horizontal Analysis: Statement of Financial Position – The Lighthouse Hotel PLC.

As at 31st March	2018		2019		2020		2021		2022
	$Δ	%Δ	$Δ	%Δ	$Δ	%Δ	$Δ	%Δ	$Δ	%Δ
Total Non-Current Assets	115139.4	3.78%	-60932.3	-1.93%	549483.6	17.72%	-86029.8	-2.36%	171333.7	4.81%
Total Current Assets	-2192.98	-1.26%	25758.05	15.03%	-60383.3	-30.64%	-46177.6	-33.77%	60472.13	66.79%
Total Assets	112946.4	3.51%	-35174.2	-1.06%	489100.3	14.83%	-132207	-3.49%	231805.8	6.34%
Total Equity	10709.81	0.37%	134051.4	4.66%	245290.6	8.15%	-170279	-5.23%	188017	6.10%
Total Non-Current Liabilities	111635.4	230.25%	3964.973	2.48%	200285	122.06%	15851.28	4.35%	77323.77	20.34%
Total Current Liabilities	-9398.74	-3.05%	-173191	-58.05%	43524.74	34.78%	22220.58	13.17%	-33535	-17.57%
Total Liabilities	102236.6	28.70%	-169226	-36.91%	243809.7	84.30%	38071.86	7.14%	43788.79	7.67%
Total Equity and Liabilities	112946.4	3.51%	-35174.2	-1.06%	489100.3	14.83%	-132207	-3.49%	231805.8	6.34%

The graphical representation of the above table is as below.

Figure 4: Summarized Horizontal Analysis: Statement of Financial Position – The Lighthouse Hotel PLC.

 

 

 

3.1.2. Summary Horizontal Analysis: Income Statement

3.1.2.1. The Kingsbury Hotel PLC.

The complete horizontal analysis conducted in attached in appendix 7.

Table 3 : Summarized Horizontal Analysis: Income statement - The Kingsbury Hotel PLC

As at 31st March	2018		2019		2020		2021		2022
	$Δ	%Δ	$Δ	%Δ	$Δ	%Δ	$Δ	%Δ	$Δ	%Δ
Gross Profit	-137,242	-8.62%	-161,449	-10.14%	-970,380	-60.97%	-1,676,623	-105.34%	-1,114,485	-70.02%
Profit Before Tax	-237,087	-55.78%	-252,228	-59.35%	-19,883	-4.68%	456,378	107.38%	31,522	7.42%
Net Profit After Tax	-241,192	-63.41%	-279,569	-73.50%	12,503	3.29%	377,848	99.34%	46,490	12.22%

Figure 5 : Summarized Horizontal Analysis: Income Statement – The Kingsbury Hotel PLC

After observing the above table, we can see that throughout all the 5 years from 2018, the gross profit has been negative. This implies that the direct expenditures of the company (cost of goods sold) have always been higher than the direct revenues in the company.

Specifically, even though the value has been declined only by 2% in 2019 comparatively to 2018, in 2020, the gross profit has been declined by around 6 times when compared to the preceding year. In 2021, this value has been further declined in a growing rate.

This might be because the company’s sales revenues were paused in because of the Easter bomb attack and Covid-19 pandemic.

However, the Net Profit After Tax has shown an increasing trend at the years of 2019, 2020, 2021. This might be because of the increase of indirect income, decrease of indirect expenditure or the decrease of tax expenditures of the company.

However, in 2022 the Net profit remains a positive figure but has dropped by around 87% compared to 2021.

3.1.2.2. The Lighthouse Hotel PLC.

The complete horizontal analysis is attached in the Appendix 8.

The summary of the income statement horizontal analysis is given below.

Table 4: Summarized Horizontal Analysis: Income Statement – The Lighthouse Hotel PLC.

As at 31st March	2018		2019		2020		2021		2022
	$Δ	%Δ	$Δ	%Δ	$Δ	%Δ	$Δ	%Δ	$Δ	%Δ
Gross Profit	16,277	2.50%	-9,690	-1.45%	-285,575	-43.34%	-259,265	-69.44%	184,212	161.47%
Profit before Tax	-9,423	-5.77%	513	0.33%	-216,630	-140.40%	-104,249	167.23%	146,035	-87.66%
Profit for the Year	-10,970	-7.40%	186	0.14%	-208,963	-152.02%	-98,353	137.54%	142,004	-83.60%

 

According to the above table, it is significant to note that even there is a negative gross profit for 2019, 2020, and 2021, it has been increased by almost 130% in 2022. Therefore, the direct revenues of the Lighthouse Hotel PLC have increased than the cost of sales in 2022. However, the Net Profit of the Year for the company has decreased drastically by around 220% in 2022. This might be because of the higher indirect expenses, lower indirect income, or higher tax expenditures.

The above table is graphically represented as follow.

 

Figure 6: Summarized Horizontal Analysis: Income Statement – The Lighthouse Hotel PLC.

Moreover, compared to the Light House PLC, based on the Net profit after tax, in 2022, Th Kingsbury PLC has performed better.

3.2.          Vertical Analysis

Accounting software called vertical analysis permits proportional study of records like financial accounts. Every line item on a financial statement is represented as a percentage of another item when performing a vertical analysis. Every line item, for instance, is stated as a percentage of gross sales on an income statement. Similar to this, each item on a balance sheet is made as a percentage of all assets rather than in terms of absolute currency. The most typical application of vertical analysis in a financial statement is for a single reporting period, such as a quarterly one. It is done this way so that accountants can figure out the proportional proportions of each account's balances. The ability to quickly compare balance sheets from companies of all sizes is one of vertical analysis's primary benefits. Additionally, it makes it simple to see annual relative changes within a single organization. Common size financial statements are the name given to the financial statements created using this technique (CFI Team, 2022b).

 

The findings of the vertical analysis help to compare the company's financial statement performance from one year to the next. Additionally, size % analyses sometimes involve comparisons between the same company over time or between various companies over time. Total assets or the sum of the value of the equity and liabilities is the base number often chosen from the balance sheet. The amount for net sales, net income, and revenue is used as the common base figure from the income statement. Following that, the sums are given as a percentage of the chosen base sum. These proportions are contrasted. The base period percentages are assumed to be 100% (Team, 2022b).

The following conclusions can be reached using data from The Kingsbury Hotel PLC’s annual reports. The base year considered is 2017.

3.2.1. Summary Vertical Analysis: Statement of Financial Position

3.2.1.1. The Kingsbury Hotel PLC.

The complete vertical analysis is attached in Appendix 9. Given below is a comprehensive summary of the attached details.

Table 5: Summarized Vertical Analysis: Statement of Financial Position – The Kingsbury Hotel PLC

As at 31st March	2017	2018	2019	2020	2021	2022
Total Non – Current Asses	82.50%	86.41%	85.98%	89.90%	94.15%	87.56%
Total Current Assets	17.50%	13.59%	14.02%	10.10%	5.85%	12.44%
Total Assets	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%
Total Equity	50.75%	55.86%	59.68%	48.78%	36.08%	26.19%
Total Non – Current Liabilities	25.23%	17.48%	20.56%	19.44%	30.22%	28.08%
Total Current Liabilities	24.02%	26.66%	19.76%	31.77%	33.71%	45.74%
Total Liabilities	49.25%	44.14%	40.32%	51.22%	63.92%	73.81%
Total Liabilities and Equity	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%

As per the above information, for the past five years, The Kingsbury Hotel PLC has maintained a total non-current asset ratio above 50%. That is a favorable situation for a business. That shows that even when their output and sales decline, they still have the resources at hand to rebuild the business. In the five years under review, Kingsbury Hotel’s inventories were extremely low.

The highest non-current asset percentage is recorded in 2021, which is 94.85%.

From one year to the next, they are getting smaller. The percentage was under 5%. It's a beneficial situation for the business because it shows that their merchandise sells quickly without retaining a stock and that they don't have to incur significant costs for inventory management.

Even though the common-size percentages for total equity have been increased in the first 3 years, it has then kept decreasing at a declining rate.

Furthermore, in the year of 2020-2021, the total non-current liabilities have been increased dramatically.  Thus, the company has been financing on long-term debt majorly in that period. However, the figure has been declined by around 2% back in 2022.

On the other hand, the current liabilities have increased by around 12% in 2020, and then by around 2% in 2021 and again by around 12% in 2022.

Figure 7: Summarized Vertical Analysis: Statement of Financial Position – The Kingsbury Hotel PLC

3.2.1.2. The Lighthouse Hotel PLC.

The complete vertical analysis is attached in Appendix 10. Given below is a comprehensive summary of the attached details.

Table 6: Summarized Vertical Analysis: Statement of Financial Position – The Lighthouse Hotel PLC

As at 31st March	2017	2018	2019	2020	2021	2022
Total Non-Current Assets	94.61%	94.86%	94.02%	96.39%	97.52%	96.11%
Total Current Assets	5.39%	5.14%	5.98%	3.61%	2.48%	3.89%
Total Assets	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%
Total Equity	88.94%	86.24%	91.23%	85.92%	84.37%	84.18%
Total Non-Current Liabilities	1.51%	4.80%	4.98%	9.62%	10.40%	11.77%
Total Current Liabilities	9.56%	8.95%	3.80%	4.45%	5.22%	4.05%
Total Liabilities	11.06%	13.76%	8.77%	14.08%	15.63%	15.82%
Total Equity and Liabilities	100.00%	100.00%	100.00%	100.00%	100.00%	100.00%

As per the above information, for the past five years, The Light House Hotel PLC has maintained a total non-current asset ratio above 50%. That is a favorable situation for a business. That shows that even when their output and sales decline, they still have the resources at hand to rebuild the business. In the five years under review, The Hotel’s inventories were extremely low.

The highest non-current asset percentage is recorded in 2021, which is 98.22%.

Figure 8:Summarized Vertical Analysis: Statement of Financial Position – The Lighthouse Hotel PLC

 

 

3.2.2. Summary Vertical Analysis: Income Statement

3.2.2.1. The Kingsbury Hotel PLC.

The complete vertical analysis is attached in Appendix 11. Given below is a comprehensive summary of the attached details.

Table 7: Summarized Vertical Analysis: Income Statement – The Kingsbury Hotel PLC.

As at 31st March	2017	2018	2019	2020	2021	2022
Gross Profit	52.00%	47.14%	48.37%	33.70%	-10.92%	23.60%
Profit Before Tax	13.88%	6.09%	5.84%	21.97%	113.30%	22.58%
Net Profit After Tax	12.43%	4.51%	3.41%	21.31%	97.46%	21.11%

According to the above summary, it is significant that the percentage of cost of sales has been always higher than the gross profit in the 5 years which the analysis is conducted. In the base year of 2017, 52% of revenue has been made into the gross profit while the minor section has been declared as cost of sales. The lowest common-size percentage is recorded in 2021, which is -10.92%.

This might be because of the higher property damage compensations due to Easter attacks and also the expenditures incurred while adjusting to COVID-19 pandemic guidelines, such as launching of Online food delivery system.

Furthermore, the Net profit after tax has shown a decreasing trend at a decreasing rate from 2017-2019. In 2021, the highest common-size difference of 97.46% has recorded with a drastic increase of 76.15%. However, again in the last year, it has again declined to 21.11%.

The summary can be graphically represented as below.

 

 

 

 

 

 

Figure 9 : Summarized Vertical Analysis: Income Statement – The Kingsbury Hotel PLC.

3.2.2.2. The Lighthouse Hotel PLC.

The complete vertical analysis is attached in Appendix 12.

Given below is a comprehensive summary of the attached details.

Table 8 : Summarized Vertical Analysis: Income Statement– The Lighthouse Hotel PLC

As at 31st March	2017	2018	2019	2020	2021	2022
Gross Profit	81.62%	81.42%	81.28%	79.25%	67.97%	76.35%
Profit before Tax	20.42%	18.73%	19.03%	-13.23%	-99.26%	-5.26%
Profit for the Year	18.55%	16.71%	16.96%	-15.18%	-101.21%	-7.13%

As per the above information, almost 1/5^th of total revenue has been incurred as cost of sales except in 2021. In that year, 3/10^rd of the total revenue has incurred on the cost of sales which has been amounted to 32.03%.

Furthermore, in all the years the company has incurred a more finance expense in contrast with their finance income.

Moreover, the net profit has drastically dropped by almost 23% in the final year of 2022 which has been recorded as -7.13%. However, when comparing the 2 companies, it is capable to denote that The Kingsbury PLC has performed well than The Light House Hotels PLC on the basis of the Net profit after the year.

The above data can be represented graphically as below.

Figure 10: Summarized Vertical Analysis: Income Statement– The Lighthouse Hotel PLC

3.3.          Trend Analysis

Technical analysis's trend analysis method makes use of trend data that was recently seen to forecast future stock price movements. To predict the long-term direction of market sentiment, trend analysis makes use of previous data, such as price fluctuations and transaction volume (Hayes, 2021).

A trend is the overall course the market is taking over a certain time period. Both upward and downward trends, which correspond to bullish and bearish markets, are possible. While there is no set minimum amount of time needed for a direction to be termed a trend, the trend becomes more noticeable the longer the direction is maintained (Hayes, 2021).

Technical analysis's trend analysis method makes use of trend data that was recently seen in order to forecast future stock price movements. Trend analysis is a type of comparative analysis that entails examining present trends in order to forecast future ones. This can involve attempting to predict if a current market trend, such as increases in one specific market sector, is likely to persist as well as whether a trend in one market area might influence a trend in another. Although a trend analysis may use a lot of data, the accuracy of the results cannot be guaranteed (Hayes, 2021).

 

 

3.3.1.   The Kingsbury Hotel PLC.

Table 9: The Kingsbury Hotel Trend Analysis

As at 31st March	2017	2018	2019	2020	2021	2022
Revenue	100.00%	100.79%	96.59%	60.23%	25.41%	66.04%
Cost of Sales	100.00%	110.98%	103.88%	83.20%	58.72%	105.11%
Gross Profit	100.00%	91.38%	89.86%	39.03%	-5.34%	29.98%

In the trend analysis, the base period (2017) values are recorded as 100%. Trend analysis replicates the tendencies of turnover, gross profit and cost of sales, of The Kingsbury Hotel PLC in the 5 years of analysis which is 2018-2022.

Accordingly, in 2018, the revenue, cost of sales and gross profit are 100.79%, 110.98% and 91.38% times larger respectively and compared to the values in base year.

In 2019, the revenue, cost of sales and gross profit are 96.59%, 103.88% and 89.86% times larger respectively and compared to the values in base year.

In 2020, the revenue, cost of sales and gross profit are 60.23%, 83.20%, and 39.03% times larger respectively and compared to the values in base year.

In 2021, the revenue, cost of sales and gross profit are 25.41%, 58.72% and -5.34% times larger respectively and compared to the values in base year.

In 2022, the revenue, cost of sales and gross profit are 66.04%, 105.11% and 29.98% times larger respectively and compared to the values in base year.

Generally, by going through these summarized amounts in the trend analysis it is important to understand that company has both positive and negative side in each element along the 5-year time considered.

The above data can be graphically represented as below.

 

 

Figure 11: The Kingsbury Hotel Trend Analysis

3.3.2.    The Lighthouse Hotel PLC.

Table 10: The Lighthouse Hotel Trend Analysis

As at 31st March	2017	2018	2019	2020	2021	2022
Revenue	100.00%	102.76%	101.44%	58.94%	21.00%	48.89%
Cost of Sales	100.00%	103.91%	103.32%	66.54%	36.59%	62.92%
Gross Profit	100.00%	102.50%	101.01%	57.23%	17.49%	45.73%

In the trend analysis, the base period (2017) values are recorded as 100%.

In 2018, the revenue, cost of sales and gross profit are 102.76%, 103.91%, and 102.50% times larger respectively and compared to the values in base year.

In 2019, the revenue, cost of sales and gross profit are 101.44%, 103.32%, and 101.01% times larger respectively and compared to the values in base year.

In 2020, the revenue, cost of sales and gross profit are 58.94%, 66.54%, and 57.23% times larger respectively and compared to the values in base year.

In 2021, the revenue, cost of sales and gross profit are 21.00%, 36.59%, and 17.49% times larger respectively and compared to the values in base year.

In 2022, the revenue, cost of sales and gross profit are 48.89%, 62.92%, and 45.73% times larger respectively and compared to the values in base year.

 

Figure 12: The Lighthouse Hotel Trend Analysis

3.4.          Ratio Analysis

Ratio analysis is the cornerstone of credit risk assessment, pricing, and fundamental business value. A financial ratio, also known as an accounting ratio, is a computation that illustrates the relative magnitude of particular numerical values obtained from a company's financial statements. It is derived from those financial statements  (CFI Team, 2022c).

The following categories are used to classify financial ratios:

1.      Solvency ratio

2.      Ratios of profitability

3.      Ratios of market value

4.      Ratios of liquidity and efficiency

Financial ratios can be used by managers within an organization, by current and potential shareholders and creditors of an organization, and by other audiences interested in understanding the strengths and weaknesses of a company, particularly when compared to the company over time or to other companies  (CFI Team, 2022c).

The complete ratio analysis computation of The Kingsbury Hotel PLC and The Lighthouse Hotel PLC is available in Appendix 13 and 14 respectively.

 

 

 

 

3.4.1.   Liquidity and Efficiency

A company's liquidity is the amount of money it can quickly access to pay off its debts. Cash, short-term assets with a quick market, fixed bank deposits, trade receivables, and bills of exchange receivables make up the liquid funds (CFI Team, 2022c).

a.      Working Capital

Short-term assets can be easily turned into cash, while short-term liabilities need to be settled as soon as possible. This ratio demonstrates whether there is enough money available to play day-to-day activities (CFI Team, 2022c).

Working Capital = Current Assets - Current Liabilities

Table 11: Working Capital

	2017	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	-655,375	-693,843	-247,606	-992,980	-1,146,559	-1,433,249
The Lighthouse Hotel PLC	-134,188	-126,983	71,966	-31,942	-100,340	-6,333

Figure 13 : Working Capital

 Throughout all the years, The Kingsbury Hotel has a negative working capital, which indicate that the company is not in a good position to pay its short-term debts.

On the other hand, The Lighthouse Hotel PLC has also recorded negative values except for 2019. Thus, The Lighthouse has mostly had current liabilities than current assets except in 2019.

b.      Current Ratio

This ratio suggests that the corporation must have adequate liquid assets on hand to cover its short-term obligations in the future. If the ratio falls below one, it indicates that the company has more debts, and if it rises significantly beyond one, it indicates that the company has an excessive amount of assets (CFI Team, 2022c).

Current Ratio = Current Assets / Current Liabilities

Table 12: Current Ratio

	2017	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	0.42	0.43	0.71	0.32	0.17	0.27
The Lighthouse Hotel PLC	0.56	0.57	1.58	0.81	0.47	0.96

 

Figure 14: Current Ratio

 

In The Kingsbury Hotel PLC, every current ratio value is lower than one. It demonstrates the company's incapacity to make on-time debt payments.

On the other hand, The Lighthouse Hotel PLC has also recorded values less than 1 except for 2019, which indicates that in most of the times the hotel had more debts.

 

c.       Acid-Test Ratio

Current assets cannot all be immediately converted into cash. The liquidity status of the company is shown by this ratio. For businesses with a poor inventory turnover, it is advisable to have an acid-test ratio value of at least one. The organization may experience cash flow issues if the ratio's value falls below one. Inventory may be important to the business (CFI Team, 2022c).

Acid-Test Ratio = Quick Assets / Current Liabilities

Table 13: Acid-Test Ratio

	2017	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	0.24	0.28	0.46	0.16	0.03	0.15
The Lighthouse Hotel PLC	0.46	0.48	1.36	0.66	0.32	0.62

Figure 15 : Acid-test Ratio

In the Kingsbury Hotel PLC, in all the years the value is less than 1. This demonstrates that the organization will not be in a strong position. The inventory is essential to the business.

On the other hand, in The Lighthouse Hotel PLC, only in 2017 has a value higher than 1. The company would be survived even if the inventory could not be sold. In the year 2017, the business was in a strong position and could continue operating even without inventory.

d.      Accounts Receivable Turnover

This ratio gauges a company's ability to effectively offer credit and recover debt by counting how frequently receivables are converted into cash each year. The efficiency of the business increases as the value increases. In calculations for both companies, we have assumed that all the sales are done on credit basis (CFI Team, 2022c).

Accounts Receivable Turnover = Sales on Account / Average Accounts Receivables

Table 14: Accounts Receivable Turnover

	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	22.40	20.79	11.85	7.63	19.45
The Lighthouse Hotel PLC	6.35	6.21	4.27	2.52	5.86

 

Figure 16: Accounts Receivable Turnover

The Kingsbury PLC has shown a declining trend from 2018 – 2021. However, it has again drastically increased in 2022. It illustrates how quickly the company is able to collect money from its receivables. The business is successful at collecting money from its receivables. This indicates a healthy performance in the hotel.

Similar to the first company, The Lighthouse Hotel PLC has also been declining till 2021 from 2018 and has been somewhat increased in 2022. However, throughout the 5 years, the value is less than 7. It illustrates how slowly the company is able to recover money from its receivables. The company struggles to effectively recover money from its receivables. This does not indicate a healthy performance.

e.       Total Assets Turnover

This ratio gauges how effectively the assets generate sales. If this ratio is larger than one, the business will benefit and become more effective. It is also bad for the company when the ratio value increases dramatically (CFI Team, 2022c).

Total Assets Turnover = Revenues/Average Total Assets

Table 15: Total Assets Turnover

	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	0.25	0.24	0.13	0.05	0.10
The Lighthouse Hotel PLC	0.70	0.68	0.41	0.18	0.48

 

Figure 17: Total Assets Turnover

In The Kingsbury Hotel PLC, the numbers for the past five years are all less than one, indicating that on average, total assets exceed total revenues. This indicates that the business is less effective.

In the Lighthouse Hotel PLC, the numbers for the past five years are all less than one, indicating that on average, total assets exceed total revenues. This indicates that the business is less effective.

 

f.        Merchandise Turnover

This ratio provides a general notion of how frequently a business sells and replaces its inventory each year. If this ratio's value increases, it indicates that the company's inventory is selling out quickly and that the level of inventory is quite low (CFI Team, 2022c).

Merchandise Turnover = Cost of Goods Sold / Average Inventory

Table 16: Merchandise Turnover

	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	22.18	21.18	15.77	11.01	16.60
The Lighthouse Hotel PLC	5.01	5.54	3.77	2.28	5.01

Figure 18: Merchandise Turnover

In the Kingsbury PLC, the value shows a decreasing trend until 2021, but it has increased in 2022 to some extent. Accordingly, in the first 4 years, it shows that higher quantity of inventory is not sold.

In the Lighthouse Hotel PLC, the value has been declined from 2019-2021, but has been increased again in 2022. However, in all these years, values have been lesser than 10. Therefore, mostly the inventory is not sold.

 

 

 

g.      Day’s Sales Uncollected

The number of days between the day of sales and the day the receivables are collected is used to calculate the liquidity of the receivables. The company's liquidity is better the fewer days there are. If it is lower than 100 days, the figure is good. If this ratio declines, it means that the business can quickly collect its money. The business might use a variety of incentives and gimmicks, such buy one get one free, to entice customers to make a payment (CFI Team, 2022c).

Day’s Sales Uncollected = (Accounts Receivables / Net Sales) * 365

Table 17: Day’s Sales Uncollected

	2017	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	15.25	17.46	16.89	34.51	13.88	32.20
The Lighthouse Hotel PLC	80.64	68.00	63.47	94.91	147.24	59.95

Figure 19: Day’s Sales Uncollected

In the Kingsbury Hotel PLC, over the years, the value has changed, and the fact that it has only exceeded 30 days in 2020 and 2022 is good. Therefore, the hotel is in good condition.

In the Lighthouse Hotel PLC, the value has been very high in the first 3 years, and it has become lowered generally in the last 3 years. Therefore, the condition of the hotel is improving.

h.      Day’s Sales Inventory

This gauges the inventory's liquidity or the typical number of days it takes a business to sell all of its stock, including things that are still being manufactured. Additionally, a smaller value is preferable. Lead times, seasonal variations in orders, alternative uses of warehouse space, bulk buying discounts, and the probability of inventory perishing or becoming obsolete are a few factors that must be considered in order to minimize the ratio values (CFI Team, 2022c).

Day’s Sales Inventory = (Ending Inventory / Cost of Sales) * 365

Table 18: Day’s Sales Inventory

	2017	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	18.13	16.58	16.76	25.34	30.43	26.97
The Lighthouse Hotel PLC	80.64	68.00	63.47	94.91	147.24	59.95

Figure 20 : Day’s Sales Inventory

In the Kingsbury Hotel PLC, over the time the value has been fluctuated. However, in the recent year of 2022, it has been decreased from the value in 2021 by almost 5%. Accordingly, the holding period of inventory before selling in Kingsbury has declined, which is healthy for the company. On the other hand, in the Lighthouse Hotel PLC, has been in a decreasing trend in the initial three years. However, in the following two years, the value has been increasing at a drastic rate. But, in 2022 again the value has been dropped by more than half of the value in 2021.

3.4.2.   Solvency

Prospective business lenders frequently utilize a solvency ratio as a significant indicator of a company's capacity to repay its long-term debt. A company's financial health can be assessed by looking at its solvency ratio, which determines if its cash flow is sufficient to cover its long-term obligations (Hayes, 2022a).

a.       Debt Ratio

This demonstrates how much of the company's assets are provided by creditors. A company's assets are divided into current and non-current assets. Current and non-current liabilities make up debts. The maximum safe debt ratio is not a hard and fast rule. Many businesses run successfully with debt ratios higher than 50%. Therefore, the debt-to-income ratio must be reduced to between 50 and 60 percent. If the ratio rises above certain levels, the company's debt position needs to be closely monitored (Hayes, 2022a).

Debt Ratio = Total Liabilities / Total Assets

Table 19: Debt Ratio

	2017	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	53.18%	45.15%	40.32%	51.22%	63.92%	73.81%
The Lighthouse Hotel PLC	11.06%	13.76%	8.77%	14.08%	15.63%	15.82%

Figure 21: Debt Ratio

In the Kingsbury Hotel PLC, the debt ratio has been fluctuating in the first 4 years within the range of 40% - 60%. However, in the last 2 years, the proportion has been increased steeply beyond 60%. Thus, since the company has shown an increasing trend recently, it is better to lower the debt financing in the company to reduce the uncertainty of insolvency.

On the other hand, in the Light House Hotel PLC, the debt ratio has been always lower than 20%, which is extremely healthy towards the efficiency of the company.

b.      Equity Ratio

This ratio shows how much of the company's assets are provided by the owners. Long-term capital of the corporation, which can either be issued share capital (ordinary shares plus other equity, non-redeemable preference shares), or long-term debt, is required to fund these assets (Hayes, 2022a).

Equity Ratio = Total Shareholders’ Equity / Total Assets

Table 20: Equity Ratio

	2017	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	54.79%	57.13%	59.68%	48.78%	36.08%	26.19%
The Lighthouse Hotel PLC	88.94%	86.24%	91.23%	85.92%	84.37%	84.18%

 

In Kingsbury PLC, opposite to the lower debt ratio, in the first 4 years, the proportion has been on its peak levels. However, at the last 2 years, the equity ratio has gone below 40% making the major proportion of the firm financed via debt.

In The Lighthouse Hotel PLC, along with debt ratios around 15% in all 5 years, the equity ratio has been able to record at around 85%. This means that, more than 4/5^th of the company is financed by owners.

 

 

Figure 22: Equity Ratio

c.       Time Interest Earned

This ratio gauges a company's capacity to safeguard the long-term creditor or how well-equipped it is to cover interest costs. The ability of the business increases with value (Hayes, 2022a).

Time Interest Earned = Net Income before Interest Expense
and Income Taxes / Interest Expense

Table 21: Time Interest Earned

	2017	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	4.06	2.42	2.14	-5.60	-9.91	-3.36
The Lighthouse Hotel PLC	-10.91	-9.31	-9.16	6.80	50.88	2.81

 

The values in both The Kingsbury PLC and The Lighthouse Hotel PLC have been fluctuating over the time. The highest amounts recorded are 4.06 in 2017 and 50.89 in 2020 for The Kingsbury and The Lighthouse Hotel respectively.

Figure 23: Time Interest Earned

3.4.3.   Profitability

The ability of a business to create money (profit) in relation to sales, balance sheet assets, operating costs, and shareholders' equity over a given time period is measured and evaluated by analysts and investors using profitability ratios. They demonstrate how well a business uses its resources to generate profit and shareholder value.

Most businesses frequently aim for a larger ratio or value because doing so typically indicates that the company is operating profitably and creating cash flow. The ratios are most helpful when compared to other companies in a similar industry or to earlier time periods. The following analysis looks at the most popular profitability ratios (Hayes, 2022b).

a.      Profit Margin

Here, it is demonstrated how a business can generate a profit from sales. The business must therefore be aware of its productivity and profitability both before and after taxes. This also illustrates how much net profit the business makes as a percentage of total sales (Hayes, 2022b).

Profit Margin = Net Income / Net Sales

 

 

 

 

Table 22: Profit Margin

	2017	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	12.43%	4.51%	3.41%	21.31%	97.46%	21.11%
The Lighthouse Hotel PLC	18.55%	16.71%	16.96%	-15.18%	-101.21%	-7.13%

Figure 24: Profit Margin

In the Kingsbury Hotel PLC, the profit margin has declined in the first 2 years and has turned into a steep spike in the next 2 years, while recording a figure which is almost 98% in 2021. However, the value has dramatically declined in the most recent year. Kingsbury has not recorded a negative value during the analysis period, which is good.

However, in The Lighthouse Hotel PLC, the value has remained positive in the first 3 years and taken up negative figures in the last 3 years. Thus, the company is not efficient in terms of profit margin.

 

 

 

 

 

b.      Gross Margin

This ratio calculates how much of $1(1 Rupee) in sales is left over after operating costs and a profit are considered. To exist, a corporation needs a high value (Hayes, 2022b).

Gross Margin = (Net Sales - Cost of Sales) / Net Sales 

Table 23: Gross Margin

	2017	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	52.00%	47.14%	48.37%	33.70%	-10.92%	23.60%
The Lighthouse Hotel PLC	81.62%	81.42%	81.28%	79.25%	67.97%	76.35%

 

Figure 25: Gross Margin

It is important to note that, in the years of 2020 and 2021, the gross margin of Kingsbury PLC has fallen into negative values. However, in the most recent year of 2022, the gross margin has increased considerably.

On the other hand, in the Lighthouse Hotel PLC, the value has been always above 70% in whole 5 years, which is good for the company’s financial health.

 

 

 

c.       Return on Total Assets

This ratio is the proportion of net income from average total assets or the efficiency with which a corporation generates earnings from its assets. This is the most accurate way to assess a company's profitability overall (Hayes, 2022b).

Return on Total Assets = Net Income / Average Total Assets

Table 24: Return on Total Assets

	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	3.16%	2.30%	8.83%	17.43%	10.14%
The Lighthouse Hotel PLC	4.14%	3.88%	-1.92%	-4.51%	-0.72%

 

Figure 26: Return on Total Assets

In the Kingsbury PLC, the values have declined in the first 2 years, but has shown an increasing trend in the years of 2020 and 2021. But, in 2022 it has again decreased. However, since there are no negative values, this is a good condition for the company.

In The Lighthouse Hotel PLC, the values have shown a decreasing trend until 2021. However, it has increased slightly in 2022. But the value is less than 1. Therefore, the company is not in a good position.

 

 

d.      Basic Earnings per Share

This ratio is crucial for buying and selling stock market shares on the stock exchange. The value gives a general sense of the amount of income generated by each share of common stock. It represents the portion of the net profit for the time period that is allocated to each ordinary share that was outstanding for all or a portion of the time(Hayes, 2022b).

Basic Earnings per Share = Net Income / Weighted-Average Common Shares Outstanding

Table 25: Basic Earnings per Share

	2017	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	1.57	0.58	0.42	-1.62	-1.57	-0.88
The Lighthouse Hotel PLC	0.003	0.003	0.003	-0.002	-0.004	-0.001

Figure 27: Basic Earnings per Share

In the Kingsbury PLC, the value has been decreased at an increasing rate. The figures of last 2 years are negative. Therefore, the most profitable year to buy shares in Kingsbury would have been 2017.

Similar to the Kingsbury, the common share price of The Lighthouse Hotel has also depreciated in the 5 years. Investing there in the recent years could not be profitable to the investor.

 

e.       Book Value per Common Share

Liquidation of the sums indicated. Through these ratio numbers, the amount received by one shareholder in the event of bankruptcy is shown (Hayes, 2022b).

Book Value per Common Share = Total Equity/ Number of Shares

Table 26: Book Value per Common Share

	2017	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	9.88	10.47	10.64	9.24	3.07	2.33
The Lighthouse Hotel PLC	0.06	0.06	0.07	0.07	0.07	0.07

 

Figure 28: Book Value per Common Share

In the Kingsbury Hotel, the value has been increasing in the first 3 years at a decreasing rate, but it has led to decline in the recent 3 years. However, since there are no negative rates and many uncontrollable causes behind, the company is in good condition.

The book value per common share in The Lighthouse Hotel has been increasing in the first 4 years and has slightly decline in 2021. However, in the end in 2022, the book value has risen back. This is a good condition to the company.

 

 

f.        Return on Shareholder’s Equity

This metric shows how well the business used the owners' capital to generate money, or the percentage of income generated per rupee invested (Hayes, 2022b).

Return on Shareholder’s Equity = Net Income / Average Shareholders’ Equity

Table 27: Return on Shareholder’s Equity

	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	1.25	1.16	0.77	0.42	1.55
The Lighthouse Hotel PLC	0.05	0.05	-0.02	-0.05	-0.01

 

Figure 29: Return on Shareholder’s Equity

In the Kingsbury PLC, the value has been declining from 2018-2021. However, in 2022, they have recorded the highest figure during analysis period. Thus, the company has used their owner’s capital better to earn income.

In Lighthouse Hotel, the value keeps declining through 2018-2022 at an increasing rate. Company should work on putting their owner’s capital into better use.

3.4.4.   Market

The market value of an investment in common stock of a publicly traded company is that investment's value. As a result, investment ratios must take into consideration both information from the firm's published financial statements and the share price, as both the PE ratio and dividend ratios do (“Market Value Ratios,” 2022).

a.      Price-Earnings Ratio

A higher PE ratio demonstrates greater shareholder confidence in the business's prospects and potential for profit growth. A lower PE ratio demonstrates less shareholder confidence. One company's PE ratio can be compared to the PE ratios of other businesses in the same industry as well as other businesses in general. In stock exchange reporting, where prices are easily accessible, it is frequently employed. As a result, investors frequently use this ratio as a rule of thumb when determining stock valuations (“Market Value Ratios,” 2022).

Price-Earnings Ratio = Market Price per Share/ Earnings per Share

Table 28: Price-Earnings Ratio

	2017	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	9.87	31.03	30.48	-10.74	-3.82	-9.09
The Lighthouse Hotel PLC	16.44	13.77	11.48	-	-	-

Figure 30: Price-Earnings Ratio

In the Kingsbury Hotel, the values have increased exceptionally in the first 2 years and has slightly declined in the 3^rd year. It has continued this decreasing trend at a higher pace. In the years of 2020,2021 and 2022, the values are less than 1. Thus, the company shares are not in a suitable position to be bought. In the Lighthouse Hotel, only the data in first 3 years is available. In these years, we can observe a decreasing trend in increasing pace. Assuming this continues in the last 3 years as well, the company should improve their condition.

b.      Dividend Yield Ratio

Dividend yield is the expected return on a shareholder's investment in a company's stock. The dividend per share is used to calculate the previous year's dividend. An essential component of a stock's performance is dividend yield. Additionally, this ratio shows the return on the stock's current market price in terms of cash dividends(“Market Value Ratios,” 2022).

Dividend Yield Ratio = Annual Dividends Per Share / Market Price Per Share

Table 29: Dividend Yield Ratio

	2017	2018	2019	2020	2021	2022
The Kingsbury Hotel PLC	0.03	0.03	-	-	-	-
The Lighthouse Hotel PLC	2.00	2.50	-	-	-	-

Figure 31: Dividend Yield Ratio

For both companies, dividend is only declared in the first 2 years which are 2017 and 2018. There we can observe a decreasing trend in The Kingsbury PLC and an increasing trend in The Lighthouse Hotel PLC.

 

 

 

4.        Assumptions

Accounting presumptions describe the structure and operations of a firm. They give business transactions that are being recorded structure. The financial data generated by a corporation and disclosed in its financial statements should change slightly if any of these presumptions are incorrect. These fundamental presumptions are:

4.1.            Business Entity Concept

The idea of a separate legal entity suggests that a business unit or corporation is a body corporate and has a separate legal identity from its owners. The company's actions are not the responsibility of the owners or members. However, a partnership or sole proprietorship does not have an independent legal entity from its owners. In this case, the owners or members are liable for the actions of the company. According to the separate entity idea of accounting, it applies to all business types to establish the parameters of what should be recorded or left out of the company's records (Periasamy, n.d.).

4.2.            Dual Aspect Concept

This idea holds that every commercial transaction has two components: a corresponding providing of benefits for every benefit that is received. The foundation of double entry bookkeeping is the dual aspect notion. As a result, there is an equivalent and comparable credit for every debit. The accounting equation of the dual aspect concept is:

Capital + Liabilities = Assets (Periasamy, n.d.)

4.3.            Accounting Period Concept

This idea states that rather than having to wait until a corporation is dissolved, one can assess and determine a company's income or loss based on an appropriate accounting period. Because a business operates continuously for an indeterminate amount of time, its owners, shareholders, and outsiders are interested in learning about its financial situation on a regular basis. As a result, one year is typically used as the accounting term. An income statement and balance sheet are created at the end of each accounting period. This idea is merely meant for a regular assessment and reporting of the concern's actual and fair financial status (Periasamy, n.d.).

 

 

4.4.            Going Concern Concept

The other name for it is Continue of Activity Concept. This idea presupposes that a firm will last for a considerable amount of time before closing. In other words, based on this supposition, the business is typically seen as a going concern and is unlikely to be liquidated very soon. According to this supposition, the assets of the company should be valued for balance sheet purposes at cost less depreciation incurred to date rather than their realizable value or present market worth. It helps with asset and liability valuation, depreciation of fixed assets, and handling of pre-paid expenses (Periasamy, n.d.).

4.5.            Historical Cost Concept

The "Going Concern Concept" is the foundation for this idea. The cost concept states that the amount paid to acquire an asset is what is recorded in the accounting books as its cost. And the asset's subsequent accounting is based on this cost. The market value of assets isn't included for accounting purposes while valuing them or deducting their depreciation. The benefit of using Cost Concept is that financial statements are prepared and presented objectively. Without a cost notion, the numbers recorded in accounting records would be arbitrary and dubious. However, because of inflationary tendencies, it is no longer appropriate to judge the genuine financial status of the company to prepare financial statements based on the cost idea (Periasamy, n.d.).

4.6.            Prudence Concept

To prevent the company from being overpriced, the prudential concept has been put in place to ensure that the person creating the financial statements ensures that the assets and income are not inflated. The costs aren't underestimated to make sure the company isn't valued fairly. Don't expect profits; instead, plan for all potential losses is how the prudence concept in accounting is frequently expressed (Periasamy, n.d.).

4.7.            Realization Concept

Revenue Recognition Concept is another name for the Realization Concept. This idea states that revenue is the total inflow of cash, receivables, or other considerations resulting from the sale of goods or the provision of services from the holding of assets during the course of an organization. No revenue is considered if no sale occurs. There are a few exceptions to this rule, though. Examples include contract accounts, hire purchase / sale, and more (Periasamy, n.d.).

4.8.            Matching Concept

Accounting period notion and matching concept have a close relationship. The main goal of the business concern is to determine the profit on a regular basis. It's crucial to correctly match the costs and revenues to calculate the profit for a certain time period. As a result, expenses and revenues pertaining to a specific time frame are referred to as matching concepts (Periasamy, n.d.).

4.9.            Accrual Concept

Matching Concept and Accrual Concept are closely related. This theory states that revenue realization, not accrual receipt, determines when revenue is recognized. Costs are also recorded when they are incurred rather than when they are paid. The accrual principle makes certain that the profit or loss is displayed is based on complete fact, including all costs and earnings (Periasamy, n.d.).

4.10.        Materiality Convention

Materiality is described as "the characteristic attaching to a statement fact, or item whereby its revelation or method of expression would be likely to influence the judgment of a reasonable person" in Kohler's Dictionary of Accountants. In accordance with this standard, when creating the profit and loss account and balance sheet, all material events are considered and insignificant details are disregarded. The Accountant has the discretion to determine whether something is material or not based on the circumstances (Periasamy, n.d.).                                    

4.11.        Objectivity Convention

The principle that financial statements should be objective in character is known as the objectivity concept in accounting. In other words, there shouldn't be any prejudice or outside or internal influences on the financial data. Financial data reported in financial statements should be supported by substantial proof rather than only being documented based on an opinion. This principle's goal is to prevent management and accountant viewpoints from having an impact on how financial statements are prepared at any particular moment (Periasamy, n.d.).

 

 

4.12.        Consistency Convention

According to the Convention of Consistency, accounting principles, practices, and methods shall not alter when preparing financial statements from one period to the next. Alternative, better accounting practices are also permitted under this norm. This norm enables a meaningful comparison of the performance over time in order to assess a concern's operational efficiency (Periasamy, n.d.).

4.13.        Disclosure Convention

One of the crucial accounting practices is the disclosure of all relevant information. This convention states that all financial statements must be accurately prepared and disclose all relevant facts and statistics. For various parties with an interest in the success of that business, financial information must be disclosed. The types of profit and loss accounts and balance sheets are defined under the Companies Act. As a result, disclosure standards must be maintained in accordance with the Income Tax Act and the Companies Act(Periasamy, n.d.).

These presumptions may seem straightforward to follow, yet they are easily broken, leading to financial statements that are fundamentally flawed. When a company's financial accounts are audited, the auditors will be searching for deviations from certain accounting assumptions. They won't express a favorable assessment on the assertions unless any errors are fixed. The updated financial statements must be created in order to account for the revised assumptions.

 

 

 

 

 

 

 

 

5.        Important Factors

Due to most of the ratio values falling below the necessary standard industry averages, the calculations show that the company's current status is not particularly favorable. Therefore, to improve the current position, the organization should focus more on its key areas of weakness and implement corrective measures. Growing inventory turnover, lowering prepayments, offering discounts or other incentives to get money back on time, and increasing inventory levels just to the point where they are needed are some treatments that can be put into practice.

There might be some restrictions on the analysis that was done. The current economic climate, as well as the type, nature, and size of the organization, are not sufficiently taken into account or described in the analysis. As a result, rather than using current data, the study is primarily reliant on previously reported data. Additionally, the computations are predicated on a number of accounting assumptions. As a result, the analysis has a number of drawbacks.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6.        Inferences

An example of a Z score is the Altman Z score, which was developed by Edward I. Altman and published as a Z score formula in 1968. This model may forecast a company's likelihood of declaring bankruptcy within a specified window of time, often two years.

Any firm's financial crisis state can be accurately predicted using this strategy. A business organization's financial health can also be evaluated using the Altman Z score by considering numerous balance sheet variables and corporate income.

Z” = 3.25 + 6.56X1 + 3.26X2 + 6.72X3 + 1.05X4

There are several models of Z-score calculations with the category of the firm. However, the model for manufacturing firms is given below(Altman, 2000).

 

Accordingly, the decisions can be taken based on the Z’’ score as below.

If,

ü  Z > 2.99 à Safe Zone

ü  1.8 < Z < 2.99 à Grey Zone

ü  Z < 1.88 à Distress Zone

6.1.            X₁

The working capital/total assets ratio is a measurement of the firm’s net liquid assets in relation to its total capitalization and is frequently found in studies of corporate difficulties. The difference between current assets and current liabilities is known as working capital. Size and liquidity features are specifically taken into account. A company that consistently experiences operational losses will typically see a decline in current assets relative to total assets. This liquidity ratio turned out to be the most useful of the three that were examined. The current ratio and the quick ratio were two additional liquidity ratios that were examined. For some failing businesses, they were discovered to be less helpful and more susceptible to unfavorable trends(Altman, 2000).

In the Kingsbury PLC, calculations of X₁ for the years 2017-2022 is given below.

Table 30: Computation of X1

	2017	2018	2019	2020	2021	2022
Total Assets		4,435,533	4,312,491	4,581,621	4,116,182	4,304,324
Working Capital	-655,375	-693,843	-247,606	-992,980	-1,146,559	-1,433,249
X1	-0.15	-0.16	-0.06	-0.22	-0.28	-0.33

 

As per the calculated ratios, throughout the 6 years, the value of X₁ has always been negative. However, the highest figure is recorded in 2019 and lowest figure is recorded in 2022.

The direction of above figures can be further observed via the below graphical representation.

Figure 32:  X1

6.2.            X₂

The account for reinvested profits and/or losses that a company has incurred throughout its existence is called retained earnings. The account is additionally known as earned surplus. It should be emphasized that stock dividend declarations and company quasi-reorganizations both have the potential to “manipulate” the retained earnings statement. A significant reorganization or equity dividend could theoretically result in a bias, and the accounts should be readjusted appropriately. However, these events are not apparent in our analysis (Altman, 2000).

This ratio implicitly takes into account the age of a company. For instance, a young company will likely have a low RE/TA ratio since it has not yet had a chance to accumulate cumulative earnings. Therefore, it may be claimed that the youthful firm is treated unfairly in this analysis and that, ceteris paribus, its likelihood of being categorized as bankrupt is relatively higher than that of another older firm. But in the actual world, things are just like this. In a firm’s early years, failure is significantly more common. In 1993, the first five years of a company’s existence were when almost half of all failures occurred (Altman, 2000).

The RE/TA ratio also calculates a company’s leverage. Companies with high RE in relation to TA have financed their assets using retained profits rather than a lot of debt (Altman, 2000).

In the Kingsbury PLC, calculations of X₂ for the years 2017-2022 is given below.

Table 31: Computation of X2

	2017	2018	2019	2020	2021	2022
Total Assets	4,362,752	4,435,533	4,312,491	4,581,621	4,116,182	4,304,324
Retained Earnings	613,646	793,072	911,606	565,212	-167,943	-579,342
X2	0.14	0.18	0.21	0.12	-0.04	-0.13

 

The value of X₂ has been increased in a decreasing rate in the first 3 years and has begun to decrease steeply in the last 3 years. This is not a good condition for the hotel.  

The above date is represented graphically below.

 

 

 

 

Figure 33: X2

6.3.            X₃

This ratio is a measurement of the actual asset productivity of the company, unaffected by taxes or leverage. This ratio seems to be particularly suitable for research dealing with corporate failure because a firm’s ultimate viability depends on the earning capacity of its assets.

Additionally, when the total liabilities exceed the fair market value of the company’s assets, which is defined by the assets’ earning potential, insolvency in the sense of bankruptcy results. We shall demonstrate that this ratio consistently surpasses other profitability indicators, such as cash flow (Altman, 2000).

In the Kingsbury PLC, calculations of X₃ for the years 2017-2022 is given below.

Table 32: Computation of X3

	2017	2018	2019	2020	2021	2022
Total Assets	4,362,752	4,435,533	4,312,491	4,581,621	4,116,182	4,304,324
EBIT	559,645	277,842	239,047	-283,032	-799,278	-346,421
X3	0.13	0.06	0.06	-0.06	-0.19	-0.08

 

As per the above data, in the first 4 years value has kept declining except in 2019. 2019 and 2018 have had the same productivity in the assets before taxes. However, in 2022, the value has started to increase again. Anyhow, since the figure is still negative, the productivity of assets should be improved more beforehand the taxes and leverage.

The above information can be graphically interpreted as follows.

Figure 34: X3

6.4.            X₄

Liabilities comprise both present and long-term obligations, whereas equity is calculated as the market value of all outstanding shares of stock, preferred and common. The indicator indicates how much the firm’s assets can depreciate before the liabilities outweigh the assets and the company becomes bankrupt. For instance, a corporation with $1,000 in market equity and $500 in debt would see a two-thirds decline in asset value prior to becoming bankrupt. However, if assets simply lose one-third of their value, the same company with $250 in equity will become insolvent. Most prior failed studies did not take into account the market value dimension, but this ratio does (Altman, 2000).

One of the variables successfully employed by Fisher (1959) in a study of corporate bond yield-spread differentials is the reciprocal of X₄, which has been slightly adjusted. Additionally, it seems to be a better indicator of bankruptcy than a comparable, more widely applied ratio, net worth/total debt (book values). In order to build a discriminant function for privately held enterprises (Z’) and for non-manufacturers (Z”), we will later substitute the book value of net worth for the market value (Altman, 2000).

In the Kingsbury PLC, calculations of 4₃ for the years 2017-2022 is given below.

Table 33 :Computation of X4

	2017	2018	2019	2020	2021	2022
Total Equity	517,916	377,071	903,047	-710,800	-2,113,780	-2,359,012
Total Liabilities	2,320,148	2,002,587	1,738,792	2,346,485	2,631,251	3,177,222
X4	0.22	0.19	0.52	-0.30	-0.80	-0.74

As per the above table the value has decreased by 0.03 in 2018 and has gone up by 0.33 in the next year. Then again in the next year, the figure decreased massively by 0.82 and again by 0.50 in 2020. However, the value has slightly increased by 0.06 in the most recent year. Vast fluctuations can be observed throughout the years.

This can be further graphically interpreted.

Figure 35: X4

According to the above calculations, we can calculate the Z’’ score of The Kingsbury Hotel PLC as below, using the given model.

Z” = 3.25 + 6.56X₁ + 3.26X₂ + 6.72X₃ + 1.05X₄

 

 

 

 

Table 34: Computation of Z’’ Score

	2017	2018	2019	2020	2021	2022
X1	-0.15	-0.16	-0.06	-0.22	-0.28	-0.33
X2	0.14	0.18	0.21	0.12	-0.04	-0.13
X3	0.13	0.06	0.06	-0.06	-0.19	-0.08
X4	0.22	0.19	0.52	-0.30	-0.80	-0.74
Z''	3.82	3.43	4.48	1.50	-0.86	-0.69

According to the table, we can interpret the data as below.

§  In 2017, the Z value is 3.82. Since 3.82 > 2.99, The Kingsbury Hotel PLC was in safe zone in the year 2016-2017.

§  In 2018, the Z value is 3.43. Since 3.43 > 2.99, The Kingsbury Hotel PLC was in safe zone in the year 2017-2018.

§  In 2019, the Z value is 4.48. Since 4.48 > 2.99, The Kingsbury Hotel PLC was in safe zone in the year 2018-2019.

§  In 2020, the Z value is 1.50. Since 1.8 < 1.5 < 2.99, The Kingsbury Hotel PLC was in distress zone in the year 2019-2020.

§  In 2021, the Z value is -0.86. Since -0.86 < 1.8, The Kingsbury Hotel PLC was in distress zone in the year 2020-2021.

§  In 2022, the Z value is -0.69. Since -0.69 < 1.8, The Kingsbury Hotel PLC was in distress zone in the year 2021-2022.

The above Z values can be graphically interpreted in a line chart as below.

Figure 36: Graphical Representation of Z’’ score values

Accordingly, the highest value was recorded in the 3^rd year which 2019 and then in the following year of 2020, it has recorded the lowest value. Anyhow, the value has slightly moved up in the most recent year. However, even though it has moved upward, the figure is still in the distress zone. Therefore, the company is headed to bankruptcy, but assuming that it will move upward, The Kingsbury Hotel can recover from the insolvency and stabilize their financial position again.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7.        Conclusion

To evaluate a company's past, current, and future financial performance, financial statement analysis is a process that involves choosing, analyzing, and interpreting financial data. The restatement of the financial information in a consistent manner is a common size analysis of horizontal analysis. This could be accomplished through both vertical analysis, where each category of accounts on the balance sheet is shown as a proportion of the total accounts, and horizontal analysis, which compares financial data from two or more years in both rupee and percentage form.

The Kingsbury Hotel PLC is a 5-star luxurious city hotel located in the heart of Colombo, Sri Lanka. The hotel is owned by the Hayleys group.

However, recently the financial health of the firm has affected inversely due to many uncontrollable reasons.

In 2019, The Kingsbury Hotel had to directly face the Easter bomb attack and has suffered with severe property damage. They closed the hotel temporarily and reopened in early 2020. However, in the mid-2020, the Sri Lanka was basically in a lockdown and travel restrictions were imposed all over the country, to stop the Covid-19 spread. Thus, the company had minimum inflows coming but they had to invest money in new things such as setting up the online food delivery system. Even though 2021, was somewhat better since the hotel was more adjusted to the pandemic, in the late 2022, Sri Lanka commenced to face an economic turmoil and a hyperinflation in the country which led the country to economic depression.

Due to all these reasons, the tourist arrivals in the country have gone below than ever. This affects severely to the tourism and hospitality industry which is one of the main income stream of Sri Lanka.

In the report, the horizontal, vertical, trend and ratio analysis of The Kingsbury Hotel has been compared with the same values in The Lighthouse Hotel PLC.

As per the horizontal analysis of the statement of financial position of The Kingsbury, total assets and equity were decreasing at an increasing rate.

As per the horizontal analysis of the income statement in The Kingsbury PLC, the gross profit has always been fluctuating in negative values and the net profit has been fluctuating but has recorded a positive value in the recent year.

Comparing with the horizontal analysis of the balance sheets in The Lighthouse Hotel PLC, it can be concluded that The Kingsbury PLC has relied more on debt than The Light House PLC in the analysis period.

In the horizontal analysis of income statement in The Lighthouse Hotel PLC, the recent gross profit is the highest figure recorded within the last 5 years. On the other hand, the most recent net profit has been the lowest value recorded.

According to the vertical analysis of income statement in The Kingsbury Hotel PLC, throughout the five years included by the investigation, the gross profit percentage has consistently been higher than the cost of sales percentage. 52 percent of revenue was allocated to gross profit in the base year of 2017, while a smaller portion was designated as cost of sales. The year 2021 has the lowest common-size percentage ever measured at -10.92 percent.

Furthermore, corresponding to the vertical analysis of balance sheet in The Kingsbury Hotel PLC, throughout the analysis period, the majority of the total assets have been the proportions of current assets and mostly, total current liabilities has exceeded the total non-current liabilities.

After comparing the vertical analysis of income statement with the same figures of The Lighthouse Hotel PLC, it can be concluded that The Kingsbury Hotel PLC has performed better than The Lighthouse Hotel PLC on the basis on Net profit after tax.

Moreover, in the vertical analysis of balance sheet of The Lighthouse Hotel, the higher proportion of totals have been invested in the short-term assets and liabilities similar to the Kingsbury Hotel PLC.

Additionally, based on the trend analysis of both companies, the values had tendencies to fluctuate more and less with the years. However, by comparing the values it can be concluded that the figure of The Kingsbury is slightly performed better in contrast with The Lighthouse Hotel.

In correspondence with the liquidity ratios, both companies have not performed good apart from the Day’s sales uncollected and Day’s sales inventory. Thus, there is a higher possibility or both companies to head towards insufficiency in repaying short-term debt.

According to the solvency ratios, we can conclude that the Kingsbury PLC has a higher debt financed percentage in contrast with The Lighthouse Hotel PLC. Thus, the Lighthouse Hotel has performed better on the solvency aspect and has more ability of paying long-term debts than the Kingsbury Hotel PLC.

Based on the profitability ratios, the companies have performed in several ways. As per the profit margin, Kingsbury Hotel has performed better than the Lighthouse hotel PLC. However, in the gross margin ratio, both companies are in a good condition, but the Lighthouse Hotel has performed exceptionally. According to the return on total assets, The Kingsbury has performed better. The basic earnings per share ratio suggests that the condition of both firms should be improved. Book Value per common share interprets that both companies are doing good. Anyhow, the return on shareholder’s equity ratio suggests that The Lighthouse Hotel should improve taking a good use of the owner’s capital.

Finally, according to the market ratios, the price earnings ratio in both companies are not in a good position while the dividend yield shows a decreasing and increasing trend in The Kingsbury and The Lighthouse respectively.

Furthermore, according to the Altman’s Z score computations, The Kingsbury Hotel PLC has been in a safe zone from 2017-2019. However, the values have shifted to the distress zone in 2020-2022. Many reasons like easter attack, Covid-19 and the economic crisis of Sri Lanka is backed up by this. However, according to the values company is headed towards bankruptcy.