FINANCIAL STATEMENT ANALYSIS OF LANKA TILES PLC

 

1.0   EXECUTIVE SUMMARY

Lanka Tiles PLC (LTPLC) is a public quoted company, which is listed on the Colombo stock exchange. LTPLC, the pioneer floor tile producer in Sri Lanka was incorporated in 1984 with the manufacture of Ceramic Glazed Floor Tiles as its core business. The Company has its manufacturing plant located at St James Estate, Jaltara, Ranala. Since 1977 Lanka tiles has been renowned locally as well as globally for the unique designs that amalgamate the best material, technology, creativity, and industrial expertise.

The company provides various floor tiles for verandahs, sitting rooms, dining rooms, bedrooms, and pantry, as well as for flooring outdoor spaces, such as terraces, path-ways, and ponds in residential and commercial buildings.

Financial Statement Analysis is a method of reviewing and analyzing a company’s accounting reports (financial statements) in order to gauge its past, present, or projected future performance. This process of reviewing the financial statements allows for better economic decision-making. The main purpose of financial statement analysis is to utilize information about the past performance of the company in order to predict how it will fare in the future. Another important purpose of the analysis of financial statements is to identify potential problem areas and troubleshoot those. There are different users of financial statement analysis. These can be classified into internal and external users. Internal users refer to the management of the company who analyzes financial statements in order to make decisions related to the operations of the company. External users do not necessarily belong to the company but still hold some sort of financial interest. These include owners, investors, creditors, government, employees, customers, and the general public.

This report will explain the performance of the Lanka tiles PLC during the past five years. The analysis is based on the data obtained from the published financial reports for the company from 2015 to 2019. Data were analyzed using vertical, horizontal, and ratio analysis. Based on the calculations the comments have been made.

 

2.0 BACKGROUND OF THE COMPANY

 Lanka Tiles PLC (LTPLC) is a public quoted company, which is listed on the Colombo stock exchange. LTPLC, the pioneer floor tile producer in Sri Lanka was incorporated in 1984 with the manufacture of Ceramic Glazed Floor Tiles as its core business. With the growth of the business over the years and winning a significant market share in the floor tiles industry, LTPLC is looking forward to increase its services to customers. Lanka Tiles PLC is a member of Ceylon Theatres Group and its parent company is Lanka Walltile PLC holding a 55% stake in LTPLC. The company has two fully own subsidiaries – Lanka Tiles Trading (Pvt) Ltd., and Ceradec (Pvt) Ltd., which are involved in selling subsidiary products and in the manufacture of tiles, producing a part of the company’s current output. It also has an associate company Parquet (Ceylon) PLC, which is in the business of wooden flooring, wooden ceiling, adhesives, grout, etc. Lanka Tiles marketing and distribution is done jointly with Lanka Walltile PLC., through a large network of direct dealers, franchise dealers, sub-dealers, and distributors covering a wide geographical area around the country.

Lanka Tiles are produced in a variety of different textures to suit customer preferences, matt, rough, gloss, stone, marble and terra-cotta finishes in a range of self-colors or shades. The factory currently has a capacity to produce 3.4 million square meters of floor tiles per annum.

The Company’s main focus is its local marketing network, which markets the larger portion of production volume as much as possible. The company’s present export markets are Australia, USA, Japan, India, New Zealand, Maldives, Pakistan, Fiji Island, and Singapore. And the main market in Australia.

Today they have a market capitalization of Rs. 3,714 Million. Currently, their financial capital is funded by Rs.7.29 billion from shareholders and Rs. 2.10 billion from debt. Lanka tiles PLC has 690 employees at present and Rs.1.50 billion worth of manufacturing facilities

 

Vision of the company

Our vision is of a future in which Lanka Tiles will have become not only a household name but a global one.

 Mission of the company

Our mission is to be a company that sets and constantly exceeds the benchmark of the highest quality in producing ceramic products of exceptional beauty and functionality and to cater to every need of our discerning customers both in Sri Lanka and abroad

  

3.0 FINANCIAL STATEMENT ANALYSIS OF LANKA TILES PLC

 Financial Statement Analysis is a method of reviewing and analyzing a company’s accounting reports (financial statements) in order to gauge its past, present, or projected future performance. This process of reviewing the financial statements allows for better economic decision making

The main purpose of financial statement analysis is to utilize information about the past performance of the company in order to predict how it will fare in the future. Another important purpose of the analysis of financial statements is to identify potential problem areas and troubleshoot those.

Several techniques that are commonly used for financial statement analysis are horizontal analysis, vertical analysis, and ratio analysis. In this report, the first method is the use of horizontal and vertical analysis for analyzing financial statements. The horizontal analysis shows changes in the amounts of corresponding financial statement items over a period of time. It is a useful tool to evaluate trend situations. The statements for two or more periods are used in horizontal analysis. The earliest period is usually used as the base period and the items on the statements for all later periods are compared with items on the statements of the base period. The changes are generally shown both in dollars and percentage. Vertical analysis is conducted on financial statements for a single time period only. Each item in the statement is shown as a base figure of another item in the statement, for a given time period, usually for a year. Typically, this analysis means that every item on an income and loss statement is expressed as a percentage of gross sales, while every item on a balance sheet is stated as a percentage of total assets.

The second method for analyzing financial statements is the use of many kinds of ratios. Ratio analysis is used to evaluate a number of issues with an entity, such as its liquidity, efficiency of operations, and profitability. After calculating a ratio, we can then compare it to the same ratio calculated for a prior period, or that is based on an industry average, to see if the company is performing in accordance with expectations.

 3.1 Horizontal Analysis

 Horizontal analysis is the comparison of financial information of a company with historical financial information of the same company over a number of reporting periods. The main purpose is to see if the numbers are high or low in comparison to past records, which may be used to investigate any causes for concern. In this method of analysis, the earliest period is usually used as the base period and the items on the statements for all later periods are compared with items on the statements of the base period. The changes are generally shown both in dollars and percentage.

Dollar change = Analysis period amount - Based period Amount

Percentage change = Dollar change / Based period amount *100

 

In considering the Lanka tiles plc the horizontal analysis as shown in the following table,

Base year – 2014

 

Percentage change = Dollar change / Based period amount *100

 

	2015	2016	2017	2018	2019
Assets
Non-current assets
Property, plant and equipment	-1.96%	31.55%	39.67%	49.22%	122.27%
Investment in associate	59.68%	134.93%	185.28%	202.3%	199.16%
Loans given to related companies	-27.69%	-55.6%	-81.52%	-90.14%	0
Total non-current assets	3.36%	37.82%	48.94%	58.72%	120.37%
Current assets
Inventories	-22.84%	-36.74%	-2.66%	32.05%	104.94%
Trade and other receivables	-21.71%	-13.95%	3.47%	31.97%	56.93%
Cash and cash equivalents	1029.12%	2014.87%	1536.25%	478.67%	76.97%
Total current assets	6.91%	30.03%	42.75%	44.44%	85.63%
Total assets	5.03%	34.15%	46.03%	51.99%	104.01%
EQUITY Capital and reserves Equity attributable to equity holders of the parent
Stated capital	0	0	0	0	0
Amalgamation reserve	0	0	0	0	0
Retained earnings	25.54%	63.93%	100.98%	118.55%	129.84%
Total equity	15.75%	63.05%	85.88%	93.66%	100.62%
LIABILITIES
Non-current liabilities
Borrowings	-21.39%	-46.6%	-88.49%	-98.5%	176.66%
Deferred tax liabilities	10.27%	33.19%	30.33%	86.26%	110.09%
Employee benefit obligations	25.9%	46.95%	41.63%	89.41%	96.41%
Total non-current liabilities	-5.1%	-8%	-31.89%	-11.87%	144.25%
Current liabilities
Trade and other payables	15.65%	25.27%	25.87%	68.66%	238.97%
Current tax liabilities	321.82%	736.16%	107.21%	41.22%
Borrowings	-52.79%	-74.55%	-36.03%	-74.6%	-1.68%
Total current labilities	-17.79%	-16.55%	-9.51%	-18.86%	84.27%
Total liabilities	-12.44%	-12.95%	-18.93%	-15.92%	109.53%
Total equity and liabilities	5.03%	34.15%	46.03%	51.99%	104.01%

 

The horizontal analysis shows that the significant increase in property, plant, and equipment from 2015 to 2019. However, it recorded a negative amount in 2015. In considering the investment in associates from 2015 to 2018 it shows an increase but in 2019 it is less than 2018 value. Meanwhile, the total non-current assets show a considerable increase from 2015 to 2019. Inventories show a decrease from 2015 to 2010. but in 2018 and 2019 it shows an increase. However, trade and other receivables show an increase from 2015 to 2019 and it reports negative values in 2015 and 2016. Cash and cash equivalents show a considerable increase but decrease in 2018 and 2019. In general total, current assets, and total assets show an increasing pattern and all the values are positive. It is a good sign for the company.

Retained earnings and total equity show a significant increase from 2015 to 2019. However, borrowings show a negative value from 2015 to 2018 and a positive value in 2019. Moreover deferred tax liabilities and benefits employee obligation are increasing considerably from 2015 to 2019. Total non-current liabilities increase considerably in 2019 whilst compare with the base year. It shows a decrease from 2015 to 2018.

Payable plays a significant increase during the study period. It increases from 15.65% to 238.97%. Current borrowings show a decreasing pattern and recorded negative values. However total current liabilities show a negative value throughout the period but in 2019, it is a positive value. The overall figures show that total liabilities decrease gradually but in 2019 it increases. Finally, total liabilities and equity are increasing throughout the study period from 2015 to 2019.

 

3.2 Trend Analysis

 

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

 

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

 

 Trend Analysis – Statement of financial position

 

	2014	2015	2016	2017	2018	2019
Assets
Non-current assets
Property, plant and equipment	100	98.05	131.55	139.67	149.22	222.27
Investment in associate	100	159.68	234.93	285.28	302.3	299.16
Loans given to related companies	100	72.32	44.41	18.49	9.87	0
Total non-current assets	100	103.36	137.82	148.94	158.72	220.37
Current assets
Inventories	100	77.17	63.27	97.35	132.05	204.94
Trade and other receivables	100	78.3	86.06	103.47	131.97	156.93
Cash and cash equivalents	100	1129.12	2114.87	1636.25	578.67	176.97
Total current assets	100	106.91	130.03	142.75	144.44	185.63
Total assets	100	105.03	134.15	146.03	151.99	204.01
EQUITY Capital and reserves Equity attributable to equity holders of the parent
Stated capital	100	100	100	100	100	100
Amalgamation reserve	100	100	100	100	100	100
Retained earnings	100	125.54	163.93	200.98	218.55	229.84
Total equity	100	115.75	163.05	185.88	193.66	200.62
LIABILITIES
Non-current liabilities
Borrowings	100	78.62	53.41	11.52	1.51	276.66
Deferred tax liabilities	100	110.27	133.19	130.33	186.26	210.09
Employee benefit obligations	100	125.9	146.95	141.63	189.41	196.41
Total non-current liabilities	100	94.91	92.01	68.12	88.14	244.25
Current liabilities
Trade and other payables	100	115.65	125.27	125.87	168.66	338.97
Current tax liabilities	100	421.82	836.16	207.21	141.22	0
Borrowings	100	47.22	25.46	63.98	25.41	98.33
Total current labilities	100	82.22	83.46	90.5	81.15	184.27
Total liabilities	100	87.57	87.06	81.08	84.09	209.53
Total equity and liabilities	100	105.03	134.15	146.03	151.99	204.01

 

 Trend analysis – Assets

According to the trend analysis property, plant, and equipment increase throughout the period. However, investment in associates is increasing from 2015 to 2018 but shows a decrease in 2019. Loans given to related companies show a gradual decrease throughout the period. Inventories and Trade and other receivables show a normal pattern of increase from 2015 to 2019. Cash and cash equivalents show an increase in 2015, 2016, and 2017 but in 2018 and 2019 it shows a drastic decrease. Total assets show a quite good increase in assets thought-out the period.

Trend analysis – Equity

Retained earnings and total equity show and normal pattern increase throughout the period.

Trend analysis – Liabilities

In considering borrowings it decreases from 2015 to 2018 but shows and remarkable increase in 2019. Differed tax liabilities and employee benefit obligation increase normally throughout the period. However, trade and other payables increase from 2015 to 2019. Current tax liabilities increase till 2016 then decrease from 2017 to 2019. Current borrowings show a slight increase from 2015 to 2019. The total liabilities show quite a similar value from 2015 to 2018 and drastically increase value 2019.

Trend Analysis – Income statement

 

	2014	2015	2016	2017	2018	2019
Revenue from contract with customers	100	104.71	108.46	101.32	119.91	137.19
Cost of sales of goods	100	99.13	89.43	82.86	108.55	144.92
Gross profit	100	116.34	148.11	139.76	143.57	121.07
Distribution costs	100	127.88	137.17	150.88	190.08	221.61
Administrative expenses	100	125.6	139	128.16	135.94	135.63
Other income	100	74.87	113.88	79.79	59.33	77.27
Other gains / (losses) - net	100	-28.24	1232.95	212.45	-0.13	205.1
Operating profit	100	106.5	151.66	135.48	119.32	62.97
Finance income	100	91.29	315.38	573.46	419.84	30.12
Finance costs	100	28.5	21.58	18.38	12.6	12.78
Finance income - net	100	17.24	-31.13	-81.2	-60.45	9.67
Share of net profit of associate accounted for using the equity method	100	212.56	267.6	355.65	317.45	15.15
Profit before income tax	100	129.01	191.37	187.77	163.68	69.4
Income tax expense	100	129.54	229.01	205.82	199.93	97.42
Profit for the year	100	128.87	181.3	182.94	153.98	61.9

                                                                                                                    

 

According to the above figures, revenue is an increase from 2015 to 2019 but a slight decline in 2017. Cost of sales shows a decrease in 2016 and 2017 but in 2018 and 2019 it shows an increase. Gross profit decreased in 2017, increase in 2018, and again decrease in 2019. Moreover, distribution cost increases from 2015 to 2019. Administration expenses increase in 2016 and show a decline from 2017 to 2019. In considering other income it shows an increase in 2017 but a decline in other years. Operating profit and finance income shows an increase from 2015 to 2017 but a decrease in 2018 to 2019. However, financial cost shows a decrease from 2015 to 2019. Income tax expenses increase in 2016 and decrease after 2017. In considering the net profit it shows an increase of the value from 2015 to 2017 and a decrease in 2018 and 2019.

 

 3.3 Vertical Analysis

 Vertical analysis of financial statements is a technique in which the relationship between items in the same financial statement is identified by expressing all amounts as a percentage of a total amount. This method compares different items to a single item in the same accounting period. When applying this method on the balance sheet, all of the three major categories of accounts (i.e., assets, liabilities, and equity) are compared to the total assets. All of the balance sheet items are presented as a proportion of the total assets. When applying this technique to the income statement, each of the expenses is compared to the total sales revenue.

The main advantages of vertical analysis are that the balance sheets of businesses of all sizes can easily be compared. It also makes it easy to see relative annual changes within one business. The financial statements prepared by using this technique are known as common size financial statements.

 

 

Common size percent = Analysis amount/ Base amount*100

 

  Vertical Analysis – Statement of financial position

 

 

	2015	2016	2017	2018	2019
Assets
Non-current assets
Property, plant and equipment	42.14	44.26	43.17	44.32	49.18
Investment in associate	8.21	9.45	10.54	10.74	7.92
Loans given to related companies	1.33	0.64	0.25	0.13	0
Total non-current assets	52.06	54.35	53.96	55.24	57.14
Current assets
Inventories	18.92	12.14	17.16	22.37	25.86
Trade and other receivables	14.95	12.87	14.21	17.42	15.43
Cash and cash equivalents	14.09	20.66	14.68	4.99	1.14
Total current assets	47.95	45.66	46.05	44.77	42.87
Total assets	100	100	100	100	100
EQUITY Capital and reserves Equity attributable to equity holders of the parent
Stated capital	14.99	11.74	10.78	10.36	7.72
Amalgamation reserve	7.66	6	5.51	5.29	3.95
Retained earnings	45.66	46.68	52.57	54.93	43.04
Total equity	68.3	75.33	78.89	78.96	60.95
LIABILITIES
Non-current liabilities
Borrowings	6.39	3.4	0.68	0.09	11.57
Deferred tax liabilities	6.25	5.91	5.31	7.29	6.13
Employee benefit obligations	1.84	1.69	1.49	1.92	1.48
Total non-current liabilities	14.48	10.99	7.47	9.29	19.18
Current liabilities
Trade and other payables	8.92	7.57	6.99	8.99	13.46
Current tax liabilities	2.33	3.61	0.83	0.54	0
Borrowings	6	2.54	5.85	2.23	6.43
Total current labilities	17.24	13.7	13.65	11.76	19.89
Total liabilities	31.71	24.68	21.12	21.05	39.06
Total equity and liabilities	100	100	100	100	100

 

In considering the vertical analysis property, plant and equipment represent 42.14 from the total assets of 2015. But it shows a slight increase in other years compared to 2015.  It shows that the company has maintained a good percentage of property, plant, and equipment from the total assets. Investment in associates reported 8.21 from total assets in 2015. In other years the value increases but in 2019 again shows a decline compared to 2015. Loan given to related companies decline throughout the period and it is 0 in 2019. In considering inventories 18.92 in 2015 and it decreases in 2016. Afterward, it shows a slight increase. This shows that inventories are quite low from total assets. More than 50% of the total assets are coming under non-current assets.

Stated capital represents 14.99 from total assets in 2015 and this value is decreasing in other years. Amalgamation reserve shows 7.66 from total assets in 2015 and from 2016 to 2019 this value shows a decline. Retained earnings are above 45% throughout the period. Borrowings represent 6.39 in 2015 but it decreases from 2016 to 2018 and again increases in 2019. Deferred tax liabilities are less than 10% of total assets throughout the period. Trade and other payables are quite low (less than 14%) which is a good remark for the company. Current tax liabilities decrease throughout the period and it is 0 in 2019.

 

Vertical Analysis - Income statement

 

	2015	2016	2017	2018	2019
Revenue from contract with customers	100	100	100	100	100
Cost of sales of goods	63.97	55.71	55.26	61.17	71.38
Gross profit	36.04	44.3	44.75	38.84	28.63
Distribution costs	11.2	11.6	-3.65	14.53	14.81
Administrative expenses	6.99	7.47	7.37	6.61	5.76
Other income	0.46	0.68	0.51	0.32	0.37
Other gains / (losses) - net	0.02	-0.71	-0.14	0.01	-0.1
Operating profit	18.34	25.21	24.11	17.94	8.28
Finance income	0.45	1.5	2.92	1.81	0.12
Finance costs	0.93	0.68	0.62	0.36	0.32
Finance income - net	-0.48	0.83	2.3	1.45	-0.21
Share of net profit of associate accounted for using the equity method	2.07	2.52	3.58	2.7	0.12
Profit before income tax	19.94	28.55	29.98	22.09	8.19
Income tax expense	4.23	7.21	6.94	5.7	2.43
Profit for the year	15.71	21.34	23.05	16.39	5.76

 

 

In considering the vertical analysis of the Income statement, the cost of sales represents more than 55% of sales revenue. Gross profit shows 36.04 from sales revenue in 2015 and increases in 2016 and 2017 but it decreases in 2018 and 2019. Other income is less than 1% from sales revenue during the analysis period. Operating profit represents 18.36 in 2015 and it increases in 2016 and starts to decrease in 2018. Finance income is less ta 3% from 2015 to 2019 from sales revenue. Finance cost is less than 1% of total sales revenue throughout the period. However, the profit of the year represents 5.71 from sales revenue in 2015. This value increase in 2016 and 2017. It decreases in 2018 and 2019.

 

3.4 Ratio Analysis

 

Ratio analysis is a foundation for evaluating and pricing credit risk and for doing fundamental company valuation. A financial ratio, or accounting ratio, is derived from a company’s financial statements and is a calculation showing the relative magnitude of selected numerical values taken from those financial statements.

Financial ratios are grouped into the following categories:

1.      Solvency ratio

2.      Profitability ratios

3.      Market value ratios

4.      Liquidity and Efficiency ratios

Financial ratios may be used internally by managers within a firm, by current and potential shareholders and creditors of a firm, and other audiences interested in understanding the strengths and weaknesses of a company, especially compared to the company over time or compared to other companies.  

  

   3.4.1 Debt Ratio

This ratio measures what portion of a company’s assets is contributed by creditors. The debt ratio is defined as the ratio of total debt to total assets, expressed in percentage, and can be interpreted as the proportion of a company’s assets that are financed by debt.

           Total liabilities / Total Assets

 

In considering the Lanka Tiles PLC the debt ratio for the years as follows

 

2015	2016	2017	2018	2019
31.71	24.68	21.12	21.05	39.06

       

The above results show that the debt ratio is quite low throughout the study period. If this ratio is high, the more leveraged the company and the greater its financial risk

    3.4.2 Equity Ratio

The equity ratio is a financial ratio indicating the relative proportion of equity used to finance a company's assets. Equity Ratio is a good indicator of the level of leverage used by a company.

 

            Total Shareholders’ Equity/ Total Assets   

 

2015	2016	2017	2018	2019
68.3	75.33	78.89	78.96	60.95

 

In considering the study period equity ratio is high in the Lanka tiles PLC. Higher equity ratios are typically favorable for companies. Because higher investment levels by shareholders show potential shareholders that the company is worth investing in since so many investors are willing to finance the company. A higher ratio also shows potential creditors that the company is more sustainable and less risky to lend future loans. However, considering the low ratio investors are not willing to invest in the company 

   3.4.3 Price Earnings Ratio

This ratio 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 / Earnings per Share

 

2015	2016	2017	2018	2019
4.8	4.9	5.6	5.3	9.2

 

Considering the price-earnings ratio, it is increasing throughout the analysis period from 2015 to 2019. In 2019 price-earnings ratio is quite high.

   3.4.4 Dividend Yield

The dividend yield or dividend-price ratio of a share is the dividend per share, divided by the price per share. It is also a company's total annual dividend payments divided by its market capitalization, assuming the number of shares is constant. It is often expressed as a percentage

            Annual dividend per share / Market price per share

 

 

2015	2016	2017	2018	2019
5.8%	6.4%	5.9%	10%	4.5%

 

In considering the results, values are low. Higher the value, more favorable for companies

 

 

3.4.5 Profit Margin

Profit margin ratios are calculated in order to determine the overall profitability of an organization after reducing both cash and non-cash expenditures. This ratio describes a company’s ability to earn a net income from sales.

 

            Net income / Net sales

 

2015	2016	2017	2018	2019
15.7%	21.3%	23.04%	16.4%	5.75%

 

Profit margin values are increasing from 2015 to 2017 but it shows a drastically decrease value in 2019. A higher net profit margin means that a company is more efficient at converting sales into actual profit. In 2017 profit margin is recorded as 23.04%, which is the highest value for the analysis period.

 

 3.4.6 Gross Margin

Gross margin is a profitability measure that is calculated as the ratio of Gross Profit (GP) to Net Sales and therefore shows how much profit the company generates after deducting its cost of revenues.

The gross profit ratio's main value is being an accurate indicator of how efficiently a company is selling its goods and services. This will give the organization's management and potential investors a view of how well the company manages to optimize its processes, keep the costs to a minimum and produce the highest possible profit.

            Net sales – Cost of Sales / Net sales

 

2015	2016	2017	2018	2019
36.03%	44.29%	44.7%	38.8%	28.6%

 

Gross margin values are increasing from 2015 to 2017 but it shows decrease values in 2018 and 2019. In 2017 gross margin is recorded as 44.7%, which is the highest value for the analysis period. A high gross profit ratio will make a company very attractive for potential investors, as it can be interpreted as a clear sign that the investment will pay off in a relatively short time. 

 

   3.4.7 Return on Equity (ROE)

The amount of net income returned as a percentage of shareholders' equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.

 

            Net profit / Average Shareholders’ Equity

    

2015	2016	2017	2018	2019
21.95%	23.9%	19.27%	14.9%	5.70%

    

In considering the above situation the ROE of Lanka tiles PLC shows an increase in 2015 and 2016 then it decreases drastically from 2017 to 2019. The ROE allows an investor to determine the change in profitability over the period.

 

   3.4.8 Earing per Share

Earnings per share (EPS) represents the net income earned for each share of outstanding common stock. In a simple capital structure, it is calculated by dividing net income by the number of weighted average common shares outstanding.

2015	2016	2017	2018	2019
15.84	22.28	22.48	18.93	7.61

 

Considering the price-earnings ratio Lanka tiles PLC's P/E ratio increase from 2015 to 2017 It decreases at 18.93 in 2018 and 7.61 in 2019.  If a company has a P/E higher than the market or industry average, this means that the market is expecting big things over the next few months or years. A company with a high P/E ratio will eventually have to live up to the high rating by substantially increasing its earnings, or the stock price will need to drop.

 

   3.4.9 Return on Total Assets (ROA)

ROA measures the ability to turn assets into profit. This is a very useful measure of comparison within an industry. A low ratio compared to the industry may mean that your competitors have found a way to operate more efficiently. After-tax interest expense can be added back to the numerator since ROA measures profitability on all assets whether or not they are financed by equity or debt

 

         Net income / Average total assets

 

2015	2016	2017	2018	2019
14.31%	17.26%	14.87%	11.7%	3.96%

 

In considering the above situation the ROA of Lanka tiles PLC shows an increase in 2015 and 2016, then it decreases drastically from 2017 to 2019. The lowest ROA value represents in 2019 which is 3.96%.

 

   3.4.10 Current Ratio

The current ratio is also called the working capital ratio, as working capital is the difference between current assets and current liabilities. This ratio measures the ability of a company to pay its current obligations using current assets. The current ratio is calculated by dividing current assets by current liabilities.

 

              Current assets / Current liabilities

 

2015	2016	2017	2018	2019
2.78:1	3.33:1	3:1	3.8:1	2.15:1

 

A current ratio below 1 means that the company doesn't have enough liquid assets to cover its short-term liabilities. Therefore, in considering the above current ratios all ratios are good.

    3.4.11 Quick Ratio

A more stringent liquidity test indicates if a firm has enough short-term assets (without selling inventory) to cover its immediate liabilities. This is often referred to as the “acid test” because it only looks at the company’s most liquid assets only (excludes inventory) that can be quickly converted to cash).

               Quick assets / Current liabilities

 

 

2015	2016	2017	2018	2019
1.23:1	2.5:1	1:56:1	1.9:1	0.85:1

 

Considering the analysis period 2019 shows a low quick ratio but other years show quite a good quick ratio. A low quick ratio can be concerning. It means your business has fewer liquid assets than liabilities. A low ratio might mean your business has slow sales, numerous bills, and poor collections for your accounts receivable.

 

4.0 CONCLUSION

The ceramic tiles industry in Sri Lanka has over 34 years long history in manufacturing and distribution of tiles all over the country as well as exporting to many foreign countries in the world. According to the annual reports of each company, the tile industry shows continuous growth of profits in parallel with net sales. According to the International Trade Center, the Sri Lankan market share in glazed ceramic tiles is 0 .19%.

 

LTPLC is a public quoted company, which is listed on the Colombo stock exchange. LTPLC, the pioneer floor tile producer in Sri Lanka was incorporated in 1984 with the manufacture of Ceramic Glazed Floor Tiles as its core business. Today they have a market capitalization of Rs. 3,714 Million. Currently, their financial capital is funded by Rs.7.29 billion from shareholders and Rs. 2.10 billion from debt. Lanka tiles PLC has 690 employees at present and Rs.1.50 billion worth of manufacturing facilities

 

In considering the improvement EPS, it reported 22.48 in 2014 which is the highest value in the analysis period. It is a considerable improvement. The total revenue and net interest income is a considerable increase in the study period. Total revenue increases 50 million from 2015 to 70 million in 2019.