Financial Statement Analysis of Lanka Wall Tiles PLC

 

1.0 Introduction

Financial statement analysis is the process of analyzing a company's financial statements for the purpose of decision-making. Financial statement analysis is used by internal stakeholders and external stakeholders to evaluate and get an idea about the business performance, value and financial stability. Internal users are Managers, Officers and Internal Auditors. External users are Shareholders, Lenders and Customers. There are four financial statements in financial accounting. They are balance sheet, income statement, equity statement and cash flow statement which form the basis for financial statement analysis.

Financial analysis is important in many ways for stakeholders to arrive at decisions. Some of them are as follows. First one is the shares investment and holding. The company is owned by its shareholders and repeated transfers and trading in shares happens with such investments. They may have to make decisions whether they have to continue with the based on the price, profit and reliability factors, among others. For that financial statement analysis is crucial to make decisions. Next for the plans, decisions and management. Financial statement analysis is an important tool for the decisions, planning and management of any company. The plans includes investment plans that can gain maximum profit in future.

Next the financial analysis is important in forecasting.  And also when providing capital credits to the company by Shareholders they offer loans according to the financial information of the company. Investors with surplus investable capital always look for opportunities to place their funds as investments in profitable and profit-potential bearing companies. So they look into the past performance and predicted profits of a company by financial analysis to determine the company’s health and potential before investing such capital funds.

There are methods to analyze financial statements. They are horizontal analysis, vertical analysis, trend analysis and ratio analysis. 

 

 

 

2.0 Background of the Company

Lanka Walltiles is a private limited company established in 1977, Lanka Walltiles PLC is the market leader in Sri Lanka for manufacturing superior quality wall tiles for the local and export markets. With one state of the Art manufacturing facilities in  Sri Lanka with a capacity of 2.4Mn sq.mt per year and Subcontract manufacturing facilities in India and China. The company’s commitment to sustainability is also shown by the certifications of GREENSL certified and conform to ISO 13006.  Lanka Walltiles Group has gone through a remarkable expansion providing direct jobs from 7,424 employees. And also through the company’s network of dealers, franchise outlets, and outsourced services they have also create indirect employment opportunities for approximately 1,000 persons contributing to the economy.  Lanka Walltiles PLC also support the livelihoods of 3,885 tillers and fabricators in the country and provide training and financial assistance to obtain certifications for approximately 300 tillers each year.

If we consider the size and growth of the company the business has grown the be the market leader in the industry contributing to the economy by Rs. 6 Bn in distributions, Rs. 4.7 Bn to employees, suppliers, government and providers of finance.  If we consider the transfer of wealth, the Lanka Walltiles Group paid taxes totaling to Rs. 172 Mn in direct taxes and of Rs. 1,203 Mn in indirect taxes during the year 0f 2019.  And also the company has earned US$ 3.9 Mn in foreign exchange during the year by expanding export product range and markets.

If we consider the financial reports of the Lanka Walltiles PLC, the following standards, frameworks and guidelines were used to prepare the reports. They are Companies Act No.7 of 2007, Continued Listing Requirements of the Colombo Stock Exchange, Sri Lanka Accounting & Auditing Standards Act No.15 of 2015, Sri Lanka Financial Reporting Standards, Integrated Reporting Framework issued by the International Integrated Reporting Council, Core option of the GRI standards, and The Code of Best Practice on Corporate Governance for public listed companies, jointly issued by The Institute of Chartered Accountants of Sri Lanka, The Securities and Exchange Commission of Sri Lanka and The Colombo Stock Exchange.

 

 

 

3.0 Financial Statement Analysis of Lanka Wall tiles PLC

Financial statement analysis is the process of analyzing a company's financial statements for the purpose of decision-making. There are methods to analyze financial statements. They are horizontal analysis, vertical analysis, trend analysis and ratio analysis.  Horizontal Analysis is comparing a company’s financial condition and performance across time. Vertical Analysis is comparing a company’s financial condition and performance to a base amount. Ratio Analysis is using key relations among financial statement items. Trend Analysis is used to reveal patterns in data covering successive periods.

3.1 Horizontal Analysis

Table: The figures of financial statements

	2015 ’000	2016  ’000	2017 ’000	2018 ’000	2019 ’000	2020 ’000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment	2,233,154	3,321,977	3,323,749	4,114,548	4,536,281	4,524,000
Investments in subsidiaries	1,276,096	1,276,096	1,276,096	1,276,096	1,276,096	1,276,096
	3,509,250	4,598,073	4,599,845	5,390,644	5,812,377	5,857,981
CURRENT ASSETS
Inventories	1,349,134	1,196,576	1,335,580	1,606,272	2,224,608	2,762,580
Trade and other receivables	681,483	517,726	499,333	725,049	814,889	673,756
Amounts due from related parties	272	15,374	17,739	34,628	72,756	64,981
Short term investments	2,964	3,078	3,296	3,239	3,499	3,754
Cash and cash equivalents	34,805	41,223	43,372	61,004	33,240	47,776
	2,102,750	1,773,977	1,899,320	2,430,192	3,148,992	3,552,847
Total assets	5,612,000	6,372,050	6,499,165	7,820,836	8,961,369	9,410,828
EQUITY AND LIABILITIES
Stated capital	787,765	787,765	787,765	787,765	787,765	787,765
Reserves	296,294	1,237,011	1,237,011	1,531,815	1,812,082	1,812,082
Retained earnings	1,886,370	2,118,262	2,494,799	2,661,459	2,739,853	2,770,701
Shareholders’ funds	2,970,429	4,143,038	4,519,575	4,981,039	5,339,700	5,370,548
Non-controlling interest
TOTAL EQUITY	2,970,429	4,143,038	4,519,575	4,981,039	5,339,700	5,370,548
NON-CURRENT LIABILITIES
Interest bearing liabilities	358,697	584,245	324,981	165,180	119,134	72,735
Deferred tax liabilities	167,892	338,863	367,375	887,282	989,442	967,884
Retirement benefit liability	67,027	82,569	75,825	108,706	118,746	142,902
	593,616	1,005,677	768,181	1,161,168	1,227,322	1,183,521
CURRENT LIABILITIES
Trade and other payables	360,936	373,245	414,318	479,476	666,730	483,266
Income tax liabilities		39,475	72,265	23,834	8,402	12,839
Amounts due to related parties	138,180	93,856	86,707	167,860	191,377	146,043
Current portion of interest bearing liabilities	1,548,839	716,759	638,118	1,007,459	1,527,838	2,214,611
	2,047,956	1,223,335	1,211,412	1,678,629	2,394,347	2,856,759
TOTAL EQUITY AND LIABILITIES	5,612,000	6,372,050	6,499,165	7,820,836	8,961,369	9,410,828
Revenue	3,078,121	3,209,560	3,345,337	3,316,247	3,220,934	3,493,619
Cost of Sales	-2,142,319	-2,053,751	-2,013,573	-2,106,806	-2,291,881	-2,537,014
Gross Profit	935,802	1,155,809	1,331,764	1,209,441	929,053	956,605
Other Income	277,718	283,146	309,426	424,965	214,793	36,823
Distribution Costs	-292,894	-324,033	-381,220	-445,167	-483,030	-528,567
Administrative Expenses	-201,007	-201,519	-210,028	-208,646	-206,133	-185,660
Finance Cost	-165,140	-112,023	-105,269	-113,185	-166,487	-220,077
Profit Before Tax	554,479	801,380	944,673	867,409	288,196	59,124
Income Tax Expense	-37,426	-158,002	-171,908	-176,368	-56,915	-21,099
Profit for the Year	517,052	643,378	772,765	691,041	231,281	38,026
Revaluation of Land		1,036,538		779,322	389,260
Actuarial Loss on Retirement Benefit Liability	-5,640	-5,036	17,789	-18,795	1,886	-9,970
Total Comprehensive Income for the Year	512,786	1,580,323	786,036	972,313	512,906	30,848
Profit attributable to :
Equity holders of the parent	517,052	643,378	772,765	691,041	231,281	38,026
Non-controlling interest
Profit for the year	517,052	643,378	772,765	691,041	231,281	38,026
Total comprehensive income attributable to :
Equity holders of the parent	512,786	1,580,323	786,036	972,313	512,906	30,848
Non-controlling interest
Total Comprehensive Income for the Year	512,786	1,580,323	786,036	972,313	512,906	30,848
Basic Earnings Per Share - Profit Attributable to Ordinary Equity Holders	9.47	11.78	14.15	12.66	4.24	0.7

 

Table: Horizontal analysis for figures of 2016-2020

	2016 (%)	2017 (%)	2018 (%)	2019 (%)	2020 (%)
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment	48.76	0.05	23.79	10.25	-0.27
Investments in subsidiaries	0.00	0.00	0.00	0.00	0.00
CURRENT ASSETS
Inventories	-11.31	11.62	20.27	38.50	24.18
Trade and other receivables	-24.03	-3.55	45.20	12.39	-17.32
Amounts due from related parties	5552.21	15.38	95.21	110.11	-10.69
Short term investments	3.85	7.08	-1.73	8.03	7.29
Cash and cash equivalents	18.44	5.21	40.65	-45.51	43.73
Total assets	13.54	1.99	20.34	14.58	5.02
EQUITY AND LIABILITIES
Reserves	317.49	0.00	23.83	18.30	0.00
Retained earnings	12.29	17.78	6.68	2.95	1.13
Shareholders’ funds	39.48	9.09	10.21	7.20	0.58
Total equity	39.48	9.09	10.21	7.20	0.58
NON-CURRENT LIABILITIES
Interest bearing liabilities	62.88	-44.38	-49.17	-27.88	-38.95
Deferred tax liabilities	101.83	8.41	141.52	11.51	-2.18
Retirement benefit liability	23.19	-8.17	43.36	9.24	20.34
CURRENT LIABILITIES
Trade and other payables	3.41	11.00	15.73	39.05	-27.52
Income tax liabilities		83.07	-67.02	-64.75	52.81
Amounts due to related parties	-32.08	-7.62	93.59	14.01	-23.69
Current portion of interest bearing liabilities	-53.72	-10.97	57.88	51.65	44.95
Total equity and liabilities	13.54	1.99	20.34	14.58	5.02
Revenue	4.27	4.23	-0.87	-2.87	8.47
Cost of Sales	-4.13	-1.96	4.63	8.78	10.70
Gross Profit	23.51	15.22	-9.19	-23.18	2.97
Other Income	1.95	9.28	37.34	-49.46	-82.86
Distribution Costs	10.63	17.65	16.77	8.51	9.43
Administrative Expenses	0.25	4.22	-0.66	-1.20	-9.93
Finance Cost	-32.16	-6.03	7.52	47.09	32.19
Profit Before Tax	44.53	17.88	-8.18	-66.78	-79.48
Income Tax Expense	322.17	8.80	2.59	-67.73	-62.93
Profit for the Year	24.43	20.11	-10.58	-66.53	-83.56
Revaluation of Land		-100.00		-50.05	-100.00
Actuarial Loss on Retirement Benefit Liability	-10.71	-453.24	-205.66	-110.03	-628.63
Total Comprehensive Income for the Year	208.18	-50.26	23.70	-47.25	-93.99
Equity holders of the parent	24.43	20.11	-10.58	-66.53	-83.56
Profit for the year	24.43	20.11	-10.58	-66.53	-83.56
Total comprehensive income attributable to :
Equity holders of the parent	208.18	-50.26	23.70	-47.25	-93.99
Total Comprehensive Income for the Year	208.18	-50.26	23.70	-47.25	-93.99
Basic Earnings Per Share	24.39	20.12	-10.53	-66.51	-83.49

 

If we consider the above table we can analyze the changes in two periods. As a summery the total assets has increased from 5.02% in 2020 when compared to 2019. If we consider the assets from 2016-2020 that has been increased when compared to the last year. The revenue in 2019 has reduced by 2.87% when compared to the last year. But when considering the 2020, the revenue has increased by 8.47% when compared to the last year. When analyzing the cost of sales the analyses shows that the cost of sales has been increased by 10.7% in 2020 when compared to the 2019 figures. That indicates the cost of the company has increased during that time period. If we consider 2017 and 2018 the cost of sales has been increased. So it indicates that, with the tie the cost of sales of the company is increasing.

The gross profit of the company has reduced by 23.18% in 2019 when compared to 2018. But it has increased by 2.97% in 2020 when compared to the previous year. If we consider the profit for the year, it has been decreased by 83.56% in 2020 when compared to the 2019 figures.

 

3.2 Vertical analysis.

Vertical analysis is done to compare the company figures within the year. In this each line item is shown as a percentage of the base figure within the statement. Vertical analysis make it easier to understand the correlation between single items on a balance sheet and the bottom line, expressed in a percentage.  And also vertical analysis can become a more potent tool when used in conjunction with horizontal analysis which considers the finances of a certain period of time.

3.3 Ratio Analysis

Ration analysis is the important part in financial analysis. It contains liquidity ratios, efficiency ratios, solvency ratios, profitability ratios and market ratios.

3.3.1 Liquidity and efficiency ratio

Under the liquidity ratio the cash position of a company is analyzed. The ratios we consider in this are working capital, current ratio, acid test ratio, account receivable turnover, merchandise turnover, days sales uncollected, days sales in inventory and total assets turnover is calculated. \

3.3.1.1 Working Capital

Working Capital = Current Assets – Current Liabilities

Year	2016 ‘000	2017 ‘000	2018 ‘000	2019 ‘000	2020 ‘000
Current assets	1,773,977	1,899,320	2,430,192	3,148,992	3,552,847
Current liabilities	1,223,335	1,211,412	1,678,629	2,394,347	2,856,759
Working Capital	550,642	687,908	751,563	754,645	696,088

 

3.3.1.2 Current ratio

Current ratio = Current assets / current liabilities

Year	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020   ' 000
Current assets	1,773,977	1,899,320	2,430,192	3,148,992	3,552,847
Current liabilities	1,223,335	1,211,412	1,678,629	2,394,347	2,856,759
Current ratio	1.45	1.57	1.45	1.32	1.24
	1.45:1	1.57:1	1.45:1	1.32:1	1.24:1

 

Current ratio measures the short term debt paying ability of the company. The above ratios shows that the firm has sufficient funds to pay its liabilities over next 12 months. The current ratio can also give a sense of the efficiency of a company’s operating cycle or its ability to turn its product into cash.

Above graph shows that during the last 5 years the current ratio has been decreased with the time. It is not a good sign but we can say because of the Covid 19 pandemic this has been decreased.

 

3.3.1.3 Acid Test ratio

Acid Test ratio = Quick assets / current liabilities

Year	2016 ' 000	2017  ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Current assets	1,773,977	1,899,320	2,430,192	3,148,992	3,552,847
Current liabilities	1,223,335	1,211,412	1,678,629	2,394,347	2,856,759
Inventories	1,196,576	1,335,580	1,606,272	2,224,608	2,762,580
Acid test ratio	0.47	0.47	0.49	0.39	0.28
	0.47:1	0.47:1	0.49:1	0.39:1	0.28:1

 

Acid test ratio compares the total of the cash, temporary marketable securities and accounts receivable to the amount of current liabilities.

During 2016-2020 a sharp drop down of acid test ratio can be seen in 2019. That may be because of the pandemic situation. So the company’s liquidity level is not good at that time. But it is gradually increasing now. So it shows a good sign of the company liquidity.

 

3.3.1.4 Accounts Receivable Turnover

Accounts Receivable Turnover = Sales on Account / Average accounts receivable

Year	2015 ' 000	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Revenue	3,078,121	3,209,560	3,345,337	3,316,247	3,220,934	3,493,619
Trade and other receivables	681,483	517,726	499,333	725,049	814,889	673,756
Average Account receivables		599,605	508,530	612,191	769,969	744,323
Accounts receivable turnover (times)		5.35	6.58	5.42	4.18	4.69

 

This shows the times the company converts its receivables in to cash.

3.3.1.5 Merchandise turnover

Merchandise turnover = Cost of goods sold/ average inventory

Year	2015 ' 000	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Cost of Sales	2142319.00	2053751.00	2013573.00	2106806.00	2291881.00	2537014.00
Inventories	1,349,134	1,196,576	1,335,580	1,606,272	2,224,608	2,762,580
Average Inventory		1,272,855	1,266,078	1,470,926	1,915,440	2,493,594
Merchandise turnover (times)		1.61	1.59	1.43	1.20	1.02

 

This shows the number of times within the year the stock has been sold by the company.

 

3.3.1.6 Days Sales Uncollected

Days Sales Uncollected = (Accounts receivable/ Net sales) * 365

Year	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Trade and other receivables	517,726	499,333	725,049	814,889	673,756
Revenue	3,209,560	3,345,337	3,316,247	3,220,934	3,493,619
Days sales Uncollected (Days)	58.87	54.48	79.80	92.34	70.39

 

This ratio shows the number of days the company needs to collect the money from debtors.

 

 

3.3.1.7 Days Sales in inventory

Days Sales in inventory = (Ending inventory/ cost of sales) * 365

Year	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Inventories	1,196,576	1,335,580	1,606,272	2,224,608	2,762,580
Cost of Sales	2,053,751	2,013,573	2,106,806	2,291,881	2,537,014
Days sales in Inventory (Days)	212.65	242.10	278.28	354.28	397.45

 

This ratio explains the number of days the stock is in the inventory. But we cannot compare this with another company because according to the production this changes. Tiles are kept lot of time in an inventory than other goods.

 

3.3.1.8 Total Asset turnover

Total Asset turnover = Revenue/ Average total assets

Year	2015 ' 000	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Revenue	3,078,121	3,209,560	3,345,337	3,316,247	3,220,934	3,493,619
Total assets	5,612,000	6,372,050	6,499,165	7,820,836	8,961,369	9,410,828
Average Total assets		5,992,025	6,435,608	7,160,001	8,391,103	9,186,099
Total asset turnover		0.54	0.52	0.46	0.38	0.38

 

 

 

 

3.3.2 Solvency Ratios

3.3.2.1 Debt ratio

Debt ratio = total liabilities/ total assets

Year	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
total liabilities	2,229,012	1,979,590	2,839,797	3,621,669	4,040,280
Total assets	6,372,050	6,499,165	7,820,836	8,961,369	9,410,828
Debt ratio	34.98%	30.46%	36.31%	40.41%	42.93%

 

Debt ratio explains about how much of the total assets will go to the creditors. If we consider the five years from 2016-2020 this percentage has been increased.

 

3.3.2.2 Equity ratio

Equity ratio = Total shareholders’ equity / total assets

Year	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Total equity	4,143,038	4,519,575	4,981,039	5,339,700	5,370,548
Total assets	6,372,050	6,499,165	7,820,836	8,961,369	9,410,828
Equity ratio	65.02%	69.54%	63.69%	59.59%	57.07%

 

Equity ratio explains about how much of the total assets are owned by the owners of the company. If we consider the five years from 2016-2020 this percentage has been decreased. The equity ratio of this company is high.

 

3.3.2.3 Times Interest earned

Times Interest earned = Net income before Interest expense and Income taxes / Interest expenses

Year	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Profit Before Tax	801,380	944,673	867,409	288,196	59,124
Finance Cost	112,023	105,269	113,185	166,487	220,077
Times interest earned	8.15	9.97	8.66	2.73	1.27

 

 

This ratio shows the firm’s ability to provide protection to long term creditors. Above graph shows that during the 5 years from 2016 – 2020 the ratio has been decreased. That is not a good sign about the company.

 

 

3.3.3 Profitability Ratios

3.3.3.1 Profit margin

Profit margin = (Net income/ Net sales)*100

Year	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Profit for the Year	643,378	772,765	691,041	231,281	38,026
Revenue	3,209,560	3,345,337	3,316,247	3,220,934	3,493,619
Profit margin	20.05%	23.10%	20.84%	7.18%	1.09%

 

Profit Margin explains the ability of a company to earn net income from the sales revenue. Profit Margin ratio of the Company is decreasing from 2016 to 2020. It shows a negative sign of the operation in the business.

 

3.3.3.2 Gross Margin

Gross Margin = (Gross profit / Revenue)*100

Year	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Gross Profit	1,155,809	1,331,764	1,209,441	929,053	956,605
Revenue	3,209,560	3,345,337	3,316,247	3,220,934	3,493,619
Gross margin	36.01%	39.81%	36.47%	28.84%	27.38%

 

Gross Margin ratio explain the sales that covering the operating expenses and profit after considering cost of sales. Gross Margin ratio has been reduced in 2016 to 2020.

3.3.3.3 Return on total assets

Return on total assets = Net Income / Average total assets

Year	2015 ' 000	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Profit for the Year	517,052	643,378	772,765	691,041	231,281	38,026
Total assets	5,612,000	6,372,050	6,499,165	7,820,836	8,961,369	9,410,828
Average Total assets		5992025	6435607.5	7160000.5	8391102.5	9186098.5
return on total assets		10.74%	12.01%	9.65%	2.76%	0.41%

 

This ratio generally considers the best overall measure of the company profitability. In the year 2017 ratio is 12.01% but after 2017 ratio has been decreased in the Company financial statements.

 

3.3.3.4 Return on common shareholders’ equity

Return on common shareholders equity = (net income- preferred dividends)/ average    shareholders’ equity

Year	2015 ' 000	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Profit for the Year	517,052	643,378	772,765	691,041	231,281	38,026
Total equity	2,970,429	4,143,038	4,519,575	4,981,039	5,339,700	5,370,548
Average equity		3,556,734	4,331,307	4,750,307	5,160,370	5,355,124
Return on common shareholders’ equity		18.09%	17.84%	14.55%	4.48%	0.71%

 

This ratio measures the how well the company employed the owners’ investment to earn income. Ratio has been declined in the year from 2016 to 2020. The ratio explains the wealth of the owners in investment in the Company.

3.3.3.5 Book value per common share

Book value per common share = Total equity / number of shares

Year	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Total equity	4,143,038	4,519,575	4,981,039	5,339,700	5,370,548
Number of shares	787765	787765	787765	787765	787765
Book value per common share	5.26	5.74	6.32	6.78	6.82

 

Book Value per Common Share measures liquidation at reported amount. Higher value of Book Value per Common Share is good sign to the organization performance. Book Value per Common share in the Company has increased gradually from 2016 to 2020.

 

3.3.3.6 Basic earnings per share

Basic earnings per share = Net profit for the year/ number of shares

Year	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Profit for the Year	643,378	772,765	691,041	231,281	38,026
Number of shares	787765	787765	787765	787765	787765
Basic earnings per share	0.82	0.98	0.88	0.29	0.05

 

Basic Earnings per Share measures how much income was earned for each share of common stock outstanding in the organization. This ratio has decreased with the time.

 

3.3.4 Market ratios

3.3.4.1 Price earnings ratio

Price earnings ratio = market price per share / earnings per share

Year	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Basic earnings per share	0.82	0.98	0.88	0.29	0.05
Market price per share	90	92	98.4	60	47
price earning ratio	109.76	135.29	112.17	204.37	973.67

 

3.3.4.2 Dividend yield

Dividend yield = Annual dividends per share / market price per share

Year	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Dividends Per Share	7.5	7.5	9.5	3	-
Market price per share	90	92	98.4	60	47
dividend yield	8.33%	8.15%	9.65%	5.00%	0.00%

 

 

 

 

 

 

3.3.5 Z-score test

 

Z= 1.2T₁ + 1.4T₂ + 3.3T₃ +0.6T₄ + 0.999T₅

Year	2015 ' 000	2016 ' 000	2017 ' 000	2018  ' 000	2019  ' 000	2020  ' 000
Working Capital		550,642	687,908	751,563	754,645	696,088
Total assets	5,612,000	6,372,050	6,499,165	7,820,836	8,961,369	9,410,828
Retained earnings	1,886,370	2,118,262	2,494,799	2,661,459	2,739,853	2,770,701
Profit Before Tax	554,479	801,380	944,673	867,409	288,196	59,124
Finance Cost	165,140	112,023	105,269	113,185	166,487	220,077
Market price per share		90	92	98.4	60	47
Number of shares		787765	787765	787765	787765	787765
total liabilities	2,641,571	2,229,012	1,979,590	2,839,797	3,621,669	4,040,280
Revenue	3,078,121	3,209,560	3,345,337	3,316,247	3,220,934	3,493,619
T1	0.000	0.086	0.106	0.096	0.084	0.074
T2	0.336	0.332	0.384	0.340	0.306	0.294
T3	0.128	0.143	0.162	0.125	0.051	0.030
T4	0.000	31.807	36.611	27.296	13.051	9.164
T5	0.548	0.504	0.515	0.424	0.359	0.371
Z- score	1.442	20.630	23.678	17.807	8.886	6.468

 

According to the information gathered on Lanka Walltiles Z-score is 6.468 in 2020. Z-score analysis defined if the score is higher than 2.99. It shows that the company falls down in to safe zone.

 

4.0 Conclusion

Lanka Walltiles is a private limited company established in 1977, Lanka Walltiles PLC is the market leader in Sri Lanka for manufacturing superior quality wall tiles for the local and export markets. In this annual report analysis a decrease in ratios can be seen in 2019 and 2020. Though it shows a gradual decrease during the 5 years of period, in 2019 it shows a huge decrement. It can be because of the COVID 19 pandemic situation. But if we consider the company in overall it is not a poorly performing company.  The Z score is also higher than 2.99. So we can say it is in the safe zone. But the managers and directors of the company can improve the performance of the company which has decreased its performance during COVID 19 pandemic situation.