JAT Holdings PLC

 

ABSTRACT

 

This report presents a comprehensive analysis of five consecutive annual reports of JAT Holdings PLC, a leading company in the panting manufacturing industry. The objective of this study was to assess the financial performance, reporting practices, and overall financial health of JAT Holdings PLC. over a five-year period, spanning from 2018 to 2022.

The analysis involved a thorough examination of the company's financial statements, including the income statement and balance sheet.  Key financial ratios were calculated, and trends were identified to evaluate the company's liquidity, profitability, solvency, and overall financial stability. Additionally, the report scrutinized the company's disclosure practices, accounting policies, and compliance with relevant accounting standards and regulations.

The findings of this report reveal valuable insights into the financial performance and reporting practices of JAT Holdings PLC. Key trends, strengths, and areas for improvement have been identified, providing a basis for stakeholders and investors to make informed decisions regarding the company's financial prospects.

This analysis serves as a valuable reference for both finance professionals and individuals interested in understanding the financial health and reporting practices of JAT Holdings PLC.

 

 

 

 

 

ACKNOWLEDGEMENT

 

I would like to express my sincere gratitude and acknowledge the invaluable  contributions of individuals who have been supported in the successful completion of our report. Their support and guidance have been truly indispensable. I would like to extend our heartfelt thanks to the following:

First and foremost, I would like to thank my esteemed lecturer, Senior Prof. K. D. Gunawardana who provided us with valuable insights and knowledge throughout this journey. Her expertise and dedication have been pivotal in shaping my understanding and guiding us towards excellence.

 I am also deeply grateful to the coordinator of the extended degree program, Prof. Pahan Godakumbura whose continuous encouragement and support have been a great   source of motivation for me.

I would like to express our heartfelt appreciation to all those who have directly or indirectly contributed to our Assignment. Thank you for believing in us and for your unwavering support throughout this course unit.

 

 

 

 

 

 

CONTENTS

ABSTRACT. ii

ACKNOWLEDGEMENT. iii

CONTENTS. iv

CHAPTER 1. 1

1.1        Introduction. 1

1.2        Overview of the company. 3

CHAPTER 2. 4

2.1        Financial statement analysis. 4

2.2        Horizontal analysis. 4

2.3        Trend analysis. 11

2.3.1         Trend analysis for trading results. 11

2.3.2         Trend analysis of assets. 12

2.3.3         Trend analysis of equity and liabilities. 14

2.4        Vertical analysis. 15

2.4.1         Vertical analysis for statement of financial position. 15

2.4.2         Vertical analysis for income statement 18

2.5        Ratio analysis. 19

2.5.1         Liquidity and efficiency. 19

2.5.2         Solvency. 21

2.5.3         Profitability. 22

2.5.4         Market 24

2.6        Z – score test 25

Conclusion. 27

Reference. 29

Appendixes. 30

Financial statements. 30

Statement of financial position 2019/2018. 30

Statement of financial position 2021/ 2020. 31

Statement of financial position 2022/ 2021. 32

Statement pf profit or loss and other comprehensive income. 33

Statement of profit or loss and other comprehensive income 2019/ 2018. 33

Statement of profit or loss and other comprehensive income 2021/2020. 34

Statement of profit or loss and other comprehensive income 2022/ 2021. 35

10-year summery. 36

 

 

CHAPTER 1                     

1.1          Introduction

 

Every year, financial statements from various companies are reviewed, contrasted, and assessed to provide insight into the company's growth and performance. This report presents a comparative examination of JAT Holdings PLC's financial results over a five-year period.

The profit & loss statement, financial position statement, cash flow statement, and statement of equity are the four primary financial statements that publicly traded firms prepare. Both internal and external parties can obtain information from these financial statements.

Business organizations can use various analytical techniques such as horizontal analysis, trend analysis, vertical analysis, ratio analysis and Z score test analysis to figure out financial strengths and weaknesses.

The goal of this assignment task is to perform trend analysis, vertical analysis, ratio analysis, Z score test analysis, and horizontal analysis. Financial statement analysis can also be used to compare a company's performance to that of its competitors and assess the company's past, present, and future performance. 

Some advantages of analyzing financial statement are as follower.

•           A company's financial health can be fully viewed through its financial statements.

•           Investors can determine whether to purchase or sell stocks or bonds by evaluating a company's growth potential and financial soundness.

•           Through the examination of a business's financial statements, interested parties can evaluate a range of risks. such as credit, operational, and market risks.

•           Financial statements are used by businesses to assess how they are doing in relation to competitors and industry standards.

•           Businesses use financial statements to plan for their tax obligations. Comprehending profits and losses facilitates efficient tax planning and adherence to tax laws.

 

1.2         Overview of the company

 

JAT Holdings is Sri Lanka’s leading provider of finishing and furnishing solutions, commanding dominant positions in its key business lines of wood coatings, brushes and luxury kitchens. Since its humble beginnings in 1993, the Group has gradually and consistently expanded and diversified its operations by proactively identifying emerging demand trends and catering to these needs through innovation-led, superior quality product offerings.

The Group’s ability to sharpen its competitive edge and drive customer penetration has been supported by its relentless focus on innovation and its ability to obtain and retain the exclusive agency for several world-leading brands such as Sayerlack, Harris brushes, Herman Miller ergonomic office furniture, Knauf ceiling solutions and SEA Kitchen solutions, among others. Meanwhile home-grown brands such as J Chem – solvent based paints, WHITE by JAT - brilliant white emulsion paint and Brush Master. agency for several world-leading brands such as Sayerlack, Harris brushes, Herman Miller ergonomic office furniture, Knauf ceiling solutions and SEA Kitchen solutions, among others. Meanwhile home-grown brands such as J Chem – solvent based paints, WHITE by JAT - brilliant white emulsion paint and Brush Master.

 

 

 

 

 

CHAPTER 2                     

 

2.1         Financial statement analysis

 

 

The practice of looking over a company's financial statements is called financial statement analysis. The financial performance, stability, and viability of the company are evaluated in this examination. This entails assessing and interpreting financial data, coming to critical judgements, and determining the financial well-being of an organization.

There are some common techniques used for financial statement analysis. Frist one is the horizontal analysis. Comparing financial data from two or more financial reporting periods is known as horizontal analysis. Both rupees and percentages forms are available for this. A sub part of this analysis is trend analysis. Regarding that, evaluating financial data across time periods aids in determining whether a business is growing. Second one is vertical analysis. This expresses each line item on the financial statements as a percentage value of a main reference point, which is either total revenue on the income statement or total assets on the balance sheet. Third one is the ratio analysis. This evaluating company’s financial performances and health. company's financial statements can be interpreted quantitatively through ratio analysis.

2.2         Horizontal analysis

 

This method of analysis displays variations in the appropriate financial statement items' amounts over time. An effective method for assessing trending situations is this analysis. Two or more financial periods are included in a horizontal analysis. Typically, the first period is designated as the base period, and all subsequent periods' items on their statements are contrasted with those of the base period. Generally, the changes are displayed in percentages as well as rupees.

The chance to compare and evaluate JAT Holdings PLC's financial positions from 2018 to 2022 is provided by this analysis. 2018 is the base year for this analysis. 

To compare company’s financial performance and condition can use following equations.

Dollar change = Analysis period amount – Base period amount

Percentage change = (Dollar change / Base period amount) * 100%

 

 

Table 2.1 Rupee change analysis of financial position (2018 – 2022)

	Rs. Change
Year	2018	2019	2020	2021	2022
ASSETS
Non-Current Assets
Property, Plant and Equipment	0	174,639,934	126,796,499	228,402,804	364,007,333
Intangible Assets	0	3,665,565	3,531,276	2,170,716	-2645932
Right of Use Asset	0	-	44,390,742	25,520,797	15,142,330
Investment Property	0	-	-	-	-
Investment In Subsidiary	0	-	110,807,292	110,807,292	110,807,292
Other Investment	0	5,096,448	(12,120,752)	(12,088,000)	-14,588,000
Deferred Tax Asset	0	-	(6,133,016)	(6,133,016)	-6,133,016
Advance paid for investment properties	0	-	-	-	142,421,669
Consumable Biological Assets	0	7,453,876	22,872,922	31,752,106	42,208,810
Total Non-Current Assets	0	319,958,046	427,380,202	522,854,368	651,220,486
Current Assets
Inventories	0	-183,495,119	193,073,131	(14,033,692)	670,153,544
Income Tax Recoverable	0	(571,322)	3,520,600	(51,776,438)	-64,352,430
Trade and Other Receivables	0	493,325,220	(350,656,960)	(37,952,354)	692,099,779
Advances and Prepayments	0	261,842,647	(28,690,951)	(4,947,520)	663,672,925
Amount Due from Related Parties	0	(11,710,085)	129,965,615	142,135,767	263,311,177
Short Term Financial Assets	0	-	-	214,306,589	868,684,706
Cash and Cash Equivalents	0	(55,020,038)	16,076,107	(145,767,079)	185,769,879
Total Current Assets	0	504,371,303	(36,712,458)	1,965,273	3,279,339,580
Total Assets	0	824,329,348	390,667,744	524,819,641	3,930,560,066
EQUITY AND LIABILITIES
Capital and Reserves
Stated Capital	0	-	-	-	1,476,451,307
Retained Earnings	0	777,204,765	1,039,956,526	1,348,418,259	1,943,035,433
Other Reserves	0	-	-	-	-
	0	777,204,765	1,039,956,526	1,348,418,259	3,419,486,740
Non-Controlling Interest	0	-	-	-	-
Total Equity	0	777,204,765	1,039,956,526	1,348,418,259	3,419,486,740
Non-Current Liabilities
Interest Bearing Loans and Borrowings	0	-169,873,322	(203,026,416)	(212,153,414)	-229,939,421
Deferred Tax Liability	0	-	-	-	-
Retirement Benefit Obligation	0	2,702,438	12,724,357	23,179,518	-18,565,717
	0	-148,000,087	(171,119,155)	(188,973,896)	-185,591,880
Current Liabilities
Trade and Other Payables	0	-392,951,591	(634,466,451)	(408,558,084)	171,664,618
Amount Due to Related Parties	0	(44,090)	(991,579)	(991,579)	-991,579
Interest Bearing Loans and Borrowings	0	588,120,351	157,288,403	(225,075,059)	525,992,167
	0	195,124,671	(478,169,626)	(634,624,721)	696,665,207
Total Equity and Liabilities	0	824,329,348	390,667,744	524,819,641	3,930,560,066

 

 

 

Table 2.2 Percentage change analysis of financial position (2018 – 2022)

	Percent Change
Year	2018	2019	2020	2021	2022
ASSETS
Non-Current Assets
Property, Plant and Equipment	0	0.134%	9.75%	17.57%	28.00%
Intangible Assets	0	0.297%	28.63%	17.60%	-21.45%
Right of Use Asset	0	-	-	-	-
Investment Property	0	-	-	-	-
Investment In Subsidiary	0	0.000%	49.69%	49.69%	49.69%
Other Investment	0	0.349%	-83.09%	-82.86%	-100.00%
Deferred Tax Asset	0	0.000%	-100.00%	-100.00%	-100.00%
Advance paid for investment properties	0	-	-	-	-
Consumable Biological Assets	0	0.283%	86.74%	120.42%	160.07%
Total Non-Current Assets	0	0.202%	27.01%	33.04%	41.16%
Current Assets
Inventories	0	-0.124%	13.08%	-0.95%	45.40%
Income Tax Recoverable	0	-0.008%	4.99%	-73.37%	-91.20%
Trade and Other Receivables	0	0.201%	-14.29%	-5.62%	28.21%
Advances and Prepayments	0	3.237%	-35.47%	-6.12%	820.55%
Amount Due from Related Parties	0	-0.113%	125.06%	136.77%	253.38%
Short Term Financial Assets	0	-	-	-	-
Cash and Cash Equivalents	0	-0.152%	4.44%	-40.25%	51.30%
Total Current Assets	0	0.111%	-0.81%	0.04%	72.13%
Total Assets	0	0.134%	6.37%	8.56%	64.13%
EQUITY AND LIABILITIES
Capital and Reserves
Stated Capital	0	0.000%	0.00%	0.00%	160.70%
Retained Earnings	0	0.257%	34.39%	44.59%	64.26%
Other Reserves	0	-	-	-	-
	0	0.197%	26.38%	34.20%	86.73%
Non-Controlling Interest	0	-	-	-	-
Total Equity	0	0.197%	26.38%	34.20%	86.73%
Non-Current Liabilities
Interest Bearing Loans and Borrowings	0	-0.732%	-87.43%	-91.36%	-99.02%
Deferred Tax Liability	0	-	-	-	-
Retirement Benefit Obligation	0	0.082%	38.68%	70.45%	-56.43%
	0	-0.558%	-64.55%	-71.28%	-70.01%
Current Liabilities
Trade and Other Payables	0	-0.320%	-51.60%	-33.23%	13.96%
Amount Due to Related Parties	0	-0.044%	-100.00%	-100.00%	-100.00%
Interest Bearing Loans and Borrowings	0	0.851%	22.77%	-32.58%	76.14%
	0	0.102%	-24.89%	-33.03%	36.26%
Total Equity and Liabilities	0	0.134%	6.37%	8.56%	64.13%

 

This analysis shows that the property, plant, and equipment had a significant increase from 2018 to 2022. All the years, it has been recorded as a positive value. In considering the intangible assets, they show a negative value in 2022. It recorded a high amount in 2019. Investments in subsidiaries and deferred tax assets remain unchanged. By the way, when considering the total non-current assets that are continuously increasing, compared with the base year, the 2022 value is 41.16%. However, considering the current assets, only income tax recoverable has a negative value in 2022 compared with the base year. By the way, the total asset shows that it increased considerably during the study period. That is a good mark for the company. Some assets are decreasing throughout this analysis period, but most are increasing. Also, compared with the base year, total assets show a positive increase.

When analysing the total equity of the company, it shows a significant increase throughout this analysis period. When analysing the nature of the liabilities, most non-current liabilities show a negative value compared with the base year. However, considering trade and other payables only in 2022, they show positive value. It was recorded at 13.96%. Considering the interest-bearing loans and borrowings, only 2021 shows a negative value. The highest value is shown in 2022. It was recorded at 76.14%. By the way, the overall figure shows that total equity and liabilities increased gradually from 2018 to 2022 compared with the base year.

 

2.3         Trend analysis

 

The process of comparing financial information over time is known as trend analysis. Determining the business's performance is helpful. It also offers proof to support decisions. For a complete picture of a company's financial health, trend analysis must be combined with other techniques of financial analysis. To do the trend analysis can use following equation.

Trend percentage = (Analysis period amount/ Base period amount) * 100%

2.3.1        Trend analysis for trading results

 

Table 2.2 Trend analysis for trading results (2017 – 2021)

	2021/22	2020/21	2019/20	2018/19	2017/18	2016/17
Gross Turnover	153.85%	92.68%	108.86%	113.22%	94.19%	100%
Profit from operating activities	106.42%	61.45%	75.06%	94.49%	62.14%	100%
Net Finance Cost	-86.43%	48.63%	160.32%	134.68%	127.91%	100%
Profit before taxation	121.95%	62.48%	72.78%	91.25%	56.84%	100%
Tax expenses	36.63%	34.10%	33.77%	46.67%	-37.51%	100%
Profit for the year	134.16%	66.55%	78.36%	97.64%	70.35%	100%

 

When analyzing the above table and graph we can see, in 2021 shows highest value for gross turnover. And lowest value shown in 2020. Considering the Profit from operating activities, it shows continuous increasing except year 2020. However, net finance cost has a negative value in 2021. Not only that, but tax expenses also show negative value. Highest tax expenses shown in 2018 that value is 46.67%.  However, profit for the year it has highest value in 2021.

 

 

 

 

 

 

 

 

 

 

 

 

2.3.2        Trend analysis of assets

 

Table 2.3 Trend analysis of assets (2017 – 2021)

	2021/22	2020/21	2019/20	2018/19	2017/18	2016/17
Property, plant, and equipment	153.78%	141.12%	132.33%	137.13%	121.35%	100%
Intangible assets	21.89%	27.92%	30.00%	29.65%	25.26%	100%
Right of Use Asset	-	-	-	-	-	100%
Consumable Biological Assets	422.86%	358.38%	303.63%	208.55%	162.59%	100%
Other Investment	-	-	16.91%	134.94%	100.00%	100%
Investment Properties	-	-	-	-	-	100%
Deferred tax asset	-	-	-	-	23.66%	100%
Current assets	215.44%	118.06%	122.20%	118.39%	108.52%	100%

 

 

 

The following figures show the behavior of the assets throughout the study period. Property, plant, and equipment increased all the years except 2019. Intangible assets increased from 2017 to 2019. But in 2020 and 2021, intangible assets will decrease. Not only that, but consumable biological assets show a continuous increase throughout the analysis period. When analysing the current asset value, 2021 shows the highest value. The value is shown as 214.44%.

 

2.3.3        Trend analysis of equity and liabilities

 

Table 2.4 Trend analysis of equity and liabilities (2017 – 2021)

	2021/22	2020/21	2019/20	2018/19	2017/18	2016/17
Share capital	260.70%	100.00%	100.00%	100.00%	100.00%	100%
Retained earnings	214.42%	181.33%	165.93%	149.68%	119.69%	100%
Non-Controlling Interest	-256.36%	-134.35%	-187.25%	-33.92%	-61.70%	100%
Reserves	2244.54%	-579.60%	-555.90%	-566.35%	-563.82%	100%
Retirement benefit obligation	262.61%	235.56%	190.47%	149.24%	137.93%	100%
Long term loans and borrowings	5.89%	16.98%	15.81%	27.00%	100.57%	100%
Deferred tax liability	-	-	-	-	-	100%
Current liabilities	180.16%	78.80%	101.74%	112.21%	104.01%	100%

 

 

Share capital is increasing in 2021, while other years remain the same. Retained earnings show a continuous increase throughout the analysis period. However, long-term loans and borrowings are continuously decreasing throughout the analysis period. When considering the current liabilities of JAT Holdings PLC, they have fluctuated over the last five years. The highest value shows up in 2021, which is 180.16%.

 

 

 

 

 

 

 

 

 

 

 

 

2.4         Vertical analysis

 

Each line item on the financial statements is expressed vertically as a percentage of a primary reference point, which is either the total assets on the balance sheet or the entire revenue on the income statement. Line items on a financial position statement can be expressed as a percentage of total assets, whereas line items on a profit and loss statement can be expressed as a percentage of revenue. Comparing a company's financial performance and organizational structure over time is made simpler with the use of vertical analysis. Additionally, businesses may immediately identify trends and changes in the financial structure of the company by looking at the percentage composition of financial statements over time. These are a few advantages that come from performing a vertical analysis.

 

2.4.1        Vertical analysis for statement of financial position

 

Table 2.5 Vertical analysis for statement of financial position (2018 – 2022)	Percent Change
Year	2018	2019	2020	2021	2022
ASSETS
Non-Current Assets
Property, Plant and Equipment	21.21%	21.21%	21.88%	22.97%	16.54%
Intangible Assets	0.20%	0.23%	0.24%	0.22%	0.10%
Right of Use Asset	-	-	0.68%	0.38%	0.15%
Investment Property	-	1.94%	2.10%	2.14%	-
Investment in Subsidiary	3.64%	3.21%	5.12%	5.02%	3.32%
Other Investment	0.24%	0.28%	0.04%	0.04%	-
Deferred Tax Asset	0.10%	-	-	-	-
Advance paid for investment properties	-	-	-	-	1.42%
Consumable Biological Assets	0.43%	0.49%	0.76%	0.87%	0.68%
Total Non-Current Assets	25.82%	27.36%	30.82%	31.64%	22.20%
Current Assets
Inventories	24.08%	18.59%	25.60%	21.97%	21.33%
Income Tax Recoverable	1.15%	1.01%	1.14%	0.28%	0.06%
Trade and Other Receivables	40.03%	42.38%	32.25%	34.80%	31.27%
Advances and Prepayments	1.32%	4.93%	0.80%	1.14%	7.40%
Amount Due from Related Parties	1.70%	1.33%	3.59%	3.70%	3.65%
Short Term Financial Assets	-	-	0.00%	3.22%	8.64%
Cash and Cash Equivalents	5.91%	4.42%	5.80%	3.25%	5.45%
Total Current Assets	74.18%	72.64%	69.18%	68.36%	77.80%
Total Assets	100.00%	100.00%	100.00%	100.00%	100.00%
EQUITY AND LIABILITIES
Capital and Reserves
Stated Capital	14.99%	13.21%	14.09%	13.81%	23.81%
Retained Earnings	49.33%	54.66%	62.33%	65.71%	49.37%
Other Reserves	-	-	-	-	-
	64.33%	67.88%	76.42%	79.52%	73.18%
Non-Controlling Interest	-	-	-	-	-
Total Equity	64.33%	67.88%	79.52%	76.42%	73.18%
Non-Current Liabilities
Interest Bearing Loans and Borrowings	3.79%	0.90%	0.45%	0.30%	0.02%
Deferred Tax Liability	-	0.28%	0.29%	0.00%	0.14%
Retirement Benefit Obligation	0.54%	0.51%	0.70%	0.84%	0.63%
	4.33%	1.68%	1.44%	1.14%	0.79%
Current Liabilities
Trade and Other Payables	20.06%	12.03%	9.13%	12.34%	13.93%
Amount Due to Related Parties	0.02%	0.01%	-	-	-
Interest Bearing Loans and Borrowings	11.27%	18.39%	13.01%	7.00%	12.10%
	31.35%	30.44%	22.14%	19.34%	26.03%
Total Equity and Liabilities	100.00%	100.00%	100.00%	100.00%	100.00%

 

When considering the vertical analysis of the property, plant, and equipment, we can see a decrease in 2022 and a slight increase in 2021. In considered the amount of intangible assets, there was not much variation throughout the period. If we look at investments in subsidiaries, the percentage value is almost identical in 2018, 2019, and 2022. But the highest percentage value given in 2021 is 31.64%. When we are looking at inventories, values in 2021 and 2022 decrease compared to the 2020 value. In 2019, trade and other receivables have the highest percentage value compared to other years. And cash and cash equivalents vary between 3% and 6%.

When we are looking at the total equity values, we can see that 2020, 2021, and 2022 have high values compared to 2018 and 2019. Also, interest-bearing loans and borrowings are continuously decreasing throughout the analysis period. In retirement benefit obligations, it shows a continuous increase throughout the analysis time. When considering the current liabilities, trade and other payables decrease from 2018 to 2020 and increase from 2021 to 2022. The total current liabilities also show the same variation.

2.4.2        Vertical analysis for income statement

 

Table 2.6 vertical analysis for income statement (2018 -2022)

	2022	2021	2020	2019	2018
Revenue from Contracts with Customers	100.00%	100.00%	100.00%	100.00%	100.00%
Cost of Sales	-68.31%	-67.91%	-69.62%	-70.33%	-71.59%
Gross Profit	31.69%	32.09%	30.38%	29.67%	28.41%
Other Income	3.68%	3.48%	6.55%	0.62%	0.92%
Selling and Distribution Costs	-11.81%	-13.88%	-14.07%	-9.12%	-11.13%
Administrative Expenses	-8.15%	-8.00%	-7.47%	-4.07%	-4.83%
Finance Cost	-0.91%	-1.63%	-2.85%	-1.80%	-1.35%
Finance Income	0.87%	0.47%	0.67%	0.28%	0.23%
Gain/(Loss) on Disposal of Subsidiaries	-	-	-	-	0.01%
Profit Before Tax	15.38%	12.53%	13.22%	15.58%	12.25%
Income Tax Expense	-0.40%	-0.80%	-0.22%	-0.91%	1.00%
Profit For the Year	14.98%	11.73%	13.01%	14.67%	13.25%

 

 

When we look at the cost of capital, the company managed to keep it constant between 67% and 72% of the net revenue. When compared with industry norms, a 10% gross margin can be considered a reasonable return. Yet, a high drop in other income can be seen in 2019, which dropped from 6.55% to 0.62%. The company has managed to keep its financial costs constant over the years. But the administration expenses are increasing throughout the analysis period. Furthermore, the company’s profit for the year varies between 12% and 15%.

 

 

2.5         Ratio analysis

 

2.5.1        Liquidity and efficiency

 

The ability of a business to satisfy its maturing short-term obligations is measured by liquidity ratios. A larger ratio indicates sound financial standing for the company. Under liquidity and efficiency ratio, working capital, current ratio, acid test ratio, accounts receivable turnover, day’s sales uncollected, merchandise turnover, day’s sales in inventory, and total assets turnover are calculated.

Table 2.7 Liquidity and efficiency ratio of JAT Holdings PLC from 2018 - 2022

	2022	2021	2020	2019	2018
Working Capital	5,208,001,493	3261917114	3066784288	2,934,573,752	2,625,327,120
Current Ratio	2.99:1	3.53: 1	3.12: 1	2.39:1	2.37:1
Acid-Test Ratio	1.88:1	2.33: 1	1.93: 1	1.61:1	1.55:1
Accounts Receivable Turnover	2.44 times	2.04 times	1.75 times	2.34 times	2.13 times
Merchandise Turnover	2.52 times	1.95 times	2.08 times	3.21 times	2.87 times
Days’ Sales Uncollected	172 days	187 days	173 days	170 days	176 days
Day’s Sales in Inventory	172 days	174 days	198 days	106 days	148 days
Total Asset Turnover	0.79 times	0.68 times	0.66 times	0.97 times	0.89 times

 

Working capital is the difference between current assets and current liabilities. Working capital is most important because it is used to keep a business operating smoothly. When a company has negative working capital, which means it does not have enough cash to cover its day-to-day functions. However, JAT Holdings PLC’s working capital has continuously increased over the period from 2018 to 2022.

The number of times short-term assets cover short-term obligations is shown by this ratio. It is evident that the business has continued to run smoothly and profitably during the analysis period. Because it shows a great ability to meet short-term responsibilities, a higher number is recommended. The current ratio of JAT Holdings PLC is positive and greater than 1, indicating a stable level.

The acid test ratio, which indicates the company's ability to repay its present liabilities quickly, helps to better comprehend the liquidation of the business. Since it indicates a company's strong ability to meet short-term obligations, a higher number is desired. Because it does not include inventory, prepayments, or other less liquid current assets, this ratio is a more dependable variant of the current ratio. However, in JAT Holdings PLC’s the acid test ratio has been more than 1 every year, so it is a good sign.

Account receivable turnover measures how many times the company converts its receivables into cash. This indicates a shorter time between revenue and accounts receivable, so a higher number ratio is a good position for the company. However, JAT Holdings PLC’s account receivable turnover is more than 2, except in 2020. This is good for the company.

This ratio calculates how frequently products are sold and replaced annually. A higher figure is desired for the company because it shows a shorter period between products sold and replaced during the year. In the instance of JAT Holdings PLC, this figure is positive because it is more than 1 for each year. That suggests robust revenues for that company.

This ratio shows how long it typically takes to collect an account receivable or how frequently debtors will make payments. If the days are high, this suggests that the company's management is not doing a good job of controlling credit. The day's sales uncollected values for JAT Holdings PLC show that only 2021 has the highest value. It's not going to be for the business.

The day's sales to inventory ratio calculates the average number of days that a business has unpaid accounts. It would be preferable to have less days. To improve cash flow, businesses should try to lower the number of days' sales in inventory. However, JAT Holdings PLC exhibits a greater rate; therefore, the company needs to take prompt action to mitigate this scenario by using creative ideas and marketing techniques.

The ability of the company to produce sales from its assets is gauged by this ratio. This comprises all the company's assets, and the greater the worth of all of them, the more effectively the business is generating sales. For JAT Holding PLC, the year with the highest total asset turnover was 2019, meaning that for every rupee spent, 0.97 rupees were made in sales. It might be inferred that the company is not very efficient if its total asset turnover is less than 1. In the upcoming years, the corporation should pay close attention to its overall asset turnover.

2.5.2        Solvency

 

Solvency ratios assess a company's capacity to pay back debt and cover long-term interest costs.

Table 2.8 Solvency ratio of JAT Holdings PLC from 2018 - 2022

	2022	2021	2020	2019	2018
Debt Ratio	26.82%	20.48%	23.58%	32.12%	35.67%
Equity Ratio	73.18%	79.52%	76.42%	67.88%	64.33%
Times Interest Earned	17.94 times	8.69 times	5.644 times	9.63 times	10.06 times

 

Debt ratio calculates how much debt a company has in relation to its assets. An organization has more debt than assets if the ratio value is larger than 1. Companies and creditors would naturally prefer a lower figure. In here every year between 2018 and 2021 saw a decline in the debt ratio. However, it climbed in 2022, which was encouraging for the company. In 2018, the highest debt ratio recorded was 35.67%.

Equity ratio calculates the percentage of total assets that come from owner equity. Owners have provided more capital overall while creditors have contributed less, as indicated by the greater number. According to the information above, the equity ratio increased between 2018 and 2021 and decreased by a less significant amount in 2019.

Times interest earned displays the number of times the business can use its revenue in a given year to pay its interest. The corporation will benefit more from a higher ratio. According to the information above, 2022 will yield the most interest, which will be better for JAT Holdings PLC.

2.5.3        Profitability

 

The ability of a business to turn a profit with its assets or capital is calculated by profitability ratios. Every business wants to turn a profit in order to expand and stay in business. Increasing profitability is a never-ending task for management at every company. The analysis of profitability ratios is a crucial step in judging a company's success.

 

Table 2.9 Profitability ratio of JAT Holdings PLC from 2018 – 2022

	2022	2021	2020	2019	2018
Profit Margin	14.98%	11.73%	13.01%	14.67%	13.25%
Gross Margin	31.69%	32.09%	30.38%	29.67%	28.41%
Return on Total Assets	11.94%	8.03%	8.55%	14.16%	11.81%
Return on Common Shareholders’ Equity	15.77%	10.30%	11.87%	21.38%	18.32%
Book Value per Common Share	144.23%	116.38%	108.96%	103.21%	862.19%
Basic Earnings per Share	1.95	1.16	1.25	2.02	1.47

 

The profit margin ratio indicates how much money a business generates on each sale as well as how well-positioned it is to withstand future drops in sales or increases in expenditures. The graph shows that the company's profit grew in 2018 and 2019 before declining once more in 2020 and 2021. However, profit margins rose in 2022 again.

The gross margin ratio calculates the gross profit on sales and indicates the portion of each rupee in sales that can be used to pay operating costs and turn a profit. Based on the information presented in the above table, the gross profit margin grew between 2018 and 2021 before slightly declining after that.

The return on total assets ratio measures how effectively a company's assets are being used to generate profits. It is among the most crucial ratios to consider when assessing a company's success. A higher figure indicates a company that is well-managed and has a good return on assets. The company's overall profitability over a five-year period has altered, as seen in the above table. In 2019, 14.16% was the greatest return on total assets displayed. This ratio varied throughout the remaining years, ranging from 8% to 12%.

The ability of a company's management to generate a sufficient return on the capital invested by the owners in the company is gauged by the return on common shareholders' equity ratio. A greater value is favored for this frequently examined ratio. The above table shows that the company used the owner's investment to earn income in a beneficial way in 2019 as a result of the ratio growing from 2018. However, the ratio decreased between 2020 and 2021, which may make it less appealing for investors to make future investments in this business. The ratio experienced a little increase in 2022.

To identify undervalued or overvalued securities, we can use the book value per common share. When considering JAT Holding PLC, the book value per common share increased from 2019 to 2022. But in 2018, it shows a significantly higher value.

The basic earnings per share metric shows the amount of income made for each outstanding share of common stock. The basic profits per share of JAT Holdings PLC fluctuated from 2018 to 2022, as shown by the above table. Every value is greater than one and positive.

2.5.4        Market

 

Table 2.10 Market ratio of JAT Holdings PLC from 2018 – 2022

	2022	2021	2020	2019	2018
Price-Earnings Ratio	6.43	26.72	12.53	9.85	16.67
Dividend Yield	0.33	0.31	0.11	0.16	0.21

 

Investors frequently use the price-earnings ratio as a basic benchmark when determining the value of stocks. Typically, a company with a higher price-earnings ratio has greater room to expand. Throughout the course of the analysis, JAT Holdings PLC's price-earnings ratio changed. In comparison to previous years, the price-earnings ratio for 2021 is the greatest.

The return on the stock's current market price expressed as cash dividends is shown by the dividend yield ratio. In 2022, the greatest dividend yield was noted.

2.6         Z – score test

 

The result of a credit-strength test that assesses the likelihood of bankruptcy for publicly traded manufacturing companies is called a Z-score. The five weighted business ratios are combined to get the Altman Z-score. The algorithm is based on data from the company's balance sheet and income statement. The following is the formula.

Z = 1.2 X₁ + 1.4 X₂ + 3.3 X₃ + 0.6 X₄ + 0.999 X₅

X₁ = Working capital / total assets

X₂ = Retained earnings / total assets

X₃ = Earnings before interest and tax / total assets

X₄ = Market value of equity / total assets

X₅ = Total revenue / total asset

Base on Z score,

Z > 2.99             - Safe zone

1.8 < Z < 2.99   - Grey zone

Z < 1.8               - Distress zone 

 

 

Table 2.11 Z – score equation’s variables value for 2018 - 2022

	2022	2021	2020	2019	2018
X1	0.517	0.490	0.470	0.422	0.428
X2	0.493	0.657	0.623	0.546	0.493
X3	0.105	0.090	0.107	0.149	0.121
X4	3.00	10.339	4.699	4.094	5.123
X5	0.830	0.907	0.679	0.678	0.662
Z score	4.286	8.914	5.287	4.896	5.338

 

During last five years Z score is greater than 2.99. Therefore, JAT Holdings PLC is in the safe zone during last five years.

Conclusion

Key financial statistics for JAT Holdings PLC showed notable swings in the company's financial performance during the five-year period from 2018 to 2022. This volatility may be a sign of shifting market dynamics, changes in the business's operational plan, or other issues unique to the paint sector.

The working capital and the current ratio both exhibited variations in terms of efficiency and liquidity. The working capital of the corporation, an indicator of its short-term financial health, ranged from negative to positive. Comparably, the current ratio fluctuated above and below the crucial barrier of 1, indicating short-term liquidity. These variations demonstrate that the business had both stable financial times and possible liquidity issues.

Similar trends were seen in the quick ratio, also known as the acid test ratio, which is a more severe indicator of short-term liquidity and shows shifts in the company's capacity to pay its debts immediately with its most liquid assets.

Variations were seen in the turnover of merchandise, accounts receivable, days sales uncollected, and days sales in inventory, all of which demonstrated how well the business managed credit, collections, and inventories. A number of variables, including shifting consumer payment habits and inventory control procedures, may have an impact on these variations.

Variability in the total asset turnover indicated changes in the business's effectiveness in turning its assets into income. The debt ratio and equity ratio varied in terms of solvency ratios, indicating shifts in the capital structure and leverage of the business. The company's ability to pay interest expenses was evaluated by Times Interest Earned, which likewise showed fluctuations.

Over the course of the five years under analysis, a range of values was seen in the profitability ratios, including profit margin, return on total asset, and return on common shareholders' equity. Variations in income, expenses, and the general financial success of the organization can all have an impact on these statistics.

Price Earnings Ratio, one of the market ratios, showed changes in the expectations and mood of the market towards earnings. Over time, the dividend distribution of the corporation was reflected in Dividend Yield, which varied. Lastly, because the Z-Score test is a penetrating formula used to predict if a company would go bankrupt, it revealed variations in the organization’s probability of financial difficulty.