1.0 INTRODUCTION
Financial statement analysis is the process of analyzing a
company's financial
statements for decision-making purposes.
External stakeholders use it to understand the overall health of an
organization as well as to evaluate financial performance and business value.
Internal constituents use it as a monitoring tool for managing the finances.
●
Financial statement analysis is used by internal and external
stakeholders to evaluate business performance and value.
●
Financial accounting calls for all companies to create a balance
sheet, income statement, and cash flow statement which form the basis for
financial statement analysis.
●
Horizontal, vertical, and ratio analysis are three techniques
analysts use when analyzing financial statements.
Ceylon
Cold Stores PLC now counts over 150 years in business. In that time, they have
continuously evolved their products and processes and empowered their team to
ensure that technology, industry expertise, and innovation will keep them at
the forefront of our business sector for many years. With Elephant House, the iconic beverage
and ice-cream brand, CCS has touched the lives of many a Sri Lankan for
generations. The entire range of Elephant House products, including ice creams,
popsicles, flavored milk products, fruit-based beverages, water, energy drinks,
carbonated soft drinks, and chasers, with their flavor and goodness, is an
integral part of the daily lives of millions of people at home and around the
world.
CCS operates
state-of-the-art factories both at Ranala and at Awissawella where they employ
the current technologies while adhering to the strictest standards of quality
and hygiene at every step of the production, packaging, and warehousing
process. Adopting the best manufacturing practices, a highly effective and
knowledgeable management team remains in charge of the manufacturing facilities
to ensure that it’s continually run at optimal capacity to harness operational
efficiencies and step up productivity
2.0 FINANCIAL ANALYSIS
OF CEYLON COLD PLC
2.1
Horizontal Analysis
|
Horizontal Analysis |
|
|
|
|
|
|
Year |
2017% |
2018% |
2019% |
2020% |
2021% |
|
Total revenue |
14.60 |
-2.31 |
-14.83 |
0.09 |
-9.03 |
|
cost of sales |
13.83 |
6.19 |
-13.86 |
-4.41 |
-5.30 |
|
gross profit |
15.88 |
-16.09 |
-16.83 |
9.66 |
-15.95 |
|
other operating income |
85.87 |
-43.28 |
318.05 |
29.70 |
27.75 |
|
Selling and
distribution expenses |
4.90 |
8.12 |
17.13 |
17.09 |
-3.13 |
|
Administrative
expenses |
25.88 |
11.34 |
4.87 |
3.16 |
3.71 |
|
Other operating
expenses |
30.33 |
-16.03 |
-0.57 |
-19.85 |
-42.91 |
|
Results from operating
activities |
32.82 |
-25.94 |
-29.21 |
13.27 |
-29.18 |
|
Finance cost |
-54.94 |
-86.25 |
1600.74 |
-85.84 |
846.39 |
|
Finance income |
42.09 |
-25.89 |
-54.68 |
8.89 |
-21.60 |
|
Net finance income /
(cost) |
54.14 |
-23.70 |
-65.51 |
39.48 |
-50.05 |
|
Profit before tax |
35.71 |
-26.99 |
-30.11 |
14.35 |
-30.68 |
|
Tax expense |
25.14 |
-32.91 |
-34.01 |
13.76 |
-90.17 |
|
Profit for the year |
39.29 |
-25.19 |
-29.04 |
14.50 |
-15.69 |
|
|
2018% |
2019% |
2020% |
2021% |
|
current assets |
4.32 |
-13.47 |
1.55 |
3.39 |
|
Current Liabilities |
3.60 |
-15.88 |
10.22 |
17.90 |
|
total liabilities |
8.88 |
-10.22 |
6.38 |
5.32 |
|
Sales on account |
-2.31 |
-14.83 |
0.09 |
-9.03 |
|
Account receivable |
-0.46 |
-5.60 |
-5.48 |
13.16 |
|
Average account
receivable |
9.49 |
-3.03 |
-5.54 |
3.58 |
|
cost of sales |
6.19 |
-13.86 |
-4.41 |
-5.30 |
|
Inventories |
-9.45 |
3.67 |
16.73 |
-8.27 |
|
average inventory |
12.01 |
-3.22 |
10.32 |
3.27 |
|
total assets |
8.15 |
10.20 |
1.93 |
1.69 |
|
average total assets |
56.81 |
8.87 |
7.27 |
1.85 |
|
total equity |
7.93 |
16.35 |
0.90 |
0.80 |
The
Revenues of the Company in 2017 and 2020 have increased by 14.6% and 0.09%
compared to previous years. But in 2018, 2019 and 2021 revenues have decreased
by orderly 2.31, 14.83, and 9.03. cost of the sales in 2017 and 2018 have
increased by orderly 13.83 and 6.19 and in 2019, 2020 and 2021 have decreased
by orderly 13.86, 4.41, 5.30. when it comes to the gross profit, 2017 and 2020
show a positive change when compared to last year. But in 2018, 2019, and 2021,
a reduction of the percentage can be seen. Although other operating income in
2018 has decreased by 43.28 compared to 2019, other years show a positive
change. Other operating expenses in 2018, 2019, 2020, and 2021 have decreased
by orderly 16.03, 0.57, 19.85, and 42.91.
profit before tax in 2017 and 2020 have positive change and 2018, 2019
and 2021 have negative change compared to the last years. Finally, when it
comes to the profit for the year, in 2017 and 2020, it shows an increment by
orderly 39.29 and 14,50. But in 2018, 2019, and 2021 it shows decrement by
orderly 25.19, 29.04 and 15.69 compared to the previous years. The below graph
shows how the horizontal analysis has happened over last 5 years.
Figure 1 - Horizontal Analysis
2.2
Vertical Analysis
|
Vertical Analysis |
|
|
|
|
|
Year |
2018% |
2019% |
2020% |
2021% |
|
current assets |
4.32 |
-13.47 |
1.55 |
3.39 |
|
Current Liabilities |
3.60 |
-15.88 |
10.22 |
17.90 |
|
total liabilities |
8.88 |
-10.22 |
6.38 |
5.32 |
|
Sales on account |
-2.31 |
-14.83 |
0.09 |
-9.03 |
|
Account receivable |
-0.46 |
-5.60 |
-5.48 |
13.16 |
|
Average account
receivable |
9.49 |
-3.03 |
-5.54 |
3.58 |
|
cost of sales |
6.19 |
-13.86 |
-4.41 |
-5.30 |
|
Inventories |
-9.45 |
3.67 |
16.73 |
-8.27 |
|
average inventory |
12.01 |
-3.22 |
10.32 |
3.27 |
|
total assets |
8.15 |
10.20 |
1.93 |
1.69 |
|
average total assets |
56.81 |
8.87 |
7.27 |
1.85 |
|
total equity |
7.93 |
16.35 |
0.90 |
0.80 |
|
|
|
|
|
|
When the last 4 years are
considered, in 2018, 2020 and 2021 current assets show a positive change by
orderly 4.32%, 1.55%, and 3.39%. but in 2019, it has decreased by 13.47%.
current liabilities in 2018, 2020 and 2021 have increased by orderly 3.6%,10.22%
and 17.9%. as well as total liabilities
also shows the same increment and decrement compared to the previous years.
Sales on account in 2018, 2019, and
2021 have negative percentage values ( -2.31, -14.83, and -9.03) compared to
the previous years. But in 2020 sales on the account has increased by an
orderly 0.09%. Account receivable in 2018, 2019, and 2020 has decreased by
orderly 0.46, 5.06 and 5.48. but in 2021 it shows a positive value and it is
13.16%. cost of sales in 2018 has increased by 6.19% compared to the previous
year. Average inventory in 2019 is also has increased compared to the previous
year. In all 4 years, total assets show positive increment in the company, as
well as the total equity also shows positive increment.
2.3 Ratio
Analysis
2.3.1 Liquidity and
Efficiency
Table 4- Liquidity and Efficiency
|
|
2017 |
2018 |
2019 |
2020 |
2021 |
|
current ratio |
1.57 |
1.58 |
1.62 |
1.50 |
1.31 |
|
Acid test ratio |
1.04 |
1.12 |
1.05 |
0.89 |
0.84 |
|
Account receivable
turnoverr |
8.91 |
7.95 |
6.98 |
7.40 |
6.50 |
|
Merchandise turnover |
8.52 |
8.08 |
7.19 |
6.23 |
5.71 |
|
Total Asset Turnover |
0.96 |
0.60 |
0.47 |
0.43 |
0.39 |
- Current ratio = current assets / current liabilities
All 5 years have enough money
to run the business. It shows 3:1 ratio and its better ratio for the company.
- Acid test ratio = (Current
asset - inventory) / Current Liabilities
If the acid test ratio is
less than 1 is not good and if its more than 1 it shows a good figure. According to the above calculations. In 2020
and 2021 figures are less than 1 and 2017, 2018, and 2019 figures are more than
1.
- Account receivable turn over = sales on account / average account
receivable
This ratio measures how many
times a company covert it is receivable in to cash each year. According to the
above data, from 2017 to 2021, the company has converted its receivables in to
cash orderly 8.52, 8.08,7.19,6.23, and 5.71 times
- Merchandise turn over = cost of sales / Average inventory
This shows how many times the
company has replaced the stocks. According to the above calculations, in 2017 –
8.52 times, in 2018 – 8.08times, in 2019 – 7.19 times, in 2020 – 6.23 times,
and in 2021 5.71 times, stocks have been replaced.
- Total assets turn over = Sales / Total Assets
This ratio shows the utilization of the total asset. If we look at
the calculations, there is a gradual slight decrease in this ratio. This shows
the total assets are properly not being utilized for the purpose of earning
interest. This decrease shows some degree in- the efficiency of the
organization.
Figure 3- Liquidity and Efficiency
ratios
2.3.2 Solvency Ratios
|
|
2017 |
2018 |
2019 |
2020 |
2021 |
|
Debt ratio |
22.98 |
23.14 |
18.85 |
19.67 |
20.38 |
|
Equity ratio |
77.02 |
76.86 |
81.15 |
80.33 |
79.62 |
Interpretation
- Debt ratio = Total
liabilities / total assets *100
This ratio shows that how much portion of the assets
are covered by the liabilities of the organization.
- Equity
ratio = Equity / total assets *100
This ratio is showing increasing trend except in
2018 in which it was at its lowest value because increase in equity is lower
increase than assets.
2.3.3 Profitability
ratio
|
|
2017 |
2018 |
2019 |
2020 |
2021 |
|
profit margin |
22.74 |
17.41 |
14.51 |
16.60 |
15.38 |
|
Gross Margin |
1.62 |
1.67 |
1.68 |
1.65 |
1.68 |
|
Return on Total Assets |
21.35 |
14.77 |
9.51 |
10.68 |
8.86 |
Interpretation
- Profit margin = Profit after tax/net sale x 100
This ratio interprets the net
profit as a percentage of net sales. In 2017, the ratio was pretty good but in
2018, there was an enormous decline, which is Alarming for the organization and
it should take action for its improvement. Higher ratio results in higher
market position of the organization.
- Gross margin = Gross profit / Net Sales * 100
The gross profit margin ratio
shows the gross profit as a % of the net sale. there was nominal change. This
ratio is favourable for the company, there may be two reasons for this
increase, one is to increase interest-earning or lower the interest expenses
- Return on total assets ( in%) = Net income/ total
asset x 100
This ratio shows the
relationship between net profit and total assets. It is the main objective of
an organization to maximize its return on assets.
.
Figure 5 - Profitability ratio
2.3.4 Market Ratios
|
Year |
2017 |
2018 |
2019 |
2020 |
2021 |
|
Price Earnings ratio |
21.7 |
35.17 |
41.7 |
29.15 |
25.27 |
|
Dividend Yield |
3.95 |
1.58 |
2.61 |
3.05 |
2.73 |
- Price-earnings ratio = Market
price per share / Earning per share
The
price-to-earnings ratio (P/E ratio) is the ratio for valuing a company
that measures its current share price relative to its earnings per share (EPS).
- Dividend Yield = Annual
dividend per share/ Market price per share * 100
The dividend
yield is a financial ratio that shows how much a company pays out in
dividends each year relative to its stock price
2.4 Company
situation from 2017 to 2021 based on the Z Score value
Zones of Discrimination:
Z = 1.2 T1+
1.4T2+3.3T3+0.6T4+0.999T5
Z > 2.9 -
“Safe” Zone
1.23 < Z
< 2.9 - “Grey” Zone
Z < 1.23
- “Distress” Zone
During 2017
and 2018 company is in the “Grey Zone” and in 2019 and 2020 company is in the
“distress zone”. In the last year, it showed a value of 2.40 which means the
company moving towards the “Safe Zone” but still in “Grey Zone”.
|
|
2017 |
2018 |
2019 |
2020 |
2021 |
|
working
capital |
1,278,768 |
1,349,957 |
1,224,225 |
1,073,191 |
795,666 |
|
total
assets |
14,878,408 |
16,090,503 |
37,568,000 |
48,236,000 |
54,975,000 |
|
T1 |
0.09 |
0.08 |
0.03 |
0.02 |
0.01 |
|
Retained
Earning |
9,477,355 |
10,440,113 |
10,705,248 |
10,726,025 |
10,703,419 |
|
total
assets |
14,878,408 |
16,090,503 |
37,568,000 |
48,236,000 |
54,975,000 |
|
T2 |
0.64 |
0.65 |
0.28 |
0.22 |
0.19 |
|
Earning
before Tax |
5,089,748 |
3,750,358 |
2,042,648 |
3,067,185 |
2,375,000 |
|
total
assets |
14,878,408 |
16,090,503 |
37,568,000 |
48,236,000 |
54,975,000 |
|
T3 |
0.34 |
0.23 |
0.05 |
0.06 |
0.04 |
|
Market
value of Equity |
2185645 |
1790750 |
464830 |
878355 |
8909677.5 |
|
Total
liabilities |
2,251,257 |
2,332,412 |
1,962,112 |
2,162,612 |
2,549,691 |
|
T4 |
0.97 |
0.77 |
0.24 |
0.41 |
3.49 |
|
Sales |
-8,645,685 |
-9,180,421 |
-7,908,379 |
-7,559,793 |
-7,158,838 |
|
total
assets |
14,878,408 |
16,090,503 |
37,568,000 |
48,236,000 |
54,975,000 |
|
T5 |
-0.58 |
-0.57 |
-0.21 |
-0.16 |
-0.13 |
|
Z |
2.13 |
1.67 |
0.55 |
0.63 |
2.40 |
3.0 CONCLUSION
According to the Ceylon Cold Store
PLC annual report figures, in 2020 and 2021, there had been a significant decrement of the revenue than
the previous year. This happens due to the COVID-19
pandemic situation of the country. Because of recovering the situation, the Z
value of 2021 has increased and we can see it is moving towards “safe zone”.
4.0 REFERENCES
●
ccs-annual-report-202021. (n.d.).
●
STAYING FOCUSED STAYING AHEAD Ceylon Cold Stores
PLC-Annual Report 2017/18.
(n.d.).
●
Relentless. (n.d.). https://www.elephanthouse.lk/downloads.html
5.0 APPENDIX
|
|
2016 |
2017 |
2018 |
2019 |
2020 |
2021 |
|
Total revenue |
12,190,925 |
13,971,391 |
13,649,255 |
11,625,320 |
11,635,796 |
10,584,847 |
|
cost of sales |
-7,595,030 |
-8,645,685 |
-9,180,421 |
-7,908,379 |
-7,559,793 |
-7,158,838 |
|
gross profit |
4,595,895 |
5,325,706 |
4,468,834 |
3,716,941 |
4,076,003 |
3,426,009 |
|
other operating income |
62,206 |
115,625 |
65,585 |
274,176 |
355,610 |
454,299 |
|
Selling and
distribution expenses |
-1,242,054 |
-1,302,891 |
-1,408,629 |
-1,649,912 |
-1,931,915 |
-1,871,380 |
|
Administrative
expenses |
-459,707 |
-578,693 |
-644,336 |
-675,745 |
-697,072 |
-722,939 |
|
Other operating
expenses |
-298,541 |
-389,100 |
-326,744 |
-324,890 |
-260,401 |
-148,675 |
|
Results from operating
activities |
2,948,822 |
3,916,707 |
2,900,770 |
2,053,472 |
2,325,911 |
1,647,314 |
|
Finance cost |
-10,860 |
-4,893 |
-673 |
-11,446 |
-1,621 |
-15,341 |
|
Finance income |
98,277 |
139,638 |
103,488 |
46,903 |
51,075 |
40,045 |
|
Net finance income /
(cost) |
87,417 |
134,745 |
102,815 |
35,457 |
49,454 |
24,704 |
|
Profit before tax |
3,053,186 |
4,143,457 |
3,025,144 |
2,114,362 |
2,417,753 |
1,675,891 |
|
Tax expense |
-772,173 |
-966,316 |
-648,274 |
-427,808 |
-486,694 |
-47,851 |
|
Profit for the year |
2,281,013 |
3,177,141 |
2,376,870 |
1,686,554 |
1,931,059 |
1,628,040 |
|
|
2017 |
2018 |
2019 |
2020 |
2021 |
|
current assets |
3,530,025 |
3,682,369 |
3,186,337 |
3,235,803 |
3,345,357 |
|
Current Liabilities |
2,251,257 |
2,332,412 |
1,962,112 |
2,162,612 |
2,549,691 |
|
total liabilities |
3419746 |
3,723,386 |
3,342,830 |
3,556,191 |
3745445 |
|
Pre-paid expenses |
|
|
|
|
|
|
Sales on account |
13,971,391 |
13,649,255 |
11,625,320 |
11,635,796 |
10,584,847 |
|
Account receivable |
1,720,333 |
1,712,353 |
1,616,420 |
1,527,884 |
1,728,984 |
|
Average account
receivable |
1,567,534 |
1,716,343 |
1,664,387 |
1,572,152 |
1,628,434 |
|
cost of sales |
-8,645,685 |
-9,180,421 |
-7,908,379 |
-7,559,793 |
-7,158,838 |
|
Inventories |
1,192,696 |
1,079,965 |
1,119,560 |
1,306,877 |
1,198,847 |
|
average inventory |
1014499.5 |
1136330.5 |
1099762.5 |
1213218.5 |
1252862 |
|
total assets |
14,878,408 |
16,090,503 |
17,732,291 |
18,075,372 |
18,381,421 |
|
average total assets |
14618920.5 |
22923659.5 |
24956648.5 |
26769977 |
27266082.5 |
|
total equity |
11,458,662 |
12,367,117 |
14,389,461 |
14,519,181 |
14,635,976 |
