ratio analysis report of litro gas PLC by Nirosan theva, Formulas and forms for Financial Statement Analysis. Sri Lanka Institute of Advanced Technical Education
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ratio analysis report of litro gas PLC by Nirosan theva, Formulas and forms for Financial Statement Analysis. Sri Lanka Institute of Advanced Technical Education

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brief explanation and Ratio analysis of the Litro gas Plc with examples
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Introduction

Litro Gas

Litro Gas is the largest importer and supplier of LP Gas in Sri Lanka. We operate the country’s only import terminal and filling facility which has the capacity to cater to the LPG needs of the entire Island. The Company is the oldest gas supplier in the country and has comprehensive coverage through an island wide network.

Throughout the years the Company has invested in developing the Liquefied Petroleum Gas (LPG) market in Sri Lanka. Along with its associate company Litro Gas Terminal Lanka (Pvt) Ltd, the Company has successfully developed the infrastructure in Sri Lanka to cater to the country’s needs.

The Company is the leader in marketing and selling LPG in Sri Lanka. Sri Lanka only produces approximately 5% of its internal demand, therefore the country depends on imported LPG to bridge the growing gap between demand and the limited production by Ceylon Petroleum Corporation (CPC) refinery

With the ownership changes in November 2010, the LPG Storage terminal was re-named Litro Gas Terminal Lanka (Private) Limited. The terminal facility consists of an 8,000 mt import and storage terminal and a modern LPG road tanker fleet. The terminal facility observes the highest levels of safety and has won numerous safety awards from the Shell Group and at the National Safety Awards. In 2000, the Terminal was placed the Runner-up of the Industrial Safety Award; in 2003, it won the "All Island National Safety Award", the Terminal was recognized as the 1st Runner-up of the Industrial Safety Award in 2004 and 2006 and in 2008, it was recognized as the All Island Winner of the National Safety Award. Litro Gas also operates its’ latest addition of terminal operations in Hambanthota consists of an 3000 mt storage facility.

It’s filling plant and bridging operations will commence by approximately July 2017. Today the total storage facility of Litro Gas is 11,000 mt. Litro Gas operates an LPG cylinder filling Plant situated in same premises where terminals in kerawalapitiya at world class standards. The filling plant has been recognized in the past for its safety performance - internationally by Shell Global and locally, at the National Safety Awards.

In 1999, it received a Merit Award at the National Safety Awards. In 2001, the Filling Plant emerged as the Winner of the Western Province. At the 2003 and 2006 National Safety Awards, the filling plant was recognized as the 1st Runner-up. In 2008, it emerged as the All Island Winner of the National Safety Award. Today, filling plant has the capacity of refilling more than 125,000 cylinders per day

Balance Sheet

1

As at 31st March 2013,2014,2015 2015/2014 2013/2012 2012/2011

Rs.000’s Rs.000’s Rs.000’s

ASSETS

Non-Current Assets

Property, Plant & Equipment 93,245,455,452.00 55,995,714.00 682,182,700.00

Investment Properties 2,366,521.00 214,399,397.00 43,081,516.00

Leasehold Property - - -

Investments in Subsidiaries 468,247,916.00 628,247,909.00 743,247,902.00

Investments in other companies 14,246,349.00 18,326,346.00 6,010,876.00

1,827,117,428.00 1,622698,366.00 1,382,522,994.00

Current Assets

Inventories 1,531,204,093.00 1,92,601,348.00 1,306,369,217.00

Trade & Other Receivables 1,887,648,663.00 1,988,712,842.00 1,504,009,244.00

Cash and Bank 322,911,027.00 233,369,067.00 559,183,598.00

3,897,763,773.00 4,146,683,250.00 3,363,562,059.00

Total Assets 5,824,881,201.00 5,727,572,616.00 4,752,085,053.00

EQUITY AND LIABILITIES

Equity Attributable to Equity Holders of the Parent

Stated Capital 301,884,200.00 301,884,200.00 301,884,200.00

Capital reserve 658,339,792.00 330,855,735.00 330,855,735.00

General reserve 800,265,254.00 800,265,254.00 800,265,254.00

Retained earning 1,091,535,837.00 895,876,905.00 887,304,997.00

Total equity attributable to equity holders of the company

2,729,629,829.00 2,206,486,840.00 2,197,914,932.00

minority interest - -

Total Equity 2,729,629,829.00 2,206,486,840.00 2,197,914,932.00

- -

Non-Current Liabilities

Interest Bearing Loans & Borrowings - - -

Dfined benefit obligations 117,579,660.00 96,735,857.00 87,970,682.00

Deferred Tax Liabilities 56,237,826.00 7,748,410.00 3,110,591.00

Borrowings 200,000,000.00 300,000,000.00 400,000,000.00

Finance lease Obligations 46,313.00 540,068.00 980,695.00

367863,799.00 398024,325.00 455,061,968.00

Current Liabilities Trade and Other Payables 1,407,323,592.00 1,472,542,570.00 459,860,446.00

Income Tax Payable 89,631,262.00 32,514,020.00 50,489,742.00

Finance lease oblication 164,768.00 776,110.00 429,095.00

Borrowings 1,148,406,691.00 1,464,228,751.00 1,870,928,868.00 2,645,526,313.00 3,013,061,451.00 2,063,108,151.00

Total Equity and Liabilities 5,824,881,201.00 5,727,572,616.00 4,752,085,053.00

Income Statement

2

Year ended 31st March

2014/ 2015

2013/2014 2012/ 2013

Rs. Rs. Rs.

Revenue 4,321 ,012, 411.0 0

4,988,843,384.00 3,325, 236,5 20.00

Cost of Sales (3786 ,948, 390.0 0)

(4,792,692,708.00) (3,00 2,153, 423.0 0)

Gross Profit 535,0 64,02 1.00

189,150,676.00 319,0 83,09 7.00

Other Operating Income

46,24 5,131 .00

44,792,335.00 39,96 6,873. 00

Distribution Expenses

(179, 909,9 39.00 )

(181,312,634.00) (189, 891,2 52.00 )

Administrative Expenses

(132, 207,9 69.00 )

(97,492,545.00) (118,5 76,81 8.00)

operating profit 493,9 31,24 4.00

202,996,832.00 55,87 4,901. 00

Finance Expense (169, 491,0 40.00 )

(172,203,829.00) (204, 101,1 65.00 )

Profit Before Tax 313,9 00,20 4.00

33,894,003.00 (146, 853,2 64.00 )

Income Tax Expense (76,3 15,69

(25,322,096.00) 36,98 0,638.

3

6.00) 00 Profit for the Period

236,5 94,50 8.00

8,632,907.00 (110,9 01,62 6.00)

Ratio Analysis

Profitability ratio

There are several ratios that can be used for evaluating profitability of a business. As a group these ratios allow the analyst to evaluate the film's earning with respect to a certain levels of assets, or sales. Most commonly used profitability ratios are

1. Gross profit ratio.

2. Net profit ratio.

3. Return on investment (ROI)

4. Return on capital employed (ROCE)

5. Assets turnover.

Gross profit ratio

The ratio explains the relationship between the gross profit and the sales turnover.

It can also be useful to compere the gross profit margin across similar business although there will often be good reasons for any disparity.

Net profit ratio/ net profit margin/ operating ratio

This ratio measures the percentage of each rupee of sales that result in net profit.

The higher the rate of net return on sales, the better, and the lower the relative cost of sales and other expenses.

Return on investment (ROI)

Return on investment is probably one of the most useful measures of profitability and efficiency of a business.

Return on equity (ROE)

This ratio shows the profit attributable to the amount invested by the owners of the business. It also shows potential investors into business what they might hope to receive as a return. The stockholders. Includes share capital,share premium, distribute and non-distributable reserves.

Return on capital employed (ROCE)

4

This ratio is a slight variation of return on investment. The ratio. Indicates how well the long- term finance is being used to generate operating profit. People who are investing their money is a business are interest in the return the business is earning on that capital expressing.

Assets turn over

This ratio indicate the efficiency with which the firm is able to use its assets to generate sales revenue. It shows how many rupees in sales are produced by each rupee invested in assets.

Liquidity ratio

These ratios are used to evaluate the short term. Financial position of an entity.

The availability of cash or the ability of the business to convert its other assets quickly into cash is referred to as it liquidity is an important aspect of ratio analysis.

Because a firm that cannot meet its short term financial obligation may not be able to operate on long run.

Most widely used liquidity ratio is:

1. Current ratio.

2. Quick assets ratio or Acid ratio

Current ratio

The current ratio expresses the relationship between the firm's current assets and current liabilities.

Current assets normally include cash, marketable securities, accounts receivable and inventory.

Current liabilities consist of accounts payable, short term notes payable, short-term loans, current maturities of long term debt, accrued income taxes and other accrued expenses.

Quick assets ratio

This ratio is to overcome one of the limitations in the current ratio. That is the current ratio does not take in to account the composition of current assets and current liabilities. Generally inventory which is not necessarily being converted quickly into cash in the event of emergency, is deducted from the current assets. However, some argue that pre-paid expenses should also be excluded because they cannot be converted into cash.

Efficiency ratio (assets management/ activity ratio)

1. Assets turnover ratio

Sales: capital employed (net assets turn over)

Sales: fixed assets (fixed assets turn over)

2. Stock turn over

3. Debtor collection period

5

4. Trade debtors turn over

5. Creditors payment period

Sales: capital employed

This ratio measure of how effective the assets are being used to generate sales. If the ratios high, the organization have capability of employ profit.

Stock turnover ratio

This is measure of the number of time that stock 1/= bought and sold during a year. It indicate the efficiency of the firm in selling its product. It is calculated by cost of sales over average stock.

Debtor's collection period

This is measure of the average time taken by customers to settle their debts.

The shorter the average collection period, the better the quality of debtors, as a short collection period implies the prompt payment by debtors.

The average collection period should be compared against the firm's credit terms and policy to judge its credit and collection efficiency.

An excessively long collection period implies a very liberal and inefficient credit and collection performance.

Gearing ratio

Gearing is measure of the relationship between the amount of finance provided by external parties (Eg:- loan capital) to the total capital employed.

Interest coverage ratio

This ratio measures the ability of a firm's operation to provide protection to long-term creditor.

Investor ratio/market strength

There are set of ratio, which focus on the expectation of the investors. Expectation of the investors very to a great extent with the personal economic circumstances and overall economic outlook. The set of ratios in this category includes.

1. Earnings per share (EPS)

2. Price earnings ratio (P/E Ratio)

3. Dividend yield

4. Dividend cover

6

Ratio Analysis Summary Profitability Ratio

Type of Ratio Formula 2013/2012 2012/2011

2011/2010

Gross Profit Ratio (Gross Profit ) *100

(Net Sales Turn over)

8.7% 2.44% 1.63%

Net Profit Ratio (Net Profit) *100

(Net Sales Turn over)

8.70% 3.97% 1.63%

Return on Investment (ROI)

Net Profit Before Interest & Tax *100

Average Total Asset

11.81% 4.83% 2.20%

Return on Capital Employed (ROCE)

Net Profit Before Interest & Tax *100

Total Assets-Current Liabilities

5.69% 2.63% 1.29%

Asset Turn over Net Sales Turn over

Average Total Asset

1.8% 1.9% 1.2%

Current Ratio Current Assets

Current Liability

1.39:1 1.36:1 1.68:1

Quick Asset Ratio Current Assets - (Invtory + Pre Paid

Exp)

Current Liability

0.87:1 0.70:1 0.90:1

Sales: Capital Employed Sales Revenue

Average Net Assets

2.58/= 2.12/= 1.50/=

Sales: Fixed Assets Sales Revenue

Fixed Assets

3.12/= 3.50/= 2.49/=

Stock Turn Over Ratio Cost of Sales

Average Stock

3.11 Times

2.43Time s

2.12 Times

Stock Turn Over Period 365

Stock Turn Over Ratio

121 Days 182 Days 182 Days

Debtors collection Period Average debtors *365

Credit sales

122 Days 135 Days 136 Days

Creditors payment Period Average Creditors *365

Cost of sales

83Days 105 Days 51 Days

7

Gearing Ratio Loan Capital *100

total capital employed

6.59 % 7.19% 10.38%

Interest coverage ratio Net Profit Before Interest and Tax

Annual Interest

2.79:1 1.20:1 0.30:1

Ratio Analysis calculation

2014/2015 2013/2014 2012/2013 Net Profit Ratio

Revenue 4,321,012,411.00 4,988,843,384.00 3,325,236,520.00

Operating profit 493,931,244.00 202,996,832.00 55,874,901.00 100.00 100.00 100.00 8.7647 2.4697 1.6378

Return on Investment (ROI) Operating profit 493,931,244.00 202,996,832.00 55,874,901.00

Total Assets 5,824,881,201.00 5,727,572,616.00 4,752,085,053.00 100 100 100 11.81 4.8351 2.2082

Return on Capital Employed (ROCE) Operating profit 493,931,244.00 202,996,832.00 55,874,901.00 Total Assets 5,824,881,201.00 5,727,572,616.00 4,752,085,053.00 Current Liabilities 367863,799.00 398024,325.00 455,061,968.00 100 100 100 5.6987 2.6339 0.7898

Asset Turn over Revenue 5,553,012,411.00 5,181,843,384.00 3,495,236,520.00 Total Assets 5,724,881,201.00 5,627,572,616.00 4,752,085,053.00 Current Liabilities 2,645,526,313.00 3,013,061,451.00 2,063,108,151.00 1.803303813 1.981954965 1.299838804

Current Ratio Current Assets 3,897,763,773.00 4,146,683,250.00 3,363,562,059.00

Current Liabilities 3,897,763,773.00 4,146,683,250.00 3,363,562,059.00 1.3965 1.3661 1.6892

Quick Asset Ratio Current Assets 3,897,763,773.00 4,146,683,250.00 3,363,562,059.00 Inventories 1,531,204,093.00 1,92,601,348.00 1,306,369,217.00

8

Current Liabilities 3,897,763,773.00 4,146,683,250.00 3,363,562,059.00 0.8796 0.7066 0.9018

Sales: Capital Employed Revenue 4,321,012,411.00 4,988,843,384.00 3,325,236,520.00

Total Equity 2,729,629,829.00 2,206,486,840.00 2,197,914,932.00 2.5833 2.1263 1.5041

Sales: Fixed Assets Revenue 4,321,012,411.00 4,988,843,384.00 3,325,236,520.00 Non-Current Assets 1,827,117,428.00 1,622698,366.00 1,382,522,994.00 3.1289 3.5012 2.4998

Stock Turn Over Ratio Cost of Sales 3786,948,390.00 4,792,692,708.00 3,002,153,423.00 Inventories 1,531,204,093.00 1,92,601,348.00 1,306,369,217.00 3.1125 2.4325 2.1298

Stock Turn Over Period Days 365 365 365 Stock Turn Over Ratio 3 2 2 121.6 182.5 182.5

Debtors collection Period Revenue 4,321,012,411.00 4,988,843,384.00 3,325,236,520.00 Debtors 1,887,648,663.00 1,988,712,842.00 1,504,009,244.00 Days 365 365 365 122.8264427 135.5734118 136.3837247

Creditors payment Period Creditors 1,148,323,592.00 1,375,542,570.00 459,860,446.00 Cost of Sales 4,814,948,390.00 4,744,692,708.00 3,172,153,423.00 Days 365 365 365 83.5621 105.8178 51.8957

Gearing Ratio Loan Capital 367863,799.00 398024,325.00 455,061,968.00 Total capital employed 5,724,881,201.00 5,627,572,616.00 4,752,085,053.00 100 100 100 6.5984 7.1986 10.3892

Interest coverage ratio

9

Operating profit 493,931,244.00 202,996,832.00 55,874,901.00 Finance charges 169,491,040.00 172,203,829.00 204,101,165.00 2.7956 1.2014 0.3021

Interpretation Managing Director,

Litro Gas Company PLC,

Hambantoda.

T.Nirosan

Financial Analysts

Vavuniya.

Evaluate the operating Performance and Financial Positions of ACL cables PLC

For the year ended 2015, 2014 &2013.

Introduction

This report is to interpret the financial reports of current year of Litro Gas Company PLC

with the last 3 years’ financial report. This analysis made on historical basis. It has not been

considered to the price changes.

Profitability (operating Performance)

The last 3 years gross profit margins of the Litro Gas Company PLC are 8.76%, 2.46% and

1.637% respectively. This shows in 2014 gross profit margin is slightly decreased and the

following year it increased as considerably. The company’s sales growth is slightly increased.

The company is implemented the price policy and purchasing method at the correct time.

The net profit margin shows drastically changes from 2013 to 2015 (1.63%, 3.97%, 8.7%).

This improvement could be attributable sales growth, and it show the best cost allocation of

the company.

The return on investments of the company are drastically increased 2.2% to 11.81% in last 3

years. It shows the company is utilized and using the assets as efficiently. The return on

capital employed also shows the drasticale increasing manner. It shows the company using

10

assets in better utilization. This company is used its excess cash in investment property. And

the assets turnover ratios of the company is 1.2:1, 1.9:1and 1.8:1last 3 years. It shows the

slight changes. Last 3 years assets turnover ratios are above 1. It indicates high efficiency in

utilizing the assets.

Financial strength ratio (Liquidity)

The current assets ratios of the company are 1.39:1, 1.36:1 and 1.68:1 in last 3 years. In

comparison of 2014and 2015 the ratio is considerably decreased, in the following year it is

slightly increased but compare to 2013 it is low. Compare to industrial ratio (2:1) also the last

3 years current ratio is low.

The last 3 years quick assets ratios also is same as the current ratio. In comparison of 2013

and 2014 the ratio is slightly decreased and in 2015 it is slightly increased but compare to

2011 it is low. Compare to industrial ratio (1:1) also the last 3 years current ratio is low

(0.87:1, 0.70:1 and 0.87:1). It indicates in this stage this company is unable to meet the short

term obligation in an emergency.

Working capital

The inventory turnover period of this company is drastically decreased from 182 day to 121

days. It shows during the last 3 years the company’s sales growth is high. Company might implement the better promotion activities.

The last 3 years debtor’s collection periods are 122 days, 135 days and 136days in 2013,

2014and 2015respectively. It shows the debtor’s collection period is considerably increased.

It indicates the recovery level of the company is increasing. It should be maintain by the

company.

Gearing ratio

The gearing ratio of the company is not under control, because it has been decreasing from

10.38% to 6.59% last 3 years. It indicates the borrowed fund has not utilized well. It may

lead some adverse impact in the future. There for the action should be taken to overcome

from this situation.

11

Conclusion

This analyses made according to given ratio. The last 3 years liquidity position of Litro Gas

PLC is slightly increased. However the company should satisfied their requirements

regarding the current ratio and quick assets ratio. And the working capital management of

the company is seems to be good, because it is drastically decreased. The gearing ratio is in

high risk, because it is in reducing manner. It may lead some adverse impact in the future.

However the financial position of the company is slightly good.

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