Group Members:

V.S.R.S Silva,
A.G.U.P Herath,
P.L.Hewapathirana,
H.M.C.K Herath,
H.P.C.C Jayasinghe,
K.A.L Migara.

Rukmali Silva

Accounting for services-MSM5231 “Comprehensive financial analysis of se

Assignment Group No. 02
 1

Financial Performance Analysis Report:

Asiri Hospital Holding PLC and the Lanka Hospitals Corporation PLC

Executive Summary
This report provides a comparative financial analysis of Lanka Hospitals Corporation Ltd and
Asiri Hospital Holdings for the year 2022 & 2023. By examining key metrics, we gain insights
into their operational efficiency, profitability, and financial health.

Key Findings
1. Sales Performance:

o Lanka Hospitals: Achieved total sales of Rs. 9.7 billion, reflecting strong market
demand.
o Asiri Hospital: Recorded total sales of Rs. 12.4 billion, demonstrating strong
revenue growth and a larger market share.

2. Gross Profit Margins:

o Asiri Hospital shows a higher gross profit margin (50.7%) compared to Lanka
Hospitals (42.5%). This indicates Asiri is more effective in converting sales into
gross profit, suggesting better control over direct costs.

3. Cost Management:

o Lanka Hospitals has higher selling and other costs (11.6%) than Asiri (3.1%),
which may impact net profitability. Both hospitals maintain similar administration
costs, highlighting effective management in this area.

4. Net Finance Income:

o Lanka Hospital benefits from net finance income (2.5%)compared to Asiri

Hospitals which indicates a significantly higher finance cost(21.3%). This
suggests that Lanka is effectively leveraging its investments.

5. Profitability:

o Lanka Hospitals has a stronger net profit before tax (11.6%) and after tax
(8.2%), indicating better overall profitability despite higher operating costs. In
contrast, Asiri Hospital shows a net profit after tax of 3.5%, which highlights the
need for improved cost management.
 2

6. Overall Financial Health:

o Lanka Hospitals demonstrates a more stable financial position, managing to

maintain higher profitability ratios. Asiri Hospital, while strong in revenue
generation and gross margins, must focus on controlling operating expenses to
enhance its profitability.

Company Background

Lanka Hospitals Corporation Ltd

Lanka Hospitals Corporation Ltd (LHC) started operating in Sri Lanka in 2002 as part of the
Apollo Hospitals group from India. It focuses on providing high-quality medical care and has a
wide network, including eight mini labs, over 60 collection centers, more than 1,000 locations
for lab tests, and 26 pharmacies.

The Company’s parent undertaking is Softlogic Holdings PLC which is incorporated and
domiciled in Sri Lanka and listed on the Colombo Stock Exchange(CSE)

In 2023, LHC made a profit of Rs. 1.3 billion, even though the economy faced difficulties. Their
finances improved, with less debt and better cash flow, but profits were affected by changes in
currency exchange rates. The company planned to optimize its resources while waiting for a
government stake sale to happen. LHC also maintained important international accreditations,
showing their commitment to high healthcare standards.

Asiri Hospital Holdings PLC

Asiri Hospital Holdings PLC, established in 1986, is the largest private healthcare provider in Sri
Lanka. It runs seven accredited hospitals and the biggest private lab service in the country. The
company is listed on the Colombo Stock Exchange and is known for its focus on quality care and
good governance.

For the year ending March 31, 2024, Asiri Health released its financial statements, highlighting
its strong performance despite receiving a qualified opinion about some transactions. The
organization values ethical practices and aims to continuously improve its services while serving
the interests of shareholders and the community.

Both hospitals play vital roles in Sri Lanka’s healthcare system, offering reliable medical
services and striving for excellence in patient care.
 3

Purpose of Analysis

The purpose of this analysis is to evaluate the financial health and operational efficiency of both
hospitals. By comparing financial ratios and metrics against industry benchmarks, this report
aims to provide actionable insights for improving financial performance and informing strategic
decisions.

Methodology

This financial analysis evaluates the performance of Lanka Hospitals Corporation Ltd and Asiri
Hospital Holdings using several tools and approaches, focusing on key financial metrics and
trends.

Data Sources

The analysis is based on consolidated financial reports obtained from the annual reports
published by both organizations.

Data for Lanka Hospitals covers the year ended December 31, 2023, while Asiri Hospitals data is
for the year ended March 31, 2024.

The financial statements analyzed include the Statement of Financial Position, Statement of
Profit or Loss, Statement of Comprehensive Income, Statement of Changes in Equity, and
Statement of Cash Flows. These documents adhere to Sri Lanka Accounting Standards.

Analysis Techniques

1. Ratio Analysis:
o Profitability Ratios: Assesses how effectively the hospitals generate profits. Key
metrics include:
 Gross Profit Margin
 Net Profit Margin
 Return on Capital Employed (ROCE)
 Return on Equity (ROE)
o Liquidity Ratios: Evaluates the hospitals’ ability to meet short-term obligations.
Key metrics include:
 Current Ratio
 Quick Ratio
o Solvency Ratios: Measures long-term financial stability. Key metrics include:
 Debt-to-Equity Ratio
 Debt-to-Assets Ratio
o Efficiency Ratios: Gauges how well resources are managed. Key metrics include:
 Asset Turnover Ratio
 4

2. Trend Analysis: Examines financial performance over time to identify patterns and
changes.
3. Common Size Analysis: Converts financial statements into percentage terms, allowing
for easy comparison across companies and time periods.

Discussion & Findings

The Lanka Hospitals Corporation PLC

Below stated Financial statements were audited by Auditors General Department

(Rs.Mn)
I. Business Performance 31.12.2022 31.12.2023
Sales Turnover 7,957 9,696
Gross Profit 3,221 4,128
Operating Profit 617 882
Finance income/Cost 2,626 238
Net Profit before Tax 3,243 1,121
Net profit after Tax 2,678 800
Sales Growth % - 21.86
II.Asset / Liability Structure
Fixed Assets 5,712 5,973
Current Assets 7,514 7,693
Total Assets 13,227 13,666
Current Liabilities 1,738 2,085
Long Term Liabilities 1,425 1,436
Total Liabilities 3,164 3,522
Net Worth 10,063 10,144
III. Ratios
Profitability Ratios
GP Ratio % 40.5 42.5
NP Ratio % 33.6 8.2
ROCE % 28.3 9.7
ROA % 20.2 5.9
Liquidity Ratios
Current Ratio 4.32 3.69
Acid Ratio 3.90 3.41
Solvency Ratios
Debt- Equity Ratio 0.31 0.35
Debt-Asset Ratio 0.24 0.26
Efficiency Ratio
Asset Turnover Ratio 0.60 0.71
 5

1. Ratio Analysis:

A. Profitability Ratio

The Gross Profit Margin has increased slightly from 40.5% to 42.6%, which suggests that the
company is managing its pricing strategy more effectively. This is a positive sign as it indicates
that the company is generating more profit from each unit of sales. An improving gross profit
margin typically reflects better control over direct costs.

The Net Profit Margin has drastically dropped from 33.7% in 2022/23 to just 8.2% in 2023/24.
This significant decline indicates that while the company still retains a portion of sales as profit,
its overall profitability has suffered. The major reason for this drop is higher operating costs
(e.g., administration and selling expenses)

There is a sharp decrease in ROA from 22.2% to 5.9%. The ROA measures how well the
company is generating profit from its average assets. Sharp decrease in ROA could be due to a
decline in net income, likely a result of lower investment income in the current economic
environment. The company have benefited from high interest income during the economic
downturn in year 2022/23, but that situation has now changed. Going forward, the company may
need to reassess its reliance on investment returns and focus more on its core operations to
ensure profitability remains strong in a more normalized economic environment.

Further, ROCE has decreased from 28.3% to 9.7% due to the same reason of lowering the net
income.To address this, the company may need to review its capital allocation, operational
efficiency, and investment strategies to restore profitability and improve capital efficiency.

B. Liquidity Ratios

The Current Ratio, which measures the company's ability to cover short-term liabilities with its
short-term assets, has decreased from 4.32 to 3.69. While still above the commonly accepted
benchmark of 2:1, this decline indicates that the company's liquidity position has weakened
slightly. The company remains in a strong position to meet short-term obligations, but the drop
in the ratio is due to increase of current liabilities in year2023

The Quick Ratio has also decreased, from 3.90 to 3.41. The quick ratio is a more firm measure
of liquidity as it excludes inventory from current assets. A decline in this ratio still indicates a
decrease in the company’s ability to cover its immediate liabilities without relying on inventory,
though the ratio remains solid. A value above 1 suggests that the company can comfortably meet
its short-term obligations without relying on inventory sales, but the decline points to a decrease
in the company's available liquid assets.
 6

C. Solvency Ratios

The Debt-to-Equity Ratio remains unchanged at 0.3, which is relatively low. This indicates that
the company has a conservative capital structure, relying more on equity than on debt for
financing its operations. A low debt-to-equity ratio is generally positive, as it reduces financial
risk, especially in case of downturns. The consistency in this ratio shows stability in the
company’s financing strategy

The Debt-to-Assets Ratio has slightly increased from 0.24 to 0.26. This means that 24% of the
company’s assets were financed through debt in 2022/23, and that proportion has increased to
26% in 2023/24. While still within acceptable limits, this rise suggests the company has slightly
increased its reliance on debt to finance its assets. It's not a cause for alarm yet, but it’s
something to monitor as increased leverage can lead to higher financial risk in the future.

D. Efficiency Ratios

Asset Turnover ratio: The increase in asset turnover ratio from 0.6 to 0.71 is a positive sign,
indicating that the company has become more efficient at using its assets to generate sales.

Debtors/Creditors turnover ratio : Not all credit purchases/sales are paid/purchase on the same
terms, so some might have longer payment periods (e.g., 60 or 90 days), while others are paid
quickly. Without information about the specific payment terms or the proportion of credit vs.
cash purchases, the creditors/debtors turnover ratio would be less accurate.Since it hasn’t been
analyzed under ratio analysis

2. Trend Analysis:

31.12.2022 31.12.2023 Trend Overview

A sharp decline in net profit margin
Profitability Net Profit from 33.6% to 8.2%, signaling a
33.6% 8.2%
Decline Margin significant drop in overall profitability
despite improvements in gross profit.
An increase in gross profit margin,
Gross indicating better cost control or
Improved
Profit 40.50% 42.5% improved pricing strategies, leading to
Efficiency
Margin higher profitability from core
operations.
Return
A decrease in ROCE from 28.3% to
Decreasing on
9.7% would suggest that the company
Capital Capital 28.3% 9.7%
is less efficient in utilizing its capital to
Efficiency Employed
generate profits.
(ROCE)
Lower Return 20.2% 5.90% A sharp decline in ROA from 20.2% to
 7

5.9%, reflecting a significant drop in

Shareholder on Asset
returns to Assets due to lower net
Returns (ROA)
profits.
Slight decrease in the current ratio,
Liquidity Current though still healthy, indicating a slight
4.32 3.69
Easing Ratio reduction in the company's liquidity
buffer to cover short-term liabilities.
Decrease in quick ratio, showing a
Reduced Quick slight reduction in the company's ability
3.90 3.41
Liquid Assets Ratio to cover short-term obligations with
liquid assets, excluding inventory.
The debt-to-equity ratio remains
Stable Debt-to-
stable, indicating that the company has
Capital Equity 0.31 0.35
maintained a low level of debt
Structure Ratio
financing, minimizing financial risk.
A slight increase in the debt-to-assets
Slight Debt-to- ratio, showing a marginal rise in the
Increase in Assets 0.24 0.26 company’s financial leverage, though
Leverage Ratio still relatively low and not a major
concern.
Increase in asset turnover, signaling
Asset Asset
improved efficiency in using assets to
Utilization Turnover 0.6 0.71
generate sales, reflecting better resource
Improvement Ratio
management.

Positive trends: The company is getting better at using its assets to generate sales and is more
efficient in its core operations and has a higher sales growth over the years, leading to improved
gross profitability.

Negative trends: However, it is facing challenges with overall profitability (lower net profit and
ROA) and liquidity (slightly less cash available to meet short-term needs). The company should
focus on improving net profit and managing costs to ensure long-term stability.

Asiri Hospitals Holdings PLC

 8

Below stated Financial statements were audited by EY Chartered Accountants

(Rs.Mn)
I. Business Performance 31.03.2022 31.03.2023
Sales Turnover 10,477 12,376
Gross Profit 3,221 4,128
Operating Profit 5,332 6,259
Finance income/Cost 2,955 3,217
Net Profit before Tax 3,721 2,641
Net profit after Tax -766 576
Sales Growth % - 18.13
II.Asset / Liability Structure
Fixed Assets 28,396 27,843
Current Assets 2,282 2,735
Total Assets 30,678 30,578
Current Liabilities 13,351 9,460
Long Term Liabilities 7,656 11,218
Total Liabilities 21,007 20,678
Net Worth 9,671 9,900
III. Ratios
Profitability Ratios
GP Ratio % 50.9% 50.7%
NP Ratio % -9.4% 3.5%
ROCE % 17.0% 15.2%
ROA % -3.19% 1.41%
Liquidity Ratios
Current Ratio 0.17 0.28
Acid Ratio 0.13 0.22
Solvency Ratios
Debt- Equity Ratio 1.38 0.95
Debt-Asset Ratio 0.43 0.30
Efficiency Ratio
Asset Turnover Ratio 0.34 0.4

1. Ratio Analysis

A. Profitability:
o Gross Profit Margin remained stable, which is positive.
 9

o Net Profit Margin improved significantly, going from a loss in 2022/23 to a

positive margin in 2023/24, reflecting a recovery in profitability.
o The drop in ROCE from 17% to 15.2% shows the company is less efficient at
using its capital to make profits, while the improvement in ROA from -3.19% to
1.41% indicates a recovery in using assets more effectively to generate profit.
B. Liquidity:
o Both the Current Ratio and Quick Ratio improved, but they remain low (below
1), indicating that the company is still struggling to meet short-term obligations
with its liquid assets. Liquidity should be a key area of focus.
C. Solvency:
o The Debt-to-Equity Ratio and Debt-to-Assets Ratio have increased, Both ratios
indicate the company has reduced its financial leverage and is relying less on debt
to fund its operations, which is a positive sign of improving financial health and
lower financial risk
D. Efficiency:
o The Asset Turnover Ratio improved, suggesting that the company is becoming
more efficient in utilizing its assets to generate sales. This is a positive sign of
operational improvements.

2. Trend Analysis:

Ratio 2022/23 2023/24 Trend Analysis

The gross profit margin has
decreased slightly (50.9% to 50.7%),
Gross Profit Slight
50.9% 50.7% indicating a small reduction in the
Margin Decrease
profitability from sales, but still
remains stable overall.
A major improvement from a
negative margin of -9.4% to a
Significant positive 3.5%, reflecting a recovery
Net Profit Margin -9.4% 3.5%
Improvement in profitability. This indicates that
the company has managed to control
costs or increase efficiency.
ROCE has decreased slightly from
17.0% to 15.2%. This suggests that
Return on Capital
Slight the company is earning slightly less
Employed 17% 15.2%
Decrease return on its capital, but the change
(ROCE)
is minimal, indicating relatively
stable returns on invested capital.

ROE improved dramatically from

Return on Significant negative to positive , showing the
-3.19% 1.41%
Asset(ROA) Improvement company is now generating positive
returns over its assets.

Current Ratio 0.17 0.28 Improvement The current ratio improved from
 10

0.17 to 0.29, indicating a slight

improvement in liquidity, meaning
the company is in a somewhat better
position to meet its short-term
obligations. However, it still remains
below the ideal threshold of 1.0.
The quick ratio also improved from
0.13 to 0.22, following the same
trend as the current ratio. While
there is improvement, the quick ratio
Quick Ratio 0.13 0.22 Improvement
still remains low, suggesting limited
ability to meet short-term
obligations without selling
inventory.
The debt-to-equity ratio decreased
slightly from 1.38 to 0.95. Although
Debt-to-Equity Slight
1.38 0.95 the company is still highly
Ratio Improvement
leveraged, the reduction indicates a
marginal decrease in financial risk.
The debt-to-assets ratio remained
unchanged , indicating that the
proportion of debt in relation to total
Debt-to-Assets
0.43 0.30 No Change assets has remained constant. The
Ratio
company continues to use a
significant amount of debt to finance
its assets.
The asset turnover ratio increased
from 0.34 to 0.40, indicating
improved efficiency in using assets
Asset Turnover
0.34 0.4 Improvement to generate sales. This suggests that
Ratio
the company has become slightly
more effective in managing its
assets.

The company has shown overall positive trends, particularly in profitability and efficiency, with
net profit margin, ROA, and asset turnover improving significantly. However, liquidity
remains a concern with both the current ratio and quick ratio still below 1.0. The company’s
reliance on debt remains high, although there has been a slight reduction in leverage as indicated
by the improvement in the debt-to-equity ratio.

3.Common Size Analysis

Common Size Analysis simplifies financial statement data, making it easier to compare a
company’s performance over time or against industry peers.

It provides a clear picture of how resources are being used, how costs are structured, and how
much profit is being generated relative to revenue or assets.
 11

Asiri 31.3.2024 Lanka Hospital

Item
(%) 31.12.2023 (%)
Income Statement Sales Turnover 100% 100%
COS 49.50% 57.50%
Gross Profit 50.50% 42.60%
Operating Profit 26.00% 9.10%
Finance Cost/Income 21.30% 2.50%
Net Profit 4.70% 11.50%
Balance Sheet Total Assets 100% 100%
Fixed Assets 91.00% 43.70%
Current Assets 8.90% 56.20%
Current Liabilities 30.90% 15.20%
Long-Term Liabilities 36.70% 10.50%
Total Liabilities 67.60% 25.80%
Net Worth 32.40% 74.20%

Key Observations:

1. Income Statement:
o Asiri has a higher Gross Profit margin (50.5%) compared to Lanka Hospital
(42.6%).
o Asiri's Net Profit margin (4.7%) is lower than Lanka Hospital's (11.5%).
o Asiri incurs higher Finance Costs (21.3%) than Lanka Hospital's Finance
Income (2.5%).

2. Balance Sheet:
o Asiri relies heavily on Fixed Assets (91.0%) compared to Lanka Hospital
(43.7%).
o Lanka Hospital has a larger portion of its assets in Current Assets (56.2%),
while Asiri has very little in Current Assets (8.9%).
o Lanka Hospital has a much higher Net Worth (74.2%) relative to Total Assets
than Asiri (32.4%).

Recommendations:

 Asiri Hospital:
 12

Asiri should work on reducing its costs, particularly the Cost of Goods Sold (COGS), to
improve profit margins. It would also be wise for the hospital to reduce its reliance on
debt to lower financial risk and improve long-term stability.

 Lanka Hospital:

Lanka has a solid financial base with strong equity and good cost control. It could benefit
from expanding its market share or exploring growth opportunities since it has more
flexibility in financing and lower debt levels. This could drive further profitability and
success

Conclusion

The common-size analysis shows clear differences in how the two hospitals manage their
finances:

 Lanka Hospital is in a stronger financial position, with better profitability, lower

debt, and more efficient use of assets. It relies more on equity financing, which makes it
less risky and more stable.
 Asiri Hospital, while performing well in some areas, faces higher financial risk because
it depends more on debt and has large investments in fixed assets. This could pose
problems if the company faces any financial or operational difficulties in the future.

In summary, Lanka Hospital appears to be the more financially stable and efficient company,
while Asiri Hospital needs to focus on improving profitability and reducing debt to strengthen
its financial health.

Annexure I-Ratio Analysis

Annexure II-Common size analysis calculations

Annexure III-Financial statement of Asiri Hospital Holdings PLC

Annexure IV- Financial statement of The Lanka Hospitals Corporation PLC

Annexure I

 Ratio Analysis

A. Profitability Ratios
 13

Gross Profit Margin:

What it is: Shows how much money is left from sales after covering the cost of providing
services.
Formula: Gross Profit Margin = Gross Profit / Total Sales × 100

Lanka Hospital

 2022: 3,221/7,957×100≈40.5%
 2023: 4,128/9,696×100≈42.5%

Asiri Hospital Lanka Hospital

31.03.2023 50.89% 31.12.2022 40.5%
31.03.2024 50.57% 31.12.2023 42.5%

B. Net Profit Margin

What it is: Indicates how much profit is left after all expenses, including taxes.
Formula: Net Profit Margin=Net Profit/Total Sales×100

Lanka Hospital

 2022:2,678/7,957×100≈33.6%
 2023:800/9,696×100≈8.2%
Asiri Hospital Lanka Hospital
31.03.2023 -9.37% 31.12.2022 33.6%
31.03.2024 3.51% 31.12.2023 8.2%

C. Return on Capital Employed (ROCE)

What it is: This ratio measures the profitability and efficiency of capital use. It shows how much
profit is generated for every rupee of capital employed (equity plus debt).
Capital Employed: Total Assets - Current Liabilities (or can also be Total Equity + Non-
Current Liabilities).
How to interpret it: A higher percentage indicates effective use of capital to generate profits.
Formula: ROCE=Net Profit before Interest & Tax/Total Assets−Current Liabilities×100
Lanka Hospital

 2022:3,243/(13,227-1,738)×100≈28.3%
 14

 2023:1,121/(13,666-2,085)×100≈9.7%
Asiri Hospital Lanka Hospital

31.03.2023 17.0% 31.12.2022 28.3%

31.03.2024 15.2% 31.12.2023 9.7%

D. Return on Total Assets (ROA)

What it is: This ratio indicates how effectively the hospital uses its assets to generate profit.
Formula: ROA=Net Profit After Tax/Total Assets×100
How to interpret it: A higher percentage means the hospital is better at using its total resources
to earn profit.
Lanka Hospital

 2022: 2,678/13,227≈20.2
 2023: 800/13,666≈5.9

Asiri Hospital Lanka Hospital

31.03.2023 -3.19% 31.12.2022 20.2%
31.03.2024 1.41% 31.12.2023 5.9%

2. Liquidity Ratios

A. Current Ratio
 What it is: Compares current assets (like cash and receivables) to current liabilities (what
they owe soon).
Formula: Current Ratio= Current Assets/ Current Liabilities
Lanka Hospital

 2022: 7,514/1,738≈4.3
 2023: 7,693/2,085≈3.6

Asiri Hospital Lanka Hospital

31.03.2023 0.17 31.12.2022 4.32
31.03.2024 0.28 31.12.2023 3.69
 15

B. Quick Ratio
What it is: Similar to the current ratio but excludes inventory, focusing on the most liquid assets.
Formula: Acid Test Ratio= (Current Assets−Stocks)/ Current Liabilities

Lanka Hospital

 2022: (7,514−716)/1,738≈3.9
 2023: (7,693−580)/2,085≈3.4

Asiri Hospital Lanka Hospital

31.03.2023 0.13 31.12.2022 3.90
31.03.2024 0.22 31.12.2023 3.41

3. Solvency Ratios

A. Debt to Equity Ratio

 What it is: Compares total liabilities to equity, showing how much debt the hospital has
compared to its own money.
Formula: Debt to Equity Ratio= Total Liabilities/ Total Equity
Lanka Hospital

 2022: 3,164/10,063≈0.31
 2023: 3,522/10,144≈0.35

Asiri Hospital Lanka Hospital

31.03.2023 1.38 31.12.2022 0.31
31.03.2024 0.95 31.12.2023 0.35

B. Debt to Asset Ratio

What it is: This ratio measures the proportion of a company’s assets that are financed through
debt. It indicates how leveraged the hospital is and how much of its assets are owned outright
versus owed to credito
Formula: Debt to Asset Ratio=Total Liabilities/Total Assets
How to interpret it: A higher ratio means a larger portion of the assets are financed by debt,
which can indicate higher financial risk. A lower ratio suggests more asset ownership by equity.
Lanka Hospital
 16

 2022: 3,164/13,227≈0.24
 2023: 3,522/13,666≈0.26
Asiri Hospital Lanka Hospital
31.03.2023 0.43 31.12.2022 0.24
31.03.2024 0.30 31.12.2023 0.26

4. Efficiency Ratios

A. Asset Turnover Ratio

Formula:Asset Turnover Ratio=Total Sales/Total Assets

 2022: 7,957/13,227≈0.60
 2023: 9,696/13,666≈0.71


Asiri Hospital Lanka Hospital

31.03.2023 0.34 31.12.2022 0.60
31.03.2024 0.40 31.12.2023 0.71

Annexure II

 Steps to Perform a Common Size Analysis:

 17

Common Size Income Statement (Percentage of Revenue)

Objective: Express each item in the income statement as a percentage of total revenue (or
sales).

Formula:

Common Size Percentage=Item/Total Revenue×100

For example, for an income statement:

Net Income = Net Income/Revenue×100

Lanka :Net Profit after Tax =800/9696*100

Cost of Goods Sold (COGS) = COGS/Revenue×100

Lanka :COGS =5567/9696*100

This tells ,what proportion of each rupee of revenue is spent on various expenses or what
portion of revenue translates to profit.

Example:Asiri Hospital

Item Amount (Rs.Mn) Common Size (%)

Sales Turnover 12,376 100%
COGS 6,117 6,117/12,376×100=49.5%
Gross Profit 6,259 6,259/12,376×100=50.5%
Operating Profit 3,217 3,217/12,376×100=26.0%
Finance Cost 2,641 2,641/12,376×100=21.3%
Net Profit 576 576/12,376×100=4.7%

Common Size Balance Sheet (Percentage of Total Assets)

Objective: Express each item on the balance sheet as a percentage of total assets.

Formula:

Common Size Percentage=Item/Total Assets×100

For example, for a balance sheet:

Total Liabilities = Total Liabilities/Total Assets×100

Equity = Equity/Total Assets×100

This allows you to see the proportion of assets financed by debt versus equity, and how much
of the company's resources are allocated to different asset types.
 18

Example: Asiri Hospital

Item Amount (Rs.Mn) Common Size (%)

Assets 30,578 100%
Fixed Assets 27,843 27,843/30,578×100=91.0%
Current Assets 2,735 2,735/30,578×100=8.9%
Current Liabilities 9,460 9,460/30,578×100=30.9%
Long-Term Liabilities 11,218 11,218/30,578×100=36.7%
Total Liabilities 20,678 20,678/30,578×100=67.6%
Net Worth 9,900 9,900/30,578×100=32.4%
Annexure III
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