Table of Contents

Executive summary.........................................................................................................................

Introduction to Fortress resorts plc and Marawila resorts plc.........................................................

Financial performance.....................................................................................................................

Ratio Analysis..................................................................................................................................

Profitability ratios............................................................................................................................

Gross profit margin......................................................................................................................

How to improve the gross profit margin?....................................................................................

Net profit margin.........................................................................................................................

How to improve the net profit margin?.......................................................................................

Liquidity ratios...............................................................................................................................

Current ratio...............................................................................................................................

How to improve the current ratio?.............................................................................................

Acid test ratio.............................................................................................................................

Working capital performance........................................................................................................

How to improve Working capital management?.......................................................................

Which company performs better?..................................................................................................

Conclusion.....................................................................................................................................

References......................................................................................................................................

1
Executive summary

Colombo Stock Exchange firms that have been competing in the same industry for a long

time will be chosen to complete this task (CSE, 2022). We'll be focusing on their financial

performance and their position in the market. In order to make informed decisions, we will

conduct a thorough review of their financial records from the past four years, and key ratios

will be calculated. Using these numbers and ratios, we'll identify the strengths and

weaknesses of each organization, and then offer ideas for how they can be improved. A

decision on which company has performed better will be made as we go forward, and we'll be

able to explain why.

Introduction to Fortress resorts plc and Marawila resorts plc

To provide lodging and other hospitality services, Fortress resorts (Private) Limited, a

subsidiary of the Fortress Resorts PLC, invests in Fortress resorts (Private). The Fortress

Resort & Spa, owned by the company, is a small, luxurious retreat. Near Galle and the

Koggala Airstrip, which provides access to the Colombo International Airport via Air Taxi or

private jet, the Fortress Resort & Spa is an upscale boutique hotel with more than 50 guest

rooms on Sri Lanka's southern coast. The resort's guest rooms and residences come in a

variety of architectural styles, numbering in excess of six. With a total of 10 Fortress Suites

and two Fortress Residences at the Fortress Resort Spa & Spa, there are more than 30 rooms

to choose from. A total of 50 rooms are available at this resort, all of which face the ocean.

The resort caters to vegans, vegetarians, and those with special dietary needs with a wide

variety of cuisines (markets.ft.com, 2022).

Hotel Club Palm Bay is owned and operated by Marawila Resorts PLC. The company's

primary focus is on the hotel industry. Food, Apartment, Beverage, and Other are some of the

2
company's divisions. Club Palm Bay is located in Sri Lanka's Marawila district in

Thalwilawella, Thoduwawa. With a nine-hole pitch and putt golf course, a Tennis, Basketball,

Badminton, and Squash court, a Pool Table, and Table Tennis, Club Palm Bay offers a wide

range of activities. There are approximately 160 deluxe rooms at Club Palm Bay, all of which

have views of the lagoon or the garden. In terms of square footage, each room is about 55

square meters. On-demand minibars are available in all rooms, as are attached bathrooms with

rain shower cubicles or bathtubs, cable television, piped-in music, as well as an electronic

safety deposit box. Its parent company is Lankem Ceylon PLC, while the ultimate parent

company and the controlling party is The Colombo Fort Land & Building PLC

(markets.ft.com, 2022).

Financial performance

Statement of Financial Position (SFP) can be used to assess the financial health of a business

or other organization (SOFP). An organization's financial picture is made up of assets,

liabilities, and equity. These three components make up the most significant part of the

Balance Sheet. One of the most important aspects of conducting a ratio analysis is to quickly

identify and verify an entity's performance. According to investors, a business's financial

health is determined by looking at its financial statements and calculating certain ratios.

Despite how daunting it may appear; financial analysis is not as difficult as it first appears. In

order to show how a project is progressing, the PERT (Program Evaluation Review

Technique) uses a timeline. Equity, expenses, revenue, and overall profitability all factor into

a company's financial health. It is possible to use a variety of business-related formulas to

determine the precise details of a company's ability to meet its objectives (Team, 2022).

3
Ratio Analysis

Many companies use ratio analysis of financial statements as a standard practice to ensure that

their business is financially sound. This investigation takes into account a variety of financial

ratios, including net profit margin, gross profit margin, return on capital employed (ROCE),

and earnings per share. The financial health of a company can be gauged using any of these

ratios.

The financial records of a company can be analyzed using a variety of Ratios in order to

determine whether or not it is a good investment. These include Profitability ratios, liquidity

ratios, efficiency ratios, and Gearing ratios, among others. There are many different types of

financial data that can be analyzed using the company's financial statements. These metrics

can be used to evaluate a company's profitability, liquidity, and solvency.

Ratio analysis uses financial records such as the balance sheet and income statement to

provide quantitative information about a company's liquidity, operational efficiency, and

profitability. Ratio analysis is a key component of fundamental equity research

(BLOOMENTHAL, 2021).

Profitability ratios

Profitability ratios are used by analysts and investors to measure and evaluate a company's

ability to generate money (profit) in relation to sales, balance sheet assets, operating costs, and

shareholders' equity during a given time frame. Indicate how effectively an organization

utilizes its assets to generate profit and value for its shareholders.

If the ratio of numbers increases, it indicates that the company is profitable and generating

cash flow, which is what most companies aim for. The ratios shine when compared to other

organizations in a similar field, as well as in the past. The following study examines the most

4
commonly used profitability ratios. These metrics are used to gauge a company's profitability

and ability to turn a profit on sales, costs of goods sold and expenses, assets, and shareholders'

equity. In terms of profitability, the three most critical metrics are gross margin, net profit

margin, and return on invested capital (ROCE). The profitability ratio is one of the most

important metrics in business. You can use the data to better your decisions if you do a little

digging into it.

Gross profit margin

Formula = (Gross profit/Sales) *100

The fortress resorts plc

Year Working GPM

2017 463,836,294/ 69.9%

663,749,824*100

2018 570,581,030/ 72.4%

787,787,516*100

2019 333,968,638/ 68%

489,320,003*100

2020 8,633,508/ 74,665,832*100 11.6%

Marawila resorts plc

Year Working GPM

2017 46,239,529/ 10.4%

444,535,322*100

2018 54,812,127/ 12%

5
 456,637,408*100

2019 10,992,629/ 2.63%

417,737,277*100

2020 - 66,643,779/ 183,599,216 -36%

Now that we have these figures, we can look at how the gross profit margins of the two

companies compare. The gross profit margin is defined as the difference between the gross

profit and the revenue generated. This shows how much money a company makes after

subtracting its costs for producing goods and services. A high gross profit margin ratio,

however, shows that it can still provide net profitability for the company while covering

operating expenses, fixed costs and dividends, and depreciation. Poor purchasing practices,

lower selling prices, lower sales volume, intense market competition, or ineffective sales

marketing strategies can all lead to a high cost of goods sold and, consequently, a low-profit

margin (BLOOMENTHAL, 2021).

The fortress resorts plc has a remarkable gross profit margin. The reason for this is that they

have taken proactive measures to maintain their gross profit margins above 100%. As a result,

their profits are ten times greater than their sales costs. After subtracting the cost of sales from

the company's revenues, they have enough money to cover the company's expenses. A

company with a higher gross profit margin can still turn a profit on its sales as long as its

overhead costs are kept in check. It's not uncommon for investors to offer more money to

businesses that make a lot of money. Considering the data in the table above, it's important to

point out that the gross profit margin ratio appears to be on the decline. This is due to a

decrease of almost 32% in the ratio over the previous four years.

6
On the other hand, Marawila resorts Plc's gross profit margin decreased over the three years

from 2017 to 2019. As recently as 2019, it even dipped below zero, at -32%. This could be the

result of a decrease in revenue for the company this year. According to the profit/loss

statement, revenue decreased from $4082,833 in 2018 to $3217,870 in 2019. The price of

doing business has also risen significantly over time. But they managed to make a gross profit

of 5.3 percent in 2020, which is reasonable given that they had a gross loss the year before.

How to improve the gross profit margin?

Your selling price; Increase the selling price while maintaining the same selling price for your

products Gross profit margin increases with each increase in a selling price that is not

accompanied by an increase in the cost of goods sold. Determine how much of an

improvement in gross profit margin the new price change will make before implementing the

price change.

Increase your sales volume without lowering your selling price or increasing your cost of

goods sold per unit. Increasing sales volume lowers the cost of goods sold because the fixed

cost of production per unit drops as production volume rises. A higher gross profit margin is

the result of increasing sales and decreasing the cost of goods sold per unit.

Reduce your cost of goods sold without altering your selling price. When the cost of goods

sold decreases, the gross profit margin rises. It is possible to reduce the cost of products

supplied by finding more affordable suppliers, purchasing cheaper raw materials, using labor-

saving technology, and outsourcing manufacturing. Keep in mind that the gross profit margin

rises as the difference between sales and the cost of goods sold widens.

Net profit margin

Formula = (Profit after tax/Sales) *100

7
 The fortress resorts plc

Year Working NPM

2017 140,799,184/ 21.2%

663,749,824*100

2018 209,520,916/ 26.6%

787,787,516*100

2019 27,380,607/ 5.59%

489,320,003*100

2020 - 175,606,069/ -235%

74,665,832*100

Marawila resorts plc

Year Working NPM

2017 - 1,144,227/ -0.25%

444,535,322*100

2018 - 14,358,226/ -3.14%

456,637,408*100

2019 - 40,662,712/ -9.7%

417,737,277*100

2020 - 112,008,536/ 183,599,216 -61%

Net income or profit as a percentage of revenue is known as the net profit margin, or simply

the net margin. It is the ratio of a company's net profits to its total revenue. It is common to

see the net profit margin expressed as a percentage, but it can also be expressed as a decimal

number. How much of a company's revenue is turned into profit can be determined by

calculating the company's net profit margin (Dan, 2013). The fortress resorts plc's current

8
NPM position in the 40 percent range compared to Marawila resorts plc's net profit margin is

nothing to be concerned about. Although the Net profit margin has decreased from 60% in

2017 to 40% in 2020, it is still worth noting. Keep an eye on the company's expenditures as

well as the cost of sales as a possible warning sign. This allows them to restart their business

and make even more money. Fortress resorts plc could benefit from the following discussion

on ways to increase net profit margins.

Net profit margins for both fortress resorts plc and maravila resorts Plc have steadily

decreased over the last few years. In 2019, Fortress Resort’s net profit margin fell to -38

percent, compared to a positive result of 11% in 2017. Using this data, it appears that the

company is struggling to keep costs and sales costs in line with its revenues. When all costs

and expenses related to sales are subtracted, the net profit of the company is reduced to a loss.

With no revenue from normal operations, the company is more likely to go out of business.

Marawila resorts' revenues fell by over 21% in the fiscal year 2018 as evidence of this. In the

wake of this, the company's profitability has dipped while costs have remained flat. Another

explanation is that they had to deal with significant Losses during these two fiscal years. The

reason for this is that they are unable to generate significantly more revenue while their costs

and cost of sales balances have increased. They lost money as a result. However, despite these

obstacles, they were able to achieve a net present value that was positive by 5.1%.

How to improve the net profit margin?

In order to boost their net margins, companies can either sell more products or services or

raise their prices.

The net margin of a business can be increased by reducing costs (e.g., finding cheaper sources

for raw materials).

9
1)Cut back on your energy usage; The following are some suggestions for reducing your

utility consumption:

Turning off equipment that is in standby mode all night will save you money in the long run.

To save water, make sure your faucets aren't leaking and install low-flow toilets in any office

bathrooms that need them.

Lower the temperature by 7 to 10 degrees at night and on weekends.

2) Cut labor costs and reduce the amount of overtime work your employees have to do. The

higher overtime rate makes it more advantageous to schedule workers in such a way that no

one works longer than is necessary.

Before adding more staff, make sure the ones you already have can handle the extra work. A

meeting to discuss any additional responsibilities and to determine who has the time to

complete them should be called asap.

When possible, make use of contract workers. There is a growing trend of outsourcing data

entry, software development, and event marketing.

Operating costs can be significantly increased by expensive suppliers, so it's important to find

ways to reduce them. To combat this, see if you can save money by purchasing popular items

in bulk.

Paying your bills on time may entitle you to a discount from your vendors.

Investigate less expensive options for handling administrative duties. Automate and outsource

tedious tasks using software solutions like Oracle or Zapier in order to free up time and

resources (taluspay.com, n.d.).

10
Liquidity ratios

Liquidity ratios can be used to assess an organization's ability to meet short-term obligations

as they fall due. Liquidity ratios include two primary types of ratios. An acid test ratio is an

example of a current ratio.

As a measure of a company's ability to meet its short-term financial obligations, liquidity

ratios are used. Liquidity ratios are frequently used by potential creditors and lenders to

determine if a business is eligible for credit or debt. These ratios look at the relationship

between a company's most recent balance sheet's current liabilities and various combinations

of reasonably liquid assets. Indicating the company's ability to meet deadlines, the ratio is

calculated.

Current ratio

Formula = Current assets / Current liabilities

The fortress resorts plc

Year Working Current ratio

2017 583,070,613/ 131,088,344 4.44:1

2018 716,950,878/ 137,824,374 5.2:1

2019 781,679,904/ 180,776,571 4.32:1

2020 711,868,733/ 240,877,701 2.96:1

Marawila resorts plc

Year Working Current ratio

2017 111,694,388/ 371,449,496 0.3:1

2018 120,807,783/ 314,762,048 0.38:1

11
 2019 70,931,862/ 262,421,374 0.27:1

2020 39,963,370/ 268,698,038 0.15:1

Company liquidity is depicted by the company's current ratio. It is possible for different

industries to have varying current ratios. lenders prefer a higher than a lower current ratio

because the former indicates a higher likelihood of repayment of the debt. High current ratios

aren't always a good thing for investors to look at (Wikipedia, 2022). If a company's current

ratio is too high, it may not be making the best use of its current assets or short-term financing

options.

The current ratio will be less than 1 if current liabilities exceed current assets. It's possible that

the company will have trouble covering its short-term obligations if its current ratio is less

than 1. However, some business models can function with a current ratio that is less than one.

The current ratio of a company can safely remain below one if inventory turns into cash at a

much faster rate than accounts payable are due. The cost of acquisition is used to value goods,

even though the corporation intends to sell the inventory at a higher price. As a result, the sale

will bring in a lot more money than the inventory is worth on the books. Paying suppliers first

and then collecting customer money may allow companies with low current ratios as an

alternative.

Only 2:1 is the standard benchmark, but if we take a look at the current ratio figures of

fortress resorts plc, we can see that they have remarkable or exaggerated current ratios. This

shows that the company has no problems paying its short-term debt obligations as they

become due. It is because of this that the suppliers and financial institutions that provide the

company's operating capital will be able to maintain long-term relationships. The financial

12
statements of the company appear to be exaggerated, so a thorough audit should be carried

out.

In contrast, maravilla resorts plc's current ratio shows that the company has typically run at a

lower current ratio of 0 decimals. A lack of ability to convert liquid assets into cash quickly

enough to cover decreasing current liabilities would explain this. A lack of funds means that

current liabilities will not be paid on time. Relationship problems with suppliers may make it

impossible to honor the credit terms with them. The risk of short-term obligations, such as

bank overdrafts, not being met and the debt not being repaid rises. So Marawila resorts plc's

reputation among its investors would be harmed.

How to improve the current ratio?

Any capital expenditures that require cash payments can be postponed, term loans can be

repaid, and personal demands on the company can be minimized to increase liquidity and the

current ratio.

Disposing of any capital assets that aren't generating revenue for the company

(porkgateway.org, n.d.).

Acid test ratio

Formula = Current Assets-Closing inventory / Current liabilities

The fortress resorts plc

Year Working Acid test ratio

2017 583,070,613- 21,755,480/ 4.28:1

131,088,344

2018 716,950,878- 21,118,791/ 5.04:1

13
 137,824,374

2019 781,679,904- 22,340,146/ 4.2:1

180,776,571

2020 711,868,733- 18,329,972/ 2.87:1

240,877,701

Marawila resorts plc

Year Working Acid test ratio

2017 111,694,388- 12,990,937/ 0.26:1

371,449,496

2018 120,807,783- 12,785,053/ 0.34:1

314,762,048

2019 70,931,862- 11,799,306/ 0.23:1

262,421,374

2020 39,963,370- 8,427,543/ 0.12:1

268,698,038

The acid test ratio was created to account for the fact that inventory was a less liquid current

asset. As a result, the Quick ratio was created because it is difficult to convert inventory into

cashflows on short notice. The data can be used by shareholders and other stakeholders to

draw important conclusions. The acid-test ratio (ATR), also known as the fast ratio, is used to

gauge a company's liquidity. It assesses the ability of current assets to cover current

obligations.

14
Only assets that can be converted to cash in less than 90 days are used to calculate the quick

ratio.

Fortress resorts Plc's acid test ratio has fluctuated between 10 and 20:1, which is exceptional

for a company. These figures show that the company is not relying on its closing inventory

balance, a less liquid source of short-term financing. As can also be seen, the acid test ratio

has far exceeded the predetermined benchmark of 1:1 or 1.5:1, indicating that there is a

significant amount of money invested in the current assets that could be put to better use

elsewhere to generate higher returns. Adding to this, the company's inflated acid and quick

ratios raise the possibility that it is engaging in accounting fraud and window dressing to keep

its financial statements attractive to the general public and investors in order to boost the sales

of its stock shares.

The Acid Test Ratio, on the other hand, must meet a 1:1 minimum standard. A negative Acid

test ratio has plagued marawila resorts plc for the past four years, from 2017 through 2020.

An excessive reliance on their closing inventory balance indicates that they have been making

timely payments on short-term loans. This raises the possibility that the current ratio, which

appears to account for the inventory balance, is misleading the investing public. Because the

company will not be able to pay back its short-term loans when they are due, its debt service

ratio has fallen to an all-time low of 0.14:1. Trade creditors and other financial institutions

could theoretically be included in these loans. This is primarily due to an increase of 51.7%

and a 149% in the current liabilities item "amounts payable to related parties" when compared

to the financial year 2018. Moreover, the current asset balance has fallen by 20%.

Working capital performance

Formula = Current assets - Current liabilities

15
 The fortress resorts plc

Year Working Working capital

2017 583,070,613- 131,088,344 451982269

2018 716,950,878- 137,824,374 579126504

2019 781,679,904- 180,776,571 600903333

2020 711,868,733- 240,877,701 470991032

Marawila resorts plc

Year Working Working capital

2017 111,694,388- 371,449,496 -259755108

2018 120,807,783- 314,762,048 -193954265

2019 70,931,862- 262,421,374 -191489512

2020 39,963,370- 268,698,038 -228734668

Working capital is a more frequent occurrence in some industries than in others. Working

capital is needed by a number of industries because they are unable to produce cash on

demand quickly enough. As a result of their lower operating capital needs, businesses that

deal with a large number of customers on a daily basis are able to raise short-term financing

more quickly.

"Working capital" refers to the money you'll need in the short term to keep your business

going. Fixed assets and R&D are long-term investments, whereas working capital has a much

shorter time horizon. "

The difference between the current value of an asset and the current value of a liability is

referred to as "working capital." "current" is used to describe things that are likely to change

16
in the near future. "Short-term" assets include inventory and accounts receivable, which can

be turned into cash in the next year or operational cycle. There are three types of current

assets: cash and short-term investments, receivables, and inventory (FERNANDO, 2022).

Bank operating credit, accounts payable, short-term debt, and tax liabilities are among the

financial obligations that must be paid off within the next 12 months. It's impossible to predict

the value or turnover of these items.

When comparing a company's current assets (such as cash, accounts receivable from

customers, inventory of raw materials, and finished goods) to its current liabilities (such as

loans), the term working capital is used (NWC). It's common to see this figure used to gauge a

company's current health.

A company's industry typically influences the amount of working capital it has available.

Depending on the industry, work-in-progress requirements may be more stringent. To

compensate for the lower working capital requirements, retail businesses are able to raise

short-term financing much more quickly (FERNANDO, 2022).

Working capital performance at Fortress resorts plc was negative 6280555365 rupees over a

four-year period. Short-term loans, such as Bank ODs, are more likely to lead to bankruptcy

than long-term ones because it is more difficult to fund ongoing business operations when a

loan is late.

As an alternative, Marawila resorts plc has maintained a positive working capital balance for

the last four years through prudent management of working capital. There has been a 100%

increase in a company's working capital balance since 2017. This is an incredible opportunity.

17
As a result, business as usual will be resumed at the company. Products, both finished and

raw, are kept on hand for quick access when needed. This widely accepted metric can be used

to gauge a company's current health.

How to improve Working capital management?

It's easy to keep track of your spending if you follow these simple instructions:

Before deciding how much inventory to keep, consider how many finished products or raw

materials you already have on hand. If you could save money, what would happen?

Investigate your options for changing service providers in order to obtain a better deal. Get

the best deal by comparing prices. A discount may be possible using the information you have

learned about your current rates and payment terms.

You'll get paid faster if you get better terms from your creditors and shorter payment terms

accepted by your customers. Paying bills on time can be made simpler by implementing a

reward system.

In the long run, keeping track of your own payments can help you avoid debt. If you pay your

bills on time, you will be able to better predict your financial situation.

Offering your customers additional services or products can increase your profit margins.

Your working capital will be better off if you get your money sooner rather than later.

Which company performs better?

Based on our calculations in areas such as liquidity and profitability, we can say that both

companies have performed at about the same level. Fortress resorts plc has a lower ROCE

margin than Marawila resorts plc, on the other hand. The liquidity ratios of Marawila resort’s

holdings, such as the current ratio and acid test, have improved. In addition to profitability

18
ratios, this is critical. However, Marawila resorts plc has exceptional working capital

management, whereas Fortress resorts plc has extremely negative working capital

management. ' As a result, maravilla resorts plc is now the country's best-performing financial

institution.

Conclusion

Non-financial aspects of a company should also be taken into account when making an

investment. Non-financial factors are just as important as financial ones when determining

which companies to invest in. Finance, technology, culture, environmental issues, education,

and expertise are all non-financial elements. Non-financial factors are often overlooked when

trying to meet educational goals and improve performance.

To ensure that the public has a good impression of a company before making a purchase, it's

important to check out its reputation. Long-term success is dependent on a company's

location, customer base, market share, and employee happiness.

References

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Available at: https://www.investopedia.com/terms/g/gross_profit_margin.asp

[Accessed 2022].

BLOOMENTHAL, A., 2021. Ratio Analysis. [Online]

Available at: https://www.investopedia.com/terms/r/ratioanalysis.asp#:~:text=Ratio

%20analysis%20is%20a%20quantitative,cornerstone%20of%20fundamental%20equity

%20analysis.

[Accessed 22 07 2022].

19
CSE, 2022. Colombo stock exchange. [Online]

Available at: https://www.cse.lk/

[Accessed 2022].

Dan, 2013. Net Profit Margin Definition. [Online]

Available at: https://strategiccfo.com/articles/profitability/net-profit-margin-analysis/

[Accessed 2022].

FERNANDO, J., 2022. Working Capital. [Online]

Available at: https://www.investopedia.com/terms/w/workingcapital.asp#:~:text=Working

%20capital%2C%20also%20known%20as,as%20accounts%20payable%20and%20debts.

[Accessed 17 07 2022].

markets.ft.com, 2022. About company. [Online]

Available at: https://markets.ft.com/data/equities/tearsheet/profile?s=RHTL.N0000:CSE

[Accessed 02 08 2022].

markets.ft.com, 2022. About the company. [Online]

Available at: https://markets.ft.com/data/equities/tearsheet/profile?s=MARA.N0000:CSE

[Accessed 02 08 2022].

porkgateway.org, n.d. how to improve the current ratio. [Online]

Available at: https://porkgateway.org/resource/how-to-improve-current-ratio/

[Accessed 18 07 2022].

taluspay.com, n.d. 5 Ways to Increase Your Profit Margin. [Online]

Available at: https://taluspay.com/blog/5-ways-to-increase-your-profit-margin/

[Accessed 2022].

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Available at: https://corporatefinanceinstitute.com/resources/knowledge/finance/financial-

performance/

[Accessed 2022].

Wikipedia, 2022. Current ratio. [Online]

Available at: https://en.wikipedia.org/wiki/Current_ratio

[Accessed 2022].

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