Financial ratio analysis is the calculation and comparison of ratios, which are derived from the in-

formation in a company’s financial statements. The level and historical trends of these ratios can be
used to make conclusions about a company’s financial condition and its operations and the strength
and weaknesses.

The information in the statements is used by people like

• Trade creditors, to identify the firm’s ability to meet their claims of the company,
• Investors, to know about the present and future profitability of the company and its financial
structure.
• Management, in every aspect of the financial analysis.

Ceylon Tobacco Company PLC (CTC) is a Sri Lankan tobacco company engaged in the manufac-
ture, marketing and export of cigarettes.It is a subsidiary of British American Tobacco.CTC is the
second largest company traded on the Colombo Stock Exchange.CTC enjoys a virtual monopoly in
the manufacture of cigarettes in the country.Cigarette brands marketed by CTC in Sri Lanka include
Bristol, Capstan, Dunhill, John Player Gold Leaf, Lucky Strike, Pall Mall and Three Roses.

In this particular report we have commented about the performance of the Ceylon Tobacco Compa-
ny (CTC) after analysing the financial data obtained from the financial statements of 5 financial
years of the CTC (from 2010 to 2014).
 CONCLUSION

Finance is an essential element in every business. Without effective financial management a com-
pany cannot survive in this competitive world.

The company’s overall financial position is at a good level. Even though the profit level in the last
year concerned (2014) is lower than that of the previous year (2013) the profits in the years con-
cerned are at a good level and thus the CTC has not made a significant loss in those years. It is bet-
ter for the firm to diversify the funds to different sectors in the present market scenario

Therefore from all the interpretation of current ratios, liquidity ratios, profitability ratios, Invest ra-

tios and solvency ratios analysis it is clear that Ceylon Tobacco Company has a good financial ca-
pacity
Debt-to-equity Ratio

The Debt to Equity Ratio of The CTC is higher than the acceptable level of the industry. The ac-
cepted ratio is 1.0.Higher debt to equity ratio is unfavourable because it means that the business is
highly relying on the external lenders to finance their short term liabilities.

In 2009, 2010, 2011, 2012, 2013 the CTC has the consecutive ratios of 2.20, 2.36, 2.86, 3.24, 2.51
where it means more assets are financed by debt, thus the business is at a considerable risk.