A solvency ratio is a financial metric used to evaluate a company's financial stability and its ability to

meet its debt obligations. These ratios provide insights into a company's financial health and its
capacity to withstand financial challenges and avoid bankruptcy.

Commonly used solvency ratios include Liquidity Ratios & Turnover Ratios.

Liquidity ratios assess a company's ability to meet its short-term financial obligations with its
available liquid assets. These ratios are crucial for evaluating a company's short-term financial health
and liquidity

Turnover Ratios measure the efficiency of a company in managing its assets or resources. These
ratios assess how effectively a company is utilizing its assets to generate revenue or sales.

Padini’s Liquidity Ratios

1. Current Ratio

2022 2021 2020 2019 2018

1,003,92
Current Asset 6 800,372 766,831 808,673 765,413
Current Liability 277,062 148,341 191,433 206,275 261,430

Current Ratio 3.62 5.40 4.01 3.92 2.93

Vs Previous Year -33% 35% 2% 34%

As above indicates, Padini has strong Current Ratio in the past 5 years record. The Current Ratios
have been ranging from 3 to 5 which means that Padini has strong short-term liquidity and is in a
favourable financial position regarding its ability to meet its current obligations. This ratio means that
the company has three times more current assets (such as cash, accounts receivable, and inventory)
than current liabilities (short-term debt, payables, and other obligations).

2. Quick Ratio / Acid Test

2022 2021 2020 2019 2018

Cash and bank balances 808,853 523,758 441,474 472,031 451,389
Trade and other receivables 56,460 47,634 49,156 57,810 55,730
Total Cash + Receivable 865,313 571,392 490,630 529,841 507,119

Current Liability 277,062 148,341 191,433 206,275 261,430

Quick Ratio / Acid Test 3.12 3.85 2.56 2.57 1.94

-19% 50% 0% 32%

Quick Ratio or Acid Test provides a more stringent measure of a company's ability to meet short-term
liabilities compared to the current ratio, where it only uses cash, cash equivalent and receivables to
compare against current liability
A Quick Ratio value of 1 suggests that a company has sufficient liquid assets to cover its short-term
liabilities without relying on selling inventory. It indicates a strong ability to meet immediate financial
needs. In Padini’s case, they are cash on hand is easily 3 times more than their current liability.

3. Cash Ratio

2022 2021 2020 2019 2018

Cash and bank balances 808,853 523,758 441,474 472,031 451,389

Current Liability 277,062 148,341 191,433 206,275 261,430

Cash Ratio 2.92 3.53 2.31 2.29 1.73

-17% 53% 1% 33%

The Cash Ratio is a much more conservative measure of a company's short-term liquidity and ability
to pay its immediate financial obligations. It is the most stringent liquidity ratio because it considers
only a company's most liquid assets – cash and cash equivalents – and excludes other current assets
such as accounts receivable and inventory.

Padini’s 2022 Cash Ratio indicates that it has 2.9 times more cash to cover its immediate financial
needs without relying on the sale of other assets or additional financing

After examined all Padini’s Liquidity Ratios (Quick Ratio, Current Ratio & Cash Ratio), Padini is cash
strong and able to meet short term immediate financial needs. This is mainly due to the reason that
Padini as a retailer receives cash from its daily operations.

Padini’s Turnover Ratios

4. Receivable Turnover Ratio

This ratio is not relevant to Padini as The Group nature of business is cash generating retailer. Padini
DOES NOT accept any Credit Sale.

The current amounts due are mainly from subsidiaries, represent dividends receivables, payments
made on behalf and advances, which are repayable within next 12 months

2022 2021 2020 2019 2018

Trade receivable 56,460 47,634 49,156 57,810 55,730

5. Account Receivable Day

As per Receivable Turnover Ratio, Padini does not have Credit Sale, therefore this is not applicable
 6. Inventory Turnover Ratio

2022 2021 2020 2019 2018

991,28
Cost of Good Sold 811,584 639,917 817,075 1,085,182 8
257,02
Inventory 137,302 218,565 273,870 277,236 2

Turnover ratio 5.91 2.93 2.98 3.91 3.86

Inventory Turnover Ratio measures how efficiently a company manages its inventory. It quantifies
how many times a company's inventory is sold and replaced within a year. This ratio is essential for
assessing a company's inventory management and its ability to turn inventory into sales.

From the historical data, Padini has been strong in managing its inventory except in 2020 & 2021
when they were hit by heavily by pandemic.

In 2022 Padini managed to sell its inventory more efficiently, minimizing holding costs and the risk of
obsolescence.

7. Days Inventory

2022 2021 2020 2019 2018

Days in a Year 365 365 365 365 365
Turnover ratio 5.91 2.93 2.98 3.91 3.86

Inventory day 61.75 124.67 122.34 93.25 94.64

Days Inventory measures the average number of days it takes for a company to sell its entire
inventory. It is a crucial metric for inventory management and provides insights into a company's
efficiency in managing and turning over its inventory.

Padini is a fashion retailer where they constantly face customer’s change of fashion taste. Therefore,
it is important for them to ensure they manage their inventory well and not holding “Off Season” or
“Out of fashion” items in their warehouse.

The current 5 years Days Inventory Ratio suggests that Padini has been improving in the
management of their Inventory.
 8. Account Payable Turnover

2022 2021 2020 2019 2018

1,051,29
Cost of Good Sold 799,878 627,867 788,319 3 958,140
+Ending Inventory 137,302 218,565 273,870 277,236 257,022
-Beginning Inventory 218,565 273,870 277,236 257,022 193,212

1,071,50 1,021,95
Additional / Purchase 718,615 572,562 784,953 7 0
Account Payable 127,143 37,642 57,973 102,422 134,282
Payable Turnover 5.65 15.21 13.54 10.46 7.61

Account Payable Turnover assesses how efficiently a company manages its accounts payable. It
measures the number of times a company pays its suppliers within a specific period, indicating how
effectively it manages its trade credit or short-term liabilities.

In Year 2022, Padini’s Account Payable Turnover Ratio is 5.65 which is relatively low compare to
previous years. This could be due to new liquidity or working capital strategy with new suppliers,
which was not mentioned in the financial report. Nevertheless, it is still a very strong number.

9. Days Payable

2022 2021 2020 2019 2018

Days in Year 365 365 365 365 365
Payable turnover 5.65 15.21 13.54 10.46 7.61
Payable days 65 24 27 35 48

Days Payable is a financial metric that measures the average number of days a company takes to pay
its suppliers after receiving goods or services. It provides insights into a company's efficiency in
managing its accounts payable and its payment practices.

As discussed in Account Payable Turnover, there could be some changes of policy with new supplier,
working capital strategy, Padini’s Days Payable from been stretched from 35 days in 2019 to 65 days
in 2022
 10. Cash Conversion Cycle

2022 2021 2020 2019 2018

Receivable days 0 0 0 0 0
+Inventory days 62 125 122 93 95
-Payable days 65 24 27 35 48

Cash Conversion Cycle -3 101 95 58 47

Cash Conversion Circle measures the time it takes for a company to convert its investments in
inventory and accounts receivable into cash, and then reinvest that cash back into the business. It
represents the time between a company's cash outflows for inventory and the cash inflows from
customers' payments. It assesses the efficiency of a company's working capital management.

As compare to the past 4 years, Padini’s working capital management has improved significantly in
2022. The group almost able to match their Inventory days (how long they sell off a inventory) to
Payable Days (how long they pay off their supplier). They have improved their liquidity and reduce
the need for any external financing.