Debt Ratio

A debt ratio exceeding 100% typically indicates that a company's liabilities exceed its assets, suggesting a
potentially risky financial position. In the case of Ceylon Hotels Corporation plc, both in 2022 and 2023,
the debt ratio exceeds this threshold, standing at 131.88% and 116.88% respectively.

Firstly, let's address the decreasing trend from 2022 to 2023. A decrease in the debt ratio could indicate
several things:

1. **Reduced Debt**: It's possible that the company actively worked to reduce its debt burden from
2022 to 2023, either by paying down existing debt, restructuring its liabilities, or perhaps by raising
additional equity capital to offset debt.

2. **Asset Growth**: Another possibility is that the company experienced an increase in its total assets
without a corresponding increase in debt. This could indicate healthy growth in the business, potentially
increasing its ability to service its debt obligations in the future.

Now, considering the absolute debt figures provided, Ceylon Hotels Corporation plc held 2,409,385,872
units of debt in 2022, which decreased to 2,248,490,911 units in 2023. A reduction in debt can be
viewed positively, as it may indicate improved financial health and reduced financial risk for the
company. In conclusion, while Ceylon Hotels Corporation plc's decreasing debt ratio from 2022 to 2023
suggests some improvement in its financial position, further analysis within the context of the
hospitality industry and consideration of other financial metrics are necessary to form a comprehensive
assessment of the company's financial health and risk profile.

GEARING RATIO

The gearing ratio, also known as the leverage ratio, indicates the proportion of a company's capital
structure that is financed by debt compared to equity. In the case of Ceylon Hotels Corporation plc, both
in 2022 and 2023, the gearing ratio remained relatively stable, standing at 79.34% and 79.21%
respectively.

First, let's break down the components of the gearing ratio:

- Debt: Ceylon Hotels held debt amounting to 2,409,385,872 units in 2022 and 2,248,490,911 units in
2023.

- Equity: The equity of the company amounted to 627,582,828 units in 2022 and 590,221,574 units in
2023.
The stability in the gearing ratio suggests that the company's capital structure remained relatively
unchanged over the two years.

In conclusion, Ceylon Hotels Corporation plc's stable gearing ratio over the two-year period suggests
effective management of its capital structure within the context of the hospitality industry. However,
continued monitoring of debt levels and their impact on financial performance is crucial to ensure the
company's long-term sustainability and resilience in a dynamic business environment.

The interest cover ratio, also known as the times interest earned (TIE) ratio, measures a company's
ability to meet its interest payments on outstanding debt. A higher ratio indicates a stronger ability to
cover interest expenses with operating income. In the case of Ceylon Hotels Corporation plc, the interest
cover ratio declined significantly from 1.73 times in 2022 to 0.62 times in 2023.

INTEREST COVER

Let's break down the components:

Interest Expense: Ceylon Hotels had interest expenses of 75,666,311 units in 2022 and 111,303,171
units in 2023.

Profit Before Tax (PBT): The company reported profits before tax of 55,357,173 units in 2022 and
36,994,949 units in 2023.

Now, let's interpret this data with industry-specific considerations:

Financial Consequences are Deteriorating Financial Health: The significant decrease in the interest cover
ratio from 2022 to 2023 indicates a deterioration in the company's ability to cover its interest expenses
with its operating income. Increased Financial Risk: A lower interest cover ratio indicates increased
financial risk for Ceylon Hotels. Inability to cover interest expenses may lead to missed debt payments,
credit rating downgrades, and higher borrowing costs in the future. Impact on Creditworthiness: Lenders
and investors often use the interest cover ratio as a measure of a company's creditworthiness. A
declining ratio may signal increased credit risk, potentially affecting the company's ability to raise capital
or negotiate favorable loan terms.

In conclusion, the significant decrease in Ceylon Hotels Corporation plc's interest cover ratio from 2022
to 2023 raises concerns about the company's financial health and ability to service its debt obligations.
Industry-specific factors, such as the cyclical nature of the hospitality industry and the impact of external
events like the COVID-19 pandemic, likely contributed to the decline in profitability and operating
income. It's imperative for the company to implement strategies to improve its financial performance,
strengthen its balance sheet, and manage its debt effectively to mitigate financial risks and ensure long-
term sustainability.
 CURRENT RATIO

Ceylon Hotels Corporation plc exhibited an improvement in its current ratio from 2022 to 2023,
indicating a strengthened ability to cover its short-term liabilities with current assets. This could signify
improved liquidity and financial stability, essential in the hospitality industry, where cash flow
management is crucial, especially during uncertain economic conditions or disruptions like the COVID-19
pandemic. The increase in current assets relative to liabilities suggests effective working capital
management, enhancing the company's resilience against short-term financial challenges.

QUICK RATIO

Ceylon Hotels Corporation plc exhibited a notable improvement in its quick ratio from 2022 to 2023,
indicating strengthened liquidity and financial resilience. The quick ratio, which measures a company's
ability to meet its short-term liabilities using its most liquid assets, excluding inventory, reflects the
company's capacity to address immediate financial obligations. In the hospitality industry, where
operational expenses and payroll must be met promptly, a healthy quick ratio is vital for maintaining
business continuity and service quality.

The increase in both current assets and liabilities suggests improved financial management and possibly
business expansion. However, the substantial rise in current liabilities in 2023 warrants careful scrutiny
to ensure sustainable debt management practices. Despite this, the quick ratio's improvement reflects
positively on the company's ability to meet its short-term financial obligations efficiently.

The rise in closing inventory is consistent with industry norms, where hotels often maintain sufficient
stock levels to accommodate fluctuating demand. While the increase in inventory may tie up capital,
effective inventory management ensures adequate supplies without excessive holding costs.

Overall, the enhanced quick ratio indicates Ceylon Hotels' improved financial position and readiness to
navigate the dynamic challenges of the hospitality sector, contributing to its long-term viability and
competitiveness in the market.