Financial Ratio Analysis: Lanka Hospital and Asiri Hospital Comparison

This report presents a financial analysis of Lanka Hospital, a multi-specialty tertiary care hospital in Sri Lanka, comparing its performance with its main competitor, Asiri Hospital. The analysis includes an overview of the companies, competitor analysis, and an evaluation of various financial ratios, such as profitability, liquidity, debt management, and investor ratios, using data from their financial statements. The report assesses the companies' asset utilization, net margin, current ratio, efficiency ratio, and dividend payout ratio over a five-year period. Based on the financial performance evaluation, the report concludes with a recommendation on which company's shares would be a better investment, along with identified problems, limitations, and assumptions made during the analysis. The report uses data from the annual reports of both companies to provide a comprehensive comparison within the healthcare industry.

Financial Analysis

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Contents
Introduction.................................................................................................................................................2
Financial Analysis.......................................................................................................................................3
Companies Shares.......................................................................................................................................7
Problems, limitations and assumptions’......................................................................................................7
Conclusion...................................................................................................................................................8
References...................................................................................................................................................9

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Introduction
Financial Analysis is the process of evaluating, analyzing, and summarizing the financial report
of the company. The organization has to maintain the financial statements to assess the financial
position of the company (Williams, and Dobelman, 2017). The companies can analyze the
financial performance of the through the financial statement. There are various methods or
techniques that can be used by the companies to evaluate the financial positions such as Trend
Analysis, Common Size Financial Statement Analysis, and Ratio Analysis . The company can
use the methods or techniques to analyze the financial statement. In this report, the discussion is
made on the topic of financial analysis of the company. In this report, Lanka Hospital has been
taken into consideration to assess the financial position of the company in the industry by
comparing with its competitors (Robinson, Henry, Pirie, and Broihahn, 2015).
In this paper, position of the company in an industry will be analyzed. After that, the financial
performance of the company will be compared with its competitors by evaluating the ratios. At
the end of the report, the best option has been selected for buying the company’s share.
Overview of the company
Lanka Hospital is a multi-specialty tertiary care hospital in Sri Lanka. It is also known as Apollo
Hospitals Colombo. It is one of the largest private hospitals in the nation. The company is
situated on Elvitigala Mawatha which is called as Baseline Road. The hospital was
commissioned in the year 2002 as a branch of Apollo Hospitals in India. In the year 2006, the
hospital was taken by Sri Lanka Insurance. After all this process, it is renamed as Lanka
Hospitals after it ended a licensing and support services agreement with Apollo Hospitals. The
company operates under the Healthcare Industry. There are numerous companies that provide the

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similar services to consumers due to which the competition among the consumers has been arises
(Lanka Hospitals, 2019).
Competitor Analysis
It has been analyzed that Sri Lanka has a free and universal health care system. It is only country
that have the higher score than the regional average in healthcare having a high life expectancy.
It is also called as one of the world’s earliest known healthcare systems. The healthcare industry
in Sri Lanka is continuously growing with the high percentage. As per the discussion, it has been
found that it is one of the countries which are popular for its healthcare services. It has been
found that there are many competitors of the hospitals such as Colomobo National Hospitals,
Epilepsy Unit, National Eye Hospital of Sri Lanka and the others. The main competitor of the
company is Asiri Hospital as it provides the similar services to consumers. Asiri Hospital is also
healthcare center which is owned by the Softlogic Group. Asiri Health comprises Asrisi Surgical
Hospital, Asiri Central Hospital, Asiri Hospital Matara, Asiri Medical Hospital, and Asiri
Laboratory Services. The threat level of competitors is high as there are many companies that
provide the similar services to consumers (Asiri Hospital, 2019).
Financial Analysis
According to the evaluation of ratio, it has been seen that the Lanka Hospital operate strongly as
per the financial terms. The financial data has been taken from the financial statement of the
organization. By using the financial report of the companies, the profitability ratio, working
capital ratio, Debt management, and liquidity ratio has been evaluated (Accounting Tools, 2018).
As per the financial ratio’s of the company, it has been found that the utilization of assets of
Lanka Hospital is high as compare to its competitor Asiri Hospital. It has been found that the

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percentage of asset utilization of Lanka Hospital is 77.89% in the year 2014 which is decreasing
with the passage of time. In the year 2018, the percentage of assets utilization is 67.26% which
depict the high percentage of gap between the 2014 and 2018 (Lanka Hospitals, 2014). The main
competitor of the hospital is Asiri Hospital. As per the evaluation of percentage of asset
utilization, it has been found that the percentage of assets utilization is increasing year by year
but it is less than the percentage of Lanka Hospital. The percentage of Asiri Hospital is 18.54%
in the year 2014 which is increasing by minor percentage in the year 2018 such as 2134% (Asiri
Hospital, 2018). According to the percentage of asset utlisation, it can be said that the Lanka
Hospital have more capability to pay all obligations.
The profitability ratio defines the capability of the company to generate the revenue. In the year
2014, the percentage of net margin is 12.75% which is increasing or decreasing every year. In
the year 2018, it has been evaluated that the percentage of ratio margin is increasing such as
18.32% (Lanka Hospitals, 2015). The ratio of net margin represent that the company low
capacity to generate the revenue as compare to its competitors. The net margin ratio of Asiri
Hospital is high as compare to Lanka Hospital. In the year 2014, the percentage of net margin is
43.38% which is high as compare to Lanka Hospital. The percentage of net margin of Asiri
Hospital is fluctuating every year but in the year 2018, the net margin percentage is decreasing
such as 33.71%. Although, the net margin of Asiri Hospital is decreasing but as compare to
Lanka Hospital the net margin percentage is high (Asiri Hospital, 2015).
The liquidity ratio states the capability of the organization to pay its all short term liabilities by
using its all assets. The liquidity position of Lanka Hospital is strong as the liquidity ratio is
effective. In the year 2014, current ratio is 2.2 which is increasing every year which states that
the strong liquidity position of the organization (Lanka Hospitals, 2017). The current ratio of the

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company is increasing from 2.2 to 2.6 in the year 2014 to 2018. By evaluating the current ratio of
Asiri Hospital, it has been seen that the current ratio is increasing or decreasing every year. In the
year 2014, the current ratio is 0.58 which is decreasing 0.27 in the year 2018. It has been
evaluated that Lanka Hospital has strong liquidity position as compare to Asiri Hospital
(Zainudin, and Hashim, 2016).
Efficiency ratio defines the length of time to pay or collect the amount from debtors or creditors.
The efficiency ratio contains the inventory, account receivable days ratio. As per the evaluation
of account receivables, it has been found that Asiri Hospital collects the amount of debtors in
less days such as 58.20 days but after that the collecting days is increasing by 82.03 due to
irresponsibility of the company (Asiri Hospital, 2017). In the year 2018, the collecting days is
decreasing which depict that the firm focuses on collecting the debtor’s amount due to which the
collecting days is decreasing. By comparing the Lanka Hospital with the Asiri Hospital, it has
been evaluated that Lanka Hospital is more effective in terms of collecting the debtor’s amount
as compare to Asiri Hospital. According to the ratio evaluation, it has been found that the
hospital receives the amount from its debtors in the 37.10 days in the year 2014 (Schroeder,
Clark, and Cathey, 2019). But the Lanka Hospital also receives the amount from debtors in more
days in the year 2018 such as 40 days. The difference between of days within the five years is
increasing. The increasing days of collecting the amount of debtors depict that the hospital gives
the healthcare services more on credit in 2018 as compare to the year 2014 (Asiri Hospital,
2014). It can be said that Lanka Hospital is more effective in terms of collecting or paying the
amount of debtors or creditors.
Investor Ratio states the financial information of the company to the investors so that they can
invest on it. Investor Ratio contains the return on equity and dividend payout ratio. According to

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the investor’s ratio, it has been found that the amount of total equity is increasing ever year from
2014 to 2018. In the year 2014, the value of equity is 455 in million which is increasing by 6037
in million. As increasing total equity, it can be said that the Lanka Hospital has enough amount
of capital as there are a lot of investors who invests in the Hospital (Lanka Hospitals, 2015). The
ratio of return on equity states that Lanka Hospital is increasing by 2018 which depict that the
ability of the hospital to pay its all return with the high profit Accounting Tools. (2018).. The
evaluation of Asiri Hospital, it has been found that the amount of total of equity of hospital is
fluctuating ever year from the year 2014 to 2018. The amount of total equity is 6783 in million in
the year 2014 which is increasing or decreasing within the five years. In 2018, the hospital has
7528 in million as the value of total equity which depict that the hospital has the ability to pay
the return to shareholders. As compare to the ratio of return on equity, it has been evaluated that
the hospital has the ability to pay the amount of returns to shareholders. The ratio of dividend
payout also defines the ability of the organization to pay the amount of dividend to the
preference shareholders. In the year 2014, the ratio of dividend is effective but it is decreasing by
0.21 in the year 2018 (Lanka Hospitals, 2016). The ratio of dividend payout of Asiri Hospital
reflects the strong position of the hospital to pay all its return to shareholder. The ratio of
dividend payout is 1.84 in the year 2014 which is decreasing by 0.04 in the year 2018. The ratio
depicts that the company pays the less amount to its shareholders which is affects its position in
the market (Little, 2019). By comparing the both hospital such as Lanka and Asiri Hospital, it
can be said that the Asiri invests the dividend amount in another side for development of the
hospital (Asiri Hospital, 2016).

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Companies Shares
From the above analysis and the evaluation of financial performance of the organization, it has
been found that the financial position of Asiri Hospital is stronger than the Lanka Hospital.
Lanka Hospital also has the strong ability to generate the revenue but it is observed that Asiri
Hospital is stronger in terms of financial position (Lanka Hospitals, 2018). By comparing the
ratio of return on total equity and dividend payout ratio, it is observed that the Asiri Hospital has
more ability to return on equity (Financial Times, 2019b).
It is difficult to take the decision of investing the amount or buy the shares in the hospital such as
Lanka and Asiri Hospital as the financial position of both hospital is effective and strong. If I
have an option to buy the shares than I will purchase the shares of Asiri Hospital as the financial
position of Asiri Hospital is stronger (Asiri Hospital, 2018). It is recommending that the person
has to invest in the company that has strong financial performance so that it can give the high
return to shareholders. It has been seen that the Asiri Hospital has the ability to pay its all return
with the profit. It is also observed that the Asiri Hospital increasing the value of total equity
every year which depict that the company pays the high amount of returns to shareholders
(Financial Times, 2019a).
Problems, limitations and assumptions’
While making this report, there are some problems that I have faced such as taking single
amount from the five years of financial annual report of both the companies. It is difficult to
compare the five years of financial data to analyze the financial position of the hospital in the
market. It has been assumed that there is no financial cost in Lanka Hospital due to which the
interest coverage ratio is not evaluated. It is also assumed that the financial report of Asiri

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Hospital have equal amount of total borrowing and total assets due to percentage of asset
financing is effective (Lanka Hospitals, 2014).
Conclusion
From the above discussion, it is concluded that the financial position of Lanka Hospital is strong
as it has strong capacity to generate the high revenue. As per the above analysis, it has been
found that the Asiri Hospital is the main competitor of Lanka Hospital. By comparing the
financial analysis of both the hospitals, it is observed that the Asiri Hospital has the more ability
to pay its all obligations and earns the high revenue. The efficiency ratio states that Asiri
Hospital collect the debtors amount in more time as compare to Lanka Hospital but the ability to
generate the revenue of the company is high. For taking a decision to buy the share of both the
companies, it has been seen that the financial position of Asiri Hospital is strong. I would like to
buy the share of Asiri Hospital as the value of total equity is increasing with every year. Asiri
Hospital to buy the share as it can provide the high amount of return on total equity.

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References
Accounting Tools. (2018) Comparability. [online] Available From:
https://www.accountingtools.com/articles/2017/5/5/comparability [Accessed 15/09/19].
Asiri Hospital. (2014) Annual Report 2014. [online] Available From:
http://www.asirihealth.com/imgup/pdf/finance/2014_report.pdf [Accessed 15/09/19].
Asiri Hospital. (2015) Annual Report 2015. [online] Available From:
http://www.asirihealth.com/imgup/pdf/finance/2015-report.pdf [Accessed 15/09/19].
Asiri Hospital. (2016) Annual Report 2016. [online] Available From:
http://www.asirihealth.com/imgup/pdf/finance/2016-report.PDF [Accessed 15/09/19].
Asiri Hospital. (2017) Annual Report 2017. [online] Available From:
http://www.asirihealth.com/imgup/pdf/finance/2017-report.pdf [Accessed 15/09/19].
Asiri Hospital. (2018) Annual Report 2018. [online] Available From:
http://www.asirihealth.com/imgup/pdf/finance/2018-report.pdf [Accessed 15/09/19].
Asiri Hospital. (2019) History. [online] Available From: http://www.asirihealth.com/asiri-
group/group-overview/history [Accessed 15/09/19].
Financial Times. (2019) Equities. [online] Available From:
https://markets.ft.com/data/equities/tearsheet/summary?s=ASIR.N0000:CSE [Accessed
15/09/19].

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Financial Times. (2019) Equities. [online] Available From:
https://markets.ft.com/data/equities/tearsheet/summary?s=LHCL.N0000:CSE [Accessed
15/09/19].
Lanka Hospitals. (2014) Annual report 2014. [online] Available From:
https://www.lankahospitals.com/wp-content/uploads/2017/03/Lanka-Hospitals-AR-2014.pdf
[Accessed 15/09/19].
Lanka Hospitals. (2015) Annual report 2015. [online] Available From:
https://www.lankahospitals.com/wp-content/uploads/2017/03/Lanka-Hospitals-AR-2015.pdf
[Accessed 15/09/19].
Lanka Hospitals. (2016) Annual report 2016. [online] Available From:
https://www.lankahospitals.com/wp-content/uploads/2017/02/The-Lanka-Hospitals-2016.pdf
[Accessed 15/09/19].
Lanka Hospitals. (2017) Annual report 2017. [online] Available From:
https://www.lankahospitals.com/wp-content/uploads/2018/04/The-Lanka-Hospitals-Corporation-
PLC-AR-2017.pdf [Accessed 15/09/19].
Lanka Hospitals. (2018) Annual report 2018. [online] Available From:
https://www.lankahospitals.com/wp-content/uploads/2019/05/ar2018_compressed.pdf [Accessed
15/09/19].
Lanka Hospitals. (2019) About Lanka Hospitals. [online] Available From:
https://www.lankahospitals.com/en/about-lanka-hospitals/ [Accessed 15/09/19].

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