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CORPORATION

Sheryl Villa Mae S. Apa


Jaya L. Arellano
John Zoren A. Hugo
Nervin D. Serquia
Marisol Tayko
Angela Kristine I. Tuazon

Prof. Ariel Pineda

1
I. COMPANY PROFILE
Historical Background
ABS-CBN Corporation (ABS-CBN or the Company) traces its roots from Bolinao
Electronics Corporation (BEC), established in 1946 as an assembler of radio transmitting equipment. In
1952, BEC adopted the business name Alto Broadcasting System (ABS) and 7 setting up the countrys
first television broadcast by 1953. On September 24, 1956, Chronicle Broadcasting Network (CBN),
owned by Don Eugenio Lopez Sr. of the Lopez family, was organized primarily for radio broadcasting.
In 1957, Don Eugenio Lopez Sr. acquired ABS and on February 1, 1967, the operations of ABS and
CBN were integrated and BEC changed its corporate name to ABS-CBN Broadcasting Corporation. On
August 16, 2010, the Philippine Securities and Exchange Commission (SEC) approved the change of
Companys corporate name to ABS-CBN Corporation. This change is a reflection of the Companys
diversified businesses in existing and new industries.
ABS-CBN achieved many firsts since it started the television industry in the country in 1953. However,
with the imposition of martial law in September 1972, ABS-CBN ceased operations as the government
forcibly took control of the Company. ABS-CBN resumed commercial operations in 1986 after the
People Power or EDSA revolution.
Recovery after 14 years of absence was difficult as resources were scarce. Nevertheless, through
relentless effort, ABS-CBN recaptured leadership in the Philippine television and radio industries by
1988. During the 1990s and the early part of the new millennium, the Company expanded and ventured
into complementary businesses in cable TV, international distribution, mobile services, and magazine
publishing among others.

Corporate Information
ABS-CBN Corporation (ABS-CBN or Parent Company) was incorporated in the Philippines
on July 11, 1946. On July 27, 1994, the Philippine Securities and Exchange Commission (SEC)
approved the extension of the corporate term of the Parent Company for another 50 years. The Parent
Companys core business is television and radio broadcasting. Its subsidiaries and associates are
involved in the following related businesses: cable and direct-to-home (DTH) television distribution

2
and telecommunications services overseas, movie production, audio recording and distribution,
video/audio post production and film distribution. Other activities of the subsidiaries include
merchandising, internet and mobile services, publishing, money remittance and theme parks.
The Parent Company is 79%-owned by Lopez, Inc. a Philippine entity, the ultimate Parent
Company.
In 2013, Capital International Private Equity Fund VI, L.P. (CIPEF) subscribed to P2.5 billion
worth of new Philippine Depository Receipts (PDRs) issued by ABS-CBN Holdings Corporation (ABSCBN Holdings) which in turn subscribed to the same number of newly issued common shares of the
Parent Company. Lopez, Inc. also subscribed to 34,702,140 common shares and 987,130,246 preferred
shares of the Parent Company in 2013. After the subscription, Lopez, Inc.s economic interest in the
Parent Company decreased to 56% while its voting rights increased from 57% to 79%.
The common shares of ABS-CBN were listed beginning July 8, 1992 and have been traded in
the Philippine Stock Exchange (PSE) since then.
The registered office address of the Parent Company is ABS-CBN Broadcast Center, Sgt.
Esguerra Avenue corner Mother Ignacia St., Quezon City.
The accompanying consolidated financial statements were approved and authorized for issuance by the
Board of Directors (BOD) on March 5, 2015.

ABS-CBN CORPORATION AND SUBSIDIARIES


STATEMENTS OF INCOME
(Amounts in Thousands)
Years Ended December 31

VERTICAL ANALYSIS
2013

HORIZONTAL ANALYSIS

2014

Increase/(Decrease)

Amount

Amount

Amount

19,331,90
8
13,287,24
5

57.9
2
39.8
1
1.73
5
0.53
8

18,879,94
6
14,029,68
4

56.28
5
41.82
5

-451,962

-2.337906843

742,439

5.587606761

351,528

1.048
0.842
1

-227,612

-39.30172324

102,859

57.26765065

100

165,724

0.496508109

11,007,656

32.82

-491,709

-4.275966543

9,045,527

26.97

192,087

2.169631239

201,993
13,288,45
2

0.602

-128,036

-38.79537859

39.62

593,382

4.674113652

10,113,904

30.15

499,548

5.195855032

1,165,313

3.474

348,394

42.64731265

94,438

28.8
2.44
7
0.28
3

153,968

0.459

59,530

63.03606599

-145,500

-0.44

-31,704

-0.09

113,796

-78.21030928

-12,397

-0.04

3,283

0.01

15,680

-126.4822134

1.945

140,030

27.33241985

REVENUE
Advertising revenue
Sale of services
Sale of goods
Others

PRODUCTION COSTS

579,140
179,611
33,377,90
4
11,499,365

COST OF SERVICES

8,853,440

COST OF SALES
GROSS PROFIT

330,029
12,695,07
0

GENERAL AND ADMINISTRATIVE EXPENSES

9,614,356

FINANCE COST
INTEREST INCOME
FOREIGN EXCHANGE GAINS (LOSSES)-net
EQUITY IN NET EARNINGS (LOSSES) OF
ASSOCIATES AND VENTURES
LOSS ON SALE OF INVESTMENTS
OTHER INCOME
INCOME BEFORE INCOME TAX
PROVISION FOR INCOME TAX
NET INCOME

II. FINANCIAL ANALYSIS

816,919

100
34.4
5
26.5
2
0.98
9
38

282,470
33,543,62
8

512,322

1.53
5

652,352

2,712,658

8.13

2,787,134

8.31

74,476

2.745499064

684,311

2.05

756,998

2.257

72,687

10.62192483

2,028,347

6.08

2,030,136

6.05

1,789

0.088199899

ABS-CBN CORPORATION AND SUBSIDIARIES


STATEMENTS OF FINANCIAL POSITION

(Amounts in Thousands)
Years Ended December 31

VERTICAL ANALYSIS
2013

HORIZONTAL ANALYSIS

2014

Amount

Cash and cash equivalents

10,616,855

Trade and other receivables

Increase/(decrease)

Amount

Amount

18.2

13,238,377

19.69

2,621,522

24.6921

8,333,761

14.29

10,717,317

15.94

2,383,556

28.6012

Program rights and other intangible assets

1,385,972

2.376

1,315,987

1.96

-69,985

-5.04952

Other current assets

3,046,886

5.224

3,669,314

5.46

622,428

20.4283

23,383,474

40.09

28,940,995

43.04

5,557,521

23.7669

18,535,905

31.78

20,572,543

30.60

2,036,638

10.9875

Program rights and other intangible assets - net of current portion

5,429,192

9.308

6,465,599

9.62

1,036,407

19.0895

Goodwill

5,288,350

9.066

5,289,956

7.87

1,606

0.03037

Available-for-sale (AFS) investments

219,191

0.376

242,368

0.36

23,177

10.5739

Investment properties

196,916

0.338

198,734

0.296

1,818

0.92324

ASSETS
Current Assets

Total Current Assets


Noncurrent Assets
Property and equipment

Investments in associates and joint ventures

166,591

0.286

199,874

0.297

33,283

19.9789

Deferred tax assets - net

2,530,164

4.338

2,858,187

4.251

328,023

12.9645

Other noncurrent assets

2,580,033

4.423

2,468,564

3.671

-111,469

-4.32045

34,946,342

59.91

38,295,825

57

3,349,483

9.58465

58,329,816

100

67,236,820

100

8,907,004

15.27

11,332,006

19.43

12,788,120

19.02

1,456,114

12.8496

Income tax payable

193,216

0.331

292,053

0.434

98,837

51.1536

Obligations for program rights

448,861

0.77

724,266

1.077

275,405

61.3564

1,345,471

2.307

110,751

0.165

-1,234,720

-91.7686

13,319,554

22.83

13,915,190

20.7

595,636

4.47189

13,334,579

22.86

20,214,484

30.06

6,879,905

51.5945

276,344

0.474

224,472

0.334

-51,872

-18.7708

4,191,082

7.185

4,790,813

7.125

599,731

14.3097

Deferred tax liabilities - net

637,533

1.093

587,654

0.874

-49,879

-7.82375

Convertible note

245,195

0.42

190,522

0.283

-54,673

-22.2978

Other noncurrent liabilities

402,772

0.691

438,857

0.653

36,085

8.95916

19,087,505

32.72

26,446,802

39.33

7,359,297

38.5556

32,407,059

55.6

40,361,992

60

7,954,933

24.547

Common

872,124

1.495

872,124

1.297

Preferred

200,000

0.343

200,000

0.297

4,495,050

7.706

4,495,050

6.685

-270,632

-0.46

-456,773

-0.68

-186,141

68.7801

121,766

0.209

143,281

0.213

21,515

17.6691

34,349

0.059

34,349

0.051

19,817,957

33.98

21,363,395

31.77

1,545,438

Total Noncurrent Assets


TOTAL ASSETS

LIABILITIES AND EQUITY


Current Liabilities
Trade and other payables

Interest-bearing loans and borrowings


Total Current Liabilities
Noncurrent Liabilities
Interest-bearing loans and borrowings - net of current portion
Obligations for program rights - net of current portion
Accrued pension obligation and other employee benefits

Total Noncurrent Liabilities


TOTAL LIABILITIES

Equity Attributable to Equity Holders of the Parent Company


Capital stock

Additional paid-in capital


Exchange differences on translation of foreign operations
Unrealized gain on AFS investments
Share-based payment plan
Retained earnings

0
7.79817

III. FINANCIAL RATIOS 2013


A. Liquidity Ratios
a. Current Ratio=

b. Acid-test ratio =
= 1.42

total current assets


total current liabilities
total quick assets
total current liabilities

23,383,474,000
= 13,319,554,000

= 1.76

10,616, 855,000+8,333,761,000
13,319,554,000

net credit sales


ave . trade receivables

c. Receivable turnover =

33,377,904,000
2,239,244,000+ 8,333,761,000

d. Collection Period =

e. Inventory turnover =

= 3.16

360 days
receivableturnover

360
3.16

Cost of goods sold


average inventory

20,682,834
262,221

f. Inventory sales period =

g. Payable turnover =

360 days
inventory turnover

= 113 days

360
79

= 5 days

net credit purchases


average trade payables

5,189,200
1,929,302

360 days
payable turnover

360
2.69

h. Payable payment days =

= 79

= 2.69

= 134 days

i. Operating turnover = collection period + inventory days = 113 + 5 = 118 days


j. Cash turnover =

cash operating expenses


average cash balance

k. Days to operating expenses =

l. Working capital turnover =

m. Assets turnover =

9,614,356
8,505,896.5

= 1.13

360
1.13

= 319 days

360 days
=
cash turnover
net sales
average working capital

net sales
average total assets

n. Current assets turnover =

= =

7,925,357
57,992,081

net sales
total current liabilities

==

7,925,357
13,513,769

= 0.57

= 14%
7,925,357
13,319,554

= 0.60

o. Net working capital = Current assets- current liabilities = 23,383,474 13,319,554


= 10,981,207

B. Solvency Ratios

a. Debt Ratio = =

total liabilities
total assets

b. Debt-to-equity ratio = =

c. Equity ratio

= =

32,407,059
58,329,816

total liabilities
total shareholde r ' sequity

total shareholde r ' sequity


total assets

d. Times interest earned

= =

= 0.56

= =

32,407,059
25,922,757

25,992,757
58,329,816

net income before interest taxes


interest expense

= 1.25

= 0.44

1995764
716,894

2.78
e. Fixed assets to non-current debts=

assets(net )
total noncurrent liabilities

29,616,954
19,087,505

= 1.55
f. Fixed assets to shareholders equity =

assets(net )
shareholde r ' s equity

29,616,954
25,922,757

1.14
g. Fixed assets to total equity =

assets(net )
total assets

18,535,905+5,288,350+5,429,192+196,916+166,591
57,992,081

= 0.51

C. Profitability Ratios
a. Gross profit rate

gross profit
net sales

b. Operating profit margin =

12,695,070
33,377,904

operating profit
net sales

net profit
c. Net profit margin = net sales

2,028,347
= 33,337,904

= 0.38 or 38%

3,080,714
33,377,904

= 0.09 or 9.22%

= 0.0608 or 6.08%

operating income
average total assets

d. Return on investment =

e. Return on shareholders equity =

3,080,714
58,329,816

net income
'
ave . shareholde r sequity

= 0.53 or 5.3%
2,028,347
25,922,757

0.08
net income+interest expense , net of tax
average total asset

f. Return on total assets =

3,052,305
58,329,816

= 0.05
net income
average current assets

g. Return on current asset =

2,028,i347
23,383,474

= 0.09

D. Growth Ratios
a. Basic Earnings per Share =
net income attributable

common equity shareholders of the parent company


weighted average of shares outsatnding
2,142,392
=2.68
799,828,863
b. Diluted Earnings per share = the company has no dilutive potential common shares
outstanding, therefore basic EPS is the same as diluted EPS.

c. Price Earnings per Ratio =

( net income preferred dividends )


]
outstanding common shares
Earnings per Share

2,028,347200,000
]
872,124
2.096
=
=0.78
2.68
2.68

d. Dividend Payout Ratio =

e. Dividend Yield Ratio =

0.40
=0.149
2.68
0.40
=0.19
2.096

f. Dividend per Share =

dividend paid
296,563
=
=0.40
ord . shares outstanding 779,584,602
'

g. Book Value per Share =

shareholde r s equity
25,922,757
=
=13.8
ave . shares outstanding 1,872,123,642

IV. FINANCIAL RATIOS 2014


A. Liquidity Ratios
a. Current Ratio=

b. Acid-test ratio =

total current assets


total current liabilities
total quick assets
total current liabilities

c. Receivable turnover =

28,940,995
= 13,915,190

net credit sales


ave . trade receivables

= 2.08

13,238,377+ 10,717,317
13,915,190

33,543,628
9,525,539

= 1.72

= 3.52

10

d. Collection Period =

e. Inventory turnover =

360 days
receivableturnover

360
3.52

Cost of goods sold


average inventory

20,255,176
403,291.5

f. Inventory sales period =

g. Payable turnover =

360 days
inventory turnover

h. Payable payment days =

360
50

net credit purchases


average trade payables

= 102 days

= 50.22

= 7 days

20,837,317
12,060,063

360
1.73

360 days
payable turnover

= 1.73

= 208 days

i. Operating turnover = collection period + inventory days = 102 + 7 days = 109 days
j. Cash turnover =

cash operating expenses


average cash balance

k. Days to operating expenses =

l. Working capital turnover =

10,113,904
11,927,616

360 days
cash turnover

360
0.85

net sales
average working capital

= 0.85

= 423 days

= =

33,543,628
12,544,862.5

2.67

m. Asset turnover =

net sales
average total assets

n. Current assets turnover =

33,543,628
62,783,318

net sales
total current liabilities

==

= 0.53
33,543,628
13,915,190

= 2.41

o. Net working capital = Current assets- current liabilities = 28,940,995 13,915,190 =


15,025,805
B. Solvency Ratios

11

a. Debt Ratio = =

total liabilities
total assets

b. Debt-to-equity ratio = =

40,361,992
67,236,820

= .60 or 60%

total liabilities
'
total shareholde r sequity

40,361,992
26,874,828

= 1.5 or

150%
c. Equity ratio

total shareholde r ' sequity


total assets

d. Times interest earned

26,874,828
67,236,820

net income before interest taxes


interest expense

= .40 or 40%

1763176
1023958

= 1.72

or 172%
e. Fixed assets to non-current debts=

assets(net )
total noncurrent liabilities

32,726,706
26,446,802

= 1.24 or 124%

f. Fixed assets to shareholders equity =

assets(net )
shareholde r ' s equity

32,726,706
26,874,828

1.22 or 122%
g. Fixed assets to total equity =

assets(net )
total assets

32,726,706
67,236,820

= .49 or 49%

C. Profitability Ratios
a. Gross profit rate

gross profit
net sales

b. Operating profit margin =

13,288,452
33,543,628

operating profit
net sales

net profit
c. Net profit margin = net sales

2,030,136
= 33,543,628

= 0.40

3,174,548
33,543,628

= 0.06

= 0.946

12

d. Return on investment =

operating income
average total assets

e. Return on shareholders equity =

3,174,548
62,783,318

net income
'
ave . shareholde r sequity

= 0.506
2,030,136
26,874,828

0.08
f. Return on total assets =
2,747,630
62,783,318

net income+interest expense+ net of tax


average total asset

= 0.04

g. Return on current asset =

net income
average current assets

2,030,136
26,162,234.5

= 0.08

D. Growth Ratios
a. Basic Earnings per Share =

net income attributable

common equity shareholders of the parent company


weighted average of shares outsatnding

2,383,418
=2.8672.87
831,220,288
b. Diluted Earnings per share = the company has no dilutive potential common shares
outstanding, therefore basic EPS is the same as diluted EPS.

c. Price Earnings per Ratio =

( net income preferred dividends )


]
outstanding common shares
Earnings per Share

2,030,136200,000
]
872,124
2.098
=
=0.73
2.87
2.87

13

d. Dividend Payout Ratio =

e. Dividend Yield Ratio =

f. Dividend per Share =

0.59
=0.21
2.87
0.59
=0.28
2.098

dividend paid
514,600
=
=0.59
ord . shares outstanding 872,124
'

g. Book Value per Share =

shareholde r s equity
26,874,828,000
=
=14.5
ave . shares outstanding 1,872,123,642

V. INTERPRETATIONS
VERTICAL AND HORIZONTAL ANALYSIS OF INCOME STATEMENT
The Vertical Analysis of Income Statement shows the proportion of individual accounts such as
all costs, expenses, income, losses or gains, other income and net income to the gross sales. Therefore, the
gross sales is used as the base and all of other components stated are shown as a percentage of sales. On
the other hand, the Horizontal Analysis of the ABS-CBNs Statement of Income shows changes in the
amounts of each item on the statement over the period of two years. The gross sales in 2014 increased by
P165,724,000 which constitutes a .497% increase after a year. A large portion of this amount came from
the advertising revenue which constitutes more than half of the gross sales for the two periods. The gross
profit of the network increased by P590,382,000 because of the reduction of costs of production, services
and sales by 1.62%. The pre-operating income increased by P74,476,000 or a percentage change of 2.745.
The increase of this account happened because of large increase of interest income by 63.04% and the
decrease of foreign exchange losses by P113,796,000. Also, the Associates and Ventures, and other
income increased in 2014. Finally, the net income of ABS-CBN in 2014 increased by P1,789,000.
Although the provision for income tax increased by 2.257%, still it resulted to a more amount of net profit
since the pre-operating income of 2014 is more than that of 2013. Indeed, the ABS-CN Corporation and
Subsidiaries made a better performance for 2014.
VERTICAL AND HORIZONTAL ANALYSIS OF BALANCE SHEET

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The vertical analysis of financial position shows the proportion of each line item on the statement
to the amount of total assets. Hence, the total assets or the sum of liabilities and equity is used as the base
and the individual account in the statement is shown as percentage of total assets or sum of liabilities and
equity.
Similar in the statement of income, the horizontal analysis shows the changes or trends in each account of
the balance sheet. All in all, the current assets increased by P5,557,521,000 or a 23.77% change. The large
portion of this amount came from cash and cash equivalents which also increased by P2,621,522,000.
However, trade and other receivables increased by P2,383,556. Since the cash increased along
with the increase of receivables, it can be inferred that the cash available is idle. In addition, the amount in
program rights and other intangible assets decreased by P69,985,000. This happened may be, some of the
TV programs of the network marked poor ratings in 2014. Under the non-current section of assets, there is
an increase of property, plant and equipment by P2,036,638,000. It may indicate that the network invest
more properties that would help them to be more profitable after a year. All in all, the noncurrent assets of
the network increased by P3,349,483,000 due to the acquisition of property, plant and equipment.
Under the liability section of financial position, the trade other payables increased by 12.85%. The
possible reason of this is there is an increase of short-term borrowings made by the network. The big
portion of the total amount of noncurrent liabilities came from the interest-bearing loans and borrowings,
which may indicate that there is high rate of interest of the long-term borrowings every month that are
accumulated around a year.
Finally, the equity part of the balance sheet shows no significant difference on common and
preferred shares since amounts there are no changes in the amount of these accounts in the two periods.
The big amount comprising this part goes to retained earnings since income of the network is reflected on
this account. Since the network became profitable in its operation in 2014, the retained earnings increased
by P1,545,438 with percentage of 7.798%
LIQUIDITY RATIOS

15
The current ratio is a liquidity ratio that measures a companys ability to pay short term and
long-term obligations. The current ratio of statement of financial position of ABS-CBN in the year 2013 is
1.76 and increased by 2.08 in a year 2014, it indicates that company is continuous to have a greater assets
than its liabilities and suggests that the company is stable to pay off its obligation.
The acid-test ratio is a strong indicator whether a firm has sufficient short-term assets to cover
its immediate liabilities. The acid-test ratio of statement of financial position of ABS-CBN in a year 2013
is 1.42 and increased by 1.72 in a year 2014; since they are both lower than their current ratio it means
that the current asset of the company is highly dependent on inventory. Moreover, the company does have
the liquid assets to pay their current liabilities.
The receivable turnover, it indicates the efficiency of collection of receivables. The receivable
turnover of the statement of financial position of ABS-CBN in a year 2013 is 3.16 and increased by 3.52
in a year 2014; it implies that the company has greater collection of accounts receivable in a prior year
than the previous year.
The collection period, it determines the average duration of accounts receivable during a year.
The collection period based on the balance sheet of ABS-CBN in 2013 is 113 days and then drop to 102
days in 2014; it is good for the company because they are able to collect their receivable in a short period
of time compared to the previous year.
The inventory turnover is a ratio showing how many times a company's inventory is sold and
replaced over a period. The inventory turnover of ABS-CBN during 2013 and 2014 are 79 and 50.22
respectively, since it is diminished the sales of the company must have been weakened so that it is
unfavorable to the company because the number of products deteriorate are increased as they sit in a
warehouse.
The inventory sales period is a financial measure of a company's performance that gives
investors an idea of how long it takes a company to turn its inventory into sales. The inventory sales
period of ABS-CBN in a year 2013 is 5 days and increased by 7 days in a year 2014. It is unfavorable to
the company because it takes longer than previous year to generate profit using their inventory.

16
The payable turnover, it short-term liquidity measure used to quantify the rate at which a
company pays off its suppliers. The payable turnover of ABS-CBN from year 2013 to 2014 is 269 to 173
respectively, since the ratio is lowered, it is unfavorable for the company because it is the sign that the
company is taking longer to pay off its supplier than It was before.
The payable payment days tells how long it takes a company to pay its invoices from trade
creditors, such as suppliers. The payable payment days of ABS-CBN from year 2013 to 2014 is 134 to
208 respectively, since it is increased, it is both favorable and unfavorable for the company. Favorable
because the company has more money on hand from which is good for the working capital and free cash
flow. Unfavorable because if the company takes too long to pay its creditors, they will be unhappy. They
may refuse to extend credit in the future, or they may offer less favorable terms.
The Operating turnover, it indicates the number of day cash is invested until the day of its
recovery. The operating turnover of ABS-CBN from year 2013 to 2014 is 109 to 118 respectively, it is
good for the company because the earlier they invest cash the earlier the cash is to be recovered.
The cash turnover measures how many times per year it replenishes its cash balance with its
sales revenue. The cash turnover of ABS-CBN from 2013 to 2014 is 1.13 to 0.85 respectively, since it is
decreased, it is unfavorable for the company because they turn over their cash balance less times per year
and take longer days to replenish it.
The Days to operating expenses it is a measure of what it costs to operate a piece of property
compared to the income that the property brings in. The days to operating expenses from year 2013 to
2014 is 319 and 423 respectively, it is unfavorable because it takes longer time pay their operating
expenses in a current year than it was before.
The working capital turnover, It is the measurement of comparing the depletion of working
capital to the sales over a given period. The working capital turnover of ABS-CBN during 2013 is 0.57.
Obviously, the company is not generating a lot of sales compared to the money it uses to fund the sales.

17
The ABS-CBN net working capital during 2013 is 10,981,207. The firm uses its net working
capital to fund operations and purchase inventory, the higher the working capital the higher the
opportunity to generate profit.
SOLVENCY AND LEVERAGE RATIOS
The debt ratio is a financial ratio that measures the extent of a companys or consumers
leverage. The debt ratio of ABS CBN during 2013 and 2014 are 56:1 and 60:1 respectively. It indicates
that the company have more assets than debt during those years. Therefore, the company has more
leveraged at the same time implying greater financial risk and probably they find expensive to borrow. A
very low debt ratio is good in the sense that the companys assets are sufficient to meet its obligations; it
may indicate underutilization of a major source of finance which may result in restricted growth. A very
high debt ratio indicates high risk for both debt-holders and equity investors. Due to the high risk, the
company may not be able to obtain finance at good terms or may not be able to raise any more money at
all.
The debt-to-equity ratio, it is a debt ratio used to measure a companys financial leverage. The
debt-to-equity ratio of ABS-CBN during 2013 and 2014 are 1.25 and 1.50 respectively. Lower values of
debt-to-equity ratio are favorable indicating less risk. Higher debt-to-equity ratio is unfavorable because it
means that the business relies more on external lenders thus it is at higher risk, especially at higher
interest rate. As a result, 2013 is more favorable than 2014.
The equity ratio is used to measure a companys financial leverage. The equity ratio of ABSCBN during 2013 is 44% and 40% in 2014. Therefore, the equity ratio in 2013 is more favorable than
2014. Higher investment levels by shareholders shows potential shareholders that the company is worth
investing in since so many investors are willing to finance the company. A higher ratio also shows
potential creditors that the company is more sustainable and less risky to lend future loans. Companies
with higher equity ratios should have less financing and debt service costs than companies with lower
ratios.

18
The times interest ratio measures a firm's ability to make interest and debt service payments.
The time interest ratios of ABS CBN during 2013 and 2014 are 2.78 and 1.72 respectively. It shows that
ABS CBN is more favorable in 2013 than 2014. Higher value of times interest earned ratio is favorable
meaning greater ability of a business to repay its interest and debt. Lower values are unfavorable.

Fixed assets to non-current debts indicate the percentage of investment in fixed assets
financed from non-current debt. The percentage of fixed assets to non-current debts of ABS-CBN
in a year 2013 is 155% but in a year 2014 it decreased by 124%, it means that the fixed assets
investment arises from non-current portion of liabilities has been reduced which is favorable to
the company because they minimized their long-term debt.
Fixed assets to shareholders equiy indicate the percentage of investment in fixed assets
by shareholders. The percentage of investment in fixed assets to shareholders equity of ABSCBN from year 2013 to 2014 is 114% and 122% respectively; since it increased it means that
some of the shareholders invested additional fixed assets to the company by use of their shares. It
is good for the company because their total assets have increased. However, the company has to
pay more dividends to the shareholders.
Fixed assets to total equity indicate the percentage of investment in fixed assets. The
percentage of investment in fixed assets to total equity of ABS-CBN in a year 2013 is 51% but in
2014 it decreased by 49%, it implies there was a depreciation that reduced the value of their
fixed assets. It is good for the company because they could generate profit by using their fixed
asset but since its value has reduced their total assets also decreases.

PROFITABILITY RATIO
The gross profit rate shows the proportion of profits generated by the sale of products or
services, before selling and administrative expenses. It is used to examine the ability of a business to

19
create sellable products in a cost effective manner. The gross profit rate of ABS-CBN in 2013 reaches to
13% lesser than the rate in 2014 which is 40%. This only shows that the company will have more money
to pay in operating expenses like salaries, utilities, and rent. Since this ratio measures the profits from
selling inventory, it also measures the percentage of sales that can be used to help fund other parts of the
business.
The operating profit margin of ABS-CBN in 2013 is 9.22% and 9.46% in 2014. This means that
the percentage of their profit increase. This indicates that the management is able to control the
companys operating expenses.
The net profit margin of ABS-CBN in 2013 is 6.08 % the same in 2014 which is also 6.05%. It
decreases which means that the cost increases.
The return on investment of ABS-CBN in 2013 is 5.3% and in 2014 5.06%. This is not
favorable because every one peso in 2013 and 2014, the return on investment are 5.3 centavos and 5.06
centavos respectively.
The return on shareholders equity of ABS-CBN in 2013 is 3% and 8% in 2014 which may
indicate that there is improvement in terms of financial operation.
The return on total assets of ABS-CBN in 2013 is 4% and 5% in year 2014. This only shows
that their operating income and usage of assets increases. The return for year 2013 is 4 cents for every one
peso of investment and 5 cents in year 2014.
The return on current asset of ABS-CBN in 2013 is 9% and 8% in 2014 which indicates
decrease in returning the resources in current assets cause by gradual decreasea in operating or increase in
costs and expenses incurred.

GROWTH RATIO

20

The basic earnings per share of ABS-CBN in 2014 is 2.87% higher than in 2013 which
is 2.68%. This indicates that the company is capable of generating a significant dividend for
investors. Moreover, the company has a potentially worthwhile investment depending on the
market price of the stock.
The price earnings per ratio of ABS-CBN in 2014 is 7.3% lesser than in 2013 which is
7.8%. This is an indication of poor current and future performance. This could also prove to be a
poor investment.
The dividend payout ratio of ABS-CBN in 2014 is 2.1% and 1.5% in 2013. It increases
by 6%. A high ratio does not mean that much. Investors are mainly concerned with sustainable
trends. For instance, investors can assume that a company has a payout ratio of 20% for the last
ten years will continue giving 20 percent of its profit to shareholders.
The dividend yield ratio of ABS-CBN in 2014 is 2.8% higher than in 2013 which is
1.9%. This indicates that the company pays its investors a large dividend compared to the fair
market value of the stock. This means that the investors are getting highly compensated for their
investments compared with lower dividend yielding stocks.
The dividend per share of ABS CBN in 2014 is 5.9%. It increases by 1.9% compared
in 2013 which is 4%. This shows that there is an increase in the companys net profits out of
which dividends are paid. There may also be a shift in the companys growth strategy that leads
the company to decide to expend less of its earnings in seeking growth and expansion, thus
leaving a larger share of profits available to be returned to equity investors in the form of
dividends.
The book value per share of ABS-CBN in 2014 is 14.5% higher than in 2013 which is
13.8%. This shows that there is an appraisal and the net worth of the company increases.
VI. CONCLUSION AND RECOMMENDATION

21

Based on our analysis, year 2014 is the better year with a better position for ABS-CBN
Corporation. The operation performance of the company increases gradually. The liability and
equity both increases. The equity for 2013 and 2014 are P25,922,757 and 26,874, 828 while the
liability for 2013 and 2014 are 32,407,059 and 40,361,992. Even though their liabilities
increased, it may imply that creditors trust the company for them to pay on time because of their
improving operating performance. Our group conclude that ABS-CBN corporation is financially
stable.
We recommend that they continue their operations and still find ways to improve to
generate more income and to strengthen the trust and support of their consumers, creditors and
investors. They find ways to lessen cost while not sacrificing their performance to continually
improve their financial condition.

22

APPENDIX

ABS-CBN CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts in Thousands)
December 31
2014

2013

P=13,238,377
10,717,317
1,315,987
3,669,314
28,940,995

P=10,616,855
8,333,761
1,385,972
3,046,886
23,383,474

20,572,543

18,535,905

6,465,599
5,289,956
242,368
198,734
199,874
2,858,187
2,468,564
38,295,825

5,429,192
5,288,350
219,191
196,916
166,591
2,530,164
2,580,033
34,946,342

P=67,236,820

P=58,329,816

P=12,788,120
292,053
724,266
110,751
13,915,190

P=11,332,006
193,216
448,861
1,345,471
13,319,554

20,214,484
224,472
4,790,813
587,654
190,522
438,857
26,446,802
40,361,992

13,334,579
276,344
4,191,082
637,533
245,195
402,772
19,087,505
32,407,059

ASSETS
Current Assets
Cash and cash equivalents (Note 6)
Trade and other receivables (Notes 7 and 22)
Program rights and other intangible assets (Note 11)
Other current assets (Note 8)
Total Current Assets
Noncurrent Assets
Property and equipment (Notes 9, 10, 17 and 30)
Program rights and other intangible assets - net of current portion
(Note 11)
Goodwill (Notes 4 and 15)
Available-for-sale (AFS) investments (Note 12)
Investment properties (Notes 9, 10 and 17)
Investments in associates and joint ventures (Note 13)
Deferred tax assets - net (Note 28)
Other noncurrent assets (Note 14)
Total Noncurrent Assets
TOTAL ASSETS

LIABILITIES AND EQUITY


Current Liabilities
Trade and other payables (Notes 16, 22 and 29)
Income tax payable
Obligations for program rights (Note 18)
Interest-bearing loans and borrowings (Notes 9, 10 and 17)
Total Current Liabilities

Noncurrent Liabilities
Interest-bearing loans and borrowings - net of current portion
(Notes 9, 10 and 17)
Obligations for program rights - net of current portion (Note 18)
Accrued pension obligation and other employee benefits (Note 29)
Deferred tax liabilities - net (Note 28)
Convertible note (Note 19)
Other noncurrent liabilities (Note 20)
Total Noncurrent Liabilities
Total Liabilities
(Forward)

-2-

December 31
2014
Equity Attributable to Equity Holders of the Parent Company
Capital stock (Note 21):
Common
Preferred
Additional paid-in capital (Notes 2, 4 and 21)
Exchange differences on translation of foreign operations
Unrealized gain on AFS investments (Note 12)
Share-based payment plan (Note 21)
Retained earnings (Note 21)
Philippine depository receipts convertible to common shares (Note 21)
Equity attributable to Equity Holders of the Parent
Noncontrolling Interests (Notes 4 and 23)
Total Equity
TOTAL LIABILITIES AND EQUITY
See accompanying Notes to Consolidated Financial Statements.

P=872,124
200,000
4,495,050
(456,773)
143,281
34,349
21,363,395
(1,264,096)
25,387,330
1,487,498
26,874,828
P=67,236,82
0

2013
P=872,124
200,000
4,495,050
(270,632)
121,766
34,349
19,817,957
(1,164,146)
24,106,468
1,816,289
25,922,757
P=58,329,816

ABS-CBN CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Per Share Amounts

Years Ended December 31


2014
REVENUE
Advertising revenue (Note 22)
Sale of services (Note 30)
Sale of goods (Note 22)
Others
PRODUCTION COSTS
(Notes 9, 11, 22, 24, 29 and 30)
COST OF SERVICES
(Notes 8, 9, 11, 14, 22, 25, 29 and 30)
COST OF SALES (Notes 8, 9, 22, 25, 29 and 30)
GROSS PROFIT
GENERAL AND ADMINISTRATIVE EXPENSES
(Notes 7, 8, 9, 10, 11, 21, 22, 26, 29 and 30)
FINANCE COSTS (Note 17, 19 and 27)

2013

2012

P=18,879,946
14,029,684
351,528
282,470
33,543,628

P=19,331,908
13,287,245
579,140
179,611
33,377,904

P=16,611,731
11,827,501
421,079
123,329
28,983,640

(11,007,656)

(11,499,365)

(10,555,162)

(9,045,527)

(8,853,440)

(8,061,381)

(201,993)

(330,029)

(292,095)

13,288,452

12,695,070

10,075,002

(10,113,904)

(9,614,356)

(8,221,168)

(1,165,313)

(816,919)

(816,701)

INTEREST INCOME (Notes 6 and 22)

153,968

94,438

119,672

FOREIGN EXCHANGE GAINS (LOSSES) - net

(31,704)

(145,500)

111,784

3,283

(12,397)

EQUITY IN NET EARNINGS (LOSSES) OF


ASSOCIATES AND JOINT VENTURES (Note 13)

(58)

LOSS ON SALE OF INVESTMENTS (Note 12)

OTHER INCOME - net (Notes 14, 19, 27 and 30)

652,352

512,322

788,099

2,787,134

2,712,658

2,031,849

756,998

684,311

413,950

INCOME BEFORE INCOME TAX


PROVISION FOR INCOME TAX (Note 28)
NET INCOME
Attributable to
Equity holders of the Parent Company (Note 33)
Noncontrolling interests

Basic/Diluted Earnings per Share Attributable


to Equity Holders of the Parent Company (Note 33)
See accompanying Notes to Consolidated Financial Statements.

(24,781)

P=2,030,136

P=2,028,347

P=1,617,899

P=2,387,085
(356,949)
P=2,030,136

P=2,145,725
(117,378)
P=2,028,347

P=1,580,623
37,276
P=1,617,899

P=2.867

P=2.678

P=2.132

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


(Amounts in Thousands)

Years Ended December 31


2014
NET INCOME
OTHER COMPREHENSIVE INCOME (LOSS)
Other comprehensive income (loss) not to be reclassified
to profit and loss in subsequent periods:
Remeasurement gain (loss) on defined benefit plan
(Note 29)
Income tax effect

P=2,030,136

2013
P=2,028,347

2012
P=1,617,899

(478,239)
143,472
(334,767)

639,129
(191,739)
447,390

(130,921)
39,276
(91,645)

(186,141)

367,657

(279,753)

21,515
(164,626)

(4,910)
362,747

6,853
(272,900)

(499,393)

810,137

(364,545)

Other comprehensive income (loss) to be reclassified to


profit and loss in subsequent periods:
Exchange differences on translation of foreign
operations
Unrealized fair value gain (loss) on AFS
investments - net (Note 12)

OTHER COMPREHENSIVE INCOME (LOSS)


TOTAL COMPREHENSIVE INCOME
Attributable to:
Equity holders of the Parent Company
Non-controlling interests

See accompanying Notes to Consolidated Financial Statements.

P=1,530,743

P=2,838,484

P=1,253,354

P=1,895,412
(364,669)
P=1,530,743

P=2,906,433
(67,949)
P=2,838,484

P=1,413,954
(160,600)
P=1,253,354

ABS-CBN CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)

Years Ended December 31

CASH FLOWS FROM OPERATING ACTIVITIES


Income before income tax
Adjustments for:
Depreciation and amortization (Notes 9 and 10)
Amortization of:
Program rights and other intangibles (Note 11)
Debt issue costs (Note 27)
Deferred charges (Note 25)
Interest expense (Note 27)
Gain on settlement of liabilities (Note 27)
Interest income (Notes 6 and 22)
Net unrealized foreign exchange loss (gain)
Loss (gain) on sale of property and equipment
Equity in net losses (earnings) of associates and joint
ventures (Note 13)
Impairment loss (Note 15)
Share-based payment expense (Note 21)
Loss on sale of investments (Note 12)
Income before working capital changes
Provisions for:
Pension expense and other employee benefits
(Note 29)
Doubtful accounts (Note 26)
Decrease (increase) in:
Trade and other receivables
Other current assets
Increase (decrease) in:
Trade and other payables
Obligations for program rights
Other noncurrent liabilities
Contribution to pension plan (Note 29)
Cash generated from operations
Income taxes paid
Net cash provided by operating activities
(Forward)

2014

2013

2012

P=2,787,134

P=2,712,658

P=2,031,849

2,871,000

2,714,199

2,825,196

1,327,894
122,975
69,617
1,023,958
(444,826)
(153,968)
(69,427)
4,167

1,430,811
73,421
52,871
716,894
(13,910)
(94,438)
2,836
5,688

1,277,597
65,576
53,166
731,633
(208,564)
(119,672)
(20,329)
(89,121)

(3,283)

7,535,241

12,397
20,061
5,397

7,638,885

58

25,256
24,781
6,597,426

973,670
432,094

1,041,210
389,904

(2,886,288)
(626,555)

(814,390)
65,175

(2,239,244)
1,485,137

985,677
225,297
(371,221)
(254,000)
5,923,816
(912,745)
5,011,071

356,911
239,177
(5,461)
(540)
8,885,521
(830,461)
8,055,060

695,427
(217,963)
(136,802)
(360,000)
7,255,095
(626,732)
6,628,363

785,092
530,573

-2-

Years Ended December 31


2014
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to:
Property and equipment (Notes 9 and 34)
Program rights and other intangible assets
(Notes 11 and 34)
Investment properties (Notes 10 and 34)
Decrease (increase) in other noncurrent assets
Interest received
Proceeds from sale of:
Property and equipment
Available-for-sale investments
Investments in joint ventures (Note 13)
Acquisition of subsidiaries and business, net of cash
acquired (Note 4)
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Long-term debt
Bank loans
Payments of:
Long-term debt
Interest
Dividends
Bank loans
Obligations under finance lease
Acquisition of Philippine depository receipts (Note 21)
Proceeds from additional investment
Issuances of:
Common shares (Note 21)
Preferred shares (Note 21)
Decrease in noncontrolling interests (Note 4)
Net cash provided by financing activities
EFFECTS OF EXCHANGE RATE CHANGES
AND TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS

2013

2012

(P=4,991,980)

(P=3,727,670)

(P=3,733,534)

(1,433,238)
(2,508)
(194,505)
140,660

(1,772,969)

(97,296)
97,881

(1,495,770)

167,840
124,303

96,580

(30,000)

24,629

(137,962)

175,861
22,863

(6,414,991)

(5,613,387)

(4,993,577)
(9,732,014)

8,576,439

2,000,000
850,000

792,432
4,000,000

(2,550,619)
(983,203)
(498,950)
(400,000)
(29,549)
(99,950)
35,878

(115,722)
(744,937)
(298,066)
(3,850,000)
(37,551)

(1,267,954)
(818,510)
(591,989)
(1,000,000)
(51,179)

4,050,046

3,939,501
200,000
(185,893)
1,757,332

(101,551)
961,249

22,912

(97,713)

2,621,522

4,221,917

(2,240,115)

CASH AND CASH EQUIVALENTS


AT BEGINNING OF YEAR

10,616,855

6,394,938

8,635,053

CASH AND CASH EQUIVALENTS


AT END OF YEAR (Note 6)

P=13,238,377

P=10,616,855

P=6,394,938

NET INCREASE (DECREASE) IN CASH


AND CASH EQUIVALENTS

See accompanying Notes to Consolidated Financial Statements.

(24,604)