A FINANCIAL ANALYIS OF

JOLLIBEE FOODS CORPORATION AND GOLDEN ARCHES

DEVELOPMENT CORPORATION
FOR THE YEARS 2000 – 2004

A Paper Submitted
In Partial Fulfillment of the Requirements for the Course
ACT611M (Financial Analysis)

MC REYNALD SIMBAJON BANDERLIPE II

Candidate for the degree of

MASTER OF SCIENCE IN ACCOUNTANCY

Mr. MICHAEL ANGELO CORTEZ

Professor

De La Salle University - Manila

Term 3, SY 2005-2006
 Table of Contents

LIST OF TABLES i

LIST OF FIGURES ii

LIST OF APPENDICES iii

ABSTRACT iv

CHAPTER 1 BACKGROUND OF THE STUDY

Introduction 1
Statement of the Problem 2
Statement of Objectives 3
Statement of Assumptions 3
Scope and Limitations 4
Significance of the Study 5

CHAPTER 2 REVIEW OF RELATED LITERATURE

Historical Account for Jollibee Foods Corporation 7
Historical Account for McDonald’s 10
GADC, Home to McDonald’s Philippines 11
A Short Discourse on the Philippine Fast Food
Industry 12
Conceptual Framework 15
Operational Framework 16

CHAPTER 3 METHODOLOGY
Research Design 17
Data for the Study/Method of Data Analysis 17

CHAPTER 4 RESULTS AND DISCUSSION 20

CHAPTER 5 CONCLUSION AND RECOMMENDATIONS 50

REFERENCES

APPENDICES
 List of Tables

Table No.

1 Timetable of Selected Jollibee Products from the Years 1978 – 2005

2 Timetable of Selected McDonald’s Products from the Years 1981 – 2005
3 Working capital for JFC and GADC
4 Current ratio for JFC and GADC
5 Quick ratio for JFC and GADC
6 Inventory turnover and average sale period for JFC and GADC
7 Debt to equity ratio for JFC and GADC
8 Debt ratio for JFC and GADC
9 Times interest earned for JFC and GADC
10 Earnings per share for JFC and GADC
11 Dividends per share, Dividend yield per share of common stock, and
Dividend payout ratio for JFC and GADC
12 Price-earnings ratio for JFC and GADC
13 Book value per share for JFC and GADC
14 Return on total assets and Return on common stockholders’ equity for JFC
and GADC
15 Return on total assets and Return on common stockholders’ equity for JFC
and GADC
16 Comparison of Average Financial Ratios for JFC and GADC with the US
Industry Averages
17 Proposed Balanced Scorecard for the Fast Food Restaurant in the
Philippines
18 Proposed Balanced Scorecard for the Fast Food Restaurant in the
Philippines

i
 List of Figures

Figure No.
1 Conceptual Framework on the Analysis of Financial Statements
2 Operational Framework for the Financial Analysis of Jollibee and
McDonald’s

ii
 List of Appendices

Appendix No.

1 Balance Sheet of Jollibee Foods Corporation for the years 2000 – 2004
2 Balance Sheet of Golden Arches Development Corporation for the years
2000 – 2004
3 Income Statement for Jollibee Foods Corporation for the years 2000 –
2004
4 Income Statement for Golden Arches Development Corporation
5 Common Size Balance Sheet for Jollibee Foods Corporation
6 Common Size Balance Sheet for Golden Arches Development
Corporation
7 Common Size Income Statement for Jollibee Foods Corporation
8 Common Size Income Statement for Golden Arches Development
Corporation
9 Working Capital for Jollibee and McDonald’s
10 Current ratio of Jollibee and McDonald’s
11 Earnings per share of Jollibee and McDonald’s
12 Inventory turnover for Jollibee and McDonald’s (Year 1 is 2001)
13 Average sale period for Jollibee and McDonald’s (Year 1 is 2001)
14 Debt to equity ratio for Jollibee and McDonald’s
15 Debt ratio for Jollibee and McDonald’s
16 Times interest earned for Jollibee and McDonald’s (Year 1 is 2001)
17 Earnings per share for Jollibee and McDonald’s
18 Book value per share for Jollibee and McDonald’s
19 Return on total assets for Jollibee and McDonald’s
20 Return on common stockholder’s equity for Jollibee and McDonald’s
21 Gross margin percentage for Jollibee and McDonald’s
22 Operating margin percentage for Jollibee and McDonald’s
23 Net profit margin percentage for Jollibee and McDonald’s
24 Du Pont computation for Jollibee and McDonald’s

iii
 A FINANCIAL ANALYSIS FOR JOLLIBEE FOODS COPORATION AND
GOLDEN ARCHES DEVELOPMENT CORPORATION
FOR THE YEARS 2000 - 2004

Mc Reynald S. Banderlipe II
De La Salle University
________________________________________________________________________

ABSTRACT

Fast food restaurants continue its presence in the Philippine market for more than

twenty years. Up to now, these companies never ceases to maintain its presence to

capture the desired market. Jollibee and McDonald’s, the two competing giants in the

Philippines, have competed in terms of offering various food products and services to its

customers. But the question remains which company is more successful in managing its

operations. Using the financial statements of Jollibee and McDonald’s for the years 2000

– 2004, an analysis was performed using financial ratios for both companies. Results

show that Jollibee has performed better than McDonalds in terms of the financial ratios,

since Jollibee has been operating profitably for the past 5 years. McDonald’s has to

continue striving to recover the deficit and eventually, improve its operations. In this

paper, the Du Pont analysis for Return on Equity was also presented, together with

contemporary issues such as Forecasting, Benchmarking, the Balanced Scorecard, and

Corporate Social Responsibility that would affect Jollibee, McDonald’s, and the entire

QSR Industry.

iv
 Chapter 1

Background of the Study

Introduction

Fast food invasion has been a triumphant success in the Philippines. Because of

the busy lifestyle of modern Filipinos, it is a natural instinct to simplify their eating

habits. Rather than spending a lot of time strolling in the market and buying food items

that needs to be cooked, they go to fast food in order to save time and energy in preparing

them. Rather than bringing to work or school packed meals, people go to fast food for

convenience instead of carrying lunchboxes. Rather than dining al fresco in expensive

restaurants, people go to fast food not only because it is delicious, but also to shell out a

small amount of money for it.

The competition between two giant fast food chains, Jollibee and McDonald’s has

existed for years. These fast food chains compete not only to win the market share of fast

food customers, but also to dominate the Quick Service Restaurants (QSR) industry in the

Philippines. The obvious side of the fierce competition is the offering of similar product

lines (Acuna, Bernaldo, Dy, Malabanan, and Young, 2004). Burger McDo of

McDonald’s challenged Jollibee’s Filipino-tasting Regular Yum. Chickenjoy faced with

McChicken in the chicken arena, while Peach Mango Pie competed with cinnamon-

sprinkled Apple Pie. Another battle exists between the Jolly Kiddy Meal and McDonald’s

Happy Meal. These and a host of other items became a big hit for fast food lovers and

even became centers of discussions regarding which one is the best.

However, another way of assessing the competition between the two fast food

chains is how these companies will sustain their competitive leadership in the QSR

1
industry in the Philippines. A careful analysis of their financial statements would enable

users to make an objective evaluation about the performance and position of these

companies in the QSR industry of the Philippines.

This discourse aims to perform an analysis of the financial statements of Jollibee

Foods Corporation (“JFC”, “Jollibee”) and Golden Arches Development Corporation

(“GADC” [the licensee of McDonald’s Corporation in the Philippines], or

“McDonald’s”) for the years 2000-2004. Specifically, the study delves in the financial

aspect of these companies by comparing them to the existing industry averages and

making an evaluation of which company would have greater chances of dominating the

fast food industry in the Philippines.

Statement of the Problem

Competition of Jollibee and McDonald’s is a fierce battle for supremacy in the

Philippine fast food industry. The performance of these companies, however, does not

rest solely on the acceptance of the similar product lines and innovations each has to

offer. An analysis of their respective financial statements will help users broaden their

understanding about the company’s financial position and the results of operations. Thus,

the research questions for this study will be:

RQ: Based on the analysis of the financial statements of Jollibee and McDonalds

for the years 2001 - 2004, who is likely to lead in terms of financial

performance and why?

2
Statement of Objectives

General Objective

The main objective of this research is to analyze the financial statements of

Jollibee and McDonald’s from 2000 – 2004.

Specific Objective

To support the general objectives of the study, the study identified the following

specific objectives:

1) Analyze the financial statements of Jollibee and McDonald’s in terms of their

financial ratios,

2) Determine which fast food company will lead in terms of financial

performance, and

3) Integrate significant issues in the analysis of the financial statements of

Jollibee and McDonald’s.

Statement of Assumptions

Prior to the actual conduct of the study, several assumptions were noted in the

analysis of the financial statements of Jollibee and McDonald’s.

1) The financial statements of the two companies are accurate and correct since

independent Certified Public Accountants subjected them to an audit.

2) Fast food restaurants other than Jollibee and McDonald’s are irrelevant in the

study since the two are the major fast food chains in the country.

3
 3) Competition between the two fast food chains is fierce.

4) Both companies are expecting growth in terms of sales and results of

operations.

Scope and Limitations

The following statements comprise the scope and limitations on the analysis of

financial statements of Jollibee and McDonald’s in the Philippines:

1) The ratios analyzed are those commonly used in the fast food industry.

Information generated through various data sources was also utilized to

understand these ratios.

2) The study used consolidated financial statements for the years 2000 – 2004.

Data for the years 2000 – 2003 used restated balances found in the subsequent

financial statements. Only 2004 data will use the audited balance for the year

2004 since the audit for the 2005 financial statements is still ongoing.

3) Due to time constraints, the subsidiaries of both fast food companies were not

excluded; however, since 95 percent of their subsidiaries are also engaged in

food service, then this might tolerable for the research. Moreover, the parent

company’s financial statements of the two companies cannot be retrieved

from the Securities and Exchange Commission (SEC).

4) Benchmarking is important in order to compare the financial ratios of each

company with the prescribed industry average. However, there is difficulty in

obtaining the industry averages for the Philippine fast food industry since the

Hotel and Restaurant Association of the Philippines (HRAP) cannot provide

that information. In this case, the average data for the United States fast food

4
 industry were used. This alternative was considered since it is in the United

States that most fast food companies operate, and as such, technology,

management practices, and other operational aspects are carried on to their

international branches, then the industry averages for fast food restaurants

operating in the United States may be applicable to the Philippines.

5) Economic Value Added ® is not included in the study. There is an existing

contention that value is only created if the returns from the operations of the

firm exceeded the cost of financing the operations (Firer, 1999). Moreover,

the procurement of data for EVA computation was impossible since the

management of the two companies cannot provide such data. Thus, no point

of comparison can be achieved.

6) Accounts receivable turnover and Average collection period are not used in

the study. Fast food restaurants generate revenue from over-the-counter

transactions. Many a few transactions enable these restaurants to recognize

receivables like related party transactions and birthday party packages, whose

receivables are collected based on installment plans before, during, and after

the event.

Significance of the study

Understanding the financial statements of Jollibee and McDonald’s would be

valuable for the following:

Present and Future Investors will be able to evaluate the performance of the

two companies for reassessing and making sound investment decisions.

5
 The Academe would utilize this research to be a reference material in the study of

Financial Analysis and Financial Management. In addition, the research will serve as a

guide for future researchers in analyzing the financial statements of other companies

within and outside the fast food industry. It also gives insights to researchers as to how to

integrate current issues and modern philosophies in business in conducting financial

analysis.

General Readers will enable to obtain an objective understanding and to

determine the real score on the financial status of Jollibee and McDonald’s, plus an

overview of their commitment to their social responsibility for the general welfare of

many.

Government and Regulatory Authorities, and Non-Governmental

Organizations (NGOs) can benefit from this research in formulating policies, setting up

guidelines, and enforcing laws that promotes social responsibility among Quick Service

Restaurants, particularly those related to environmental safety and protection, waste

disposal systems, and investing on youth nutrition and education.

6
 Chapter 2

Review of Related Literature

Before making a thorough analysis of Jollibee and McDonalds’ financial

statements, it is necessary to provide a historical summary that shaped these two

companies to lead the fast food (QSR) industry in the Philippines. The review also

includes a brief discourse on the Fast Food Industry in the Philippines.

Historical Account for Jollibee Foods Corporation

After graduating with a degree in Chemical Engineering, Tony Tan Caktiong

decided not to compete with fellow new yuppies at his time searching for jobs after

graduation. Having gained first-hand experience in managing a family eatery in Davao

during his childhood years, he decided to pursue a food business that would be simple to

operate. Thus, he borrowed P200,000 from his father to commence a Magnolia ice cream

franchise beside Coronet Theater in 1975. With his ingenuity and passion to satisfy the

cravings of his customers, the idea of serving American foods such as hamburgers and

fries that is quick, tasty and affordable (Acuna, et al., 2004) became his vision that he

never thought would be one of the entrepreneurial successes in the Philippines.

In 1978, the vision became a reality when Tony and his family decided to

incorporate and saw the birth of Jollibee Foods Corporation. One year after, the company

posted P2 Million peso sales. It also marked the establishment of a first Jollibee franchise

in Sta. Cruz, Manila and its first TV advertisement.

7
 Jollibee entered the list of the Top 1000 Corporations in 1981. Since then, the

company continues its unprecedented growth as it enters the Top 500 in 1984, the Top

250 in 1986, and Top 100 in 1987. Meanwhile, in 1983, JFC launched flagship motto of

JFC, known as the “Langhap Sarap.” The year 1986 signaled the start of branching out in

the international market by putting an international outlet in Taiwan and Brunei

Darussalam. In 1989, the company posted very remarkable sales of P1.3 Billion, while

expansion efforts continued when they acquired 73% share in the Hamburger segment of

the fast food industry in 1991. Jollibee became a public corporation in 1993 with its

initial offering of P9.00 per share.

The expansion of JFC came when they acquired Greenwich Pizza Corporation in

1994 and Delifrance, a popular French patisserie shop, in 1995. This led to the increased

variety of food items served by JFC. In 1996, the Far Eastern Economic Review cited

Jollibee as one of the leading companies in Asia. At the end of the year, more and more

Filipinos abroad trooped down to their Jollibee stores in Guam, the Middle East, and

Hong Kong. It was also in this year that social responsibility to the youth became one of

the primary agendas of the company by launching the MaAGA ang Pasko sa Jollibee and

the TV program “Chikiting Patrol: At Home Ako Dito!”

In 1997, Jollibee opened another branch in Xiamen, China, while launching

“Kaya Mo, Kid!” campaign to promote positive values and to help children achieve their

dreams. A year after, the company marked its 300th store in Balagtas, Bulacan, together

with an international branch in Daly City, California. The following years thereafter saw

the P20 Billion sales and recognition of Jollibee as the Most Admired Company in the

Philippines and third overall in Asia.

8
 Jollibee opened its 400th store in Intramuros, Manila, while sales continuously

shoot up to the P27 Billion mark. In the same year, Jollibee opened its 500th store in

Basilan, Isabela Province. At present, Jollibee continues to expand its network of stores,

after acquiring Chowking in 2000, an 85 percent share in Yonghe King in 2004, and Red

Ribbon Bakeshop in 2005.

As of 2004, the company has about 500 Jollibee stores, 232 Greenwich stores,

303 Chowking stores, and 31 Delifrance stores, and expansion is still underway. Table 1

below shows the timetable of selected Jollibee Products sold in the Philippine market

starting from its inception in 1978.

Table 1

Timetable of Selected Jollibee Products from the Years 1978 – 2005

Jollibee Foods Corporation

Timetable of Selected Products
1978 – 2005

YEAR PRODUCTS
1978 Regular Yum, Yum with Cheese
1979 Spaghetti Special
1980 Chickenjoy, French Fries
1982 Palabok Fiesta
1985 Breakfast Meals
1986 Chunky Chicken Sandwich
1988 Jollytwirl soft sundaes
1990 Coleslaw, Jolly Hotdog, Peach Mango Pie
1991 Pancakes
1992 Fruit-flavored ice cream sundaes
1994 Greenwich Pizzas and Pastas
1995 Delifrance French Pastries, Burger Steak
1996 Amazing Aloha, Chili Wings
1999 Cheezy Bacon Mushroom Burger
2000 Chowking Products, Pepper Crazy Burger,
Shanghai Rolls, Pocket Pies, and Swirly Bitz
2001 Glazed Chicken Rice, Honey Beef Rice,
2004 Chicken Sotanghon Soup, Jolly Meat Pies
2005 Super Meals, Jolly Chicken Tocino

9
Historical Account for McDonald’s

The name McDonald’s refers to Dick and Mac McDonald, who, after World War

II, desired to improve their little drive-in restaurant in California. Improvement, for them,

means speedy service, low prices and big volume (Acuna, et al., 2004). This requires

slashing off some items in their menu and limiting it to the popular hamburgers, soft

drinks, French fries and milkshakes. This also triggered the reduction of the prices of

hamburgers while inducing improvements in their kitchen facility to accommodate mass

production.

Since 1952, the company received numerous inquiries for franchising because of

its success. It is also when McDonald’s launched its “Golden Arches” logo, inspired by

the red and white building with an angled roof owned by its first franchisee, Neil Fox.

However, in 1954, a person by the name Ray Kroc, approached the brothers and

offered to expand their restaurant upon knowing that the brothers are running 8 multi-

mixers for their milk shakes. This eventually led to the expansion of McDonald’s from

San Bernardino, California to Des Plaines, Illinois. Their Hamburger University trained

McDonald’s personnel in the science of “Hamburgerology.” People who graduated from

this “University” became successful in managing the operations of McDonald’s stores in

the United States and in other countries (Boas and Chain, 1976).

In the Philippines, the first two McDonald’s restaurants opened in Morayta and

New Frontier in 1981. Since 1982, the restaurants branched out to different parts of the

country like Greenhills (1982); Dau, Pampanga (1983); Roxas Boulevard (1985); Makati

(1988); Subic (1989); Tarlac (1991); Baguio (1991); Cagayan (1992); Cebu, (1992); and

Marikina (1997), the 100th store of McDonald’s in the Philippines. At present,

10
approximately 300 stores are now operating in the Philippines. Previously under the

supervision of McGeorge, McDonald’s stores in the Philippines are now under the

tutelage of Golden Arches Development Corporation (GADC).

GADC, Home to McDonald’s Philippines

On July 16, 1980, Golden Arches Development Corporation (GADC) in the

Philippines was established. Its business is to acquire and develop real and personal

properties for the use of McDonald’s restaurants. The company’s business focuses on

operating fast food restaurants under the McDonald’s brand and in accordance with a

franchise agreement with McDonald’s Corporation – USA. McDonald’s Restaurant

Operations, Inc. (MRO), a US-based company, owned the major segment of the

company.

All McDonald’s restaurants in the Philippines either are operated by GADC, by

independent entrepreneurs under the terms of a franchise agreement with GADC, or

affiliated restaurants operating under joint venture agreements between the GADC and

the local executives.

In 2002, GADC became the surviving entity under the approved merger of GADC

and McGeorge, the former licensee of McDonald’s in the Philippines. Under the terms of

an approved Articles of Merger, the stockholders of record will not receive shares of

stock from McGeorge due to capital deficiencies of both parties. Soon, GADC absorbed

all assets, liabilities, licenses, privileges, and rights of McGeorge.

In 2003, the subsidiaries of Golden Arches Development Corporation approved

the merger of involved companies, with GADC as the surviving corporation. At this time,

11
GADC absorbed all the resources, obligations, rights, privileges, immunities and all debts

incurred by the subsidiaries. GADC considers these mergers as forms of business

reorganization only. Table 2 shows a list of selected McDonald’s products in the

Philippines.

Table 2

Timetable of Selected McDonald’s Products from the Years 1981 – 2005

McDonald's Philippines
Timetable of Selected Products
1981 – 2004

YEAR PRODUCTS
1981 Hamburger, Big Mac, Quarter Pounder, Cheeseburger
Milkshakes, French Fries, Apple Pie, Sundaes
and other original McDonald's food items
1985 Breakfast Meals
1986 McSpaghetti
1987 McChicken
1991 Chicken McNuggets
1993 McSaver's Value Meals, Burger McDo
1996 Twister Fries
1997 Happy Meals, Sundae cones for P5.00
1998 McDobols
1999 McFlurry specialty sundae
2001 McShaker Fries, Rice Burger
2003 Taro Pies, Burger McDo Steak
2004 Beef Prosperity Burger, BBQ McDo Burger
2005 Longganisa Burger, Mega Meals, Beef Steak

A Short Discourse on the Philippine Fast Food Industry

Fast food restaurants have continued to thrive in the Philippines. These

establishments, also known as Quick Service Restaurants (QSR), will remain very strong

and continuously growing despite the political and economic problems in the country.

According to Bautista (2002), the QSR industry will be the last to succumb from

12
economic recession and the first one to succeed in the economic recovery period;

practically because of their main product: food.

In addition, Bautista described the QSR market as a “monopolistic competition”

given a few number of players ruling the industry of a vast number of sellers. Examples

of these are Jollibee and McDonald’s for the hamburger segment, Chowking for the

Oriental food segment, Goldilocks and Red Ribbon for cakes and pastries, and

Greenwich for the pizza segment.

In terms of the foreign franchises, thirty-five percent of them are fast food

restaurants like McDonald’s and Burger King. Why consider fast food restaurants as the

best places to eat? Palma (2001) presented that 5 out of 10 Filipinos considers fast food

chains as destinations for al fresco eating, since the food caters to Filipino taste buds and

the prices are reasonable. Moreover, better service and quality of food contributes to the

increasing number of customers, plus the fact that the increase of shopping malls within

and outside Metro Manila evidenced rapid urbanization in these areas (Cabacungan,

1995).

In addition, Acuna, et al. (2004) also noted that having a big market like this

industry requires other industries to back up their needed resources. Hence, fast food

chains procure local suppliers for beverages, food and dairy products for sale, except for

potatoes for French Fries and imported beef for their hamburgers. Furthermore, they

identified factors such as advertising and promotion, proper pricing, quality of food,

service and facilities, product lines, extensive branch network, and availability of raw

materials that would help these fast food restaurants attain continuous success. In terms

13
of price, any changes that would not agreeable to customers would induce them to buy

the alternatives (Palma and Bernardino, 1999).

Population is also considered one of the factors affecting the growth of the QSR

industry in the country. Economic theories stated that since population is one of the

determinants for consumption (Medina, 2003), then the increase in population will

increase food consumption. Hence, it is expected that the number of food outlets will

increase to meet the desired level of consumption.

Bautista (2002) described the QSR industry as the buyer’s market due to low-

switching costs and growing number of food outlets. Hence, fluctuations in product

prices would mean losing customers unless valid reasons apply. Moreover, Bautista

pointed out that youth population, proliferation of shopping malls, urban traffic, more

working wives (the increase of women in the labor force, as stated by Garcia, 2002),

increasing demand for alternatives to home cooking, and urbanization of key cities

outside Metro Manila will become the greatest opportunities for industry’s growth. This

has been the critical areas in forecasting the future growth of the Quick Service

Restaurants.

Lastly, Bautista identified the strategies to be undertaken in expanding fast food

businesses in the future, as in the case of Jollibee Foods Corporation. She stresses the

need for store expansion, new store concepts, new products and enhancements,

acceleration of promotional activities, identification of cost leadership strategies,

strengthening the Management Information Systems (MIS), and the re-tooling of Human

Resources in order to attain the successful growth plans.

14
Conceptual Framework

The framework of the study delves on the useful role of financial statements

based on the rationale presented by Mejorada (2002). According to Mejorada, financial

statements provide information about the firm’s profitability, liquidity, and long-term

stability and require the ability of readers to interpret and give meaning to the data while

examining their relationships.

Translated into a diagram, Figure 1 shows the framework for the study. The

analysis of the financial statements requires computing for Profitability ratios, Liquidity

ratios, and Solvency ratios. After a thorough and careful analysis of the financial

statements, the users of the financial statements can make conclusions about the

company’s performance and investment decisions on these companies.

Figure 1

Conceptual Framework on the Analysis of Financial Statements

Profitability
Ratios

SOUND
DECSIONS
FINANCIAL Liquidity
STATEMENTS Ratios

Solvency
Ratios

15
Operational Framework

The study utilizes the same principles as found in the conceptual framework.

Since the study involves analyzing the financial statements of the two giant fast food

companies. Financial ratios applicable to the industry will be computed after which,

Figure 2

Operational Framework for the Financial Analysis of Jollibee and McDonald’s

Liquidity
Ratios ISSUES:

Du Pont
WHO IS THE Analysis
BEST FAST
FINANCIAL
Solvency FOOD CHAIN IN Benchmark
STATEMENTS
Ratios THE COUNTRY With
OF JOLLIBEE &
IN TERMS OF US QSR
MCDONALD’S
FINANCIAL
PERFORMANCE Balanced
? Scorecard
Profitability
CSR
Ratios

significant literature will be used to complement the outcome of the computed financial

ratios. These in turn, will be compared with the industry averages to determine whether if

these companies meet the desired target for the industry. In addition, the study will also

employ other issues such as Benchmarking, Du Pont Analysis, Balanced Scorecard and

Corporate Social Responsibility that will affect Jollibee and McDonald’s continuous

leadership in the QSR industry of the Philippines.

16
 Chapter 3

Methodology

Research Design

The study adopted a comparative analysis (Acuna, et al., 2004) to establish a

comparison among the financial ratios of Jollibee and McDonalds. The financial ratios of

each company were subjected to a confrontation with average financial ratios of the fast

food industry to determine the extent of closeness of the company’s ratios with the

benchmark ratio. The discussion on the results of the financial analysis requires the use of

additional information provided by each company.

Data for the study / Method of Data Analysis

The study required the procurement of financial statements for Jollibee Foods

Corporation and Golden Arches Development Corporation for the years 2000 – 2004.

The annual reports containing the financial statements of Jollibee were obtained via

referral while the financial statements of Golden Arches Development were retrieved

upon visiting the Public Reference Section of the Securities and Exchange Commission

(SEC). Because GADC is not listed in the Philippine Stock Exchange (PSE), GADC has

no obligation to provide SEC Form 17-A (Annual Report) to PSE.

The researcher encoded the financial statements, particularly the balance sheet

and the income statement in an Excel spreadsheet. Because of the difference in the line

items of the financial statements, some items were aggregated based on similar

classification. Retained earnings are reconciled for the years covered in the study.

17
 Data collected in the study are the balances of the balance sheet and income

statement accounts. While two analyses can be made: 1) a horizontal analysis of the

financial statements to spot increasing or decreasing trends on the accounts using the year

2000 as the benchmark year (year 2000 = 100) and 2) a vertical analysis of the financial

statements to determine the relationship of the account balances to the total assets, total

liabilities, or net sales, the study provided greater importance on the use of vertical

analysis.

Horizontal analysis is devoted to analyze trends (increase or decrease) of financial

statement item; a vertical analysis ponders on the relationships among components of the

financial statement within a particular period (Plewa and Friedlob, 2002).

Focusing on the vertical analysis provides the opportunity to create common-size

financial statements useful in comparing the company with another company and the

industry averages (Mohamad, 1996). This was due to a limitation of financial analysis

(Atkinson, Kaplan, and Young, 2004) which shows the difficulty of using horizontal

analysis in interpreting trends. The existence of unknown economic, competitive, or

political factors that might affect the organization can explain this drawback.

For the year 2000, some financial ratios were not computed. In as much as the

researcher would like to use the data, that would be impossible because of what happened

to Golden Arches Development Corporation in connection with their merger with wholly

owned subsidiaries. As stated in Note 2 of the company’s financial statements for the

year ending December 31, 2002, their merger with wholly owned subsidiaries namely:

Cebu Golden Food Industries, Inc. (Cebu Food); Cebu Golden Food Ventures, Inc. (Cebu

18
Ventures); and EDSA Food Industries, Inc. (EDSA Food) resulted to GADC’s takeover

of assets and liabilities of the subsidiaries.

“The merger is considered a business reorganization (sic), the Subsidiaries being

wholly owned by GADC. Accordingly, the merger will be accounted for at historical cost

in a manner similar to the pooling of interests method. The … financial statements as of

and for the years ended December 31, 2002 and 2001 gives effect to the planned merger

as if it had been consummated on December 31, 2000.”

In this case, starting in the year 2001, the financial statements of GADC will be

presented in the same manner as the years 2002 onwards. The disclosures regarding gross

revenues pointed out two sources of income by GADC namely: Sales of company-owned

restaurants, and revenue from franchised and affiliated restaurants. Disclosures on

operating costs and expenses, on the other hand, began presenting the cost of sales of

GADC. This took place when GADC merged with McGeorge Food Industries

(McGeorge), Inc. on November 28, 2002

In the merger of GADC and McGeorge in 2002, the operations of GADC diverted

from the lease and sale or lease of restaurant facilities and equipment of McDonald’s

Restaurant Operations to establish, maintain, and operate restaurants, cafes, bars, and

general food catering services, and to engage in the fast food restaurant business under

the McDonald’s brand.

More than the financial analyses, current issues will be tackled such as

benchmarking with the U.S. industry averages, the use of the Balanced Scorecard, and

the integration of the Corporate Social Responsibility.

19
 Chapter 4

Results and Discussion

The objective of the study is to conduct a financial analysis of the financial

statements for Jollibee Foods Corporation and Golden Arches Development Corporation

for the years 2000 – 2004. Issues such as benchmarking, Du Pont Model, Balanced

Scorecard, and Corporate Social Responsibility will be included in the paper.

Appendix 1 presents the balance sheet for Jollibee Foods Corporation. As can be

seen, there is an increasing trend in the current assets and total assets for JFC. Total assets

range from P8.89 Billion in 2000 to P15.38 Billion in 2004. The liabilities and

stockholder’s equity section of the balance sheet has the same trend. Moreover, the

company provides minority stockholders a share in their earnings ranging from P8.8

Million in 2000 to around P238 Million in 2004.

On the other hand, GADC did not show a constant movement in its cash accounts.

In Appendix 2, the same movement was visible in the current assets and total assets of

the business, ranging from P4.12 Billion in 2001 to P4.12 Billion in 2004. Total

liabilities, on the other hand, increased from P5.17 Billion in 2000 to P6.56 Billion in

2001, but decreased to P5.70 Billion in 2004. On the average, GADC suffered a P1.75

Billion deficit for the past five years.

Appendix 3 depicts the results of operations of JFC. As can be seen, the company

is consistent with an increasing trend in terms of revenues, operating costs and expenses.

Furthermore, in 2003, JFC hit the P1 Billion peso net income, the first among the fast

food industries to attain a very remarkable net profit, with a net income of P1.18 Billion.

20
Because of profitable operations, the company also increased its total dividends paid

annually to stockholders, from P199 Million in 2000 to P444 Million in 2004. Such

increasing trend is also visible the amount of retained earnings of JFC.

On the other hand, GADC suffered a decline in revenues in 2003, but was able to

recoil its total earnings in 2004. As presented in Appendix 4, the company also

experienced a somewhat smooth trend in its operating costs and expenses. In addition, the

income statement shows a decline in net losses of GADC from P641.7 Million in 2000 to

P22.6 Million in 2003. In 2004, the company obtained net income of P343 Million.

However, GADC’s huge deficit resulted to no dividend distribution for the years covered.

More than looking at the basic financial statements of Jollibee and McDonald’s,

the researcher performed an analysis of these two companies using certain financial ratios

applicable in the fast food industry in the Philippines. Appendices at the end of the paper

show the common-size financial statements, the trends for every ratio discussed and the

Du Pont computations for Return on Equity.

Liquidity ratios

I. Working capital

Table 3

Working capital for JFC and GADC

Ratio 2000 2001 2002 2003 2004

Working Capital

JFC 661,327,983 640,773,468 1,312,955,358 957,578,128 402,737,607

GADC -3,981,407,376 -5,072,840,387 -4,836,956,329 -21,465,341 181,711,039

21
 Working capital measures the capability of a business to settle its current

obligations using current assets (Garrison and Noreen, 2000). Table 3 shows the working

capital of JFC and GADC. JFC maintained a positive working capital ranging from P402

Million to P1.312 Billion. On the other hand, GADC started with a negative working

capital of P3.9 Billion in 2000, to a positive P181.7 Million in 2004. Louderback,

Holmen, and Dominiak (2000) argue that a positive working capital is a rough measure

of liquidity. Instead, variations in working capital supplements other calculations that

considers the size of the company. Thus, the following table presents a more adequate

measure using the current ratio.

II. Current ratio

Current ratio measures the firms’ ability to meet its short-term obligations by

determining “how much pesos of assets are likely to be converted into cash within one

year in order to pay debts that come due during the same year” (Kennon, 2006). The

proxies for this ratio are current assets and current liabilities of the enterprise.

Table 4

Current ratio for JFC and GADC

Ratio 2000 2001 2002 2003 2004

Current ratio

JFC 1.22 1.20 1.35 1.22 1.07

GADC 0.21 0.22 0.21 0.98 1.14

Table 4 shows the currents ratios for Jollibee Foods Corporation and Golden

Arches Development Corporation. As can be seen, JFC has a current ratio from 1.22 in

22
2000 to 1.07 in 2004. GADC has current ratios lower than JFC from 2000 to 2003.

However, in 2004, GADC ousted JFC in the top spot, with a current ratio of 1.14.

The current ratio of JFC pertains to the reclassification of accounts in relation to a

P850 Million loan applied in 2001 for the construction of a new commissary in

Canlubang, Laguna. It also includes recognition of a P419 Million receivable from an

insurance company in connection with the fire that damaged the ongoing construction of

the commissary in 2002. Lastly, it also includes provisions to improve certain common

services required by various QSR systems. The restructuring, which commenced in 2003,

forms part of the three-year Cost Improvement Plan (CIP) of the company. Despite the

low current ratio for JFC, JFC can still manage all its current obligations.

In contrast, the low current ratio of GADC in 2000 to 2002 pertains to the loan

applied by GADC to an affiliate, McDonald’s Restaurants Operators (MRO). This loan

was reclassified as non-current in 2003, following a meeting by GADC and MRO to

capitalize a portion of MRO’s advances to the company for P3.47 Billion. Despite the

improvement of the current ratio of GADC in 2003 to 2004, unless the capitalization

materializes, GADC has to find ways of managing its existing current obligations.

III. Quick ratio

Table 5

Quick ratio for JFC and GADC

Ratio 2000 2001 2002 2003 2004

Quick ratio

JFC 0.68 0.63 0.84 0.86 0.78

GADC 0.17 0.14 0.15 0.65 0.77

23
 Quick ratios test the ability of the business to settle current obligations without

placing reliance on inventory since it is the most stringent and difficult test of measuring

financial strength (Kennon, 2006). Table 5 presents the quick ratio for JFC and GADC

for the years 2000 – 2004. As can be seen, the quick ratio of JFC is the highest in 2003,

when it registered 0.86. It, however, declined in 2004 with a ratio of 0.78. GADC has to

catch up with JFC, having quick ratios as low as 0.14.

JFC’s quick ratios are higher than GADC, which means JFC has the greater

capability to manage all their existing obligations without inventory and prepaid

expenses. GADC might have improved in its struggle to come up with cold cash in a span

of hours or days, as evidenced by their increasing quick ratios from 0.14 to 0.77.

However, both companies admit that these quick assets cannot settle all the short-term

obligations. Quick ratios of both companies did not exceed 1.0, a trigger to improve the

management of their quick assets.

IV. Inventory turnover and Average sale period

Inventory turnover measures the number of times the company’s inventory is sold

during the year. It shows how fast the inventory is sold, thereby reducing obsolescence

and spoilage. Average sale period, on the other hand, identifies the number of days to sell

inventory one time. Table 6 displays the inventory turnover and average sale period for

JFC and GADC.

As shown in Table 6, JFC’s inventory sells faster, with increasing turnover ratios

from 15.6 to 21 times and decreasing average sale period from 23 days to 17 days.

Conversely, GADC has to manage its slow movement of inventory. Because of its low

24
inventory turnover, it takes GADC to sell one batch of inventory in as much as 34 days in

2002.

Table 6

Inventory turnover and average sale period for JFC and GADC

Ratio 2000 2001 2002 2003 2004

Inventory turnover

JFC 15.73 15.58 17.23 20.58 21.27

GADC N/A 10.29 7.80 8.66 8.20

Average sale period

JFC 23.20 23.42 21.18 17.73 17.16

GADC N/A 35.45 46.77 42.14 44.54

The increasing number of distribution outlets and its three major commissaries

can explain Jollibee’s high turnover. Jollibee has been operating for more than 25 years

in approximately 500 branches in the Philippines and in other countries like Brunei,

Indonesia, Taiwan, Hong Kong, China, and in the United States. With the desire to

become the dominant food service industry in the country, the JFC acquired Greenwich,

Delifrance, Chowking, Yonghe King, and Red Ribbon. This expanded the variety of

products and distribution channels by JFC.

In addition, the company operates three commissaries in the country, one in Pasig

City, the other in Cebu City, and the new commissary in Canlubang, Laguna. These

further intensified the distribution system of the company to its stores. Moreover,

Jollibee’s revenue shoots up because of its strong marketing programs emanating from

the “Langhap sarap” motto.

25
 GADC invests on their marketing programs as well, ranging from its first, drive-

thru facilities, the McSaver’s value meals and Happy Meals, and the introduction and re-

launching of various McDonald’s products. Although these pave way for the increased

popularity of McDonald’s products, the company has to catch up Jollibee in generating

revenues from its products. Even McDonald’s has more than 300 outlets in the country, it

still has to diversify its line of products and intensify its marketing programs in order to

attract more customers and create more sales of its popular items.

GADC’s data for 2000 is not available since the cost of sales is not traceable in

the income statement. This was due to the difference in the type of operations GADC

assumed when GADC merged with McGeorge Food Industries in 2002 and took over the

restaurant operations of McDonald’s in the country. Such takeover modified the income

statement presentation starting in 2001.

Solvency ratios

V. Debt to equity ratio

Table 7

Debt to equity ratio for JFC and GADC

Ratio 2000 2001 2002 2003 2004

Debt to equity ratio

JFC 0.51 0.70 0.64 0.77 0.81

GADC (4.89) (3.57) (3.36) (3.06) (3.61)

The debt to equity ratio represents the amount of assets contributed by creditors

for every peso of assets supplied by the stockholders. As presented in Table 7, the debt to

equity ratio for JFC ranges from 0.51 to a high 0.81, while GADC has a negative D/E

26
ratio from 3.06 to a low 4.89. In relation to its current ratios, these results for Jollibee

relate to financing of the construction of a larger commissary through a loan applied to

Citibank, N.A. in 2001. The stockholders’ equity of JFC is larger because of the

continuous influx of new investors to the company way back in 1993 when JFC became

listed in the Philippine Stock Exchange. This was further enhanced by the retained

earnings reverted to the company reserved for future expansion and development

programs.

GADC is a corporation not listed in the Philippine Stock Exchange, and as such,

has a limited opportunity to increase its capital. In 2004, only 147,000 shares of stock

were issued out of its 150,000 authorized shares. McDonalds continue to suffer losses,

resulting to a colossal deficit carried from prior years’ operations, which were toppled

down by huge debt. GADC still is optimistic of recovering the deficit, as it marked an

operating net income in 2004.

VI. Debt ratio

Table 8

Debt ratio for JFC and GADC

Ratio 2000 2001 2002 2003 2004

Debt ratio

JFC 0.34 0.41 0.38 0.43 0.44

GADC 1.26 1.39 1.42 1.48 1.38

Debt ratio focuses on the fraction of debt in a company’s financial structure

(Louderback, et al., 2000). There is risk in the company if there are higher proportions of

total liabilities in the company. Table 8 presents the debt ratios for JFC and GADC. As

27
shown in the table, GADC’s total liabilities finance the company’s total assets ranging

from 126% to 148%. This outcome was due to the advances from affiliates, which forms

the biggest bulk of their total liabilities. As of 2004, many of these advances are still

unsettled. Although it cannot be said that JFC is a safer investment, JFC’s debt ratios

outperform GADC in terms of managing their outstanding obligations, with only 44% of

the total assets financed by debt.

VII. Times interest earned

Times interest earned measures the company’s ability to make interest payments.

It determines the extent to which operations cover interest expense. Louderback, et al.

(2000) further claims that “the higher the ratio, the more likely the company will be able

to continue meeting the interest payments.”

Table 9

Times interest earned for JFC and GADC

Ratio 2000 2001 2002 2003 2004

Times interest earned

JFC N/A 9.75 15.81 22.61 38.48

GADC (0.22) (1.74) (1.75) 1.13 8.91

Table 9 shows the times interest earned for JFC and GADC for years 2000 –

2004. As presented in the table, JFC has increasing times interest earned from 9.75 to

38.48 times, while GADC declined to -1.75 in 2002. However, a sudden improvement

occurred in 2003 up to 2004, but such did not able to catch up with a high ratio for JFC.

JFC’s escalating ratio is a result of the higher increase in sales over its cost of sales and

operating expenses, leading to a higher income before interest and taxes. Furthermore, it

28
can be attributed to the decrease in the outstanding liability of JFC to Citibank, N.A. for

the P850 Million loan applied in 2001, due to principal and interest payments.

GADC’s times interest earned ratios resulted from the continuous losses incurred

by the company in closing down some of their stores. In addition, the negative income

before interest and taxes from 2000 to 2002 pertained to losses in writing off investments

and receivables, and the recognition of impairment losses in property, plant and

equipment amounting to P140.5 Million in 2002. However, an improvement in operations

began in 2003, as there was a decline in other expenses incurred. The large chunk of

interest expense for GADC pertains to their license agreement with McDonald’s, the

conversion of P78 Million of the advances by McDonald’s Restaurant Operators into an

interest-bearing loan, and the lease of warehouse and some restaurant locations from

McDonald’s Philippines Realty Corporation.

Profitability ratios and Stock Market ratios

VIII. Earnings per share

Table 10

Earnings per share for JFC and GADC

Ratio 2000 2001 2002 2003 2004

Earnings per share

JFC 0.85 0.48 0.95 1.15 1.54

GADC (37,527.28) (34,370.52) (1,578.42) (153.50) 2,333.78

Earnings per share represent the share of each common stock in the net income of

the company. The higher the earnings per share means the greater share the common

stock has in the company’s profit after tax and dividends paid to preferred stockholders

29
(Louderback, et al., 2000). Table 10 displays the EPS output for the financial statements

of JFC and GADC.

As can be seen, JFC has EPS ratios from 0.85 in 2000 to 1.54 in 2004. Because

JFC has stockholders who own more than 1 Billion authorized and issued shares, the

greater the denominator JFC has in determining its EPS. The stock of JFC is attractive

because of its greater earning capability than GADC due to profitable operations. A

GADC stock can share in the company’s losses for as high as P37,527 per share in 2001.

Profitable operations for GADC in 2004 would result to a greater EPS of 2,334.

However, investing in a share of GADC stock would be risky for investors whether they

will suffer great losses or generate huge earnings.

IX. Dividends per share, Dividend yield per share of common stock, and Dividend

payout ratios

Table 11

Dividends per share, Dividend yield per share of common stock, and Dividend payout ratio for JFC and

GADC

Ratio 2000 2001 2002 2003 2004

Dividend per share of common stock

JFC 0.20 0.23 0.26 0.33 0.43

GADC N/A N/A N/A N/A N/A

Dividend yield per share of common stock

JFC 0.02 0.02 0.01 0.02 0.02

GADC N/A N/A N/A N/A N/A

Dividend payout ratio

JFC 0.23 0.47 0.28 0.29 0.28

GADC N/A N/A N/A N/A N/A

30
 Garrison and Noreen (2000) defines dividend yield per share of common stock as

the ratio that shows the return in terms of cash dividends provided by a stock. This ratio

is determined since investors cannot “get” the EPS, investors are entitled to receive

dividends. Dividend payout ratio, on the other hand, is an index that shows whether the

company pays out its earnings or reinvests it for future dividends (Louderback, et al.,

2000). Table 11 summarizes the computed dividends per share, dividend yield per share

of common stock, and dividend payout ratios for JFC and GADC.

As shown in the table 11, GADC is devoid of all the values of these three ratios.

The main reason is that the company did not paid dividends to its stockholders. To

reiterate, GADC suffered a deficit for the years covered, making the company unable to

distribute dividends. The company’s net income in 2004 does not suffice dividend

payments as well.

On the other hand, JFC’s stock yields an average of 0.18 on dividends. In the past

five years, the company distributes an average of 31% of total earnings, with the

remainder reinvested for future dividends.

X. Price – earnings ratio

Table 12

Price-earnings ratio for JFC and GADC

Ratio 2000 2001 2002 2003 2004

Price-earnings ratio

JFC 11.54 26.11 18.98 15.92 16.25

GADC N/A N/A N/A N/A N/A

31
 Price-earnings ratio measures the amount investors are willing to pay to purchase

a dollar of earnings (Louderback, et al., 2000). This is also used as a gauge of future

earning power of the firm (Gibson, 1997) since high P/E ratios would mean higher

growth opportunities. Table 12 shows the price-earnings ratio of JFC and GADC for the

years 2000 – 2004.

As can be seen in the table, JFC’s price-earnings ratio escalated to a high 26.11 in

2001. However, the growth in the market price of JFC is slower than the growth in its

earnings per share. Despite this occurrence, JFC still expects high growth opportunities.

On the other hand, GADC expects to recover from its losses and obtain a positive EPS.

However, since GADC is not listed in the PSE, market price of its stock is unavailable;

thus, computing P/E ratio is not possible at this time. Growth may be difficult to attain

because of limited capitalization.

XI. Book value per share

Book value per share measures the amount allocated to each share of common

stock after all assets are realized at their balance sheet carrying amounts and after all

liabilities are settled (Garrison and Noreen, 2000). Table 13 presents the book values per

share of JFC and GADC.

Table 13

Book value per share for JFC and GADC

Ratio 2000 2001 2002 2003 2004

Book value per share

JFC 5.80 5.58 6.53 6.97 8.19

GADC (61,788.82) (107,471.55) (22,369.08) (13,087.25) (10,753.47)

32
 As can be seen in Table 13, JFC improved from 5.80 in 2001 to 8.19 in 2004.

Because of profitable operations, the stockholder’s equity because of the increase in

retained earnings. This progress kept total liabilities form a minority in the enterprise’s

total assets. The ratio means that for Jollibee, assuming the business decides to liquidate,

the common stockholders are entitled to receive P8.19 worth of net assets after all assets

are sold and liabilities are paid off in 2004. Such scenario may be different for GADC,

whose total common stockholder’s equity became negative due to the continuous deficit

from 2000 – 2004. GADC’s deficit amounted to P1.11 Billion in 2000 increased to

P2.073 Billion in 2003. Net income in 2004 of P343.2 Million decreased the deficit to

P1.729 Billion. As of now, the stockholders of GADC could not receive something if the

company liquidates.

XII. Return on total assets and Return on common stockholders’ equity

Garrison and Noreen (2000) define return on total assets as a measure of how

efficient the company employs the resources under their control to generate income.

Conversely, return on common stockholder’s equity, when faced off with the return on

total assets, measures the extent to which the financial leverage is working for or against

common stockholders since return on investments are affected by operations, debt and

preferred stock in the capital structure of the company (Louderback, et al., 2000). Table

14 displays the summary of return on total assets and return of common stockholders’

equity for JFC and GADC.

As shown in the table, JFC has a positive return on assets and equity because of

its profitable operations and its capital structure. Meanwhile, GADC has negative ROA

33
from 2001 to 2003, but had a positive ROA of 0.08 in 2004. Return on common

stockholder’s equity for GADC results from both net losses and negative stockholder’s

equity in 2001 to 2003. However, in 2004, the company generated net income and a

negative stockholder’s equity because of the continuous deficit, making the ratio

negative. It is also noteworthy that return on assets did not exceed return on equity for

JFC. This could mean the greater capability of stockholders’ contribution to generate

revenues for the company.

Table 14

Return on total assets and Return on common stockholders’ equity for JFC and GADC

Ratio 2000 2001 2002 2003 2004

Return on total assets

JFC 0.10 0.05 0.09 0.09 0.11

GADC (0.26) (0.16) (0.03) (0.01) 0.08

Return on common stockholder's equity

JFC 0.15 0.08 0.16 0.17 0.20

GADC 0.87 0.41 0.07 0.01 (0.20)

Discussion

The discussion part of this paper is a financial review on other information that

may be relevant in the analysis of the financial ratios of JFC and GADC.

Jollibee Foods Corporation

The company posted increasing sales from P15.6 Billion in 2000 to P26.2 Billion

in 2004, 92.6% of which came from food sales. This resulted from the intensified across

34
the board expansion of the Quick Service Restaurants of the company with approximately

more than 100 stores opened each year. At the same time, the cost of sales also increased

from P15.5 Billion to P21.2 Billion; the same trend was seen also in the operating

expenses of JFC due the general rise of the costs of doing business, salaries and wages,

raw materials, fuel, and marketing and promotions. In addition, starting in year 2001, the

company began recognizing provisions for the impairment of owned and leased non-

operating properties as part of the rationalizing operations with the changing market

conditions.

Interest expense varies for the years 2000 – 2004. In 2002, the company decided

to covert the P850 Million loan applied in 2001 from a fixed rate of 11.91% to floating

rates because going fixed rates requires certain restrictions such as in selling, leasing or

transferring properties to other parties, the consolidation with other corporations,

declaring dividends greater than the net income, and the maintenance of financial ratios.

Hence, the interest rate of the loan became 7.87% in 2002, 7.75% in 2003, and 10.21% in

2004.

The increasing trend of equity in net losses in joint venture pertains to increasing

share of the company in the net loss of the joint venture of Baker Fresh Foods

Philippines, Inc. and Delifrance Asia, Ltd. from 1.6 Million in 2001 to 23.1 Million in

2004. Moreover, in 2004, the company acquired 85% of the issued capital shares of

Belmont Enterprises Ventures Ltd., the holding company of Yonghe King Chain of fast

food restaurants in China. Such acquisition resulted in the recognition of goodwill

amounting to P994 Million. Amortization of goodwill starting in 2004 amounted to 37.3

Million.

35
 Total assets increased from P9.75 Billion in 2001 to P15.4 Billion in 2004, the

biggest chunk of the assets are cash and cash equivalents; property, plant and equipment;

and refundable deposits and other non-current assets. The expansion of the network of

fast food stores including the establishment of the new P1.5 Billion commissary in

Canlubang, Laguna, triggered the increase in the fixed assets, while other non-current

assets include refundable deposits and non-operating assets from closed shops subject to

impairment.

Notwithstanding the increase in current liabilities from P3.2 Billion in 2001 to

P5.9 Billion in 2004, the company was able to maintain its liquidity position, with a

current ratio of 1.20 in 2004. Non-current liabilities increased in connection with the

P850 Million loan. The stockholders’ equity, on the other hand, continues to increase

because of the fluctuating retained earnings, albeit the increase in dividends distributed to

stockholders from P229.8 Million in 2001 to P444.1 Million in 2004.

The company is continuously seeking to lead the QSR industry in the Philippines

in the following years through exponential growth in operations and the continuous

expansion of market coverage. Superior menu line-up, creative promotions and

marketing, and efficient manufacturing and logistics facilities to support the expanding

operations will help materialize this endeavor. Moreover, Jollibee Foods Corporation

continues to adhere to the strict, high standards of F.S.C. (Food, Service, and Cleanliness)

to support the mission of bringing happiness to everyone.

36
Golden Arches Development Corporation

Jollibee’s fiercest competitor in the QSR industry, McDonald’s (GADC),

maintains an average of at least P4 Billion in its total assets, majority of which is

composed of cash and cash equivalents and property, plant, and equipment. The

continuous decrease of the composition of fixed assets, as shown in the common-size

financial statements, pertains to the continuous recognition of depreciation and

impairment losses in its buildings, leasehold improvements, signs, and seats.

The mainstream of its receivables came from related party transactions and

sublicense agreements to its franchisees. Non-current assets consists of long-term

receivables, the largest portion pertained to the lease of land by Golden Arches Realty

Corporation, with unpaid rentals of P139.7 Million as of 2004, with the refundable

security deposits from affiliated restaurants amounting to P38.8 Million as of 2004.

GADC’s Liabilities mainly come from the advances of McDonald’s Restaurant

Operators (MRO), with the amount increased to P4.8 Billion in 2001, of which P78

Million assigned as payment for MRO’s subscription of shares of stock of GADC was

approved in 2002 by the SEC. In 2003, the company reclassified the loan as non-current

liability.

Because of the assignment, the capital stock increased, although the stockholders’

equity continues to experience a deficit, because of continuous losses. In addition, the

merger of GADC and McGeorge Food Industries, Inc. in 2002 resulted to GADC’s

absorption of losses and capital deficiency of McGeorge.

Revenue from company-owned restaurants comprises an average of 95% for the

years 2001 – 2004, while Cost of Sales average 42% of the total revenues of GADC.

37
Major expenses of the company come from the general increase in operating costs of the

company, including the general and administrative expenses.

In spite of the “underdog” status of GADC in the QSR industry behind its

competitor, GADC hopes to recover its deficit and continues to sprawl as the fastest

growing fast food chain in the country. This will be supplemented with the offering of

attractive menu items, locating restaurants in areas with possible growth potential,

improving the taste and appeal of its product lines, enhancing its image through

promotions, intensive marketing, and franchising strategies (Acuna, et al., 2004).

Up to now, McDonald’s in the Philippines continue to live by the values of

Q.C.S.V (Quality, Service, Cleanliness, and Value) implemented in McDonald’s outlets

worldwide to achieve customer satisfaction and further boost its sales to eventually

surpass the competitor’s feat.

Du Pont Analysis

The use of the Du Pont Model in determining Return on Equity (ROE) has

brought about the need to measure the true “financial health” of the firm by identifying

the drivers that create value for the firm. The Du Pont model seeks to understand “factors

that influence the Return on Equity of the firm using basic accounting relationships”

(Firer, 1999). Return on equity, in this case, is computed as the product of Profit Margin,

Asset Turnover, and Equity Multiplier (Leverage).

Table 15 shows the summary of Return on Equity computations for JFC and

GADC using the Du Pont Model for the years 2000 – 2004. As can be seen, GADC has

higher Returns on Equity than JFC for 2000 and 2001 with 0.607 and 0.320, respectively.

38
Apparently, the analysis of the financial statements show that GADC has negative net

profit margin because of continuous losses, and negative leverage because of the

continuous deficit experienced by the company. Appendix 24 shows the computations for

Return on Equity for JFC and GADC using the model. It can be said that the results for

GADC are quite misleading because negative proxies will lead to a positive product,

making users believe that the returns are higher for GADC.

Table 15

Summary of Return on Equity using Du Pont Model for JFC and GADC for the years 2000 – 2004

Return on Equity
Year JFC GADC

2000 0.146 0.607

2001 0.086 0.320
2002 0.144 0.070
2003 0.164 0.012
2004 0.189 (0.217)

JFC, on the other hand, may have prudent returns but because the company

continues to generate net income and manages its assets well, then the ROE computation

using Du Pont model should be favorable for Jollibee.

Benchmarking

To determine whether JFC and GADC’s financial performance are in accordance

with the industry standards, the researcher determined the average financial ratios of JFC

and GADC for the years 2000 – 2004. The average ratios were compared with the

industry averages set in the United States for the year 2005 found in Reuters.com

website. The study used the US Industry Averages data since it is in the United States

39
that originated the spur of fast food chains and the birth of the Quick Service Restaurants

Industry.

Table 16 presents the comparison of the average financial ratios for JFC and

GADC together with the US Industry Averages. As can be seen, the current ratio and

quick ratio for JFC exceeded the US Industry Average of 1.01 and 0.64, respectively;

implying the ability of JFC to manage its current assets and quick assets. GADC has yet

to outperform the industry standards for these ratios.

Table 16

Comparison of Average Financial Ratios for JFC and GADC with the US Industry Averages

Benchmarking with the US Industry Averages for the

QSR Industry

JFC US Industry GADC

Ratio 2001-2004 Averages* 2001-2004
Current ratio 1.01 0.90 0.64
Quick ratio 0.76 0.60 0.43
Inventory turnover 18.08 52.50 8.74
Average sale period 20.54 6.95 42.22
Debt to equity ratio 0.69 0.50 -3.70
Debt ratio 0.40 0.33 1.39
Price-earnings ratio 17.76 26.6 N/A
Return on total assets 0.09 0.1 -0.08
Return on common SHE 0.15 0.2 0.23
Gross margin percentage** 0.19 0.28 0.58
Operating margin percentage** 0.06 0.13 0.04
Net profit margin percentage** 0.05 0.12 -0.62
Note:* obtained from http://www.investor.reuters.com
**obtained from the common size financial statements

In terms of inventory turnover and average sale period, both JFC and GADC are

still struggling to sell its inventory at a faster pace. However, JFC sells their inventory

faster than GADC, having placed orders 18.08 times and sold each order within 20.54

days, compared with GADC, who placed orders at an average of 8.74 times and sold

them in 42.2 days. ROA and Return on Equity of JFC is also better than GADC, although

40
both companies have to meet the US Industry averages of 0.10 and 0.20, respectively.

The same goes for gross margin percentage, operating margin percentage, and net profit

margin percentage for JFC. GADC, on the other hand, while maintaining a high 0.58

gross margin percentage, suffered losses that made the other two ratios negative.

The United States has the longest history of fast food consumption in the world.

From its inception in 1921 when the first fast food, White Castle, spawned, there are

about countless fast food brands introduced in American markets. It is also in the United

States that foreign fast food chains adopted technology, management practices, and other

operational aspects. In 2000, consumer spending on fast food restaurants amounted to

$110 Billion, far from $6 Billion in 1970. The National Restaurant Association in

America forecasts that in 2006, consumer spending on fast food restaurants will increase

to P142 Billion (“Fast Food,” 2006).

In line with this, it can be inferred that such phenomenon might affect the

performance of fast food companies in terms of its financial ratios. This phenomenon can

also be explained by the large number of fast food companies situated in the country,

leading to more food choices and more avenues towards generating income.

Based on the analysis, JFC performs better than GADC in terms of the financial

ratios; but still, it has to work its way toward meeting the industry requirements, although

both companies are trendsetters in the Quick Service Restaurants Industry in the

Philippines.

Proposed Balanced Scorecard for the Fast food Industry in the Philippines

The use of the balanced scorecard is nowadays a more useful tool in meeting the

corporate objectives of the organization. Other than its corporate objective, the balanced

41
scorecard is composed of four important perspectives that every organization should look

into: the Financial Perspective, the Customer Perspective, the Internal Process

Perspective, and the Internal Learning and Growth Perspective (Kaplan and Norton,

1996). Table 17 presents the proposed balanced scorecard for the Quick Service (Fast

Food) Restaurants in the Philippines after the financial analysis of Jollibee and

McDonald’s.

Table 17

Proposed Balanced Scorecard for the Fast Food Restaurant in the Philippines

Corporate Objective: To become the leader in the QSR industry of the Philippines

Strategic Objectives Specific Objectives Measures

Financial (Mission- Become the largest fast food
Level) Perspective chain in terms of number
Become the most popular QSR
brand in the country
Improve revenue growth
Improve returns
Number of outlets (per city, per
province, per region)
Number of food segments, Number of
products offered within the segment
Total revenues, Gross profit margin,
Operating profit margin, and net profit
margin
Return on Total Assets, Return on
Equity, and Return on Investment

Customer Perspective Increase Customer Satisfaction Market share in the Industry, Market
with our products and people share in every food segment

Increase Satisfaction “After Sale” Customer Satisfaction Survey

Internal Process Understand our Customers Market feasibility studies, Market

Perspective
Introduce New Products
Ensure Product Quality
Minimize Operational Problems
Deliver Food Quickly
Internal Learning and Systematic Approach to Training
Growth Perspective
Align Personal Goals
Survey
Product Development Cycle Analysis,
New Product Revenue, Quality
Assessment Reports
Quality Assessment Reports
Service Error Rate and Customer
Complaints
Delivery time Reports
Training audit grades, Training log of
number and levels of training activities,
Staff turnover rates, and Mystery
customer audit grades
Employee Satisfaction Survey Grades,
Revenue per Employee

42
 As can be seen in the table, in terms of financial perspective, fast food companies

continue to struggle to lead fast food industry by its presence in various places in the

Philippines. In terms of the number of outlets in the system, Jollibee has a system-wide

network of more than 900 stores, distributed strategically throughout the entire country.

On the other hand, McDonald’s has kept to its international standard of business

organizations, carrying only the same brand for 25 years in the Philippines. Despite its

successful marketing programs, the company has to recover from its huge deficit and

should maintain profitable operations, which started in 2004.

In terms of the customer perspective, Acuna, et al. (2004) assumed a combined

market share of 80% for Jollibee and McDonald’s, leaving the rest of the pack behind

including Burger King, Wendy’s, Tropical Hut, and a host of others fast food stores.

Jollibee’s triumphant success in getting the largest share in the market is associated with

the variety of products being offered by the company, hence, increasing customer

satisfaction.

Trying to get a large share of the market requires the company to understand the

needs of its customers and to offer products and services that would cater to their needs.

In addition, they should work out the delivery process to reduce errors in effectively

serving the customers. Furthermore, fast food companies should invest in staff training to

harness the potentials of their employees and to increase employee satisfaction.

Kaplan and Norton (1996) argue that the balanced scorecard goes beyond

traditional financial measures since business units also strive to create value for current

and future customers. In addition, it also addresses the redefining of internal strengths

43
and investing on people, systems, and processes to ensure a favorable performance for

the organization.

Corporate Social Responsibility and the Corporate Social Responsibility Scorecard

for the QSR Industry in the Philippines

In the modern business world, businesses must also endeavor not only to make

profits but also, to contribute to the welfare of the society. Thus, corporate social

responsibility was born to address the need for socially – responsible business

organizations.

This section focuses on the activities conducted by Jollibee and McDonalds in

promoting Corporate Social Responsibility.

Jollibee

In 1995, Aga Muhlach, a favorite endorser of Jollibee products, approached

Jollibee and proposed a nationwide toy drive for kids on Christmas. This idea was coined

as “Ma-AGA ang Pasko sa Jollibee.” This campaign encourages young kids and adults to

donate their old toys to children housed in different shelters in the Philippines. Because

of its huge success in the first year, JFC decided to continue the nationwide toy drive and

in 1999, JFC saw the addition of books in the program, and the increase in the number of

charitable institution beneficiaries to more than 100. In 2005, JFC is celebrating the

project’s 11th anniversary, with more than 400,000 children blessed with toys and books

given during the Christmas season.

44
 As part of the social responsibility especially to the people with hearing

disabilities, Jollibee, in 1997, began hiring, hearing-impaired people to work as staff and

crew of its Jollibee stores. They tied up with a non-government organization called

STEAM Foundation, Inc. (Special Training, Employment, Advocacy and Management,

Inc.) to promote this project after Aga Muhlach witnessed the donation of toys by a deaf

young sales clerk of Jollibee.

More than giving good food and toys to the children, it is the ultimate thrust of

Jollibee to harness their innate creativity and Filipino values. This led them to the

implementation of a program that will promote positive values and provide venues for

unleashing their talents and potentials. Thus, in 1996, Jollibee spearheaded a campaign

called “Sabi ng Jollibee, Kaya Mo Kid” Its first three commercials in 1997 depict the

values of love to brothers/sisters, perseverance and self-confidence. In the same year,

Jollibee launched a nationwide contest entitled “Sabi ng Jollibee, Kaya Mong Mag-

Drawing Kid!” The contest selected 10 winners from among 3,000 submitted entries.

In 1998, the centennial year of Philippine independence, the campaign was

dubbed as “Sabi ng Jollibee, Kaya Mong Maging Bayani Kid!” in order to promote

children heroism even in small ways. Jollibee also launched another contest to develop

the writing skills of the Filipino children.

Other projects include the launching of “Kaya Mo Kid – Ang Aklat” showing

various drawings an essays submitted in their nationwide contests, and the “Kaya Mong

Mag-kuwento Kid” promoting close family ties and strengthening family relationships. In

addition, a mixed-media art contest showcasing visual representations of happiness.

Another contest, “Kaya Mong Ilarawan Kid!” was designed to promote the imaginative

45
thinking abilities of children of promoting peace to the country. These projects lauded

Jollibee with a Grand Anvil Award in 2000 as the most outstanding community service

program by the Public Relations Society of the Philippines (PRSP) Anvil Awards.

Jollibee also took a bolder step in 2000 when they considered Habitat for

Humanity a beneficiary for its 4th Quarter 2000 Mission. The company launched a project

entitled “Pabahay Pambuhay” through the JFC Group for Habitat. This project aims to

raise funds for construction materials and to encourage employees, management, and

suppliers of JFC to spend some of their time building homes for the poor families in the

country. Since then, the project has helped different Habitat for Humanity projects in

various sites in the Philippines. This project motivated the company to make a long-term

commitment of not just building homes, but also hoping for a better life for its

beneficiary families.

Jollibee tied up with the Department of Social Welfare and Development and

Kabisig ng Kalahi, to promote a Supplemental-feeding program entitled “Nurture the

Future.” This program, which was launched in 2001, aims to feed hundreds of

undernourished schoolchildren. This is done through serving one nutritious meal daily

with vegetables and other ingredients to the school children. The organization taught

mothers of these schoolchildren personal hygiene, child spacing, family life and a host of

other lessons. This project is in line to decrease the percentage of malnutrition among

schoolchildren throughout the country.

Recently, Jollibee supported the Give-A-Life Charity Foundation. Through the

financial assistance of the employees of the company, Jollibee assisted indigent patients

46
confined at various hospitals. The company also provided life-saving medical devices and

medicines to support these patients.

McDonald’s Philippines

Since McDonalds believes in the capabilities of the young children, the company

launched in 1993 the MAKABATA program, designed to award the selected child

achievers in various areas of achievement. This project was the first for the Quick Service

Restaurants Industry.

In 1996, McDonald’s launched Ronald McDonalds House Charities in the

Philippines to provide housing facilities to street children throughout the entire country.

McDonald’s Philippines also established schoolhouses to different poor communities to

serve as day care centers fully staffed and furnished with meals and snacks for its

students. They also installed a playground for the enjoyment of the students as well as

promoting good health through physical activities.

The company also launched the “Tuloy sa Don Bosco” program. This program

aims to provide assistance to the development programs of the Don Bosco Technical

Institute in its desire to train young boys with the various vocational courses such as

welding, mechanics and machine shops and to provide employment opportunities for

these young men upon graduation in the courses. While training, the Society of Don

Bosco provides shelter to these boys; the boys, on the other hand, may have the option to

live in their families. This entails the program to support the daily expenses of the Society

in helping these boys.

McDonald’s also provides nutritional information of its products to its customers

and to promote workforce diversity and minority – owned franchises for its outlets.

47
Corporate Social Responsibility Scorecard

Van der Woerd and Van den Brink (2004) claims that sustainability should be

included in the preparation of the balanced business scorecard. Hence, they proposed a

Responsive Business Scorecard (RBS) that integrates chain management (society) and

environmental performance (planet). It also involves community-driven strategies to

promote the welfare of the society, which is an integral part of the corporate social

responsibility of every business organization.

Table 18

Proposed CSR Scorecard for the Fast Food Restaurants in the Philippines

Society and Planet Material Usage, Energy and Energy consumption data, Water
Water Consumption consumption data, Use of renewable
energy, Gas Emission Reports, Efficiency
reports

Sale points with waste Waste disposal system, Bulk cooking oil
collection initiative

Health and nutrition Product nutritional information, Balanced

menus

Support Local Communities Participation in social initiatives, Charity

and Charitable Programs donations, Expenses for social initiatives,
Relations with the global communities,
Diverse hiring

With this at hand, the study proposes a CSR scorecard for the QSR Industry

which entails resolving of issues affecting the society and the environment. Table 18

shows the proposed scorecard for this purpose after analyzing the financial statements for

Jollibee and McDonald’s.

As can be seen, the scorecard delves more on the usage of resources, waste

disposal, health and nutrition, and support to charitable programs. QSR restaurants should

48
undertake energy conservation activities since most stores are open for hours. QSR

restaurants must also recognize its commitment to environment and society by finding

alternative methods of converting used cooking oil as sources of alternative renewable

energy. Moreover, they should also practice cultural and environmental considerations in

procuring raw materials for its products such as meats, fish and agricultural produce, and

in the waste disposal practices to reduce the amount of kitchen scraps, plastics, and styro

materials.

Restaurants must also promote health and wellness by providing nutritional

information in their products and offering balanced menus to reduce the adverse effects

of fast food consumption that leads to obesity. Fast food restaurants must also continue to

support local communities and undertake charitable programs to improve the lives of the

marginalized sectors of the society. While the ultimate goal of Jollibee and McDonald’s

is to dominate the QSR market, it should not compromise its responsibility to the

environment and the society by considering these measures of social commitment.

49
 Chapter 5

Conclusion and Recommendation

Since food is one of the ultimate needs of every person, then food retailers will

continue to grow and succeed in nourishing the needs of its consumers. The Quick

Service Restaurants (QSR) Industry is one of the food retailers who will continue to

flourish as the major food providers for every customer, especially in the Philippines,

where majority of the total expenditures of every Filipino goes to food.

The success of every Quick Service (fast food) restaurant cannot solely be

determined by the number of its customers, the number of its mascot endorsers, or the

variety of menu items offered. Their performance is measured by analyzing their

financial statements to see how they manage their resources and obligations to generate

profitable earnings for the business.

Jollibee and McDonalds are the archrivals in the Philippine fast food industry.

With more than 25 years of existence, these companies have proven its dominance in

introducing new product lines and programs to attract a significant market for their

products.

However, in the analysis of the financial statements of these two companies, it is

no doubt that financial performance measures favored Jollibee over McDonalds (or the

GADC). More than the nationalistic aspect since Jollibee is of a Filipino origin, its strong

marketing programs and networks with other fast food chains like Greenwich, Delifrance,

Chowking, Yonghe King, and its newest member, Red Ribbon, enabled the company to

soar higher in terms of profits and increasing resources, while managing their obligations.

50
Furthermore, the expansion of facilities and the introduction and re-introduction of their

brands has enabled consumers to appreciate their products.

Jollibee succeeded because of its impressive financial ratios. However, the

company should not rest in their laurels. Further improvements in its operations should be

considered together with their settlement of obligations.

Conversely, McDonald’s have to continue its struggle of ousting Jollibee in its

current position in the market. However, the dominance of Jollibee in the market and the

management of expenses resulted to continuous losses and deficit. Furthermore, the

company’s obligations are valued at huge amounts and are still unpaid. This results to

dismal financial ratios that would severely affect the company in terms of its operating

capabilities. GADC, therefore, has to improve in its financial performance, to negotiate

its obligations, and to continue intensifying its marketing programs to finally recover and

successfully compete with Jollibee.

If allowed, GADC may consider offering their stocks to the public. This may

entail opportunities for greater capitalization and thus, be able to recover their deficit.

These should be complemented with profitable operations.

Other than Jollibee and McDonald’s, the QSR industry in the Philippines, in

general, is still challenged to improve its standing despite its stability. Fast food

companies should continue to strive for excellence in gaining customer satisfaction

leading to greater profits. They should also manage its resources and obligations to their

suppliers and creditors, as well as continuing their obligation to serve the community and

the society where these companies benefit from.

51
 Having analyzed the financial statements of Jollibee and McDonald’s, the study

enumerates the following recommendations.

1. Perform an industry analysis of the QSR industry in the Philippines. The Hotel

and Restaurants Association of the Philippines cannot perform the industry

analysis because fast food companies do not furnish data to the association

anymore. It is hoped that the group will be more persistent to the procurement of

data for all companies covered by the industry to come up with relevant

information that can be useful in performing studies connected with the industry.

2. Future studies should also include the computation of EVA ®. Economic value

added was not performed in the study due to lack of data. Should future

researchers be given more time to do financial analysis studies, they should also

place importance in the inclusion of Economic Value Added in their analysis.

3. Perform an analysis of measuring business performance through the balanced

scorecard and the CSR scorecard. Although this study presented the proposed

balanced scorecard and CSR scorecard for the QSR industry in the Philippines,

there might be some other items that should form part of the scorecards to be

explored in future research. In addition, future studies should also delve on the

actual use of these scorecards for performance measurement of QSR companies.

4. Consider other financial ratios that may be useful in the analysis of financial

statements. The research may not have covered all financial ratios that maybe

relevant in the evaluation of the companies’ financial performance. Hence, ratios

such as cash ratio, cash flow liquidity ratios, and a host of others should also be

evaluated.

52
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APPENDICES
Appendix 1
Balance Sheet of Jollibee Foods Corporation for the years 2000 - 2004

JOLLIBEE FOODS CORPORATION

Balance Sheets
2004 2003 2002 2001 2000
ASSETS
Current assets
Cash and cash equivalents P 3,001,990,853 P 2,788,514,243 P 2,297,887,999 P 1,157,712,953 P 1,217,517,358
Short-term investments 281,596,838 0 0 0 0
Short-term receivables, net 1,276,900,695 960,440,878 864,927,511 860,042,210 838,548,511
Inventories, net of inventory obsolescence 1,109,461,890 880,984,892 818,342,097 1,088,900,064 897,672,922
Prepaid expenses and other current assets 591,134,202 693,081,357 1,083,674,218 754,592,451 717,931,192
Total current assets 6,261,084,478 5,323,021,370 5,064,831,825 3,861,247,678 3,671,669,983
Long-term receivables 68,922,242 63,812,052 0 0 5,694,000
Long-term investments and interest in joint
venture 121,665,782 123,475,355 160,493,217 49,994,029 3,350,616
Property, plant and equipment, net 6,307,689,197 5,782,210,909 4,887,341,447 4,598,220,498 3,537,787,547
Deferred tax assets 686,211,288 623,380,627 165,988,526 213,403,953 90,496,996
Refundable deposits and other noncurrent assets 1,942,374,692 1,008,958,554 928,109,074 1,028,093,980 1,588,767,104

TOTAL ASSETS P 15,387,947,679 P 12,924,858,867 P 11,206,764,089 P 9,750,960,138 P 8,897,766,246

LIABILITIES AND EQUITY

Liabilities
Accounts payable and accrued expenses P 4,409,666,753 P 3,688,339,652 P 3,021,513,101 P 2,574,587,566 P 2,539,288,073
Current portion of long-term debt 226,666,667 226,666,667 226,666,667 113,333,333 0
Current portion of provisions 656,195,285 17,000,000 5,500,000 0 0
Other current liabilities 565,818,166 433,436,923 498,196,699 532,553,311 471,053,927
Total Current Liabilities 5,858,346,871 4,365,443,242 3,751,876,467 3,220,474,210 3,010,342,000
Long-term debt 56,666,666 283,333,333 510,000,000 736,666,667 0
Provisions - net of current portions 63,594,910 90,433,000 20,000,000 0 0
Operating lease payable 779,491,489 746,498,940 0
Other noncurrent liabilities 24,633,275 57,827,369 20,604,180 19,126,686 0

Total Liabilities 6,782,733,211 5,543,535,884 4,302,480,647 3,976,267,563 3,010,342,000

Minority Interests 238,801,012 179,409,964 179,647,405 99,007,866 8,822,821
Stockholder's equity
Capital Stock, P1 par value 1,022,158,363 1,032,928,362 1,030,081,688 1,017,238,784 1,014,394,851
Subscription receivables (18,155,444) (72,351,160) (97,303,721) 0 0
Additional paid-in capital 1,710,781,686 1,833,141,842 1,788,889,996 1,656,967,805 1,640,025,313
Translation adjustments 144,291,625 207,736,533 190,492,509 85,196,487 (26,022,885)

Retained earnings 5,947,990,508 4,811,437,711 4,386,731,055 3,620,244,231 3,540,823,753

Total 8,807,066,738 7,812,893,288 7,298,891,527 6,379,647,307 6,169,221,032

Less: Treasury stock 440,653,282 610,980,269 574,255,490 703,962,598 290,619,607

Total stockholder's equity 8,366,413,456 7,201,913,019 6,724,636,037 5,675,684,709 5,878,601,425

TOTAL LIABILITIES AND EQUITY P 15,387,947,679 P 12,924,858,867 P 11,206,764,089 P 9,750,960,138 P 8,897,766,246

Appendix 2
Balance Sheet of Golden Arches Development Corporation for the years 2000 – 2004

GOLDEN ARCHES DEVELOPMENT CORPORATION

Balance Sheets

2004 2003 2002 2001 2000

ASSETS

Current assets
Cash and cash equivalents P 691,249,702 P 425,545,315 P 516,331,989 P 534,334,399 P 2,169,246
Short-term receivables, net 300,969,948 323,465,574 367,960,248 404,357,013 851,095,523
Inventories 348,059,538 267,252,192 269,056,129 390,255,466 138,263,369
Prepaid expenses and other current assets 135,869,302 106,577,541 95,061,069 77,356,585 49,422,868
Total current assets 1,476,148,490 1,122,840,622 1,248,409,435 1,406,303,463 1,040,951,006
Long-term receivables 12,764,583 22,318,542 36,978,542 9,250,000
Investments, advances and interest in joint venture 112,738,431 104,375,390 92,744,182 118,475,936 88,471,418
Property, plant and equipment, net 1,746,636,492 1,961,589,395 2,205,591,711 2,428,970,650 2,589,719,641
Deferred tax assets 140,090,880 27,166,792 0 0 0
Refundable deposits and other noncurrent assets 634,280,211 731,387,128 755,283,892 761,013,864 396,268,805

TOTAL ASSETS P 4,122,659,087 P 3,969,677,869 P 4,339,007,762 P 4,724,013,913 P 4,115,410,870

LIABILITIES AND EQUITY

Liabilities
Short-term loans P 0 P 0 P 0 P 161,000,000 P 1,918,500,000
Accounts payable and accrued expenses 880,634,754 785,331,564 916,283,069 927,613,309 133,359,773
Advances from a stockholder - current 0 0 4,735,032,611 0 0
Payable to affiliates 413,802,697 358,974,399 422,611,617 5,306,782,976 2,837,165,276
Current portion of long-term debt 0 0 0 66,666,667 133,333,333
Income tax payable 0 0 11,438,467 17,080,898
Total Current Liabilities 1,294,437,451 1,144,305,963 6,085,365,764 6,479,143,850 5,022,358,382
 Long-term debt 0 0 0 0 66,666,667
Accrued rent 175,091,101 169,055,652 0 0 0
Advances from a stockholder 4,140,770,111 4,492,332,611 0 0 0
Advances from affiliates 57,431,435 57,431,435 57,431,435 57,431,436 57,431,436
Guaranty deposits 36,764,153 31,686,058 31,594,210 23,992,620 24,413,084
Deferred tax liability 0 0 1,117,943 1,209,537 1,130,156

Total Liabilities 5,704,494,251 5,894,811,719 6,175,509,352 6,561,777,443 5,171,999,725

Stockholder's equity (capital deficiency)
Capital Stock, P1,000 par value 147,100,000 147,100,000 147,100,000 17,100,000 17,100,000
Additional paid-in capital 849,970 849,970 849,970 0 31,986,653

Retained earnings (deficit) (1,729,785,134) (2,073,083,820) (1,984,451,560) (1,854,863,530) (1,105,675,508)

Total stockholder's equity (capital deficiency) (1,581,835,164) (1,925,133,850) (1,836,501,590) (1,837,763,530) (1,056,588,855)

TOTAL LIABILITIES AND EQUITY (DEFICIENCY) P 4,122,659,087 P 3,969,677,869 P 4,339,007,762 P 4,724,013,913 P 4,115,410,870
Appendix 3
Income Statement for Jollibee Foods Corporation for the years 2000 - 2004

JOLLIBEE FOODS CORPORATION

Comparative Income Statement and Reconciliation
2004 2003 2002 2001 2000

Revenues: Net sales P 24,325,440,617 P 19,970,375,920 P 18,774,292,493 P 17,446,126,352 P 14,474,091,714

Royalties, frachise fees
and other revenues 1,902,221,504 1,689,968,217 1,485,523,248 1,320,533,439 1,139,523,116

Gross Revenues 26,227,662,121 21,660,344,137 20,259,815,741 18,766,659,791 15,613,614,830

Less: Cost of Sales 21,170,217,720 17,487,885,289 16,435,280,247 15,480,178,021 12,367,070,829

Gross Profit 5,057,444,401 4,172,458,848 3,824,535,494 3,286,481,770 3,246,544,001

Less: Operating costs and expenses 3,255,518,125 2,976,354,986 2,457,742,884 2,570,295,449 2,245,789,430

Income from Operations 1,801,926,276 1,196,103,862 1,366,792,610 716,186,321 1,000,754,571

Other income (charges) 164,875,775 88,267,343 18,638,639 46,941,947 127,366,224
Income before interest and taxes 1,966,802,051 1,284,371,205 1,385,431,249 763,128,268 1,128,120,795
Add: Interest income 122,669,155 129,509,729 63,289,019 45,676,771
Less: Interest expense (51,113,678) (56,813,534) (87,648,781) (78,308,850)
Equity in net loss of a joint venture and
amortization of goodwill (60,370,866) (24,093,915) (15,927,116) (1,643,152)
Income before income tax and minority
interest 1,977,986,662 1,332,973,485 1,345,144,371 728,853,037 1,128,120,795
Benefit from (Provision for) income tax
Current (465,331,180) (397,216,896) (373,755,325) (314,272,098) (331,575,480)
Deferred 102,021,568 253,163,097 (8,405,103) 35,507,033 6,559,330
Income before minority interest 1,614,677,050 1,188,919,686 962,983,943 450,087,972 803,104,645
MINORITY INTEREST (34,003,894) (6,711,932) 7,827,292 36,305,301 56,897,383
Net income 1,580,673,156 1,182,207,754 970,811,235 486,393,273 860,002,028
Total dividends paid 444,120,359 344,420,209 272,870,250 229,782,492 199,232,812

Net income retained 1,136,552,797 837,787,545 697,940,985 256,610,781 660,769,216

Effect of changes in accounting (344,525,050) (127,524,279)

Retained earnings, beginning of the year 4,811,437,711 3,973,650,166 3,620,244,231 3,363,633,450 2,830,388,513

Retained earnings, end of the year P 5,947,990,508 P 4,811,437,711 P 3,973,660,166 P 3,620,244,231 P 3,363,633,450
Appendix 4
Income Statement for Golden Arches Development Corporation

GOLDEN ARCHES DEVELOPMENT CORPORATION

Comparative Income (Loss) Statement and Reconciliation

2004 2003 2002 2001 2000

Revenues
Sales by company-owned
restaurants P 5,789,051,243 P 5,474,993,735 P 5,967,976,748 P 5,547,140,194
Revenue from franchise and
affiliated restaurants 348,747,875 302,901,255 251,230,293 225,849,233
Gross Revenues 6,137,799,118 5,777,894,990 6,219,207,041 5,772,989,427 P 1,170,559,624
Less: Cost of Sales 2,521,423,940 2,322,529,228 2,572,875,445 2,720,537,523
Gross Profit 3,616,375,178 3,455,365,762 3,646,331,596 3,052,451,904
Less: Operating costs and expenses 3,455,339,057 3,426,476,686 3,573,660,281 3,406,341,168 914,422,969
Income (Loss) from Operations 161,036,121 28,889,076 72,671,315 (353,889,264) 256,136,655
Other income 107,535,392 40,202,019 41,255,097 135,271,749 6,339,962
Other expenses (23,296,814) (174,768,039) (134,602,725) (377,815,073)
Income before interest and taxes 268,571,513 45,794,281 (60,841,627) (353,220,240) (115,338,456)
Less: Interest expense (30,149,376) (40,563,686) (34,805,117) (202,917,152) (517,382,857)
Income (Loss) before income tax 238,422,137 5,230,595 (95,646,744) (556,137,392) (632,721,313)
Benefit from (Provision for) income
tax
Current (8,047,539) (27,202,289) (34,032,880) (31,519,125) (8,119,841)
Deferred 112,924,088 (607,433) 91,594 (79,381) (875,418)
Net income (loss) 343,298,686 (22,579,127) (129,588,030) (587,735,898) (641,716,572)

Total dividends paid 0 0 0 0 0

Net income retained 343,298,686 (22,579,127) (129,588,030) (587,735,898) (641,716,572)

Effect of changes in accounting (66,053,133) (161,452,124)

Retained earnings (deficit), beginning
of the year (2,073,083,820) (2,050,504,693) (1,854,863,530) (1,267,127,632) (463,958,936)
Retained earnings (deficit), end of the
year P (1,729,785,134) P (2,139,136,953) P (1,984,451,560) P (1,854,863,530) P (1,267,127,632)
Appendix 5

Common Size Balance Sheet for Jollibee Foods Corporation

JOLLIBEE FOODS CORPORATION

Balance Sheets

2004 2003 2002 2001 2000

ASSETS

Current assets % % % % %
Cash and cash equivalents 19.51% 21.57% 20.50% 11.87% 13.68%
Short-term investments 1.83% 0.00% 0.00% 0.00% 0.00%
Short-term receivables, net 8.30% 7.43% 7.72% 8.82% 9.42%
Inventories, net of inventory obsolescence 7.21% 6.82% 7.30% 11.17% 10.09%
Prepaid expenses and other current assets 3.84% 5.36% 9.67% 7.74% 8.07%
Total current assets 40.69% 41.18% 45.19% 39.60% 41.27%
Long-term receivables 0.45% 0.49% 0.00% 0.00% 0.06%
Long-term investments and interest in joint venture 0.79% 0.96% 1.43% 0.51% 0.04%
Property, plant and equipment, net 40.99% 44.74% 43.61% 47.16% 39.76%
Deferred tax assets 4.46% 4.82% 1.48% 2.19% 1.02%
Refundable deposits and other noncurrent assets 12.62% 7.81% 8.28% 10.54% 17.86%
TOTAL ASSETS 100.00% 100.00% 100.00% 100.00% 100.00%

LIABILITIES AND EQUITY

Liabilities % % % % %
Accounts payable and accrued expenses 28.66% 28.54% 26.96% 26.40% 28.54%
Current portion of long-term debt 1.47% 1.75% 2.02% 1.16% 0.00%
Current portion of provisions 4.26% 0.13% 0.05% 0.00% 0.00%
Other current liabilities 3.68% 3.35% 4.45% 5.46% 5.29%
Total Current Liabilities 38.07% 33.78% 33.48% 33.03% 33.83%
 Long-term debt 0.37% 2.19% 4.55% 7.55% 0.00%
Provisions - net of current portions 0.41% 0.70% 0.18% 0.00% 0.00%
Operating lease payable 5.07% 5.78% 0.00% 0.00% 0.00%
Other noncurrent liabilities 0.16% 0.45% 0.18% 0.20% 0.00%
Total Liabilities 44.08% 42.89% 38.39% 40.78% 33.83%
Minority Interests 1.55% 1.39% 1.60% 1.02% 0.10%
Stockholder's equity
Capital Stock, P1 par value 6.64% 7.99% 9.19% 10.43% 11.40%
Subscription receivables -0.12% -0.56% -0.87% 0.00% 0.00%
Additional paid-in capital 11.12% 14.18% 15.96% 16.99% 18.43%
Translation adjustments 0.94% 1.61% 1.70% 0.87% -0.29%
Retained earnings 38.65% 37.23% 39.14% 37.13% 39.79%
Total 57.23% 60.45% 65.13% 65.43% 69.33%
Less: Treasury stock 2.86% 4.73% 5.12% 7.22% 3.27%
Total stockholder's equity 54.37% 55.72% 60.01% 58.21% 66.07%
TOTAL LIABILITIES AND EQUITY 100.00% 100.00% 100.00% 100.00% 100.00%
Appendix 6

Common Size Balance Sheet for Golden Arches Development Corporation

GOLDEN ARCHES DEVELOPMENT CORPORATION

Balance Sheets

2004 2003 2002 2001 2000

ASSETS

Current assets
Cash and cash equivalents P 16.77% 10.72% 11.90% 11.31% 0.05%
Short-term receivables, net 7.30% 8.15% 8.48% 8.56% 20.68%
Inventories 8.44% 6.73% 6.20% 8.26% 3.36%
Prepaid expenses and other current assets 3.30% 2.68% 2.19% 1.64% 1.20%
Total current assets 35.81% 28.29% 28.77% 29.77% 25.29%
Long-term receivables 0.31% 0.56% 0.85% 0.20% 0.00%
Investments, advances and interest in joint venture 2.73% 2.63% 2.14% 2.51% 2.15%
Property, plant and equipment, net 42.37% 49.41% 50.83% 51.42% 62.93%
Deferred tax assets 3.40% 0.68% 0.00% 0.00% 0.00%
Refundable deposits and other noncurrent assets 15.39% 18.42% 17.41% 16.11% 9.63%

TOTAL ASSETS P 100.00% 100.00% 100.00% 100.00% 100.00%

LIABILITIES AND EQUITY

Liabilities
Short-term loans P 0.00% 0.00% 0.00% 3.41% 46.62%
Accounts payable and accrued expenses 21.36% 19.78% 21.12% 19.64% 3.24%
Advances from a stockholder - current 0.00% 0.00% 109.13% 0.00% 0.00%
Payable to affiliates 10.04% 9.04% 9.74% 112.34% 68.94%
Current portion of long-term debt 0.00% 0.00% 0.00% 1.41% 3.24%
Income tax payable 0.00% 0.00% 0.26% 0.36% 0.00%
Total Current Liabilities 31.40% 28.83% 140.25% 137.15% 122.04%
Long-term debt 0.00% 0.00% 0.00% 0.00% 1.62%
Accrued rent 4.25% 4.26% 0.00% 0.00% 0.00%
Advances from a stockholder 100.44% 113.17% 0.00% 0.00% 0.00%
Advances from affiliates 1.39% 1.45% 1.32% 1.22% 1.40%
Guaranty deposits 0.89% 0.80% 0.73% 0.51% 0.59%
Deferred tax liability 0.00% 0.00% 0.03% 0.03% 0.03%
Total Liabilities 138.37% 148.50% 142.33% 138.90% 125.67%
Stockholder's equity (capital deficiency)
Capital Stock, P1,000 par value 3.57% 3.71% 3.39% 0.36% 0.42%
Additional paid-in capital 0.02% 0.02% 0.02% 0.00% 0.78%
Retained earnings (deficit) 41.96% 52.22% 45.74% 39.26% 26.87%
Total stockholder's equity (capital deficiency) -38.37% -48.50% -42.33% -38.90% -25.67%
TOTAL LIABILITIES AND EQUITY (DEFICIENCY) P 100.00% 100.00% 100.00% 100.00% 100.00%
Appendix 7

Common Size Income Statement for Jollibee Foods Corporation

JOLLIBEE FOODS CORPORATION

Comparative Income Statement and Reconciliation

2004 2003 2002 2001 2000

Revenues
Net sales 92.75% 92.20% 92.67% 92.96% 92.70%
Royalties, frachise fees and other revenues 7.25% 7.80% 7.33% 7.04% 7.30%
Gross Revenues 100.00% 100.00% 100.00% 100.00% 100.00%
Less: Cost of Sales 80.72% 80.74% 81.12% 82.49% 79.21%
Gross Profit 19.28% 19.26% 18.88% 17.51% 20.79%
Less: Operating costs and expenses 12.41% 13.74% 12.13% 13.70% 14.38%
Income from Operations 6.87% 5.52% 6.75% 3.82% 6.41%
Other income 0.63% 0.41% 0.09% 0.25% 0.82%
Other expenses 0.00% 0.00% 0.00% 0.00% 0.00%
Income before interest and taxes 7.50% 5.93% 6.84% 4.07% 7.23%
Add: Interest income 0.47% 0.60% 0.31% 0.24% 0.00%
Less: Interest expense 0.19% 0.26% 0.43% 0.42% 0.00%
Equity in net loss of a joint venture 0.23% 0.11% 0.08% 0.01% 0.00%
Income before income tax and minority interest 7.54% 6.15% 6.64% 3.88% 7.23%
Benefit from (Provision for) income tax
Current 1.77% 1.83% 1.84% 1.67% 2.12%
Deferred 0.39% 1.17% 0.04% 0.19% 0.04%
Income before minority interest 6.16% 5.49% 4.75% 2.40% 5.14%
MINORITY INTEREST 0.13% 0.03% 0.04% 0.19% 0.36%
Net income 6.03% 5.46% 4.79% 2.59% 5.51%
Appendix 8

Common Size Income Statement for Golden Arches Development Corporation

GOLDEN ARCHES DEVELOPMENT CORPORATION

Comparative Income (Loss) Statement and Reconciliation

2004 2003 2002 2001 2000

Revenues
Sales by company-owned restaurants P 94.32% 94.76% 95.96% 96.09% 0.00%
Revenue from franchise and affiliated restaurants 5.68% 5.24% 4.04% 3.91% 0.00%
Gross Revenues 100.00% 100.00% 100.00% 100.00% 100.00%
Less: Cost of Sales 41.08% 40.20% 41.37% 47.13% 0.00%
Gross Profit 58.92% 59.80% 58.63% 52.87% 0.00%
Less: Operating costs and expenses 56.30% 59.30% 57.46% 59.00% 78.12%
Income (Loss) from Operations 2.62% 0.50% 1.17% -6.13% 21.88%
Other income 1.75% 0.70% 0.66% 0.00% 0.54%
Other expenses 0.49% 1.11% 2.81% 3.50% 32.28%
Income before interest and taxes 3.88% 0.09% -0.98% -9.63% -9.85%
Less: Interest expense 0.00% 0.00% -0.56% 0.00% -44.20%
Income (Loss) before income tax 3.88% 0.09% -1.54% -9.63% -54.05%
Benefit from (Provision for) income tax
Current -0.13% -0.47% -0.55% -0.55% -0.69%
Deferred 1.84% -0.01% 0.00% 0.00% -0.07%

Net income (loss) 5.59% -0.39% -2.08% -10.18% -54.82%

Note: For all years, year 1 represents 2000, year 2 represents 2001, year 3 represents 2002, year4
represents 2003, and year 5 represents 2004, unless otherwise indicated

Appendix 9

Working Capital for Jollibee and McDonald’s

Working Capital

2,000,000,000
0
Amount

-2,000,000,000
-4,000,000,000
-6,000,000,000
1 2 3 4 5
JFC 661,327,983 640,773,468 1,312,955,358 957,578,128 402,737,607
GADC -3,981,407,37 -5,072,840,38 -4,836,956,32 -21,465,341 181,711,039
Year

Appendix 10

Current ratio of Jollibee and McDonald’s

Curre nt Ratio

1.50

1.00
Value

0.50

0.00
1 2 3 4 5

JFC 1.22 1.20 1.35 1.22 1.07

GADC 0.21 0.22 0.21 0.98 1.14
Ye ar
Appendix 11

Earnings per share of Jollibee and McDonald’s

Quick Ratio

1.00

0.80

0.60
Value

0.40

0.20

0.00
1 2 3 4 5

JFC 0.68 0.63 0.84 0.86 0.78

GADC 0.17 0.14 0.15 0.65 0.77
Ye ar

Appendix 12

Inventory turnover for Jollibee and McDonald’s (Year 1 is 2001)

Inve ntory Turnove r

25.00

20.00

15.00
Value

10.00

5.00

-
1 2 3 4

JFC 15.58 17.23 20.58 21.27

GADC 10.29 7.80 8.66 8.20
Ye ar
Appendix 13

Average sale period for Jollibee and McDonald’s (Year 1 is 2001)

Ave r age Sale Pe r iod

50.00

45.00

40.00

35.00

30.00
lue

25.00
Va

20.00

15.00

10.00

5.00

-
1 2 3 4

JFC 23.42 21.18 17.73 17.16

GA DC 35.45 46.77 42.14 44.54
Ye ar

Appendix 14

Debt to equity ratio for Jollibee and McDonald’s

De bt to Equity Ratio

2.00

-
Value

(2.00)

(4.00)

(6.00)
1 2 3 4 5

JFC 0.51 0.70 0.64 0.77 0.81

GA DC (4.89) (3.57) (3.36) (3.06) (3.61)
Ye ar s
Appendix 15

Debt ratio for Jollibee and McDonald’s

De bt Ratio

2.00

1.50
Value

1.00

0.50

-
1 2 3 4 5

JFC 0.34 0.41 0.38 0.43 0.44

GADC 1.26 1.39 1.42 1.48 1.38
Ye ars

Appendix 16

Times interest earned for Jollibee and McDonald’s (Year 1 is 2001)

Tim e s Intere st Earned

50.00
40.00
No. of Times

30.00
20.00
10.00
-
(10.00)
1 2 3 4

JFC 9.75 15.81 22.61 38.48

GADC (1.74) (1.75) 1.13 8.91
Ye ars
Appendix 17

Earnings per share for Jollibee and McDonald’s

Earnings per Share

20000.00

0.00
Value

-20000.00

-40000.00
1 2 3 4 5
JFC 0.85 0.48 0.95 1.15 1.54
GADC (37,527.28) (34,370.52) (1,578.42) (153.50) 2,333.78
Years

Appendix 18

Book value per share for Jollibee and McDonald’s

Book Value per Share

50,000.00
-
Value

(50,000.00)
(100,000.00)
(150,000.00)
1 2 3 4 5
JFC 5.80 5.58 6.53 6.97 8.19
GADC (61,788.82) (107,471.55) (22,369.08) (13,087.25) (10,753.47)
Years
Appendix 19

Return on total assets for Jollibee and McDonald’s

Return on Total Assets

0.20

0.10

-
Value

(0.10)

(0.20)

(0.30)
1 2 3 4 5

JFC 0.10 0.05 0.09 0.09 0.11

GADC (0.26) (0.16) (0.03) (0.01) 0.08
Years

Appendix 20

Return on common stockholder’s equity for Jollibee and McDonald’s

Return on Com m on Stockholders' Equity

1.00
0.80
0.60
Value

0.40
0.20
-
(0.20)
(0.40)
1 2 3 4 5

JFC 0.15 0.08 0.16 0.17 0.20

GADC 0.87 0.41 0.07 0.01 (0.20)
Years
Appendix 21

Gross margin percentage for Jollibee and McDonald’s

Gros s Margin Pe rce ntage

80.00%

60.00%
Percentage

40.00%

20.00%

0.00%
1 2 3 4

JFC 17.51% 18.88% 19.26% 19.28%

GADC 52.87% 58.63% 59.80% 58.92%
Ye ar

Appendix 22

Operating margin percentage for Jollibee and McDonald’s

Ope rating Margin Pe rce ntage

30.00%

20.00%
Percentage

10.00%

0.00%

-10.00%
1 2 3 4 5

JFC 6.41% 3.82% 6.75% 5.52% 6.87%

GADC 21.88% -6.13% 1.17% 0.50% 2.62%
Ye ar
Appendix 23

Net profit margin percentage for Jollibee and McDonald’s

Ne t Profit M argin Pe rce ntage

20.00%

0.00%
Percentage

-20.00%

-40.00%

-60.00%
1 2 3 4 5

JFC 5.51% 2.59% 4.79% 5.46% 6.03%

GADC -54.82 -10.18 -2.08% -0.39% 5.59%
Ye ar

Appendix 24

Du Pont computation for Jollibee and McDonald’s

Du Pont Analysis
2000 2001 2002 2003 2004
JFC
Profit Margin 0.055 0.026 0.048 0.055 0.060
x Total Asset Turnover 1.755 1.925 1.808 1.676 1.704
Return on Assets 0.097 0.050 0.087 0.092 0.103
x Financial Leverage 1.514 1.718 1.667 1.795 1.839
Return on Equity 0.146 0.086 0.144 0.164 0.189

GADC
Profit Margin (0.548) (0.102) (0.021) (0.004) 0.056
x Total Asset Turnover 0.284 1.222 1.433 1.456 1.489
Return on Assets (0.156) (0.124) (0.030) (0.006) 0.083
x Financial Leverage (3.895) (2.571) (2.363) (2.062) (2.606)
Return on Equity 0.607 0.320 0.070 0.012 (0.217)