CORPORATION

Sheryl Villa Mae S. Apa

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

Prof. Ariel Pineda

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I. COMPANY PROFILE

Historical Background

ABS-CBN Corporation (“ABS-CBN” or the “Company”) traces its roots from Bolinao Electronics

Corporation (BEC), established in 1946 as an assembler of radio transmitting equipment. In 1952, BEC

adopted the business name Alto Broadcasting System (ABS) and 7 setting up the country’s first television

broadcast by 1953. On September 24, 1956, Chronicle Broadcasting Network (CBN), owned by Don

Eugenio Lopez Sr. of the Lopez family, was organized primarily for radio broadcasting. In 1957, Don

Eugenio Lopez Sr. acquired ABS and on February 1, 1967, the operations of ABS and CBN were

integrated and BEC changed its corporate name to ABS-CBN Broadcasting Corporation. On August 16,

2010, the Philippine Securities and Exchange Commission (SEC) approved the change of Company’s

corporate name to ABS-CBN Corporation. This change is a reflection of the Company’s diversified

businesses in existing and new industries.

ABS-CBN achieved many firsts since it started the television industry in the country in 1953. However,

with the imposition of martial law in September 1972, ABS-CBN ceased operations as the government

forcibly took control of the Company. ABS-CBN resumed commercial operations in 1986 after the

People Power or EDSA revolution.

Recovery after 14 years of absence was difficult as resources were scarce. Nevertheless, through

relentless effort, ABS-CBN recaptured leadership in the Philippine television and radio industries by

1988. During the 1990s and the early part of the new millennium, the Company expanded and ventured

into complementary businesses in cable TV, international distribution, mobile services, and magazine

publishing among others.

Corporate Information

ABS-CBN Corporation (“ABS-CBN” or “Parent Company”) was incorporated in the Philippines

on July 11, 1946. On July 27, 1994, the Philippine Securities and Exchange Commission (SEC) approved

the extension of the corporate term of the Parent Company for another 50 years. The Parent Company’s

core business is television and radio broadcasting. Its subsidiaries and associates are involved in the

following related businesses: cable and direct-to-home (DTH) television distribution and
 2

telecommunications services overseas, movie production, audio recording and distribution, video/audio

post production and film distribution. Other activities of the subsidiaries include merchandising, internet

and mobile services, publishing, money remittance and theme parks.

The Parent Company is 79%-owned by Lopez, Inc. a Philippine entity, the ultimate Parent

Company.

In 2013, Capital International Private Equity Fund VI, L.P. (CIPEF) subscribed to P2.5 billion

worth of new Philippine Depository Receipts (PDRs) issued by ABS-CBN Holdings Corporation (ABS-

CBN Holdings) which in turn subscribed to the same number of newly issued common shares of the

Parent Company. Lopez, Inc. also subscribed to 34,702,140 common shares and 987,130,246 preferred

shares of the Parent Company in 2013. After the subscription, Lopez, Inc.’s economic interest in the

Parent Company decreased to 56% while its voting rights increased from 57% to 79%.

The common shares of ABS-CBN were listed beginning July 8, 1992 and have been traded in the

Philippine Stock Exchange (PSE) since then.

The registered office address of the Parent Company is ABS-CBN Broadcast Center, Sgt. Esguerra

Avenue corner Mother Ignacia St., Quezon City.

The accompanying consolidated financial statements were approved and authorized for issuance by the

Board of Directors (BOD) on March 5, 2015.

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II. FINANCIAL ANALYSIS

ABS-CBN CORPORATION AND SUBSIDIARIES
STATEMENTS OF INCOME
(Amounts in Thousands)
Years Ended December 31

VERTICAL ANALYSIS HORIZONTAL ANALYSIS

2013 2014 Increase/(Decrease)

Amount % Amount % Amount %
REVENUE
Advertising revenue 19,331,908 57.92 18,879,946 56.285 -451,962 -2.337906843
Sale of services 13,287,245 39.81 14,029,684 41.825 742,439 5.587606761
Sale of goods 579,140 1.735 351,528 1.048 -227,612 -39.30172324
Others 179,611 0.538 282,470 0.8421 102,859 57.26765065
33,377,904 100 33,543,628 100 165,724 0.496508109
PRODUCTION COSTS 11,499,365 34.45 11,007,656 32.82 -491,709 -4.275966543
COST OF SERVICES 8,853,440 26.52 9,045,527 26.97 192,087 2.169631239
COST OF SALES 330,029 0.989 201,993 0.602 -128,036 -38.79537859
GROSS PROFIT 12,695,070 38 13,288,452 39.62 593,382 4.674113652
GENERAL AND ADMINISTRATIVE EXPENSES 9,614,356 28.8 10,113,904 30.15 499,548 5.195855032
FINANCE COST 816,919 2.447 1,165,313 3.474 348,394 42.64731265
INTEREST INCOME 94,438 0.283 153,968 0.459 59,530 63.03606599

FOREIGN EXCHANGE GAINS (LOSSES)-net -145,500 -0.44 -31,704 -0.09 113,796 -78.21030928

EQUITY IN NET EARNINGS (LOSSES) OF

ASSOCIATES AND VENTURES -12,397 -0.04 3,283 0.01 15,680 -126.4822134
LOSS ON SALE OF INVESTMENTS - -
OTHER INCOME 512,322 1.535 652,352 1.945 140,030 27.33241985
INCOME BEFORE INCOME TAX 2,712,658 8.13 2,787,134 8.31 74,476 2.745499064
PROVISION FOR INCOME TAX 684,311 2.05 756,998 2.257 72,687 10.62192483
NET INCOME 2,028,347 6.08 2,030,136 6.05 1,789 0.088199899
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ABS-CBN CORPORATION AND SUBSIDIARIES

STATEMENTS OF FINANCIAL POSITION

(Amounts in Thousands)

Years Ended December 31

VERTICAL ANALYSIS HORIZONTAL ANALYSIS

2013 2014 Increase/(decrease)

Amount % Amount % Amount %

ASSETS

Current Assets

Cash and cash equivalents 10,616,855 18.2 13,238,377 19.69 2,621,522 24.6921

Trade and other receivables 8,333,761 14.29 10,717,317 15.94 2,383,556 28.6012

Program rights and other intangible assets 1,385,972 2.376 1,315,987 1.96 -69,985 -5.04952

Other current assets 3,046,886 5.224 3,669,314 5.46 622,428 20.4283

Total Current Assets 23,383,474 40.09 28,940,995 43.04 5,557,521 23.7669

Noncurrent Assets

Property and equipment 18,535,905 31.78 20,572,543 30.60 2,036,638 10.9875

Program rights and other intangible assets - net of current portion 5,429,192 9.308 6,465,599 9.62 1,036,407 19.0895

Goodwill 5,288,350 9.066 5,289,956 7.87 1,606 0.03037

Available-for-sale (AFS) investments 219,191 0.376 242,368 0.36 23,177 10.5739

Investment properties 196,916 0.338 198,734 0.296 1,818 0.92324

Investments in associates and joint ventures 166,591 0.286 199,874 0.297 33,283 19.9789

Deferred tax assets - net 2,530,164 4.338 2,858,187 4.251 328,023 12.9645

Other noncurrent assets 2,580,033 4.423 2,468,564 3.671 -111,469 -4.32045

Total Noncurrent Assets 34,946,342 59.91 38,295,825 57 3,349,483 9.58465

TOTAL ASSETS 58,329,816 100 67,236,820 100 8,907,004 15.27

LIABILITIES AND EQUITY

Current Liabilities

Trade and other payables 11,332,006 19.43 12,788,120 19.02 1,456,114 12.8496

Income tax payable 193,216 0.331 292,053 0.434 98,837 51.1536

Obligations for program rights 448,861 0.77 724,266 1.077 275,405 61.3564

Interest-bearing loans and borrowings 1,345,471 2.307 110,751 0.165 -1,234,720 -91.7686

Total Current Liabilities 13,319,554 22.83 13,915,190 20.7 595,636 4.47189

Noncurrent Liabilities

Interest-bearing loans and borrowings - net of current portion 13,334,579 22.86 20,214,484 30.06 6,879,905 51.5945

Obligations for program rights - net of current portion 276,344 0.474 224,472 0.334 -51,872 -18.7708

Accrued pension obligation and other employee benefits 4,191,082 7.185 4,790,813 7.125 599,731 14.3097

Deferred tax liabilities - net 637,533 1.093 587,654 0.874 -49,879 -7.82375

Convertible note 245,195 0.42 190,522 0.283 -54,673 -22.2978

Other noncurrent liabilities 402,772 0.691 438,857 0.653 36,085 8.95916

Total Noncurrent Liabilities 19,087,505 32.72 26,446,802 39.33 7,359,297 38.5556

TOTAL LIABILITIES 32,407,059 55.6 40,361,992 60 7,954,933 24.547

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Equity Attributable to Equity Holders of the Parent Company

Capital stock

Common 872,124 1.495 872,124 1.297 0 0

Preferred 200,000 0.343 200,000 0.297 0 0

Additional paid-in capital 4,495,050 7.706 4,495,050 6.685 0 0

Exchange differences on translation of foreign operations -270,632 -0.46 -456,773 -0.68 -186,141 68.7801

Unrealized gain on AFS investments 121,766 0.209 143,281 0.213 21,515 17.6691

Share-based payment plan 34,349 0.059 34,349 0.051 0 0

Retained earnings 19,817,957 33.98 21,363,395 31.77 1,545,438 7.79817

Philippine depository receipts convertible to common shares -1,164,146 -2 -1,264,096 -1.88 -99,950 8.58569

Equity attributable to Equity Holders of the Parent 24,106,468 41.33 25,387,330 37.76 1,280,862 5.31335

Non-controlling Interests 1,816,289 3.114 1,487,498 2.212 -328,791 -18.1024

TOTAL EQUITY 25,922,757 44.4 26,874,828 40 952,071 3.6727

TOTAL LIABILITIES AND EQUITY 58,329,816 100 67,236,820 100 8,907,004 15.27
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III. FINANCIAL RATIOS 2013

A. Liquidity Ratios

𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 23,383,474,000

a. Current Ratio= 𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 = 13,319,554,000 = 1.76

𝑡𝑜𝑡𝑎𝑙 𝑞𝑢𝑖𝑐𝑘 𝑎𝑠𝑠𝑒𝑡𝑠 10,616,855,000+8,333,761,000

b. Acid-test ratio = 𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 = = 1.42
13,319,554,000

𝑛𝑒𝑡 𝑐𝑟𝑒𝑑𝑖𝑡 𝑠𝑎𝑙𝑒𝑠 33,377,904,000

c. Receivable turnover = = = 3.16
𝑎𝑣𝑒.𝑡𝑟𝑎𝑑𝑒 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 2,239,244,000+8,333,761,000

360 𝑑𝑎𝑦𝑠 360

d. Collection Period = = = 113 days
𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 3.16

𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑 20,682,834

e. Inventory turnover = = = 79
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 262,221

360 𝑑𝑎𝑦𝑠 360

f. Inventory sales period = = = 5 days
𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 79

𝑛𝑒𝑡 𝑐𝑟𝑒𝑑𝑖𝑡 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠 5,189,200

g. Payable turnover = 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑟𝑎𝑑𝑒 𝑝𝑎𝑦𝑎𝑏𝑙𝑒𝑠 = = 2.69
1,929,302

360 𝑑𝑎𝑦𝑠 360

h. Payable payment days = = = 134 days
𝑝𝑎𝑦𝑎𝑏𝑙𝑒 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 2.69

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

𝑐𝑎𝑠ℎ 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠 9,614,356

j. Cash turnover = = = 1.13
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑐𝑎𝑠ℎ 𝑏𝑎𝑙𝑎𝑛𝑐𝑒 8,505,896.5

360 𝑑𝑎𝑦𝑠 360

k. Days to operating expenses = = = 319 days
𝑐𝑎𝑠ℎ 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 1.13

𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 7,925,357

l. Working capital turnover = 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑤𝑜𝑟𝑘𝑖𝑛𝑔 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 = = 13,513,769 = 0.57

𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 7,925,357

m. Assets turnover = = 57,992,081 = 14%
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 7,925,357

n. Current assets turnover = == = 0.60
𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 13,319,554

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

= 10,981,207

B. Solvency Ratios
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𝑡𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 32,407,059

a. Debt Ratio = = = = 58,329,816 = 0.56
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

𝑡𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 32,407,059

b. Debt-to-equity ratio = = 𝑡𝑜𝑡𝑎𝑙 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠𝑒𝑞𝑢𝑖𝑡𝑦 = = 25,922,757 = 1.25

𝑡𝑜𝑡𝑎𝑙 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠𝑒𝑞𝑢𝑖𝑡𝑦 25,992,757

c. Equity ratio = = = 58,329,816 = 0.44
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑡𝑎𝑥𝑒𝑠 1995764

d. Times interest earned = = = 2.78
𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒 716,894

𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡𝑠 (𝑛𝑒𝑡) 29,616,954

e. Fixed assets to non-current debts= = = 1.55
𝑡𝑜𝑡𝑎𝑙 𝑛𝑜𝑛−𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 19,087,505

𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡𝑠 (𝑛𝑒𝑡) 29,616,954

f. Fixed assets to shareholder’s equity = 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠 𝑒𝑞𝑢𝑖𝑡𝑦 = = 1.14
25,922,757

𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡𝑠 (𝑛𝑒𝑡)

g. Fixed assets to total equity = 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
=
18,535,905+5,288,350+5,429,192+196,916+166,591
= 0.51
57,992,081

C. Profitability Ratios

𝑔𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡 12,695,070

a. Gross profit rate = = = 0.38 or 38%
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 33,377,904
𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡 3,080,714
b. Operating profit margin = = = 0.09 or 9.22%
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 33,377,904

𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 2,028,347

c. Net profit margin = 𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 =33,337,904 = 0.0608 or 6.08%

𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑖𝑛𝑐𝑜𝑚𝑒 3,080,714

d. Return on investment = = = 0.53 or 5.3%
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 58,329,816

𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 2,028,347

e. Return on shareholder’s equity = = 25,922,757 = 0.08
𝑎𝑣𝑒.𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠𝑒𝑞𝑢𝑖𝑡𝑦

𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒+𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒,𝑛𝑒𝑡 𝑜𝑓 𝑡𝑎𝑥 3,052,305

f. Return on total assets = = 58,329,816 = 0.05
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡

𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 2,028,𝑖347

g. Return on current asset = 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 = 23,383,474 = 0.09

D. Growth Ratios

a. Basic Earnings per Share =

𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝑎𝑡𝑡𝑟𝑖𝑏𝑢𝑡𝑎𝑏𝑙𝑒 𝑡𝑜 𝑐𝑜𝑚𝑚𝑜𝑛 𝑒𝑞𝑢𝑖𝑡𝑦 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 𝑜𝑓 𝑡ℎ𝑒 𝑝𝑎𝑟𝑒𝑛𝑡 𝑐𝑜𝑚𝑝𝑎𝑛𝑦
𝑤𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑎𝑡𝑛𝑑𝑖𝑛𝑔

2,142,392
= 2.68
799,828,863
 8

b. Diluted Earnings per share = the company has no dilutive potential common shares
outstanding, therefore basic EPS is the same as diluted EPS.

(𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒−𝑝𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠) 2,028,347−200,000

[ ] [ ] 2.096
𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑚𝑜𝑛 𝑠ℎ𝑎𝑟𝑒𝑠 872,124
c. Price Earnings per Ratio = = = =
𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 2.68 2.68
0.78

0.40
d. Dividend Payout Ratio = 2.68 = 0.149

0.40
e. Dividend Yield Ratio = 2.096 = 0.19

𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑎𝑖𝑑 296,563

f. Dividend per Share = = = 0.40
𝑜𝑟𝑑.𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 779,584,602

𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠 𝑒𝑞𝑢𝑖𝑡𝑦 25,922,757

g. Book Value per Share = = = 13.8
𝑎𝑣𝑒.𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 1,872,123,642
 9

IV. FINANCIAL RATIOS 2014

A. Liquidity Ratios

𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 28,940,995

a. Current Ratio= 𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 = 13,915,190 = 2.08

𝑡𝑜𝑡𝑎𝑙 𝑞𝑢𝑖𝑐𝑘 𝑎𝑠𝑠𝑒𝑡𝑠 13,238,377+10,717,317

b. Acid-test ratio = 𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 = = 1.72
13,915,190

𝑛𝑒𝑡 𝑐𝑟𝑒𝑑𝑖𝑡 𝑠𝑎𝑙𝑒𝑠 33,543,628

c. Receivable turnover = = = 3.52
𝑎𝑣𝑒.𝑡𝑟𝑎𝑑𝑒 𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠 9,525,539

360 𝑑𝑎𝑦𝑠 360

d. Collection Period = = = 102 days
𝑟𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 3.52

𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑 20,255,176

e. Inventory turnover = = = 50.22
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 403,291.5

360 𝑑𝑎𝑦𝑠 360

f. Inventory sales period = = = 7 days
𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 50

𝑛𝑒𝑡 𝑐𝑟𝑒𝑑𝑖𝑡 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑠 20,837,317

g. Payable turnover = 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑟𝑎𝑑𝑒 𝑝𝑎𝑦𝑎𝑏𝑙𝑒𝑠 = = 1.73
12,060,063

360 𝑑𝑎𝑦𝑠 360

h. Payable payment days = = = 208 days
𝑝𝑎𝑦𝑎𝑏𝑙𝑒 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 1.73

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

𝑐𝑎𝑠ℎ 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑒𝑥𝑝𝑒𝑛𝑠𝑒𝑠 10,113,904

j. Cash turnover = = = 0.85
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑐𝑎𝑠ℎ 𝑏𝑎𝑙𝑎𝑛𝑐𝑒 11,927,616

360 𝑑𝑎𝑦𝑠 360

k. Days to operating expenses = = = 423 days
𝑐𝑎𝑠ℎ 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 0.85

𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 33,543,628

l. Working capital turnover = 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑤𝑜𝑟𝑘𝑖𝑛𝑔 𝑐𝑎𝑝𝑖𝑡𝑎𝑙 = = 12,544,862.5 = 2.67

𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 33,543,628

m. Asset turnover = = 62,783,318 = 0.53
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 33,543,628

n. Current assets turnover = == = 2.41
𝑡𝑜𝑡𝑎𝑙 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 13,915,190

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

15,025,805
 10

B. Solvency Ratios

𝑡𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 40,361,992

a. Debt Ratio = = = = .60 or 60%
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 67,236,820

𝑡𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 40,361,992

b. Debt-to-equity ratio = = 𝑡𝑜𝑡𝑎𝑙 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠𝑒𝑞𝑢𝑖𝑡𝑦 = = 1.5 or 150%
26,874,828

𝑡𝑜𝑡𝑎𝑙 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠𝑒𝑞𝑢𝑖𝑡𝑦 26,874,828

c. Equity ratio = = 67,236,820 = .40 or 40%
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑡𝑎𝑥𝑒𝑠 1763176

d. Times interest earned = = 1023958 = 1.72 or
𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒
172%

𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡𝑠 (𝑛𝑒𝑡) 32,726,706

e. Fixed assets to non-current debts= 𝑡𝑜𝑡𝑎𝑙 𝑛𝑜𝑛−𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 = = 1.24 or
26,446,802
124%

𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡𝑠 (𝑛𝑒𝑡) 32,726,706

f. Fixed assets to shareholder’s equity = 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠 𝑒𝑞𝑢𝑖𝑡𝑦 = 26,874,828 = 1.22 or
122%

𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡𝑠 (𝑛𝑒𝑡) 32,726,706

g. Fixed assets to total equity = = = .49 or 49%
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 67,236,820

C. Profitability Ratios

𝑔𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡 13,288,452

a. Gross profit rate = 𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
= 33,543,628
= 0.40

𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡 3,174,548

b. Operating profit margin = = = 0.946
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 33,543,628

𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 2,030,136

c. Net profit margin = 𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 =33,543,628 = 0.06

𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑖𝑛𝑐𝑜𝑚𝑒 3,174,548

d. Return on investment = = = 0.506
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 62,783,318

𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 2,030,136

e. Return on shareholder’s equity = = 26,874,828 = 0.08
𝑎𝑣𝑒.𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠𝑒𝑞𝑢𝑖𝑡𝑦

𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒+𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒+𝑛𝑒𝑡 𝑜𝑓 𝑡𝑎𝑥 2,747,630

f. Return on total assets = = 62,783,318 = 0.04
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡

𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 2,030,136

g. Return on current asset = = = 0.08
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 26,162,234.5
 11

D. Growth Ratios

a. Basic Earnings per Share =

𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝑎𝑡𝑡𝑟𝑖𝑏𝑢𝑡𝑎𝑏𝑙𝑒 𝑡𝑜 𝑐𝑜𝑚𝑚𝑜𝑛 𝑒𝑞𝑢𝑖𝑡𝑦 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 𝑜𝑓 𝑡ℎ𝑒 𝑝𝑎𝑟𝑒𝑛𝑡 𝑐𝑜𝑚𝑝𝑎𝑛𝑦

𝑤𝑒𝑖𝑔ℎ𝑡𝑒𝑑 𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑜𝑓 𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑎𝑡𝑛𝑑𝑖𝑛𝑔

2,383,418
= 2.867 𝑜𝑟 2.87
831,220,288

b. Diluted Earnings per share = the company has no dilutive potential common shares
outstanding, therefore basic EPS is the same as diluted EPS.

(𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒−𝑝𝑟𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑𝑠) 2,030,136−200,000

[ ] [ ] 2.098
𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑐𝑜𝑚𝑚𝑜𝑛 𝑠ℎ𝑎𝑟𝑒𝑠 872,124
c. Price Earnings per Ratio = = = =
𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒 2.87 2.87
0.73

0.59
d. Dividend Payout Ratio = 2.87 = 0.21

0.59
e. Dividend Yield Ratio = 2.098 = 0.28

𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑 𝑝𝑎𝑖𝑑 514,600

f. Dividend per Share = = = 0.59
𝑜𝑟𝑑.𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 872,124

𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟 ′ 𝑠 𝑒𝑞𝑢𝑖𝑡𝑦 26,874,828,000

g. Book Value per Share = = = 14.5
𝑎𝑣𝑒.𝑠ℎ𝑎𝑟𝑒𝑠 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 1,872,123,642

V. INTERPRETATIONS

VERTICAL AND HORIZONTAL ANALYSIS OF INCOME STATEMENT

The Vertical Analysis of Income Statement shows the proportion of individual accounts such as all

costs, expenses, income, losses or gains, other income and net income to the gross sales. Therefore, the

gross sales is used as the base and all of other components stated are shown as a percentage of sales. On the

other hand, the Horizontal Analysis of the ABS-CBN’s Statement of Income shows changes in the amounts

of each item on the statement over the period of two years. The gross sales in 2014 increased by

P165,724,000 which constitutes a .497% increase after a year. A large portion of this amount came from

the advertising revenue which constitutes more than half of the gross sales for the two periods. The gross

profit of the network increased by P590,382,000 because of the reduction of costs of production, services
 12

and sales by 1.62%. The pre-operating income increased by P74,476,000 or a percentage change of 2.745.

The increase of this account happened because of large increase of interest income by 63.04% and the

decrease of foreign exchange losses by P113,796,000. Also, the Associates and Ventures, and other income

increased in 2014. Finally, the net income of ABS-CBN in 2014 increased by P1,789,000. Although the

provision for income tax increased by 2.257%, still it resulted to a more amount of net profit since the pre-

operating income of 2014 is more than that of 2013. Indeed, the ABS-CN Corporation and Subsidiaries

made a better performance for 2014.

VERTICAL AND HORIZONTAL ANALYSIS OF BALANCE SHEET

The vertical analysis of financial position shows the proportion of each line item on the statement

to the amount of total assets. Hence, the total assets or the sum of liabilities and equity is used as the base

and the individual account in the statement is shown as percentage of total assets or sum of liabilities and

equity.

Similar in the statement of income, the horizontal analysis shows the changes or trends in each account of

the balance sheet. All in all, the current assets increased by P5,557,521,000 or a 23.77% change. The large

portion of this amount came from cash and cash equivalents which also increased by P2,621,522,000.

However, trade and other receivables increased by P2,383,556. Since the cash increased along with

the increase of receivables, it can be inferred that the cash available is idle. In addition, the amount in

program rights and other intangible assets decreased by P69,985,000. This happened may be, some of the

TV programs of the network marked poor ratings in 2014. Under the non-current section of assets, there is

an increase of property, plant and equipment by P2,036,638,000. It may indicate that the network invest

more properties that would help them to be more profitable after a year. All in all, the noncurrent assets of

the network increased by P3,349,483,000 due to the acquisition of property, plant and equipment.

Under the liability section of financial position, the trade other payables increased by 12.85%. The possible

reason of this is there is an increase of short-term borrowings made by the network. The big portion of the

total amount of noncurrent liabilities came from the interest-bearing loans and borrowings, which may
 13

indicate that there is high rate of interest of the long-term borrowings every month that are accumulated

around a year.

Finally, the equity part of the balance sheet shows no significant difference on common and

preferred shares since amounts there are no changes in the amount of these accounts in the two periods. The

big amount comprising this part goes to retained earnings since income of the network is reflected on this

account. Since the network became profitable in its operation in 2014, the retained earnings increased by

P1,545,438 with percentage of 7.798%

LIQUIDITY RATIOS

The current ratio is a liquidity ratio that measures a company’s ability to pay short term and long-

term obligations. The current ratio of statement of financial position of ABS-CBN in the year 2013 is 1.76

and increased by 2.08 in a year 2014, it indicates that company is continuous to have a greater assets than

its liabilities and suggests that the company is stable to pay off its obligation.

The acid-test ratio is a strong indicator whether a firm has sufficient short-term assets to cover its

immediate liabilities. The acid-test ratio of statement of financial position of ABS-CBN in a year 2013 is

1.42 and increased by 1.72 in a year 2014; since they are both lower than their current ratio it means that

the current asset of the company is highly dependent on inventory. Moreover, the company does have the

liquid assets to pay their current liabilities.

The receivable turnover, it indicates the efficiency of collection of receivables. The receivable

turnover of the statement of financial position of ABS-CBN in a year 2013 is 3.16 and increased by 3.52 in

a year 2014; it implies that the company has greater collection of accounts receivable in a prior year than

the previous year.

The collection period, it determines the average duration of accounts receivable during a year. The

collection period based on the balance sheet of ABS-CBN in 2013 is 113 days and then drop to 102 days in

2014; it is good for the company because they are able to collect their receivable in a short period of time

compared to the previous year.

 14

The inventory turnover is a ratio showing how many times a company's inventory is sold and

replaced over a period. The inventory turnover of ABS-CBN during 2013 and 2014 are 79 and 50.22

respectively, since it is diminished the sales of the company must have been weakened so that it is

unfavorable to the company because the number of products deteriorate are increased as they sit in a

warehouse.

The inventory sales period is a financial measure of a company's performance that gives investors

an idea of how long it takes a company to turn its inventory into sales. The inventory sales period of ABS-

CBN in a year 2013 is 5 days and increased by 7 days in a year 2014. It is unfavorable to the company

because it takes longer than previous year to generate profit using their inventory.

The payable turnover, it short-term liquidity measure used to quantify the rate at which a company

pays off its suppliers. The payable turnover of ABS-CBN from year 2013 to 2014 is 269 to 173 respectively,

since the ratio is lowered, it is unfavorable for the company because it is the sign that the company is taking

longer to pay off its supplier than It was before.

The payable payment days tells how long it takes a company to pay its invoices from trade

creditors, such as suppliers. The payable payment days of ABS-CBN from year 2013 to 2014 is 134 to 208

respectively, since it is increased, it is both favorable and unfavorable for the company. Favorable because

the company has more money on hand from which is good for the working capital and free cash flow.

Unfavorable because if the company takes too long to pay its creditors, they will be unhappy. They may

refuse to extend credit in the future, or they may offer less favorable terms.

The Operating turnover, it indicates the number of day cash is invested until the day of its

recovery. The operating turnover of ABS-CBN from year 2013 to 2014 is 109 to 118 respectively, it is good

for the company because the earlier they invest cash the earlier the cash is to be recovered.

The cash turnover measures how many times per year it replenishes its cash balance with its sales

revenue. The cash turnover of ABS-CBN from 2013 to 2014 is 1.13 to 0.85 respectively, since it is

decreased, it is unfavorable for the company because they turn over their cash balance less times per year

and take longer days to replenish it.

 15

The Days to operating expenses it is a measure of what it costs to operate a piece of property

compared to the income that the property brings in. The days to operating expenses from year 2013 to 2014

is 319 and 423 respectively, it is unfavorable because it takes longer time pay their operating expenses in a

current year than it was before.

The working capital turnover, It is the measurement of comparing the depletion of working

capital to the sales over a given period. The working capital turnover of ABS-CBN during 2013 is 0.57.

Obviously, the company is not generating a lot of sales compared to the money it uses to fund the sales.

The ABS-CBN net working capital during 2013 is 10,981,207. The firm uses its net working

capital to fund operations and purchase inventory, the higher the working capital the higher the opportunity

to generate profit.

SOLVENCY AND LEVERAGE RATIOS

The debt ratio is a financial ratio that measures the extent of a company’s or consumer’s leverage.

The debt ratio of ABS CBN during 2013 and 2014 are 56:1 and 60:1 respectively. It indicates that the

company have more assets than debt during those years. Therefore, the company has more leveraged at the

same time implying greater financial risk and probably they find expensive to borrow. A very low debt ratio

is good in the sense that the company’s assets are sufficient to meet its obligations; it may indicate

underutilization of a major source of finance which may result in restricted growth. A very high debt ratio

indicates high risk for both debt-holders and equity investors. Due to the high risk, the company may not

be able to obtain finance at good terms or may not be able to raise any more money at all.

The debt-to-equity ratio, it is a debt ratio used to measure a company’s financial leverage. The

debt-to-equity ratio of ABS-CBN during 2013 and 2014 are 1.25 and 1.50 respectively. Lower values of

debt-to-equity ratio are favorable indicating less risk. Higher debt-to-equity ratio is unfavorable because it

means that the business relies more on external lenders thus it is at higher risk, especially at higher interest

rate. As a result, 2013 is more favorable than 2014.

The equity ratio is used to measure a company’s financial leverage. The equity ratio of ABS-CBN

during 2013 is 44% and 40% in 2014. Therefore, the equity ratio in 2013 is more favorable than 2014.
 16

Higher investment levels by shareholders shows potential shareholders that the company is worth investing

in since so many investors are willing to finance the company. A higher ratio also shows potential creditors

that the company is more sustainable and less risky to lend future loans. Companies with

higher equity ratios should have less financing and debt service costs than companies with lower ratios.

The times interest ratio measures a firm's ability to make interest and debt service payments. The

time interest ratios of ABS CBN during 2013 and 2014 are 2.78 and 1.72 respectively. It shows that ABS

CBN is more favorable in 2013 than 2014. Higher value of times interest earned ratio is favorable meaning

greater ability of a business to repay its interest and debt. Lower values are unfavorable.

Fixed assets to non-current debts indicate the percentage of investment in fixed assets

financed from non-current debt. The percentage of fixed assets to non-current debts of ABS-

CBN in a year 2013 is 155% but in a year 2014 it decreased by 124%, it means that the fixed

assets investment arises from non-current portion of liabilities has been reduced which is

favorable to the company because they minimized their long-term debt.

Fixed assets to shareholders’ equiy indicate the percentage of investment in fixed assets

by shareholders. The percentage of investment in fixed assets to shareholders’ equity of ABS-

CBN from year 2013 to 2014 is 114% and 122% respectively; since it increased it means that

some of the shareholders invested additional fixed assets to the company by use of their shares. It

is good for the company because their total assets have increased. However, the company has to

pay more dividends to the shareholders.

Fixed assets to total equity indicate the percentage of investment in fixed assets. The

percentage of investment in fixed assets to total equity of ABS-CBN in a year 2013 is 51% but in

2014 it decreased by 49%, it implies there was a depreciation that reduced the value of their fixed

assets. It is good for the company because they could generate profit by using their fixed asset

but since its value has reduced their total assets also decreases.
 17

PROFITABILITY RATIO

The gross profit rate shows the proportion of profits generated by the sale of products or services,

before selling and administrative expenses. It is used to examine the ability of a business to create sellable

products in a cost effective manner. The gross profit rate of ABS-CBN in 2013 reaches to 13% lesser than

the rate in 2014 which is 40%. This only shows that the company will have more money to pay in operating

expenses like salaries, utilities, and rent. Since this ratio measures the profits from selling inventory, it also

measures the percentage of sales that can be used to help fund other parts of the business.

The operating profit margin of ABS-CBN in 2013 is 9.22% and 9.46% in 2014. This means that

the percentage of their profit increase. This indicates that the management is able to control the company’s

operating expenses.

The net profit margin of ABS-CBN in 2013 is 6.08 % the same in 2014 which is also 6.05%. It

decreases which means that the cost increases.

The return on investment of ABS-CBN in 2013 is 5.3% and in 2014 5.06%. This is not favorable

because every one peso in 2013 and 2014, the return on investment are 5.3 centavos and 5.06 centavos

respectively.

The return on shareholder’s equity of ABS-CBN in 2013 is 3% and 8% in 2014 which may

indicate that there is improvement in terms of financial operation.

The return on total assets of ABS-CBN in 2013 is 4% and 5% in year 2014. This only shows that

their operating income and usage of assets increases. The return for year 2013 is 4 cents for every one peso

of investment and 5 cents in year 2014.

The return on current asset of ABS-CBN in 2013 is 9% and 8% in 2014 which indicates decrease

in returning the resources in current assets cause by gradual decreasea in operating or increase in costs and

expenses incurred.
 18

GROWTH RATIO

The basic earnings per share of ABS-CBN in 2014 is 2.87% higher than in 2013 which

is 2.68%. This indicates that the company is capable of generating a significant dividend for

investors. Moreover, the company has a potentially worthwhile investment depending on the

market price of the stock.

The price earnings per ratio of ABS-CBN in 2014 is 7.3% lesser than in 2013 which is

7.8%. This is an indication of poor current and future performance. This could also prove to be a

poor investment.

The dividend payout ratio of ABS-CBN in 2014 is 2.1% and 1.5% in 2013. It increases

by 6%. A high ratio does not mean that much. Investors are mainly concerned with sustainable

trends. For instance, investors can assume that a company has a payout ratio of 20% for the last

ten years will continue giving 20 percent of its profit to shareholders.

The dividend yield ratio of ABS-CBN in 2014 is 2.8% higher than in 2013 which is 1.9%.

This indicates that the company pays its investors a large dividend compared to the fair market

value of the stock. This means that the investors are getting highly compensated for their

investments compared with lower dividend yielding stocks.

The dividend per share of ABS –CBN in 2014 is 5.9%. It increases by 1.9% compared in

2013 which is 4%. This shows that there is an increase in the company’s net profits out of which

dividends are paid. There may also be a shift in the company’s growth strategy that leads the

company to decide to expend less of its earnings in seeking growth and expansion, thus leaving a

larger share of profits available to be returned to equity investors in the form of dividends.

The book value per share of ABS-CBN in 2014 is 14.5% higher than in 2013 which is

13.8%. This shows that there is an appraisal and the net worth of the company increases.
 19

VI. CONCLUSION AND RECOMMENDATION

Based on our analysis, year 2014 is the better year with a better position for ABS-CBN

Corporation. The operation performance of the company increases gradually. The liability and

equity both increases. The equity for 2013 and 2014 are P25,922,757 and 26,874, 828 while the

liability for 2013 and 2014 are 32,407,059 and 40,361,992. Even though their liabilities increased,

it may imply that creditors trust the company for them to pay on time because of their improving

operating performance. Our group conclude that ABS-CBN corporation is financially stable.

We recommend that they continue their operations and still find ways to improve to

generate more income and to strengthen the trust and support of their consumers, creditors and

investors. They find ways to lessen cost while not sacrificing their performance to continually

improve their financial condition.

 20

APPENDIX

ABS-CBN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Amounts in Thousands)

December 31
2014 2013
ASSETS
Current Assets
Cash and cash equivalents (Note 6) =13,238,377
P =10,616,855
P
Trade and other receivables (Notes 7 and 22) 10,717,317 8,333,761
Program rights and other intangible assets (Note 11) 1,315,987 1,385,972
Other current assets (Note 8) 3,669,314 3,046,886
Total Current Assets 28,940,995 23,383,474

Noncurrent Assets
Property and equipment (Notes 9, 10, 17 and 30) 20,572,543 18,535,905
Program rights and other intangible assets - net of current portion
(Note 11) 6,465,599 5,429,192
Goodwill (Notes 4 and 15) 5,289,956 5,288,350
Available-for-sale (AFS) investments (Note 12) 242,368 219,191
Investment properties (Notes 9, 10 and 17) 198,734 196,916
Investments in associates and joint ventures (Note 13) 199,874 166,591
Deferred tax assets - net (Note 28) 2,858,187 2,530,164
Other noncurrent assets (Note 14) 2,468,564 2,580,033
Total Noncurrent Assets 38,295,825 34,946,342

TOTAL ASSETS =67,236,820

P =58,329,816
P

LIABILITIES AND EQUITY

Current Liabilities
Trade and other payables (Notes 16, 22 and 29) =12,788,120
P =11,332,006
P
Income tax payable 292,053 193,216
Obligations for program rights (Note 18) 724,266 448,861
Interest-bearing loans and borrowings (Notes 9, 10 and 17) 110,751 1,345,471
Total Current Liabilities 13,915,190 13,319,554

Noncurrent Liabilities

Interest-bearing loans and borrowings - net of current portion

(Notes 9, 10 and 17) 20,214,484 13,334,579
Obligations for program rights - net of current portion (Note 18) 224,472 276,344
Accrued pension obligation and other employee benefits (Note 29) 4,790,813 4,191,082
Deferred tax liabilities - net (Note 28) 587,654 637,533
Convertible note (Note 19) 190,522 245,195
Other noncurrent liabilities (Note 20) 438,857 402,772
Total Noncurrent Liabilities 26,446,802 19,087,505
Total Liabilities 40,361,992 32,407,059

(Forward)
 -2-

December 31
2014 2013
Equity Attributable to Equity Holders of the Parent Company
Capital stock (Note 21):
Common =872,124
P =872,124
P
Preferred 200,000 200,000
Additional paid-in capital (Notes 2, 4 and 21) 4,495,050 4,495,050
Exchange differences on translation of foreign operations (456,773) (270,632)
Unrealized gain on AFS investments (Note 12) 143,281 121,766
Share-based payment plan (Note 21) 34,349 34,349
Retained earnings (Note 21) 21,363,395 19,817,957
Philippine depository receipts convertible to common shares (Note 21) (1,264,096) (1,164,146)
Equity attributable to Equity Holders of the Parent 25,387,330 24,106,468
Noncontrolling Interests (Notes 4 and 23) 1,487,498 1,816,289
Total Equity 26,874,828 25,922,757

TOTAL LIABILITIES AND EQUITY =67,236,820

P =58,329,816
P

See accompanying Notes to Consolidated Financial Statements.

ABS-CBN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands, Except Per Share Amounts

Years Ended December 31

2014 2013 2012

REVENUE
Advertising revenue (Note 22) P18,879,946
= =19,331,908
P =16,611,731
P
Sale of services (Note 30) 14,029,684 13,287,245 11,827,501
Sale of goods (Note 22) 351,528 579,140 421,079
Others 282,470 179,611 123,329
33,543,628 33,377,904 28,983,640
PRODUCTION COSTS
(Notes 9, 11, 22, 24, 29 and 30) (11,007,656) (11,499,365) (10,555,162)

COST OF SERVICES
(Notes 8, 9, 11, 14, 22, 25, 29 and 30) (9,045,527) (8,853,440) (8,061,381)

COST OF SALES (Notes 8, 9, 22, 25, 29 and 30) (201,993) (330,029) (292,095)

GROSS PROFIT 13,288,452 12,695,070 10,075,002

GENERAL AND ADMINISTRATIVE EXPENSES

(Notes 7, 8, 9, 10, 11, 21, 22, 26, 29 and 30) (10,113,904) (9,614,356) (8,221,168)

FINANCE COSTS (Note 17, 19 and 27) (1,165,313) (816,919) (816,701)

INTEREST INCOME (Notes 6 and 22) 153,968 94,438 119,672

FOREIGN EXCHANGE GAINS (LOSSES) - net (31,704) (145,500) 111,784

EQUITY IN NET EARNINGS (LOSSES) OF

ASSOCIATES AND JOINT VENTURES (Note 13) 3,283 (12,397) (58)

LOSS ON SALE OF INVESTMENTS (Note 12) – – (24,781)

OTHER INCOME - net (Notes 14, 19, 27 and 30) 652,352 512,322 788,099

INCOME BEFORE INCOME TAX 2,787,134 2,712,658 2,031,849

PROVISION FOR INCOME TAX (Note 28) 756,998 684,311 413,950

NET INCOME =2,030,136

P =2,028,347
P =1,617,899
P

Attributable to
Equity holders of the Parent Company (Note 33) =2,387,085
P =2,145,725
P =1,580,623
P
Noncontrolling interests (356,949) (117,378) 37,276
=2,030,136
P =2,028,347
P =1,617,899
P

Basic/Diluted Earnings per Share Attributable

to Equity Holders of the Parent Company (Note 33) =2.867
P =2.678
P =2.132
P
See accompanying Notes to Consolidated Financial Statements.
ABS-CBN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in Thousands)

Years Ended December 31

2014 2013 2012

NET INCOME =2,030,136

P =2,028,347
P =1,617,899
P

OTHER COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) not to be reclassified
to profit and loss in subsequent periods:
Remeasurement gain (loss) on defined benefit plan
(Note 29) (478,239) 639,129 (130,921)
Income tax effect 143,472 (191,739) 39,276
(334,767) 447,390 (91,645)
Other comprehensive income (loss) to be reclassified to
profit and loss in subsequent periods:

Exchange differences on translation of foreign

operations (186,141) 367,657 (279,753)

Unrealized fair value gain (loss) on AFS

investments - net (Note 12) 21,515 (4,910) 6,853

(164,626) 362,747 (272,900)

OTHER COMPREHENSIVE INCOME (LOSS) (499,393) 810,137 (364,545)

TOTAL COMPREHENSIVE INCOME =1,530,743

P =2,838,484
P =1,253,354
P

Attributable to:
Equity holders of the Parent Company =1,895,412
P =2,906,433
P =1,413,954
P
Non-controlling interests (364,669) (67,949) (160,600)
=1,530,743
P =2,838,484
P =1,253,354
P

See accompanying Notes to Consolidated Financial Statements.

ABS-CBN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)

Years Ended December 31

2014 2013 2012

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax =2,787,134
P =2,712,658
P =2,031,849
P
Adjustments for:
Depreciation and amortization (Notes 9 and 10) 2,871,000 2,714,199 2,825,196
Amortization of:
Program rights and other intangibles (Note 11) 1,327,894 1,430,811 1,277,597
Debt issue costs (Note 27) 122,975 73,421 65,576
Deferred charges (Note 25) 69,617 52,871 53,166
Interest expense (Note 27) 1,023,958 716,894 731,633
Gain on settlement of liabilities (Note 27) (444,826) (13,910) (208,564)
Interest income (Notes 6 and 22) (153,968) (94,438) (119,672)
Net unrealized foreign exchange loss (gain) (69,427) 2,836 (20,329)
Loss (gain) on sale of property and equipment 4,167 5,688 (89,121)
Equity in net losses (earnings) of associates and joint
ventures (Note 13) (3,283) 12,397 58
Impairment loss (Note 15) – 20,061 –
Share-based payment expense (Note 21) – 5,397 25,256
Loss on sale of investments (Note 12) – – 24,781
Income before working capital changes 7,535,241 7,638,885 6,597,426
Provisions for:
Pension expense and other employee benefits
(Note 29) 785,092 973,670 1,041,210
Doubtful accounts (Note 26) 530,573 432,094 389,904
Decrease (increase) in:
Trade and other receivables (2,886,288) (814,390) (2,239,244)
Other current assets (626,555) 65,175 1,485,137
Increase (decrease) in:
Trade and other payables 985,677 356,911 695,427
Obligations for program rights 225,297 239,177 (217,963)
Other noncurrent liabilities (371,221) (5,461) (136,802)
Contribution to pension plan (Note 29) (254,000) (540) (360,000)
Cash generated from operations 5,923,816 8,885,521 7,255,095
Income taxes paid (912,745) (830,461) (626,732)
Net cash provided by operating activities 5,011,071 8,055,060 6,628,363

(Forward)
 -2-

Years Ended December 31

2014 2013 2012

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to:
Property and equipment (Notes 9 and 34) (P
=4,991,980) (P
=3,727,670) (P
=3,733,534)
Program rights and other intangible assets
(Notes 11 and 34) (1,433,238) (1,772,969) (1,495,770)
Investment properties (Notes 10 and 34) (2,508) – –
Decrease (increase) in other noncurrent assets (194,505) (97,296) 167,840
Interest received 140,660 97,881 124,303
Proceeds from sale of:
Property and equipment 96,580 24,629 175,861
Available-for-sale investments – – 22,863
Investments in joint ventures (Note 13) (30,000) (137,962) –
Acquisition of subsidiaries and business, net of cash
acquired (Note 4) – – (4,993,577)
Net cash used in investing activities (6,414,991) (5,613,387) (9,732,014)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from:
Long-term debt 8,576,439 2,000,000 792,432
Bank loans – 850,000 4,000,000
Payments of:
Long-term debt (2,550,619) (115,722) (1,267,954)
Interest (983,203) (744,937) (818,510)
Dividends (498,950) (298,066) (591,989)
Bank loans (400,000) (3,850,000) (1,000,000)
Obligations under finance lease (29,549) (37,551) (51,179)
Acquisition of Philippine depository receipts (Note 21) (99,950) – –
Proceeds from additional investment 35,878 – –
Issuances of:
Common shares (Note 21) – 3,939,501 –
Preferred shares (Note 21) – 200,000 –
Decrease in noncontrolling interests (Note 4) – (185,893) (101,551)
Net cash provided by financing activities 4,050,046 1,757,332 961,249

EFFECTS OF EXCHANGE RATE CHANGES

AND TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS (24,604) 22,912 (97,713)

NET INCREASE (DECREASE) IN CASH

AND CASH EQUIVALENTS 2,621,522 4,221,917 (2,240,115)

CASH AND CASH EQUIVALENTS

AT BEGINNING OF YEAR 10,616,855 6,394,938 8,635,053

CASH AND CASH EQUIVALENTS

AT END OF YEAR (Note 6) =13,238,377
P =10,616,855
P =6,394,938
P

See accompanying Notes to Consolidated Financial Statements.