Acceptability of CHB with Rice Husk Ash

CHAPTER I

THE PROBLEM AND ITS SETTING

Introduction

Financial statement analysis is the method of examining a company's performance

in the context of its industry and economic environment to arrive at a decision or

recommendation. Often, the decisions and recommendations addressed by financial

analysts pertain to providing capital to companies—specifically, whether to invest in the

company's debt or equity securities and at what price. An investor in debt securities is

concerned about the company's ability to pay interest and to repay the principal lent. An

investor in equity securities is concerned about the company's ability to pay dividends

and the likelihood that its share price will increase. Researchers have argued that it is

possible to make informed financial projections using financial statement information and

to earn consistent excess returns (Abarbanell & Bushee 1997; Lewellen 2004). Research

suggests that most analysts employ fundamental analysis when valuing company shares

(e.g., Arnold & Moizer 1984; Arnold, Moizer & Noreen 1984; Barker 1998; Pike et al.

1993). Further, they attach a great deal of importance to the income statement and

balance sheet information when conducting this fundamental analysis.

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A vital stock exchange in Southeast Asia and the only stock exchange in the Philippines,

The Philippine Stock Exchange (PSE), is the earliest stock exchange in Asia, which

functioned from 1927. Today, as technology develops, more Filipinos were actively

trading and investing in the Philippine Stock Exchange (PSE). It is essential to analyze

financial information to reduce the risks of losing money and investment in trading

securities. Financial Statement Analysis, sometimes called Ratio Analysis, is one of the

topics in finance and accounting books. It suggests to evaluate and analyze the financial

statements of the companies in order to derive information that would possibly indicate

where the company is heading.

Yearly, there would be top gainers and losers stocks. This study evaluates these

companies using financial statement analysis, would there be significant common ratios

that can indicate this stocks' performances in the stocks exchange. The product of this

study would be very beneficial to investors, lenders, and traders of the Philippine Stocks

Exchange.

Statement of the Problem

This study aimed to know the indications of financial ratios towards the

performances of the stocks in the Philippine Stocks Exchange for the year 2015 to 2019.

Specifically, the study will answer the following queries:

1. What are the top 10 gainer stocks of each year from 2015 to 2019?
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1.1. The Ratio analysis of each year's identified top 10 gaining stocks for the

following general groups of ratios:

1.1.1. Liquidity ratios.

1.1.2. Activity ratios.

1.1.3. Leverage ratios.

1.1.4. Profitability ratios.

2. What are the top 10 loser stocks of each year from 2015 to 2019?

2.1. The ratio analysis of each year's identified top 10 losing stocks for the

following general groups of ratios:

2.1.1. Liquidity ratios.

2.1.2. Activity ratios.

2.1.3. Leverage ratios.

2.1.4. Profitability ratios.

3. Which ratios indicate that stocks' market prices would increase?

4. Which ratios indicate that stocks' market prices would decrease?

5. Is there a relationship between these ratios and the market prices of the stocks? If

there is, what type of relationship?

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Significance of the Study

The general objective of this research is to determine if there is a significant

relationship between the ratio analysis and the performance of the stocks in the Philippine

stock market. Specifically, it sought to determine the following: 1) the ratios that indicate

the excellent performance of the stock for the next year of operations; 2) the ratios that

indicate the lousy performance of the stock for the next year of operations; 3) the degree

of relationship of these ratios to the stocks' performances.

The study will be beneficial to the following:

Business, Finance, and Accountancy Students. The study helps the students better

understand the Financial Analysis topic and relate the theory to real-world scenarios.

Business, Finance, and Accountancy Teachers. The study could provide

additional insights to teachers that can be used to improve their teaching strategies on this

topic.

Market Traders, Investors, and Fund Managers. The study could give additional

strategies to make a better investment decision in the stock market, lessen the risk of loss
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in their stocks trades and stock investments. They can make profitable investments by

managing their portfolio using the outcomes suggested by the study

Future Researchers. The study could give essential insights and other benefits to

future researchers. The study would help them acquire additional knowledge through the

facts and figures about the ratio indicators and its relationship to stocks' future

performance

Community. The study could positively affect the economy of the nation by

strengthening the financial markets of the Philippines through actively trading with lesser

risk in the stock market.

Scope and Delimitation

The study is devised to know the financial ratios of the top gainers and losers of

the Philippines stocks exchange for each year of 2015 to 2019. The study is to be

conducted in the Philippines setting. Expressly, this is limited only to the stocks traded in

the Philippines stocks exchange which were reported as included in the annual top 10

gainers and top 10 losers of the years 2015-2019.

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Nonfinancial factors that might affect stock's performance is not considered in

conducting the study.

The researcher identifies the top 10 gainer and top 10 loser stocks of each year

based on the annual reports published by PSE. Financial statements issued by the listed

companies would be the primary source of information and analysis of this study.

Definition of Terms

The following terms used in this study are defined conceptually and operationally

for a better understanding of the readers:

PSE. This stands for the Philippines Stocks Exchange. The only stock exchange in

the Philippines and one of the oldest stock exchanges in Asia, having been in continuous

operation since the establishment of the Manila Stock Exchange in 1927. It currently

maintains a trading floor at the PSE Tower in Bonifacio Global City, Taguig City.

(Philippines Stocks Exchange, n.d.)

Liquidity. In accounting, the term liquidity is defined as the ability of a company

to meet its financial obligations as they come due.

Liquidity ratio. Refers to a calculation that is used to evaluate a company's

capability to pay its short-term debts. There are three common calculations that fall under
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the category of liquidity ratios. The current ratio is the most liberal of the three. It is

followed by the acid ratio, and the cash ratio. These three ratios are often grouped

together by financial analysts when attempting to accurately measure the liquidity of a

company. (Liquidity Ratio: Definition, Calculation & Analysis, 2015)

Activity ratios. These ratios indicate the efficiency with which a business uses its

assets, such as inventories, accounts receivable, and fixed assets. Another term for asset-

management ratios.

Leverage Ratios.
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CHAPTER II

CONCEPTUAL FRAMEWORK AND REVIEW OF LITERATURE AND STUDIES

This chapter contains the related literature obtained by the researcher from

journals, books and internet. This provides information and references related to this

technical study.

Conceptual Framework

The conceptual framework shows the presentation of the variables used in the

study. It served as a guide in achieving all the objectives (Figure 1).

This study involves ratio analysis of audited financial statements of the annual top

10 gainers and top10 losers in the Philippines stocks exchange. This research endeavor

would uncover what significant ratios would indicate a stock's performance.

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There would be an analytical phase in conducting this study, which primarily

concerned with analyzing and developing financial ratios from audited financial reports

and synthesizing those ratios into a relevant framework.

This analytical phase will begin with a description of the objective, focus, and

purpose of the framework for financial ratio analysis. The objective of the framework for

financial ratio analysis is to provide those users of publicly-traded companies’ financial

reports relevant information that will assist them in making better informed relevant

decisions and make more accurate predictions about market and stocks’ conditions.

FINANCIAL STATEMENT RATIO ANALYSIS

Liquidity Ratios
Activity Ratios
Leverage Ratios
Profitability Ratios

STOCK’S MARKET PERFORMANCE IN PSE

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Figure 1. Conceptual Framework

In determining the stock’ performance: %Δ= Change in Stock’s Market Price

divided by opening price, is used;

Review of Literature

Concrete Masonry

Masonry is the type of construction made up of masonry units laid with mortar,

grout or other methods of joining (ASTM C 1232). A masonry unit can either be a stone,

a brick or a concrete block. With respect to dry density, Concrete Masonry Units

(CMUs) are classified as lightweight, medium weight, and normal weight. CMUs whose

3
dry density is less than 1680 kg/m are considered lightweight, while those whose dry

3
density ranges from 1680 to 2000 kg/m are medium weight, and masonry units whose

3
dry density is greater than 2000 kg/m are considered as normal weight (ASTM 1209). In

building construction, masonry units are often used as walls. When the net cross-sectional

area of a masonry unit is more than 75% of its gross cross-sectional area, it is considered
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solid; otherwise, if it is less than 75%, it is hollow (ASTM 1232). Workability, strength,

and durability are three basic properties of concrete.

All over the world, masonry has been used as a basic construction material for

public and residential buildings in the past thousand years. In fact, a number of well -

preserved old masonry buildings still exist which only proves that masonry can resist

loads and environmental impacts and provides shelter for people and their goods for a

long period of time, if adequately conceived and constructed. Masonry is the type of

construction that is made up of masonry units laid with mortar, grout, or other methods of

joining (ASTM 1232). Concrete Masonry Units (CMU) can either be hollow or solid.

3 spaces

Rice Husk Ash

Rice milling generates a by-product know as husk. This surrounds the paddy

grain. During milling of paddy about 78 % of weight is received as rice, broken rice and

bran. The rest, which is the 22 % of the weight of paddy, is received as husk. This husk is

used as fuel in the rice mills to generate steam for the parboiling process. This husk

contains about 75 % organic volatile matter and the balance 25 % of the weight of this

husk is converted into ash during the firing process, is known as rice husk ash (RHA).

This RHA in turn contains around 85 % - 90 % amorphous silica. So for every 1000 kg of

3 spaces
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paddy milled, about 220 kg (22 %) of husk is produced, and when this husk is burnt in

the boilers, about 55 kg (25 %) of RHA is generated (Nagrale, Hajare and Modak, 2012).

Concrete

Concrete is a composite material composed of coarse granular material (the

aggregate of filler) embedded in a hard matrix of material (the cement or binder) that fills

the space between the aggregate particles and glues them together. Concrete is a mass of

sand, gravel, crushed rock, or other aggregate bonded together by a hardened paste of

hydraulic cement and water. When properly proportioned, mixed and consolidated, these

ingredients form a workable mass which can be placed into a form of desired size and

shape. The water present reacts with the cement to convert the concrete to a hard and

durable product (Adekunle and Daramola, 2013).

4 spaces

Review of Studies

3 spaces

Rice Husk Ash in Concrete

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Philippines is one of the largest rice producers in the world. From 2011 - 2013,

there are 17.72 million metric tons of rice produced annually and 5.14 million tons of hull

or straw and 3.54 million tons of rice husk ash (http://www.bioenergyconsult.com).

Rice Husk Ash is known as one of the potential biomass sources. Being light and

bulky, however, causes problems on disposal and its presence in the open environment

has been proven to increase cases of respiratory problems, being also one of the

contributors to the universal global warming problems. However, according to the

research of Ijabo and Agbede (2011), RHA can be tailor-made to meet the requirements

of various users apart from the two main uses as an insulator in the steel industry and as a

pozzolana in the cement and building industry.

Bibliography
Philippines Stocks Exchange. (n.d.). https://pse.com.ph/corporate/home. Retrieved from
PSE.COM.PH.
Liquidity Ratio: Definition, Calculation & Analysis. (2015, December 8). Retrieved from
https://study.com/academy/lesson/liquidity-ratio-definition-calculation-
analysis.html.