INTERNAL ASSESSMENT

Accounting and Finance

The financial information obtained in performing the analysis is based from the
annual reports, dated December 31, 2015 and June 30, 2016, available in the
Philippine Stock Exchange.

https://edge.pse.com.ph/companyPage/financial_reports_view.do?cmpy_id=614

The assessment of the Company’s financial information is performed through the

evaluation of financial ratios such as liquidity, solvency, and profitability.

A. Liquidity Ratios

Liquidity ratios indicate a company’s ability to convert its current assets to cash
quickly. It shows how capable a company is in paying its short-term obligations.

Current Ratio (CR) is used to assess the Company’s liquidity. CR shows how much
cash (or any asset easily convertible into cash) the Company has for every current
liability it owes.

Ratio June 30, 2016 December 31, 2015

Current Ratio (CR)

Current Assets 3,430,080,633 2,399,616,597

CR= CR= CR=
Current Liabilities 1,659,639,165 1,204,409,098

CR=2.07 CR=1.99

The CR in 2016 at 2.07 is higher than the CR in 2015 at 1.99. This shows that the
Company is more liquid in 2016 than 2015. As this may be a good indicator that the
Company is capable of paying its currently maturing debts, an excessively high CR
may also indicate that the Company is not efficiently using its current assets. The
Company may re-evaluate its financial position and identify any assets that may be
invested in a longer term resulting to a higher investment income.

B. Solvency Ratios

Solvency ratios, also called leverage ratios, measure a company’s ability to sustain
operations indefinitely by comparing debt levels with equity, assets, and earnings 1.
This type of financial ratio determines a company’s ability to continue as a going
concern.
Debt to Equity Ratio (D/E) and Debt Ratio (D/A) tell us how the assets were funded;
D/E indicates how much debt it is in comparison to equity whereas D/A compares
debt with total assets. Ideally, a lower D/E and lower D/A are better since the
Company is operating less through debts. A lower D/E and D/A imply more
financially stable business.

Ratio June 30, 2016 December 31, 2015

Debt to Equity Ratio (D/E)

Total Liabilities 2,670,737,807 1,559,605,941

D/ E= D/ E= D/ E=
Total Equity 2,654,837,733 2,662,751,938

D/ E=1.01 D/ E=0.59

Debt Ratio (D/A)

Total Liabilities 2,670,737,807 1,559,605,941

D/ A= D/ A= D/ A=
Total Assets 5,325,575,540 4,222,357,879

D/ A=50.15 % D/ A=36.94 %

The increase in D/E and D/A from 2015 to 2016 indicates that there is an increase
in debts availed by the Company. It is now more financed by its creditors than its
owners. Generally, debts are more expensive for the business than equity (or
shareholder’s capital) because debts financing requires interest. The shareholders
should consider investing more in the Company to maintain its financial stability.
Also, the management is suggested to consider strategies or plans that will attract
more investors to the Company to lessen the use of debts.
1
https://www.myaccountingcourse.com/financial-ratios/solvency-ratios

C. Profitability Ratios

Profitability ratios are the ratios that are used to measure the company’s ability to
generate income or profit during a period of time 2. These are used in measuring the
company’s performance during a period of time.

Net Profit Margin (NPM) shows the percentage remaining from the total revenue
after deducting expenses. Return on Assets (ROA) shows the percentage of net
income earned in relation to the assets that the Company has. In general, a high NPM
is an indicator of efficient operations and a high ROA implies an efficient utilization
of assets.
Ratio June 30, 2016 December 31, 2015
Net Profit Margin (NPM)

Net Profit 106,087,398 196,938,856

NPM= NPM= NPM=
Total Revenue 2,009,064,357 3,859,110,317

NPM=5.28 % NPM=5.10 %

Return on Asset (ROA)

Net Profit 106,087,398 196,938,856

ROA= ROA= ROA=
Averae Total Assets 4,773,966,710 4,275,355,531

ROA=2.22 % ROA=4.61%

An increase in NPM from 5.10% in 2015 to 5.28% in 2016 implies that the Company
earned more net income in 2016 than 2015 in relation to the amount of revenue it
earned. This is possibly through the reduction of several expenses and may also
indicate that operations were better in 2016 than 2015. To keep increasing this
ratio, the Company should plan to operate at a lesser level of costs and expenses.
To do this, they can plan a more efficient operation or cut unnecessary expenditures.

The ROA decreased from 4.61% in 2015 to 2.22% in 2016. This implies that the
Company was not able to make maximum use of its assets for getting more profit.
To improve this, management may consider making plans on boosting its revenue
through increase in market share or product development that will yield to increase
in number of units sold or services rendered. Another is that the management could
sell poorly performing assets.