Ayala Corporation

Makati, Philippines

Members:

De Castro, Roselyn B.

Gabi, Shaima Maroosh

Guerra, Mary Jane T.

Macalindong, Jesca Marie M.

Rivera, Prince Andrew M.

PROFITABILITY AND RISK ANALYSIS

Liquidity Ratio

When we looked at the financial statements of Ayala Corporation, we also looked at

the liquidity ratio, which measures the company’s ability to pay debt obligations and its margin
of safety. We discovered that the company has a quick ratio of 1.14 in 2019 and a quick ratio of
1.19 in 2020 which indicates that the company’s quick assets are the same as its current assets
and that the company is able to pay off its current debts without having to sell any of its long-
term assets. We observed that the company’s quick ratio increased during the year 2020, which
is extremely positive for the company. The higher the quick ratio, the greater the likelihood that
the company will be able to pay off its current liabilities. The current ratio is the next one on the
list. Its current ratio was 1.51 in 2019 and increased to 1.64 in 2020, indicating that the company
is in good shape. As a result, it demonstrates that the company has sufficient cash to pay its
debts, but that it does not have an excessive amount of finance locked up in current assets that
could be reinvested or distributed to investors. This information allows us to conclude that Ayala
Corporation is able to meet its short-term debt obligations.
Risk Ratio

Additionally, we calculated Ayala Corporation’s risk ratios, which are used to evaluate a
company’s financial health and are used to assist in the decision-making process when making
investment decisions. We can use this to determine how well a company can manage its debt
while also evaluating the company’s capital structure and the current risk it is exposed to. In both
2019 and 2020, the company’s computed Debt of Equity is 2.53. As a result, the outstanding debt
of the company is 2.5 times greater than the amount of equity in the company. It is a little risky
for the company because the greater the amount of debt, the greater the likelihood that earnings
will be violated due to increased interest expenses as well as increased vulnerability to business
downturns. As for the company’s capital ratio, it calculated 1.51 in the year 2019 and increased
to 1.64 in the following year 2020. It is beneficial for the company to have a ratio of 1.64, as it
indicates that the company is on solid financial ground in terms of liquid assets. So, based on
this, we can conclude that Ayala Corporation is still a suitable investment for investors, despite
the fact that it is a risky investment due to the high debt to equity ratio. For Ayala Corporation,
the debt ratio is calculated at 0.62 during 2019, and at 0.61, or 61 percent, in 2020. The debt-ratio
of Ayala Corporation is considered higher for others, which means that borrowing money is
more difficult in this case. It also mean that the vast majority of Ayala Corporation’s assets are
financed through debt. In conclusion with this information, we can conclude that Ayala
Corporation faces a little amount of risk when it comes to their debt obligations.