Performance Task #1 & Written Work #1

Financial JFC PETRON GLOBE

Ratios
LIQUIDITY
1. Current Current Asset Current Asset Current Asset
¿ ¿ ¿
Current Liabilities Current Liabilities Current Liabilities
Ratio

₱ 24,022,000 ₱ 219,029,000 ₱ 219,029,000

¿ ¿ ¿
₱ 19,091,000 ₱ 202,587,000 ₱ 202,587,000

= 1.26 = 1.08 = 0.77

 A company has more current liabilities than current assets if its current ratio is less than one. The only
corporation with more current liabilities than current assets is Globe.
2. Quick Casℎ+ Marketable Casℎ+ Marketable Casℎ+ Marketable
Securities Securities Securities
Ratio + Accounts + Accounts + Accounts
Receivables Receivables Receivables
¿ ¿ ¿
Current Current Current
Liabilities Liabilities Liabilities

₱ 7,619,000+¿ ₱ 7,621,000 ₱ 90,602,000+¿ ₱ 17,927,000 ₱ 16,757,000+¿ ₱ 23,543,000

¿ ¿ ¿
₱ 19,091,000 ₱ 202,587,000 ₱ 60,350,000

= 0.80 = 0.54 = 0.67

 Quick ratios of 1 and higher indicate high liquidity and the ability to meet immediate obligations. The three
businesses are not very liquid.
3. Receivable Net Credit Net Credit Net Credit
Sales Sales Sales
s Turnover ¿ ¿ ¿
Accounts Accounts Accounts
Rati0 Receivables Receivables Receivables

₱ 73,728,000 ₱ 463,100,000 ₱ 10,661,000

¿ ¿ ¿
₱ 7,621,000 ₱ 17,927,000 ₱ 23,543,000

= 9.67 = 25.83 = 0.45

 The data shows that PETRON has the highest turnover rate for receivables among the three businesses,
indicating that the company has the biggest percentage of reliable clients that pay their debts on time.
4. Inventory Cost of Good Sold Cost of Good Sold Cost of Good
¿ ¿
Turnover Inventories Inventories Sold
¿
Inventories
Ratio
₱ 73,728,000 ₱ 463,100,000
¿ ¿
₱ 5,972,000 ₱ 53,180,000 ₱ 10,661,000
¿
₱ 3,186,000

= 12.35 =8.71
= 3.35
EFFICIENCY or SOLVENCY
1. Debt Ratio Total Liabilities Total Liabilities Total Liabilities
¿ ¿ ¿
Total Assets Total Assets Total Assets

₱ 26,041,000 ₱ 277,634,000 ₱ 124,969,000

¿ ¿ ¿
₱ 54,119,000 ₱ 391,324,000 ₱ 170,507,000

=0.48118 x 100 = 0.70947 x 100 =0.69617 x 100

=48.12% = 70.95% = 69.62%
 If interest rates abruptly rise, PETRON might be in danger of going into default on its loans.
2. Debt to Total Liabilities Total Liabilities Total Liabilities
¿ ¿ ¿
Total Equity Total Equity Total Equity
Equity
Ratio
₱ 26,041,000 ₱ 277,634,000 ₱ 124,969,000
¿ ¿ ¿
₱ 28,078,000 ₱ 113,692,000 ₱ 54,538,000

=0.92745 x 100 = 2,44198 x 100 = 2.29141 x 100

= 92.75% = 244.20% =229.14%
 Because GLOBE's D/E ratio is high, it is assumed by lenders and investors that the company is funding a
sizeable portion of its potential expansion through borrowing.
3. Interest Earning before interest Earning before interest Earning before interest
¿ ¿taxes ¿ ¿ ¿ ¿taxes ¿ ¿ ¿ ¿taxes ¿ ¿
Coverage ¿ ¿ ¿
Ratio
₱ 6,579,000 ₱ 3,813,000 ₱ 19,383,000
¿ ¿ ¿
₱ 126,000 ₱ 5,528,000 ₱ 14,940,000
 = 52,2142 = 0.6898 = 1.2974
 JFC has the highest value. Therefore, a higher interest coverage ratio indicates stronger financial health –
the company is more capable of meeting interest obligations.
4. Accounts Sales Sales Sales
¿ ¿ ¿
Accounts Receivable Accounts Receivable Accounts Receivable
Receivable
Turnover
₱ 90,671,000 ₱ 482,535,000 ₱ 103,235,000
¿ ¿ ¿
₱ 7,621,000 ₱ 17.927,000 ₱ 23,543,000

= 11.89752001 = 26.91666202 = 4.384955188

= 11.90 = 26.92 = 4.38

 PETRON has the highest receivables turnover ratio, which means that it has the highest proportion of
quality customers that pays their debt quickly
5. Average 365 365 365
¿ ¿ ¿
Accounts Receivable Accounts Receivable Accounts Receivable
Collection
Turnover Turnover Turnover
Period

356 356 356

¿ ¿ ¿
11.90 26.92 4.38

= 30.67226891 = 13.55869242 = 83.23916307

= 30.67 = 13.5 = 83.24

 GLOBE is taking too long to collect payments.

CostOf Good Sold Cost Of Good Sold CostOf Good Sold
¿ ¿ ¿
Inventory Inventory Inventory
6. Inventory
Turnover
₱ 73,728,000 ₱ 463,100,00 ₱ 10,661,000
¿ ¿ ¿
₱ 5,972,000 ₱ 53,180,000 ₱ 3,186,000

= 12.34561286 = 8.708160963 = 3.346202134

= 12.35 = 8.71 = 3.35
 Higher ratio means stronger sales, which means JFC has the greatest number of sales

365 365 365

¿ ¿ ¿
Inventory Turnover Inventory Turnover Inventory Turnover
7. Average
 Age of
Inventory 356 356 356
¿ ¿ ¿
12.35 8.71 3.35

= 29.56515842 = 41.91470525 = 109.0788857

= 29.57 = 41.91 = 109.08
 GLOBE is not properly managing its inventory 
8. Accounts Purcℎase Purcℎase Purcℎase
¿ ¿ ¿
Inventory Inventory Inventory
Payable
Turnover
₱ 179,400,000 ₱ 834 , 870,000 ₱ 2,726,450
¿ ¿ ¿
₱ 5,972,000 ₱ 53,180,000 ₱ 3,186

= 30.0401 = 15.6989 = 0.85576

 JFC is paying its creditors and suppliers quickly

365 365 365

¿ ¿ ¿
Inventory Turnover Inventory Turnover Inventory Turnover
9. Average
Payment
356 356 356
Period ¿ ¿ ¿
30.0401 15.6989 0.85576

= 12.15 = 23.25 = 426.52

 GLOBE is taking too long to pay off its credit.

10.Operating ¿ Average Colletion Period + Average
¿ Average
AgeColletion
of Inventory
Period + Average
¿ Average
AgeColletion
of Inventory
Period + Average
Cycle
= 30.67 = 29.57 = 13.56 + 41.91 = 83.24 = 109.08
= 60.2374 = 55.47 or 55.48 = 192.32
= 60.24
 PETRON has a shorter operating cycle is more favorable as it means the company has enough cash to
maintain operations, recover investments and meet various obligations.
11.Cash ¿ OperatingCycle − Average Age
¿ OperatingCycle
of Payables − Average Age
¿ OperatingCycle
of Payables − Average Age of P
Conversion
Cycle = 60.24 – 12.15 = 55.47 – 23.25 = 192.32 – 426.52
= 48.09 = 32.22 or 32.23 = 234.2 or 234.21
 PETRON has a shorter cash conversion cycle it is better than a longer one because it means a business is
operating more efficiently.

PROFITABILITY
' ' '
1. Return on ¿ Net Income ÷ Stockℎolde r s Equity
¿ Net Income ÷ Stockℎolde r s Equity
¿ Net Income ÷ Stockℎolde r s Equity
Equity
= = = ₱ 13,372,000 ÷ ₱ 54,538,000
₱ 5,488,000 ÷ ₱ 28,078,000 ₱ 3,009,000 ÷ ₱ 113,692,000 = 0.24518 x 100
= 0.19545 x 100 = 0.02646 x 100 = 24.52%
= 19.55 % = 2.65%
 GLOBE has the highest ROE, the higher the ROE, the better a company is at converting its equity financing
into profits.
¿ Operating Income ÷ Total Assets
¿ Operating Income ÷ Total Assets
¿ Operating Income ÷ Total Assets

= = ₱ 13,372,000 ÷ ₱ 179,507,000
2. Return to ₱ 5,488,000 ÷ ₱ 54,119,000 = = 0.07449 x 100
Assets = 0.10140 ₱ 3,009,000 ÷ ₱ 391,324,000 = 7.45%
= 10.14% = 0.00768 x 100
= 0.77%
 JFC has the highest ROA, a higher ROA means a company is more efficient and productive at managing its
balance sheet to generate profits
3. Gross ¿ Gross Profit ÷ Sales ¿ Gross Profit ÷ Sales ¿ Gross Profit ÷ Sales
Profit
Margin = = = ₱ 92,574,000÷ ₱ 103,235,000
₱ 16,943,000 ÷ ₱ 90,671,000 ₱ 19,435,000 ÷ ₱ 482, 535,000 = 0.89673 x 100
= 0.18686 x 100 = 0.04027 x 100 = 89.67%
= 18.69% = 4.03%
  Indicates that GLOBE is more efficiently run and more financially stable than the 2 companies

4. Operating ¿ Operating Income ÷ Sales ¿ Operating Income ÷ Sales ¿ Operating Income ÷ Sales
Profit
Margin = = = ₱ 33,068,000 ÷ ₱ 103,235,000
₱ 6,137,000 ÷ ₱ 90,671,000 ₱ 7,605,000 ÷ ₱ 482,535,000 = 0.32031 x 100
= 0.18686 x 100 = 0.01576 x 100 = 32.03%
= 6.77% = 1.58%
 GLOBE has the highest value. It means that its manager’s performance is higher than the other 2 companies
5. Net Profit ¿ Net Income ÷ Sales ¿ Net Income ÷ Sales ¿ Net Income ÷ Sales
Margin
¿ ₱ 5,488,000 ÷ ₱ 90,671,000 ¿ ₱ 3,009,000 ÷ ₱ 483 ,535,000 ¿ ₱ 13,372,000 ÷ ₱ 4103,235,000
= 0.06052 x 100 = 0.00623 x 100 = 0.12952 x 100
= 6.05% = 0.62% = 0.12952 x 100
= 12.95%
 GLOBE is able to effectively control its costs and/or provide goods or services at a price significantly higher
than its costs

EASY
Sales
 Asset Turnover Ratio=
Total Asset
Pℎp 1,500,000
=2׿
Pℎp 750,000
365
 Average Collection Period=
AR Turnover
365
=91.25∨91 days
4
Sales
 A/R Turnover Ratio=
Average A / R
 100,000
=8.33׿
12,000
Average Collection Period
 Annual  Quarterly
365 365 91.25 91.25
= =43.8∨44 days = =10.95∨11 days
A / R Turnover 8.33 A / R Turnover 8.33

AVERAGE/DIFFICULT
Current Assets
A. Current Ratio=
Current Liabilities
Current Assets
2.5=
5,000
Current Assets= 2.5×5,000
= 12,500
Current Assets − Inventory
Quick Ratio=
Current Liabilities
12,500− Inventory
1.7=
5,000
(1.7× 5,000) = 12,500−Inventory
8,500= 12,500−Inventory
Inventory= 12,500-8,500
= 4,000
Cost of Good Sold
Inventory Turnover=
Inventory
52,000
=
4,000
=13.125 times
365
Average age of Inventory=
Inventory Turnover Ratio
365
=
13.125
=27.8 days
B. Cost of Goods Sold= 2× Ending Inventory
= 2× 5,000
= 10,000
Purchases= Cost of Goods Sold+ Ending Inventory− Ending Inventory
= 10,000+ 5,000− 2,000
=13,000
 Purcℎases
Accounts Payable Turnover Ratio=
Accounts Payable Turnover
13,000
=
4,000
= 3.25 times
365
Average Payment Period=
Accounts Payable Turnover
365
=
3.25
=112.3 days

1
C. Purchases= Ending Inventory ×
2
1
= 13,000 × =6,500
2
Purcℎases
Accounts Payable Turnover=
Accounts Payable
6,500
=
2,500
= 2.60 times
365
Average Age of Payables=
Accounts Payable Turnover
365
=
2.60
= 140.4 days
D. Total Assets= Current Assets+ Non-Current Assets
=30,000+ 50,000
=80,000
Net Sales
Total Asset Turnover=
Total Assets
200,000
=
80,000
= 2.5
E. Operating Cycle= Average Collection Period+ Average Age of Inventory
= 71.6 days
Cash Conversion Cycle= Operating Cycle- Average Age of Payables
= 40.7 days

PRACTICE
 Current Assets
 Current Ratio=
Current Liabilities

2,000
=0.57
3,500
Current Assets( Inventory +Casℎ∧ Accounts Receivables)
 Current Ratio=
Current Liabilities
150+800 950
= =2.11
450 450
Casℎ∧ Accounts Receivable
Quick Ratio=
Current Liabilities
800
=1.78
450
( x +Casℎ+ Inventory)
 Current Ratio= wℎere x=total Accounts Receivable
Accounts Payable
1.7=¿ ¿
( x+ 27,000)
1.7=
30,000
(1.7 × 30,000) = x + 27,500
51,000 = x + 27,500
51,000- 27,500= x
Total Accounts Receivables= 23,500

 Assume that the current liabilities is 70,000

Current Assets
Current Ratio=
Current Liabilities
Current Assets
2.3=
70,000
2.3×70,000= Current Assets
Current Assets= 161,000

Cash is 30% of current assets

161,000×30%= 48,300
Hence, non-current asset increased by 50%
112,700+ 50% = 169,050
Now the total asset will be 48,300+ 169,050= 217,350
Now the new ratio is
Current Assets
Current Ratio=
Current Liabilities
217,350
=3.105
70,000