COMPANY BACKGROUND

A business in retail industry with an agriculutarl

machine and accessories lines of product owned by Mr.
Melvin and Mrs. Josephine Maravilla located at Matias
District Talavera, Nueva Ecija.
 MARAVILLA 2015 2016 2017 MARAVILLA 2015 2016 2017
ENTERPRISE ELECTRONICS

GROSS PROFIT GROSS PROFIT

30% 30% 30% 30% 30% 30%
MARGIN MARGIN

EBITDA MARGIN 10% 10% 8% EBITDA MARGIN 17% 15% 14%

OPERATING PROFIT OPERATING PROFIT

MARGIN
8% 8% 8% MARGIN
16% 13% 14%

NET PROFIT MARGIN 4% 4% 4% NET PROFIT MARGIN 11% 9% 9%

TOTAL 2015 2016 2017

GROSS PROFIT MARGIN 30% 30% 30%

EBITDA MARGIN 12% 15% 10%

OPERATING PROFIT MARGIN 10% 13% 10%

NET PROFIT MARGIN 6% 9% 5%

 MARAVILLA 2015 2016 2017
ENTERPRISE

GROSS PROFIT 2,408,537 2,733,768.64 2,920,857

EBITDA 950,031.08 1,034,358.44 975,984.36

OPERATING PROFIT 826,538.76 880,639.47 975,984.36

NET PROFIT 491,929.20 500,126.28 516,316.01

NET SALES 8,028,453.00 9,112,578.64 9,736,187.00

MARAVILLA 2015 2016 2017

ENTERPRISE

GROSS PROFIT
MARGIN
30% 30% 30%

EBITDA MARGIN 10% 10% 8%

OPERATING PROFIT
MARGIN
8% 8% 8%

NET PROFIT MARGIN 4% 4% 4%

 Evaluation
Although the business’ ROA is in good ratio, assessing the
profitability of each line segment of the business, shows
different range of ratios. As you can see, the Maravilla
enterprise’s common margin ratios shows a constant
percentage from 2015 to 2017. Which only depicts that
the segment’s profitability is not improving, even when sales
increase the corresponding cost and expenses also
increases.
While in Maravilla Electronics, the ratios show a decrease
from 11% in 2015 to 9% in 2017. Though the range of the
ratio reached the industry average ratio (according to csi-
market.com/retailsector), the 2% decrease means that
there is a large increase in expenses while having a minimal
increase in sales.

Overall, the business’ consolidated profitability ratios show

an unstable percentage, that is unfavorable for the business.
A decrease to 5% in 2017 shows that the earnings of the
business in 2017 is not good.
 RECOMMENDATION
In this case, the business should gain more
sales but if not lessen, maintain its
costs and expenses. We recommend to
find a supplier that will bargain and
supply goods that are cheaper than the
existing. Also in our computation, the
result shows a percentage on the part of
operating expenses which are constantly
increasing with a range of 29% to 31%
which represents a large part of
deduction in the sales. Monitor every
costs, especially on the salaries and
allowances which shows the largest part
of the operating expenses.
 Evaluation
2015 2016 2017

Return on
Asset 6% 6% 7%
Return on
Equity 9% 9% 9% ROA In 2015 to 2016 was 6%, means that for
every peso invested in its assets during the
year produced 0.06 cents of Net Income. It
Increased to 7 % in 2017. The increase of 1%
in the latter years is a good sign that the
business is using productively its assets.
Furthermore these ratios compared to average
of the retail industry ( 2015 = 5.43, 2016 =
5.42, 2017 = 6.29) proves also that the
management is able to utilize their assets in
making profits efficiently.
 2015 2016 2017

Net Profit 491,929.20 500,126.28 516,316.01

Common
Equity
8,381,267.40 8,719,593.68 7,060908.69

Total Asset 8,437,635.40 8,760,956.43 7,099,103.69

RECOMMENDATION

Increase revenues by improved customers

services or by keep looking for any
additional sales opportunities. Watch for
excessive payroll expenses and might
consider reducing the number of
employees.
 Evaluation
2015 2016 2017

Return on
Asset 6% 6% 7%
Return on
Equity 9% 9% 9% ROE In the span of 3 years, the business’ ROE
was at 9% constant. It was very low
compared to its retail industry average ratio
of (2015 = 15.94, 2016 = 16.76, 2017 =
23.14). Not only that the company is not
making any progress on its return on equity. It
also indicates that the business is not
effectively capable of generating profit
internally.
RECOMMENDATION

Increase Profit Margins by increasing

prices of each product sold but should not
compromise the total amount of Sales.
Lowering the cost of Sales and cut the
unnecessary expenses.
2015 2016 2017 Evaluation
0.51 % 0.47% 0.54%

In 2015, the business’ total liabilities

amounted to 0.51% of the total assets, this
ratio was decreased to 0.47% in 2016
and increased to 0.54% in 2017. Having
a very low Debt ratio shows that the
company is substantially relying on its
equity to fund their own business. This ratio
is also attractive to lenders because of the
company’s stability, which also means they
have access to loans anytime when they
plan to expand their business.
2015 2016 2017 Evaluation
0.52% 0.44% 0.54% During 2015, debt to equity ratio is .52%,
which decreased to .44%, and had a comeback
to 0.54%.
This ratio is helpful for a business to show how
reasonable the company is in taking their loans.

Even though there are fluctuations in the ratios, it

does not indicate large change in the company’s
actions, which is they rely substantially in their
own equity instead of creditor’s loans.

Too low ratio indicates that the company maybe

losing its supposed to be increase in its earning
potential by not taking any adequate loans
 2015 2016 2017 2015 2016 2017
MARAVILLA MARAVILLA
ENTERPRISE 107.5% 109% 112% ELECTRONICS 41.7% 50.4% 48.2%

2015 2016 2017

TOTAL 149% 159% 160%
 Evaluation
Enterprise - This ratios indicates that the enterprise is
performing well when it comes to targeting it sales and it
doesn't rely in its investment to drive its financial needs.

Electronic - This ratios are already considered as low,

meaning their investments are exceeding the sales that they
are generating. But this might be a result of separating the
two businesses but using the same equity.

Overall it shows that the entity's revenue isn't a problem

here, because it continues to increase by almost 10 each
year and maintaining its equity along with it, with a 6%
increase each year. Meaning they re managing their
money or business efficiently in this aspect.
2015 2016 2017
Evaluation
100% 100% 100%
Financial Leverage ratio shows how leveraged the
company is compared when the company used its
equity instead. Because the company substantially relies
on its own equity. The ratios for 2015 through 2017
shows 100% or no substantial addition to the
company’s earning potential.

This ratio shows that the company is not leveraged,

which brings no risk to the company in terms of credit
risk.

The business with this ratio is a business that is not

scaling to its full potential, but rather focuses too much
on its stability.
2015 2016 2017 Evaluation
0.99 1.00 0.99
Financial leverage index tests the company’s
usage of its liabilities. If the number exceeds 1.0
, it means that the company is using its liabilities
efficiently. Because the company does not take
any loan to further expand or increase its profit,
the ratio showed negative or indifferent
feedback on how the company uses its loans. It
also confirmed the management’s assertion that
they only have loans regarding to its day to day
transactions, like utilities and payroll, not in more
profitable ventures like expanding its business.
 RECOMMENDATION

• There must be a balance between stability and

profitability. By not taking loans to expand or
invest in more profitable assets make the
company lose its potential earning capacity.
• The company must also use its working capital to
finance in purchasing inventory on account, in
addition to using payables in operational costs,
which may lead to increased profitability.
 2017 2016
Current
2015 Evaluation
Ratio 76.09 121.84 105.69

Ratios in 2015, 2016 & 2017 are above 1 which

is the standard. The result shows that the
enterprise has the ability to pay all of its current
liabilities and still have current assets left over.
However, current ratio is too high in which we
assume that the enterprise may not be using its
short-term financing facilities efficiently. Also may
indicate problems in working capital
management.
The ideal current ratio is 2:1
Hence, the enterprise needs to stop playing safe
and need to reduce the current ratio.
Also, it reduce profits with implied interest cost.
RECOMMENDATION
As you can see cash 522,094.56 is
very high. Its impact will lower the
return on assets and will increase
the cost of the capital.
Cash is remaining stable and
decreasing the opportunities to
create better financial stability.
Hence:
Cash needs to be invested or;
Cash needs to be used for fixed assets
 2017 2016 2015 Evaluation
Quick
Ratio 14.1 59.41 51.42

Ratio in 2015 has 51.45 times as many quick

assets than current liabilities, 59.41 times in
2016 and 14.1 times in 2015.
The ideal quick ratio is 1:1
However, quick ratio of the enterprise is
higher than the ideal ratio because based on
the FS it keeps too much cash and we will
assume (because the enterprise did not
provide Notes to FS) that they may have a
problem in collecting its accounts receivable.
Hence, enterprise need to reduce the ratio.
 RECOMMENDATION
Cash account recommendation is the
same with current ratio
Accounts Receivable is reduced
already by 1,500,000 in 2017 and
the quick ratio is reduced from 59.41
to 14.10 but still it is beyond the
ideal ratio
• Hence, the company should
make credit offers regarding
acquisition of inventories
• Use cash to acquire earning
assets
Cash
2017 2016 2015 Evaluation
Ratio 13.67 22.705 16.27

Ratio in year 2015 the enterprise was able to

pay immediately 16.27 times of its current
liabilities. In year 2016 cash ratio increased
to 22.705 times (the ability to meet current
debt become higher) and decreased to 13.67
times in year 2017 in which its ability become
lower.
The amount of cash is very excessive, it
indicates poor resource management and very
high liquidity meaning low profitability.
Cash
2017 2016 2015
Evaluation
Flow
Ratio 13.67 12.09 63.99 The result shows the number of times the
business can pay off current debts with
cash generated within the same period.
The company has generated more cash
in a period than what is needed to pay
off its current liabilities.
 RECOMMENDATION

Hence, the enterprise needs to

reduce the cash ratio:
Cash needs to be invested or;
Cash needs to be used for fixed assets
 2017 2016 2015 Evaluation
Defensive
Interval 382.07 676.34 706.94

The result shows how many days the

company can operate in terms of
meeting daily operational expenses
without running into financial difficulty.
The company has the ability to meet
the daily expenses of the business
using the current liquid assets without
seeking outside revenues, however
during 2017 the defensive interval
period decrease because the other
receivables are already collected.
 RECOMMENDATION

As to daily operation aspects,

maintaining a good defensive
interval ratio is favorable for
the business.
 THANK YOU

AMATORIO, Wendy MARINO, John Fernand

CARIAZO, Clarisse Yvvone PAULITE, Byron
ESPA, Divine RAMOS, Allyssa Jean
GATDULA, Kate Nicole Vicente, Jemeel
GREGORIO, Drizzle Jan