vi.

Accounting and Finance

a. Liquidity Ratios

2014 2015 2016

Current 6.05 5.38 4.58
Ratio

The ratio is mainly used to give an idea of the company's ability to pay back its short-term

liabilities (debt and payables) with its short-term assets (cash, inventory, receivables).

Based on the computations, Filinvest’s current ratio constantly decreases as years pass.

This means that the company becomes less liquid as time passes by. This is due to a

higher percentage of growth of current liabilities compared to the growth of the current

assets.

2014 2015 2016

Quick Ratio 2.27 2.19 2.46

Quick ratio gives a more stringent measure of liquidity than the current ratio in that it

excludes inventories and other current assets from the numerator. Just like current ratio,

the higher the acid-test ratio, the more liquid a company is. Even though both measure

liquidity, they didn’t have the same results. In quick ratio, the rate decreases too, but

unlike the current ratio, it does not constantly decrease, such as from 2015 to 2016, where

the rate increase by .27. This is likely to happen since the numerator only contains the

firm’s most liquid assets (i.e. cash and receivables).

 b. Leverage Ratios

2014 2015 2016

Debt-to-Total-Asset 51.14 54.04 54.15
Ratio

The debt to total assets ratio is an indicator of financial leverage. It tells you the

percentage of total assets that were financed by creditors, liabilities, debt. The debt to

total assets ratio is calculated by dividing a corporation's total liabilities by its total assets.

2014 2015 2016

Debt-to-Equity Ratio 0.78 0.86 0.90

Debt-to-Equity ratio is the ratio of total liabilities of a business to its shareholders' equity.

It is a leverage ratio and it measures the degree to which the assets of the business are

financed by the debts and the shareholders' equity of a business. So Filinvest debt-to-

equity ratio for the past 3 years are less than 1 indicating less risk and are favorable to

the company. The company doesn’t relies more on external lenders.

2014 2015 2016

Long-Term Debt-to- 0.84 1.02 0.86
Equity Ratio

It shows the relation between the portion of assets financed by creditors and the portion

of assets financed by stockholders. A debt-to-equity ratio of 0.84 in 2014 means that the

company uses debt-financing equal to 84% of the equity.

 2014 2015 2016
Times-Interest-Earned 8.70 7.02 6.21
Ratio

Times interest earned (TIE) or interest coverage ratio is a measure of a company's ability

to honor its debt payments. It may be calculated as either EBIT or EBITDA divided by the

total interest payable. Interest Charges = Traditionally "charges" refers to

interest expense found on the income statement.

c. Activity Ratios

2014 2015 2016

Inventory Turnover 0.34 0.35 0.35

Inventory turnover ratio is used to assess how efficiently a business is managing its

inventories. In general, a high inventory turnover indicates efficient operations. A low

inventory turnover compared to the industry average and competitors means poor

inventories management. As you can see, Filinvest’s turnover is at almost at constant

rate. This means that Filinvest only sold roughly a third of its inventory during the each

year.

2014 2015 2016

Fixed Assets Turnover 12.50 12.69 8.82

The fixed asset turnover ratio is an efficiency ratio that measures a company’s return on

their investment in property, plant, and equipment by comparing net sales with fixed

assets. In other words, it calculates how efficiently a company is a producing sales with

its machines and equipment. Filinvest’s Fixed Assets Turnover indicates that the assets
of the company are being utilized efficiently and large amount of sales are generated

using a small amount of assets. But it decreased from 2015 to 2016 it means that from

that year the company isn’s using its assets to their fullest extent.

2014 2015 2016

Total Assets Turnover 0.15 0.15 0.14

This measures how efficiently a firm is using its total assets. A higher turnover means the

firm is using its assets more efficiently. On the data that were computed, the total asset

turnover was constant on the first two years. This means that the management used the

assets consistently for the two years. Then comes the third year where it reached its

lowest point in three years. This gives the impression that the firm wasn’t able to improve

the usage of the assets to generate more sales/revenue. They were able to decrease

their revenue in greater percentage than the decrease in their costs. This means the firm

managed to retain some of their improvement, as they didn’t return to the lowest point of

asset turnover. This may not be very material though, because the increase and decrease

were not high enough to be alerted. This just shows that Filinvest really isn’t just a

beginner in the industry.

2014 2015 2016

Accounts Receivable 69.12 49.63 79.79
Turnover

Accounts receivable turnover is an efficiency ratio or activity ratio that measures how

many times a business can turn its accounts receivable into cash during a period. In other

words, the accounts receivable turnover ratio measures how many times a business can
collect its average accounts receivable during the year. Thus, Filinvest’s accounts

receivable turned over 69.12, 49.63, and 79.79 times during 2014, 2015, and 2016,

respectively. It means that the company is efficient in collecting its credit sales from

customers.

d. Profitability Ratios
2014 2015 2016
Gross Profit Margin 47.20 48.10 48.60

The gross profit margin ratio is an indicator of a company’s financial health. It tells

investors how much gross profit every dollar of revenue a company is earning. Low gross

profit margin indicates that the business is unable to control its production cost. Filinvest’s

Gross Profit Margin constantly increases as years pass. It means that it can make a

reasonable profit on sales, as long as it keeps overhead costs in control.

2014 2015 2016

Operating Profit Margin 33% 35% 35%

The overall measure of day to day operating effectiveness – how well revenues are being

generated and cost and expenses controlled. A higher margin means a firm is better at

managing its day to day operations. While a lower margin means it’s worse at managing

its day to day operations. It’s not a surprise that the computations resulted to almost the

same values. Since Filinvest isn’t new in the industry, the management already knows

how to properly manage their day to day operation, which gives them an almost consistent

operating profit margin.

 2014 2015 2016
Net Profit Margin 29.31 29.48 29.75

Net profit margin is an indicator of how efficient a company is and how well it controls its

costs. The higher the margin is, the more effective the company is in converting revenue

into actual profit. A net profit margin of 29.31 means that every $1 sale contributes 29

cents towards the net profits of the business. The Net Profit Margin of Filinvest increases

constantly for the past 3 years which is favorable to the company, the company earns a

higher profit each year.

2014 2015 2016

Return on Total Assets 0.04 0.04 0.04

This is the rate of return being earned on a firm’s assets. A higher return indicates more

operating profits per peso. A lower return indicates less operating profit per peso.

Filinvest’s operating return on assets was constant for five years. This proves that they

are constant on their practice. This may also be their optimum level of performance.

2014 2015 2016

Return on Equity 90.03 9.33 9.16

Return on equity reveals how much after-tax profit a company earned in comparison to

the total amount of shareholder equity. Filinvest ROE increases from 2014 to 2015 which

is favorable for the company because it means that the shareholders or the owners of the

company earned higher return on their investments. But for the year 2016, ROE ratio
decreased which is not favorable. This may give the firm a bad image to investors

because investors prefer firms that can give higher return on their investments.

2014 2015 2016

Earnings Per Share 0.19 0.21 0.22

Earnings per share (EPS) is the portion of a company's profit allocated to each

outstanding share of common stock. Earnings per share serves as an indicator of a

company's profitability. The higher the EPS figure, the better it is. Filinvest’s higher EPS

is the sign of higher earnings, strong financial position and, therefore, a reliable company

to invest money. Filinvest’s consistent improvement in the EPS figure year after year is

also an indication of continuous improvement in the earning power.

2014 2015 2016

Price-Earnings Ratio 15.50 8.62 8.50

The price earnings ratio, often called the P/E ratio or price to earnings ratio, is a market

prospect ratio that calculates the market value of a stock relative to its earnings by

comparing the market price per share by the earnings per share. In other words, the price

earnings ratio shows what the market is willing to pay for a stock based on its current

earnings. The Price Earnings ratio of Filinvest are 15.50, 8.62, and 8.50 for 2014, 2015,

and 2016, respectively. It means that the earnings per share of the company in 2014 is

15 times by the market price of its share. In other words, 1 peso of earnings has a market

value of 15 pesos. And so for the succeeding years.

 e. Growth Ratios
2014 2015 2016
Sales 25% 7% 6%
Sales Growth measure the pace at which your organization's sales revenue is increasing

or decreasing. This is a key metric for any organization to monitor since it is an essential

part of growth projections and is instrumental in strategic decision-making. Monitor this

metric over multiple time periods to gain a clear indication of growth trends and normalize

your values. This will help you to account for monthly or quarterly spikes in revenue.

2014 2015 2016

Net Income 16% 10% 5%

Net-income growth gives a good picture of the rate at which companies have grown their

profits. All things being equal, stocks with higher net-income growth rates are generally

more desirable than those with slower net-income growth rates.

2014 2015 2016

Earnings Per Share 0.19 0.21 0.22

Earnings per share (EPS) is the portion of a company's profit allocated to each

outstanding share of common stock. Earnings per share serves as an indicator of a

company's profitability. The higher the EPS figure, the better it is. Filinvest’s higher EPS

is the sign of higher earnings, strong financial position and, therefore, a reliable company

to invest money. Filinvest’s consistent improvement in the EPS figure year after year is

also an indication of continuous improvement in the earning power.

2014 2015 2016

Dividends Per 0.050 0.056 0.061
Share
The measure is used to estimate the amount of dividends that an income investor might

expect to receive if he or she were to buy a company's common stock.

Investors generally use dividends as a signal. If dividends per share drop, investors may

take that as a signal that the company is not doing well financially. An announcement of

a larger dividend than anticipated, on the other hand, often results in an upward spike in

the stock price. This means that Filinvest DPS is favorable to the company because it

consistently increases for the past 3 years, it gives a good image to investors.