FINANCIAL MANAGEMENT RESEARCH

DE LA SALLE LIPA
College of Business, Economics, Accountancy and Management

FINANCIAL STATEMENT ANALYSIS

PLDT INC.
AS FOR THE YEARS ENDED DECEMBER 31, 2016, 2015, 2014, 2013, 2012

Final Project
Submitted to Evangeline Garcia
Financial Statement Analysis
De La Salle Lipa

In Partial fulfillment
Of the Requirements for the Degree
Bachelor of Science in Financial Management

Submitted by:
Panganiban, Sheena Marie N.
Ramos, Dannah Francesca T.
Tenorio, Dianna P.

May 2018
 FINANCIAL MANAGEMENT RESEARCH
DE LA SALLE LIPA
College of Business, Economics, Accountancy and Management

PLDT INC.
I. Company Background
PLDT is the leading telecommunications and digital services provider in the Philippines.
Through its principal business groups – fixed line, wireless and others – PLDT offers a
wide range of telecommunications and digital services across the Philippines’ most
extensive fiber optic backbone, and fixed line and cellular networks.
When PLDT was incorporated and given the franchise to establish and operate
telephone services in the country on November 28, 1928, a typhoon had just ravaged
Eastern Visayas, Bicol Peninsula, and Samar. The ability to communicate amongst loved
ones and across the country became crucial. Sadly, phone networks then were like
disconnected intercom systems and you could only call people within your own small
city. Filipinos were disconnected from neighboring towns, disconnected from friends in
the other island and, needless to say, disconnected from the rest of the world. It was
under this scenario that the law was signed giving birth to PLDT.
What the new law hoped to achieve was to interconnect these "intercom" systems into a
seamless nationwide network that would facilitate communication and delivery of
services to the people, as well as spur economic development in the countryside.
The first president of PLDT was Theodore Vail Halsey while Major J.E. Hamilton
Stevenot, who represented the American firm General Telephone and Electronics Corp.
(GTE), was elected executive vice president and general manager.
Under the American owners of PLDT, many small phone companies in the provinces
were acquired by the Company to help speed up the rollout and connection of these
different phone systems all over the.

II. Relevant Financial Analysis Tools

Financial Analysis Tools are the most efficient tools that help assess relevant financial
information, both internal and external, to various users and decision makers. These
tools are helpful in evaluating a business and investing in a way so as to maximize the
profit from the investments. In this financial statement analysis, the group used various
financial analysis tools such as the horizontal and vertical analysis, profitability ratios,
liquidity ratios, solvency ratios and investor ratios.

To further analyze the statement of financial position, statement of financial

performance, and statement of cash flows, the group used horizontal analysis to
determine the changes in the amounts occurring in each accounts over the past years.
Vertical analysis was also applied by the group in order to determine the portion of each
account from the total account.
 FINANCIAL MANAGEMENT RESEARCH
DE LA SALLE LIPA
College of Business, Economics, Accountancy and Management

The group also used various ratios such as profitability, liquidity, solvency and investor
ratios to analyze the financial statements. Net profit margin, return on assets and return
on equity were used to assess PLDT’s profitability. On the other hand, current ratio,
quick ratio and receivables turnover were used to assess PLDT’s ability to meet its
short-term obligations. Debt to asset ratio, debt to equity ratio, and cash-flow to debt
ratio were used to determine PLDT’s ability to cover all its long-term obligations.
Earnings per share was also applied in order to measure PLDT’s ability to earn an
adequate return for the owners of the business.Lastly, cash return on assets, operating
cash flow to sale and cash flow to total debt were used to analyze PLDT Inc.’s Cash flow
ratio.

The group chose such ratios to analyze the financial statements due to the fact that this
would further provide an easy interpretation regarding the figures indicated in the
financial statements as well as the reasons behind PLDT’s profitability, liquidity, solvency
and its ability to generate such returns for the shareholders.
 FINANCIAL MANAGEMENT RESEARCH
DE LA SALLE LIPA
College of Business, Economics, Accountancy and Management

D. Liquidity Ratios

Current Ratio
1
0.8
0.6
0.4
0.2 PLDT Inc.
0
201 201 201 201 201 Globe Telecom
2 3 4 5 6
PLDT Inc. 0.69 0.52 0.53 0.58 0.47
Globe Telecom 0.74 0.65 0.77 0.72 0.64

CURRENT RATIO
The current ratio of PLDT Inc. for the year 2012 is 0.69, it indicates that for every 1 peso of their
current liabilities, PLDT INC. has 0.69 of Current Asset on hand. The current ratio fluctuate
which in the year 2016 it declines to 0.47. It indicates that the company has 0.47 current assets
on hand for every 1 peso of their current liabilities. Globe Telecommunication has a fluctuation
on its ratio but it has a greater ratio rather than PLDT. Globe Telecom has 0.74 of current asset
on hand for every 1 peso of current liabilities.
In view of the management, the company should decrease its liabilities in order for them to meet
their short-term obligation through their assets. The ratio indicates that the company have
difficulty in complying on its short term obligation. In comparing the ratio from its competitor,
Globe Telecom performs better than PLDT Inc.

Quick Ratio
0.8
0.6
0.4
0.2
0 PLDT Inc.
201 201 201 201 201
Globe Telecom
2 3 4 5 6
PLDT Inc. 0.44 0.39 0.4 0.46 0.36
Globe Telecom 0.41 0.41 0.57 0.52 0.43

QUICK RATIO
Because this ratio eliminates the inventory, there is a tendency that current asset is most liquid.
In the year 2016, it resulted to 36 % of its current asset can meet its short term obligation
without resorting to the sale of its inventory. Globe Telecom has an ability to pay its short term
 FINANCIAL MANAGEMENT RESEARCH
DE LA SALLE LIPA
College of Business, Economics, Accountancy and Management

obligation through its current asset by pulling out the inventory. The two company decreases its
quick ratio in the year 2016.
Same as the current ratio, the company have difficulty in meeting their current liabilities. It
indicates that the management should focus on their current liabilities because each year there
is an increase on it. However, low ratio doesn’t indicate poor performance for the company as a
whole. It is because PLDT Inc. has an increase in their long-term assets which means they can
borrow against those assets to meet their obligation.

Receivable Turnover
15
10
5 PLDT Inc.
0 Globe Telecom
2012 2013 2014 2015 2016
PLDT Inc. 10.02 9.91 7.31 6.33 6.7
Globe Telecom 7.78 6.97 6.24 6.03 5.16

RECEIVABLE TURNOVER
In year 2016, the receivable turnover was 6.70. The drop in this ratio from 9.91 to 6.70 for the
past 4 years indicates that the company has difficulty in collection process. The issue may be
lost of billing statements or problem in collection procedure. Globe Telecom as a duopoly of
PLDT, in which they offer the same services, they have almost the same ratio. But the result
shows that PLDT have a strong ratio rather than Globe but as the year goes by there is a
decrease in ratio.

In the perspective of the management, from 10 times of ability of collecting receivables it

declines to nearly 7 times annually in their valued customer. In this situation, the company
should have to maintain and increase the receivable turnover because collecting receivables is
important. Mainly, because it will help to have more positive cash flow situation for the company
and also for payment of their liabilities.
 FINANCIAL MANAGEMENT RESEARCH
DE LA SALLE LIPA
College of Business, Economics, Accountancy and Management

E. Profitability Ratios

Return on Asset
0.1
0.08
0.06
0.04
0.02 PLDT Inc.
0 Globe Telecom
2012 2013 2014 2015 2016
PLDT Inc. 0.09 0.09 0.07 0.05 0.04
Globe Telecom 0.05 0.03 0.08 0.09 0.07

RETURN ON ASSETS
During the first 2 years, PLDT Inc. was able to maintain their ROA with a value of 0.09 but as
years pass by the company’s ROA declined continuously to 0.04. On the other hand, Globe
Telecom has a declining ratio during the first two years, then a sudden increase in the preceding
years. This indicates that PLDT Inc. encountered some difficulties in utilizing their assets from
year 2014 to 2016. This sudden downturn might be due to the fact that most of the company’s
assets are financed by debt. Therefore, on the investor’s perspective, Globe Telecom’s ROA is
much better than PLDT Inc. because Globe Telecom’s assets are much more profitable than
PLDT Inc. as shown in the figure above.

Return on Equity
0.4
0.3
0.2
0.1 PLDT Inc.
0
2012 2013 2014 2015 2016 Globe Telecom
PLDT Inc. 0.23 0.25 0.22 0.18 0.18
Globe Telecom 0.14 0.11 0.28 0.29 0.26

RETURN ON EQUITY
From year 2013, PLDT Inc.’s ROE continuously decreased from 0.11 up to 0.29 and was
retained during year 2015 to 2016. On the other hand, Globe Telecom’s ROE turned out to be
the other way around. This may imply that during year 2013 from 2015, the company might
have encountered some difficulties in generating profit to fund their investors but this downward
trend does not necessarily mean that the company is not performing well. This may indicate that
Globe Telecom is utilizing the fund of their investors more effectively than PLDT Inc. In other
words, Globe Telecom’s ROE is much better than PLDT Inc.’s on the view of investors.
 FINANCIAL MANAGEMENT RESEARCH
DE LA SALLE LIPA
College of Business, Economics, Accountancy and Management

Net Profit Margin

0.25
0.2
0.15
0.1
0.05 PLDT Inc.
0
201 201 201 201 201 Globe Telecom
2 3 4 5 6
PLDT Inc. 0.22 0.21 0.18 0.13 0.12
Globe Telecom 0.08 0.05 0.13 0.14 0.13

NET PROFIT MARGIN

A downward trend on PLDT Inc.’s net profit margin indicates that the company has larger sales
than its actual net income. This may imply that the company is experiencing some difficulties in
controlling their costs. Though the Net profit margin of PLDT Inc. shows a downward trend over
the years, the company manage to have higher ratios than Globe Telecom. Hence, on the
investors view, this may indicate that PLDT Inc. has a better net profit margin than Globe
Telecom.
E. Solvency Ratios

Debt to Asset
1
0.8
0.6
0.4 PLDT Inc.
0.2
Globe Telecom
0
2012 2013 2014 2015 2016
PLDT Inc. 0.64 0.66 0.69 0.75 0.77
Globe Telecom 0.69 0.74 0.70 0.70 0.75

DEBT TO ASSET RATIO

Based on the balance sheet of PLDT Inc., the company has more assets compared to their total
debts. This simply means that PLDT Inc. the company could settle all its obligations by selling
all its assets if needed to. Hence, PLDT Inc. is well leveraged.
 FINANCIAL MANAGEMENT RESEARCH
DE LA SALLE LIPA
College of Business, Economics, Accountancy and Management

Debt to Equity
4
3
2
PLDT Inc.
1
0 Globe Telecom
2012 2013 2014 2015 2016
PLDT Inc. 1.75 1.91 2.24 3 3.38
Globe Telecom 2.24 2.82 2.29 2.29 2.94

DEBT TO EQUITY RATIO

PLDT Inc.’s has more liabilities compared to its total shareholder’s equity overtime as
manifested on its financial statement. Hence, most of PLDT Inc.’s financing comes from its
creditors which would also specify that the company is more on debt financing rather than equity
financing. Probably because PLDT Inc. lacks in good performance which lead the company to
seek extra debt financing.

Cash flow to Debt

0.4
0.3
0.2
PLDT Inc.
0.1
Globe Telecom
0
2012 2013 2014 2015 2016
PLDT Inc. 0.31 0.28 0.22 0.2 0.13
Globe Telecom 0.24 0.29 0.29 0.26 0.2

CASH FLOW TO DEBT RATIO

From year 2012 to 2016, PLDT Inc.’s total liabilities appeared to be greater than its operating
cash flows as manifested on its financial statement. This may indicate that PLDT Inc. may
experience some difficulties in covering all of its obligations by using its cash from operating
activities.
 FINANCIAL MANAGEMENT RESEARCH
DE LA SALLE LIPA
College of Business, Economics, Accountancy and Management

E. Investor Ratio

Earnings per share

200
150
100
50 PLDT Inc.
0 Globe Telecom
2012 2013 2014 2015 2016
PLDT Inc. 167.07163.67157.51101.8592.33
Globe Telecom 51.38 37.22 98.41119.92115.27

EARNINGS PER SHARE

PLDT Inc.’s earnings per share have been continuously decreasing from year 2012 up to year
2016. This case may imply that investors might bought shares to other companies and did not
buy more shares on PLDT Inc. because, as manifested in their income statement, PLDT Inc.’s
net income decreased overtime which might be alarming for the investors of the company. On
the other hand, Globe Telecom’s EPS appeared to be increasing over the years but comparing
this to PLDT Inc., PLDT Inc. has larger EPS than Globe Telecom. This might imply that PLDT
Inc. is attracting more investors than Globe Telecom during these years.

F. Cash flow Ratio

Cash return on Assets

0.25
0.2
0.15
0.1 PLDT Inc.
0.05
Globe Telecom
0
2012 2013 2014 2015 2016
PLDT Inc. 0.2 0.18 0.16 0.16 0.11
Globe Telecom 0.17 0.22 0.22 0.19 0.17

CASH RETURN ON ASSETS

In terms of utilizing the asset to generate more cash flows, comparing PLDT and Globe, the
graph shows that Globe in the year of 2013-2014 is more efficient in using its asset to produce
more cash flow which there’s a consistency with a ratio of 0.22 rather than PLDT 0.16-0.18,
even though there’s a minimal decline in Globe they still manage to utilize its asset in generating
their cash flow. As for the management, they are likely interested to have their assets on a
higher ratio for them to easily utilize its assets in generating their cash flow. As for the PLDT,
 FINANCIAL MANAGEMENT RESEARCH
DE LA SALLE LIPA
College of Business, Economics, Accountancy and Management

they should focus on increasing the value of their cash in the operation. Allowing them to
produce more cash flow and lowering the average in total asset, the higher cash return on their
assets.

Operating Cash flow to Sale

0.6
0.4
0.2 PLDT Inc.
0 Globe Telecom
2012 2013 2014 2015 2016
PLDT Inc. 0.49 0.44 0.39 0.41 0.3
Globe Telecom 0.28 0.35 0.35 0.3 0.3

OPERATING CASH FLOW TO SALES

PLDT have a higher ratio which indicates that they are more efficiently in converting their sales
into cash than Globe. During the year 2012 PLDT got a ratio of 0.49 and for the proceeding
years there’s a decline in the ratio which leads to 0.3 in year 2016. For the creditors and
investors perspective, they are looking for the potential of a company’s ability to pay. They look
for a potential company that is capable of generating their sales into cash efficiently. As for the
management, having a higher ratio can give more incentive for the company. However PLDT
has experienced a downturn in the year 2016 with a ratio of 0.3. For the company given the
situation, they should focus on lowering their use of cash in the operation and to increase their
sales for them to convert their sales into cash more efficient.

Cash flow to Total Debt

0.4
0.3
0.2
0.1 PLDT Inc.
0 Globe Telecom
2012 2013 2014 2015 2016
PLDT Inc. 0.31 0.28 0.22 0.2 0.13
Globe Telecom 0.24 0.28 0.29 0.26 0.2

CASH FLOW TO TOTAL BEDT

Globe has more has more cash flows to pay off debts than PLDT. The higher ratio indicates that
a company is capable of meeting its short-term and long-term obligation. In the view of
management, they would like to have more cash flow for them to be able to pay off some debts,
same as the creditors and investors because they want to know if the company is solvent and
has enough cash to meet its obligation to pay them in return. Instead of using debts to pay, the
company should lessen it. If this continuous, chances of paying their debt will have a downturn
 FINANCIAL MANAGEMENT RESEARCH
DE LA SALLE LIPA
College of Business, Economics, Accountancy and Management

and could affect the performance of the company wherein they will not be able to cover total
debt with the yearly operating cash flow. The tendency of this will result to losing of creditors
and investors that would be engaging in the company. Even though PLDT had a higher ratio
than of Globe during the year 2012, if you will look closely Globe is more capable to cover its
total debt.

IV. Summary and Recommendation

Overall, Liquidity ratios are just a small part of fundamental analysis but it is a tool in order to
know if the company is liquid. Looking only at those ratios it would lead that Globe Telecom is
more liquid than PLDT Inc. As for the year 2016, both company’s liquidity declined but Globe
still managed to assess their assets. Furthermore, the ratios imply that the best time to invest in
PLDT would have been sometime in the year 2014.
As for the profitability, Globe Telecom has better ROA and ROE than PLDT Inc. This is
practically for the reason that most of PLDT Inc.’s assets are funded by debt. As a result,
shareholders from PLDT Inc. are earning less than shareholders from Globe Telecom during
years 2012 to 2016. As for the net profit margin, PLDT Inc.’s ratio has a downward trend. This
means that the company should have cut their costs during years 2012 to 2016 in order to
increase their net income. It was also observed that PLDT Inc. managed to have higher ratios
than Globe Telecom despite of the downward trend which indicates that PLDT Inc.’s ratio is
better than Globe Telecom.
PLDT Inc. was also observed to have higher earnings per share than Globe Telecom despite of
the downward trend. This might indicate that there are more investors investing on PLDT Inc.
rather than Globe Telecom.
As for the cash flow, knowing the ability of the company with utilizing and generating it cash
flows will help the company assess what they should give more emphasis to attract more
investors and creditors to engage in their business.
Along with these analyses, the group came up with the following recommendations to further
improve the overall performance of PLDT Inc.

 As PLDT Inc.’s net income decrease, the expenses of the company increases overtime.
As for this, the group recommends that the company should invest more on assets like
machines, equipment etc.
 As we can see, expenses are one of the reasons why there is a decrease in net income.
One of the reasons behind this is a rise on the asset impairment which will be observed
to increase over time. An increase on the asset impairment means that anticipated cash
flows are unrecoverable. One of the expenses which affect the earnings of the company
is depreciation and amortization expense. In order to reduce this expense, the company
should buy high quality equipment or the company may use different depreciation
methods.
 FINANCIAL MANAGEMENT RESEARCH
DE LA SALLE LIPA
College of Business, Economics, Accountancy and Management

 PLDT pay attention on their weaknesses during the previous years and provide strategic
plans regarding this such as the utilization of their assets as well as the fund of their
investors.
 As for the company’s profitability, PLDT Inc. was observed to have a downward trend
over the years. Based on the analysis of the group, PLDT Inc. is more on debt financing
but it turns out that the company is encountering some difficulties managing their debts.
In relation to this, the group recommend that PLDT Inc. should also focus on their equity
financing or they may also practice debt restructuring in order to increase their net
income.