Balance Sheet, Vertical analysis

2017` 2016

ASSET
Current assets
Cash and cash equiv. 4.04% 3.45%
Receivables 9.83% 11.58%
Inventories and supplies 1.67% 1.83%
Derivatives assets 0.001% 0.03%
Prepayments and other CA 5.66% 5.12%
Total current assets 21.20% 21.22%
Non- current
Property and equip-net 58.54% 56.43%
Investment 5.35% 5.94%
Deferred income tax asset 12.81% 13.68%
Derivatives asset 0.99% 1.05%
Other NCA 0.32% 0.30%
Total NCA 1.25% 0.88%
78.80% 78.78%
Total assets 100% 100%
Current liabilities
Accounts payable and accrued expense 22.90% 23.66%
Notes Payable 1.80%
Current portion of long term 2.98% 2.33
Unearned Revenue 1.98% 2.03%
Income tax payable 0.42% 0.44%
Provision 0.72% 2.65%
Derivatives Liabilities 0.06% 0.04%
Total current liabilities 28.64% 32.97%
Non-current liabilities

Long term debt 38.18% 44.37%

Deferred income tax liability 0.98% 0.77%
Other long term liability 0.07% 2.67%
Tota non currentl liabilities 47.44% 41.62%

Equity
Paid up capital 16.11% 17.81%
Cost of share based payments 0.14% 0.23%
Other service (0.12%) (0.23%)
Retained earnings 7.81% 7.78%
Total equity 23.95% 25.95%
Total liabilities and equity 100% 100%

14
INCOME STATEMENT
VERTICAL ANALYSIS

Globe Telecom,Inc.
Statement of Income

For the year ended For the year ended

December 31 2017 December 31, 2016

Sales 100% 100%

Cost of Sales 9.62% 9.40%
Gross profit 90.62% 90.60
Administrative and selling expense (41.85%) (41.60%)
Income from operating activities 48.53% 49.39%
Interest income 1.035 0.11%
Other income (expense)net 3.07% 0.78%
Income before tax 52.63% 50.10%
Income tax expense 4.77% 4.78%
Net income 47.86% 45.32%

ANALYSIS

The vertical analysis show that in year 2017 and 2016 the company product cost of
9.62% and 9.40% of sales respectively to produce. The company increase 0.21% in cost of sales
expense at were 9.40% last year. The globe telecom has a gross profit of 90.38% in 2017 and 90.60
in 2016 respectively. The Globe did well in managing cost of sales. Show the company has more to
cover operating expense and other cost. Similarly the general administrative and selling expense in
2017 increase 41.85% compare to last year of 41.60

On the other hand Globe telecom has not performed very well on reducing other
operating expense which are now 0.11% increase to 1.03% last year. The interest income is
increase from 0.78% to 3.07% last year. The net income as a percentage of sales increased by 2.54
% from 45.32 to 47.86.
Financial Performance
15
Liquidity ratio

1. Current ratio
2017
Current ratio=Current asset/current liabilities
=57 515 137/79 457 031
= 0.72
2016
=53 022 654/82 401 897
=0.64

years 2017 2016

Current ratio 0.72 0.64

Analysis

The current ratio of globe telecom inc. is 0.64 in 2016 and increased by 0.72 show
that the company has no ability to pay its current liabilities. A less than 1 current ration
means that the globe telecom inc has no ability to fulfill its obligation when they become
due, as definitaion says that the higher the ratio, greater the ability of the firm to pay
bills,this tell that globe telecom is improving there liquidity and efficiency, because their
current ratio is little improving.

2. Quick/Acid test ratio

Quick/acid test ratio=current –inventories/current liabilities

=57 515 137-3 242 689/79 457 031

=0.68

=53 022 654-4 679 954/82 401 897

=0.59

Year 2017 2016

Quick acid test ratio 0.68 0.59
Analysis

Quick acid ratio test ratio of globe telecom Inc. with a ratio of 0.59 in 2016 and increased at
the year 2017 of 0.68 shows that both current and prior year have no ability to pay its short term
debts. This ratio shows that the globe telecom is not liquid and not capable to meet their short term 16

obligation.

Then we observe slight improvement in 2017. So we can figure out from the ratio that globe
telecom still cannot pays its debt without its inventory. This leads us to believe that globe telecom
inc is some what risky business, even thought it is one of the largest telecommunication industry in
the Philippines

Activity Ratio

3. Inventory turnover

Inventory turnover=cost of sales

(beg.Inv. + end. Inv)/2

= 13 013 437/(4579 954+3 242 689)/2

= 3.32

11 914 114/(4 579 954+3 242 689)/2

=3.04

year 2017 2016

Inventory turnover 3.32 3.04

Analysis

Globe inventory turnover implies has been able to convert its inventory to sales very fast.
The inventory turnover of 3.04 in 2016 and increased by 3.32 which means strong sales or
ineffective inventory buildup. Globe telecom inc has a high inventory levels which reflects tied up
investment w a rate of return of zero. These ratio increases show their product still continues
improving their sales.
 4. Average age of inventory

Average age of inventory=360/inventory turnover

17
=360/3.32

108.5 days

360/4.92

=118.42

Year 2017 2016

Average turnover 108.5 days 118.4 days

Analysis

On the average age on inventory 2017 the globe telecom inc becomes quickly in purchasing the
raw material and convert into sales froms 118 days to 108 days.they become more productive compare
to last year.

5. Average Collection Period

Average collection period=(beg. AR+end AR)/2

Annual sales/360

=(26 944 645+27 304 288)/2

135 280 731/360

=72 days

=(26 944 645+273 042 880/2

126 781 660/360

=77 days

Year 2017 2016

Average collection period 72 days 77 days

Analysis

The ability of the firm of collecting the receivables in the specific time. On the average
collection period globe telecom inc takes 15 weeks to collect receivables. Trades and other receivables
increased by 10% in 2017 as a result of record increases in sales compares to last year. This shows that
the collection is faster as compared to previous year.

18
6. Total Asset Turnover

Total asset turnover=sales/ total sales

=135 280 731/277 766 288
=0.49

=126 781 660/249 863 100

=0.51

Year 2017 2016

Total asset turnover 0.49 0.51

Analysis
The ratio is supposed to be high. Here we can see that the globe telecom company total
asset turnover ratio in 2016 was 0.51, which means that the company generated more revenue
of asset per peso of asset investment. The ratio then comes slightly down in 2017. The higher
the total asset turnover , the better is the company utilization of assets.

7. Fixed asset turnover

Fixed asset turnover=sales/net fixed asset

=135 280 731/162 602 646
=0.83

=126 781 660/142 251 981

=0.89

Year 2017 2016

Fixed asset turnover 0.83 0.89

Analysis

Globe telecom inc. turnover its net fixed asset in 2017 (0.83) and in 2016 (0.89). we
observe that the ratio decreased in the year 2017 which means that globe telecom inc are
insufficient because they are not utilize their fixed assets effectively.

19
 Leverage Ratio

8. Debt ratio

Debt ratio=total liabilities/total asset

=21 120 855/277 766 288

=0.76

=186 386 808/249 863 100

0.75

Year 2017 2016

Debt ratio 0.76 0.75

Analysis

The ratio shows company’s ability to cover its debts through its total assets. The ratio was 0.75
in 2016, then goes up in 2017. The ratio has to be low.so we can interpret that in the year 2017, the risk
of the firm getting higher as the ratio goes up.the creditors favor lower debt ratio because in the event
of liquidation the risk of creditor’s losses is reduced.

9. Debt Equity ratio

Debt equity ratio=total liabilities/stockholders equity

=211 208 551/66 557 737

=3.2:1

=186 386 808/6 347 6302

=2.9:1

Year 2017 2016

Debt equity ratio 3.2:1 2.9:1

Analysis

Similar to debt ratio globe telecom debt equity have close to 3:1 for 2016 -2017 which means
that the company has ability to repays its obligation because from the point of view of creditors, a lower
Debt-to-Equity ratio is more ideal.

20
 Profitability ratio

10. Gross Profit Margin

Gross Profit Margin =Sales – Cost of sale

Sales
= 135 280 731-13 013 437
135 280 731
= 0.90

=126 781 660-11 914 114

126 781 660
=0.91

Year 2017 2016

Gross profit margin 0.90 0.91

Analysis

The ratio should be high according to the definition. Because higher the ratio, higher will
be the firms ability to produce goods and services at low cost with high sales. This means the
globe telecom inc. earns php 90 cent. Of gross profit every peso of revenue its generate this
ratio also says that globe has 90% of its revenue to cover operating expense, for the year 2017,
its decrease by 91%. Here in this table there is small difference between the ratios in 2 years,
but still high, which means it is favorable

11. Operating profit margin

Operating profit margin=operating profits/sales

=50 304 262/135 280 731

=0.37

=37 462 597/126 781 660

=0.30

Year 2017 2016

Operating profit margin 0.37 0.30

21
Analysis

Globe telecom inc. operating profit margin has increased in 2017 than the margin in 2016 by
approximately 7%. This increase in operating profit is mainly due to growth of net revenue good lost
control and strong productivity in company in management or the more profitable business. Regardless
of the taxes impose by government, the firm is able to earn this margin. The higher the ratio the better
it is.

12. Net profit margin

Net profit margin=net profit after tax

Sales

=15 084 213/135 280 731

=11.15

=15 888 499/126 781 660

=12.53

Year 2017 2016

Net profit margin 11.15 12.53

Analysis

According to the definition, higher the ratio, higher will be the firms ability to pay its taxes.in the
year 2016, the margin was little low in 2017 the margin decreased by 1%. For the company, roughly 0.38
cents out of every sales consist of after tax profit. Globe telecom inc. is more efficient converting sales
into actual profit and its cost control is good.

22
 13. Return on Equity

Return on equity=net profit after tax

Stockholders equity

=15 084 213/66 557 737

=27%

=15 888 499/63 176 302

=25%

Year 2017 2016

Return on equity 27% 25%

Analysis

The ratio should be higher, here starting from 2016, the ratio was 25% and goes up 2017 to 27%.
This increase in return on equity is a good thing for stockholders and indicate that globe telecom inc. is
using equity provided by stockholders during this specific year effectively and using it to generate more
equity for the owners.

23
 Balance Sheet,horizontal analysis

BALANCE SHEET
PERCENTAGE GROWTH
DECLINE 2017-2016
Percentage
Increase / decrease
ASSET
Current assets
Cash and cash equiv. 29.99%
Receivables -5.56%
Inventories and supplies -29.20%
Derivatives assets -77.98%
Prepayments and other CA 22.93%
Total current assets 8.47%
Non- current
Property and equip-net 14.31%
Intangible assets and goodwill-net 0.34%
Investment -4.62
Deferred income tax asset 5.30%
Derivatives asset 20.69%
Other NCA 58.87%
Total NCA 11.89%
Total assets 11.16%
Current liabilities
Accounts payable and accrued expense 5.23%
Notes Payable -100
Current portion of long term 41.99%
Unearned Revenue 8.24%
Income tax payable 6.76%
Provision -68.87%
Derivatives Liabilities 80.37%
Total current liabilities 26.70%
Non-current liabilities 13.32%

Equity
Paid up capital 0.57%
Cost of share based payments -31.31%
Other service -67.16%
Retained earnings 11.77%
Equity attributable to equity holders of the parent 4.85%
Non controlling Interest 16.91%
Total equity 4.79%
Total liabilities and equity 11.16%

24
Balance Sheet, Horizontal Analysis

Globe telecom total asset as of 2017 registered a 11.16% growth from las year
primarily due to increase in other non current asset. Cash and cash equivalent increased by
29.99% mainly due to net cash from operation which consist basically of income for the
period. Some assets decrease such as receivables’, inventories, derivatives assets and
investment.
Under current liability, account payable and other accrued expenses increases by
5.231. income and other taxes payable increased by 6.76% in 2017 mainly due to higher
income tax due.
On the equity side increases in stockholder’s equity in 2017 of 4.85%
Globe 2017 performance as assessed through financial analysis, proved that its not
impressive but it performed well in terms of profitability and activity. Its corporate
strategies with particular mention of its aggressive marketing, effective cost control
efficient collection effort and asset utilization are the key contributing factors to its
successful spin off from globe.

25
II. Industry Profile
Telecommunications investment in the Philippines will continue to see increasing emphasis on
supporting high speed broadband access. The bulk of the fixed services are in urban areas. In
contrast, the fixed line market in the Philippines remains underdeveloped and fixed line
penetration continues to decline. A major reason for this is due to the dominance of the mobile
segment and the rapid expansion of the mobile broadband segment.
Despite competition from new carriers and mobile operators, PLDT has continued to be the
Philippines’ dominant fixed-line provider. However, in recent years, Globe Telecom in particular
has been pushing hard to overhaul the incumbent and now is the leading mobile provider in term of
overall subscribers.
In 2018 the Department of Information and Communications Technology (DICT) published its
guidelines to accommodate the entry of a third major telecoms operator in the local market.
In recent few years, the major operators have also been forced to cope with the pressures of
slowing growth in traditional areas of the market and rising investment needs for new growth
areas in such as consumer broadband – both fixed line and mobile. In particular, there has been
good progress in the rollout of optical fiber infrastructure. PDLT announced plans to accelerate a
network modernization plan that will see it switching to fiber over the following two years.
Broadband is primarily building a healthy subscriber’s base, boosted by the considerable presence
of mobile services in the mix of the various broadband platforms delivering internet access. There
has also been good progress in the rollout of optical fibre infrastructure. In 2016, the President of
the Philippines signed the bill to create a new regulator. The DICT effectively replaces a number of
agencies whose functions and responsibilities will be absorbed into the new body. The DICT will
develop a national broadband plan to accelerate the deployment of Fibre optic and wireless
technologies across the country. In March 2017, the National broadband plan was formally by the
Philippines government. PLDT announced it would roll out fiber-to-the-home and is arriving to
boost its current homes passed to six million by 2020.
Fixed line penetration in the Philippines has been in decline over the past 10 years. Penetration has
declined from 4.6% in 2017 to 3.5% in 2012 and 3.0% in 2016. A major challenge remained as only
a little more than half of all Philippine towns and cities had a basic telephone service. The mobile
subscriber market in the Philippines has displayed strong growth over the past few years in an
expanding market. Growth is predicted over the next five years in a maturing and increasingly
saturated market. By the 2021, mobile subscriber penetration is predicted to reach between over
130%. A key factor in the growth of mobile services is that they have proved to be more effective
than fixed-line telephony in the adapting to the county’s geographical features.
A feature of the Philippines mobile market has been the near duopoly with Smart together with
Globe Telecom maintaining a tight hold on the industry. However, Globe Telecom has bridged the
gap significantly over the past few years and now leads the market in terms of market share.
By 2017, both Globe Telecom and PLDT were well underway with the expansion of their 46
networks. Smart communications have begun switching on faster 4G mobile data services using
triple carrier aggregation, LTE advance technology. As part of Smart’s three-year deployment plan,
PLDT Inc. intends to extend LTE coverage to 70% of the population by end of 2017 and 95% of
cities and municipalities by 2018.
8
Broadband users in the Philippines have a number of high speed internet access options available
to them: DSL, cable modem, FWA, WiMax and mobile data services. The total broadband market has
observed slow to moderate growth over the last five years from a relatively small base of
subscribers. Market penetration has increased from 5% in 2011, to 9% in 2017 and 10% in 2016.
Moderate growth is predicted over the next five years to 2012. By 2012, broadband market
penetration is predicted to reach over 15%.

Globe Telecom and PLDT (which has mobile companies Smart Communications and Sun Cellular)
have been bolstering their efforts to increase their subscriber base, and we have seen this last
year that Globe had the overall upper hand in terms of key performance, while PLDT wins in terms
of total subscriber count. It was a tough year for the telecommunications industry as both
companies suffered losses in the number of subscribers on all segments, but Globe managed to keep
its postpaid segment nearly flat with a 5,000 subscriber loss. PLDT, on the other hand, has the
upper hand in terms of combined Smart and Sun postpaid users to beat the blue brand in this
category.

The MVP-led PLDT suffered a huge loss in its prepaid Smart/Sun base — more than three million
since 2016 — While Globe’s prepaid segment is quite steady as a lesser 450,000 Globe Prepaid
subscribers had gone from the past year. Despite the losses, Globe had the smaller cuts and is now
able to take the top prepaid subscriber crown from its arch-rival.

Onto their mass-targeted MNVOs, Globe’s TM has more count than PLDT’s TNT despite both
networks losing more than a million subscribers from the last year. Overall, the Ayala-led telco had
the smaller loss in the total number of subscribers as compared to 2016 — Globe has -3% and PLDT
with -7%.

Also taken into account are individuals who use multiple SIM cards, as these figures are already
baked into the numbers presented. Both telco companies acknowledge that a portion of their
subscriber base uses multiple SIM cards.

In conclusion, Globe is now assumed as the top telecommunications in the country in terms of total
subscriber count, while Smart still has its foothold in the postpaid race game.

The war between the country's two largest telecommunication firms Globe Telecom and Philippine
Long Distance Co (PLDT) is reaching fever pitch.

9
In June, both claimed to be No. 1 in the postpaid segment – PLDT by number of subscribers and
Globe by revenue per subscriber in the first 3 months of 2012.
In August, a "word war," which used to be confined among industry players, intensified and became
more public. Globe CEO Ernest Cu lashed out at PLDT for the ads of its mobile arm Smart
Communications on dropped calls of "other networks."
Churn rate, a market measure for how fast a company is losing customers, stood at a low 1.8% in
the first 6 months of the year. That number could reflect longtime subscribers' unwillingness to
change brands when their co-workers, friends or family members are on the same network. This
means they can take advantage of promotions that make connecting to those within the same
network cheaper.

Globe and Smart were neck and neck, respectively shedding 5.6% and 5.9% of customers during the
same 6 month period. Globe's Bithos was quick to point out that while the rates are similar, Smart
has many more prepaid customers so their equivalent number of lost customers represents a
greater overall loss.

However, one of PLDT's largest prepaid brands, Talk 'N Text, only lost 4.9% of its customers during
the period. Globe's equivalent brand, Touch Mobile, was relatively higher with a 6.3% turnover.

What's different about the prepaid market today is that the majority of growth is coming from Talk
'N Text.

PLDT's Talk 'N Text not only retained the most customers, but also grew 21% in the first half of the
year, compared to the same period in 2011. The high growth figure is affirmation of PLDT's more
targeted approach and shift away from Smart as its mass market brand. Prepaid customers of main
mobile brand Smart only grew a mere 1%.

Globe's growth wasn't nearly as robust at Talk 'N Text's. In the same period, Globe prepaid grew
9% and Touch Mobile increased 12%.

However, Globe's figures still show steady growth in the prepaid market.

That smaller telcos that attempted to get into the market were eventually taken over by Smart and
Globe seems to run parallel to the experience of other countries in the natural tendency for mergers
and acquisitions for the needed “bigness” in resources to avail of these economies of scale for an
enterprise as ambitious as a telco.

This is further exacerbated by the fast development and major changes in the technology of the
industry, which have caused “bundled services” (such as phone/Internet/cable), and the constant
pressure for telcos to always offer new, improved user-friendly products that incur product
development costs and huge additional investments.

10
0
“Globe and PLDT already reinvest about 30% of their revenues to build their networks — well
above the world average of 20%,” Sean Gowran, country manager of Ericsson Philippines and
Pacific Islands said (CNN Philippines, July 12, 2016).

And thus grow monopolies and duopolies. “Telephony was a ‘natural monopoly,’ and it was in the
national interest if served by just one company,” Ajit Ranade, chief economist at Aditya Birla Group
said as he analyzed the strong hold of American Telephone and Telegraph Company (AT&T) for
almost 100 years in the US. “AT&T’s long-lived monopoly status is quite remarkable in a country
that prides itself on the intensity of antitrust scrutiny,” he said.

The emergence of the Internet, the mobile phone, and cable plus satellite television and the other
new technologies somewhat disrupted the AT&T monopoly — but observing the growth and
direction of telcos after 1984 — it would seem that the natural tendency is again for the industry to
morph into a monopoly, or a duopoly with the market capture insinuated. Today, the two largest US
wireless providers are Verizon Wireless with 149 million subscribers and AT&T Mobility with
138.8 million both as of Q3 2017, Nov. 10, 2017).

“The economics of telecommunication is a complex subject. Suffice to say that there is still a gentle
tussle between the monopolistic and competitive nature of telephony,” Ranade concluded.

So, leave the fight for market shares between Smart and Globe, and let market forces resolve up to
how much the “duopoly” can stretch pricing — to the benefit of the end-users, the people. And
toward the government’s development objectives for science and for economics, the government
should be objective, and not focus on opportunistic business that presently fill up the lack and
needs of the people. Perhaps it is not time to force a third entrant into the industry now — let that
happen when the competitive environment will allow, under recognized financial constraints.

The government should henceforth impose stricter regulation and monitoring of existing antitrust
and constitutional foreign ownership limitations, where loopholes and lack of implementation
allowed mergers and acquisitions that grew giant businesses, not only in telecommunications, but
more glaringly in banking, retailing, construction, and other industries with broad social impact.
Perhaps the Antitrust laws and the Competition Act should be amended and improved. In the telco
wars, it actually benefits the Filipino customer to have no clear winner. Battling it out for
subscribers forces both companies to improve their service as they see the opponent making gains
in key territory.
11
Arguably, even more competitors would benefit consumers. Lorraine Carlos Salazar's insightful
book "Getting a Dial Tone: Telecommunications Liberalization in Malaysia and the Philippines"
chronicles the high rate of dropped calls and the long time it took customers to get a phone when
PLDT was the only national network for decades before the turn of the century.

Customer favorites, like bucket unlimited pricing, are the result of a healthy 3 way competition
among telecommunications firms.

Mobile phone subscriptions have reportedly reached 119 million when the total population is at
101 million, meaning a 117% penetration rate (many people have more than one SIM number)
pushed by the growth rate of 1.5x (or 30 million users) every year .The median age for Filipinos is
24, and around this age are the millennials who grew up as digital natives, the most avid and active
users of mobile phones and the Internet.

Is the reputed “duopoly” of PLDT/Smart Communications and Globe Telecom taking advantage of
how necessary the cell phone has become at this time? Demand is tending toward inelasticity, so
that pricing is set high by these only-two suppliers, some critics say. Early in his term, President
Rodrigo Duterte warned the “duopoly” that if they didn’t improve their services (and their pricing),
he would bring in competitors from China.

Globe President and CEO Ernest Cu denied that there is a duopoly, saying “that only happens when
two industry players are comfortable with each other. Globe and PLDT are at each other’s throats
constantly. We compete with each other fiercely, both in terms of price, in terms of features and in
terms of products as well.”

Refuting an Inquirer columnist who said that the Philippines had “the slowest Internet speed in the
world,” Globe cited a “State of the Internet Report” by Akamai. In the said report, the country
registered an average speed of 5.5 Mbps for fixed line Internet and 8.7 Mbps for mobile Internet.
Certainly not the fastest but not the slowest, either.

In May 2016, PLDT and Globe each took a 50% stake of San Miguel Corp.’s (SMC) telco assets, “the
much-coveted 700-megahertz spectrum frequency,” which is seen by the industry as the key to
much faster mobile Internet.

12
SMC had initially wanted to use the frequency, partnering with Australian carrier Telstra Corp., Ltd.
for around $1 billion, but negotiations fell through. In a statement, SMC said it decided to sell its
assets because the legal and commercial risks in the investment were far too large to take on alone.
“The deal (selling to Globe and Smart) seems the most beneficial for consumers, since Globe and
PLDT would be able to maximize the assets much faster,” SMC declared. SMC admitted to the
barriers to entry for a third telco in the Philippines: foremost, the formidable cost of investment and
operations. Indeed, there are economies of scale that PLDT/Smart and Globe already enjoy, and will
continue to enjoy, from their early staggered investments as they grew with the mobile telephone
industry since the 1990s.

13
Overall analysis
The is the summary of the financial ratio computed in Globe Telecom Inc. In liquidity ratio they
have the current ratio and Acid test ratio. The current ratio of Globe Telecom in 2017 is 0.72 and
0.64 in 2016. The current asset of Globe Telecom are cash, recievables, inventories, derivatives
asset and pre-payment and other current asset while current liabilities are accounts payable and
notes payable, current portion of long-term debt, unearn revenues, income tax payable, provision
and derivatives liabilities.

A current ratio of 0.72 shows that the company has no ability repay it’s liabilities. Because
the liability is more higher than the current assets. Globe telecom is low on cash or it’s inventory
level or other current assets. A quick or acid test ratio is 0.68 shows that the Globe telecom may not
be able to pay their current liabilities. It means that the current asset may most likely be composed
more of inventories which are not easily convertible to cash.

The Globe telecom has a lower quick/acid test ratio with respect to the current ratio, still in
the critical level of below 1.0. The ratio shows that Globe telecom in liquidity.In activity ratio, they
have the inventory turnover. Globe inventory turnover implies that the company has been able to
convert it’s inventory to sales fast. This expected considering that Globe produce services and other
product are fast moving. The higher ratio may imply in strong sales build up. On the average, it
takes Globe a mere108.5 days to purchase raw materials, process them into goods and services and
converted to sales.

The average collection period means that the average, it takes the Globe roughly 15 weeks
to collect receivables. Globe trade and other receivables decrease by -5.67 as result of record
decrease in sales. The average collection period of 72 days not indicate of an efficiently
managedcredit, 72days is a long period to collect receivables. Its not good for the company.

The fixed asset turnover of Globe telecom is 0.83 in 2017 and 0.89 in previous year. This
indicate that the Globe have a lower fixed asset turnover they are not efficient utilize their fixed
asset effectively. The company need to generate stable revenues that require high capital
expenditure for operation. Globe Telecom total asset turnover its asset over 0.49 times a year the
higher the total asset turnover, the better is the company utilization of assets.

Globe leverage ratio they have debt ratio and debt equity ratio. The resulting debt ratio of
0.76% in 2017 and 0.75% in 2016. The 0.76% of Globe telecom means that its creditor have
supplied of the company total financing. The Globe telecom have a higher financial leverage it

26
observe that Globe telecom debt equity ratio close to 3.1 for and 2.1 for 2016. In 2017 increase
debt equity ratio the company operation were finance by debt. Globe profit margin means that
Globe earn Php 90 centavos of gross profit for every peso of revenue it generates.

The ratio also says that globe telecom has 90% of its revenue to cover for operating
expense. A higher ratio is preferred to having lower cost of good sold in proportion to sale. Globe
operating profit margin increase in 7% in 2017. Indicates that the globe has ability to manage its
resource as it takes into the selling, general and administrative expense increase in producing
revenues.

G’lobe telecom net profit margin has 11.15% that indicates the company’s selling and
general and administrative expense or interest expense are increasing. The company’s
managemetn to rationalize such expense.

Globe telecom on return assets is 5% in 2017 and 6% in 2016 the company have average
geneerating profits with its available asset.

Return on equity on 2017. Every peso of investment in Globe telecom yield 23% return for
each shareholder. It is good for shareholders.

27
Conclusion
As a result of financial analysis of Globe Telecom is giving average results in financial. It
enjoys a market leadership position, constantly earning profit and have been a haven for investors.
However its liquidity and working capital management is locking in all issues and competitors are
cathing up very fast.

Globe Telecom Inc. must concentrate on eradicating the deficiencies of company abilities to
pay its short term obligation to improve financial position we could see on financial performance,
after applying all ratios we got an idea that Globe Telecom is suitable for investors who are looking
fot profitable firm because through out the analysis of two years, we found that the company is
getting profitable return on long term.

We concluded that regardless of the current ratio of the Globe Telecom from 2016 to
2017, it shows that the company do not satisfy the ideal current ratio of 2:1 and has no ability to
pay the current liabilities and the ideal quick ratio of 1:1 is not satisfied by both proir and current
year which means they have insuficient quick assets to meet there current liabilities but still
manage to be more efficient and became profitable firm.

Both the prior and current year do not satisfy the ideal absolute liquid ratio of 1:2. Hence,
both the year liquidity position of both is not good. The overall liquidity position of both prior and
current year is not quite satisfactory and the company need to work on improving their current ratio
and absolute liquid ratio as liquidity is a prerequisite for the survival of any company.

In the year 2017 Globe Telecom Inc. has higher debt equity ratio compared to the year 2016
this indicates that the year 2017 is being finance by creditors ruther that from its own financial
sources which maybe a dangerous trend. Globe Telecom have stable profit that can afford to operate
on a relatively high debt equity ratio. Debt equity ratio of the company shows an increasing trend.
Globe Telecom should lowering this ratio as lenders usually prefer low debt to equity ratios beacause
their interest is better protected agains possible losses in the events of liquidation. In the year 2017
has higher inventory turnover compared to the year 2016 which indicates that the stock is selling
quickly. It also indicates effective utilization of capital or resources. The low inventory turnover ratio
of the year 2016 compared to the year 2017 that it will impact the liquidity of the year 2017.

The strength of Globe Telecom is when we talk about the companys profiatability especially
operating profit margin that shows increasing trend. Regardless of the taxes impose by the
government, the firm is able to earn this margin. However, the return on total assets base on the

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gathered data indicates that the company is generating less profit from all of its resources in the
year 2017 as compared to the year 2016, this ratio has the possibility to affect the perspective of
investors but if the investors are willing to take the risk and believe that the Globe Telecom
continously growing financialy, stable and can generate positive residual profit in the future.

So that it is important to determine a company’s health and stability through financial ratios
and reveals the weaknesses and strength of the firm. It gives an investor an idea of how a company
operates. It helps the clients to decide in which firm the risk is less or in which on they should
invest so that the maximum benefit can be earned. It is known that investing in any company
involves a lot of risk. So before putting up money in any company one must have through
knowledge about its past records and performance. Based on the data available the trend of the
Globe Telecom Inc. can be predicted in the near future. This financial analysis and interpretation in
the production concern is not merely a work of the project but a brief knowledge and experience of
that how to analyze the financial performance of the firm.

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