Anda di halaman 1dari 17

2014-2016

FINANCIAL MIX RATIOS

GLOBE
TELECOM, INC.

GLOBE
TELECOMMUNICATIONS, INC.

Arango, Shylyn Mae


De Leon, Renee Alyanna
Garay, Kheim Dexter
ACCOUNTING 8.1, 1:30-3:30pm MWF
I. INTRODUCTION

Since time immemorial technological advancement has been bringing about a significant
change to a country’s economy. One of the sectors that continues to bring such change is the
telecommunications industry. It is a ginormous industry made up of all telecommunications
companies selling service and non-service products to their customers. Since the growth in the
mobile industry and the increasing demand for wireless internet connections has been dramatic by
virtually any measure, it continuous to be one of the drivers of growth and innovation in a country’s
economy.
In the Philippines, one of the major providers of digital wireless communication services
is Globe Telecom, Inc., a successor of Globe-Mackay Cable and Radio Corporation that was
incorporated in January 16, 1935. For many years Globe Telecom Inc. has partnered with a lot of
telecommunication companies and has improved its services since then. One of the catalyst of its
improvement in the earlier years, enfranchised under Republic Act (RA) No. 7229 and its related
laws, was dated way back in 1992 when Globe Telecom, Inc. merged with Clavecilla Radio
Corporation which gave it the capability to provide all forms of telecommunications to address the
international and domestic requirements of its customers. In 2017, Globe Telecom took a big step
with its improved PH mobile internet services with the help of its deal with San Miguel. It was at
that time when Globe deployed a newly enhanced Long-Term Evolution (LTE), a standard for
high-speed wireless communication for mobile devices and data terminals, which was originally
launched in 2012. Such improvement, according to Globe Telecom’s president and CEO, made
the network more robust and resilient to cater the growing data requirements of customers and
improve their digital lifestyle.
With Globe Telecom’s objective to delight their customers at all times, it has assimilated
the value of innovation in providing products and services to the market. Postpaid and prepaid
services, mobile data services, broadband services and IT-enabled services are some of the services
that Globe provides. It also sells products like popular brands of mobile devices and accessories,
SIM packs, WIFI devices, apparel, nomadic broadband sticks, call cards, modems and many more.
In the ever-changing business world, competition is high. Apropos to that, more
specifically in the Philippines’ telecommunication industry, Globe Telecom has always stood its
ground. It has always adapted to changes in its business environment that Globe Telecom is
considered as one of the major telecommunication carriers in the country. Its contender of the same
title is PLDT. Philippine Long Distance Telephone (PLDT) has always diversified the services it
provides through its mobile group, SMART Communications and Sun Cellular. According to an
online article by Miguel Camus, PLDT controls 70% of the mobile market leaving Globe with
30% control.
II. TABLES

GLOBE TELECOM, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the years ended 2015 and 2016
(Amounts in Thousands and in Philippine peso, Except Per Share Figures)

HORIZONTAL ANALYSIS

2016 2015 Increase/(Decrease) %


ASSETS
Current Assets
Cash and cash equivalents 8,632,852.00 11,814,379 (3,181,527.00) -27%
Receivables - net 26,944,645.00 21,935,775.00 5,008,870.00 23%
Inventories and supplies - net 4,579,954.00 4,489,182.00 90,772.00 2%
Derivative assets 68,311.00 600,939.00 (532,628.00) -89%
Prepayments and other current assets 12,796,892.00 8,232,428.00 4,564,464.00 55%
Total current assets 53,022,654.00 47,072,703.00 5,949,951.00 13%
Noncurrent Assets
Property and equipment - net 142,251,981.00 129,039,522.00 13,212,459.00 10%
Intangible assets and goodwill - net 14,833,220.00 13,056,925.00 1,776,295.00 14%
Investments and advances 34,181,452.00 1,498,565.00 32,682,887.00 2181%
Deferred income tax assets - net 2,622,703.00 1,324,081.00 1,298,622.00 98%
Derivative assets 755,137.00 481,342.00 273,795.00 57%
Other noncurrent assets 2,195,963.00 3,206,613.00 (1,010,650.00) -32%
Total noncurrent assets 196,840,456.00 148,607,048.00 48,233,408.00 32%
TOTAL ASSETS 249,863,110.00 195,679,751.00 54,183,359.00 28%

LIABILITIES AND EQUITY


Current Liabilities
Accounts payable and accrued expenses 59,137,686.00 ₱49,827,302 9,310,384.00 19%
Notes payable 4,500,000.00 4,500,000.00 100%
Current portion of long-term debt 5,830,319.00 7,973,594.00 (3,473,594.00) -44%
Unearned revenues 5,090,421.00 4,938,233.00 892,086.00 18%
Income tax payable 1,105,931.00 1,519,639.00 3,570,782.00 235%
Provisions 6,631,612.00 1,160,118.00 (54,187.00) -5%
Derivative liabilities 105,928.00 111,278.00 6,520,334.00 5859%
Total current liabilities 82,401,897.00 65,530,164.00 16,871,733.00 26%
Noncurrent Liabilities
Long-term debt - net of current portion 95,398,272.00 64,255,264.00 31,143,008.00 48%
Deferred income tax 1,916,923.00 2,211.00 1,914,712.00 86599%
Other long-term liabilities 6,669,716.00 6,494,330.00 175,386.00 3%
Total noncurrent liabilities 103,984,911.00 70,751,805.00 33,233,106.00 47%
Total Liabilities 186,368,808.00 136,281,969.00 50,086,839.00 37%

Shareholder’s Equity
Paid-up capital 44,505,703.00 44,486,976.00 18,727.00 0%
Cost of share-based payments 584,586.00 338,008.00 246,578.00 73%
Other reserves (1,072,925.00) (1,211,513.00) 138,588.00 11%
Retained earnings 19,422,402.00 15,778,557.00 3,643,845.00 23%
Equity attributable to equity holders
63,439,766.00 59,392,028.00 4,047,738.00 7%
of the Parent
Non-controlling interest 36,536.00 5,754.00 30,782.00 535%
Total Equity 63,476,302.00 59,397,782.00 4,078,520.00 7%
Total Liabilities and Equity 249,863,110.00 195,679,751 54,183,359.00 28%

GLOBE TELECOM, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the years ended 2015 and 2016
(Amounts in Thousands and in Philippine peso, Except Per Share Figures)

HORIZONTAL ANALYIS

2016 2015 Increase/(Decrease) %


REVENUES
Service revenues 119,989,546.00 113,679,226.00 6,310,320.00 6%
Nonservice revenues 6,193,657.00 6,289,968.00 (96,311.00) -2%
Total Revenue 126,183,203.00 119,969,194.00 6,214,009.00 5%
INCOME
Interest income 151,589.00 518,537.00 (366,948.00) -71%
Gain on disposal of property and equipment – net 101,232.00 57,642.00 43,590.00 76%
Other income – net 983,186.00 2,130,853.00 (1,147,667.00) -54%
Total Income 1,236,007.00 2,707,032.00 (1,471,025.00) -54%
Total Gross Income 127,419,210.00 122,676,226.00 4,742,984.00 4%
COSTS AND EXPENSES
General, selling and administrative
expenses
51,872,596.00 48,766,962.00 3,105,634.00 6%
Depreciation and amortization 23,848,646.00 21,132,698.00 2,715,948.00 13%
Cost of sales 11,914,114.00 13,665,203.00 (1,751,089.00) -13%
Interconnect costs 9,623,127.00 9,007,919.00 615,208.00 7%
Financing costs 4,096,826.00 3,372,924.00 723,902.00 21%
Impairment losses and others 3,271,301.00 3,109,520.00 161,781.00 5%
Equity in net losses of associates and
joint ventures
855,198.00 153,512.00 701,686.00 457%
Total Cost and Expenses 105,481,808.00 99,208,738.00 6,273,070.00 6%
INCOME BEFORE INCOME TAX 21,937,402.00 23,467,488.00 (1,530,086.00) -7%
PROVISIONS FOR INCOME TAX
Current 5,556,965.00 6,203,825.00 (646,860.00) -10%
Deferred 491,938.00 779,213.00 (287,275.00) -37%
Total Provision for Income Tax 6,048,903.00 6,983,038.00 (934,135.00) -13%
NET INCOME 15,888,499.00 16,484,450.00 (595,951.00) -4%
GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended 2014-2016
(Amounts in Thousands and in Philippine peso, Except Per Share Figures)

TREND ANALYSIS

2016 2015 2014 2014 2015 2016


REVENUES
Service revenues 119,989,546.00 113,679,226.00 99,024,604 100% 115% 121%
Nonservice revenues 6,193,657.00 6,289,968.00 4,211,109.00 100% 149% 147%
Total Revenue 126,183,203.00 119,969,194.00 103,235,713.00 100% 116% 122%
INCOME
Interest income 151,589.00 518,537.00 682,998.00 100% 76% 22%
Gain on disposal of property and equipment – net 101,232.00 57,642.00 101,159.00 100% 57% 100%
Other income – net 983,186.00 2,130,853.00 470,647.00 100% 453% 209%
Total Income 1,236,007.00 2,707,032.00 1,254,804.00 100% 216% 99%
Total Gross Income 127,419,210.00 122,676,226.00 104,490,517.00 100% 117% 122%
COSTS AND EXPENSES
General, selling and administrative expenses 51,872,596.00 48,766,962.00 41,382,877.00 100% 118% 125%
Depreciation and amortization 23,848,646.00 21,132,698.00 18,123,524.00 100% 117% 132%
Cost of sales 11,914,114.00 13,665,203.00 10,661,344.00 100% 128% 112%
Interconnect costs 9,623,127.00 9,007,919.00 8,429,934.00 100% 107% 114%
Financing costs 4,096,826.00 3,372,924.00 2,565,706.00 100% 131% 160%
Impairment losses and others 3,271,301.00 3,109,520.00 3,720,169.00 100% 84% 88%
Equity in net losses of associates and joint ventures 855,198.00 153,512.00 224,257.00 100% 68% 381%
Total Cost and Expenses 105,481,808.00 99,208,738.00 85,107,811.00 100% 117% 124%
INCOME BEFORE INCOME TAX 21,937,402.00 23,467,488.00 19,382,706.00 100% 121% 113%
PROVISIONS FOR INCOME TAX
5,556,965.00 6,203,825.00 5,879,878.00 100% 106% 95%
Current
Deferred 491,938.00 779,213.00 130,636.00 100% 596% 377%
Total Provisions for Income tax 6,048,903.00 6,983,038.00 6,010,514.00 100% 116% 101%
NET INCOME 15,888,499.00 16,484,450.00 13,372,192.00 100% 123% 119%

GLOBE TELECOM, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
For the years ended 2014-2016
(Amounts in Thousands and in Philippine peso, Except Per Share Figures)

TREND ANALYSIS

2016 2015 2014 2014 2015 2016


ASSETS
Current Assets
Cash and cash equivalents 8,632,852 11,814,379 16,756,908 100% 71% 52%
Receivables – net 26,944,645 21,935,775 17,860,750 100% 123% 151%
Inventories and supplies – net 4,579,954 4,489,182 3,186,415 100% 141% 144%
Derivative assets 68,311 600,939 8,319 100% 7224% 821%
Prepayments and other current assets 12,796,892 8,232,428 8,929,671 100% 92% 143%
Total Current Assets 53,022,654 47,072,703 46,742,063 100% 101% 113%
Noncurrent Assets
Property and equipment – net 142,251,981 129,039,522 117,229,158 100% 110% 121%
Intangible assets and goodwill – net 14,833,220 13,056,925 5,671,644 100% 230% 262%
Investments 34,181,452 1,498,565 450,717 100% 332% 7584%
Deferred income tax assets – net 2,622,703 1,324,081 1,904,298 100% 70% 138%
Derivative assets 755,137 481,342 580,224 100% 83% 130%
Other noncurrent assets 2,195,963 3,206,613 6,928,848 100% 46% 32%
Total Noncurrent Assets 196,840,456 148,607,048 132,764,889 100% 112% 148%
TOTAL ASSETS 249,863,110 195,679,751 179,506,952 100% 109% 139%

LIABILITIES AND EQUITY


Current Liabilities
Accounts payable and accrued expenses 59,137,686 49,827,302 47,526,559 100% 105% 124%
Notes payable 4,500,000 - – - - 100%
Current portion of long-term debt 5,830,319 7,973,594 6,129,663 100% 130% 95%
Unearned revenues 5,090,421 4,938,233 4,609,967 100% 107% 110%
Income tax payable 1,105,931 1,519,639 1,587,428 100% 96% 70%
Provisions 6,631,612 1,160,118 401,288 100% 289% 1653%
Derivative liabilities 105,928 111,278 94,809 100% 117% 112%
Total Current Liabilities 82,401,897 65,530,164 60,349,714 100% 109% 137%
Noncurrent Liabilities
Long-term debt – net of current portion 95,398,272 64,255,264 59,146,140 100% 109% 161%
Deferred income tax – net 1,916,923 2,211 399 100% 554% 480432%
Other long-term liabilities 6,669,716 6,494,330 5,473,033 100% 119% 122%
Total Noncurrent Liabilities 103,984,911 70,751,805 64,619,572 100% 109% 161%
Total Liabilities 186,386,808 136,281,969 124,969,286 100% 109% 149%
Shareholder’s Equity
Paid-up capital 44,505,703 44,486,976 44,478,242 100% 100% 100%
Cost of share-based payments 584,586 338,008 189,433 100% 178% 309%
Other reserves (1,072,925) (1,211,513) (977,853) 100% 124% 110%
Retained earnings 19,422,402 15,778,557 10,852,478 100% 145% 179%
Equity attributable to equity holders of the
63,439,766 59,392,028 54,542,300 100% 109% 116%
Parent
Non-controlling interest 36,536 5,754 (4,634) 100% -124% -788%
Total Equity 63,476,302 59,397,782 54,537,666 100% 109% 116%
TOTAL LIABILITIES AND EQUITY 249,863,110 195,679,751 179,506,952 100% 109% 139%
GLOBE TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended 2014-2016
(Amounts in Thousands and in Philippine peso, Except Per Share Figures)

COMMON SIZE / VERTICAL ANALYSIS


2016 2015 2014 2014 2015 2016
REVENUES
Service revenues 119,989,546.00 113,679,226.00 99,024,604.00 95% 93% 94%
Nonservice revenues 6,193,657.00 6,289,968.00 4,211,109.00 4% 5% 5%
Total Revenue 126,183,203.00 119,969,194.00 103,235,713.00 99% 98% 99%
INCOME
Interest income 151,589.00 518,537.00 682,998.00 1% 0% 0%
Gain on disposal of property and equipment – net 101,232.00 57,642.00 101,159.00 0% 0% 0%
Other income – net 983,186.00 2,130,853.00 470,647.00 0% 2% 1%
Total income 1,236,007.00 2,707,032.00 1,254,804.00 1% 2% 1%
Total Gross Income 127,419,210.00 122,676,226.00 104,490,517.00 100% 100% 100%
COSTS AND EXPENSES
General, selling and administrative expenses 51,872,596.00 48,766,962.00 41,382,877.00 40% 40% 41%
Depreciation and amortization 23,848,646.00 21,132,698.00 18,123,524.00 17% 17% 19%
Cost of sales 11,914,114.00 13,665,203.00 10,661,344.00 10% 11% 9%
Interconnect costs 9,623,127.00 9,007,919.00 8,429,934.00 8% 7% 8%
Financing costs 4,096,826.00 3,372,924.00 2,565,706.00 2% 3% 3%
Impairment losses and others 3,271,301.00 3,109,520.00 3,720,169.00 4% 3% 3%
Equity in net losses of associates and joint ventures 855,198.00 153,512.00 224,257.00 0% 0% 1%
Total Cost and Expenses 105,481,808.00 99,208,738.00 85,107,811.00 81% 81% 83%
INCOME BEFORE INCOME TAX 21,937,402.00 23,467,488.00 19,382,706.00 19% 19% 17%
PROVISIONS FOR INCOME TAX
Current 5,556,965.00 6,203,825.00 5,879,878.00 6% 5% 4%
Deferred 491,938.00 779,213.00 130,636.00 0% 1% 0%
Total Provisions for Income Tax 6,048,903.00 6,983,038.00 6,010,514.00 6% 6% 5%
NET INCOME 15,888,499.00 16,484,450.00 13,372,192.00 13% 13% 12%

GLOBE TELECOM, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
For the years ended 2014-2016
(Amounts in Thousands and in Philippine peso, Except Per Share Figures)

COMMON SIZE / VERTICAL ANALYSIS


2016 2015 2014 2014 2015 2016
ASSETS
Current Assets
Cash and cash equivalents 8,632,852 11,814,379 16,756,908 9% 6% 3%
Receivables – net 26,944,645 21,935,775 17,860,750 10% 11% 11%
Inventories and supplies – net 4,579,954 4,489,182 3,186,415 2% 2% 2%
Derivative assets 68,311 600,939 8,319 0% 0% 0%
Prepayments and other current assets 12,796,892 8,232,428 8,929,671 5% 4% 5%
Total Current Assets 53,022,654 47,072,703 46,742,063 26% 24% 21%
Noncurrent Assets
Property and equipment – net 142,251,981 129,039,522 117,229,158 65% 66% 57%
Intangible assets and goodwill – net 14,833,220 13,056,925 5,671,644 3% 7% 6%
Investments 34,181,452 1,498,565 450,717 0% 1% 14%
Deferred income tax assets – net 2,622,703 1,324,081 1,904,298 1% 1% 1%
Derivative assets 755,137 481,342 580,224 0% 0% 0%
Other noncurrent assets 2,195,963 3,206,613 6,928,848 4% 2% 1%
Total Noncurrent Assets 196,840,456 148,607,048 132,764,889 74% 76% 79%
TOTAL ASSETS 249,863,110 195,679,751 179,506,952 100% 100% 100%

LIABILITIES AND EQUITY


Current Liabilities
Accounts payable and accrued expenses 59,137,686 49,827,302 47,526,559 26% 25% 24%
Notes payable 4,500,000 - – - - 2%
Current portion of long-term debt 5,830,319 7,973,594 6,129,663 3% 4% 2%
Unearned revenues 5,090,421 4,938,233 4,609,967 3% 3% 2%
Income tax payable 1,105,931 1,519,639 1,587,428 1% 1% 0%
Provisions 6,631,612 1,160,118 401,288 0% 1% 3%
Derivative liabilities 105,928 111,278 94,809 0% 0% 0%
Total Current Liabilities 82,401,897 65,530,164 60,349,714 34% 33% 33%
Noncurrent Liabilities
Long-term debt – net of current portion 95,398,272 64,255,264 59,146,140 33% 33% 38%
Deferred income tax – net 1,916,923 2,211 399 0% 0% 1%
Other long-term liabilities 6,669,716 6,494,330 5,473,033 3% 3% 3%
Total Noncurrent Liabilities 103,984,911 70,751,805 64,619,572 36% 36% 42%
Total Liabilities 186,386,808 136,281,969 124,969,286 70% 70% 75%
Shareholder’s Equity
Paid-up capital 44,505,703 44,486,976 44,478,242 25% 23% 18%
Cost of share-based payments 584,586 338,008 189,433 0% 0% 0%
Other reserves (1,072,925) (1,211,513) (977,853) -1% -1% 0%
Retained earnings 19,422,402 15,778,557 10,852,478 6% 8% 8%
Equity attributable to equity holders of the
63,439,766 59,392,028 54,542,300 30% 30% 25%
Parent
Non-controlling interest 36,536 5,754 (4,634) 0% 0% 0%
Total Equity 63,476,302 59,397,782 54,537,666 30% 30% 25%
TOTAL LIABILITIES AND EQUITY 249,863,110 195,679,751 179,506,952 100% 100% 100%
GLOBE TELECOM, INC. AND SUBSIDIARIES

FINANCIAL MIX RATIOS 2016 2015 2014

PROFITABILITY RATIOS (Amounts in Percentage Form, Except for the last two profitability ratios)
Return on Sales 13 14 13
Gross Profit Rate 91 89 90
Return on Total assets 8 10 9
Return on Shareholder's Equity 26 29 28
Return on Ordinary Shareholder's Equity 34 36 33
Operating Leverage 4 4 4
Times preferred dividend earned 29 30 47
LIQUIDITY RATIOS
Operating turnover n/a n/a n/a
Inventory turnover 3 4 3
Inventory days 122 91 122
Receivable turnover n/a n/a n/a
Collection period n/a n/a n/a
Payable turnover n/a n/a n/a
Payable days n/a n/a n/a
Material turnover n/a n/a n/a
Work-in-process turnover n/a n/a n/a
Finished goods inventory n/a n/a n/a
Cash turnover n/a n/a n/a
Days to pay operating expenses n/a n/a n/a
Working capital turnover -4 -6 -8
Assets turnover 57 64 61
Current assets turnover 3 3 3
Net working capital ₱(29,379,243) ₱(18,457,461) ₱(13,607,651)
Current ratio (In percentage form) 64 72 77
Quick assets ratio (In percentage form) 59 65 72
Defensive-interval ratio n/a n/a n/a
Earnings per share ₱116 ₱120 ₱99
GROWTH RATIOS (Amounts in Percentage Form, Except Per Share Figures)
Price-earnings ratio 9 18 17
Dividend yield ratio 8 4 4
Dividend payout ratio 76 69 76
Book value per share 478.13 447.46 410.88
LEVERAGE RATIOS
Debt-to-equity ratio (In percentage form) 150 108 108
Debt-to-assets ratio (In percentage form) 38 33 33
Equity-to-assets ratio (In percentage form) 25 30 30
Equity multiplier 4 3 3
Times interest earned 4 6 6
Financial leverage 1 1 1
Total leverage 5 4 4
Fixed charges rate n/a n/a n/a
Total-assets-to-total liabilities ratio (In percentage form) 134 144 144
Non-current assets-to-long-term liabilities ratio (In
percentage form) 189 210 205

III. INTERPRETATIONS

GROWTH
Price earnings ratio allows us to measure the number of years before investment in stock
can be recovered by the investors in relation to the earnings it receive from the company and
with this, we can say that most investors prefer to have a lesser price earnings ratio. In the year
2015 in reference to year 2014, the said ratio of Globe Telecommunication has a slight increase
due to the increase of the company’s market share, which was driven by the myLifestyle Plan
when it recorded 12.2 million net additions. The said myLifestyle Plan was a significant growth
driver of postpaid revenues and customer base for it perfectly caters to their customers’ digital
lifestyle. In year 2016, it has a decreased due literally to the decrease in the market value of the
company’s shares. Nevertheless, if the investors foresee the use of this ratio as a measure to the
profitability of the company, then they will prefer to have a higher result of P/E ratio, which
would make 2016’s result be on disadvantage.
Dividend yield ratio of the company measures the percentage return on a particular stock
that has resulted from current operation of the company through the issuance of dividend. This
ratio is important for those investors who purchase shares to earn dividend income. In the above
table, we could see that Globe Telecommunication has a less than 10% of dividend ratio even
though the said company is earning more compared to its competitors in telecommunication. As
for the year 2016, the company only increased its dividends to common shareholders for about
6.03%; minimal increased but doubled the rate of dividend yield ratio due to its corresponding
decrease in market price per share.
Dividend payout ratio measures the percentage of earnings that have been paid out to
shareholders as dividends. This helps the investors in establishing predictions on dividends will
be paid in the future using the measures provided in the past. Globe Telecommunications has a
76%, 69% and 76% dividend payout ratio for the year 2014, 2015, and 2016, respectively.
Making year 2014 as a reference, the number of outstanding shares amounts increased by
0.00734% in 2015. The dividend payout ratio in 2015 decreased by 12.66% because of the
21.11% increase in its earnings per share (EPS). In year 2016, its dividend payout ratio increased
back to 76% because of the increase of its dividend payments. In average for the 3-consecutive
year, Globe Telecommunications has a 73.67% of dividend payout ratio which nears to 100%
may mean that the company’s cash reserves is used to pay dividends to its investors.

PROFITABILITY

Return on sales measures a company’s performance by analyzing what percentage of


total company revenues are actually converted into company profits. In other words, it calculates
how efficient a company is at generating profits from its revenue. As we can see in the
profitability ratios in the given table, Globe has a 13%, 14%, and 13% return on sales for the
year 2014, 2015, and 2016 respectively. It shows that an average of 13% of Globe’s revenue can
be converted into profits. It can be said that Globe spends 87% of its revenues to run the
business. Despite the 17% increase in cost and expenses in 2015, its return on sales still increases
because of the 16% increase of its revenues. However in the year 2016, there was a drop of
return of sales due to the 6% increase in its cost and expenses. If Globe wishes to increase its net
income, it can either reduce its operating expenses or increase its revenues. Moreover, if Globe
can reduce its expenses while maintaining its revenues, Globe will be more efficient and as a
result will be more profitable. But, sometimes, it is not easy to reduce expenses. In this case,
Globe should strive for higher revenue while keeping the expenses the same.
Gross profit rate measures how profitable a company sells its inventory or merchandise.
In Globe’s case, how well it sells its services (or its non-service). Hence, it is Globe’s mark-up
percentage, the pure profit, on services from its cost. As we can see in the profitability ratios in
the given table, Globe has a 90%, 89%, and 91% gross profit rates for the year 2014, 2015, and
2016 respectively. The 13% decrease in its cost of sale causes the higher profit percentage for
2016. This is so because the cost of its services is very cheap. It can be further said that Globe
will have more money to pay for its operating expenses.
Return on asset measures how efficient a company is in managing its assets to produce
profits. Stated differently, return on asset shows how efficiently a company can convert the
money used to purchase assets into net income or profits. In the year 2014, 2015, and 2016,
Globe has return of asset of 9%, 10%, and 8% respectively. This means that for every peso
Globe invested in assets during 2014, 2015, and 2016, it produced P.09, P.10, and P.08 of net
income respectively. There was a sudden drop of return of assets in 2016 because of the 28%
increase in its total assets. This drop may be attributed to the continued aggressive efforts of
Globe to invest more and expand to gain the support of growing subscribers and speed-up
growth on the data network.
LIQUIDITY
Asset turnover measures a company’s ability to generate sales from its assets. Since asset
turnover measures how efficiently a company can use its assets to generate sales, a higher ratio is
always more favorable. In reference to the liquidity ratio table, there is a sudden drop of asset
turnover from 2015 to 2016. The sudden drop is caused by poor management since it is not using
its assets efficiently.
Working capital measures a firm’s ability to pay off its current liabilities with current
assets. Since working capital measures current assets as a percentage of current liabilities, it would
only make sense that a positive working capital is more favorable. However, as shown in the
liquidity ratio table, Globe experiences a negative working capital for three consecutive years. This
means that Globe’s current assets are less than its current liabilities. Moreover, it does not have
enough liquid assets to meet its current obligations. The negative working capital of Globe may
either be caused by inefficient asset management and poor cash flow. This makes Globe more
risky to new potential creditors and investors because it shows that it is not running efficiently and
cannot cover its current debt. If Globe wants to apply for another loan, it should pay off some of
its liabilities to make it more attractive to creditors.

LEVERAGE
Earnings per share measure the amount of money each share of stock would receive if all
of the profits were distributed to the outstanding shares at the end of the year. In the given liquidity
ratio table, Globe has an increasing earnings per share. This means that it is becoming more
profitable each year. Thus, it has more profits to distribute to its shareholders and making its market
value increase each year.
Equity multiplier is a financial leverage ratio that measures the amount of a firm's assets
that are financed by its shareholders. It shows the percentage of assets that are financed or owed
by the shareholders.

VERTICAL ANALYSIS
For the year ended December 31, 2016
(Amounts in Philippines Peso and in Thousands, Except for Figures in Percentages)

GLOBE TELECOM PLDT


Amount Percentage Amount Percentage
Total Gross Income 127,419,210 100 172,769,000 100
Total Costs 105,481,808 83 150,698,000 87
Net Income 15,888,499 12 22,071,000 13
* NOTE: All percentages are based on the Total Gross Income

The table shows a comparison between the financial performance of Globe Telecom and
PLDT. Globe telecom shows amounts lesser than PLDT’s because Globe only controls 30% of the
mobile market, based on the PLDT’s 70% control. PLDT got its insurmountable lead because it
was focusing on acquiring businesses to increase its market shares, a recent acquisition was its
massive acquisition of Digital Telecommunications Philippines, Inc. (Sun Cellular) in 2011. On
the other hand, Globe has been focusing on providing data services that it had been catching up
with PLDT’s market shares in the recent years.
Based from the data obtained from each of the company’s annual reports, Globe’s financial
performance in terms of net income is lesser by 1% than that of PLDT’s which is disadvantageous
because a slight difference would mean an opportunity for its rival to rise above. Globe’s financial
performance in terms of total costs is lesser by 4% than that of PLDT’s, this would mean that
Globe is much more effective and efficient in controlling its cost than PLDT. The difference
between Globe and PLDT’s total gross income is due to factors such as but are not limited to (1)
the number of subscribers it caters (2) the strategies they made in selling their products and
services, and (3) customer satisfaction.

IV. OPPORTUNITIES AND THREATS

The opportunities of Globe Telecom are but are not limited to the following: (a) continuous
development of modern technology that will help aid in providing a much faster and suffice the
user’s needs (b) expected increase in smartphone penetration will influence more people in seeking
high-speed (c) internet services demand is set to skyrocket in the coming years, and accordingly
(d) the company’s income is expected also to increase.
As of now, the threat that Globe Telecom must consider is the plan of San Miguel
Corporation. The president of the said company announced earlier in 2015 that they are planning
to launch a “better” mobile broadband service, a known threat that is yet to come. Overall, Globe
Telecom is expected to continue experiencing a harmonious business operations in the near future.
V. REFERENCES

[1] Globe Telecom, Inc. (2016). Annual Report 2016. Retrieved from https://annual-
report.globe.com.ph/content/dam/multi-microsites/docs/annual-report/2016/GLOBE-
AR2016-APRIL17-MICROSITE-LOW-RES.pdf
[2] Globe Telecom, Inc. (2015). Annual Report 2015. Retrieved from https://annual-
report.globe.com.ph/content/dam/multi-microsites/docs/annual-
report/2015/GLOBE.pdf
[3] Globe Telecom, Inc. (2014). Annual Report 2014. Retrieved from https://annual-
report.globe.com.ph/content/dam/multi-microsites/docs/annual
report/2014/GLOBE.pdf
[4] PLDT Inc. (2016). Annual Report 2016. Retrieved from http://www.pldt.com/docs/default-
source/financial-results/fs/2016/pldt-audited-2016-fs.pdf
[5] Globe Company Information. Retrieved from http://edge.pse.com.ph/companyInformation
/form.do?cmpy_id=69
[6] Globe products. Retrieved from https://shop.globe.com.ph/products
[7] Camus, Miguel. 2016. Telcos seen facing tougher times ahead. Retrieved from
http://business.inquirer.net/205851/telcos-seen-facing-tougher-times-ahead
[8] Dividend Payout Ratio. Retrieved from
http://www.investopedia.com/terms/d/dividendpayoutratio.asp#ixzz4upMJDmZK
[9] Bilant, Sarah. Dividend Payout Ratio: Definition, Formula & Analysis. Retrieved from
http://study.com/academy/lesson/dividend-payout-ratio-definition-formula-
analysis.html
[10] Dividend Yield Ratio. Retrieved from http://www.accountingformanagement.org/dividend-
yield-ratio/