ASSIGNMENT 3
NAME: OLPINDO, JIFF S.
COURSE CODE: BA 2103
COURSE NAME: FINANCIAL MANAGEMENT
POINTS: 100
Search for financial statements of a publicly listed company (in Philippine Stock Exchange) from
the internet. Evaluate the PROFITABILITY, LIQUIDITY AND SOLVENCY of this company for a given
period/year. Use ratios to support your evaluation.
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About the Company – Globe Telecom Inc.
Globe Telecom Inc. (GLO) was originally incorporated on January 16, 1935 as Globe Wireless
Limited with a franchise to operate wireless long distance message services in the Philippines.
The Company eventually changed its name to the present one in 1992, and welcomed Singapore
Telecom, Inc. as a new foreign partner the following year.
GLO is a telecommunications company that provides digital wireless communication services
nationwide under the "Globe Postpaid", "Globe Prepaid", and "TM" brands using a fully digital
network. The Company also offers domestic and international long distance communication
services or carrier services. GLO currently has 76.6 million mobile subscribers (including fully
mobile broadband), 3.8 million Home Broadband customers, and 1.6 million landline subscribers.
The Company's subsidiaries are composed of Innove Communications, Inc.; GTI Business
Holdings, Inc.; Kickstart Ventures, Inc.; Asticom Technology, Inc.; Globe Capital Venture Holdings,
Inc.; Bayan Telecommunications, Inc.; TaoDharma Inc.; GTowers Inc.; Yondu, Inc.; and Electronic
Commerce Payments, Inc.
Source: SEC Form 17-A
Financial Statement Analysis:
In this part of the paper, to evaluate the PROFITABILITY, LIQUIDITY AND SOLVENCY of
Globe Telecom Inc. (GLO) for the year ended 2021, telecommunication industry averages (of
financial ratios) will be utilized. These are generally used as benchmarks or tools which helps
business to make comparisons that helps to determine its position within the industry and
evaluate financial performance of the business. Industry averages ratios are obtained and
compiled, in form of collection of data by financial analysts-publishers, from a various type of
business belonging to a same industry that offers alike products and services.
PROFITABILITY- Profitability analysis is used to analyse a company’s ability to make money from
its goods and divided by or services.

PROFIT MARGIN ON SALES OR NET PROFIT PERCENTAGE - It helps investors assess if a
company's management is generating enough profit from its sales and whether operating
costs and overhead costs are being contained.
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
23, 723, 857
=
= 16%
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
167, 747, 217
The Globe Telecom Inc.’s (GLO) Profit Margin on sales or net profit percentage is 16% - which is
a significantly higher to industry average for the Profit Margin under the telecommunication
industry which is 12.41%, and to its previous year’s profit margin on sales or net profit percentage
which was only 13%. This means that the company’s management has been more efficient at
converting sales into actual profit than it was last year, and compared to the other entities as
well belonging to the same industry.

RETURN ON EQUITY – It helps investors understand how efficiently a firm uses its capital
to generate profit.
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
23, 723, 857
=
= 24.10%
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐸𝑞𝑢𝑖𝑡𝑦 ∗
98, 600, 168
*Average Equity = (
𝐸𝑞𝑢𝑖𝑡𝑦,𝑏𝑒𝑔 + 𝐸𝑞𝑢𝑖𝑡𝑦,𝑒𝑛𝑑
2
)
In assessing the Return on Equity, based on the available information, the industry average for
the Return on Equity under the telecommunication industry is 22.96% and the previous year’s
Return on Equity which was 23%, are insignificantly lower to what the Globe Telecom Inc.’s (GLO)
management has generated this year, which is a return on equity of 24.10%. This means that the
company is striving to be consistent in being more effective at generating profit from its existing
assets.

RETURN ON ASSETS – It refers to a financial ratio that indicates how profitable a company
is in relation to its total assets.
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
23, 723, 857
=
= 5.20%
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
458, 459, 847
The industry average for the Return on Assets under the telecommunication industry is 5.12%,
which is approximately near to what the GLO management has generated (5.20%). Also, the
previous year’s return on asset was also within the same base percentage, at 5%. With the
closeness of the previous year’s ratio and the industry average ratio to the current year’s ratio,
we can tell that the company has been steadily effective in converting the money it invests into
net income.
LIQUIDITY- Liquidity analysis is used to analyse a company’s abilities to meet its immediate debt
obligations out of its current assets.

CURRENT RATIO – It helps investors understand more about a company's ability to cover
its short-term debt with its current assets.
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
67, 846, 605
=
= 0.58; 1
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
117, 527, 007
Compared to the previous year’s current ratio which was 0.80:1, this year’s Globe Telecom Inc.’s
(GLO) has decreased to 0.58:1. It may indicate that the company may have difficulty meeting its
current obligations. Low values, however, do not indicate a critical problem. If the present
current ratio is compared with the industry average which is 0.44:1, we can say that the company
is doing just fine if the performance of other entities in the same industries are considered.

ACID-TEST OR QUICK RATIO – It measures the firm’s ability to pay its short-term debts
from its most liquid assets without having to rely on inventory.
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 − 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
63, 801, 556
=
= .54: 1
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
117, 527, 007
Since technically, the current ratio has a small difference with the acid test or quick ratio in the
form of inventories in relation to this type of industry (service-telecommunication), it is quite
expected that same evaluation will be reached.
Compared to the previous year’s acid-test or quick ratio which was 0.72:1, this year’s Globe
Telecom Inc.’s (GLO) has decreased to 0.54:1, but if the present current ratio is also compared
with the industry average which is 0.42:1, we can say that the company is also doing just fine if
the performance of other entities in the same industries are considered.
SOLVENCY - Solvency analysis is used to analyse a company’s ability to pay off all the debt it
currently holds with its income, assets and divided by or equity.

DEBT TO EQUITY RATIO - It tells us how much debt you have per 1.00 unit of equity.
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 ∗
210, 053, 567
=
= 1.84: 1
𝑆𝑡𝑜𝑐𝑘ℎ𝑜𝑙𝑑𝑒𝑟𝑠′ 𝐸𝑞𝑢𝑖𝑡𝑦
114, 395, 866
*Total debt = Total Loans Payable (Current and Noncurrent)
Generally, a low debt-to-equity ratio indicates a lower amount of financing by debt via lenders,
versus funding through equity via shareholders. A higher ratio indicates that the company is
getting more of its financing by borrowing money, which subjects the company to potential risk
if debt levels are too high. In the case of Globe Telecom Inc. (GLO), it has managed to lower its
debt to equity ratio from previous year’s 2.02:1 to this year’s 1.84:1. It has managed also to yield
a lower ratio compared to the industry average for the Debt to Equity Ratio under the
telecommunication industry which is 1.98:1.
Because debt is inherently risky, lenders and investors tend to favor businesses with lower D/E
ratios. For lenders, a low ratio means a lower risk of loan default. For shareholders, it means a
decreased probability of bankruptcy in the event of an economic downturn. Globe Telecom Inc.
and other entities’ goals surely includes the management of this ratio, thus we are expecting for
a lower ratio in the next few years.

TOTAL DEBT RATIO – It measures the percentage of funds provided by creditors in the
firm’s operations. Debts include only interest-bearing obligations.
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡 ∗
210, 488, 393
=
= 0.46: 1
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
458, 459, 847
*Total debt = Total Loans Payable (Current and Noncurrent)
For the total debt ratio, the previous year and current year has yielded the almost the same value
(0.46:1). Meanwhile, the industry average under the telecommunication industry is 0.495:1,
which is a bit higher to what the Globe Telecom Inc (GLO) has yielded. A debt ratio of less than 1
indicates that a company has more assets than debt. The company should give their best efforts
in steadily lowering it and to not exceed the industry average to assure creditors-investors that
the company has enough assets to meet the obligations due just like the other entities within the
same industry.
Sources:
 Company
Information
and
Financial
Statements
https://edge.pse.com.ph/companyInformation/form.do?cmpy_id=69

Industry
Average
Ratios
of
Telecommunication
https://ph.investing.com/equities/globe-telecom-ratios
Industry
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