1.

Based on the gathered company information, describe the working capital policy of the 2
companies.
The following are the important ratios used by the group to measure the efficiency of working capital. The
following, easily calculated, ratios are important measures of working capital utilization:
Ratio:

Globe Telecom

PLDT

Inventory
Turnover
(In days)

44 days

103 days

Globe Telecoms inventory turns over every 4

inventory is 2 810 550 while PLDTs cost of sales is
turnover ratio is higher than PLDT because it has low
days making the inventory to turn over more frequen

Receivables ratio
(in days)

58 days

38 days

Globe has a longer time

between making a sale and collecting
the cash of 58 days compared to
PLDT which is only 38 days. This
means that, PLDT is more aggressive
to generate cash from their Account
Receivables than Globe Telecom
which may negatively affect the shortterm debt paying ability of the Globe.
This could have also affected their
current ratio. The PLDT may generate
accounts receivable shorter than
Globe that made them generate more
cash to invest in other investments
making PLDTs current ratio lower
than
Globes.
However,
both
companies period both good and bad,
depends on the credit terms allowed
by each of them. Globe was said to
have 2 months or 60 days credit terms
same as PLDT. Both companies are
doing good for they have number of
collection days lower than their credit
terms. However, PLDT is doing better
since their Accounts Receivable
Turnover is a shorter period compared
to Globe.

Payables Ratio
(In days)

160 days

69 days

In terms of Accounts Payable Turnover, Globes acco

Even if Globes accounts payable turnover is longer
has higher average accounts payable is that the c
(capex) are estimated to reach $450 million to $5
investments in fixed line, international cable facilities

Working
Cycle
Capital in days

-58 days

72 days

Current assets

35,631,202

67,663,000

Current
Liabilities
Working Capital

54,989,331

129,047,000

-35,631,202.00

-61,384,000

0.65

0.52

Current Ratio

Globe has -58 days while PLDT has 72 days of con

this doesnt mean that it is more liquid than Globe be
And when you try to look at PLDTs current ratio its
that is just the same as Globe which is in fact has a h

The current assets of PLDT is way more higher than Globe Tel

The Current Liabilities shows that Globe has bigger liability from
its assets.
The working capital of Globe and PLDT is in negative which t
and PLDT having both negative working capital, essentially m
Business without any Capital requirements. Since Globe has
credit suppliers obligation.
Globe is more liquid than PLDT that is least liquid even though

Table 1: Globe and Pldts ratios related to working capital

Ratios

Computation
GLOBE

Inventory Turnover
(In days)

Receivables ratio
(in days)

Payables Ratio
(In days)

Working Cycle Capital

in days
Current Ratio

PLDT

365 days / (Cost of Goods Sold /

Average Inventory)

365 days / (Cost of Goods Sold /

Average Inventory)

365/ (23 211 500 / 2 810 550)

365/ 8.25
44 days

365/ (11 806 000 / 3 315 500)

365/ 3.56
103 days

365 days / (Sales / Accounts

Receivable)

365 days / (Sales / Accounts

Receivable)

365/ (95 140 985 / 15 200 923)

365/ 6.26
58 days

365/ (168 331 000 / 17 564 000)

365/ 9.58
38 days

365 days / (Cost of Goods Sold /

Average Accounts Payable)

365 days / (Cost of Goods Sold /

Average Accounts Payable)

365/ (23 211 500 / 10 189 963)

365/ 2.28
160 days

365/ (11 806 000 / 2 215 500)

365/ 5.33
69 days

Globes Working Capital for 3 years

Globe Telecom
0.00
2011
-5,000,000.00
-10,000,000.00
-15,000,000.00
-20,000,000.00
-25,000,000.00
-30,000,000.00
-35,000,000.00
-40,000,000.00

2012

2013
Globe Telecom

Major Findings why Globes Working Capital has been increasing:

* Existing cash reserves
* Profits has been on accounts receivable booming up to 2013
* Payables had been increasing in 2013 up to 10M.
* Additional liabilities funding current assets
The firm has a moderate amount of net working capital. It is a relatively amount of risk balanced by a
relatively moderate amount of expected return. This also reflects in their current ratio which tends to be
higher than PLDT.
Working Capital Policy
Globe Telecom
Restricted/Aggressive Policy

PLDT
Restricted/Aggressive Policy

Globe is having an aggressive working capital policy. Reviewing their ratios, both telecommunications
company is having an aggressive approach or restricted working policy. Looking at the Globes working
capital, more than half of Globes liability can be paid using their current assets which covers 64% of
liability over PLDT which can only cover 52% of their overall current liabilities that can be paid by their
current assets. Their permanent and fixed assets are financed by their short term funds which indicates
an aggressive policy. This is also proven in the disclosure of their short term Notes payable in the
financial statement that Globe Telecoms notes payable and accounts payable consists promissory notes
from
local banks for working capital requirements amounting to P5,219.90 million. They also have
been booming liabilities to support their obligations especially in their system upgrade.
Both telecommunications company are having aggressive policy which indicates why
both have a current ratio less than 1 and a negative working capital too. However, Despite of both having
the same working capital policy, Globe is performing average compared to PLDT who is performing well
since the ratios related to working capital such as receivable turnover and payable deferral conversion is
performing better in favor of PLDT. Globe despite of being aggressive in terms of financing their fixed
asset by their short term funds, still is less aggressive in terms of service and meeting credit suppliers
obligation.

2. Gather 2 or 3 current articles about each of the three companies that the group believes will
have an effect on their working capital. Thoroughly discuss the identified impact together with
insights about the suitability of the company actions about their working capital (and
financing) to their nature of business. The group must be able to provide support in all their
answers.

March 25, 2013 Globe secures $195-M loan

MANILA, Philippines - Ayala-led telecommunications firm Globe Telecom Inc. obtained a $120million loan from Metropolitan Bank and Trust Co. (Metrobank) to fund its operations. In a disclosure to
the Philippine Stock Exchange on Monday, March 25, the company said loan proceeds would be spent for
its capital expenditures in 2013. Globe's capital expenditures (capex) are estimated to reach $450 million
to $500 million.Thecapex would include expenses related to the firm's network modernization program,
and investments in fixed line, international cable facilities and information technology infrastructure.
On March 7, Globe received a $75 million loan facility from Bank of Tokyo - Mitsubishi UFJ, Ltd. to
partially cover its 2013 capex.The term loan facility with Metrobank brings to $195 million the total loans
signed by Globe for the first quarter of the year, the company said. Globe is expected to complete the
first phase of its $700-million network modernization and transformation program and its $90 million IT
upgrade this month. Globe's net income dropped 30% to P6.857 billion in 2012 from P9.832 billion in
2011. The company's 4th quarter earnings dropped 97% to P49 million from P1.8 billion.
Source:

http://www.rappler.com/business/industries/172-telecommunications-media/24715-globe-loan-

operations
July 9, 2013

Globe gets SEC nod to sell P7-B bonds

Globe will use the proceeds to finance its capital expenditures and pare down its debt MANILA,
Philippines The Securities and Exchange Commission (SEC) approved Ayala-led Globe Telecom Inc.'s
plan to issue up to P7 billion worth of bonds to finance its capital expenditures and prepay expensive
debt.Globe head of investor relations Jose Mari Fajardo told the Philippine Stock Exchange in a
disclosure that the SEC issued a permit for the fixed-rate bond sale.Fajardo said Globe plans to sell P7
billion worth of bonds due 2020 and 2023.

In May, Globe's board of directors approved the bond offer, proceeds of which will go to capital
expenditures amounting to as much as $650 million, as well as debt prepayments this year.Globe ended
the first quarter with a net income of about P700 million, down 75% from P2.7 billion in the same quarter
of 2012.Core net income, which excluded foreign exchange transactions, mark-to-market gains and
losses and non-recurring items, grew 13% to P3.1 billion from P2.74 billion last year.
As of end-March, Globe subscribers totaled 35.1 million, accounting for 33% of the market.
Source:

http://www.rappler.com/business/industries/172-telecommunications-media/33273-globe-gets-

sec-nod-to-sell-p7-b-bonds
Analysis:
One of the reasons why Globe telecoms working capital increases is because of the continuous increase
in their liabilities. Globe Telecom Inc. acquired a $120-million loan from Metropolitan Bank and Trust Co.
also known as Metrobank in 2013. They also obtained a $75 million loan from Bank of Tokyo; which
brings a total of $195 million loan signed by globe on 2013. Globe said that the loan proceeds will be used
for Globes capital expenditure like expenses related to the firm's network modernization program which
costs $700-million for the first phase only. Capital expenditures also include investments in fixed line,
international cable facilities and information technology infrastructure.
In accordance on the first article, The Securities and Exchange Commission approved Globe Telecom
Inc.'s plan to issue up to P7 billion worth of bonds due on 2020 and 2023 to finance its capital
expenditures and to trim down its debt.

The group thinks it is okay to acquire such loans and sell bonds for modernization as long as it will
produce positive effects on the company. The company already needs to modernize their network but it is
really costly. Using loans and bonds they can already modernize their network at this point in time without
paying instantly; besides globe has the capacity to pay its long term debts.

Smart signs P3.5-B loan deal with LandBank

Wireless services company Smart Communications Inc. has signed a P3.5 billion term loan facility
agreement with the LandBank of the Philippines (LBP) to finance its network upgrade and expansion
programs in response to growing demand for faster mobile broadband services in the country.

Smart said the loan facility came in two tranches of P3 billion and P500 million and that the agreements
were signed last January 29 and February 3, respectively. Both loans are payable over seven years with
an annual amortization rate of 1 percent of the principal amount on the first year up to the sixth year,
commencing on the first anniversary of the initial drawdown and the balance payable upon maturity on
February 5, 2021. The amount of P3 billion was fully drawn on February 5, while the second loan of P300
million was fully drawn on February 7.
Smart, a unit of local telecom giant Philippine Long Distance Telephone Co. (PLDT), has set a
full-year capital expenditure of P29 billion. Meanwhile, PLDT announced the roll-out of its P1-billion
domestic fiber optic network (DFON) linking Palawan Province to PLDTs broader network infrastructure.
The project consists of 620 kilometers of state-of-the-art fiber optic inland and submarine cables
that run from Puerto Princesa to Taytay in Palawan and San Jose de Buenavista to La Paz, Iloilo City. The
company said the DFON project was designed to support the increasing demand for reliable telecom and
data services in one of the most popular tourist destinations in the country.
It said DFON enables PLDT to provide fiber-to-the-home (FTTH) facilities that deliver multimedia services
and high-speed internet connectivity from the comfort of peoples homes in Palawan
With its huge capacity at 40 Gigabits that can easily be expanded to 100 GBPS (Gigabits per second),
Palawan DFON supports the rapidly growing demand for greater bandwidth by corporate and individual
subscribers, PLDT president and CEO Napoleon Nazareno said.

At the end of September last

year, PLDTs total fiber footprint stood at more than 75,000 kilometers, inclusive of 7,200 kilometers of
international submarine fiber, and over 4,000 kilometers of domestic submarine fiber.

Source: