De La Salle University

Graduate School of Business

Globe Telecoms
Financial Statement Analysis Report
Financial Accounting
A!"""
#embers$
Baluma% Brenda
Da&uioag% Alvin
Tan% Des
'#(A)* BA+GR'U)D
Globe Telecom is one of the leading providers of digital wireless
communication services in the Philippines under the Globe brand using a full digital
network based on the Global System for Mobile Communication (GSM) technology
Globe Telecom offers its wireless services including local! national long distance!
international long distance! international roaming and other value"added services
through three brands# Globe Postpaid, Globe Prepaid and TM. Globe Postpaid is the
postpaid brand of Globe This includes all postpaid plans such as G-Plans and
consumable G-Flex Plans! and Platinum (for the high"end market) Globe Prepaid
and TM are the prepaid brands of the Globe Group $ach brand is positioned at
different market segments Globe Prepaid is focused on the mainstream! broad market
while TM is focused on value"conscious! working class market %dditionally! Globe
has customi&ed services and benefits to address specific market segments! each with
its own uni'ue positioning and service offerings Globe also provides our subscribers
with mobile payment and remittance services under the GCash brand and through our
whollyowned subsidiary! G"(change! )nc This service enables our subscribers to
perform international and domestic remittance transactions! pay annual business
registration fees! income ta*es for professionals! utility bills! avail of micro "finance
transactions! donate to charitable institutions! and buy Globe prepaid reloads
Globe Telecom+s principal e*ecutive offices are located at ,th -loor! Globe
Telecom Pla&a! Pioneer corner Madison Streets! Mandaluyong City! Metropolitan
Manila! Philippines Globe Telecom is listed in the Philippine Stock $*change (PS$)
and has been included in the PS$ composite inde* since September ./! 011.
Globe Telecom owns .112 of )nnove Communications! )nc (3)nnove4)
)nnove is a stock corporation organi&ed under the laws of the Philippines and
enfranchised under 5% 6o /7/0 and its related laws to render any and all types of
domestic and international telecommunication services )nnove offers cellular services
under the TM prepaid cellular brand which is supported in the integrated cellular
networks of Globe Telecom and )nnove )nnove also offers a broad range of wireline
services! including fi*ed line voice! consumer broadband! high"speed internet and
private data networks for enterprise clients! internet protocol"based solutions as well
as domestic and international long distance communications services or carrier
services )nnove+s principal e*ecutive office is located at .8th -loor! )nnove )T Pla&a!
Samar 9oop corner Panay 5oad! Cebu :usiness Park! Cebu City! Philippines
Globe Telecom is a grantee of various authori&ations and licenses from the
6ational Telecommunications Commission (6TC) as follows# (.) license to offer and
operate facsimile! other traditional voice and data services and domestic line service
using ;ery Small %perture Terminal (;S%T) technology< (0) license for inter"
e*change services< and (7) Certificate of Public Convenience and 6ecessity (CPC6)
for# (a) international digital gateway facility ()G-) in Metro Manila! (b) nationwide
digital cellular mobile telephone system under the GSM standard (CMTS"GSM)! and
(c) local e*change carrier (9$C) services in Makati and surrounding areas in Metro
Manila! :atangas! Cavite! Mindoro! Palawan and certain areas in Mindanao
=n >uly 07! 0110! the 6TC also issued the CPC6 for )nnove+s )G-! CMTS
and 9$C services which is valid and renewable after 0, years
=n %ugust /! 0117! the 6TC granted Globe Telecom+s application to transfer
its wireline business! assets! obligations and subscribers to )nnove ?ith the transfer
of Globe Telecom+s wireline voice and data services to )nnove on September 71!
0117! )nnove now holds the following# (a) the authori&ations and licenses from the
6TC issued to Globe Telecom to offer and operate tele*! facsimile! and other
traditional voice and data services and domestic leased line service using ;S%T
technology< and (b) the CPC6 previously issued to Globe Telecom on >uly 07! 0110
to offer 9$C services in Makati and surrounding areas in Metro Manila! :atangas!
Cavite! Mindoro! Palawan and certain areas in Mindanao
=n %ugust 07! 011@! Globe Telecom invested in G"(change! )nc (G())! a
wholly"owned subsidiary! with the primary purpose of developing! designing!
administering! managing and operating software applications and systems! including
systems designed for the operations of bills! payment and money remittance! payment
and delivery facilities through various telecommunications systems operated by
telecommunications carriers in the Philippines and throughout the world and to supply
software and hardware facilities for such purposes G() handles the mobile payment
and remittance service using Globe Telecom+s network as transport channel under the
GCash brand The service! which is integrated into the cellular services of Globe
Telecom and )nnove! enables easy and convenient person"to"person fund transfers via
short messaging services (SMS) and allows Globe Telecom and )nnove subscribers to
easily and conveniently put cash into and get cash out of the GCash system G()
started commercial operations on =ctober .A! 011@ G() is a stock corporation
organi&ed under the laws of the Philippines G() is registered with the :angko
Sentral ng Pilipinas as a remittance agent G()+s principal e*ecutive office is located
at Ath -loor! Globe Telecom Pla&a! Pioneer Bighlands! Pioneer corner Madison
Streets! Mandaluyong City! Metropolitan Manila! Philippines
=n >une ./! 011,! 6TC issued a provisional authority (valid for .8 months
from date of approval) to )nnove to establish! install telephone! operate and maintain
9$C service! particularly integrated local telephone service with public payphone
facilities and public calling stations in all regions! provinces! cities and municipalities
across the nation that are not yet covered by its e*isting CPC6 and to charge therefore
monthly rates at par with the approved rates of the 9$C operators in the area! subCect
to certain conditions
=n December 08! 011,! 6TC approved Globe Telecom+s application for third
generation (7G) radio fre'uency spectra to support the upgrade of its CMTS network
to be able provide 7G services Globe Telecom has been assigned the .1"Megahert&
(MB&) of 7G radio fre'uency spectrum
F,)A),AL STAT-#-)T A)AL*S,S
Figures are shown in thousand pesos, except per share figures.
Currency is PP
'.-RALL (-RF'#A)- #-ASUR-S
=verall Performance Measures

2007 2006 2005
Market Price per Share* 1,570.00 1,235.00 720.00
Net Income per Share 99.58 88.32 76.60
Price/Earnings Ratio 15.77 13.98 9.40
* taken from citiseconline.com, price at the end of the last business day of the year.

Net Income 13,277,019.00 11,754,673.00 10,314,508.00
Interet 2,996,347.00 4,213,976.00 4,657,748.00
!a" #ate 35$ 35$ 35$
!ota% &et 116,620,852.00 124,579,833.00 125,102,390.00
Return on Assets 13% 12% 11%

Net Income 13,277,019.00 11,754,673.00 10,314,508.00
Interet 2,996,347.00 4,213,976.00 4,657,748.00
!a" #ate 35$ 35$ 35$
'on()term 'ia*i%itie 33,604,473.00 41,873,541.00 49,250,296.00
Shareho%+er, -./it0 55,416,810.00 56,948,151.00 51,618,810.00
Return on Investe !a"ita# 17% 15% 13%

Net Income 13,277,019.00 11,754,673.00 10,314,508.00
Shareho%+er, -./it0 55,416,810.00 56,948,151.00 51,618,810.00
Return on $%are%o#ers& E'uit( 24% 21% 20%
(rice/-arnings Ratio
E?hen it comes to selling stocks! it is plain that nobody can sell unless somebody
wants those stocks )f you operate on a large scale! you will have to bear that in mind
all the timeE
" >esse 9 9ivermore
The PF$ is sometimes referred to as the EmultipleE! because it shows how much
investors are willing to pay per dollar of earnings )f a company were currently
trading at a multiple (PF$) of 01! the interpretation is that an investor is willing to pay
Php01for Php. of current earnings
Globe Telecoms has shown a consistent increase in its PF$ ratio ?hile it does mean
that the stock is getting more 3e*pensive4 on a per"peso"invested basis!
)t is important that investors note important problems that arise with the PF$ measure!
and to avoid basing a decision on this measure alone
The numerator (price) is based on the market prices The 3market4 is composed of
people who generally will be affected by prevailing market conditions % 3good4
market condition will make this market feel good about investing and therefore stock
market prices rise % 3bad4 market condition (such as the economic crunch we are
e*periencing now) will also pull the market down This emotional response of
prevailing sentiment causes an emotional roller"coaster in the stock prices! and the
maCority of the market generally overlooks the facts behind the solid financial figures
The denominator (earnings) is based on an accounting measure of earnings that is
susceptible to forms of manipulation! making the 'uality of the PF$ only as good as
the 'uality of the underlying earnings number
6ew GS studies indicate! though! that using the PF$ ratio to perform long or short
trades is possible Bowever! we have not seen a study for the local PS$ for this yet
Return on Assets
The assets of the company are comprised of both debt and e'uity :oth of these types
of financing are used to fund the operations of the company The 5=% figure gives
investors an idea of how effectively the company is converting the money it has to
invest into net income The higher the 5=% number! the better! because the company
is earning more money on less investment )t is important to see how the managers
are wisely (or unwisely) allocating its resources
Globe+s figures show an increasing income over a decreasing asset base! therefore
showing a trend of an increasing 5=% as well
Return on ,nvested apital
The 5=)C is used to assess a companyHs efficiency at allocating the capital under its
control to profitable investments The return on invested capital measure gives a sense
of how well a company is using its money to generate returns
9ooking at the figures! it is evident that Globe has a good history of efficiently
allocating its funds for investments The good! consistent upward trend will lend a
sense of confidence to its stakeholders and provide goodwill to the company name
Return on Shareholders0 -&uity
5=S$ helps investors determine if a company is a lean! mean profit machine or an
inefficient clunker -irms that do a good Cob of milking profit from their operations
typically have a competitive advantage " a feature that normally translates into
superior returns for investors The relationship between the companyHs profit and the
investorHs return makes 5=S$ a particularly valuable metric to e*amine )n general!
financial analysts consider return on e'uity ratios in the .,"012 range as representing
attractive levels of investment 'uality
The consistently rising 5=S$ for Globe gives its shareholders a literally rosy outlook
for the company ?e can definitely determine from these that the Globe management
has been a good steward for shareholders+ money! and that given the same
management team! shareholders can e*pect good times ahead with the company
(R'F,TAB,L,T* #-ASUR-S
2007 2006 2005 2004
Net Sa%e #e1en/e 68,041,818 62,955,443 62,248,493 56,470,308
2ot o3 Sa%e 3,322,777 4,618,735 6,024,711 6,326,879
4ro Mar(in Percenta(e 95$ 93$ 90$ 89$
Gross #argin (ercentage
Gross Margin Percentage is the measure of Gross Margin in relation to the company+s
net sales revenue Gross Margin is obtained from the difference between 5evenue
and Cost of Sales )t is an indication of the average margin obtained on products
(goods or services) sold The higher the Gross Margin Percentage the better position
of the company in terms of profitability )n the case of Globe Telecom! Gross Margin
Percentage is significantly very high ranging from 8I2"I,2 %lso! since 011@! the
company was able to consistently improve their GM Percentage showing greater
indication of profitability
2007 2006 2005 2004
Net Income 13,277,019 11,754,673 10,314,508 11,396,242
Net Sa%e #e1en/e 68,041,818 62,955,443 62,248,493 56,470,308
Pro3it Mar(in 20$ 19$ 17$ 20$
(rofit #argin
Profit Margin also refers to the measure of profitability The profit margin is usually
use in internal comparison )t is an indicator of a companyHs pricing policies and its
ability to control costs % low profit margin indicates a low margin of safety# higher
risk that a decline in sales will erase profits and result in a net loss %s for Globe! they
registered 012! ./2! .I2 and 012 Profit Margin from 011@ to 011/ $*cept for the
decline in Profit Margin from 011@ to 011,! the company showed an increasing
profitability status based on a steady increment in their Profit Margin
Basic -arnings per Share
:asic $arnings Per Share is a measurement of the corporation+s per share
performance over a period of time )t is computed by dividing net income applicable
to the common stock by the number of shares of common stocks outstanding The
company was able to show an increase from 011, to 011/ indicating a good stocks
turn"over in a given period of time
Diluted -arnings per Share
Diluted $arnings per Share is another measurement of a corporation+s per share
performance )t is the amount of earnings for the period applicable to each share of
common stocks outstanding (basic earnings per share) adCusted for the period
applicable to each share of common stock outstanding (basic earnings per share)
adCusted to reflect dilution (lower earnings per share) assuming all potentially dilutive
common shares were outstanding during the period This reflects the potential
dilution of earnings per share that could occur if these contracts and securities were
e*ercised or converted into common stock Same as with the :asic $arnings Per
Share steady increase registered during the period of 011, to 011/ indicating a good
profitability of the company
2007 2006 2005 2004
2ah 4enerate+ *0
5peration 41,793,012 40,416,674 35,101,793 32,036,810
Net Income 13,277,019 11,754,673 10,314,508 11,396,242
2ah #ea%i6ation 3.15 time 3.44 time 3.40 time 2.81 time
ash Reali1ation
C5 ratio indicates how close a company+s net income is to being reali&ed in cash %
ratio higher than one is considered to signal high"'uality earnings This means that
the 7., times value in 011/ for Globe reflects great cash earnings
T-STS 'F ,).-ST#-)T UT,L,2AT,')
2007 2006 2005
Sa%e #e1en/e 68,041,818.00 62,955,443.00 62,248,493.00
!ota% &et 116,620,852.00 124,579,833.00 125,102,390.00
Asset )urnover 0.58 0.51 0.50

Sa%e #e1en/e 68,041,818.00 62,955,443.00 62,248,493.00
'on()term 'ia*i%itie 33,604,473.00 41,873,541.00 49,250,296.00
Shareho%+er, -./it0 55,416,810.00 56,948,151.00 51,618,810.00
Investe !a"ita# )urnover 0.76 0.64 0.62

Sa%e #e1en/e 68,041,818.00 62,955,443.00 62,248,493.00
Propert0, p%ant an+ e./ipment 91,527,820.00 95,052,719.00 97,692,207.00
!a"ita# Intensit( 0.74 0.66 0.64

2ah 6,191,004.00 7,505,715.00 10,910,961.00
2ah -"pene 24,627,250.00 22,699,666.00 25,166,973.00
*a(s& !as% 90.50 119.04 156.08

&cco/nt recei1a*%e 6,383,541.00 5,527,905.00 6,764,130.00
Sa%e 68,041,818.00 62,955,443.00 62,248,493.00
*a(s& Receiva+#e 33.77 31.61 39.12

In1entor0 1,112,146.00 993,495.00 1,372,459.00
2ot o3 Sa%e 3,322,777.00 4,618,735.00 6,024,711.00
*a(s& Inventor( 120.49 77.44 82.01

2ot o3 Sa%e 3,322,777.00 4,618,735.00 6,024,711.00
In1entor0 1,112,146.00 993,495.00 1,372,459.00
Inventor( )urnover 2.99 4.65 4.39

Sa%e #e1en/e 68,041,818.00 62,955,443.00 62,248,493.00
2/rrent &et 18,740,373.00 24,214,990.00 22,894,035.00
2/rrent 'ia*i%itie 27,599,569.00 25,758,141.00 24,233,284.00
,or-ing !a"ita# )urnover .7.68/ .40.80/ .46.48/

2/rrent &et 18,740,373.00 24,214,990.00 22,894,035.00
2/rrent 'ia*i%itie 27,599,569.00 25,758,141.00 24,233,284.00
!urrent Ratio 0.68 0.94 0.94

2/rrent Monetar0 &et 17,628,227.00 23,221,495.00 21,521,576.00
2/rrent 'ia*i%itie 27,599,569.00 25,758,141.00 24,233,284.00
0uic- Ratio 0.64 0.90 0.89
Asset Turnover Ratio
%sset turnover measures a firmHs efficiency at using its assets in generating sales or
revenue " the higher the number the better )t also indicates pricing strategy#
companies with low profit margins tend to have high asset turnover! while those with
high profit margins have low asset turnover
=bservations on the financials show a consistent but small upward trend in the %sset
Turnover 5atio of Globe ?hile it may be said that the turnover is low (J.)! the best
way to determine its strength is to compare it with a competitor+s figures % 'uick
check with so"called Philippine Telecom giant Philippine 9ong Distance Company
shows a 011/ %sset Turnover 5atio of 1A1! which is a tad bit higher than Globe
Bowever! considering that P9DT has a good foothold on the fi*ed line industry for
decades before Globe! the ratios that Globe has recorded so far is a good indicator of
comparable performance
,nvested apital Turnover
)n accounting! Turnover is the number of times an asset is replaced during a financial
period
Globe shows that while there is no .#. return on invested capital yet! there is still a
considerably consistent upward trend ?hile certain factors are possible to increase
this ratio to reach .#. such as an increase in profit margins! it should be well
considered that Globe is in a very tight competitive market and increasing its margins
might adversely affect actual subscriber base figures and generally affect its entire
financials as well
%gain! a 'uick comparison with P9DT shows that both companies have the same 1/A
turnover ratio for the year ending 011/
apital ,ntensity
Capital )ntensity (or -i*ed %sset turnover) is financial ratio of net sales to fi*ed
assets The fi*ed"asset turnover ratio measures a companyHs ability to generate net
sales from fi*ed"asset investments " specifically property! plant and e'uipment
(PPK$) " net of depreciation % higher fi*ed"asset turnover ratio shows that the
company has been more effective in using the investment in fi*ed assets to generate
revenues
P9DT has a better fi*ed asset turnover rate of 1I.! compared to Globe+s 1/@ )t has
to be noted! however! that one should consider how long both companies+ PPK$
investments have been depreciated already to fully assess the impact of this ratio %
substantial PPK$ purchase for the ne*t year will greatly impact on the ne*t year+s
ratio as well
Days0 ash
=ne of the gauges to see how a company manages its cash properly is by checking
how many days worth of bills it can cover with its cash on hand
%s can be seen from the table! Globe has slowly eased from ,"month to a 7"month
cash inventory ?hile this means there is lesser cash on hand! it also means that its
fund managers are looking into more ways of using funds for company benefit!
thereby not allowing cash to idly sit and do nothing
Days0 Receivables
This provides us with the average collection period for receivables Considering that
Globe has both postpaid and prepaid accounts (with prepaid accounts being sold
through dealers who have credit terms as well)! it is e*pected that there is still a
receivable window of anywhere from 71"I1 days The 77"day collection period of
Globe is very good! considering that it is in the low end of the collection window
assumed
Globe+s 77"day receivable average is comparable with industry leader P9DT with its
7."day receivables average
Days0 ,nventory
Possessing a high amount of inventory for long periods of time is not usually good for
a business because of inventory storage! obsolescence and spoilage costs Bowever!
possessing too little inventory isnHt good either! because the business runs the risk of
losing out on potential sales and potential market share as well
-or Globe Telecoms! inventory means their stock of handsets! sims! and Call Cards
=f these three items! the bulk of the cost is poured into handsets Globe+s .01"day
inventory stock might still be big for their industry Considering that their business
hinges on technical advances! newer models of handsets are being churned out by
cellphone companies 'uarterly! if not monthly
This is the point where Globe+s .01"day inventory levels cannot be compared to
P9DT+s 10,"day inventory levels! since P9DT+s core business is still in the fi*ed line
category which means that all telecom infrastructures would have been classified
under PPK$ and not much investment are spent on handsets for bundled services
,nventory Turnover
% ratio showing how many times a companyHs inventory is sold and replaced over a
period %n inventory turnover ratio of 7 is low! and this could be attributed to their
.01"day inventory levels
Bigh inventory levels are unhealthy because they represent an investment with a rate
of return of &ero )t also opens the company up to trouble should prices begin to fall
3or4ing apital Turnover
% company uses working capital (current assets " current liabilities) to fund operations
and purchase inventory These operations and inventory are then converted into sales
revenue for the company The working capital turnover ratio is used to analy&e the
relationship between the money used to fund operations and the sales generated from
these operations )n a general sense! the higher the working capital turnover! the
better because it means that the company is generating a lot of sales compared to the
money it uses to fund the sales
The -S notes e*plained why there is a negative ?CT for Globe %gain! inventories
played a maCor part in increasing %ssets! and the 7G rollout has increased its
9iabilities section ?eighing these two factors! it is evident that the rollout facility
would eventually be a good asset for the company! while Globe has to make sure that
the inventories would be sold instead of eventually being re"classified under
3Provision for )nventory 9osses! =bsolescence and Market Decline4
urrent Ratio
This ratio is mainly used to give an idea of the companyHs ability to pay back its short"
term liabilities (debt and payables) with its short"term assets (cash! inventory!
receivables) The higher the current ratio! the more capable the company is of paying
its obligations % ratio under . suggests that the company would be unable to pay
off its obligations if they came due at that point ?hile this shows the company is not
in good financial health! it does not necessarily mean that it will go bankrupt " as there
are many ways to access financing " but it is definitely not a good sign
The current ratio can give a sense of the efficiency of a companyHs operating cycle or
its ability to turn its product into cash Companies that have trouble getting paid on
their receivables or have long inventory turnover can run into li'uidity problems
because they are unable to alleviate their obligations :ecause business operations
differ in each industry! it is always more useful to compare companies within the
same industry
Globe+s current ratio has gone lower than its performance in the past years %s it is
said above! it is not a bad thing but it is not good either % good look at the financials
also shows that dividends are being paid back to shareholders consistently -urther!
there has been maCor e*penditures in their telecommunications hardware (the 7G
compliance rollout) The lower ratio therefore is not a case of fund mismanagement
?hile there is an e*pected low ratio result even for the 0118 report! it is a temporary
setback considering that the maCor fund e*pense was poured into infrastructure
upgrades )n the meantime! management e*pertise in accessing financing comes in to
keep the shareholders happy and to keep the profits coming in as well
5uic4 Ratio
The 'uick ratio is more conservative than the current ratio! a more well"known
li'uidity measure! because it e*cludes inventory from current assets )nventory
is e*cluded because some companies have difficulty turning their inventory into cash
)n the event that short"term obligations need to be paid off immediately! there are
situations in which the current ratio would overestimate a companyHs short"term
financial strength
?hile much has been said about Globe+s high inventory levels! it is to be noted that
the 'uick ratio results do not vary so much with the current ratio
T-ST 'F F,)A),AL ')D,T,')
-&uity #ultiplier
9ike all debt management ratios! the e'uity multiplier is a way of e*amining how a
company uses debt to finance its assets %lso known as the financial leverage ratio or
leverage ratio
)n other words! this ratio shows a companyHs total assets per dollar of stockholdersH
e'uity % higher e'uity multiplier indicates higher financial leverage! which means
the company is relying more on debt to finance its assets
2007 2006 2005 2004
!ota% &et 116,620,852 124,579,833 125,102,390 129,703,928
!ota% -./it0 55,416,810 56,948,151 51,618,810 54,506,902
&et 7 -./it0 2.104430984 2.187601016 2.423581443 2.379587231
% decreasing e'uity multiplier shows the independence of the company from using
debt to finance its assets Bowever! from the given table! it shows that the assets of
the company is decreasing annually since 011@
2007 2006 2005 2004
2/rrent &et 18,740,373 24,214,990 22,894,035 21,980,879
Nonc/rrent aet 97,880,479 100,364,843 102,208,355 107,723,049
The table provided shows the trend of the company+s current and noncurrent assets
since 011@
Current assets showed a steady increase from year 011@ to 011A but fell significantly
in 011/ due to repayment of Globe+s Senior 6otes and higher dividend payouts
6oncurrent assets showed a decrease in value mainly because of the depreciation of
the company+s Property and $'uipment
Debt/-&uity Ratio
)ndicates the proportion of debt the firm holds in relation to e'uity This measures the
risk of the firmHs capital structure in terms of amounts of capital contributed by
creditors and that contributed by owners This e*presses the protection provided by
owners for the creditors
Computed as Total 9iabilities F Total $'uity
2007 2006 2005 2004
!ota% 'ia*i%itie 61,204,042 67,631,682 73,483,580 75,197,026
!ota% -./it0 55,416,810 56,948,151 51,618,810 54,506,902
8e*t to -./it0 1.104430984 1.187601016 1.423581443 1.379587231
The company+s Debt"$'uity ratio shows a healthy decrease in proportion This
reflects a good sign for creditors to invest as the value of e'uity shows strength over
liability )f the value of the company+s asset increases! value of e'uity increases
e*ponentially with the decrease in the Debt to $'uity ratio
Gnder the company+s loan agreement! this ratio is compliant with the target debt to
e'uity not e*ceeding 7#.
Debt Ratio
This ratio measures the amount of debt a firm has for each value of assets $ssentially!
total debt ratio is a measure of the company+s ability to meet financial obligations
9ow debt ratios shows a greater cushion against creditorHs losses in li'uidation
Computed as Total 9iabilities F Total %ssets
2007 2006 2005 2004
!ota% 'ia*i%itie 61,204,042 67,631,682 73,483,580 75,197,026
!ota% &et 116,620,852 124,579,833 125,102,390 129,703,928
8e*t #atio 0.524812167 0.542878252 0.587387499 0.579759049
)n reference with Debt"$'uity ratio! Debt ratio also shows a descending pattern that
signifies a strong capability of the company to payoff its debt yearly % ratio of less
than . (one) indicates that the company will be able to distribute part of its asset value
to shareholders in time of li'uidation
Long/term Debt to apitali1ation Ratio
This ratio computes the proportion of a companyHs long"term debt compared to its
available capital :y using this ratio! investors can identify the amount of
leverage utili&ed by a specific company and compare it to others to help analy&e the
companyHs risk e*posure Generally! companies that finance a greater portion of their
capital via debt are considered riskier than those with lower leverage ratios
Computed as 9ong"term debt F Total Capitali&ation Total Capitali&ation is the sum of
9ong"term debt and total e'uity
2007 2006 2005 2004
'on()term %ia*i%itie 33,604,473 41,873,541 49,250,296 50,051,048
!ota% 2apita%i6ation 89,021,283 98,821,692 100,869,106 104,557,950
8e*t)2apita%i6ation 0.377488078 0.423728234 0.488259468 0.478691941
% declining long"term debt to capitali&ation ratio implies the decrease in allocation of
funds for long"term debt or the ratio implies an increase in e'uity -rom the e'uity
turnover ratio! we can assess that e'uity shows an increase in value thus affecting this
ratio )n effect! this shows the capability of the company to pay off long"term debts by
means of revenues (retained earnings)
ashflo6 from operations 7 Debt Ratio
This ratio compares a companyHs operating cash flow to its total debt! This ratio
provides an indication of a companyHs ability to cover total debt with its yearly cash
flow from operations The higher the percentage ratio! the better the companyHs ability
to carry its total debt
Computed as Cashflow generated by operations F Total 9iabilities
2007 2006 2005
2ah3%o9 (enerate+ *0
operation 41,793,012 40,416,674 35,101,793
!ota% 'ia*i%itie 61,204,042 67,631,682 73,483,580
2ah3%o9 ) 8e*t 0.6828473 0.5975997 0.4776821
The less than one (.) ratio result shows the incapability of the company to pay off its
debt Cust by cash flow from operations The decrease of cash flow generated by the
operations is due to the higher actual income ta*es paid
Times ,nterest -arned 8T,-9
% metric used to measure a companyHs ability to meet its debt obligations )t is
calculated by taking a companyHs earnings before interest and ta*es ($:)T) and
dividing it by the total interest payable on bonds and other contractual debt )t is
usually 'uoted as a ratio and indicates how many times a company can cover its
interest charges on a preta* basis -ailing to meet these obligations could force a
company into bankruptcy
Computed as (preta* operating profit L interest e*pense) F interest e*pense
2007 2006 2005 2004
Pre ta" operatin( pro3it 20,050,348 17,598,693 14,281,451 12,722,934
Interet -"pene 2,996,347 4,213,976 4,657,748 4,368,716
!ime interet earne+ 7.691597469 5.176267971 4.066170819 3.912282236
%n increasing T)$ ratio shows the capability of the company to pay off interest
e*penses This may mean either an increasing in preta* operating profit or decreasing
interest e*pense
-rom the given data! pre ta* operating profit is increasing annually from year 011@
This implies a steady increase in T)$ ratio as well )nterest e*pense! on the other
hand! has an estimated average of @!@11!111 from 011@ to 011A and significantly
decreased in the year 011/ This decrease in interest e*pense for the year 011/
Cumped the ratio by up to ,1 percent from the previous year+s ratio The 0I percent
decline! in interest e*pense! of P.!0.8 million from P@!0.@ million to P0!IIA million
for the full year of 011/ mainly due to repayment of loans to foreign and local banks
during the period! coupled with decrease in peso interest rates
T-ST 'F D,.,D-)D ('L,*
2007 2006 2005 2004
:aic -arnin( per Share
Php
100.07
Php
88.56
Php
76.74
Php
80.92
;/%%0 8i%/te+ -arnin( per
Share 99.58 88.32 76.60 80.78
8i1i+en+ per Share 116.00 50.00 40.00 36.00
Share Price 1,570.00 1,235.00 735.00 955.00
8i1i+en+ <ie%+ 7$ 4$ 5$ 4$
Dividend *ield
This is a financial ratio that shows how much a company pays out in dividends each
year relative to its share price )n the absence of any capital gains! the dividend yield
is the return on investment for a stock Globe shown an increasing dividend yield
from year 011@ to 011/ Due to the increase in cash dividends by .702 to P..A per
share brought dividend yield for 011/ to /2! one of the highest in the Philippine stock
market and among the highest of telecom companies in the region
2007 2006 2005 2004
8i1i+en+ 15,403,412 6,668,151 5,511,145 5,104,496
Net Income 13,277,019 11,754,673 10,314,508 11,396,242
8i1i+en+ Pa0)o/t 116$ 57$ 53$ 45$
Dividend (ay/'ut Ratio
Dividend payout ratio is the fraction of net income a firm pays to its stockholders in
dividends The part of the earnings not paid to investors is left for investment to
provide for future earnings growth )nvestors seeking high current income and limited
capital growth prefer companies with high Dividend payout ratio Bowever investors
seeking capital growth may prefer lower payout ratio because capital gains are ta*ed
at a lower rate Bigh growth firms in early life generally have low or &ero payout
ratios %s they mature! they tend to return more of the earnings back to investors
6ote that dividend payout ratio is a reciprocate ratio to dividend cover! which is
calculated as $PSFDPS
-or Globe! dividend pay"out has increased from 011@ to 011A from @,",/2 -or
011/! Globe paid dividends more than its net income coming out a tremendous
increase in dividend pay"out of ..A2 Total cash dividends paid in 011/ reached a
high of P.,7 billion! e'uivalent to .712 of their net income the prior year The P00
billion deficits from the net income for dividend allocation was deducted from the
retained earnings
')LUS,') A)D R-'##-)DAT,')
?e can see from the trends in the =verall Performance Measures that Globe looks to
be an ideal investment vehicle for interested investors $ven if its PF$ ratio has been
constantly increasing! it only means that an early purchase of the stocks in the market
will lend to a higher yield over time The fact that all measurable returns are
consistently increasing also points to a good management team with sound financial
decisions
The company shows a strong position with regards to their financial condition! which
has the capability of earning and paying off its debts Bowever! the $'uity Multiplier
does not show a favourable trend for investors as the value of their investment against
the company+s asset is decreasing $ven though asset is decreasing! we can attribute
this to the dividends and notes payout by the company )n addition! other financial
condition ratios are showing good signs of leveraging asset! liability and e'uity
Globe+s increasing Profitability Measures and Dividend 5atios only shows the
company+s strong financial results translated to significantly higher returns to their
shareholders This only shows a substantial pay"out that underscores the company+s
continuous potential to generate strong cash flows and earning This also balances the
company+s obCectives of attaining an efficient balance sheet while retaining financial
fle*ibility to make further investments in new growth areas
R-F-R-)-S
%nthony! Bawkins! and Menneth Merchant! !ccounting Test " Cases! .0
th
$dition!
(:oston# McGraw"Bill! 011/)
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