Presentation3 FINMAN Working Capital

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1. Based Based on the gather gathered ed company company informa informatio tion, n, describe describe the working working capita capitall pol policy icy of the 2 companies.

The following are the important important ratios used by the group to measure the efficiency of working working capital. The following, easily calculated, calculated, ratios are important measures of working capital utilization: utilization:

Ratio:

Globe Telecom

P!T

51 days

36 days

'$rrent assets

35,6 35 ,631 31,2 ,202 02

67,6 67 ,663 63,0 ,000 00

'$rrent iabilities

54,9 54 ,989 89,3 ,331 31

129, 12 9,04 047, 7,00 00 0

35,631,202.0 0

61,384,00 0

(.)*

(.*2

"n#entory T$rno#er  %"n days& Recei#ables ratio %in days& Payables Ratio %"n days& Wor orki king ng Cycl Cy cle e Capital in days

Working Capital

Current Ratio

The working capital of

Globe telecom has higher current ratio which may indicate tha

Table Table 1: Globe and Pldt’s ratios related to working capital

Globe+s orking 'apital for - years a/or 0indings why Globe+s orking 'apital has been increasing: %3 G44R"54 P T6& G789  4;isting cash reser#es  Profits %when yo$ sec$re it as cash <&  Payables %credit from s$ppliers&  ew e=$ity or loans from shareholders  Bank o#erdrafts or lines of credit  ong>term loans

6#erall 'oncl$sion: Globe is ha#ing a conser#ati#e working capital policy. $e#iewing their ratios, Globe has been #ery keen in terms of their in#estment compared to !"T. %#erall looking at their working capital, more than half of Globe&s liability can be paid using their current assets which co#ers '() of liability o#er  !"T which can only co#er 5*) of their o#erall current liabilities that can be paid by their current assets. Therefore we conclude that !"T is ha#ing an aggressi#e working capital policy which was also pro#en by !"T&s president +anny angilinan based on their .5- worth of cable epansion. Globe&s current ratio implies a conser#ati#e working capital policy that&s why it has greater liquidity and lower risk/ while !"T&s aggressi#e working capital policy indicates higher risk and poor liquidity. This is also the reason why Globe has higher current ratio compared to !"T despite of Globe&s system upgrade that had started last *01*.

2. Gather 2 or - c$rrent articles abo$t each of the three companies that the gro$p belie#es will ha#e an effect on their working capital. Thoro$ghly disc$ss the identified impact together with insights abo$t the s$itability of the company actions abo$t their working capital %and financing& to their nat$re of b$siness. The gro$p m$st be able to pro#ide s$pport in all their  answers.

Globe sec$res ?12(> loan for operations

+23!, hilippines 4 yala4led telecommunications firm Globe Telecom 3nc. obtained a 1*04 million loan from +etropolitan -ank and Trust 6o. 7+etrobank8 to fund its operations. 3n a disclosure to the hilippine 9tock change on +onday, +arch *5, the company said loan proceeds would be spent for  its capital ependitures in *01. Globe;s capital ependitures 7cape8 are estimated to reach (50 million to 500 million.The cape would include epenses related to the firm;s network modernization program, and in#estments in fied line, international cable facilities and information technology infrastructure. %n +arch <, Globe recei#ed a <5 million loan facility from -ank of Tokyo 4 +itsubishi =>?, !td.  to partially co#er its *01 cape.@The term loan facility with +etrobank brings to 1A5 million the total loans signed by Globe for the first quarter of the year,B the company said. Globe is epected to complete the first phase of its <004million network modernization and transformation program and its A0 million 3T upgrade this month. Globe;s net income dropped 0) to '.C5< billion in *01* from A.C* billion in *011. The company;s (th quarter earnings dropped A<) to (A million from 1.C billion. D

Source:

http://www.rappler.com/business/industries/172telecommunicationsmedia/2!71"globeloan

operations

Globe Telecom says capital in#estments slash first nine mo. net income Telecommunications industry profits continued to fall in the second quarter as the country&s top companies accelerated modernization efforts while struggling against competition from each other and from 3nternet communication applications like 9kype and >acebook. 3n a statement released Tuesday, dominant carrier hilippine !ong "istance Telephone 6o. 7!"T8 reported a net income of 1A.5 billion, down C percent year on year. @These results reflect the consolidation of the operating performance of "igital Telecommunications hilippines 3nc. E"igitelF from its acquisition, which closed last %ctober,B !"T said. 9tripping out one4time gains, !"T&s core profits fell 11 percent to 1C.< billion. !"T said higher ser#ice re#enues were offset by an increase in epenses due to manpower reduction programs at !"T and "igitel. The company also spent more on selling and promotions initiati#es, the statement added. @6ore net income was also affected by the recognition of a *4billion deferred gain relating to the transfer of  shares of +anila lectric 6o. 7+eralco8 from !"T 6ommunications and nergy entures to -eacon  sset Holdings. -eacon sset is the +anuel . angilinan group&s holding company for its controlling stake in +eralco, the country&s biggest power distributor. @3t is noteworthy that, despite the earnings pressure from the competiti#e state of the local industry and continuing pressure on our margins, our free cash flows remain strong, thus enabling us to sustain our  customary di#idend le#els,B said angilinan, !"T&s chairman. !"T&s earnings before income ta, depreciation and amortization 7bitda8 margin for the ?anuary4to4 ?une period remained at a healthy (' percent, although this was lower than the 554percent le#el recorded a year earlier. 6onsolidated free cash flow reached *(.( billion, an increase of 1 percent o#er last year. !"T, which controls mobile carriers 9mart 6ommunications and 9un 6ellular, ended the period with '<.( million subscribers, or two thirds of the industry. This helped prop up consolidated ser#ice re#enues by 1* percent year on year to C(.< billion. +eanwhile, Globe Telecom reported a similar earnings drop, with its net income settling at 5 billion for  the si4month period. This was down 10 percent from the same time last year. "espite the lower profit, the company remained optimistic, saying @the mobile business thri#ed against the challenges posted by competition, notwithstanding peaking penetration le#els dri#en in part by multi493+ usage and subscribers& preference for ser#ices offering the best #alue for their money.B The company said total ser#ice re#enues reached (0.C billion, up ' percent from the same period last year. cluding foreign echange and mark4to4market gains and losses as well as nonrecurring items, howe#er, core net income was up * percent year on year from 5.' billion to 5.< billion, Globe said. @Ie are #ery satisfied with our performance this period, allowing us to further etend our growth momentum for another quarter. This was achie#ed despite the challenges posed by competition that is beginning to le#erage its scale ad#antages of ha#ing a bigger combined subscriber base and network,B Globe president and 6% rnest 6u said. The company ended the first semester with 1.< million subscribers, up 1* percent year on year. @Ie hope to build further on this momentum as we head into the second half of the year,B 6u said. Source: http://business.in#uirer.net/7"!7$/pldtglobetelecompostlower#2pro%its&i'(($)*+k,!), 

Globe Telecom 3nc., a Joint #enture of yala 6orp. and 9ingapore Telecom, reported Thursday a 1A4 percent drop in net income in the first nine months of the year, saddled by epenses incurred by a <004 million network modernization and transformation program. 2et income totaled '.C0C billion, down 1.1C' billion from <.AA( billion a year earlier. @6onsolidated net income after ta stood at '.C billion as of end49eptember this year, down 15 percent from almost C billion in the same period last year, dri#en by the continued in#estment in subscriber acquisitions and network and 3T infrastructures,B the company noted in a statement.  6apital ependitures Jumped 1' percent to 1' billion from 1.A billion in the same comparable period. 6onsolidated re#enues rose by ' percent to '1. billion from 5<.< billion, reflecting strong performance of mobile, broadband, and fied line data ser#ices. Globe&s mobile subscribers rose 10 percent to *.1 million. 9ocial networking boosted demand for 3nternet connecti#ity, dri#ing growth in the telco&s broadband business that was supported by ad#anced technology for better 3nternet connection speeds. Globe said broadband subscribers surged *0 percent to o#er 1.' million Dfrom 1.( million D as of  end49eptember. @"espite the #ery challenging competiti#e en#ironment, our business remains fundamentally strong,B said Globe president and 6% rnest 6u.

The company is gearing for stiff competition. @K Ie are prepared for the challenge and will be in a much better position to deli#er o#erall enhanced #alue to our stakeholders upon completion of our network upgrade and with the new capacities coming onstream,B 6u noted. L @9, G ews Source: http://www.gmanetwork.com/news/stor-/21"!"/econom-/companies/globetelecomsa-s capitalinestmentsslash%irstninemonetincome

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