Comparative Financial Ratios
For Holding Companies in the Philippines
Prof. Redentor Caguioa
Financial Management 1
Second Semester A.Y. 2014-2015
Table of Contents
Summary of Financial Ratios
Common Size Analysis
Review of Ratios and Analysis
Financial analysis is the examination of a business from a variety of perspectives in order to fully understand the greater financial situation and determine how best to strengthen the business. A financial analysis looks at many aspects of a business from its profitability and stability to its solvency and liquidity. The key source of information for financial analysis is the financial statements of a business. The financial analyst uses these documents to derive ratios, create trend lines, and conduct comparisons against similar information for comparable firms.
Financial analysis is one of the key tools needed by the managers of a business to examine how their organization is performing. For this reason, they are constantly querying the financial analyst about the profitability, cash flows, and other financial aspects of their business.
Through comparative financial analysis of top holding companies in the Philippines namely, JG Summit Holdings, Inc (JGS), GT Capital Holdings, Inc. (GTCAP) and Ayala Land Inc./ Cebu Holdings, Inc., this study aims to know the following:
1. To compare and asses the 2013 performance of each entity
This objective where investors or creditors are interested in the trend of past sales, cost of goods sold, operating expenses, net income, and return on investment. These trends offer a means for judging management's past performance and are possible indicators of future performance.
2. To know and asses its profitability and growth prospects
Financial statement analysis helps in assessing and predicting the earning prospects and growth rates in earning which are used by investors while comparing investment alternatives and other users in judging earning potential of business enterprise.
3. To assess its operational efficiency
The actual performance of the firm which are revealed in the financial statements can be compared with some standards set earlier and the deviation of any between standards and actual performance can be used as the indicator of efficiency of the management.
4. To predict its bankruptcy or failure in the future
Assessing and predicting bankruptcy and probability of business failure using financial ratios and analysis are very important to give management a warning or notice whenever the company is not doing well as compared to its competitors.
A holding company is a company or firm that owns other companies outstanding stock. The concept refers to a company which does not produce goods or services itself; rather, its purpose is to own shares of other companies. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies.
The Philippine Stock Exchange has an index named Holding Firms. This index primarily has the entire conglomerate that has shareholdings in businesses of various industries. To name a few the likes of JGS(JG Summit) of the Gokingwei's, AC(Ayala Corp.) of the Ayala's, SM(SM Investments) of the Sy's, LPZ(Lopez Group) of the Lopez's, and MPI(Metro Pacific Investments) of Manny V. Pangilinan of First Pacific are the known holding firms in the Philippines.
JG Summit Holdings, Inc. is one of the leading conglomerates in the Philippines, with business interests in Food and Beverages, Real Estate and Hotels, Air Transportation, Banking and Petrochemicals, as well as core investments in Real Estate, Telecommunications and in Power Distribution.
The business of JG Summit started in 1957 when Universal Corn Products, Inc. (now...
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