FINANCIAL ANALYSIS

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January 5, 2022
 FINANCIAL STATEMENT

Financial Statement are written records that convey the business activities and the

financial performance of a company. Financial statements are often audited by

government agencies, accountants, firms, etc. to ensure accuracy and for tax,

financing, or investing purposes. Financial statements include:

 Balance sheet

 Income statement

 Cash flow statement.

KEY TAKEAWAYS

 Financial statements are written records that convey the business activities and

the financial performance of a company.

 The balance sheet provides an overview of assets, liabilities, and stockholders'

equity as a snapshot in time.

 The income statement primarily focuses on a company’s revenues and

expenses during a particular period. Once expenses are subtracted from

revenues, the statement produces a company's profit figure called net income.

 The cash flow statement (CFS) measures how well a company generates cash

to pay its debt obligations, fund its operating expenses, and fund investments.

Using Financial Statement Information

Investors and financial analysts rely on financial data to analyze the performance of a

company and make predictions about its future direction of the company's stock price.
One of the most important resources of reliable and audited financial data is the annual

report, which contains the firm's financial statements.

The financial statements are used by investors, market analysts, and creditors to

evaluate a company's financial health and earnings potential. The three major financial

statement reports are the balance sheet, income statement, and statement of cash

flows.

Understanding Balance Sheets

The balance sheet provides an overview of a company's assets, liabilities, and

stockholders' equity as a snapshot in time. The date at the top of the balance sheet

tells you when the snapshot was taken, which is generally the end of the fiscal year.

The Balance Sheet Formula

\displaystyle \text{Assets}=(\text{Liabilities}+\text{Owner's

Equity})Assets=(Liabilities+Owner’s Equity)

The balance sheet totals will be calculated already, but here's how you identify them.

1. Locate total assets on the balance sheet for the period.

2. Total all liabilities, which should be a separate listing on the balance sheet. It

may not include contingent liabilities.

3. Locate total shareholder's equity and add the number to total liabilities.

4. Total assets should equal the total of liabilities and total equity.
Data From the Balance Sheet

The balance sheet identifies how assets are funded, either with liabilities, such as debt,

or stockholders' equity, such as retained earnings and additional paid-in capital. Assets

are listed on the balance sheet in order of liquidity.

Liabilities are listed in the order in which they will be paid. Short-term or current

liabilities are expected to be paid within the year, while long-term or non-current

liabilities are debts expected to be paid in over one year.

Items Included in the Balance Sheet

Below are examples of items listed on the balance sheet.

Assets

 Cash and cash equivalents are liquid assets, which may include Treasury

bills and certificates of deposit.

 Accounts receivables are the amount of money owed to the company by its

customers for the sale of its product and service.

 Inventory

Liabilities

 Debt including long-term debt

 Wages payable

 Dividends payable

Shareholders' Equity
  Shareholders' equity is a company's total assets minus its total

liabilities. Shareholders' equity represents the amount of money that would be

returned to shareholders if all of the assets were liquidated and all of the

company's debt was paid off.

 Retained earnings are part of shareholders' equity and are the amount of net

earnings that were not paid to shareholders as dividends. 

Example of a Balance Sheet 

Below is a portion of Exxon Mobil Corporation's (XOM) balance sheet as of September

30, 2018. 

 Total assets were $354,628.

 Total liabilities were $157,797.

 Total equity was $196,831.

 Total liabilities and equity were $354,628, which equals the total assets for the

period.

Income Statements

Unlike the balance sheet, the income statement covers a range of time, which is a year

for annual financial statements and a quarter for quarterly financial statements. The
income statement provides an overview of revenues, expenses, net income and

earnings per share. It usually provides two to three years of data for comparison.

Income Statement Formula and Calculation

\text{Net Income}=(\text{Revenue}-\text{Expenses})Net Income=(Revenue−Expenses)

1. Total all revenue or sales for the period.

2. Total all expenses and costs of operating the business.

3. Subtract total expenses from revenue to achieve net income or the profit for the

period.

Data From Income Statements

An income statement is one of the three important financial statements used for

reporting a company's financial performance over a specific accounting period. Also

known as the profit and loss statement  or the statement of revenue and expense, the

income statement primarily focuses on a company’s revenues and expenses during a

particular period.

Once expenses are subtracted from revenues, the statement produces a company's

profit figure called net income.

Types of Revenue

Operating revenue is the revenue earned by selling a company's products or services.

The operating revenue for an auto manufacturer would be realized through the

production and sale of autos. Operating revenue is generated from the core business

activities of a company.

Non-operating revenue is the income earned from non-core business activities. These

revenues fall outside the primary function of the business. Some non-operating

revenue examples include:

 Interest earned on cash in the bank

 Rental income from a property

 Income from strategic partnerships like royalty payment receipts

 Income from an advertisement display located on the company's property

Other income is the revenue earned from other activities. Other income could include

gains from the sale of long-term assets such as land, vehicles, or a subsidiary.

Types of Expenses

Primary expenses are incurred during the process of earning revenue from the primary

activity of the business. Expenses include the cost of goods sold (COGS) , selling,

general and administrative expenses (SG&A), depreciation or amortization,

and research and development (R&D). Typical expenses include employee wages,

sales commissions, and utilities such as electricity and transportation.

Expenses that are linked to secondary activities include interest paid on loans or debt.

Losses from the sale of an asset are also recorded as expenses.

The main purpose of the income statement is to convey details of profitability and the

financial results of business activities. However, it can be very effective in showing

whether sales or revenue is increasing when compared over multiple periods. Investors

can also see how well a company's management is controlling expenses to determine

whether a company's efforts in reducing the cost of sales might boost profits over time.

Example of an Income Statement

Below is a portion of Exxon Mobil Corporation's (XOM) income statement as of

September 30, 2018.

 Total revenues were $76,605 for the period.

 Total costs were $67,525.

 Net income or profit was $6,240.

The Cash Flow Statement

The cash flow statement (CFS) measures how well a company generates cash to pay

its debt obligations, fund its operating expenses, and fund investments. The cash flow

statement complements the balance sheet and income statement.

Data From the Cash Flow Statement

The CFS allows investors to understand how a company's operations are running,

where its money is coming from, and how money is being spent. The CFS also

provides insight as to whether a company is on a solid financial footing.

There is no formula, per se, for calculating a cash flow statement. Instead, it contains

three sections that report cash flow for the various activities for which a company uses

its cash. Those three components of the CFS are listed below.

Operating Activities 

The operating activities on the CFS include any sources and uses of cash from running

the business and selling its products or services. Cash from operations includes any

changes made in cash, accounts receivable, depreciation, inventory, and accounts

payable. These transactions also include wages, income tax payments, interest

payments, rent, and cash receipts from the sale of a product or service.

Investing Activities

Investing activities include any sources and uses of cash from a company's

investments into the long-term future of the company. A purchase or sale of an asset,

loans made to vendors or received from customers or any payments related to a

merger or acquisition is included in this category.

Also, purchases of fixed assets such as property, plant, and equipment (PPE) are

included in this section. In short, changes in equipment, assets, or investments relate

to cash from investing.

Financing Activities

Cash from financing activities include the sources of cash from investors or banks, as

well as the uses of cash paid to shareholders. Financing activities include debt
issuance, equity issuance, stock repurchases, loans, dividends paid, and repayments

of debt.

The cash flow statement reconciles the income statement with the balance sheet in

three major business activities.

Example of a Cash Flow Statement

Below is a portion of Exxon Mobil Corporation's (XOM) cash flow statement as of

September 30, 2018. We can see the three areas of the cash flow statement and their

results.

 Operating activities generated a positive cash flow of $27,407 for the period.

 Investing activities generated negative cash flow or cash outflows of -$10,862

for the period. Additions to property, plant, and equipment made up the majority

of cash outflows, which means the company invested in new fixed assets.

 Financing activities generated negative cash flow or cash outflows of -$13,945

for the period. Reductions in short-term debt and dividends paid out made up

the majority of the cash outflows

Financial Statement Limitations

Although financial statements provide a wealth of information on a company, they do

have limitations. The statements are open to interpretation, and as a result, investors

often draw vastly different conclusions about a company's financial performance.

For example, some investors might want stock repurchases while other investors might

prefer to see that money invested in long-term assets. A company's debt level might be
fine for one investor while another might have concerns about the level of debt for the

company. When analyzing financial statements, it's important to compare multiple

periods to determine if there are any trends as well as compare the company's results

its peers in the same industry.

II.

COMPANY NAME: San Miguel Corporations

SMG Story:

San Miguel Corporation (SMC) is one of the Philippines’ largest and most diversified

conglomerates, with revenues equivalent to about 4% of the country’s GDP in 2020.

Originally founded in 1890 as a single product brewery in the Philippines, SMC today

has highly integrated operations with ownership in market leading businesses and

investments in various sectors, such as beverages, food, packaging, energy, fuel and

oil, infrastructure, property development and leasing, cement, car distributorship and

banking services. SMC has a portfolio of companies that is interwoven into the

economic fabric of the Philippines, benefiting from, as well as contributing to the

development and economic progress of the nation.

Since adopting its business diversification program in 2007, SMC has channeled its

resources into what it believes are attractive growth sectors, which are aligned with the

development and growth of the Philippine economy. SMC believes that continuing this
strategy and pursuing growth plans within each business will achieve a more diverse

mix of sales and operating income, and better position SMC to access capital, present

different growth opportunities and mitigate the impact of downturns and business

cycles.

SMC is one of the nation’s largest employers, with a direct workforce of 45,522

employees as of December 2020. For each job created within the San Miguel

ecosystem, many additional jobs are generated through suppliers, distributors, retailers,

and other business partners. At present, we have more than 100 major facilities in the

Philippines, Southeast Asia, China, Australia, and New Zealand.

Through strategic partnerships forged with major international companies, we have

access to managerial expertise, international practices and advanced technology. Our

partners, notably Kirin Brewery Co., Ltd., Nihon Yamamura Glass, U.S.-based Hormel

Foods Corporation, and Korea Water Resources Corporation, are world leaders in their

respective businesses.

SMC is listed on the Philippine Stock Exchange (PSE Ticker: SMC). Publicly-listed

subsidiaries include San Miguel Food and Beverage, Inc., Ginebra San Miguel, Inc.,

and Petron Corporation.

Food and Beverage

San Miguel Food and Beverage, Inc. (SMFB) is the Philippines’ leading food and

beverage company, combining the strength of San Miguel Brewery Inc., Ginebra San

Miguel Inc, and San Miguel Foods. It has among the most recognizable and top-of-mind
brands in the industry and holds market leading positions in the food, beer and spirits

categories. Key brands under the SMFB portfolio include San Miguel Pale Pilsen, San

Mig Light and Red Horse for beer, Ginebra San Miguel for gin and Vino Kulafu for

Chinese wine, Magnolia for chicken, ice cream and dairy products, Monterey for fresh

and marinated meats, Purefoods and Purefoods Tender Juicy, for refrigerated prepared

and processed meats and canned meats, Star and Dari Crème for margarine and B-

Meg for animal feeds.

Fuel and Oil

Petron Corporation, is the largest integrated oil refining and marketing company in the

Philippines and a strong player in the Malaysian downstream oil market. Petron has a

combined refining capacity of 268,000 barrels per day producing a full range of world-

class fuels and petrochemicals to fuel the lives of millions of Filipinos and Malaysians. It

produces a full range of petroleum products including gasoline, diesel, LPG, jet fuel,

kerosene and petrochemicals.

 With the most extensive service stations around the country, Petron retail gasoline,

diesel, and autoLPG to motorists and the public transport sector. It has also partnered

with popular food and service locator chains to give our customers a one-stop, full-

service experience.

Power

Our power subsidiary, SMC Global Power Holdings Corp. (SMCGP), together with its

subsidiaries, associates and joint ventures, is one of the largest power companies in the
Philippines which currently has a combined capacity of 4,714 MW. It has a full spectrum

of three Independent Power Producer Administrator (IPPA) contracts, brownfield and

greenfield power plants. SMCGP benefits from a diversified power portfolio, including

natural gas, coal, and renewable energy, such as hydroelectric power and more

recently the battery energy storage systems (BESS). , Based on the total installed

generating capacities in the Energy Regulatory Commission Resolution on Grid Market

share Limitation, SMCGP believes that its current combined installed capacity

comprises approximately 27% of the Luzon grid, 8% of the Mindanao grid, and 20% of

the National Grid.

Infrastructure

SMC Infrastructure, our infrastructure arm, today manages the construction, operation

and maintenance of the country’s largest infrastructure network. Its current portfolio

includes: Tollroads - the Tarlac-Pangasinan-La Union Expressway (TPLEX), the

Southern Tagalog Arterial Road (STAR), South Luzon Expressway (SLEX) TR1, TR2,

TR3, Skyway Stages 1, 2, 3, and the NAIA Expressway (NAIAx); Mass Rail - Mass Rail

Transit Line 7 (MRT-7); Bulk Water - Bulacan Bulk Water Supply; and Airports -

Boracay and the Manila International Airport. SMC Infrastructure also has investments

in Manila North Harbour Port Inc. Other projects in the pipeline include SLEX-TR4,

Skyway Stage 4 and the Pasig River Expressway.

Our Vision

We are San Miguel

Guided by a strong sense of social, environmental and economic responsibility, our

businesses will lead effort on national goals, setting the pace of progress in the

Philippines.

Our Goals

San Miguel's goal is to help people enjoy and make progress in their lives through

the many products and services that our company offers. We want to give every

customer and consumer we touch access to the best we can offer—whether in terms of

quality, or affordability or choice

Our Mission

To provide goods and vital services well within the reach of every Filipino, making

everyday life a celebration.

Our Objectives

San Miguel's goal is to help people enjoy and make progress in their lives through

the many products and services that our company offers. We want to give every

customer and consumer we touch access to the best we can offer—whether in terms of

quality, or affordability or choice.

II. Income Statement

Particulars(millions 2018 2019 2020

)

Net Sales - - -
Gross Profit 171.29 181.87 199.20
Operating Income 118.11 116.76 73.26
Net Income 1,106,029,000,00 1,105,430,000,00 801,884,000,000
0 0

Series 1
120

100
NET INCOME

80

60 Series 1

40

20

NET INCOME

Figure 2. Trend Analysis