Contamina, Sendiong, Uy Group-18

St.
Paul University Surigao

St. Paul University System
Surigao City, Philippines
Financial Statement Analysis of Pan De Victoria Bakeshop in Placer, Surigao Del Norte
FINANCIAL STATEMENT ANALYSIS OF PAN DE VICTORIA

BAKESHOP IN PLACER, SURIGAO DEL NORTE
A Thesis Presented to
The Faculty of the College of Business and Technology
St. Paul University Surigao
Surigao City
In Partial Fulfilment of the Requirements for the Degree

BACHELOR OF SCIENCE IN ACCOUNTING INFORMATION SYSTEM
by:
MARY-ANN N. CONTAMINA
PAUL ULDARIC R. SENDIONG
ELLANIE GRACE C. UY
MAY 2022
ACKNOWLEDGMENT
The researchers would like to express their humble gratitude to the following people
who in a way extended their full support and assistance to make this research a successful
one.
First and foremost, to Almighty God, for all the countless blessings that He showed,
to the strength that He had given, and for the wisdom that He had gifted to the researchers.
To Mrs. Myka Bianca G. Logronio, CPA, REB, the researchers’ adviser, for the
educational guidance, valuable ideas, and sustained inspirations and for giving constructive
criticism in the making of this work into its final form;
To Dr. Erlita C. Guerra, MBA, MPA, the researchers’ instructor, for her
encouragement, intellectual advice and patience in motivating the researchers and for the
knowledge she imparted that served as useful information in conducting the study;
To the Pan de Victoria Bakeshop Manager and Owner who actively cooperated to
the fulfillment of this study during the data gathering; and
Finally, to the researchers’ parents for their peerless support, unconditional love and
for providing them everything especially financial matters.
MARY-ANN N. CONTAMINA
PAUL ULDARIC R. SENDIONG
ELLANIE GRACE UY
Researchers
ABSTRACT
This study aimed to analyze the Audited Financial Statement of Pan de Victoria
Bakeshop in Placer, Surigao del Norte year 2018-2020 and to determine the major setbacks
encountered by the bakery. The Profitability, Liquidity, and Leverage ratios were used to
interpret the data. The financial performance was determined using financial data. The data
was obtained from Pan de Victoria Bakeshop's audited financial statements, which included
the statements of financial position and comprehensive income for the fiscal years ending
2018, 2019, and 2020. The data was examined and interpreted using the profitability,
liquidity, and leverage ratios. The study's findings indicate that pan de Victoria Bakeshop
has handled its assets, liabilities, and equity well, and that it has the potential to enhance its
financial situation in the future if progress is maintained.
The company has the ability to generate additional revenue and is anticipated to do
so soon. While the company's overall financial performance remains positive, it still needs
to cut expenditures.
Keywords: Performance, profitability, liquidity and leverage ratio earnings per share
TABLE OF CONTENTS
TITLE i
ACKNOWLEDGMENT ii
ABSTRACT iii
TABLE OF CONTENTS iv
CHAPTER
1 THE PROBLEM AND ITS BACKGROUND 1
Introduction 1
Conceptual Framework of the Study 4
Statement of the Problem 6
Assumption 8
Significance of the Study 8
Scope and Delimitation 9
Definition of Terms 9
2 REVIEW OF RELATED LITERATURE 12

Synthesis of the Review 28
3 METHOD 29
Research Design 29
Participants 29
Research Instrument 29
Data Gathering Procedures 30
Ethical Considerations 30
Data Analysis 31
REFERENCES 51
CURRICULUM VITAE 67
LIST OF TABLES AND FIGURES
TABLES
1 Liquidity Ratios of Pan De Victoria Bakeshop 40

2 Current Ratio of Pan De Victoria Bakeshop 40
3 Working Capital to Total Assets of Pan De Victoria Bakeshop 41
4 Working Capital of Pan De Victoria Bakeshop 42
FIGURES
1 Schematic Diagram of the Study 5

2 Operating Profit Margin of Pan De Victoria Bakeshop 33
3 Cash Flow Margin of Pan De Victoria Bakeshop 35
4 Rate of Return on Assets of Pan De Victoria Bakeshop 36
5 Rate of Return on Equity of Pan De Victoria Bakeshop 37
6 Gross Profit Margin of Pan De Victoria Bakeshop 38
7 Profitability Ratio of the Pan De Victoria Bakeshop 39
8 Debt Ratio of Pan De Victoria Bakeshop 43
9 Equity Ratio of the Pan De Victoria Bakeshop 44
10 Debt to Equity Ratio of the Pan De Victoria Bakeshop 45
Financial Statement Analysis of Pan De Victoria Bakeshop in Placer, Surigao Del Norte 1
CHAPTER 1
THE PROBLEM AND ITS BACKGROUND
A bakery often known as a bakeshop, is a business that prepares and sells baked
goods such as bread, cake, and pastries. Bread is made up of flour, yeast, water, salt, and
sugar, these ingredients can be utilized to establish a small bakery and serve people.
The bakery sector is one of several industrial enterprises that cater to the culinary
needs of communities. Customers are more inclined to buy from bakeries since their
goods have already been part of the typical Filipino diet. Once a bakery has developed a
reputation for customer satisfaction, it can be a potential for growth and even franchising.
Bakery foods are commonly replaced for breakfast due to their ease of preparation
Pan de Victoria bakeshop is a family-owned business established by Mrs. Victoria
Vicente Ocoy on 2012 in Placer, Surigao del Norte. The pan de Victoria bakeshop is
known for its cheap, texture and delicious bread that people bring back and forth. Pan de
Victoria Bakeshop products are always fresh with distinctive taste and appearance that are
attributed to their skilled staffs and strict adherence to quality control that will satisfy
every clientele’s taste and the management ensures excellent services through its warm
and friendly staffs (Pinoyentre, 2015).
According to Johnston (2017), maintaining correct records and managing the
company's checking statement are only two aspects of small business financial accounting.
To minimize overspending and to guarantee that they are prepared for both costs and benefit
payments, management must maintain track of their accounts.
The objectives of financial statement analysis are to assess the past performance and
current position of the business, predict net income, and investors and other users interested
in analyzing the earning potential of a commercial enterprise use earnings growth prospects
to compare investment options. The risk or uncertainty connected with the projected return
is also taken into account by investors. Given that decision makers are futuristic and are
constantly concerned with the future, the prediction of bankruptcy and collapse of a
company firm is the final aim. Agarwal (2016)
Furthermore, financial statement analysis is performed in a number of ways, using
a range of instruments and procedures, according to Tofler (2015). Some of the financial
statement techniques and methodologies available include horizontal and vertical analysis,
ratio analysis, graphical analysis, trend analysis, and regression analysis. A ratio is a
mathematical expression that indicates the connection between two numbers, in this case
financial statement items. Ratios are popular because they enable easy internal and cross-
company comparison.
The primary goal of financial statement analysis is to forecast the company's
financial health by picking relevant facts from financial statements. This may be performed
by searching for patterns in main financial data, comparing financial data across firms, and
evaluating key financial metrics. Another important aspect of financial analysis is
comparing current financial concerns to future financial conditions. Expected circumstances

can be described using one of three methods: (1) preset criteria, (2) previous performance,
or (3) competition or industry average performance.
Ratio analysis is computed using the company's income statement and balance sheet.
Financial ratios are instruments for investing and analyzing relationships between various
types of financial data. Financial ratio analysis may help small firms. If management does
a thorough financial ratio analysis using comparable data, they will get a great deal of insight
into the company's financial status and will be able to make the necessary financial changes
to enhance performance. Auerbach (2017) stated that financial ratios research would
provide managers with a better grasp of their company's current financial health as well as
its potential. This financial analysis ratios can be used to compare current business
performance to earlier periods of time, such as the previous quarter or years before, this can
assist management in identifying problems that need to be addressed. Peavler's (2016),
In view of the aforementioned, the researchers decided to conduct a study to evaluate
the financial accounts of Pan De Victoria Bakeshop in Placer, Surigao del Norte. It is to
comprehend the company's overall financial performance and give recommendations for
how to improve it. This analysis uses certified financial accounts for the years 2018, 2019,
and 2020. The data acquired is still relevant to the current year since it helps the firm
recognize prior activities and may provide them an indication that their business is having
troubles in a specific area.

Conceptual Framework of the Study
This study was founded on Cabrera's (2018) thesis, which said that financial
statements analysis included the meticulous selection of data from financial statements for
the primary objective of anticipating the company's financial health. This was done by
studying important financial ratios and patterns in crucial financial data. Another crucial
part of financial analysis was the comparison of current and predicted financial situations.
Expected circumstances might be indicated by (1) preset criteria, (2) previous performance,
or (3) rivals' or industry average performance.
Figure 1, the schematic diagram of the study on the financial statement analysis of
Pan De Victoria. The first box is the audited financial statement for the year 2018,2019 and
2020 of Pan De Victoria Bakeshop in Placer. The second box comprises the variables
considered in the Analysis of Financial Statement of Pan De Victoria Bakeshop Years 2018
to 2020 in terms of Profitability Ratios, Liquidity Ratios and Leverage Ratios. The Proposed
Recommendation for Business Improvement is shown in the third box.

Analysis of Financial
Statement of Pan De
Victoria Bakeshop in
Placer, Surigao del
Norte
• Profitability Ratio Proposed Possible

Financial - Operating Profit Margin
Statement of Pan Actions and
De Victoria - Cash Flow Margin Recommendations to
Bakeshop for Year - Rate of Returns on
2018-2020 Assets Improve the
- Rate of Return on Equity Company’s
- Gross profit margin
Operations
• Liquidity Ratio
- Current Ratio
-Working Capital to Total
Asset
- Working Capital
• Leverage Ratio
- Equity Ratio
- Debt Ratio
- Debt to Equity Ratio
Figure 1. Schematic Diagram of the Study

Statement of the Problem
This study focused on the Analysis of Financial Statement of Pan de Victoria
Bakeshop in Placer, Surigao del Norte for years 2018 to 2020.
Specifically, it answered the following questions:
1. What are the results of the profitability ratio analysis of Pan de Victoria Bakeshop in
terms of:
1.1. Operating Profit Margin;
1.2. Cash Flow Margin;
1.3. Rate of Returns on Assets;
1.4. Rate of Return on Equity; and
1.5. Gross Profit Margin?
2. What are the results of the liquidity ratio analysis of Pan de Victoria Bakeshop in terms
of:
2.1. Current Ratio;
2.2. Working Capital to Total Assets; and
2.3. Working Capital?

3. What are the results of the leverage ratio analysis of Pan de Victoria Bakeshop in terms
of
3.1. Debt Ratio;
3.2. Equity Ratio; and
3.3. Debt to Equity Ratio?
4. Based on the results of the study, what possible actions and recommendations can be
proposed to improve the company’s operation?

Assumption
The study assumed that the firm has a healthy financial performance in analyzing
the financial statements in terms of knowing their past performance, growth and future risk
in their business.
Significance of the study
The findings of the study will be relevant to the entity's financial statement analysis.
Specifically, this will benefit to the following:
Proprietor. The study’s findings will help the owner make business decisions.
Manager. The study's final result will assist the management in determining whether
they are making the optimal selection for their company's operations. The management will
be able to examine how their financial statement reflects on their firm activities with the use
of financial statement analysis. They can make better financial decisions to develop a long-
term, sustainable business. Finally, by conducting this study, the manager will be able to
inform the proprietor of a favorable conclusion, offering insight into what will occur in the
future.
Accounting students. The results of this study will assist students in learning more
about financial statements and, in particular, financial ratio analysis.
Future researchers. The study will be useful as a guide for prospective researchers
who want to do further research on financial statement analysis.

Scope and Delimitation of the Study
This study focused on the Analysis of Audited Financial Statement of Pan de
Victoria Bakeshop in Placer, Surigao del Norte for the years 2018, 2019 and 2020, which
endeavoured to aid the owner in making decisions by informing them of the potential impact
of financial statement analysis on their company. Thus, the participants of the study were
the persons who is directly involved in the daily operations of Pan De Victoria Bakeshop,
the owner, manager, and the accountant. This study was carried out throughout the school
year 2021-2022.
Definition of Terms
Probability Ratio. This is a financial indicator used to measure a company's ability
to generate revenue versus the expenses and other costs associated with generating revenue
over a period of time. The company's net income is represented by this ratio.
Operating Profit Margin. It is a profitability or performance ratio that represents the
percentage of profit generated by a company's operations before taxes and interest charges
are deducted. t is calculated by dividing total revenue by operating profit.
Returns on Assets. It is a profitability ratio that determines how well a company
generates income from its assets.
Returns on Equity. It is a measure of financial performance determined by dividing
net income by equity. Since a company's assets minus its liabilities equal its equity, the
return on net assets is called ROE.

Cash Flow Margin. It's a profitability ratio that calculates your company's cash from
operations as a proportion of sales revenue over a certain time period. Simply said, it's a
representation of your company's ability to transform revenues into cash.
Gross profit margin. Refers to an analytical metric used to assess the financial health
of a business by calculating the amount of money remaining from product sales after
deducting the cost of goods sold (COGS).
Liquidity Ratio. It is a financial ratio used to assess a company's ability to meet its
current debts.
Current Ratio. It is one of two key liquidity ratios used to determine if a company
has enough cash or similar current assets to pay its debts as they become due. Liquidity
ratios, in other words, are concerned with a company's solvency.
Working Capital to Total Asset. It refers to a metric that evaluates the ability of a
company to meet short-term financial obligations.
Working Capital. It refers to the money that a corporation has accessible for day-to-
day operations. Working capital simply refers to a company's operational liquidity and
efficiency.
Leverage Ratio. It refers to financial measurements used to determine the amount of
debt loan a firm has taken on its assets or equity. A high ratio shows that the company has
taken on more debt than it can service, and that it will be unable to meet the commitments
with current cash flows.

Debt Ratio. It refers to financial ration that shows proportion of all assets that are
financed with debt.
Equity Ratio. It pertains to a leverage ratio that measures the portion of company
resources that are funded by contributions of its equity participants and its earnings.
CHAPTER 2
REVIEW OF RELATED LITERATURE
This part of the study presents the literature and readings which are the foundation
of the present study. The discussions below come from the internet, books, unpublished
thesis, and essential sources are presented in this section.
Baking Industry
One would feel that getting started in the banking sector is the most challenging part.
Sure, it takes a lot of effort, and it may result in a few restless nights and anxiety. However,
once a bakery has been founded, surviving the competition will become the key concern.
Furthermore, his goal is to become a destination for those looking for wonderful pastries,
not only to stay afloat. He wants to earn a profit as a bread business. This will need precise
attention to his money, records, and inventory, but one part of the business that is often
forgotten is marketing. Regardless matter what items his bakery specializes in, such as
croissants, donuts, buns, bread, nutritious gluten-free pastries, miniature pastries, and so on,
he should have a sound marketing and sales plan. It would be tough to attract new customers,
increase bakery sales, and raise brand awareness otherwise.

When launching a bakery, one must determine who their target market is and how
they will be reached utilizing a bakery marketing plan. This enables him to select a suitable
business location and evaluate how much potential customers are ready to pay for his
delectable treats. His business plan should also contain market research and a bakery market
analysis to demonstrate potential investors that his firm has the ability to flourish.
The "Bakery Cafe Consumer Trend Report," published by day economics, provides
some positive news for bakery-café owners and operators. According to the report in an
article published in Nation's Restaurant News, 43 percent more people have visited a bakery
since 2008. Seventy-two percent of those surveyed said they visit bakeries at least once a
month. "...the most typical reasons stated by consumers who do not visit bakery-cafés have
to do with location and unfamiliarity," according to the article. Health, enjoyment, and
convenience are the three main principles of bread, bakery, and pastry innovation. This
article examines the influence of culinary trends on bread and other baked items. Bread and
bakery are not only a complement to the meals served in famous chefs' restaurants, but also
a significant component of new cuisine and unique offers.
Financial management for a small firm, according to Johnston (2017), requires more
than merely keeping accurate accounts and balancing the company's checking account. To
avoid overspending and to guarantee that they are prepared for any costs or profit
distributions, management must keep track of their money. Their financial management
responsibilities affect every aspect of their business. A company that sells well but manages
its finances poorly risks going out of business. Everything that happens within a company
in order to keep it running and making money is referred to as business operations. Business
operations analysis, as described by Business Encyclopedia (2015), refers to the necessity
to examine and analyze business operations on a regular basis to identify inefficiencies and
improve communication once a company has been created, particularly during a period of
rapid expansion.
According to Valix (2016), financial statements are the regular delivery of data
obtained and processed in financial accounting to clients. Financial statements are
comprehensive financial representations of a company's financial condition and
performance. Financial statements, according to Cabrera (2015), are documented records of
an entity's financial activity. They are written reports that quantify the financial impact of a
business's activities and events. The financial statements include the balance sheet, the
income statement, the statement of changes in equity and the cash flow statement.
Users of financial statements can utilize the statement of financial position to
determine an entity's financial health. When analyzed across numerous accounting periods,
balance sheets can reveal underlying trends in an entity's financial status. It's particularly
beneficial for assessing the entity's liquidity risk, financial risk, credit risk, and business
risk. The balance sheet, when combined with the entity's other financial statements and the
financial accounts of its competitors, can help identify links and trends that signal potential
problems or chances for improvement. By evaluating the statement of financial position,
users of financial statements may be able to predict the amount, timing, and volatility of
future earnings. 2016 (Accounting-Simplified.com).
According to Firm Encyclopedia (2015), after a corporate is founded, it is
important to routinely examine and analyze business processes to uncover inefficiencies and
enhance coordination, especially following a growth spike. According to Eagle Business
Solutions, market operations research is an empirical assessment method used to clarify and
enhance operational procedures (2017). It's a method for evaluating a company's present
and past performance objectively. It assesses productivity in terms of specific expenses,
procedures, and infrastructure. It also considers how objectives might be met in a more
efficient and cost-effective way. According to Schneider (2017), financial statements depict
the company's revenue and financial position. The four most essential reports generated by
publicly traded companies are the balance sheet, financial statement, cash flow statement,
and statement of changes in equity.
Financial analysis determines an organization's health and viability. Consumers
may receive a natural picture of how the firm works by looking at the data, according to
Griffin (2017). Financial statement analysis is the process of appropriately comparing a
balance sheet with the profit and loss account to assess a company's strengths and
weaknesses. This analysis will aid the company's quantitative analysis and decision-making,
and as Anastasia (2015) stated, this method of reviewing financial accounts allows for better
economic decision-making. Furthermore, the major purpose of financial statement analysis
is to utilize past data to estimate how a company's performance will change in the future
and to identify and resolve potential problem areas. The financial statement analysis would
be used by the company's management to make choices about the company's operations.
To make educated judgments, many business owners and managers use
sophisticated analytic tools to extensively review their company's financial statements.
(Vitez, 2017).
According to Agarwal (2016), the goals of financial statement analysis are to
evaluate a company's past performance and current position, predict net income and
earnings growth prospects, which are used by investors to compare investment opportunities
and by other users to assess a company's earning potential The risk or uncertainty associated
with the predicted return is also taken into account by investors. Given that decision makers
are futuristic and always focused on the future, the ultimate goal is to foresee a company's
insolvency and collapse.
Financial Ratios
Financial ratios allow a corporation to understand the percentage of a certain activity
to overall financial success (Delen et al, 2013). Financial ratios are a common method of
analyzing financial statements. These ratios employ financial data from a company's books
to provide economic indicators that may be compared to a rival or an industry standard.
Liquidity, asset turnover, financial leverage, and profitability are all measured using
financial ratios. Liquidity ratios are used to analyze a company's ability to satisfy its short-
term financial obligations. Asset turnover ratios reflect how efficiently a business uses its
assets to generate revenue. Financial leverage ratios are used to analyze the long-term
profitability. Businesses use profitability ratios to figure out how much money they gain
from selling various goods and services. (Vitez, 2017).
Ratio Analysis is a useful technique with a number of advantages. Financial
statements provide straightforward information. It's simpler to compare firms of various
sizes when you use ratios. Ratios can be used to evaluate a company's financial performance
to industry benchmarks. Ratios may also be used in trend analysis to see if performance has
improved or declined over time. It is based on accounting data; however, it is limited in its
use due to financial statement distortions induced by variables such as Historical Cost
Accounting and inflation. As a result, ratio analysis should only be used as a first stage in
financial research to gain a quick sense of a company's performance and to identify areas
that require more inquiry. (Lane, 2017)
Financial ratios are divided into five categories. Liquidity or solvency ratios assess
a company's ability to repay short-term debt. As a result, they focus on the balance sheet's
current assets and liabilities. Financial leverage, also referred to as debt ratios, is a metric
used to analyze a company's ability to satisfy long-term financial obligations. It examines

the balance sheet's long-term commitments, such as bonds. Asset efficiency, often known
as turnover ratios, measures how well a corporation uses its assets to create revenue. As a
result, the income statement (sales) and the balance sheet are given special attention (assets).
The profitability ratio assesses a firm's ability to profit while maintaining an acceptable
return on assets and equity. They evaluate how well the firm manages its resources and runs
its operations. Market value ratios for publicly traded companies may only be calculated in
relation to stock price. (Peavler, 2016)
Liquidity or Solvency Ratio
Liquidity refers to a company's ability to meet current liabilities as they come due.
The ability of a person to convert activities into cash or generate money in another way is
referred to as liquidity. (Mayo, 2012). We may study and measure the amount of capability
of a computer hardware store corporation to satisfy their liabilities when they mature using
the liquidity ratio.
The liquidity ratio assesses the capacity of a company to meet its financial
obligations in the short term. Ready Ratios (2017) According to the definition, this ratio
examines a company's capacity to pay off its short-term debts as they become due. The
ability of a corporation to repay current and long-term debt when it matures is measured by
liquidity ratios. In other words, this ratio reflects a company's cash position as well as its
ability to convert other assets into cash in order to pay down liabilities and other current
commitments. (My Accounting Course, 2017)

Current ratio
The current ratio is one of the most fundamental liquidity measures. It evaluates a firm's
ability to repay current creditors with current assets (Accounting Explained, 2013).
According to Siddiqui (2015), a company's current ratio is a measure of its short-term
liquidity. It is often used to determine if a company has enough cash on hand to satisfy its
obligations over the following 12 months. The current ratio ensures that the company's
short-term liabilities (debt and payables) are covered by its short-term assets. This approach
evaluates a company's capacity to pay outstanding liabilities by the maturity date. This is
calculated by dividing current assets by current liabilities.
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 =
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
We shall be able to measure the capacity of computer hardware retailers to satisfy
their current liabilities with their assets using the current ratio. This aids in determining
management's capacity to plan and set aside funds for maturing loans.
It is due to the opinion that the higher the current ratio, the greater the capacity of the
company to fulfill its short -term obligations. A current ratio of several shows that the
current assets of the company are superior to its current liabilities. A current ratio of 2 to 1
or higher is generally considered sufficient. It shows that the company's current assets
exceed its current liabilities. The current ratio can also be used to determine if a
company will be able to meet its creditors' expectations. A high current ratio,
according to this method, suggests that the company will be able to meet its creditors'
demands. However, a current ratio of less than one is not a positive indicator for the
firm since it implies that the company has no assets to cover its creditors, which
might lead to bankruptcy (Business and Finance, 2015).
Working Capital to Assets
The Working Capital to Total Assets ratio, according to Financial Analysis Hub
(2017), assesses a company's capacity to meet short-term financial obligations by comparing
Total Current Assets to Total Assets (Total Current Liabilities). This ratio may represent the
proportion of remaining liquid assets to total assets (after subtracting Total Current
Liabilities), which might give insight into the company's liquidity.
The working capital to total asset ratio is one of the most highly watched financial
indicators by investors, business owners, and other stakeholders. A high ratio of net working
capital to total assets indicates a company's ability to pay its trade payables on time.
Suppliers like to do business with such companies since they are more likely to pay on time.
Because sales revenue is generated quicker than payments for raw materials and other
services, the company may have a high working capital-to-total assets ratio. It's also likely
that the company isn't getting the most out of its cash reserves. Companies strive to
minimize working capital levels as much as possible, with the goal of achieving zero
working capital. (Bright Hub, 2011)
Even though a firm is profitable and has sufficient assets to fulfill its liabilities, a low
working capital to total assets ratio typically indicates that the company is having difficulty
paying its suppliers and creditors. The low ratio might be the result of persistent operational
losses owing to faulty sales, which drain working capital reserves, causing them to decline
in comparison to total assets, indicating impending insolvency or disaster. In contrast, a low
or negative ratio may imply that a zero-working-capital plan should be implemented. 2011
(Bight Hub).
Financial Leverage or Debt Ratio
Financial leverage, according to Agamata (2014), refers to a company's strategy of
utilizing creditors' money to fund its investment and operational operations. Debt Ratio is a
financial ratio that indicates a company's financial leverage, according to My Accounting
Course (2017).
The debt-to-equity ratio is used to determine how much risk a company is ready to
assume. Low risk is desired since it indicates a more self-sufficient business that does not
rely heavily on borrowed capital and hence is more financially stable. The debt-to-equity
ratio of these firms will be low (below.5 or 50%), indicating that the bulk of their assets are
entirely owned (not funded by debt). When a corporation's risk level is high and its debt
ratio is high, it means the company has taken on a lot of danger. When a company's debt
ratio is high (more than.5 or 50%), it is considered to be "highly leveraged," implying that
debt rather than equity is utilized to fund the bulk of its assets. In certain circumstances, a
high debt ratio indicates that a firm may be in trouble if its creditors demand repayment of
their loans unexpectedly. This is one of the reasons why a lower debt-to-income ratio is
often preferred. Companies should compare themselves to the industry average or direct
rivals to obtain a suitable debt ratio. (2017, Debitoor)
Equity Ratio
The equity ratio is a measurement of a company's leverage. This is accomplished by
comparing the total amount of invested assets to the total amount of equity. If the
computation yields a high result, it indicates that management has avoided utilizing debt to
meet the entity's asset requirements, which is a smart strategy. A low ratio, on the other
hand, shows that the assets were purchased with a big amount of debt. A low equity ratio
isn't always a bad thing. It means that if a company is profitable, the return on investment
is high since investors did not have to spend a huge sum of money in proportion to the profit
made. A low equity ratio makes it simpler for a company to an industry with little variation
in sales and earnings over time. In a highly competitive firm with constantly shifting market
share, on the other hand, a low equity ratio may be a bad option. Potential investors and
creditors like a high equity ratio since it implies that the company is well-managed and pays
its debts on schedule. 2014 (Accounting Tools).

The closer a company's shareholder equity ratio gets to 100%, the closer it is to self-
funding all of its assets. A thriving firm with a low equity ratio has a higher return on
investment since a lower quantity of total equity generates a higher return. Investors often
favor a higher ratio since it shows a more careful approach to debt management. A higher
value implies that a large number of shareholders feel the company is a worthwhile
investment, while also notifying potential creditors that the company is a good credit risk.
Wealthy Education, 2017
Debt to Equity Ratio
The Debt-to-Equity Statistic is a long-term solvency ratio that assesses a company's
long-term financial practices. Creditors and shareholders both contribute equally to the
company's assets when the debt-to-equity ratio is 1 (or 1:1). A ratio of less than one means
that the portion of assets supplied by shareholders is bigger than the part provided by
creditors, while a ratio of more than one means that the portion of assets provided by
creditors is more than the portion provided by stockholders. Creditors like a low debt-to-
equity ratio since it shows that their money is better safeguarded (less than 1). However,
shareholders like to profit from cash given by creditors, therefore a high debt to equity ratio
is desirable. For the most part, a 1:1 ratio is deemed adequate by most businesses.
(Accounting for Management, 2012).
According to Business Literacy, the debt-to-equity ratio is a favorite among bankers
(2017). It is used to assess whether or not to lend money to a firm. According to Saint-Leger
(2016), a high debt-to-equity ratio puts a firm in jeopardy regardless of industry. Investors
are concerned about the ratio since multiple missed interest payments might lead to the
company's financial collapse.
Profitability Ratio
According to Agamata (2014), the profitability ratio is used to assess a company's
potential to create profit from sales, investments, assets, and ordinary shares outstanding.
According to the definition, a profitability ratio is a measure of profitability used to evaluate
a company's performance. It is a statistic that evaluates a company's ability to profit from
its expenditures and other costs over time.
Since the primary goal of every firm is to make money. Profitability ratios will assist
the company in achieving a larger profit. Financial managers will advise strategies for the
company to grow in order to maximize profits. It is also up to the financial manager's
abilities to spot and analyze chances that can help the company make more money and
minimize losses. We may gather additional proof and data with the aid of the profitability
ratio to evaluate computer hardware stores and offer solutions to improve the company's
financial performance.
Operating Profit Margin
The operating profit margin indicates how profitable a company's operations are
(Peavler, 2017). In general, a small business with a high, positive operating margin is
desirable, according to Keythman (2017). The operational margin may be negative if the
firm is new or has a bad quarter or year. The lower the figure, the better when it comes to
negative operating margins. The larger the negative percentage, the greater the operating
loss. When a firm loses more money in operations than it makes in sales, the owner must
pay operating expenses with cash reserves, earnings from asset sales, or new investment.
Non-operating costs must be covered since operational profit and operating margin are
determined before interest and taxes.
In general, a higher operational profit margin is preferable since it indicates greater
profit potential and provides better protection against increases in competition or costs. A
change in the operating profit margin ratio might be due to a number of causes, including
A) an increase in the operating profit margin ratio and a reduction in the gross profit margin
ratio Fixed overheads (e.g., management wages, office rent, etc.) are dispersed over a higher
number of sales units, resulting in a reduction in the proportion of non-production overheads
owing to economies of scale. A higher operational profit margin and a higher gross profit
margin ratio. Its probable reason is a growth in sales volume, which causes economies of
scale to reduce the percentage of both production and non-production costs. C) Lower
operational profit margins and higher gross profit margin ratios. Its possible cause is
increase in the proportion of selling, general and administrative expenses (e.g
advertisement, management salaries, rent) due to recent expansion of business into new
markets whose revenue potential has not yet been realized. D) Decrease in operating profit
margin ratio and decrease in gross profit margin ratio. Its possible causes are operating
inefficiencies (e.g., overstaffing, lower productivity, poor cost control) (Accounting
Simplified, 2017).
Cash Flow Margin
According to Dave Clarke (2015), it is one of the most commonly used profitability
ratios. It is a metric that determines how much money a firm generates from its operations
for every dollar of sales it gets. It illustrates how well (or poorly) the company transforms
its activity into cash. Although there is no one-size-fits-all ideal ratio for any organization,
the bigger the cash flow margin, in general, the better. If this ratio grows over time, it
indicates that the firm is improving its ability to convert sales earnings into cash flow. One
strategy to boost cash flow is to reduce the payment period for accounts receivable. Putting
off purchasing investments and deferring payment of accounts payable are two strategies to
save money. Late payments, on the other hand, might harm your creditor relationships and
result in fines.
Rate of Return on Assets
This indicator shows how much profit they generate per dollar invested in assets.
The higher this number is, the more efficient the company is with its resources. Return on
asset is meaningless when comparing sectors, companies within sectors, or even
organizations within the same industry. Even though a firm is in the same industry, that does
not imply it will offer the same product or service (Tim Ord, 2011)
Internally, firms use ROA to examine asset utilization over time, evaluate the
company's performance in relation to industry performance, and compare different activities
or divisions, according to a source from Inc. (2021). In order for this to be done properly,
accounting systems must be in place to accurately allocate assets to different processes.
Both good asset use and undercapitalization can be indicated by ROA. If the ROA begins
to climb in line with the industry as a whole, and management is unable to pinpoint the
precise efficiencies that generate profitability, the positive signal might be interpreted as a
negative: new equipment investment may be overdue.
Rate of Return on Equity
The rate of return on equity (ROE) assesses a company's profitability in accordance
to the amount of money invested by a shareholder. Internal cash production is more
successful for a corporation with a high return on equity. Investors are constantly on the
lookout for companies that have high and rising returns on equity. A company's success is
proportional to its ratio (Strategic CFO).
Gross Profit Margin
Gross profit margin is a measure used to evaluate the performance of a company's
manufacturing process. A higher percentage of the gross profit margin suggests that a
company's products are manufactured more efficiently. A financial manager may compare
a company's gross profit margin to other companies in the same industry or across time.
Carlson's (Carlson, 2020)

The gross profit margin is a financial indicator used by executives to evaluate the
efficiency of a company's manufacturing process for a single product or group of products.
One product's manufacturing and sale may be more efficient than another's. The gross profit
margin for each individual product can be calculated as long as the company can distinguish
the direct costs of making one product from the others. On a company's revenue statement,
the cost of goods sold accounts for the direct costs of manufacturing its items. Direct costs
are those related with a specific cost item, such as a product, department, or project (Carlson,
2020)
Synthesis of the Review. The above related studies have significant bearing to the
present study in as much as they discuss financial statement analysis of the business which
is closely related to improve financial management performance of the business. The
profitability ratio, and leverage ratio are the topics of concern in both the present study and
those reviewed and cited studies.

CHAPTER 3
METHODOLOGY
This chapter presents the research design, participants of the study, research
instruments, and data gathering procedure, ethical considerations, and data analysis.
Research Design
This study applied a quantitative documentary analysis which considered as an
appropriate tool in gathering information to analyze business operations specifically the
audited financial statements of Pan de Victoria Bakeshop in Placer, Surigao del Norte. The
result of the study was deemed to contribute for the improvement of Pan de Victoria
Bakeshop.
Participants
The participants of the study were the proprietor, manager, and the accountant for
the preparation of financial statements of Pan de Victoria Bakeshop. Purposive sampling
method was used for the selection of participants for they are more knowledgeable in the
financial operations of the business.
Instrument
The instruments used in this study are the Statement of Financial Position, Statement
of Financial Performance, Statement of Changes in Owner’s Equity and Statement of Cash
Flows of Pan de Victoria Bakeshop in Placer, Surigao del Norte.

Data Gathering Procedure
The researchers sent a letter of request signed by the instructor and adviser asking
permission to conduct the study of Pan de Victoria Bakeshop in Placer, Surigao del Norte.
After receiving acceptance letter, the researchers went to Pan de Victoria Bakeshop to gather
the audited financial statements for the years ended 2018 to 2020.
Ethical Consideration
The researchers considered the following ethics during the research:
• The researchers considered the ethics in conducting the study to ensure the
protection of Pan de Victoria Bakeshop privacy.
• The researchers politely asked for the full consent of the participants of this
research study.
• Any type of communication in relation to the study was done with transparency.
• The protection of the Pan de Victoria Bakeshop privacy ensured by the researcher
and results of this study is confidential to respect and protect their privacy.
Data Analysis
The data was analyzed using the following financial statement analysis tools:
Profitability Ratio. It measured the firm's overall success as well as the consistency
with which it manages cash, liabilities, and equity.
Operating Profit Margin. It was used to determine by dividing a firm’s net revenue
by its gross profit (GP). Return on Assets Rate (ROA). This figure was calculated by
dividing net profit by average gross assets.
Cash Flow Margin. It was employed by multiplying net sales by the cash flow from
corporate operations.
Rate of Return on Equity. It was calculated by dividing net income by average
ordinary equity.
Gross profit margin. It was used to calculate a company's profitability as gross profit
as a percentage of revenue.
Liquidity Ratio. It was used to assess a company's ability to satisfy unexpected cash
needs.
Current Ratio. It was used to measure a company's ability to meet its short-term or
one-year obligations.
Working Capital to Total Asset. It was used to compare a company's Total Current
Assets to its Total Assets to determine its capacity to fulfill its short-term financial
obligations (Total Current Liabilities).
Working Capital. It was used to show what would be left over if a corporation used
all of its short-term resources to pay down all of its short-term commitments. It is more
trustworthy than virtually any other financial ratio or balance sheet calculation.
Leverage Ratio. It was used to calculate a company's debt in relation to its equity,
as well as its ability to finance interest and other fixed costs such as rent and sinking fund
payments.
Debt Ratio. It was used to measure the amount of leverage used by a company in
terms of total debt versus total assets.
Equity Ratio. This was used to determine the amount of investor-funded assets of a
company.
Debt to Equity Ratio. It is calculated by dividing a company's total liabilities by its
equity and has been used to measure financial leverage.

CHAPTER 4
RESULTS AND DISCUSSION
This chapter presents the results and discussions of the data gathered in this study.
Profitability Ratio as to Operating Profit Margin
Operating Profit Margin

20% 19%
18%
16%
14% 14%
14%
12%
10%
8%
6%
4%
2%
0%
2018 2019 2020
Figure 2: Operating Profit Margin of Pan De Victoria Bakeshop for the Years 2018,
2019 and 2020.
Based on the Figure 2 given, the operating profit margin in 2018, 2019 and 2020
were 14%, 19% and 14%, respectively. In years 2018 and 2020, the figure shows that the
operating margin was not on the average percentage of having a good result since an
operating margin higher than 15% is considered good (Girsch-Bock, 2020). Whereas, in
2019, it had a high operating profit margin of 19%. This was the only year that the company
had the necessary requirement based on its operating margin to survive market challenges
or an economic crisis. As a higher operating margin indicates that a company is better able
to survive market challenges or an economic crisis (Girsch-Bock, 2020). The graph presents
the decline of profits in its business operations to pay its business expenses. A higher
operational margin shows that the company earns enough money from business operations
to cover all of the associated costs of running that business (Girsch-Bock, 2020).
Cash Flow Margin

0.35
0.3
0.3
0.25
0.25
0.2
0.16
0.15
0.1
0.05
0
2018 2019 2020
Figure 3: Cash Flow Margin of Pan De Victoria Bakeshop for the Years 2018, 2019
and 2020
It can be gleaned from Figure 3 that the results of years 2018-2020 were 0.3, 0.25
and 0.16, respectively. It is clearly seen on the graphs that there was a decline on its cash
flow margin. It explains that the company was having problems in converting its earnings
from its sales to cash flow. It was also observed that the decline on its cash flow margin was
starting to increase from 0.05 difference from year 2018-2019 and a 0.09 difference from
2019-2020. It is plausible that an additional of either employee or an additional equipment
may have affected the business’ cash flow margin. Additional workforce or a new bought
equipment may have negative result in its operating activities.

Rate of Return on Assets

25%
23%
22%
20%
15%
12%
10%
5%
0%
2018 2019 2020
Figure 4: Rate of Return on Assets of Pan De Victoria Bakeshop for the Years 2018,
2019 and 2020
Based on the information provided in Figure 4, it shows that during 2018 the rate of
return on assets was 12% and then there was a sudden spike in 2019 which was 22%
obtaining 10% difference. Similarly, in 2020, the rate was 23% leading to increase by 1%.
It clearly shows that there was a steady increase in the company’s percentage of profit by
making use of the company’s assets. According to Ord (2011), the higher this number is the
more effective the company is in utilizing its assets.

Rate of Return on Equity

0.25
23%
22%
0.2
0.15
12%
0.1
0.05
0
2018 2019 2020
Figure 5: Rate of Return on Equity of Pan De Victoria Bakeshop for Years 2018, 2019
and 2020
Figure 5 shows that the entity had a rate of return on equity in 2018-2020 of 12%,
22% and 23%, respectively. The higher the ratio, the better a company is. (Strategic CFO,
2013). In 2019, the Pan De Victoria Bakeshop had 22% rate of return on equity obtaining
10% increase from 2018. This shows that the entity was starting to effectively make use of
the company’s equity.

Gross Profit Margin

0.45
39%
0.4
0.35
31% 31%
0.3
0.25
0.2
0.15
0.1
0.05
0
2018 2019 2020
Figure 6: Gross Profit Margin of Pan De Victoria Bakeshop for Years 2018, 2019 and
2020
Figure 6 shows the result of the entity’s gross profit margin with 31% in 2018, 31%
in 2019 and 39% in 2020. Gross profit margin is a measure of the efficiency of a firm's
production process (Carlson, 2020). So, based on the data given on the graph, the entity’s
efficiency on its production process was stagnant for years 2018 and 2019. While in year
2020, it increased by 8% which shows that the entity’s efficiency on its production processes
increased.
Profitability Ratio
0.45
0.4
0.35 0.39
0.3
0.3 0.31 0.31
0.25
0.25
0.2 0.22 0.23 0.22 0.23
0.15 0.19
0.16
0.1 0.14 0.14
0.12 0.12
0.05
0
Operating Profit Cash Flow Margin Rate of Return on Rate of Return on Gross Profit Margin
Margin Assets Equity
2018 2019 2020
Figure 7. Profitability Ratio of the Pan De Victoria Bakeshop in Placer, Surigao Del
Norte for the Years Ended December 31, 2018 to 2019 and 2019 to 2020
The overall results of the profitability ratio are presented on Figure 7. It is observed
that due to an additional workforce or a hired employee, the company’s gross profit
increased than what it used to in 2018 and 2019 as shown on the Gross Profit Margin;
however, due to the increase of its gross profit, the company was starting to have its decline
on its availability to convert its earnings to cash flow all because of the additional operating
costs on its daily operations. As can be gleaned from the graph, the cash flow margin results
are on the down turn which explains that costs were also increasing so as sales.
Liquidity Ratios
Table 1. Liquidity Ratios of Pan De Victoria Bakeshop in Placer, Surigao Del Norte
for fiscal years 2018-2020
Liquidity Ratio 2018 2019 2020 Average
1 Current Ratio 73.22 202.68 158.18 144.69
2 Working Capital to 0.75 or 75%

0.75 or 75% 0.77 or 77% 0.73 or 73%
Total Assets
3 Working Capital ₱933,391.00 ₱1,008,391.0 ₱785,891.00 ₱909,224.33
Liquidity Ratio as to Current Ratio
Variable Parameter Qualitative Description
Current Ratio 2.0 and If the ratio is too high, the company is more than able to
above cover its current short-term liabilities.
1.0 The company has adequate funds to cover its current short-
term liabilities.
0.99 below The company is not able to cover its current maturing
liabilities.
Table 2. Current Ratio of Pan De Victoria Bakeshop for the year 2018 to 2020
The result of the Financial Statement Analysis of Pan De Victoria Bakeshop in
ascertaining its liquidity for years 2018-2020 is shown in Table 1. In terms of current ratio,
the highest quotient was found in the year 2019 with ratio of 202.68, qualitatively showing
as more than able to cover its current short-term liabilities. Whereas in 2018, based on the
table shown it had the lowest ratio, a ratio of 73.22 and qualitatively described as more than
able to cover its current short-term liabilities.
Liquidity Ratio as to Working Capital to Total Assets
Working Capital to 0-100% The higher the value the more effective
Total Assets the company liquidates its total assets and
distributes resources employed.
Table 3. Working Capital to Total Assets of Pan De Victoria Bakeshop for the year
2018-2020
In terms of working capital to assets, the highest ratio was found in the year 2019
having a result of 77%. This means that this was a result of a highly effective value of how
much the business firm liquidated its total assets, while the lowest was found in the year
2020 obtaining 73% which means it had also a high enough result. While in 2018, it had a
result of 75% which was also the average result from years 2018-2020. So, based on the
three results, it shows that it was more than effective in liquidating the company’s total
assets.
Liquidity Ratio as to Working Capital
Working Capital N/A The lower the value the more efficient the
company employs its assets to generate revenue.
Table 4. Working Capital of Pan De Victoria Bakeshop for the year 2018 to 2020
The business’ working capital for years 2018, 2019 and 2020 were ₱933,391.00,
₱1,008,391.00, and ₱785,891.00, respectively gaining an average of ₱909,224.33. This
shows the extra amount of current assets the business had after paying off its current
liabilities. So, based on the results, during the year 2019, it got the highest result of
₱1,008,391.00, while the lowest result was in 2019 with the result of ₱785,891.00.
Leverage Ratio as to Debt Ratio
Debt Ratio
Debt Ratio 0
0.01
0 0.002 0.004 0.006 0.008 0.01 0.012

Debt Ratio
2020 0
2019 0
2018 0.01
2020 2019 2018
Figure 8. Debt Ratio of Pan De Victoria Bakeshop in Placer Surigao Del Norte
Figure 8 shows that the Pan De Victoria Bakeshop had a Debt ratio of 0.01 in 2018,
0. 00 in 2019 and 0.00 in 2020 which indicates that their Bakeshop is far from being into
financial insolvent as the ratio close to 0 or being 0 itself is an indication of stable financial
condition and it also indicates that the business debt is lesser than the amount of its assets.
(Charles Lutwidge, 2020).

Leverage Ratio as to Equity Ratio
Equity Ratio
1.002
1
1
0.998
0.996
0.994
0.992
0.99
0.988
0.986
0.984
Equity Ratio
2018 0.99
2019 1
2020 1
2018 2019 2020
Figure 9. Equity Ratio of the Pan De Victoria in Placer, Surigao Del Norte
The entity also had an equity ratio of 1 in 2018-2019. 1 and 0.99 simply indicates
that the bakery was less risky as the equity ratio was greater than 50% or 0.50. Therefore,
the Pan De Victoria Bakeshop was financially stable. A higher ratio is much preferable as
there are plenty of financing activities done using their equity. (Dheeraj Vaidya, 2020).
Leverage Ratio as to Debt-to-Equity Ratio

0.012 0.01
0.01
0.008
0.006
0.004
0.002 0 0
0
2018 0.01
2019 0
2020 0
2018 2019 2020
Figure 10. Debt to Equity Ratio of the Pan De Victoria Bakeshop in Pacer, Surigao Del
Norte
As can be gleaned from Figure 10, the bakeshop had a Debt-to-Equity ratio in 2018-2019
of 0.01 and 0, respectively. It simply indicates that the entity had not used debt to finance. A ratio
of 0.01 to 0.00 shows that they much relied on their equity on their financing activities rather than
debt financing. A good debt to equity ratio is around 1 to 1.5. A higher debt-to-equity ratio is an
indication of a business that uses debt to finance the financing activities of a certain entity. (Tyre,
2020)
The leverage ratio of the Pan De Victoria Bakeshop in Placer, Surigao Del Norte showed
positive outcome and had a plenty of indications that the bakeshop will continue their operations in
much long period of time and is far from being bankrupt or insolvent as they manage their financing
activities properly and they have a strong financial stability that could lead to the growth of their
entity.
CHAPTER 5
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
This chapter contains the study's summary, findings, conclusions, and recommendations.
Summary
This study aimed to provide possible actions and methods that could help
enhance the business financial Activities using Financial Statement Analysis as its main tool
for the years 2018 to 2020. In determining such, the proponents ascertained Pan de Victoria
Bakeshop’s profitability, Liquidity, and leverage ratios. The ratios under Profitability ratios
that were utilized are as follows (1) Operating Profit Margin (2) Cash Flow Margin (3) Rate
of Return on Assets (4) Rate of Return on Equity and (5) Gross Profit Margin. As to
Determining the Liquidity Ratio the followings are (1) Current Ratio (2) Working Capital
to Total Asset (3) Working Capital and lastly for the Leverage Ratio the followings are (1)
Debt Ratio (2) Equity Ratio (3) Debt to Equity ratio.
This study used the documentary analysis as a technique in determining the financial
ratios of the Pan de Victoria in Placer, Surigao del Norte. The strategy was deemed
appropriate because the researchers undergo collecting the documents from the financial
statements of the entity and analyze using financial ratios.

Findings
The study's findings are summarized as follows:

1. Based on the results on the profitability ratio analysis, the business had problems in
maintaining its sales from its day-to-day operations as disclosed on its operating profit
margin and cash flow margin. Although its production efficiency increased in 2020, it
is still likely that the business’ profits would likely to affect its income which could pose
a threat if any financial crisis or economic challenges may occur.
2. According to the results calculated on the company’s liquidity ratio, the business was
more than capable of handling its short-term liabilities which explains that the business
had a higher rate of current assets available to supplement the current liabilities of the
business. On the working capital to assets, it shows that the company had issues in
balancing its working capital to the number of total assets of the business per year for it
had its decreasing amount on the business in 2020. This may prove that the company
was having issues of a negative result based on its working capital to total assets
according to its average result of 75%. Lastly, on the working capital, it shows that the
company was having a negative remark since its yearly working capital for 2018 spiked
up in 2019 but decreased greatly in 2020 which shows that the business still had enough
assets to pay for its current liabilities but failed to be above the average of its average
working capital of ₱ 909,224.33. So, the evaluation of the business’ liquidity ratio was
more than capable to pay of its current liabilities with its total assets available.
3. In the Leverage Ratio, it shows that the Pan de Victoria bakeshop had a Debt ratio of
0.01 in 2018, 0.00 in 2019 and 0.00 in 2020 which indicates that their Bakeshop was far
from being into financial insolvent as the ratio was close to 0 or being 0 itself is an
indication of stable financial condition and it also indicates that the business debt was
lesser than the amount of its assets. The bakeshop had an Equity ratio in 2018-2019 of
1. 1 and 0.99 this simply shows that the bakery was less risky as the Equity ratio was
greater than 50% or 0.50. Debt-to-Equity ratio in 2018-2019 of 0.01, 0 and 0 as seen in
the graph this simply indicates that the entity has not used so much of their debt to
finance their growth having a ratio of 0.01 to 0.00 shows that they much relied on their
equity on their financing activities rather than debt financing.
Conclusion
The following conclusions are taken from the study's findings:
The profitability ratio should be taken into consideration and high concern since the
company’s day-to-day operations affect the annual income the business can have. Since the
result of its profitability ratios used were mostly on the negative, the company will likely to
experience problems if financial crisis or economic challenges shall occur.
On the results on the company’s liquidity ratios, it explains that the company failed
to maintain on its average performance on year 2020 from years 2018-2020. This presents
that the company’s capabilities to handle its liabilities was slowly decreasing and may have
to experience problems in the near future if not tended to. But based on the results, the
company was still on the positive side since it did not fall on the negative or unable to pay
its liabilities.
Based on the findings, on the leverage ratios, it could be concluded that the business
firm had excess cash as can be seen in their debt ratio and debt to equity ratio that it had 0
to 0.01 which indicates that their debt was very low and their equity was higher. Therefore,
having that explains that they have not utilized their assets properly.
Recommendations
The following recommendations are made based on the findings and conclusions
presented:
The company should look for ways to avoid being in a deficit based on its daily
operations as the results of the profitability ratios explains that the business was having
problems in keeping up in the average of having a good result on its daily operations and
these results will inflict damages to the business since if a financial crisis or any economic
challenges that may occur, the business will have problems in maintaining to keep up on its
operations.
The managing owner should consider to weigh the importance of labor intensive and
machine intensive and which is best that could bring the company’s day-to-day operation
performance on its best. Since the business is in the baking industry, manual labor is
important, so skills, experiences and abilities of each employee do matter in this industry.
So, it is likely that the managing owner should hire professionals who are experts on the
said position needed which is highly beneficial to the business. Machineries are also need
to be up-to-date as they help increase the operation’s efficiency and quantity of products
produced per day.
It is recommended to have the accountant of the business to depreciate the equipment
machineries, transportation equipment, and the furniture and store fixtures since the stated
accounts were not depreciated since 2018 up until 2020.
Similarly, it is recommended that instead of withdrawing too much on their earnings
or cash, they need to invest it on equipment or machineries that could increase work force
and can make their operating activities better. Also having such PPE can be used as
collateral in case they borrow money from the bank.
Overall, the business is on the below average on its performance which makes the
business on its end. For the result of the financial ratios used, it is advisable to adjust and
properly manage its liabilities and equity.

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https://www.myaccountingcourse.com/financial-ratios/debt-ratio
Peavler, R. (2016). Categories of Financial Ratios. Retrieved from

https://www.thebalance.com/categories-of-financial-ratios-393217
Peavler, R. (2017). What Is the Operating Profit Margin Ratio. Retrieved from
https://www.thebalance.com/what-is-the-operating-profit-margin-ratio-393205
Ready Ratios (2014). Accounts Payable Turnover Ratio. Retrieved from

https://www.readyratios.com/reference/asset/accounts_payable_turnover_ratio.htm
l
\
Shuli, I., & Perri, Rr. (2010). Analysis of Financial Statements, albPAPER, Tirana, 275-
338
APPENDIX A
Computation of Financial Ratios
SAINT PAUL UNIVERSITY SURIGAO

Cor. San Nicolas &Rizal Streets
8400 Surigao City, Philippines
FINANCIAL RATIOS 2018 2019 2020
PROFITABILITY RATIOS
OPERATING PROFIT MARGIN
Operating profit/Net Sales
Net income 151,550 275,000 277,500
Sales 1,092,428 1,438,462.31
2,027,405
Operating Profit Margin 0.14 0.19 0.14
CASHFLOW MARGIN
Cash flow for operating activities/Net sales
Net Cash Provided from Operating Activities 330,686 355,805 322,545
Sales 1,092,428 1,438,462.31
2,027,405
Cash flow Margin 0.30 0.25 0.16

RATE OF RETURN ON ASSETS
Net Income/Average Total Assets
Net Income 151,550 275,000 277,500
Total Assets 1,238,266 1,305,341
1,082,841
Rate of Return on Assets 0.12 0.22 0.23
RATE OF RETURN ON EQUITY
Net Income/Average Ordinary Equity
Net Income 151,550 275,000 277,500
Equity 1,225,341 1,300,341
1,077,841
Rate of return on equity 0.12 0.22 0.23
GROSS PROFIT MARGIN
Gross Profit/Net Sales
Gross Profit 336,195 445,923 791,630
Sales 1,092,428 1,438,462.31
2,027,405
Gross Profit Margin 0.31 0.31 0.39

LIQUIDITY
CURRENT RATIO
Total Current Assets /Total Current Liabilities
Current Assets 946,316 1,013,391 790,891
Current Liabilities 12,925 5,000 5,000
Current Ratio 73.22 202.68 158.18
WORKING CAPITAL TO TOTAL ASSETS
Working Capital/Total Assets
Working Capital 933,391 1,008,391 785,891
Total Assets 1,238,266 1,305,341
1,082,841
Working Capital to Total Assets 0.75 0.77 0.73
WORKING CAPITAL
Current Assets less Current Liabilities
Current Assets 946,316 1,013,391 790,891
Less: Current Liabilities 12,925 5,000 5,000
Working Capital 933,391 1,008,391 785,891

LEVERAGE RATIO
DEBT RATIO
Total Liabilities/Total Assets
Total Assets 1,238,266 1,305,341
1,082,841
Debt Ratio 0.01 0.00 0.00
EQUITY MARGIN
Total Equity/Total Assets
Equity 1,225,341 1,300,341
1,082,841
Total Assets 1,238,266 1,305,341
1,082,841
Equity Margin 0.99 1.00 1.00
DEBT TO EQUITY RATIO
Total Liabilities/Total Equity
Equity 1,225,341 1,300,341
1,082,841
Debt to Equity Ratio 0.01 0.00 0.00
APPENDIX B
Letter to Conduct the Study
Cor. San Nicolas & Rizal Streets
APPENDIX C
Audited Financial Statements
Cor. San Nicolas &Rizal Streets
CURRICULUM VITAE
Personal Information
Name: Paul Uldaric R. Sendiong
Date of Birth: April 16, 1999
Place of Birth: Surigao City
Address: P3 – Badas, Placer, Surigao del Norte
Civil Status: Single
Nationality: Filipino
Parents: Maria Imelda R. Sendiong
Gonzalo A. Sendiong
Educational Background
Elementary: Badas, Elementary School
Badas, Placer, Surigao, del Norte
Secondary: Amando A. Fabio Memorial National High School
Badas, Placer, Surigao del Norte
Tertiary: Saint Paul University Surigao
Cor. San Nicolas and Rizal Streets,

Surigao City
Course: Bachelor of Science in Accounting
Information System
CURRICULUM VITAE
Name: Ellanie Grace C. Uy
Date of Birth: October 22, 1999
Place of Birth: Surigao City
Address: Brgy.13 Dapa surigao del norte
Parents: Eddie T. Uy
Regena C. Uy
Elementary: Dapa Central Elementary School
Dapa, Surigao del Norte
Secondary: University of Cebu
Cebu City

Surigao City
Information System
CURRICULUM VITAE
Name: Mary – Ann E. Contamina
Date of Birth: April 13, 2000
Place of Birth: Brgy. Cabitoonan General Luna, Surigao Del Norte
Address: Brgy. Cabitoonan General Luna, Surigao Del Norte
Parents: Nerie E. Contamina
Roberto N. Contamina
Elementary: Cabitoonan Elementary School
Cabitoonan, Surigao del Norte
Secondary: General Luna National High School
General Luna, Surigao del Norte

Surigao City
Information System

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Paul University Surigao

FINANCIAL STATEMENT ANALYSIS OF PAN DE VICTORIA

In Partial Fulfilment of the Requirements for the Degree

criticism in the making of this work into its final form;

the fulfillment of this study during the data gathering; and

for providing them everything especially financial matters.

financial situation in the future if progress is maintained.

1 THE PROBLEM AND ITS BACKGROUND 1

2 REVIEW OF RELATED LITERATURE 12

LIST OF TABLES AND FIGURES

1 Liquidity Ratios of Pan De Victoria Bakeshop 40

1 Schematic Diagram of the Study 5

THE PROBLEM AND ITS BACKGROUND

Pan de Victoria bakeshop is a family-owned business established by Mrs. Victoria

and friendly staffs (Pinoyentre, 2015).

According to Johnston (2017), maintaining correct records and managing the

payments, management must maintain track of their accounts.

company firm is the final aim. Agarwal (2016)

Furthermore, financial statement analysis is performed in a number of ways, using

The primary goal of financial statement analysis is to forecast the company's

evaluating key financial metrics. Another important aspect of financial analysis is

comparing current financial concerns to future financial conditions. Expected circumstances

or (3) competition or industry average performance.

assist management in identifying problems that need to be addressed. Peavler's (2016),

In view of the aforementioned, the researchers decided to conduct a study to evaluate

troubles in a specific area.

Conceptual Framework of the Study

or (3) rivals' or industry average performance.

Recommendation for Business Improvement is shown in the third box.

• Profitability Ratio Proposed Possible

Figure 1. Schematic Diagram of the Study

Statement of the Problem

This study focused on the Analysis of Financial Statement of Pan de Victoria

Bakeshop in Placer, Surigao del Norte for years 2018 to 2020.

Specifically, it answered the following questions:

1.1. Operating Profit Margin;

1.2. Cash Flow Margin;

1.3. Rate of Returns on Assets;

1.4. Rate of Return on Equity; and

1.5. Gross Profit Margin?

2.1. Current Ratio;

2.2. Working Capital to Total Assets; and

2.3. Working Capital?

3.1. Debt Ratio;

3.2. Equity Ratio; and

3.3. Debt to Equity Ratio?

proposed to improve the company’s operation?

Significance of the study

Specifically, this will benefit to the following:

about financial statements and, in particular, financial ratio analysis.

who want to do further research on financial statement analysis.

Scope and Delimitation of the Study

This study focused on the Analysis of Audited Financial Statement of Pan de

Probability Ratio. This is a financial indicator used to measure a company's ability

Operating Profit Margin. It is a profitability or performance ratio that represents the

are deducted. t is calculated by dividing total revenue by operating profit.

Returns on Assets. It is a profitability ratio that determines how well a company

generates income from its assets.

Returns on Equity. It is a measure of financial performance determined by dividing

return on net assets is called ROE.

representation of your company's ability to transform revenues into cash.

deducting the cost of goods sold (COGS).