Alegado Dahuyla Sudio Manuscript 2022

St.
Paul University Surigao

St. Paul University
System Surigao City,
Philippines
FINANCIAL PERFORMANCE OF SURIGAO PET DOCTORS IN SURIGAO CITY
A Thesis Presented to
The Faculty of the College of Business and Technology
Saint Paul University Surigao
Surigao City
In Partial Fulfillment of the Requirements for the Degree

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN: FINANCIAL MANAGEMENT
By
LUEGY MAE B. ALEGADO

JAY CHRISTIAN L. DAHUYLA
FRENZKENTH B. SUDIO
May 2022
St. Paul University Surigao
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Financial Performance of Surigao Pet Doctors in Surigao City ii

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Financial Performance of Surigao Pet Doctors in Surigao City iii

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Financial Performance of Surigao Pet Doctors in Surigao City iv
ACKNOWLEDGEMENT
First and foremost, the researchers are grateful and fortunate to express their
gratitude to the Almighty God for the blessings, strength, courage, wisdom, and patience
he showers to complete this study successfully.
The researchers’ families, who, despite the difficulties, never ceased to

support us financially and emotionally to make this research possible. Their unwavering
support is much valued.
Mrs. Chanda Tiu, MBA, the researcher’s adviser, for the educational
guidance, valuable ideas, sustained inspirations and for giving constructive criticism in
the making this work into final form;
Dr. Erlita C. Guerra, MBA, MPA, the researcher’s 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.
Mr. Rodolfo E. Ravelo, CPA, the dean of the College of Business and
Technology, for sharing his knowledge and expertise for the improvement of the study.
Atty. Leonardo L. Del Carmen Jr., CPA, a research panel member, for
providing his expertise to help improve the study.
Sr. Marie Rosanne Mallillin, SPC, the chairperson of the board, for sharing
her expertise by giving constructive comments and suggestions upon reviewing the study
and encouraging to finish this piece of work.
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Financial Performance of Surigao Pet Doctors in Surigao City v
The researchers’ grammarian, William L. Aramas Jr., LPT, for the time and
effort in checking the grammar of the study conducted by the researchers.
Lastly, to Dr. Oriel O. Echavez the proprietor of Surigao Pet Doctors in

Surigao City who take part and support our study by providing enough amounts of
financial data that serves as the key information of this study.
Luegy Mae B. Alegado
Jay Christian L. Dahuyla
Frenzkenth B. Sudio
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Financial Performance of Surigao Pet Doctors in Surigao City vi
ABSTRACT
Financial performance analysis and evaluation of a company have always been
proven and tested processes or indicators of a company's financial status. Several methods
and tools were used to properly determine and evaluate the viability and profitability of the
financial performance status of a company. It played a crucial role as it can create, develop,
and devise a strategic management plan and investment decisions that the company may be
able to continuously use for its advantage as to competition, success, and growth.
The data gathered were the audited financial statements of Surigao Pet Doctors in
Surigao City at Burgos Street, Corner Narciso Street, Surigao City for the years ended 2018,
2019 and 2020. Quantitative documentary analysis was used in the study and the participants
were the management and the accountant of Surigao Pet Doctors in Surigao City. The data
were analyzed and interpreted using the comparative statements, horizontal and vertical
analysis and financial performance ratios.
Based on the findings of the study, one of the problems encountered by the firm was
that the annual revenue was insufficient to cover its cost of sales and operating expenses.
This can be addressed by increasing budget for advertising and checking whether there can
be some improvements in the company’s quality of service.
Overall, the company was performing well if it is still generating net income at the
end of the year. However, the company still could increase its earnings by creating more
revenue while cost of sales, operations, and other costs were managed and reduced.
Keywords: Financial Performance, Vertical Analysis, Horizontal Analysis, Activity Ratio

and Profitability Ratio.
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TABLE OF CONTENTS
TITLE PAGE i
APPROVAL SHEET ii
CERTIFICATE OF ORIGINALITY iii
ACKNOWLEDGEMENT iv
ABSTRACT vi
TABLE OF CONTENTS vii
LIST OF TABLES ix
CHAPTER
1 THE PROBLEM AND ITS BACKGROUND 1
Introduction 1
Conceptual Framework of the Study 3
Statement of the Problem 5
Assumption 5
Significance of the Study 6
Scope and Limitation of the Study 7
Definition of Terms 7
2 REVIEWS OF RELATED LITERATURE 11

Synthesis of the Review 20
3 METHOD 21
Research Design 21
Participants 21
Research Instrument 21
Data Gathering Procedure 22
Ethical Consideration 22
Data Analysis 23
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4 RESULTS AND DISCUSSION 25
5 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 33
Summary 33
Findings 34
Conclusions 36
Recommendations 37
REFERENCES 38
APPENDICES 44
A Letter to Conduct the Study 44
B Letter to the Participants 45
C Letter to the Accountant 46
D Audited Financial Statements 47
CURRICULUM VITAE 65
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LIST OF TABLES AND FIGURES
LIST OF TABLES
Table 1 Horizontal Analysis on the Financial Performance of Surigao Pet Doctors for the 25
last three (3) years of operation
Table 2 Vertical Analysis on the Financial Performance of Surigao Pet Doctors for the last 26
three (3) years of operation
Table 3 Proposed Improvements in the entity’s Financial Performance 32
LIST OF FIGURES
Figure 1 Schematic Diagram of the Study 4

Figure 2 Inventory Turnover Ratio of Surigao Pet Doctors in Surigao city 27
Figure 3 Asset Turnover Ratio of Surigao Pet Doctors in Surigao City 28
Figure 4 Gross Profit Margin of Surigao Pet Doctors in Surigao City 29
Figure 5 Operating Margin of Surigao Pet Doctors in Surigao City 30
Figure 6 Return on Equity (ROE) of Surigao Pet Doctors in Surigao City 31
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Financial Performance of Surigao Pet Doctors in Surigao City
CHAPTER 1
THE PROBLEM AND ITS BACKGROUND
Every year or every day, the organizations or entities prepare and create financial
statements. This technique helps them to maintain track of or monitor the transactions
and activities of their former organization. However, the financial quantities stated or
reported on financial statements may not provide sufficient evidence that a firm or
corporation is performing properly. It is because a growing number of adjustments to a
company's assets may not be sufficient to ensure the company's existence and
profitability. Economic decision-makers, owners, and investors must also have a better
understanding of the overall efficiency of all commodities and resources used by the
companies at any one time. As a result, financial ratios and analysis are critical in
answering other important questions regarding a company's overall financial and
comparative profitability performance. Furthermore, a slew of empirical investigations
and expert studies will undoubtedly expose and support a long list of the benefits of
financial planning via financial ratios and analysis. According to Droms and Wright
(2010), adequate budgeting is essential for the success of any business. On the other
hand, a company have lack of adequate financial planning is a major cause of business
failure in many cases.
A financial ratio is a tool for analyzing a company's financial health, performance,
and position in a variety of ways. Its advantages and disadvantages are frequently
determined by the problems they are attempting to solve, their key decisions and goals,
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Financial Performance of Surigao Pet Doctors in Surigao City 2
and who is using or assessing the data. However, to collect enough data for a financial
performance review, a variety of different ratios and procedures, such as horizontal and
vertical analysis, must be used. According to Hermanson (2011), a single amount of
money may not make itself known. Computing and analyzing several related ratios for a
company can provide more insight.
Background of the Study
Surigao Pet Doctors is a sole proprietorship business owned and managed by the
proprietor Oriel O. Echavez. It operated since 2009 with six veterinarians. Its principal
business is located in Burgos Street, Corner Narciso Street, Surigao City. It engages in
selling different types of pets, caring and diagnosing pets center and egg laying operation
throughout Surigao del Norte. It also serves as a mini-hospital for different pets. Further,
it has outlets in General Luna, Surigao Del Norte, which opened in 2015, and in Claver,
Surigao del Norte, which opened on February 2021.
Therefore, the main objective of this study was to evaluate the financial performance
of Surigao Pet Doctors in Surigao City covering its recent three years of operation. It
may enable the management to analyze and recognize significant changes in their past
performing years that bring positive impact on the business and forecasts the company's
future financial position.

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Conceptual Framework of the Study
This study was based on Weygandt's theory on financial accounting which
indicated that there are two methods to analyze a company's financial statements. First is a
horizontal analysis which was a way of evaluating a sequence of economic statements
information over a time period. Moreover, there was the vertical analysis which was a
method that expresses every economic announcement item as a percent of base amount.
Various types of ratio measurement can depict financial performance in a variety of ways.
Also, there were five ratio measurement categories to measure several aspects of financial
performance. These ratios included liquidity ratio, activity ratio, profitability ratio, debt
ratio, and market ratio (Nuhu, 2012).
Figure 1 showed the schematic diagram of the study which was an analysis
developed by the cited kinds of literature and studies. It illustrated the following data
needed, the steps or the series of actions applied used of this study.
Consideration was given to the financial statements, the statement of financial
position, and the complete revenue statement for 2018, 2019, and 2020 of Surigao Pet
Doctors in Surigao City. The processes involved were the computation and evaluation of
the data gathered from the financial performance in terms of horizontal analysis, vertical
analysis, and financial ratios.

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Financial performance of
Surigao Pet Doctors in
Surigao city in terms of:
 Horizontal Analysis
Audited Financial  Vertical Analysis Proposed Financial
Statements for the  Financial Ratios Improvement for
operational years  Activity Ratio the Surigao Pet
2018, 2019 and 2020  Inventory Turnover Doctors in Surigao
Ratio City
 Profitability Ratio
 Statement of  Gross Profit Margin;
Financial Position;  Operating Profit
and Margin;
 Statement of  Return on Asset;
Comprehensive  Return on Equity;
Income
and
 Asset Turnover Ratio
Figure 1. Schematic Diagram of the Study

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Statement of the Problem
This study aimed to determined and evaluated the financial performance of Surigao
Pet Doctors in Surigao City of the business.
It sought answers to the following specific questions:
1. What is the Financial Health of Surigao Pet Doctors using;
1.1. Horizontal Analysis;
1.2. Vertical Analysis;
1.3.1 Financial Analysis;
1.3.2. Activity Ratio; and
1.3.3. Profitability Ratio
2. Based on the result of the study, what financial improvements may be proposed?
Assumption
This study assumed that the Surigao Pet Doctors business in Surigao City did not
operate well during the year 2020 due to pandemic business restrictions implemented
during this year. The researchers of this study asserted that the outcome of the financial
performance of Surigao Pet Doctors in Surigao City would help the management of the
business in determining or recognizing each loss or gain of the company while
optimizing their strengths and potentials, improve their weaknesses and lessen the
threats.
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Significance of the Study
The results of this study were beneficial to the management of Surigao Pet Doctors
in Surigao City and other stakeholders in terms of the company's financial performance.
Therefore, this study benefited or contributed to the following areas:
Surigao Pet Doctors Management. The results of this research provided greater
understanding and insights into how the business may enhance its financial performance,
viability, and profitability and improve its operations.
Investors/Owners. This enabled the proprietors or investors to maximize their profit
without sacrificing their commitment to providing excellent service to their customers.
Veterinary Business Competitors. The findings of this study gave other competitors
information allowing them to keep track of the status of the Pet Doctors that may suggest
them to whether to improve more their operations and financial performance or not.
Business Students. This study helped students enhance their knowledge regarding
the value of assessing a business's financial performance as a basis for operational
improvement.
Community. This benefited the community as the business's financial performance,
and public services may improve.
Government. This enabled the government to better understand and assist small
clinics in providing better services to their communities.

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Future Researchers. This study served as a guide and reference in their future studies,
specifically regarding a company's financial performance as a basis for operational
improvement.
In the Field of Financial and Economic Education. This research added information
and proof to the growing works of literature of studies about the financial performances
of a company.
Scope and Limitation of the Study
This Study focused on the financial performance of Surigao Pet Doctors in Surigao
City by examining the management’s prepared financial statements of the business
requested by the researchers. This study was limited only to covering the three
operational years period of the company from 2018, 2019, and 2020
Definition of Terms
The following words were described theoretically for the benefit of all the readers
of this study:
Activity Ratio. It is used by the company to determine the efficiency with which
it can use its various operating assets, available on the balance sheet, and convert them
into a sale or cash.
Asset turn-over Ratio. It is also known as the overall asset turnover ratio,
determines how correctly a company makes use of its belongings to generate sales. The
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asset turnover ratio formula is net sales divided by a corporation's overall or average
assets. whilst in comparison to competitors with a lower ratio, an agency with a high
asset turnover ratio plays more efficiently.
Finance. It is a general term applied to the management, production, and study
of money and investments. It is concerned with how a person, corporation, or
government obtains money, known as capital in the context of a business, and how that
money is spent or invested.
Financial Performance. It is a subjective indicator of a company's ability to use
assets and generate revenue from its primary mode of operation. Furthermore, the term
refers to a company's overall financial health over a specific period of time.
Financial Ratios. These are created by deriving numerical numbers from
financial documents to obtain relevant information about a business. The balance sheet,
income statement, and cash flow statement of a company are used to perform quantitative
analysis to determine a business's liquidity, rate, growth, margins, profit, profit margins,
and value, among other things.
Financial Statements. Summaries of monetary data about a company. Balance
sheet, income statement, and cash flow statement the purpose of financial statements is
to provide information about an organization's operating results so that users can make
economic decisions.
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Gross Profit Margin. It evaluates the manufacturing and distribution efficiency
of a company during the manufacturing process. It is a calculation of how much of a
company's revenue is available to cover overhead, other expenses, and profits.
Horizontal analysis. it's used to function a multi-length audit of a business
enterprise's monetary statements. it also includes expressed as a percent increase over
the equal a line object inside the previous yr. customers of monetary statements can
speedy become aware of developments and development styles using horizontal
evaluation.
Inventory Turnover Ratio. It evaluates a company's efficiency in converting
inventory into sales. Its purpose is to evaluate the inventory's liquidity.
Operating Profit Margin. It is used to evaluate the pricing strategy and
operational efficiency of a company. It shows how much money a company makes
(before interest and taxes) on each dollar of sales. The operating margin ratio indicates
whether fixed costs are excessively about to production or sales volume.
Profitability Ratio. It is used to assess a company's potential to create profits in
relation to its revenue, operational costs, and other expenses.
Return on Asset (ROA). When net income is compared to total assets, the return
on assets, or ROA, reveals how profitable the company is. ROA will show investors,
clients, or financial analysts how well the organization manages its finances. The return
on investment is expressed as a percentage.

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Return on Equity. Return on equity (ROE) is a financial performance metric
calculated by dividing total profit by the number of shareholders. ROE is defined as the
return on net assets because shareholders' equity equals a company's assets minus its
debt.
Statement of Comprehensive Income. It is a financial statement that summarizes
the company's revenue and expenses. Furthermore, it indicates whether or not a company
will be profitable within a certain time frame. The comprehensive income statement,
along with the balance sheet and cash flow statement, assists you in determining your
company's financial health.
Statement of Financial Position. It is described a company's assets, liabilities, and
shareholder equity. The balance sheet is one of three basic financial statements that are
used to evaluate a company. It depicts a company's financial position as of the publishing
date, including what it owns and owes.
Vertical Analysis. It is an economic statement ratio analysis wherein each line
object is expressed as a percentage of another line item. because of this on an earnings
statement, every line item is defined as a percentage of gross income, and within the
balance sheet, each line object is expressed as a percent of the entire property.
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CHAPTER 2
REVIEW OF RELATED LITERATURE
This chapter forms and reviews the related kind literature and studies, which had a
direct bearing on the present study. This includes books, articles, and websites.
Pets are family members, so it stands to reason that we would treat them
consequently. Pets, like people, require routine veterinary care from a veterinarian. It is
critical to keep track of our pet's health to keep him or her as healthy as possible. Small
animals, livestock, avian, zoo, and laboratory animals all receive veterinary care. Small
animal veterinarians, also known as "veterinarians," spend the majority of their time
working in private clinics. Pets, such as dogs, cats, and birds, are treated here.
Veterinarians work in either their own or other people's veterinary clinics or hospitals.
Those who provide farm or large animal care must travel to their patients. Zoo
veterinarians are part of a team that conducts research and care for the facility's animals
(McKay, 2021).
Financial Performance
In a broader sense, financial performance refers to the extent to which financial goals
are or have been met; it is also an important aspect of financial risk management. It is the
process of determining the monetary value of a company's policies and operations. It is used
to assess a company's overall financial health over time and can also be used comparing
similar firms in the same industry or comparing industries or sectors in combination. Also,
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Dalayeen (2017) stated that several factors influence an organization's financial
performance, including capital structure, cost, revenue, and the resulting profit margin.
Return on assets, sales, equity, and other financial variables are the best indicators of
financial performance.
According to Hartil (2021) the word "financial performance" refers to a company's
overall financial health. When you hear a company's financial performance is good, it usually
indicates it has expanding sales, manageable debt, and plenty of free cash flow. Financial
performance, on the other hand, is subjective and cannot be measured with a single statistic.
Also, monitoring financial performance regularly is one of the most important tasks that
successful business owners undertake. Management who understands where the business
stands in terms of reliability as well as where it is headed has a considerable advantage over
those who do not. Financial performance monitoring tends to increase certainty and
confidence in making both short and long-term decisions. This, in turn, leads to a healthier
business and a faster rate of growth. It also enables you to outperform and outmaneuver
competitors who fall short in this area. You have a consistent and effective platform for
making decisions by accumulating data and monitoring their performance, of the kind that
your contenders do not have. Management can then use this business intelligence to guide
the company through both the good times and the more uncertain and volatile times
(Dolfinblue, 2018).
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Financial Statement
Cameron (2020) claimed that a financial statement is a set of financial information
regarding your business. Financial statement analysis and organization can assist you in
drawing financial health conclusions for your company. Statements feature line-by-line
things as well as total quantities for what you're looking at. The three basic financial
statements are the income statement, balance sheet, and cash flow statement. also, every
business venture necessitates a physical representation of its current financial status. When
a company needs to attract potential investors, the importance of its financial statements is
most visible. These documents are also crucial in cash flow management. Financial
statements are usually produced by the services of qualified consultants and are used together
to determine the financial position of the entity in the current period (Martinez, 2020).
Way (2019) stated that a company's financial statements provide financial data that
investors, creditors, and analysts use to assess financial performance. A significant
proportion of the information presented in a financial report is legally mandated or
accounting standards. The financial statements of your company are an important tool for
senior management to communicate past successes and future prospects. Management can
communicate with interested outside parties, such as investors, the news media, and industry
analysts, about the company's accomplishments by publishing financial statements.
Statement of Financial Position
Borga (2022) stated that almost all organizations that use a double-entry accounting
system prepare a statement of financial position. These may be completed by the owner in
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small enterprises, or by a staff accountant and evaluated by an external accountant in slightly
bigger businesses. those statements are challenge to extreme scrutiny in bigger public
companies and have to be prepared consistent with generally popular accounting concepts,
or GAAP. outside auditors must then investigate them earlier than they're filed with the
Securities and alternate fee. also, one of the simple monetary statements of a non-profit
business enterprise is the statement of financial function, which may additionally offer
records approximately a company's liquidity by using both sequencing assets and liabilities
or categorizing property and liabilities as cutting-edge versus non-current. An announcement
of financial position, in addition to required notice disclosures and different facts, also are
included in the financial statements (Larkin & Di Tommaso, 2014).
Statement of Comprehensive Income
An income statement also shows comprehensive income. An income statement
shows a company's total revenue and costs (“Comprehensive Income,” 2022). It contains a
company's net income, which is made up of profits and losses incurred. A figure for
comprehensive income takes into account future investment gains as well as expected losses
from payments such as employee retirement and pension plans. Also, it stated that the
revenue and expense items that have not yet been recognized are listed on the statement of
comprehensive income. It is designed to supplement an organization's statement of
comprehensive income by presenting fuller details of the business's financial results. Within
the financial statements' details, it is usually presented after the income statement, but it can
also be on the same page as the income statement. A private firm with simpler operations
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may not have engaged in any of the transactions that would ordinarily appear on a statement
of comprehensive income (“Comprehensive Income,” 2021).
Horizontal Analysis
A horizontal or trend analysis is used to identify and evaluate trends over time. For
example, instead of creating a balance sheet or income statement for a specific period of
time, you would also create a comparative income statement or balance sheet for your
company's quarterly or annual activity. The comparative statement is then used to highlight
any will increase or decreases that occurred throughout that duration time. This lets in you
to quickly discover boom tendencies in addition to any crimson flags that want to be
addressed. Horizontal analysis compares totals the usage of a line-with the aid of-line
contrast (Girsch-Bock, 2020).
Szramiak (2017) stated that horizontal analysis, also known as time series analysis,
focuses on numerical trends and changes over time. Horizontal allows you to detect growth
patterns, cyclicality, and other factors and compare them across companies.
Vertical Analysis
Vertical analysis is a financial statement analysis method in which each line item is
listed as a percentage of the statement's base figure. The basic figure is always shown at
100% in the first line of the statement, with each subsequent item representing a percentage
of everything. For example, each line of the income statement represents a percentage of
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total sales, whereas each line of the cash flow statement represents each inflow and outflow
as a percentage of total revenue (“Comprehensive Income,” 2021).
Staff (2016) stated vertical analysis is used to showcase the relative sizes of the
numerous accounts on a financial statement. When a vertical analysis was conducted on an
income statement, for example, the top line sales number will be shown as 100 percent, and
every other account is shown as a percent of the overall sales number.
Financial Ratios
According to Hofstrand (2013) that financial estimates are used to quickly identify
potential financial problems and risks. Ratings provide a unique perspective and insight into
a company. If a budget identifies a potential problem, additional research is required to
determine whether the problem exists and how it can be resolved. Although specific
benchmarks are frequently assigned to ratios to indicate when there is cause for concern,
ratios should also be viewed as a spectrum from weak to strong, with the stronger the ratio
being the better. Ratios can identify problems not only by their size but, also by their
direction over time. Financial ratios are also essential tools that help business managers and
investors analyze and compare financial relationships between accounts on financial
statements. They are one instrument that enables financial study of a company's history,
industry, or business sector (Carlson, 2020).

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Activity Ratio
The activity ratio is used to determine the size of a company's level of effectiveness
in employing its assets. The higher the ratio of activities achieved by a firm, the better the
company's potential (Gunadi, 2020). Based on the study of Sianipar (2015), he discovered
that the activity ratio had a favorable impact on business value.
For inventory turnover ratio, Henry (2020) stated that the inventory turnover ratio
measures how quickly an item sells and is replaced over time. The cost of products sold is
divided by the average inventory during the same time period to calculate inventory turnover.
Inventory turnover is defined as the number of times inventory is sold and replaced in a
certain period of time, according to the report. For corporate performance, cost control, and
sales, understanding average inventory turnover is critical. It can be compared to other
companies in the same industry and is inversely proportional to days in sales inventory
(Callarman, 2019).
Profitability Ratio
According to Carlson (2020), profitability ratios indicate a company's overall
efficiency in asset utilization and performance at the end of each quarter or year. There are
two types of profitability ratios: margin ratios and return ratios. At various stages of
measurement, margin ratios represent a company's ability to convert sales dollars into profits.
Return ratios demonstrates a company's ability to quantify its overall efficiency in generating
returns for its shareholders.

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The gross profit margin is the percentage of a company's sales revenue that can
be converted into gross profit. Gross profit margin is used by businesses to determine how
efficiently they generate gross profit from product or service sales (Beaver, 2020). For the
operating profit margin, according to Carlson (2020), the operating profit margin ratio of a
company indicates how well the company's operations contribute to its profitability.
A company with a high-profit margin ratio earns more money per dollar of sales
than one with a low-profit margin. A good margin varies depending on the industry and size
of the company, but in general, a 10% net profit margin is considered average, a 20% margin
is considered high (or "good"), and a 5% margin is considered low It should be noted that
between 2018 and 2020, the operating profit margin will be in the range of low to average
net profit margin based on the average margin per company (Zin, 2019).
Return on assets (ROA) is a ratio that indicates how much profit a company
generates from its resources and assets (“Comprehensive Income,” 2021). This data is useful
to a company's owners, management team, and investors because it shows how well the
company uses its resources and assets to generate a profit. The asset return rate is expressed
as a percentage. Atkins, (2019) stated that return on equity is more than just a profit measure.
It's also a measure of efficiency, which is critical for creating long-term value. A rising ROE
indicates that management can generate more profit as the value of the underlying assets
rises. A higher Return on Equity also indicates how effective management is at allocating
shareholder capital to high-growth projects that generate long-term value.

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According to Staff (2022), the asset turnover ratio is one of the metrics used to
assess a company's efficiency. This ratio is frequently evaluated on an annual basis and
examines the revenues generated by a company per dollar of assets. A greater asset turnover
ratio suggests a more efficient corporation, whereas a lower asset turnover ratio could imply
inefficiencies throughout the organization, from store management to billing. This ratio
study is used by creditors and investors to evaluate a company's growth potential and
obligations. Also, Brush (2020) stated that the asset turnover ratio is a metric that measures
how effectively a corporation generates income or sales utilizing its own resources. The ratio
compares a company's gross revenue to its average total assets to determine how many sales
were generated per dollar of assets. The higher the asset ratio, the more effectively the
company's assets are utilized.

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Synthesis of the Review
The concepts from the different authors and writers from the readings above
provided the ideas related to the present study. They formed part and were the basis for the
formulation of the researcher’s topic. They were similar to the present study in the sense that
they both about the importance of financial performance in any business firm or
establishment. However, they differ from the idea that not all concepts presented in the
literature were used in the study. Only selected and applicable ratios were utilized by the
researcher. Furthermore, the readings discussed the ideas on general perspective, while the
present study focused on the local perspective, particularly in Surigao Pet Doctors in Surigao
City.
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CHAPTER 3
METHOD
This chapter presents the ethical consideration, research design, participants
of the study, research instruments, data gathering procedure, and data analysis.
Research Design
This study used the quantitative approach to analyze the financial statement
using vertical, horizontal, and ratio analysis, in collecting data from Surigao Pet
Doctors in the form of financial statements.
Participant of the Study
The participants of the study were the business proprietor and the accountant
of Surigao Pet Doctors in Surigao city.
Research Instrument
In gathering the pertinent data relevant to the study, the researchers used
primary data which was the audited financial statement of Surigao Pet Doctors in
Surigao City covering the years 2018, 2019, and 2020.

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Data Gathering Procedure
The researchers asked permission from the college dean to conduct the study.
Following approval, the college dean signed a letter of request and submitted it to the
Surigao Pet Doctors in Surigao City administration for confirmation of the entity's
documented analysis. Such documents were submitted to the researcher’s accountant for
the computations of the financial ratios.
Ethical Consideration
During the investigation, the researchers examined the following ethical
considerations:
 While conducting the research, the researchers kept ethics in mind to
guarantee that the firm's privacy was protected.
 The researchers politely asked for the full consent of the management before
the study.
 Any type of communication concerning the study was done with
transparency.
 The researchers ensured the firm's privacy was protected by handling all
gathered data from the firm needed for this study with utmost confidentiality and concern,
and the results of this study were handled with utmost confidentiality and concern to all
gathered data from the firm needed for this study to respect and protect their privacy.
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Data Analysis
The financial statements provided by the business owner for financial performance
was used to analyze the following data:
Horizontal Analysis. This was used to analyze financial records by comparing
specific financial reports to information from previous years during a given accounting
period.
Vertical Analysis. This was used to show the relative sizes of various accounts on a
financial statement.
Activity ratio. This was used to analyze how well a company uses its assets to
generate revenue. A well-managed organization makes the best use of receivables, inventory,
and fixed assets while generating the most revenue possible.
Formula
Inventory turnover ratio = cost of goods sold

Average inventories
The Profitability Ratio. This was used to measure a company's ability to generate
income in comparison to its expenses and other costs associated with income generation
during a given period. This ratio represented the company's ultimate result.
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Formula
Gross profit margin = Gross profit

Sales
Operating profit margin = Operation profit
sales
Return on asset = Net Income
total asset
Return on equity = Net Income
equity
Asset Turn-over Ratio= Net Sales
Average total assets
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CHAPTER 4
RESULTS AND DISCUSSION
This chapter presents the results and discussions of the data gathered in this study.
Horizontal Analysis
Table 1. Horizontal Analysis on the Financial Performance of Surigao Pet Doctors for the
last three (3) years of operation
ACCOUNT Percentage change Percentage change

in 2019 to 2020 in 2018 to 2019
Revenue -19.48% 4.97%

Less: Cost of Sales -13.24% -5.01%
Gross Margin -28.58% 19.53%
Less: Operating Expenses -30.68% -5.47%
Net Income --21.14% 108.27%
Table 1 shows the horizontal analysis on the financial performance of Surigao Pet
Doctors for the recent three (3) years of operation. A 4.97% increase in revenue in 2019
indicated that there was an improvement, but in 2020, there was a decrease of 19.48%.
Whereas the cost of sales decreased by 5.01% and 13.24% in 2019 and 2020, respectively.
As a result, the gross margin in 2019 increased by 19.53%, however, there was a decrease of
28.58% in 2020 attributable to decline in sales. Like cost of sales, operating expenses
decreased by 5.47% and 30.68% in 2019 and 2020, respectively. Accordingly, net income
in 2019 increased significantly by 108.27%. Any sort of reduction in company expenditure,
in general, increased earnings, however, net income still decreased by 21.14% despite of the
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decline in cost of sales and operating expenses in 2020. It may be presumed that there is a
needed improvement to consider in increasing the company’s annual sales to earn higher net
income.
Vertical Analysis
Table 2. Vertical Analysis on the Financial Performance of Surigao Pet Doctors for the last
three (3) years of operation
2020 2019 2018

Sales 1,239,436.67 100% 1,615,838.00 100% 1,539,278.67 100%
Less: Cost of Sales 792,176.00 63.91% 867,300.90 53.67% 913,030.00 59.32%
Gross Margin 447,260.67 36.09% 748,537.10 46.33% 626,248.67 40.68%
Less: Operating
Expenses 338,712.60 27.33% 461,872.95 28.58% 488,607.60 31.74%
Net Income
108,548.07 8.76% 286,664.15 17.74% 137,641.07 8.94%
Based on the vertical analysis in Table 2, it can be noted that there is a fluctuation in
the company’s gross margin, cost of sales and net income. From 40.68% in 2018, gross
margin increased to 46.33% in 2019 but dropped to 36.09% in the year 2020. The company’s
profitability declined in the year 2020 due to drop in sales by ₱376,401.33 equivalent to
19.48% based on the horizontal analysis provided in Table 1. Although the company’s cost
of sales and operating expenses were continuously decreasing from year to year, it was still
insufficient to raise the company’s net income if annual sales will not improve in the next
years of operations.
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Financial Ratios
Inventory Turnover Ratio
Inventory Turnover
Ratio
4.8
9
3.8
8 3.5
4
201 201 202

8 9 0
Inventory Turnover
Ratio
Figure 2. Inventory Turnover Ratio of Surigao Pet Doctors
Figure 2 presents the graphical illustration of the inventory turnover ratios of the
company in 2018, 2019 and 2020. It revealed that the company’s inventory turnover ratio
was declining from time to time. From 4.89 in 2018, the ratio continuously dropped to 3.88
and 3.54 in 2019 and 2020, respectively. Growing stock turnover leaded to increased sales,
that may result in elevated overall revenues. Higher inventory turnover normally has the
effect of growing a company's direct charges as the organization buys better volumes of
inventory or makes more frequent purchases. But, the growth in charges was accompanied
by way of extended overall revenues, as stated above. This was not constantly the case,
however, as purchasing and pricing decisions can have exclusive results on total sales and
profitability regardless of sales quantity. If higher stock turnover causes charges to upward
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push better in percentage to sales, the end result can be a decrease in net income and a
corresponding lower in ROE.
Asset Turnover Ratio
Asset Turnover
0.
Ratio
5
0.45 0.45
0. 3 6
0. 0.35
3 4
0.
2
0.
1
201 201 202
8 9 0
Asset Turnover
Ratio
Figure 3. Asset Turnover Ratio of Surigao Pet Doctors
Figure 3 shows the graph of the Asset Turnover Ratio of the company in 2018, 2019
and 2020. During the years 2018 and 2019, there was a minimal change in the asset turnover
ratio. On the other hand, the ratio dropped from .456 to .354 during the year 2020. It may be
presumed that the company was not efficient enough its capacity to its limits by properly
utilizing their assets. Companies with high asset turnover often have low profit margins,
whereas those with low turnover typically have better profit margins. However, whether a
specific ratio is useful or bad is determined by the sector in which the company operates.
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Gross Profit Margin
Gross Profit Margin

50.00%
40.00% 46.33%
40.68
30.00% % 36.09%
20.00%
10.00%
0.00%
2018 2019 2020
Gross Profit Margin
Figure 4. Gross Profit Margin of Surigao Pet Doctors
The graph in Figure 4 clearly illustrates the rise and fall that happened in the company’s
gross profit for the last three (3) years of operation. In 2019, the gross profit margin increased
by 5.65% but decreased by 10.24% in the year 2020. In reference to the result of the
horizontal analysis in Figure 1, the company’s gross profit dropped to 36.09% since revenue
was not enough to rise their net income. Lower gross margin implies less money was
available to fund the business's running costs, such as marketing and administrative staff
causing the company to grow more slowly over time. Furthermore, there may be an -
insufficient funds to pursue options like acquiring a competitor or increasing its geographic
reach.
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Operating Profit Margin

20.00%
15.00% 17.74%
10.00%
8.94% 8.76%
5.00%
0.00%
2018 2019 2020
Figure 5. Operating Profit Margin of Surigao Pet Doctors
Figure 5 illustrates the fluctuations in the company’s operating profit margin in the
year 2018, 2019 and 2020. A good margin varies depending on the industry and size of the
company, but in general, a 10% net profit margin is considered average, a 20% margin is
considered high (or "good"), and a 5% margin is considered low. It should be noted that
between 2018 and 2020, the operating profit margin was in the range of low to average net
profit margin based on the average margin per company (Zin, 2019). But during the year
2019, the operating profit margin is 17.74% and considered on the range between average
and high profit margin. In reference to the previous discussions, the company has improved
their profitability in 2019 due to increase in annual sales and reduction in cost of sales and
operating expenses. It was clear that the company was able to raise their net income but did
not sustain until 2020. The company earned a net income of ₱108,548.07, however, it was
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lower than 2019 by ₱178,116.08 equivalent to 8.8%. The company was still able to produce
net income for the year 2020 due to decrease in cost of sales and operating expenses.
Return of Equity (ROE)
Return on
10.00
Equity
%
8.00
% 7.78
%
4.00
% 4.05
2.00 % 3.28
% %
0.00
% 201 201 202
8 9 0
Return on
Equity
Figure 6. Return on Equity (ROE) of Surigao Pet Doctors
Figure 6 presents the rise and fall in the graph of the company’s return on equity for
the years 2018, 2019 and 2020. Since the company did not have any current or even long-
term liabilities, total assets were equal to the owner’s equity. As a result, ROE and ROA was
also the same. From 2018, the company was able to raise its Return on equity ratio to 7.78%
in 2019. Yet in 2020, it dropped to 3.28%. It may be presumed that the company was
inefficient in using their capital to generate more sales. According to Ozyasar (n.d.), if the
company increases its advertising and promotion budgets to sell more products, it may lose
money until sales pick up. When volume reaches a certain level, advertising and promotions
can be reduced, and profits tend to improve.

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Table 3. Proposed Improvements in the entity’s Financial Management Practices
Proposed Improvements in the entity’s Financial Performance
Areas of Concern Objectives Problems Proposed Improvements

Revenue To increase Annual revenue Increase budget for
annual sales was insufficient to advertising and check
cover its cost of whether there can be some
sales and improvements in the
operating company’s quality of
expenses. service.
Return on Asset and To increase The company had Increase the profitability of
Equity firm’s a lower ratio on a company's stock by
profitability years 2018 and maximizing its capital to
2020. create more revenue.
Asset Turnover To improve The company did Invest in high-quality

ratio not efficiently use equipment to increase asset
its assets to turnover. To broaden its
generate geographic reach, the
income. company may consider
opening more clinics in
other cities.
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CHAPTER 5
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
This chapter presents the summary, findings, conclusions, and recommendations
of the study.
Summary
This study focused on the financial performance of Surigao Pet Doctors from the
years 2018-2020 which was then used as basis to evaluate the business operations for
financial performance improvement.
The company’s statement of financial performance was used to for the analysis
and computations of ratios for the years 2018-2020. To determine results and
improvements in its financial condition, various accounting and statistical tools were
applied. Horizontal and vertical analysis, and financial performance ratios including
Return on Equity (ROE), Gross Profit and Net Profit Margin, Inventory and Asset
Turnover were employed.
The research design of this study used quantitative documentary analysis in
collecting data from Surigao Pet Doctors in the form of financial statements. The data
were analyzed and interpreted using financial statement analysis and ratios.
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Findings
The findings of the study were summarized as follows:
1. Based on the horizontal analysis on the financial performance for the last three years
(2018-2020), the company's revenue increased by 4.97%, resulting in a significant
increase in gross margin and net income of 19.53% and 108.27%, respectively,
presumably as a result of decrease on the cost of sales and operating expenses by
5.01% and 5.47%. The company experienced a decrease in revenue which was lower
than the base year by 19.48%. In addition, the cost of sales decreased by 13.24%. a
significant decrease in gross margin of 28.58% and net income of 21.14%.
respectively, indicating that management was able to find a way to cut some of its
spending.
2. As to financial performance, it can be noted that there was a fluctuation in the
company’s gross margin, cost of sales and net income. In the year 2018-2019 the
gross margin increases 5.65% but dropped by 10.24% in the year 2020. The
profitability dropped in the year 2020 equivalent to 19.48%.
3. As to financial ratios in years 2018-2020, Return on Equity (ROE) of the company
was experiencing a rise and fall for three (3) periods which indicated that a company
was still struggling to generating more profits while using the capital. Due to decline
in revenue, the gross profit and operating profit margin was also experiencing a rise
and fall in ratios. As discussed previously, the lower sales had its impact to the overall
margin where it decreased. There was an increase in 2019 which the gross profit and
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operating profit margin became 46.33% and 17.74%, respectively, compared from
the previous year which was 4.68% and 8.94%. This would mean that the firm was
able to improve their net profit margin but did not sustain until 2020.
4. There was minimal change in the asset turnover ratio in 2018 and 2019 which was
0.453 and 0.456, respectively, compared in 2020, the asset turnover was 0.354 which
meant a declining trend in asset turnover. Likewise, the company’s inventory
turnover was also experiencing a declining trend. During 2018, the company’s
inventory turnover ratio was 4.89 then it dropped continuously in 2019 and 2020 to
3.88 and 3.54, respectively.

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Conclusion
The following conclusions were formed based on the study's findings:
Surigao Pet Doctors raised more revenue and was expected to generate higher
revenue in the next period. The additional investment in the company’s assets like building
expansion and equipment was expected to generate more profit for a long period of time.
The company may also consider examining its personnel and other factors where there can
be improvement in the quality of services.
Although the company’s cost of sales and operating expenses were continuously
decreasing from year to year, it was still insufficient to raise the company’s net income if
annual sales will not improve in the next years of operations. The company’s overall
financial performance was still at a favorable range but needed to strategize the price of their
services or increase sales volumes to enable the company to increase its sales since this was
the main problem of the company based on the findings of this study.
Overall, the company was performing well if they are still generating net income at
the end of the year. However, the company still could increase its earnings by create more
revenue while cost of sales, operations, and other costs are managed and reduced.
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Recommendations
Based on the conclusions, the following were recommended:
1. Surigao Pet Doctors may use the above-stated findings and conclusions of this study
as basis for the Company’s financial improvement in order to efficiently and
effectively operate the business.
2. To improve earnings, management and financial analysis findings connected to
profitability, the company might implement decrease in expense, as well as plans for
more production techniques that allow the company to raise sales.
3. The company needs to expand its geographic reach to generate more revenue like
opening new branches in other cities near Surigao.
4. Based on the findings, the proposed improvements in the financial performance of
the company are the following: (1) in order to improve earning, management and
financial analysis outcomes in connection to profitability, the company must increase
budget for advertising and check whether there can be some improvements in the
Company’s quality of service; (2) increase firm’s profitability relative to equity by
effectively utilizing its capital to generate more revenue; (3) increase asset turnover
by investing in high quality equipment; and (4) the company may also consider
additional branches in other cities to increase its geographical reach.

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APPENDIX A
Letter to Conduct the Study
SAINT PAUL UNIVERSITY SURIGAO
Cor. San Nicolas & Rizal Streets
8400 Surigao City, Philippines
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APPENDIX B
Letter to the Participant
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APPENDIX C
Letter to the Accountant
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APPENDIX D
Audited Financial Statement 2018-2020
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CURRICULUM VITAE
Personal Information
Name : Luegy Mae B. Alegado
Date of Birth : November 26, 1999
Place of Birth : Cab-ilan Dinagat, Dinagat Islands Surigao Del

Norte
Address : Bernadette Village Surigao City
Civil Status : Single
Nationality : Filipino
Parents : Mr. Wendel T. Alegado

Mrs. Ronalyn B. Alegado
Educational Attainment
Elementary : Sucat Elementary School Sucat-Annex
Secondary : Muntinlupa Business High School Sucat-Annex
Junior High : Muntinlupa Business High School Sucat-Annex
Senior High : Lyceum of Alabang
Tertiary : St. Paul University Surigao
Km. 3, Brgy. Luna, Surigao City
Course : Bachelor of Science in Business Administration, Major in
Financial Management
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CURRICULUM VITAE
Name : Jay Christian L. Dahuyla
Date of Birth : April 2, 2000
Place of Birth : P 3 San Juan San Jose Dinagat Islands
Address : BLK, 3 Lt. 15 Barangay Rizal Pepang Village Surigao Del Norte
Parents : Mrs. Esterlita L. Doocey
Elementary : Sombrado Elementary School, Basilisa Dinagat Islands
Secondary : Ritag Glenda National High School, Basilisa Dinagat Islands
Junior High : Ritag Glenda National High School, Basilisa Dinagat Island
Senior High : Ritag Glenda National High School, Basilisa Dinagat Island
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CURRICULUM VITAE
Name : Frenz Kenth B. Sudio
Date of Birth : November 02, 1999
Place of Birth : Placer, Surigao del Norte
Address : P-7, Sta. Cruz, Placer, Surigao del Norte
Parents : Mr. Faustino Sudio

Mrs. Suzette Sudio
Elementary : Sta. Cruz, Elementary School, Sta. Cruz, Placer, Surigao del Norte
Secondary : Amando A. Fabio Memorial National High School,
Sta. Cruz, Placer Surigao del Norte
Junior High : Amando A. Fabio Memorial National High School,
Sta. Cruz, Placer Surigao del Norte
Senior High : Surigao State College of Technology, Narciso Street,
Magallanes Street, Surigao City, Surigao del Norte


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Paul University Surigao

FINANCIAL PERFORMANCE OF SURIGAO PET DOCTORS IN SURIGAO CITY

In Partial Fulfillment of the Requirements for the Degree

LUEGY MAE B. ALEGADO

Financial Performance of Surigao Pet Doctors in Surigao City ii

Financial Performance of Surigao Pet Doctors in Surigao City iii

Financial Performance of Surigao Pet Doctors in Surigao City iv

The researchers’ families, who, despite the difficulties, never ceased to

Financial Performance of Surigao Pet Doctors in Surigao City v

Lastly, to Dr. Oriel O. Echavez the proprietor of Surigao Pet Doctors in

Luegy Mae B. Alegado

Jay Christian L. Dahuyla

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Financial performance analysis and evaluation of a company have always been

analysis and financial performance ratios.

be some improvements in the company’s quality of service.

Keywords: Financial Performance, Vertical Analysis, Horizontal Analysis, Activity Ratio

Financial Performance of Surigao Pet Doctors in Surigao City vii

CERTIFICATE OF ORIGINALITY iii

TABLE OF CONTENTS vii

1 THE PROBLEM AND ITS BACKGROUND 1

2 REVIEWS OF RELATED LITERATURE 11

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4 RESULTS AND DISCUSSION 25

5 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 33

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LIST OF TABLES AND FIGURES

Figure 1 Schematic Diagram of the Study 4

Financial Performance of Surigao Pet Doctors in Surigao City

THE PROBLEM AND ITS BACKGROUND

corporation is performing properly. It is because a growing number of adjustments to a

answering other important questions regarding a company's overall financial and

comparative profitability performance. Furthermore, a slew of empirical investigations

failure in many cases.

A financial ratio is a tool for analyzing a company's financial health, performance,

Financial Performance of Surigao Pet Doctors in Surigao City 2

vertical analysis, must be used. According to Hermanson (2011), a single amount of

company can provide more insight.

Background of the Study

Surigao del Norte, which opened on February 2021.

future financial position.

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Conceptual Framework of the Study

This study was based on Weygandt's theory on financial accounting which

horizontal analysis which was a way of evaluating a sequence of economic statements

ratio, and market ratio (Nuhu, 2012).

Consideration was given to the financial statements, the statement of financial

analysis, and financial ratios.

Financial Performance of Surigao Pet Doctors in Surigao City 4

Figure 1. Schematic Diagram of the Study

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Statement of the Problem

Pet Doctors in Surigao City of the business.

It sought answers to the following specific questions:

1. What is the Financial Health of Surigao Pet Doctors using;

1.1. Horizontal Analysis;

1.2. Vertical Analysis;

1.3.1 Financial Analysis;

1.3.2. Activity Ratio; and

1.3.3. Profitability Ratio

business in determining or recognizing each loss or gain of the company while

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Significance of the Study