Case Analysis:

MARIWASA Manufacturing
Corporation
MERLITA M. AGUILLAS, MD
AILEEN Y. ARAMBULO, DMD
ROCHELLE P. MAMMUAD-GONZALES, DMD
INTRODUCTION

 Accounts receivable are sales made on credit

which will be paid later based on agreed credit
terms.
BACKGROUND

With the continued growth of ceramic industry in the Philippines

in the 1990’s, Mariwasa Manufacturing Corporation was challenged
by entry of business competitors.
First Lepanto Ceramics, Inc. offered liberal credit terms to its
customers creating pressure on the corporation to follow the same
suit. It was on this ground that  Bituin Ocampo, the account officer
of Oriental Bank, saw the chance to offer lending to Mariwasa to
support the possibility of extending credit to its customers.
TIME CONTEXT

In 1992, new players in the ceramic industry are coming in

and heightened competition using customer credit policy.
VIEW POINT

 Mark Habaluyas, Finance Manager of Mariwasa

Manufacturing Corporation
STATEMENT OF THE PROBLEM

 To determine whether Mariwasa Manufacturing Corporation

should match with the new players like First Lepanto Ceramics in
extending its current credit terms to its customers.
  TO INCREASE SALES AND IMPROVE
OBJECTIVES PROFITABILTY

 TO RETAIN ITS CURRENT MARKET

SHORT TERM
SHARE
  TO GROW MARKET SHARE

OBJECTIVES  TO TAKE NUMBER 1 POSITION IN THE INDUSTRY

LONG TERM  TO SUSTAIN PROFITABLE GROWTH

 Known brand  Very high level of inventory
 Profitable with good margins
 Good receivable management
 Highly capitalized with long term
-turn-over debt
-average collection day (47 days)
 Financially Stable with high current ratio
(1.73)

 Potential increase in sales & profit  Aggressive competition from

with change in credit terms Lepanto

 Improved margin and profitability  Loss in market share

 BALANCE SHEET

MARIWASA FIRST LEPANTO

ASSETS
31-Dec-91 31-Dec-90 30-Jun-91
CURRENT ASSETS
Cash 26.00 13.80 0.90
AR 60.20 38.00 55.40
Inv 292.90 203.40 80.20
Deposits on Letters of Credit and
prepaid import charges 61.70 36.10 1.30
Others 4.70 4.30 0.00
TOTAL CURRENT ASSETS 445.50 295.60 137.80

PLANT, PROPERTY & EQUIPMENT - NET 409.40 345.50 227.20

OTHER ASSETS 24.10 14.70 28.60

TOTAL ASSETS 879.00 655.80 393.60

 MARIWASA FIRST LEPANTO
LIABILITIES & STOCKHOLDER'S EQUITY
31-Dec-91 31-Dec-90 30-Jun-91
CURRENT LIABILITIES
AP 105.40 126.90 20.90
STLP 7.30 27.50 23.10
ITP 4.80 3.40 0.00
Acceptance & Trust receipts - NET 82.20 72.70 0.00
Current portion of LTD 58.00 26.80 0.00
TOTAL CURRENT LIABILITIES 257.70 257.30 44.00

DUE TO PARENT COMPANY 0.00 0.00 184.50

LTD - NET of CURRENT PORTION 109.80 104.10 90.00

TOTAL LIABILITIES 367.50 361.40 318.50

STOCKHOLDER'S EQUITY
Capital Stock 229.60 148.60 40.00
Additional Paid-in Capital 118.30 17.80 0.00
Revaluation increment in Property 95.40 95.50 0.00
Retained Earnings 68.20 32.50 35.10

TOTAL STOCKHOLDER'S EQUITY 511.50 294.40 75.10

TOTAL LIABILITIES & STOCKHOLDERS EQUITY 879.00 655.80 393.60

 FINANCIAL RATIOS
MARIWASA FIRST LEPANTO
31-Dec-91 31-Dec-90 30-Jun-91

ROE 0.0811 0.0995 0.4660

ROA 0.0472 0.0447 0.0889

DAYS RECEIVABLE 48.1442 32.9845 195.9399

DAYS PAYABLE 84.2923 110.1510 73.9196
DAYS INVENTORY 376.0412 247.3051 799.8087
FIXED ASSET TURNOVER 1.1148 1.2171 0.4542
TOTAL ASSET TURNOVER 0.5192 0.6412 0.2622

GROSS PROFIT MARGIN 38% 29% 65%

NET PROFIT MARGIN 9.09% 6.97% 33.91%

DEBT TO EQUITY 0.2147 0.3536 1.1984

DEBT TO ASSET 0.4181 0.5511 0.8092

CURRENT RATIO 1.7288 1.1489 3.1318

QUICK ASSET RATIO 0.3345 0.2013 1.2795
 INCOME STATEMENT

MARIWASA FIRST LEPANTO

31-Dec-91 31-Dec-90 30-Jun-91

Net Sales 456.4 420.5 103.2

Cost of Goods Sold 284.3 300.2 36.6
Gross Profit 172.1 120.3 66.6
Operating Expenses 61.7 50.9 10.3
Income from Operation 110.4 69.4 56.3
Other Income/Charges
Interest & Financing Charges -59.2 -38.3 -21.6
Loss on Foreign Exchange -2.9 -0.4 0
Miscellaneous 4.2 5.1 0.3
Income Before Income Tax 52.5 35.8 35
Provision for Income Tax 11 6.5 0

NET INCOME 41.5 29.3 35.0

 Formula Mariwasa Lepanto
Average Daily Sales Annual sales(456.4)/360 1.27 0.57M
AR Turn-over Sales/Receivables 7.58 3.72
Average Days Receivable 360/7.58 47 days 97 days
Credit Term 30 days 90 days
Gross Profit Ratio/ Sales 37.7% 64.5%

Current Ratio Current Assets/ Current 1.73 3.13

Liabilities

Return on Equity Income/ Stockholder’s 8% 47%

Equity

FINANCIAL ANALYSIS
 INCREMENTAL ANALYSIS
Current Proposed Proposed
30 days 60 days 90 days
Net Sales 456.4 38.1 76.2
Cost of Goods Sold 284.3 23.7 47.4
Gross Profit 172.1 14.4 28.8
Operating Expenses 61.7 0.8 3.8
Income from Operations 110.4 13.6 25.0
Other Income/ Charges:
Interest (59.2) -
Forex Loss (2.9) -
Miscellaneous 4.2 -
Income before Income 52.5 13.6 25.0
Tax
Provision for Income 11 2.8 5.2
Tax
Net Income 41.5 10.8 19.8
  CONSIDER MATCHING CREDIT TERM OF
ALTERNATIVE COMPETITION
 EVALUATE NEED TO GIVE CASH DISCOUNT
COURSE OF ACTION INSTEAD OF TRADE DISCOUNT FOR SHORT
TERM CREDIT
 ASIDE FROM MATCHING CREDIT TERM, MARIWASA
RECOMMENDATION SHOULD REVIEW AND LOOK FOR OPPORTUNITIES
TO REDUCE THE COST OF GOODS SOLD.
 PLAN OF ACTION

 Segment clients and offer various credit terms:

-30 days with cash discount
-60 days
-90 days
 Monitor collection of receivables closely
 Review and manage cost of production
THANK YOU!!