Group 1

Dacua, Elsie
Gilva, Elaine Anne
Larida, Charlene
Morales, Shaneen
Angelique
Panunciar, Charlyn
Patlingrao, Irish
Pimentel, Lorimer

FINANCIAL STATEMENT ANALYSIS & FORECASTING

Advance Financial Management with MAC
 HORIZONTAL ANALYIS
Statement of Financial Position
GRN LOGISTICS
Statement of Financial Position
Analysis : Increase (Decrease)
2018 and 2017 2017 and 2016
Assets 2018 2017 2016 Amount % Amount %
Current:
Cash and Cash Equivalent 4,766,768.18 1,214,423.43 1,663,888.28 3,552,344.75 293% -449,464.85 -27%
Accounts Receivable 3,000,150.85 2,920,599.42 2,781,523.25 79,551.43 3% 139,076.17 5%
Total Current Assets 7,766,919.03 4,135,022.85 4,445,411.53 3,631,896.18 88% -310,388.68 -7%

Non-Current:
Property & Equipments-net 42,902,225.00 43,652,625.00 11,324,025.00 -750,400.00 -2% 32,328,600.00 285%

Total Assets 50,669,144.03 47,787,647.85 15,769,436.53 2,881,496.18 6% 32,018,211.32 203%

Liabilities and Capital

Current Liabilities
Trade & Other Payables 19,875,733.24 18,702,237.96 9,226,788.16 1,173,495.28 6% 9,475,449.80 103%

Capital 30,793,410.79 29,085,409.89 6,542,648.37 1,708,000.90 6% 22,542,761.52 345%

Total Liabilities & Capital 50,669,144.03 47,787,647.85 15,769,436.53 2,881,496.18 6% 32,018,211.32 203%
 HORIZONTAL ANALYIS
Statement of Financial Position
Analysis:
• Increase in cash means an idle resource, and would not generate a business return
• Decrease in cash means currently maturing obligations are paid and it is also used for generating profit
• Increase in AR means more credit extended to customer, higher cost of credit and collection, and increase in
the occurrence of uncollectible accounts
• Decrease in the net amount of PPE is basically due to increase in depreciation expense.
• Increase in the net amount of PPE means new purchases of PPE were made. Thus, most of the assets are
not liquid. This will also lead to an increase in expenses particularly the depreciation and other expenses
directly related to the use of such PPEs.
• Increase in liabilities means more resources entrusted by suppliers to the business. However, this can also
lead to an increase in interest expense.
• Increase in Capital could either mean an increase in the net income or investment of the owner which could
be used as an additional resource for the operation of the business.
 HORIZONTAL ANALYIS
Statement of Financial Performance
GRN LOGISTICS
Statement of Financial Performance Analysis : Increase (Decrease)
2018 and 2017 2017 and 2016
2018 2017 2016 Amount % Amount %
Service Revenue 45,770,835.06 48,939,173.33 42,171,725.17 -3,168,338.27 -6.47% 6,767,448.16 16.05%
Less: Direct Cost 36,242,941.00 38,862,626.34 33,878,764.42 -2,619,685.34 -6.74% 4,983,861.92 14.71%
Gross Income 9,527,894.06 10,076,546.99 8,292,960.75 -548,652.93 -5.44% 1,783,586.24 21.51%
Less: Operating Expense 6,501,422.15 6,265,132.99 5,624,817.82 236,289.16 3.77% 640,315.17 11.38%
Net Income Before Tax 3,026,471.91 3,811,414.00 2,668,142.93 -784,942.09 -20.59% 1,143,271.07 42.85%
Less: Provision for Income Tax 818,471.01 1,168,652.48 802,805.74 -350,181.47 -29.96% 365,846.74 45.57%
Net Income after Tax 2,208,000.90 2,642,761.52 1,865,337.19 -434,760.62 -16.45% 777,424.33 41.68%
 HORIZONTAL ANALYIS
Statement of Financial Performance
GRN LOGISTICS
Statement of Financial Performance
Analysis : Increase (Decrease)
2018 and 2017 2017 and 2016
2018 2017 2016 Amount % Amount %
Direct Costs:
Salaries and Wages 11,589,633.25 12,315,430.00 10,251,522.00 -725,796.75 -5.89% 2,063,908.00 20.13%
Materials Supplies and Facilities 13,780,944.10 14,111,091.34 14,513,500.00 -330,147.24 -2.34% -402,408.66 -2.77%
Fuel and Oil 10,872,363.65 12,436,105.00 9,113,742.42 -1,563,741.35 -12.57% 3,322,362.58 36.45%
Total Direct Cost 36,242,941.00 38,862,626.34 33,878,764.42 -2,619,685.34 -6.74% 4,983,861.92 14.71%
 HORIZONTAL ANALYIS
Statement of Financial Performance
Analysis : Increase (Decrease)
2018 and 2017 2017 and 2016
2018 2017 2016 Amount % Amount %
Less: Operating Expense
Taxes, Licenses and Fees 61,565.74 117,628.47 109,890.42 -56,062.73 -47.66% 7,738.05 7.04%
Light and Power 115,890.74 100,082.95 168,425.50 15,807.79 15.79% -68,342.55 -40.58%
Postage and communication 140,897.25 141,241.64 156,935.15 -344.39 -0.24% -15,693.51 -10.00%
Commissions 165,800.00 155,500.00 160,500.00 10,300.00 6.62% -5,000.00 -3.12%
Office Supplies 120,750.21 118,890.40 148,613.00 1,859.81 1.56% -29,722.60 -20.00%
Insurance 2,190,160.50 2,190,160.50 1,846,516.00 0.00 0.00% 343,644.50 18.61%
Interest Expense 285,162.00 280,140.50 378,152.50 5,021.50 1.79% -98,012.00 -25.92%
Representation 420,585.33 300,630.00 450,650.00 119,955.33 39.90% -150,020.00 -33.29%
Professional Fee 105,000.00 85,000.00 55,000.00 20,000.00 23.53% 30,000.00 54.55%
Transportation and Travel 175,220.50 168,831.47 198,625.25 6,389.03 3.78% -29,793.78 -15.00%
SSS, PHIC and HDMF 394,800.00 385,830.00 495,820.00 8,970.00 2.32% -109,990.00 -22.18%
Tolling Fee 406,215.89 400,220.00 465,220.00 5,995.89 1.50% -65,000.00 -13.97%
Charitable Contribution 95,741.10 80,925.00 76,925.00 14,816.10 18.31% 4,000.00 5.20%
Miscellaneous 1,073,232.89 989,652.06 298,145.00 83,580.83 8.45% 691,507.06 231.94%
Depreciation 750,400.00 750,400.00 615,400.00 0.00 0.00% 135,000.00 21.94%
Total Operating Expense 6,501,422.15 6,265,132.99 5,624,817.82 236,289.16 3.77% 640,315.17 11.38%
 HORIZONTAL ANALYIS
Statement of Financial Performance
Analysis:
• The income statements of GRN showed that the company performed better during 2017 compared with
2018.
• There is a material increase in service revenue, gross income and net income that outweighed the significant
increase in direct costs, operating expenses and income taxes during 2017.
• On the other hand, the reverse happened during 2018 wherein there is a decrease in service revenue while
operating expenses increased which resulted to a considerable decrease in net income after tax.
• The increase and decrease in salaries and wages, and fuel and oil is directly related to the increase and
decrease in service revenue for the 2017 and 2018 respectively.
• The material increase in miscellaneous expenses for 2017 represents a red flag for the management because
its increase is more than twice its value during 2016. In addition, the increase continued during 2018.
Therefore, management needs to identify the transactions involved in this account for validation and
verification.
 Vertical Analysis
Statement of Financial Position
As of December 31 Analysis (%)
Assets 2018 2017 2016 2018 2017 2016
Current:
Cash and Cash Equivalent 4,766,768.18 1,214,423.43 1,663,888.28 9% 3% 11%
Accounts Receivable 3,000,150.85 2,920,599.42 2,781,523.25 6% 6% 18%
Total Current Assets 7,766,919.03 4,135,022.85 4,445,411.53 15% 9% 28%

Non-Current:
Property & Equipments-net 42,902,225.00 43,652,625.00 11,324,025.00 85% 91% 72%

Total Assets 50,669,144.03 47,787,647.85 15,769,436.53 100% 100% 100%

Liabilities and Capital

Current Liabilities
Trade & Other Payables 19,875,733.24 18,702,237.96 9,226,788.16 39% 39% 59%

Capital 30,793,410.79 29,085,409.89 6,542,648.37 61% 61% 41%

Total Liabilities & Capital 50,669,144.03 47,787,647.85 15,769,436.53 100% 100% 100%
 Vertical Analysis
Statement of Financial Position
Analysis:
• The financial position of GRN for 2016 to 2018 showed that majority of its assets are
PPEs since the business is a trucking company.
• Most of its PPEs are trucks and other vehicles that are directly used for the operations of
the company.
• Current assets of GRN, containing the cash and receivables, comprised a portion of up to
28% of the total asset at maximum for the past three years from 2016 -2018.
• The assets of GRN are mostly financed through debt during 2016. For the next two years
of operation from 2017-2018, the company shifted its financing using the owner's equity.
 Vertical Analysis
Statement of Financial Performance
December 31 Analysis (%)
2018 2017 2016 2018 2017 2016
Service Revenue 45,770,835.06 48,939,173.33 42,171,725.17 100.00% 100.00% 100.00%
Less: Direct Cost 36,242,941.00 38,862,626.34 33,878,764.42 79.18% 79.41% 80.34%
Gross Income 9,527,894.06 10,076,546.99 8,292,960.75 20.82% 20.59% 19.66%
Less: Operating Expense 6,501,422.15 6,265,132.99 5,624,817.82 14.20% 12.80% 13.34%
Net Income Before Tax 3,026,471.91 3,811,414.00 2,668,142.93 6.61% 7.79% 6.33%
Less: Provision for Income Tax 818,471.01 1,168,652.48 802,805.74 1.79% 2.39% 1.90%
Net Income after Tax 2,208,000.90 2,642,761.52 1,865,337.19 4.82% 5.40% 4.42%
 Vertical Analysis
Statement of Financial Performance
December 31 Analysis (%)
2018 2017 2016 2018 2017 2016
Direct Costs:
Salaries and Wages 11,589,633.25 12,315,430.00 10,251,522.00 25.32% 25.16% 24.31%
Materials Supplies and Facilities 13,780,944.10 14,111,091.34 14,513,500.00 30.11% 28.83% 34.42%
Fuel and Oil 10,872,363.65 12,436,105.00 9,113,742.42 23.75% 25.41% 21.61%
Total Direct Cost 36,242,941.00 38,862,626.34 33,878,764.42 79.18% 79.41% 80.34%
 Vertical Analysis
Statement of Financial Performance
December 31 Analysis (%)
2018 2017 2016 2018 2017 2016
Less: Operating Expense
Taxes, Licenses and Fees 61,565.74 117,628.47 109,890.42 0.13% 0.24% 0.26%
Light and Power 115,890.74 100,082.95 168,425.50 0.25% 0.20% 0.40%
Postage and communication 140,897.25 141,241.64 156,935.15 0.31% 0.29% 0.37%
Commissions 165,800.00 155,500.00 160,500.00 0.36% 0.32% 0.38%
Office Supplies 120,750.21 118,890.40 148,613.00 0.26% 0.24% 0.35%
Insurance 2,190,160.50 2,190,160.50 1,846,516.00 4.79% 4.48% 4.38%
Interest Expense 285,162.00 280,140.50 378,152.50 0.62% 0.57% 0.90%
Representation 420,585.33 300,630.00 450,650.00 0.92% 0.61% 1.07%
Professional Fee 105,000.00 85,000.00 55,000.00 0.23% 0.17% 0.13%
Transportation and Travel 175,220.50 168,831.47 198,625.25 0.38% 0.34% 0.47%
SSS, PHIC and HDMF 394,800.00 385,830.00 495,820.00 0.86% 0.79% 1.18%
Tolling Fee 406,215.89 400,220.00 465,220.00 0.89% 0.82% 1.10%
Charitable Contribution 95,741.10 80,925.00 76,925.00 0.21% 0.17% 0.18%
Miscellaneous 1,073,232.89 989,652.06 298,145.00 2.34% 2.02% 0.71%
Depreciation 750,400.00 750,400.00 615,400.00 1.64% 1.53% 1.46%
Total Operating Expense 6,501,422.15 6,265,132.99 5,624,817.82 14.20% 12.80% 13.34%
 Vertical Analysis
Statement of Financial Performance
Analysis:
• The direct costs of GRN is indeed high. There has been an decrease in direct costs during
2017 and 2018 but is not material enough to support a substantial increase in gross
income. Thus, management can look for ways on managing its direct costs efficiently.
• There has been no significant changes in GRN's operating expenses for the three
reported periods which also resulted to immaterial changes in its net income.
 Financial Ratio Analysis
Liquidity Ratios
CURRENT RATIO
Formula
 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜= 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
2018 2017 2016
Current Assets
Cash and Cash Equivalents 4,766,768.18 1,214,423.43 1,663,888.28
Accounts Receivable 3,000,150.85 2,920,599.42 2,781,523.25
Total Current Assets 7,766,919.03 4,135,022.85 4,445,411.53

Current Liabilities
Trade & Other Payables 19,875,733.24 18,702,237.96 9,226,788.16

Current Ratio 0.39 0.22 0.48

 Financial Ratio Analysis
Liquidity Ratios
QUICK RATIO
Formula
 𝑄𝑢𝑖𝑐𝑘 𝑅𝑎𝑡𝑖𝑜= 𝑄𝑢𝑖𝑐𝑘 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

2018 2017 2016

Current Assets
Cash and Cash Equivalents 4,766,768.18 1,214,423.43 1,663,888.28
Accounts Receivable 3,000,150.85 2,920,599.42 2,781,523.25
Total Current Assets 7,766,919.03 4,135,022.85 4,445,411.53

Current Liabilities
Trade & Other Payables 19,875,733.24 18,702,237.96 9,226,788.16

Quick Ratio 0.39 0.22 0.48

 Financial Ratio Analysis
Liquidity Ratios
CURRENT & QUICK RATIO

2018 2017 2016

Current Ratio 0.39 0.22 0.48
Quick Ratio 0.39 0.22 0.48

Analysis:
• The current and quick ratio of GRN are the same because its current assets (cash and
cash equivalents, and accounts receivables) are also considered quick assets. GRN does
not report any current asset that is not considered as a quick asset.
• The computed ratios shows that GRN does not have enough financial resources on hand
to meet its short-term liabilities for the past 3 years. However, the reported current
liabilities of GRN included mortgages (as presented in the notes to FS) that are classified
as non-current liabilities and should be excluded in the computation of these ratios.
 Financial Ratio Analysis
Profitability Ratios
GROSS PROFIT RATE
Formula
 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 𝑅𝑎𝑡𝑒= 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠

2018 2017 2016

Service Revenue 45,770,835.06 48,939,173.33 42,171,725.17
Gross Profit 9,527,894.06 10,076,546.99 8,292,960.75

Gross Profit Ratio 0.21 0.21 0.20

 Financial Ratio Analysis
Profitability Ratios
GROSS PROFIT RATE

2018 2017 2016

Gross Profit Ratio 0.21 0.21 0.20

Analysis:
• This means that for every ₱1 of revenue, there is only at least ₱ 0.21 left to cover
operating costs and profit.
• GRN only has at least 21% of its revenue that it can use to pay its operating expenses,
interest and taxes.
 Financial Ratio Analysis
Profitability Ratios
OPERATING PROFIT RATIO
Formula
  𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝑅𝑎𝑡𝑖𝑜=
𝑆𝑎𝑙𝑒𝑠

2018 2017 2016

Service Revenue 45,770,835.06 48,939,173.33 42,171,725.17
EBIT (Operating Profit) 3,311,633.91 4,091,554.50 3,046,295.43

Operating Profit Ratio 0.07 0.08 0.07

 Financial Ratio Analysis
Profitability Ratios
OPERATING PROFIT RATIO

2018 2017 2016

Operating Profit Ratio 0.07 0.08 0.07

Analysis:
• This analysis shows that there is no improvement in GRN’s profitability for during the
three periods presented.
• Its operating profit ratio for the past three years reflected a ratio that is below 10%. This
means that there is only an average of 7% left of its revenue to cover non-operating
expenses such as interest.
 Financial Ratio Analysis
Profitability Ratios
RETURN ON EQUITY
Formula
 𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦 = 𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
′
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑆h𝑎𝑟𝑒h𝑜𝑙𝑑𝑒 𝑟 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦

2018 2017 2016

Net Income 2,208,000.90 2,642,761.52 1,865,337.19
Beg., Owner's Equity 29,085,409.89 6,542,648.37 4,777,311.18
End., Owner's Equity 30,793,410.79 29,085,409.89 6,542,648.37

Return on Equity 7% 15% 33%

 Financial Ratio Analysis
Profitability Ratios
RETURN ON EQUITY
2018 2017 2016
Return on Equity 7% 15% 33%

Analysis:
• GRN’s financial statements for 2016 to 2018 showed a decreasing ROE.
• The significant decrease in ROE during 2017 is due to the substantial increase in owner’s
equity which is the result of additional investment particularly in the PPEs of the
company.
• However, the decrease in ROE during 2018 to almost half of its previous year’s ROE might
indicate that GRN had not efficiently used its additional PPEs from 2017. This is shown in
its income statements wherein the net income decreased by 16.45% during 2018 despite
the fact that there is an increase in the owner’s investments in the previous year.
 Financial Ratio Analysis
Leverage Ratios
DEBT RATIO
Formula
  𝐷𝑒𝑏𝑡 𝑅𝑎𝑡𝑖𝑜= 𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

2018 2017 2016

Total Assets 50,669,144.03 47,787,647.85 15,769,436.53
Total Liabilities 19,875,733.24 18,702,237.96 9,226,788.16

Debt Ratio 0.39 0.39 0.59

 Financial Ratio Analysis
Leverage Ratios
DEBT RATIO
2018 2017 2016
Debt Ratio 0.39 0.39 0.59

Analysis:
• The data presented above shows that GRN has been financing the company’s assets
through debt during 2016. However, it shifted its financing to equity during 2017 and
2018.
• During 2016, the company has a higher financial risk compared to the next two years
because of its high debt ratio.
• The computed data also shows that GRN has more assets than its liabilities all
throughout the three years presented from 2016 to 2018.
 Financial Ratio Analysis
Leverage Ratios
DEBT-TO-EQUITY RATIO
Formula
 𝐷𝑒𝑏𝑡 −𝑡𝑜 − 𝐸𝑞𝑢𝑖𝑡𝑦 𝑅𝑎𝑡𝑖𝑜= 𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
′
𝑇𝑜𝑡𝑎𝑙 𝑆h𝑎𝑟𝑒h𝑜𝑙𝑑𝑒𝑟 𝑠 𝐸𝑞𝑢𝑖𝑡𝑦

2018 2017 2016

Total Liabilities 19,875,733.24 18,702,237.96 9,226,788.16
End., Owner's Equity 30,793,410.79 29,085,409.89 6,542,648.37

Debt-to-Equity 0.65 0.64 1.41

 Financial Ratio Analysis
Leverage Ratios
DEBT-TO-EQUITY RATIO

2018 2017 2016

Debt-to-Equity Ratio 0.65 0.64 1.41

Analysis:
• GRN has been aggressive in financing its growth during 2016 because it uses more debt
than equity. In other words, its liabilities exceeds its owner’s equity during 2016.
• During 2017, there has been a significant decrease in its Debt-to-Equity ratio since the
owner of GRN invested a significant amount in the business which led to the increase in
its equity.
 Financial Ratio Analysis
Leverage Ratios
TIMES INTEREST EARNED
Formula
 
RATIO
𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑏𝑒𝑓𝑜𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑡𝑎𝑥𝑒𝑠( 𝐸𝐵𝐼𝑇 )
𝑇𝑖𝑚𝑒𝑠 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑎𝑟𝑛𝑒𝑑 𝑅𝑎𝑡𝑖𝑜 =
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒

2018 2017 2016

Interest Expense 285,162.00 280,140.50 378,152.50
EBIT 3,311,633.91 4,091,554.50 3,046,295.43

Times Interest Earned Ratio 11.61 14.61 8.06

 Financial Ratio Analysis
Leverage Ratios
TIMES INTEREST EARNED RATIO
2018 2017 2016
Times Interest Earned Ratio 11.61 14.61 8.06

Analysis:
• For the past three years, GRN was able to pay its interest with its pre-tax earnings since it
showed a high times interest earned ratio which denotes that it can pay its interest 11
times, 14 times, and 8 times with its income before tax for 2018, 2017, and 2016
respectively.
• This also means that GRN has a lower risk for bankruptcy or default. Thus, it presents a
lower risk to creditors and to its owner.
• However, this could also mean that GRN might not be utilizing excess income for
additional investment to get higher returns.
 Probable Recommendations
• In its financial statement preparation, it is important that the management emphasize
the appropriate classification of transactions and presentation of accounts in the
financial statements. Inaccurate presentations in the financial reports could mislead its
users and will result to inappropriate decisions by the management which could
significantly affect the company’s operations.
• Management should also plan strategically on how to efficiently use its resources
particularly its PPE which is directly related or used in the operations of its business to
generate higher returns.
Thank You!