SAINT

COLUMBAN
COLLEGE
College of
Business Education
Pagadian City
SECOND SEMESTER A.Y. 2024-2025

HANDOUT FINMAN 2501

FINANCIAL STATEMENT ANALYSIS
FINANCIAL MANAGEMENT
This is the acquisition and deployment of financial resources to achieve key objectives. We can
analyze this definition by breaking it down into three separate parts.

1. Acquisition of Financial Resources – This involves obtaining suitable sources of finance

and is a financing decision. In selecting sources of finance, risk will be a consideration since
some sources of finance create risk for a business.

2. Deployment of Financial Resources – This involves using a business’ financial resources

effectively and can involve deciding whether or not to invest in projects under investment
decision, and whether or not to return surplus cash shareholders under dividend decision.
When making investments, risk will be again a consideration.

3. Achievement of Key Financial Objectives – Under financial management, the following are
the two most important key financial objectives:
a. Shareholder Wealth Maximization – For a profit company, maximization of
shareholder wealth is assumed to be the main financial objective, although profit
based objectives are still important. The wealth of the shareholders in a company
comes from
▪ Dividends Received

▪ Market Value of Shares. The market value of shares will depend on the
forecast future cash flows of the company, and the perceived risk of these
cash flows. These forecasts will result from a financial analysis of the impact
of a firm’s long-term business pans and corporate strategy.

b. Profit Maximization – This is assumed to be the main financial objective of a

business. But in fact, this is not the assumption made in financial management and, in
reality, shareholders often express disappointment in a company’s performance even
when profits are rising. This suggests that profit is not sufficient as a financial objective.

Drawbacks of Profit as a Financial Objective:

▪ It is historic and not future-oriented.

▪ It does not measure liquidity or risk.

▪ It can be manipulated.

OBJECTIVES OF FINANCIAL MANAGEMENT

▪ To ensure regular and adequate supply of funds to the firm.

▪ To ensure adequate returns to the shareholders. Such returns depend on the earning capacity
of the firm, the market price of the corporation’s shares, and the expectations of the
shareholders.
▪ To ensure optimum utilization of funds.

▪ To ensure safety of investments.

 ▪ To plan a sound capital structure, considering a balance between debt and equity capital.

SCOPE OF FINANCIAL MANAGEMENT

a. Investment Decisions – includes investment in fixed assets (capital budgeting) as well as
investment in current assets (working capital decisions).

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b. Financing Decisions – relate to raising of funds from various resources which will depend on
the decision on the type of source, period of financing, cost of financing, and the expected
reruns therefrom.
c. Dividend Decisions – decision with regards to the net profit distribution, which may be
dividends for shareholders and retained profits, considering the expansion and diversification
plans of the firm.

FINANCIAL STATEMENT ANALYSIS

This involves careful selection of data from financial statements in order to assess and evaluate the
firm’s past performance, present condition and future business potentials. Behind the numbers are
interesting stories of strategies and performances. Simply, financial statements analysis aims to
reveal the great and interesting stories behind each number and account presented on the financial
reports. It should be able to tell what happened in the past, what is happening now, and what is
expected to happen in the next business season.

OBJECTIVES OF FS ANALYSIS (MASEA)

1. Maximizing Profitability
This pertains to the ability of the firm to yield a sufficient amount of return on company sales
assets and invested capital. It also refers to the firm’s capacity to generate earnings vis-à-vis
its expenses and other relevant costs incurred during a specific period of time.

2. Ability to Pay Obligations

This pertains to liquidity and solvency. Liquidity is also referred to as working capital position
or short-term financial position. This is the ability of the company to pay short-term
obligations. On the other hand, solvency is the ability of the company to pay long-term
financial obligations.

3. Safety of the Investment in Business

This pertains to the benefits of financial statements towards internal and external
stakeholders. Financial Statement Analysis provides them the opportunity to make informed
decisions so that they can enhance their investment and make their value increase as the
business continue its operations.

4. Efficiency of Management on Resources Entrusted to them

This pertains to how efficient the company is in managing its resources. It also refers to the
firm’s speed or pace in turning over accounts receivable, inventory and long-term assets. This
reveals the frequency of the firm in selling its products or in collecting its receivable. In so far
as fixed or long-term assets are concern, it reveals how the company uses their fixed assets
to yield revenue.

5. Attainment of Stability
This pertains to the state in which the financial system of a business is stable and resistant to
economic shocks and is fit to smoothly fulfill its basic functions such as the intermediation of
financial funds, management of risks, and the arrangement of payments.

FS ANALYSIS TECHNIQUES
1. Horizontal Analysis
2. Vertical Analysis
3. Trend Analysis
4. Ratio Analysis

A. HORIZONTAL ANALYSIS
This is also called interperiod, cross-period, comparative or intercompany analysis. Horizontal
analysis presents the differences in absolute amount and in percentage differences between two
compared variables or sets of data. Such comparisons may be made between two periods, between
two companies, between actual and budgeted data, or between data of different entities or other
bases of

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analysis. Horizontal Analysis enables investors and analysis to see what has been driving a
company’s financial performance over time, as well as identify trends and growth patterns. This
focuses on the comparison of financial statements data across accounting periods.

Characteristics of Horizontal Analysis

▪ The base may be the last year’s data, budgeted data, average industry data, chief competitor’s

data, government standard data, or any data that serves as meaningful basis for analysis. ▪ The
percentage change is not computed if the base is ZERO.
▪ Getting the changes in amount and percentage is not the end-in-view of financial statements
analysis. The interpretation about those changes is of more relevance.

Formula for Computation:

1. Amount of Change in Pesos = Current Period – Prior Period
2. Percentage Change = Amount Change / Prior Period
3. Ratio = Current Period / Prior Period

PROBLEM 1:
FOUR SEASONS CORPORATION Perform Horizontal Analysis
Comparative Statement of Financial
Position As of December 31, 2024, and
2025

Year Year Amount Percentage Ratio

2025 2024

ASSETS:

Current Assets:

Cash 2,400 2,100

Marketable Securities 1,350 900

Accounts Receivable 36,000 33,000

Inventory 60,000 51,000

Prepaid Expenses 750 900

Total Current Assets 100,500 87,900

Noncurrent Assets:

Long-Term Investment 1,500 1,650

Land 18,000 18,000

Building, Net 165,000 156,000

Equipment, Net 75,000 69,000

 Total Noncurrent Assets 259,500 244,650

TOTAL ASSETS 360,000 332,550

LIABILITIES AND SHE:

Current Liabilities:

Accounts Payable 22,500 21,150

Accrued Expenses 6,600 6,300

Notes Payable 10,900 8,700

Total Current Liabilities 40,000 36,150

Noncurrent Liabilities:

Bonds Payable 110,000 108,000

Total Noncurrent Liabilities 110,000 108,000

Shareholders' Equity:

Preferred Stock, P100 par, 8% 18,000 18,000

Common Stock, P10 par 75,000 72,000

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Additional Paid-in Capital 12,000 11,400

Retained Earnings 105,000 87,000

Total Shareholders' Equity 210,000 188,400

TOTAL LIAB. AND SHE 360,000 332,550

FOUR SEASONS CORPORATION Perform Horizontal Analysis

Comparative Statement of Financial
Performance For the Year Ended December 31,
2024, and 2025

Year Year Amount Percentage Ratio

2025 2024

Net Sales 261,000 246,000

Less: Cost of Sales 182,790 169,050

Gross Profit 78,210 76,950

 Less: Operating Expenses 21,000 20,100

Net Operating Income 57,210 56,850

Less: Interest Expense 12,090 11,670

Net Income Before Tax 45,120 45,180

Less: Tax Expense 11,280 11,400

Net Income After Tax 33,840 33,780

B. VERTICAL ANALYSIS
This is also called common-size analysis. This is a financial statement analysis technique in which
each line item is listed as a percentage of a base figure in the statement. Vertical Analysis makes
comparing financial statements from one company to another and across industries much easier.

Characteristics of Vertical Analysis

▪ The vertical analysis gets the proportional component of each of the variables in financial
statements in relation to a chosen base which is equal to 100%.
▪ The financial statements are treated individually and each is analyzed independent of the
others financial statements.
▪ The base in the Income Statement is the net sales.

▪ The base in the Statement of Financial Position is the total assets.

▪ Size alone does not reflect the true merits of managerial performance. To compare the
financial data, they should be put in equal standing by expressing financial figures of
presented items into percentage of a common base (100%).

Relevant Base
1. Income Statement 100% = Net Sales
2. Balance Sheet 100% = Total Assets

PROBLEM 2:
FOUR SEASONS CORPORATION Perform Vertical Analysis
Comparative Statement of Financial
Position As of December 31, 2024, and
2025

Year 2025 Year Year 2025 Year 2024

2024

ASSETS:

Current Assets:

Cash 2,400 2,100

Marketable Securities 1,350 900

Accounts Receivable 36,000 33,000

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Inventory 60,000 51,000
Prepaid Expenses 750 900

Total Current Assets 100,500 87,900

Noncurrent Assets:

Long-Term Investment 1,500 1,650

Land 18,000 18,000

Building, Net 165,000 156,000

Equipment, Net 75,000 69,000

Total Noncurrent Assets 259,500 244,650

TOTAL ASSETS 360,000 332,550

LIABILITIES AND SHE:

Current Liabilities:

Accounts Payable 22,500 21,150

Accrued Expenses 6,600 6,300

Notes Payable 10,900 8,700

Total Current Liabilities 40,000 36,150

Noncurrent Liabilities:

Bonds Payable 110,000 108,000

Total Noncurrent Liabilities 110,000 108,000

Shareholders' Equity:

Preferred Stock, P100 par, 8% 18,000 18,000

Common Stock, P10 par 75,000 72,000

Additional Paid-in Capital 12,000 11,400

Retained Earnings 105,000 87,000

Total Shareholders' Equity 210,000 188,400

TOTAL LIAB. AND SHE 360,000 332,550

 FOUR SEASONS CORPORATION Perform Vertical Analysis
Comparative Statement of Financial
Performance For the Year Ended December 31,
2024, and 2025

Year Year 2024 Year 2025 Year 2024

2025

Net Sales 261,000 246,000

Less: Cost of Sales 182,790 169,050

Gross Profit 78,210 76,950

Less: Operating Expenses 21,000 20,100

Net Operating Income 57,210 56,850

Less: Interest Expense 12,090 11,670

Net Income Before Tax 45,120 45,180

Less: Tax Expense 11,280 11,400

Net Income After Tax 33,840 33,780

C. TREND ANALYSIS
This is a more longitudinal and modification of the horizontal and vertical analysis. Under this
method, the percentage changes are determined for several successive periods instead of the
typical two-year period horizontal analysis.

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Characteristics of Trend Analysis
▪ Trend analysis is used to analyze three or more sets of comparable data. ▪ Trend analysis
used indexes and ratios to simplify the visible complications of numbers contained in the
financial reports.
▪ Financial data expressed in indexes and ratios are easily readable than those presented in
terms of millions or billions of a given currency unit.
▪ Indexes are expressed in hundreds while ratios are expressed in normal decimal places. ▪ In
computing the trend index or ratio, the base year is normally the earliest year. The choice of the
base is, however, purely judgmental.

PROBLEM 3:
SHOWER Corporation’s sales, current assets, and current liabilities have been reported as follows
over the last five years.
2014 2015 2016 2017 2018

Sales 8,000,000 8650,000 9,200,000 9,600,000 10,800,000

Current Assets 2,225,000 2,270,000 2,220,000 2,180,000 2,630,000

Current Liabilities 250,000 325,000 350,000 450,000 475,000

Requirements:
1. Compute the trend ratio of sales, current assets, and current liabilities using 2014 as the base year.
 2014 2015 2016 2017 2018

Sales

Current Assets

Current Liabilities

2. Compute the trend index of sales, current assets, and current liabilities using 2018 as the base year.
2014 2015 2016 2017 2018

Sales

Current Assets

Current Liabilities

D. RATIO ANALYSIS
This is a quantitative method for gaining insight into a company’s liquidity, operational efficiency, and
profitability by examining financial statements. This is a fundamental component of equity analysis.

Classifications of Financial Ratios

1. Liquidity Ratios
2. Activity Ratios
3. Profitability Ratios
4. Solvency and Leverage Ratios
5. Growth or Market Test Ratios

D.1. LIQUIDITY RATIOS

These are ratios that show the relationship of the company’s cash and other current assets to its
current liabilities. Liquidity is the number one concern of most financial analysts. Accordingly, this will
indicate whether the firm can meet its maturing obligations. The most common liquidity ratios and
their procedural computations are the following:

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1. Working Formula: Current Assets – Current Liabilities
Capital Definition: This is the excess of current assets over current liabilities.
This is used to designate current assets only as the
amount intended for day to day operations of the
business.
Interpretation: The bigger the working capital, the better for the company.

2. Current Formula: Current Assets / Current Liabilities

Ratio Definition: This is the basic liquidity test of the firm. This will determine
the adequacy of working capital or the ability of the company to meet
current obligations.
Interpretation: The higher the current ratio, the better for the company.
 3. Quick or Formula: Quick Assets / Current Liabilities
Acid Test Definition: This is a more stringent test of the ability to pay current
Ratio obligations as they come due. Quick assets consist of
cash, cash equivalents, marketable securities, and short-
term notes and accounts receivable.
Interpretation: The higher the quick ratio, the better liquidity position.

B. ACTIVITY RATIOS
These measure how efficiently a company uses its assets to generate revenue or manage
operations. These ratios assess the effectiveness of the company's management in utilizing
resources such as inventory, receivables, and fixed assets. The most common activity ratios and
their procedural computations are the following:
1. Accounts Formula: Net Credit Sales / Average Accounts Receivable Definition: This
Receivable measures the efficiency of collections and how fast the collections are
Turnover being made. This also indicates the efficiency of the company’s credit
collection policies.
Interpretation: The higher the turnover, the better. A greater number of
times receivable is reinvested indicates more profit.

2. Days Formula: 360 Days / Accounts Receivable Turnover Definition: Also called
Accounts number of days in accounts receivable or average collection period. This
Receivable is to measure the number of days the firm invests in accounts receivable.
Interpretation: The shorter the collection period, the better for the company
since it represents more reinvestment opportunities and
an additional income.

3. Inventory Formula: Cost of Goods Sold / Average Inventory

Turnover Definition: This measures how fast the inventory were converted into
sales. This also indicates the number of times
inventories were acquired and sold during the period.
This is the same with finished goods inventory for
manufacturing companies.
Interpretation: The higher the turnover, the better for the company
because this indicates more profit will be realized.

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4. Raw Formula: Raw Materials Used / Average Raw Materials Inventory
Materials Definition: This measures the number of times raw materials were used in
Turnover average during the period.
Interpretation: The higher the turnover, the better.

5. Work in Formula: Cost of Goods Manufactured / Average Work in Process

Process Definition: This measures the number of time average work in process are
Turnover converted to finished goods.
Interpretation: The higher the turnover, the better.
 6. Days Formula: 360 Days / Inventory Turnover
Inventory Definition: Also called number of days in inventory, average selling period
or average conversion period. This measures the
number of days the inventory is held as stock before it
will be sold to the customer. For manufacturing
companies, individual days inventory shall be computed
for raw materials, work in process, and finished goods.
Interpretation: The shorter the number of days, the better.

7. Accounts Formula: Net Credit Purchases / Average Accounts Payable Definition:

Payable The measures how efficiently a company pays off its suppliers within a
Turnover given period.
Interpretation: The higher the turnover, the better.

8. Days Formula: 360 Days / Accounts Payable Turnover

Accounts Definition: Also called Average Payment Period or number of days in
Payable accounts payable. This measures the average number of
days a company takes to pay its suppliers.
Interpretation: The shorter the number of days, the better.

9. Fixed Formula: Net Sales / Average Fixed Assets

Assets Definition: This is also called fixed utilization ratio. This measures the
Turnover effectiveness of asset utilization in terms of fixed assets.
Interpretation: The higher the turnover, the better.

10. Total Formula: Net Sales / Average Total Assets

Assets Definition: This measures the number of times investments in assets are
Turnover reinvested in sales.
Interpretation: The higher the turnover, the better.

IMPORTANT NOTE:
▪ If no Net Credit Sales is given, use the following order of priority: Net Sales and Gross Sales. ▪
If no Net Credit Purchases is given, use the following order of priority: Net Purchases and Gross
Purchases.
▪ If no Cost of Goods Sold is given, use Net Sales.

▪ The default number of days is 360 days.

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C. PROFITABILITY RATIOS
These are financial metrics used to assess a company's ability to generate profit relative to its
revenue, assets, equity, or other financial components. These ratios provide insights into the
efficiency of the company's operations and its financial performance. The most common activity
ratios and their procedural computations are the following:
1. Return on Formula: Net Profit / Net Sales
Sales Definition: This measures the percentage of revenue that turns into profit
after covering operating costs.
Interpretation: A higher return is better for the company.
 2. Return on Formula: 1. Operating Profit After Tax / Average Total Assets 2.
Assets (EBIT x After Tax Rate) / Average Total Assets
3. (Net Profit + Interest Expense, Net of Tax) / Average
Total Assets
Definition: This assesses how effectively a company uses its assets to
generate net income.
Interpretation: A higher return is better for the company.

3. Return on Formula: Net Profit / Average Shareholders’ Equity

Equity Definition: This measures the profitability of a company in generating
returns on shareholders’ equity.
Interpretation: A higher return is better for the company.

4. Earnings Formula: (Net Profit – Preference Dividend) / Average Outstanding

per Share Ordinary Shares
Definition: This measures the rate of earnings per ordinary share and this
shows the portion of a company’s profit allocated to
each outstanding share.
Interpretation: A higher earnings per share is better.

5. Gross Formula: Gross Profit / Net Sales

Profit Rate Definition: This measures the percentage of revenue left after deducting
the cost of goods sold
Interpretation: A higher gross profit rate is better.

6. Dividends Formula: 1. Dividends Paid to Common Stock / Number of Outstanding

Per Share Ordinary Shares
Definition: This indicates the amount of cash dividends paid to
shareholders per share of stock.
Interpretation: A higher dividend is better for the shareholders.

7. Dividend Formula: 1. Dividends Per Share / Earnings Per Share 2.

Payout Dividend Paid to Common Stock / Net Income
Ratio 3. 100% - Retention Ratio
Definition: This shows the percentage of net income distributed as
dividends to shareholders
Interpretation: A higher payout ratio is better for the shareholders.

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IMPORTANT NOTE:
▪ Return on Sales is also called Profit Margin.

▪ Return on Sales is also called Profit Margin.

▪ OPAT = Earnings Before Interest and Taxes MINUS Tax. If not given, use Net Income.

▪ In EPS, Net Income must be NET of any Preferred Dividends and Liquidation Value.

D. SOLVENCY AND LEVERAGE RATIOS

This measure a company’s ability to meet its long-term financial obligations and sustain operations
over the long term. These ratios assess the overall financial stability of the business by analyzing its
debt levels relative to assets, equity, or earnings. The most common activity ratios and their
procedural computations are the following:
1. Debt Ratio Formula: Total Liabilities / Total Assets
Definition: This is the ratio of total liabilities to total assets. This measures
to what extent that portion of the total assets provided
by the creditors.
Interpretation: A higher debt ratio indicates greater reliance on debt to
finance assets. A lower ratio suggests less dependence
on debt and greater financial stability.

2. Equity Formula: Total Equity / Total Assets

Ratio Definition: This ratio indicates the proportion of a company’s assets
financed by shareholders' equity. This also reflects the
company's reliance on equity rather than debt.
Interpretation: A higher equity ratio indicates a stronger financial position
with less reliance on debt, while a lower ratio suggests
higher reliance on debt financing, which can increase
financial risk.

3. Debt Formula: Total Liabilities / Total Equity

Equity Definition: This measures the resources provided by the owners in the
Ratio business. It provides information on the equivalent
amount provided by creditors for every one peso
provided by the owners of the company.
Interpretation: A higher debt-equity ratio means more reliance on debt to
finance equity, which increases financial risk, while a
lower ratio indicates less reliance on debt, providing
more financial stability.

4. Leverage Formula: 1. Total Assets / Total Equity

Ratio 2. 1 / Equity Ratio
Definition: This is also called equity multiplier. This indicates the number
of times the equity is multiplied.
Interpretation: A higher leverage ratio shows that a company uses more
debt relative to equity, increasing financial risk, while a
lower ratio indicates a lower level of financial risk and
more reliance on equity.

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5. Times Formula: EBIT / Interest Expense
Interest Definition: This measures the ability of the firm to meet its annual interest
Earned payments. This also measures the extent to which
Ratio operating income can decline before the firm is unable to
meet its annual interest costs.
Interpretation: A higher times interest earned ratio suggests the company
can easily cover its interest payments with operating
income, while a lower ratio indicates potential difficulty in
meeting interest obligations.

E. GROWTH OR MARKET TEST RATIOS

This is a set of ratios that relate the firm’s stock price to its earnings and book value per share. These
ratios give the management an indication of what investors think of the company’s past performance
and prospects. The most common activity ratios and their procedural computations are the following:
1. Price Formula: Market Price Per Common Share / Earnings Per Share
Earnings Definition: This is a valuation ratio that compares a company's current
Ratio share price to its earnings per share
Interpretation: A higher ratio suggests investors expect higher future
growth, while a lower ratio may indicate the stock is
undervalued or experiencing difficulties.

2. Dividend Formula: Dividends Per Share / Market Price Per Common Share
Yield Ratio Definition: This ratio measures the rate of return on actual dividend
distribution to common stockholders.
Interpretation: A higher dividend yield indicates a higher return on
investment through dividends, while a lower yield
suggests lower payouts relative to stock price.

3. Earnings Formula: Earnings Per Share / Market Price Per Share Definition: This
Yield Ratio ratio measures the earnings generated per one peso invested in the
company’s stock.
Interpretation: A higher earnings yield suggests the company generates
more profit relative to its stock price, making it potentially
a better value for investors.

4. Market Formula: Market Price Per Common Share / Book Value Per Share
Book Definition: This ratio compares the market value of a company’s stock to
Ratio its book value per share, indicating how much investors are willing to pay
for each peso of net assets.
Interpretation: A higher market-book ratio suggests that the market values
the company more than its book value, often reflecting
growth potential or intangible assets.

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PROBLEM 4:
The financial statements of ESCAPE COMPANY are provided as follows:

ESCAPE COMPANY
Statement of Financial Performance
For the Year Ended December 31, 2024

Gross Sales 5,500,000 Less: Sales Returns and Allowances 500,000

Net Sales 5,000,000 Less: COGS 3,000,000 Gross Profit 2,000,000
Less: OPEX
Doubtful Accounts Expense 50,000
Depreciation Expense 450,000
Rent Expense 100,000
Advertising Expense 75,000
Taxes and Licenses 50,000
Salaries Expense 150,000 875,000 Operating Income 1,125,000 Less:
Interest Expense 125,000 Income Before Tax 1,000,000 Less: Income
Tax Expense 300,000 Income After Tax 700,000 Less: Preference
Dividends 200,000 Profit Available to Ordinary SHE 500,000
 ESCAPE COMPANY
Statement of Changes in Shareholders’ Equity
For the Year Ended December 31, 2024

Common Stock Share Premium

Retained Earnings Total
Preferred Stock
Beginning 3,000,000 2,000,000 1,000,000 500,000 6,500,000 Issuance of Common Stock
400,000 225,000 625,000 Net Income 700,000 700,000 Preference Dividends (200,000)
(200,000) Dividends to Common Stock (125,000) (125,000) Ending 3,400,000 2,000,000
1,225,000 875,000 7,500,000

ESCAPE COMPANY
Statement of Financial Position
As of December 31, 2024

2023 2024
Cash 250,000 625,000 Marketable Securities 500,000 375,000 Accounts
Receivable 750,000 1,250,000 Allowance for Doubtful Accounts (75,000)
(125,000) Inventories 625,000 500,000 Prepaid Expenses 375,000
500,000 Total Current Assets 2,425,000 3,125,000

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Long Term Investments 3,750,000 4,375,000
PPE 7,500,000 7,500,000
Accumulated Depreciation (1,675,000) (2,125,000)
Other Assets 500,000 375,000
Total Noncurrent Assets 10,075,000 10,125,000

TOTAL ASSETS 12,500,000 13,250,000

Accounts Payable 500,000 375,000

Accrued Expenses 250,000 375,000
Short Term Notes Payable 750,000 500,000
Total Current Liabilities 1,500,000 1,250,000

Bonds Payable 2,000,000 1,000,000

Long Term Notes Payable 2,500,000 3,500,000
Total Noncurrent Liabilities 4,500,000 4,500,000

Ordinary Share Capital, P100 par 3,000,000 3,400,000

10% Preference Share, P160 par 2,000,000 2,000,000
Share Premium 1,000,000 1,225,000
Retained Earnings 500,000 875,000
Total Shareholders’ Equity 6,500,000 7,500,000

TOTAL LIABILITIES AND SHE 12,500,000 13,250,000

Additional Information:
1. The Liquidation Value of Preference Shares is P200 per share.
2. The dividends on both preference and ordinary shares had been declared and paid. 3. Assume the
cost of goods sold is purely variable cost while the operating expenses, except doubtful account
expense are fixed costs.
4. 90% of sales to customers are made on credit while the remaining 10% is cash sales. 5. All
purchases are made on credit.
6. The ordinary shares are now currently selling at a quoted price of P150.
7. The book value per ordinary share is P146.50.
Requirement: Compute all the financial ratios provided by this handout.

-------------------------------------------------- END OF HANDOUT -----------------------------------------------------

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