Globe Telecom FINAL PAPER

Final Project in Financal Accounting 2
Submitted to:
Mr. Normiel Aslor, CPA, CTT, REB, MM
Submitted by:
Baltao, Sittie Johanna
Cano, Kris Charen
Dais, Casmir Jinky
Inojales, Arlyn
Pieza, Danna
Torreon, Mary Joy
October 8, 2018
PART I: COMPANY BACKGROUND
Globe Telecom, Inc. (GLO) is a stock corporation organized under the laws of the
Philippines on January 16, 1935, and enfranchised under Republic Act (RA) No. 7229
and its related laws to render any and all types of domestic and international
telecommunications services. It was originally incorporated on January 16, 1935 as
Globe Wireless Limited with a franchise to operate wireless long-distance message
services in the Philippines. The Company eventually changed its name to the present
one in 1992, and welcomed Singapore Telecom, Inc. as a new foreign partner the
following year.
GLO is a telecommunications company that provides digital wireless communication

services nationwide under the "Globe Postpaid", "Globe Prepaid", and "TM" brands
using a fully digital network. The Company also offers domestic and international long-
distance communication services or carrier services.
On May 30, 2016, the Board of GLO approved the acquisition of 50% of Vega Telecom,
Inc. (VTI) from San Miguel Corporation, with Philippine Long-Distance Telephone
Company acquiring the remaining 50% interest. VTI owns an equity stake in Liberty
Telecom Holdings, Inc. (LIB) as well as in enfranchised companies including Bell
Telecommunication Philippines, Inc.; Eastern Telecom Philippines, Inc.; Express
Telecom, Inc.; and Tori Spectrum Telecom, Inc., among others.
On June 21, 2016, GLO exercised its rights as holder of 50% equity interest of VTI to
cause VTI to propose the conduct of a tender offer on the common shares of LIB held
by minority shareholders as well as the voluntary delisting of LIB. At the completion of
the tender offer and delisting of LIB, VTI's ownership of LIB is at 99.1%.
The Company's subsidiaries are composed of Innove Communications Inc.; GTI

Business Holdings, Inc.; Kickstart Ventures, Inc.; Asticom Technology, Inc.; Globe
Capital Venture Holdings, Inc.; Bayan Telecommunications, Inc.; and TaoDharma Inc
PART II:FINANCIAL ANALYSIS
PROFITABILITY AND RETURNS TO INVESTOR
Net Income
Net Profit Margin = Net Sales
P 15,084,213
2017 = P 135,280,731 = 11.15%
P 15,888,499
2016 = P 126,781,660 = 12.53%
P 16,484,450
2015 = P 120,339,458 = 13.70%
Net Income
Return on Asset = Average Total Asset
P 15,084,213
2017 = P 263,814,699 = 5.72%
P 15,888,499
2016 = P 222,771,430.5 = 7.13%
Net Income
Return on Equity = Average Stockholders Equity
P 15,084,213
2017 = P 65,017,019.5 = 23.2%
P 15,888,499
2016 = P 61,437,042 = 25.86%
Return on Equity
Financial Leverage Index = Return on Assets
23.2
2017 = 5.72 = 4.056
25.86
2016 = 7.13 = 3.63
If the Financial Leverage Index is greater than 1, the company is using its debt in a
positive way. The result of 2017 and 2016 Financial Leverage for the Return on Asset
and the Return on Equity is greater than 1 which is 4.056, meaning the GLO is using its
debt successfully.
LIQUIDITY
Current Asset
Current Ratio = Current Liability
P 57,515,137
2017 = P 79,457,031 = 72:1
P 53,022,654
2016 = P 82,401,897 = 64:1
GLO with P57,515,137 in current asset and P79,457,031 in current liabilities would have
a current ratio of 72:1. The higher the current ratio, the more capable the company is of
paying its obligations, as it has a larger proportion of asset value relative to the value of
its liabilities.
Cash+Cash Flow
Cash-Flow Liquidity Ratio = ¿ Operating Activities ¿
Current Liability
P 11,222.220+ P 50,304,262
2017 = P79,457,031 = 77:1
P 8,632,852+ P 37,462,597
2016 = P 82,401,897 = 56:1
Net Sales
Account Receivable Turnover = Average Accounts Receivable Balance
P 135,280,731
2017 = P 27,124,466.5 = 4.987 times
P 126,781,660
2016 = P 24,440,210 = 5.187 times
GLO company collects its receivable 4.987 times on average per year. It indicates that
the company has a low receivable turnover.
No. of days ∈a year

Average Collection Period = Accounts Receivable Tur nover
365
2017 = 4.987 = 73.190 or 73 days
365
2016 = 5.187 = 70.37 or 70 days
The ratios for GLO company indicate that during 2017, the company collected its
account in 73 days. The average customer takes 73 days to pay his or her bills. If the
company had a 30-day policy for when payments should be made, then the average
accounts receivable turnover shows that the average customer makes payments late.
PART III: EARNINGS PER SHARE
The Globe Group's earnings per share amounts were computed as follows:
Net income attributable to common shareholders P 15,605,779
Less dividends on preferred shares:
Non-voting preferred shares (520,060)
Convertible Voting preferred shares (33,731)
Net income attributable to common shareholders 14,511,988
for basic earnings per share (a)
Add dividends on convertible voting preferred shares 33,731
Net income attributable to common shareholders 14,545,719
for diluted earnings per share (b)
Common shares outstanding, beginning 132,759
Weighted average number of exercised 105
shares for stock options
Weighted average number of shares 132,864
for basic earnings per share (c)
Dilutive shares arising from:
Convertible preferred shares 400
Share based compensation plans 103
Stock options 67
Adjusted weighted average number of common 133,434
shares for diluted earnings per share (d)
Basic earnings per share (a/c) P109.22
Diluted earnings per share (b/d) P109.01
COMPUTATION OF BEPS AND DEPS:
Net Income
Basic Earnings Per Share = Weighted Average Number of Shares
P 14,511,988
= P132,864
= 109.22
Net Income
Diluted Earnings Per Share = Weighted Average Number of Shares
P 14,545,719
= P 133,434
= 109.01
PART IV: CONCLUSION
Based on the information that we have gathered on Globe Telecom, Inc. 2017 Financial
Statement, with the result, GLO company’s Financial Leverage Index shows that the
company uses their debt successfully. Also their liquidity using the current ratio present
that the firm is capable in terms of paying its obligation, as it has a larger proportion of
asset value relative to the value of its liabilities.
On the other hand, There are lot of factors and risk that affect their transaction such as
the credit policy, foreign exchange risk and decreasing net profit. GLO company has a
low receivable turnover and the average accounts receivable turnover shows that the
average customer makes payments late. GLO company is in problem with their credit
policy, that might be the cause of losses. GLO company is exposed in Market risk in
which it is a risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in market prices. Specifically, in foreign exchange risk
because GLO company is a domestic and international company. In which, movements
of the PHP against the USD with respect to USD-denominated financial assets, USD-
denominated financial liabilities and certain USO-denominated revenues. Majority of
revenues are generated in PHP, while substantially all of capital expenditures are in
USD. In the past years, the net profit margin of GLO company is consecutively
decreasing.Therefore, we will not invest. Its so hard to invest in a company who is prone
to risk and consecutively decreasing net profit.

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Final Project in Financal Accounting 2

Mr. Normiel Aslor, CPA, CTT, REB, MM

Baltao, Sittie Johanna

Cano, Kris Charen

Dais, Casmir Jinky

Torreon, Mary Joy

GLO is a telecommunications company that provides digital wireless communication

The Company's subsidiaries are composed of Innove Communications Inc.; GTI

PROFITABILITY AND RETURNS TO INVESTOR

No. of days ∈a year

COMPUTATION OF BEPS AND DEPS:

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