1.
1. BasBased on ed on the gatthe gatherhered compaed company infony informarmatiotion, descrn, describe the workibe the working capiing capitatal l polpolicy of the 2icy of the 2 companies.
companies.
The following are the important ratios used by
The following are the important ratios used by the group to measure the the group to measure the efficiency of working capital. Theefficiency of working capital. The following, easily calcul
following, easily calculated, ratios are important measures of ated, ratios are important measures of working capital utilizatiworking capital utilization:on:
Ratio:
Ratio: GGlloobbe e TTeelleeccoomm PP!!TT "n#entory "n#entory T$rno#er T$rno#er %"n days& %"n days& '
'' ' ddaayyss 11(() ) ddaayyss
Globe Te
Globe Telecom’s inventory turns
lecom’s inventory turns over ever
over every 4
y 4
inventory is & (#$ ''$ while !"T’s cost of sales is
inventory is & (#$ ''$ while !"T’s cost of sales is
turnover ratio is higher than !"T because it has lo
turnover ratio is higher than !"T because it has lo
days making the inventory to turn over more fre+ue
days making the inventory to turn over more fre+ue
Recei#ables ratioRecei#ables ratio
%in days&
%in days&
*+ days
*+ days )+ days)+ days
G
Gllo
ob
be
e h
ha
as
s a
a llo
on
ng
ge
er
r ttiim
me
e
between making a sale and collecting
between making a sale and collecting
tthe
he ca
cash
sh of
of '
'(
( da
dayys
s co
com
mpa
pare
red
d to
to
!
!"T
"T wh
whic
ich
h is
is on
only
ly %(
%( da
dayys.
s. Th
This
is
means that, !"T is
means that, !"T is more aggressive
more aggressive
to generate cash from their ccount
to generate cash from their ccount
-e
-ece
ceiv
ivab
able
les
s th
than
an Gl
Glob
obe
e T
Te
ele
leco
com
m
which may
which may negat
negatively affect the
ively affect the short
short
term debt paying ability of the Globe.
term debt paying ability of the Globe.
Th
This
is co
coul
uld
d ha
have
ve al
also
so af
affe
fect
cted
ed th
thei
eir
r
current ratio. The !"T may generate
current ratio. The !"T may generate
ac
acco
coun
unts
ts re
rece
ceiv
ivab
able
le sh
shor
orte
ter
r th
than
an
Globe that made them generate more
Globe that made them generate more
ca
cash
sh to
to in
inve
vest
st in
in ot
other
her in
inve
vest
stmen
ments
ts
ma
maki
king
ng !
!"T
"T’s
’s cu
curre
rrent
nt rat
ratio
io lo
lowe
wer
r
tth
ha
an
n
G
Gllo
ob
be
e’’ss.
.
/
/o
ow
we
evve
err,
,
b
bo
otth
h
companies’ period both good and bad,
companies’ period both good and bad,
depends on the credit terms allowed
depends on the credit terms allowed
by each of them. Globe was said to
by each of them. Globe was said to
have & months or )$ days credit terms
have & months or )$ days credit terms
same as !"T. 0oth companies are
same as !"T. 0oth companies are
doing good for they have number of
doing good for they have number of
collection days lower than their credit
collection days lower than their credit
terms. /owever
terms. /owever, !"T is
, !"T is doing better
doing better
si
sinc
nce
e th
thei
eir
r
cc
ccou
ount
nts
s -
-ec
ecei
eivvab
able
le
Turnover is a shorter period compared
Turnover is a shorter period compared
to Globe.
to Globe.
Payables Ratio Payables Ratio %"n days& %"n days& 11( ( ddaayyss - - ddaayyss
1n terms of ccounts a
1n terms of ccounts ayable Turnover, Glo
yable Turnover, Globe’s acc
be’s acc
*ven if Globe’s accounts payable turnover is longe
*ven if Globe’s accounts payable turnover is longe
has higher average accounts payable is that the
has higher average accounts payable is that the
5cape36 are estimated to reach 74'$ million to 7
5cape36 are estimated to reach 74'$ million to 7
investments in fi3ed line, international cable
Working Cycle Capital in days
*+ days /2 days
Globe has '( days while !"T has 8& days of co
this doesn’t mean that it is more li+uid than Globe b
nd when you try to look at !"T’s current ratio its
that is 9ust the same as Globe which is in fact has a
0$rrent assets )*,)1,2(2 /,),((( The current assets of !"T is way more higher than Globe Tel 0$rrentiabilities
*',-+-,))1 12-,('/,((( The urrent !iabilities shows that Globe has bigger liability fro its assets.
Working Capital )*,)1,2(2.(( 1,)+',((( The working capital of Globe and !"T is in negative which and !"T having both negative working capital, essentially 0usiness without any 0apital re$irements. ;ince Globe has credit suppliers obligation.
Current Ratio (.* (.*2 Globe is more li+uid than !"T that is least li+uid even though
Table 1: Globe and Pldt’s ratios related to working capital
Ratios
Computation
GLOBE
PLDT
"n#entory T$rno#er %"n days&
)* days %0ost of Goods 3old 4#erage "n#entory&
)* %2) 211 *(( 2 +1( **(& )* +.2*
'' days
)* days %0ost of Goods 3old 4#erage "n#entory& )* %11 +( ((( ) )1* *((& )* ).* 1() days Recei#ables ratio %in days&
)* days %3ales 4cco$nts Recei#able&
)* %-* 1'( -+* 1* 2(( -2)& )* .2
*+ days
)* days %3ales 4cco$nts Recei#able& )* %1+ ))1 ((( 1/ *' (((& )* -.*+ )+ days Payables Ratio %"n days&
)* days %0ost of Goods 3old 4#erage 4cco$nts Payable& )* %2) 211 *(( 1( 1+- -)& )* 2.2+
1( days
)* days %0ost of Goods 3old 4#erage 4cco$nts Payable& )* %11 +( ((( 2 21* *((& )* *.))
- days Working Cycle Capital
in days Current Ratio
Globe5s 6orking 0apital for ) years 2011 2012 2013 -40,000,000.00 -35,000,000.00 -30,000,000.00 -25,000,000.00 -20,000,000.00 -15,000,000.00 -10,000,000.00 -5,000,000.00 0.00
Globe Telecom
Globe Telecom7a8or 9indings why Globe5s 6orking 0apital has been increasing: < *3isting cash reserves
< rofits has been on accounts receivable booming up to &$#% < ayables had been increasing in &$#% up to #$=.
< dditional liabilities funding current assets
The firm has a moderate amount of net working capital. 1t is a relatively amount of risk balanced by a relatively moderate amount of e3pected return. This also reflects in their current ratio which tends to be higher than !"T.
6orking 0apital Policy
GlobeTelecom P!T
Restricted4ggressi#e Policy Restricted4ggressi#e Policy
Globe is having an aggressive working capital policy. -eviewing their ratios, both telecommunications company is having an aggressive approach or restricted working policy. !ooking at the Globe’s working capital, more than half of Globe’s liability can be paid using their current assets which covers )4> of liability over !"T which can only cover '&> of their overall current liabilities that can be paid by their current assets. Their permanent and fi3ed assets are financed by their short term funds which indicates an aggressive policy. This is also proven in the disclosure of their short term ?otes payable in the financial statement that Globe Telecom’s notes payable and accounts payable consists promissory notes from local banks for working capital re+uirements amounting to ',.2$ million. They also have been booming liabilities to support their obligations especially in their system upgrade.
0oth telecommunications company are having aggressive policy which indicates why both have a current ratio less than # and a negative working capital too. /owever, "espite of both having the same working capital policy, Globe is performing average compared to !"T who is performing well since the ratios related to working capital such as receivable turnover and payable deferral conversion is performing better in favor of !"T. Globe despite of being aggressive in terms of financing their fi3ed asset by their short term funds, still is less aggressive in terms of service and meeting credit suppliers obligation.
2. Gather 2 or ) c$rrent articles abo$t each of the three companies that the gro$p belie#es will ha#e an effect on their working capital. Thoro$ghly disc$ss the identified impact together with insights abo$t the s$itability of the company actions abo$t their working capital %and financing& to their nat$re of b$siness. The gro$p m$st be able to pro#ide s$pport in all their answers.
=arch &', &$#% Globe sec$res 1-*7 loan
=?1!, hilippines yalaled telecommunications firm Globe Telecom 1nc. obtained a 7#&$ million loan from =etropolitan 0ank and Trust o. 5=etrobank6 to fund its operations. 1n a disclosure to the hilippine ;tock *3change on =onday, =arch &', the company said loan proceeds would be spent for its capital e3penditures in &$#%. Globes capital e3penditures 5cape36 are estimated to reach 74'$ million to 7'$$ million.Thecape3 would include e3penses related to the firms network modernization program, and investments in fi3ed line, international cable facilities and information technology infrastructure. @n =arch 8, Globe received a 78' million loan facility from 0ank of Tokyo =itsubishi ABC, !td. to partially cover its &$#% cape3.DThe term loan facility with =etrobank brings to 7#2' million the total loans signed by Globe for the first +uarter of the year,E the company said. Globe is e3pected to complete the first phase of its 78$$million network modernization and transformation program and its 72$ million 1T upgrade this month. Globes net income dropped %$> to ).('8 billion in &$#& from 2.(%& billion in &$##. The companys 4th +uarter earnings dropped 28> to 42 million from #.( billion. F
Source: http:www!rappler!co"businessindustries1#$%teleco""unications%"edia$'%globe%loan% operations
Culy 2, &$#% Globe gets ;* nod to sell 80 bonds
Globe will use the proceeds to finance its capital e3penditures and pare down its debt =?1!, hilippines F The ;ecurities and *3change ommission 5;*6 approved yalaled Globe Telecom 1nc.s plan to issue up to 8 billion worth of bonds to finance its capital e3penditures and prepay e3pensive debt.Globe head of investor relations Cose =ari Ba9ardo told the hilippine ;tock *3change in a disclosure that the ;* issued a permit for the fi3edrate bond sale.Ba9ardo said Globe plans to sell 8 billion worth of bonds due &$&$ and &$&%.
1n =ay, Globes board of directors approved the bond offer, proceeds of which will go to capital e3penditures amounting to as much as 7)'$ million, as well as debt prepayments this year.Globe ended the first +uarter with a net income of about 8$$ million, down 8'> from &.8 billion in the same +uarter of &$#&.ore net income, which e3cluded foreign e3change transactions, marktomarket gains and losses and nonrecurring items, grew #%> to %.# billion from &.84 billion last year.
s of end=arch, Globe subscribers totaled %'.# million, accounting for %%> of the market.
;ource: http:www.rappler.combusinessindustries#8&telecommunicationsmedia%%&8%globegets secnodtosellp8bbonds
nalysis:
@ne of the reasons why Globe telecom’s working capital increases is because of the continuous increase in their liabilities. Globe Telecom 1nc. ac+uired a 7#&$million loan from =etropolitan 0ank and Trust o. also known as =etrobank in &$#%. They also obtained a 78' million loan from 0ank of TokyoH which
brings a total of 7#2' million loan signed by globe on &$#%. Globe said that the loan proceeds will be used for Globe’s capital e3penditure like e3penses related to the firms network modernization program which costs 78$$million for the first phase only. apital e3penditures also include investments in fi3ed line, international cable facilities and information technology infrastructure.
1n accordance on the first article, The ;ecurities and *3change ommission approved Globe Telecom 1nc.s plan to issue up to 8 billion worth of bonds due on &$&$ and &$&% to finance its capital
e3penditures and to trim down its debt.
The group thinks it is okay to ac+uire such loans and sell bonds for modernization as long as it will
produce positive effects on the company. The company already needs to modernize their network but it is really costly. Asing loans and bonds they can already modernize their network at this point in time without paying instantlyH besides globe has the capacity to pay its long term debts.
3mart signs P).*B loan deal with andBank
Iireless services company ;mart ommunications 1nc. has signed a %.' billion term loan facility agreement with the !and0ank of the hilippines 5!06 to finance its network upgrade and e3pansion programs in response to growing demand for faster mobile broadband services in the country.
;mart said the loan facility came in two tranches of % billion and '$$ million and that the agreements were signed last Canuary &2 and Bebruary %, respectively. 0oth loans are payable over seven years with an annual amortization rate of # percent of the principal amount on the first year up to the si3th year, commencing on the first anniversary of the initial drawdown and the balance payable upon maturity on Bebruary ', &$&#. The amount of % billion was fully drawn on Bebruary ', while the second loan of %$$ million was fully drawn on Bebruary 8.
;mart, a unit of local telecom giant hilippine !ong "istance Telephone o. 5!"T6, has set a fullyear capital e3penditure of &2 billion. =eanwhile, !"T announced the rollout of its #billion domestic fiber optic network 5"B@?6 linking alawan rovince to !"T’s broader network infrastructure.
The pro9ect consists of )&$ kilometers of stateoftheart fiber optic inland and submarine cables that run from uerto rincesa to Taytay in alawan and ;an Cose de 0uenavista to !a az, 1loilo ity. The company said the "B@? pro9ect was designed to support the increasing demand for reliable telecom and data services in one of the most popular tourist destinations in the country.
1t said "B@? enables !"T to provide fibertothehome 5BTT/6 facilities that deliver multimedia services and highspeed internet connectivity from the comfort of people’s homes in alawan
DIith its huge capacity at 4$ Gigabits that can easily be e3panded to #$$ G0; 5Gigabits per second6, alawan "B@? supports the rapidly growing demand for greater bandwidth by corporate and individual subscribers,E !"T president and *@ ?apoleon ?azareno said. t the end of ;eptember last year, !"T’s total fiber footprint stood at more than 8',$$$ kilometers, inclusive of 8,&$$ kilometers of international submarine fiber, and over 4,$$$ kilometers of domestic submarine fiber.