University of San Carlos
School of Business and Economics
Department of Accountancy
Formative Assessment on Financial Statement Analysis
Universal Robina Corporation
Submitted to:
Ms. Gracienne Rose Curso
Professor
Submitted by:
Burgos, Gracielle Kyle G.
Cababat, Britche Mae O.
Codilla, Mercielle Kym B.
Garrote, Paulyn Andrea A.
Original, Christine Joy A.
Zanoria, Roselane Kristelle M.
AC 4103 Group 9
MW 4:30-6:00PM
February 16, 2021
UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES LIQUIDITY POSITION
1. Company’s Current Ratio (Current Assets/ Current Liabilities)
2019
= ₱64,844,632,262/ ₱34,933,350,028
= 1.8562/1.86x
- In comparison to the previous year’s current ratio, the current ratio for 2019 has
increased. This means that the company’s ability to generate cash to meet its current
liabilities is 1.862 times.
2018
= ₱54,409,734,482/ ₱31,968,500,498
= 1.7020/1.70x
- Compared to the previous year, the company’s current ratio for the year 2018 is
smaller. This means that the company can generate cash to meet its current short-term
obligation 1.7020 times. This was caused by the increase in short-term debts.
2017
= ₱53,702,604,881/ ₱27,999,562,398
= 1.9180/1.92x
- This means that the Universal Robina Corporation can meet its current short-term debt
obligations 1.9180 times over. In order to stay solvent, the firm must have a current
ratio of at least 1.0x, that would indicate that the fir, can exactly meet its current
liabilities or obligations. Having a 1.9180 current ratio would mean that Universal
Robina corporation is solvent.
2. Quick Ratio [(Current Assets- Inventory)/ Current Liabilities]
2019
= (₱64,844,632,262 – ₱24,374,509,971)/ ₱34,933,350,028
= 1.1585/1.16x
2018
= (₱54,409,734,482 – ₱22,085,770,041)/ ₱31,969,500,498
= 1.0111/ 1.01x
2017
= [(₱53,702,604,881-₱18,465,363,440)/ ₱27,999,562,398]
=1.2585x/1.26x
- Universal Robina Corporation is in a decent position for all 3 years since it can meet its
current short-term obligation without selling its inventory. This is because in order to
stay solvent and for the firm to be able to pay its short-term debt without selling
inventory, the quick ratio must be at least 1.0x.
3. Net Working Capital (Current Assets- Current Liabilities)
2019
= ₱64,844,632,262 - ₱34,933,350,028
= ₱29,911,282,234
2018
= ₱54,409,734,482 – ₱31,968,500,498
= ₱22,441,233,984
2017
= ₱53,702,604,881- ₱27,999,562,398
= ₱25,703,042,483
- Based on this calculation, it can be seen that there is a positive net working capital with
which to pay short-term debt obligations before even calculating the current ratio.
UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES
SUMMARY OF LIQUIDITY POSITION
2017 2018 2019
Current Ratio 1.9180/1.92x 1.7020x/1.70x 1.8562x/1.86x
Net Working Capital ₱25,703,042,483 ₱22,441,233,984 ₱29,911,282,234
Quick Ratio (Acid Test) 1.2585x/1.26x 1.0111x/ 1.01x 1.1585x/1.16x
Based on the calculations made, the data can be summarized with the following statements:
1. The three metrics of Universal Robina Corporation decreased from 2017 to 2018, but has
improved from 2018 to 2019.
2. The current ratio, net working capital as well as the quick ratio positions improved.
3. The quick ratio shows that the company does not need to sell its inventory in order to meet
its current debt obligations.
4. Universal Robina Company is operating with relatively high liquidity.
UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES FINANCIAL LEVERAGE POSITION
Financial Leverage (Equity Multiplier)
2017 2018 2019
Assets 147,640,799 151,935,713 168,652,990
Equity 81,686,013 83,993,479 95,184,502
Financial Leverage 1.80 1.80 1.77
We use the Equity Multiplier to compute for the company’s financial leverage. The financial
leverage of URC is in good state as it was not aggressively high. Lower equity multiplier implies that
the URC has fewer debt-financed assets. The ratio in 2017 and 2018 was constant having an equity
multiplier of 1.80, and it made a significant decline for about 0.03 in 2019, which is a good thing.
UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES EARNING ABILITY
a) Earning Ability of Universal Robina Corporation
YEAR FORMULA AMOUNTS (in EARNING
billions) ABILITY/POWER
2019 EBIT Php15,011.957 0.089
TOTAL ASSETS Php 168,652.989
2018 Php13,380.612 0.088
Php 151,925.713
2017 Php 14,952.166 0.10
Php 147,640.799
b) Operating Effectiveness
b1) Asset Turnover Ratio
YEAR FORMULA AMOUNTS (in ASSET TURNOVER
billions)
2019 NET SALES Php134174.527 0.83705
AVERAGE ASSETS 168.652+ 151.935
( )
2
2018 Php 127769.949 0.8530
151.935+147.640
( )
2
2017 Php125.007 0.8612
147.640+142.665
( )
2
The asset turnover ratio can depict the performance of a company’s earning ability. The
higher its asset turnover ratio, the better the company is performing based on its earning
ability. If we compare the three years, on the year 2017, the company has the highest asset
turnover ratio. Therefore, it can be concluded that in the year 2017-2019, URC had the most
effective operations in the year 2017.
b2) Inventory Turnover Ratio
YEAR FORMULA AMOUNTS (in INVENTORY
billions) TURNOVER RATIO
2019 COGS 93.861 4.04
AVERAGE INVENTORY 24.374+22.085
( )
2
2018 90.332 4.45
22.085+18.465
( )
2
2017 85.693 4.6
18.465+18.600
( )
2
An inventory turnover formula can be used to measure the overall efficiency of a business.
In general, higher inventory turnover indicates better performance and lower turnover,
inefficiency. In this case, the inventory turnover in three years (2017-2019) is 4, meaning it
would take URC three months (quarterly) to sell and replace all inventories.
b3) RECEIVABLE TURNOVER RATIO
There are no net credit sales provided in the URC financial statements. I would put
into conclusion, however, the company’s turnover ratio implies that the company
should reassess its credit policies to ensure the timely collection of its receivables
c) RECOVER LONG TERM INVESTMENT
C1) ROE Ratio
YEAR FORMULA AMOUNTS (in RETURN ON
billions) INVESTMENT
RATIO
2019 NET INCOME 10.114 0.1063
SHAREHOLDERS ' EQUITY95.184
2018 94.627 1.127
83.993
2017 11.152 0.1265
81.686
Return on equity (ROE) ratio analyzes how the profitability of a corporation in relation to
stockholders’ equity. Whether an ROE is considered satisfactory will depend on what is
normal for the industry or company peers. In the case of URC, from 2017-2019, the ROE of
the company rose during 2018 but declined on 2019. A rising ROE suggests that a company
is increasing its profit generation without needing as much capital. It also indicates how
well a company's management deploys shareholder capital. Put another way, a higher ROE
is usually better while a falling ROE may indicate a less efficient usage of equity capital.
C2) DEBT SERVICE COVERAGE RATIO
YEAR FORMULA AMOUNTS (in RETURN ON
billions) INVESTMENT
RATIO
2019 OPERATING INCOME 21.348 1.722
TOTAL DEBT SERVICE 12.395
2018 19.442 2.2925
8.480
2017 - -
No information was available about the total debt service of URC for 2017.
In 2018, URC had a DSCR of 2.2925 which is a little over the ideal DSCR of 2. However in
2019, this number decreased to 1.7222 which is still above the minimum of 1.
C3) INTEREST COVERAGE RATIO
YEAR FORMULA AMOUNTS (in RETURN ON
billions) INVESTMENT
RATIO
2019 OPERATING INCOME 21.348 113.33
INTEREST EXPENSE 188.375
2018 - -
2017 - -
An interest coverage ratio that is this big goes to show that URC is more than capable
of meeting interest expenses without being much of a burden on company funds;
leaving them with the opportunity to invest more in capital assets.
UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES ASSET MANAGEMENT
4.
Asset Turnover= Net Sales/ Average Total Sales
2017
=₱11,152,921,333/ ₱125,007,824,013
=0.0892/ 8.92%
2018
=₱9,462,786,222/ ₱127,769,949,329
=0.0741/ 7.41%
2019
=₱10,114,683,777/ ₱134,174,527,579
=0.0754/ 7.54%
- Universal Robina Corporation was most efficient in generating revenue from its assets
during 2017. During 2018, the company’s asset turnover decreased; thus, they were less
efficient in using its assets to generate sales. In 2019, its asset turnover increased.
Inventory Turnover= Cost of goods sold/ Average inventory
2017
=₱ 85,693,355,234/ [(₱18,600,730,912 + ₱18,465,363,440)/ 2]
=4.6238x/ 4.62x
2018
=₱90,332,569,341/ [(₱18,465,363,440 + ₱22,085,770,041)/ 2]
=4.4552x/ 4.46x
2019
=₱93,861,929,762/ [(₱22,085,770,041 + ₱24,374,509,971)/ 2]
=4.0405x/ 4.04x
- Universal Robina Corporation was most efficient in selling the inventory it buys during
2017. It may show that the company is not overspending on inventory purchases and is
not incurring high storage and holding costs during this year. It is important for the
company to achieve a higher inventory turnover ratio since it implies lower storage and
handling costs.
Number of Days of Inventory= 365 days/ Inventory turnover
2017
=365 days/ 4.6238x
=78.9394/ 79 days
2018
=365 days/ 4.4552x
=81.9267/ 82 days
2019
=365 days/ 4.0405x
=90.3354/ 91 days
- Universal Robina Corporation can quickly turn their inventories into cash during 2017.
It is important for the company to have its inventory move as fast as possible to
minimize costs and to increase cash flows.
UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES DUPONT ANALYSIS
DuPont ANALYSIS
2017 2018 2019
(in thousands)
Sales 125,007,824.00 127,769,949.00 134,174,528.00
EBIT 14,952,167.00 13,380,613.00 15,011,958.00
EBT 13,950,408.00 11,544,880.00 11,896,412.00
Net Income 11,152,921.00 9,462,786.00 10,114,684.00
Assets 147,640,799.00 151,935,713.00 168,652,990.00
Equity 81,686,013.00 83,993,479.00 95,184,502.00
Profit Margin Asset Turnover Financial Leverage
DuPont Formula Net Income x Sales x Assets
Sales Assets Equity
YEAR 2017
Computation 11,152,921.00 125,007,824.00 147,640,799.00
x x
125,007,824.00 147,640,799.00 81,686,013.00
ROE
Profit Margin Asset Turnover Financial Leverage
0.09 x 0.85 x 1.81 = 0.14
YEAR 2018
Computation 9,462,786.00 x 127,769,949.00 x 151,935,713.00
127,769,949.00 151,935,713.00 83,993,479.00
ROE
Profit Margin Asset Turnover Financial Leverage
0.07 x 0.84 x 1.81 = 0.11
YEAR 2019
10,114,684.00 134,174,528.00 168,652,990.00
Computation x x
134,174,528.00 168,652,990.00 95,184,502.00
ROE
Profit Margin Asset Turnover Financial Leverage
0.08 x 0.80 x 1.77 = 0.11
The company’s profit margin has an average of 8% for the past three years, and it’s reasonably low.
Only 8% of the company sales are comprised of net income.
URC’s asset turnover is incredibly high; for each peso (₱) of asset the company has generates an
average of Php0.83 in sales.
From 2017 to 2019, URC had an average equity multiplier of 1.79, so the company financed more
than half of its assets through equity, which is great.
References:
2017 Annual Report Retrieved from
https://www.urc.com.ph/uploads/downloads/2018/05/2018-0521_urc-2017annual-
report_web.pdf
2018 Annual Report Retrieved from
https://www.urc.com.ph/annualreport2018/urcannualreport2018
2019 Annual Report Retrieved from https://www.urc.com.ph/annualreport2019/financial-
statements/
