FINANCIAL STATEMENT ANALYSIS

CASE STUDY:

KAPUSO o KAPAMILYA

FINANCIAL MANAGEMENT
CODE 032: TEAM 2
Leader:
Shaira Marie Maguddayao
Members:
Mark Angelo Bustos
Mary Geraldine Pineda
Nina Erika Yasto
 TABLE OF CONTENTS
Front Cover…………………………………………………………………………………………………………………………… 1
Table of Contents…………………………………………………………………………………………………………………… 2
Introduction…………………………………………………………………………………………………………………………… 3
Objectives……………………………………………………………………………………………………………………………... 3

GMA Network & ABS – CBN Corporation: Evaluation & Analysis of Financial Statements

TREND ANALYSIS

Statement of Financial Position of GMA & ABS-CBN…………………………………………………………………… 4-7

GMA Network Trend Analysis (SFP) ………………………………………………………………………………………….. 8-9
ABS-CBN Corporation Trend Analysis (SFP) ……………………………………………………………………………… 10-11
Income Statement of GMA & ABS-CBN……………………………………………………………………………………… 12-13
GMA Network Trend Analysis (IS) ……………………………………………………………………………………………… 14
ABS-CBN Corporation Trend Analysis (IS) ………………………………………………………………………………….. 15
Trend Analysis Interpretations of GMA & ABS-CBN……………………………………………………………………… 16-18

VERTICAL ANALYSIS

GMA Network Vertical Analysis (SFP) ……………………………………………………………………………………… 19-20

ABS-CBN Corporation Vertical Analysis (SFP) …………………………………………………………………………… 21-22
GMA Network Vertical Analysis (IS) …………………………………………………………………………………………… 23
ABS-CBN Corporation Vertical Analysis (IS) ………………………………………………………………………………… 24
Vertical Analysis Interpretation of GMA & ABS-CBN…………………………………………………………………….. 25-26

FINANCIAL RATIO ANALYSIS

Financial Statements of GMA Network……………………………………………………………………………………… 27-32

Financial Ratios of GMA………………………………………………………………………………………………………….. 33-35
Financial Ratio Analysis Interpretation of GMA…………………………………………………………………………… 36-37
Financial Statements of ABS-CBN Corporation…………………………………………………………………………… 38-42
Financial Ratios of ABS-CBN……………………………………………………………………………………………………. 43-44
Financial Ratio Analysis Interpretation of ABS-CBN……………………………………………………………………… 45-47

CASH FLOW ANALYSIS

Cashflow Analysis Ratios of GMA………………………………………………………………………………………………. 48

Cashflows Analysis Ratios of ABS-CBN……………………………………………………………………………………….. 49

SUMMARY of Findings…………………………………………………………………………………………………………….. 50-51

INTRODUCTION:

Investing is the act of allocating resources, usually money, with the expectation of generating an
income or profit. You can invest in endeavours, such as using money to start a business, or in assets, such as
purchasing real estate in hopes of reselling it later at a higher price. The expectation of a return in the form of
income or price appreciation with statistical significance is the core premise of investing. The spectrum of
assets in which one can invest and earn a return is a very wide one. Risk and return go hand in hand in investing;
low risk generally means low expected returns, while higher returns are usually accompanied by higher risk.

To lower the risks and to choose a better company to invest in, you can do analysis of those company you are
interested in to probably know what their performance is and condition at short term and long term year.
Financial Statement Analysis will help you to know and have glimpse of the financial condition and business
performance of that firm whether it is operating at its peak and have an exceptionally good financial condition
or the other way around. The accurate the analysis is the more and the better decision you will come up, it
will help you give the fact that those risk will be lessened.

KNOWLEDGE OF THE FIRM

ABS-CBN Corporation is the Philippines' leading media and entertainment organization. It is primarily
involved in content creation and production for television, online, and over-the-top platforms, cable,
satellite, cinema, live events, and radio for domestic and international markets.

GMA Network was founded by Robert La Rue Stewart in 1950 as Republic Broadcasting System (RBS) with
flagship AM radio station DZBB. RBS ventured into television in 1961 and began broadcasting on Channel 7 in
the Greater Manila Area. In 1974, the triumvirate of Felipe L. Gozon, Menardo R. Jimenez and Gilberto M.
Duavit took over the management of RBS. In 1996, RBS was renamed GMA Network, Inc. Today, GMA Network,
Inc. is the leading broadcasting company in the Philippines which produces the most innovative, most trusted,
and top rating TV programs. It operates a network of 47 VHF and 41 UHF TV stations, as well as 24 radio
stations throughout the country. Apart from its television and radio businesses, GMA also owns a wide array
of media-related entities engaged in program syndication, film production, music publishing and distribution,
set design and implementation, audio-visual production, and new media. GMA Network, Inc. was officially
listed in the Philippine Stock Exchange in 2007.

OBJECTIVES:

In this case study, our goal and objective is to analyze efficiently the financial statements of GMA
Network and ABS-CBN Corporation, to know the financial condition and performance of both company and it
will be our basis to choose what company we will invest in.
GMA NETWORK, INC.
STATEMENTS OF FINANCIAL POSITION

GMA NETWORK, INC.

STATEMENTS OF FINANCIAL POSITION

31-Dec
2018 2017 2016
ASSETS
Current Assets
Cash and Cash Equivalents 2,559,105,322 2,279,838,495 3,419,014,205
Trade and Other Receivables 4,811,973,802 4,905,864,211 5,270,306,881
Program and Other Rights 736,461,608 1,140,223,422 860,369,128
Prepaid Expenses and Other Current Assets 644,937,919 685,992,630 833,817,514
Total Current Assets 8,752,478,651 9,011,918,758 10,383,507,728

Noncurrent Assets
Property and Equipment:
At Cost 2,642,298,449 2,665,618,075 2,776,484,984
At Revalued Amounts 2,803,196,184 1,805,234,093 1,805,146,475
Available-for-Sale Financial Assets --- 245,741,881 243,391,881
FVOCI 240,255,846 ---- ----
Investments and Advances 158,215,331 151,103,271 150,835,949
Program and Other Rights-net of current portion 200,772,808 205,914,090 200,262,381
Investment Properties 40,003,984 51,048,514 53,315,111
Deferred Tax Assets 242,939,864 291,169,389 291,512,030
Other Non-Current Assets 212,372,345 365,366,211 154,319,976
Total NonCurrent Assets 6,540,054,811 5,781,195,524 5,675,267,787

15,292,533,46
TOTAL ASSETS 14,793,114,282 16,058,775,515
2

LIABILITIES AND EQUITY

Current Liabilities
Trade Payables and Other Current Liabilities 2,160,986,267 2,386,901,598 2,441,945,601
Short-Term Loans 500,000,000 500,000,000 646,360,000
Income Tax Payable 424,940,559 346,686,304 496,104,301
Obligations for Program and Other Rights 119,646,269 139,571,493 76,847,692
Dividends Payable 17,053,776 15,437,102 12,705,059
Total Current Liabilities 3,222,626,871 3,388,596,497 3,673,962,653

Noncurrent Liabilities
Pension Liability 2,182,994,135 1,670,157,190 1,644,323,747
Other Long-Term Employee Benefits 298,843,728 284,654,028 284,556,515
Total NonCurrent Liabilities 2,481,837,863 1,954,811,218 1,928,880,262

TOTAL LIABILITIES 5,704,464,734 5,343,407,715 5,602,842,915

EQUITY
Capital Stock: 4,864,692,000 4,864,692,000 4,864,692,000
Additional Paid in Capital 1,659,035,196 1,659,035,196 1,659,035,196

Revaluation Increment on Land-net of tax 1,710,505,188 1,017,247,029 1,017,247,029

(1,038,041,118
Remeasurement Loss on Retirement Plans-net of tax (666,224,427) (664,042,118)
)
Net Unrealized Loss on AFS Financial Assets-net of tax --- (8,092,181) (10,113,681)
Net Unrealized Loss on FA at FVOCI-net of tax (5,051,345) --- ---
Retained Earnings 2,368,404,468 2,570,710,400 3,574,757,302
Treasury Shares (28,483,171) (28,483,171) (28,483,171)
Underlying Shares of the Acquired Phil. Deposit
(5,790,016) (5,790,016) (5,790,016)
Receipts
Noncontrolling Interest 62,797,526 46,611,737 48,630,059

TOTAL EQUITY 9,588,068,728 9,449,706,567 10,455,932,600

15,292,533,46
TOTAL EQUITY AND LIABILITIES 14,793,114,282 16,058,775,515
2
 ABS-CBN Corporation and Subsidiaries
Consolidated Statements of Financial Position
(amounts in thousands)
2016 2017 2018
ASSETS
Current assets
Cash and cash equivalents 10,964,524 12,346,556 18,104,686
Short-term investments 3,065,793 1,358,429 1,804,041
Trade and other receivables 10,204,118 10,630,014 10,369,080
Inventories 349,821 508,721 680,628
Program rights and other intangible assets 1,067,144 1,137,234 1,359,188
Other current assets 4,141,388 5,062,390 5,383,138
Total current assets 29,792,788 31,043,344 37,700,761
Noncurrent Assets
Property and equipment 24,509,980 25,700,997 27,875,625
Goodwill, Program rights and other intangible asset-
net of current portion 12,530,231 13,181,185 13,310,366
Available-for-sale investment 210,219 242,743 0
FA@FVOCI 0 0 268,304
Investment properties 202,114 200,740 202,763
Investment in associate and joint ventures 530,005 524,963 495,247
Deferred tax assets 2,498,677 2,462,942 3,020,803
Other noncurrent assets 2,459,848 1,748,181 1,685,348
Total noncurrent assets 42,941,164 44,061,741 46,858,456
TOTAL ASSETS 72,733,952 75,105,085 84,559,217

LIABILITIES AND EQUITY

Current liabilities
Trade and other payables 13,648,504 13,252,577 13,637,426
Contract Liabilities 0 0 890,644
Income tax payable 277,239 263,329 208,056
Obligations for program rights 439,316 349,736 441,875
Interest-bearing loans and borrowings 354,950 350,678 414,911
Total current liabilities 14,720,009 14,216,320 15,592,912
Noncurrent Liabilities
Interest-bearing loans and borrowings - net of current
portion 20,117,273 20,036,027 27,810,584
Obligations for program rights - net of current portion 660,667 554,637 541,548
Accrued pension obligation and other employee
benefits 4,906,236 5,757,944 4,029,591
Deferred tax liability 138,271 138,271 138,271
Convertible note 221,063 205,380 221,217
Other noncurrent liabilities 278,730 485,542 500,346
Total noncurrent liabilities 26,322,240 27,177,821 33,241,857
TOTAL LIABILITIES 41,042,249 41,394,141 48,834,769

EQUITY
Equity attributable to equity holders of the parent company
Capital Stock
Common 872,124 872,124 872,124
Preferred 200,000 200,000 200,000
Additional paid-in capital 4,740,811 4,745,399 4,745,399
Exchange differences on translation of foreign
operations -1,638,719 -1,638,719 -1,638,719
Unrealized gain on AFS investments 18,349 359,816 921,624
Share-based payment plan 147,884 180,408 0
Retained earnings 4,588 0 205,969
Treasury shares and Philippine depository receipts
convertible to common shares 26,709,981 28,560,106 30,291,703
Equity attributable to equity holders of the parent 31,055,018 33,279,134 35,598,100
Non-controlling interests 636,685 431,810 126,348
TOTAL EQUITY 31,691,703 33,710,944 35,724,448

TOTAL LIABILITIES AND EQUITY 72,733,952 75,105,085 84,559,217

 TREND ANALYSIS
GMA NETWORK, INC.
STATEMENTS OF FINANCIAL POSITION

31-Dec
2018 2017 2016
ASSETS
Current Assets
Cash and Cash Equivalents 74.8 66.7 100.0
Trade and Other Receivables 91.3 93.1 100.0
Program and Other Rights 85.6 132.5 100.0
Prepaid Expenses and Other Current Assets 77.3 82.3 100.0
Total Current Assets 84.3 86.8 100.0

Noncurrent Assets
Property and Equipment:
At Cost 95.2 96.0 100.0
At Revalued Amounts 155.3 100.0 100.0
Available-for-Sale Financial Assets --- 101.0 100.0
FVOCI 100.0 ---- ----
Investments and Advances 104.9 100.2 100.0
Program and Other Rights-net of current portion 100.3 102.8 100.0
Investment Properties 75.0 95.7 100.0
Deferred Tax Assets 83.3 99.9 100.0
Other Non-Current Assets 137.6 236.8 100.0
Total NonCurrent Assets 115.2 101.9 100.0

TOTAL ASSETS 95.2 92.1 100.0

LIABILITIES AND EQUITY

Current Liabilities
Trade Payables and Other Current Liabilities 88.5 97.7 100.0
Short-Term Loans 77.4 77.4 100.0
Income Tax Payable 85.7 69.9 100.0
Obligations for Program and Other Rights 155.7 181.6 100.0
Dividends Payable 134.2 121.5 100.0
Total Current Liabilities 87.7 92.2 100.0
Noncurrent Liabilities
Pension Liability 132.8 101.6 100.0
100.0
Other Long-Term Employee Benefits 105.0 100.0

Total NonCurrent Liabilities 128.7 101.3 100.0

TOTAL LIABILITIES 101.8 95.4 100.0

EQUITY
Capital Stock: 100.0 100.0 100.0

Additional Paid in Capital 100.0 100.0

100.0
Revaluation Increment on Land-net of tax 168.2 100.0 100.0

Remeasurement Loss on Retirement Plans-net of tax (156.3) (100.3) 100.0

Net Unrealized Loss on AFS Financial Assets-net of tax --- (80.0) 100.0
Net Unrealized Loss on FA at FVOCI-net of tax (100.0) --- ---
Retained Earnings 66.3 72.0 100.0
Treasury Shares (100.0) (100.0) (100.0)
Underlying Shares of the Acquired Phil. Deposit Receipts (100.0) (100.0) (100.0)
Noncontrolling Interest 129.1 95.8 100.0

TOTAL EQUITY 91.7 90.4 100.0

TOTAL EQUITY AND LIABILITIES 95.2 92.1 100.0

 TREND ANALYSIS OF ABS-CBN Corporation

ABS-CBN Corporation and Subsidiaries

Consolidated Statements of Financial Position Trend Percentages
2016 - 2018

2016 2017 2018

ASSETS
Current assets
Cash and cash equivalents 100 112.60 165.12
Short-term investments 100 44.31 58.84
Trade and other receivables 100 104.17 101.62
Inventories 100 145.42 194.56
Program rights and other intangible assets 100 106.57 127.37
Other current assets 100 122.24 129.98
Total current assets 100 104.20 126.54
Noncurrent Assets
Property and equipment 100 104.86 113.73
Goodwill, Program rights and other intangible
asset- net of current portion 100 105.20 106.23
Available-for-sale investment 100 115.47 0.00
FA@FVOCI 100
Investment properties 100 99.32 100.32
Investment in associate and joint ventures 100 99.05 93.44
Deferred tax assets 100 98.57 120.90
Other noncurrent assets 100 71.07 68.51
Total noncurrent assets 100 102.61 109.12
TOTAL ASSETS 100 103.26 116.26

LIABILITIES AND EQUITY

Current liabilities
Trade and other payables 100 97.10 99.92
Contract Liabilities 100
Income tax payable 100 94.98 75.05
Obligations for program rights 100 79.61 100.58
Interest-bearing loans and borrowings 100 98.80 116.89
Total current liabilities 100 96.58 105.93
Noncurrent Liabilities
Interest-bearing loans and borrowings - net of
current portion 100 99.60 138.24
Obligations for program rights - net of current
portion 100 83.95 81.97
Accrued pension obligation and other employee
benefits 100 117.36 82.13
Deferred tax liability 100 100.00 100.00
Convertible note 100 92.91 100.07
Other noncurrent liabilities 100 174.20 179.51
Total noncurrent liabilities 100 103.25 126.29
TOTAL LIABILITIES 100 100.86 118.99

EQUITY
Equity attributable to equity holders of the parent company
Capital Stock
Common 100 100.00 100.00
Preferred 100 100.00 100.00
Additional paid-in capital 100 100.10 100.10
Exchange differences on translation of foreign
operations 100 100.00 100.00
Unrealized gain on AFS investments 100 1960.96 5022.75
Share-based payment plan 100 121.99 0.00
Retained earnings 100 0.00 4489.30
Treasury shares and Philippine depository receipts
convertible to common shares 100 106.93 113.41
Equity attributable to equity holders of the parent 100 107.16 114.63
Non-controlling interests 100 67.82 19.84
TOTAL EQUITY 100 106.37 112.72
TOTAL LIABILITIES AND EQUITY 100 103.26 116.26
GMA NETWORK, INC.
INCOME STATEMENT

31-Dec
2018 2017 2016
₱
REVENUE ₱15,602,292,188 ₱16,953,948,299
15,236,192,369
PRODUCTION COST 6,483,703,064 6,682,296,268 6,641,457,517
GROSS PROFIT 8,752,489,305 8,919,995,920 10,312,490,782
GENERAL AND ADMINISTRATIVE EXPENSES 5,514,342,920 5,384,409,786 5,236,089,061
OTHER INCOME (EXPENSE)-NET
Interest expense (36,251,389) (23,010,666) (16,905,154)
Interest Income 25,455,860 23,776,178 23,650,808
Net foreign currency exchange gain (loss) 19,221,001 2,300,851 21,044,145
Equity in net earnings (losses) of joint ventures 6,351,690 329,580 2,758,875
Others- net 79,113,895 119,017,401 100,865,087
93,891,057 122,413,344 131,413,761
INCOME BEFORE TAX 3,332,037,442 3,657,999,478 5,207,815,482
PROVISION FROM INCOME TAX
CURRENT 1,056,853,906 1,094,886,107 1,510,923,590
DEFFERED (48,828,615) 3,383,736 50,296,632
1,008,025,291 1,098,269,843 1,561,220,222
NET INCOME 2,324,012,151 2,559,729,635 3,646,595,260
 ABS-CBN Corporation and Subsidiaries
Consolidated Statements of Income
(amounts in thousands)

2016 2017 2018

Revenues 41,630,599 40,698,244 40,130,592
Production Costs 12,011,950 11,683,615 12,345,277
Cost of Services 10,323,075 10,711,713 10,785,230
Cost of Sales 1,693,608 2,109,942 2,493,359
GROSS PROFIT 17,601,966 16,042,974 14,506,726
General and Administrative Expenses 12,661,479 11,916,759 12,310,128
Finance Costs 1,036,386 1,007,916 1,124,677
Interest Income 220,982 166,788 202,801
Foreign Exchange Gains 89,063 41,194 404,031
Equity in net losses of associates and joint
ventures 1,055 5,052 29,706
Other Income 467,780 614,806 331,253
INCOME BEFORE INCOME TAX 4,680,871 3,936,035 198,030
Current 1,047,055 604,575 600,791
Deferred 108,500 167,883 528,732
Provision for Income Tax 1,155,555 772,458 72,059
NET INCOME 3,525,316 3,163,577 1,908,241
Attributable to equity holders of the Parent
Company 3,885,278 3,333,889 21,110,251
Noncontrolling Interests 359,962 170,312 202,010
 TREND ANALYSIS
GMA NETWORK, INC.
INCOME STATEMENT

31-Dec
2018 2017 2016
REVENUE 89.9 92.0 100
PRODUCTION COST 97.6 100.6 100
GROSS PROFIT 84.9 86.5 100
GENERAL AND ADMINISTRATIVE EXPENSES 105.3 102.8 100
OTHER INCOME (EXPENSE)-NET
Interest expense (214.4) (136.1) (100)
Interest Income 107.6 100.5 100
Net foreign currency exchange gain (loss) 91.3 10.9 100
Equity in net earnings (losses) of joint ventures 230.2 11.9 100
Others- net 78.4 118 100
71.4 93.2 100
INCOME BEFORE TAX 64 70.2 100
PROVISION FROM INCOME TAX
CURRENT 70 72.5 100
DEFFERED (97.1) 6.7 100
64.6 70.3 100
NET INCOME 63.7 70.2 100
 ABS-CBN Corporation and Subsidiaries
Consolidated Statements of Income Trend Percentages
2016 – 2018

2016 2017 2018

Revenues 100 97.76 96.40
Production Costs 100 97.27 102.77
Cost of Services 100 103.76 104.48
Cost of Sales 100 124.58 147.22
GROSS PROFIT 100 91.14 82.42
General and Administrative Expenses 100 94.12 97.23
Finance Costs 100 97.25 108.52
Interest Income 100 75.48 91.77
Foreign Exchange Gains 100 46.25 453.65
Equity in net losses of associates and joint
ventures 100 478.86 2,815.73
Other Income 100 131.43 70.81
INCOME BEFORE INCOME TAX 100 84.09 4.23
Current 100 57.74 57.38
Deferred 100 154.73 487.31
Provision for Income Tax 100 66.85 6.24
NET INCOME 100 89.74 54.13
Attributable to equity holders of the Parent
Company 100 85.81 543.34
Noncontrolling Interests 100 47.31 56.12
GMA NETWORK TREND ANALYSIS INTERPRETAION:

1. Short-term Solvency
- The current assets decreased by 15.7% while the current liabilities also decreased by
12.3% by 2018. The current financial position of the GMA network, Inc. did not
improve as reflected by the downward trend in total current assets although it was
accompanied by the downward trend in total current liabilities. The current liabilities
declined at a higher rate. This was probably due to the decreased in cash and cash
equivalent which might have been used to settle the current obligations as they come
due. The current assets were just enough to settle its current obligations.
- The trend data reveals that cash and receivables showed downward tendencies over
the years. But the program and other rights showed upward tendencies in 2017 but
declined in 2018. The decrease in receivables and program and other rights is not
favorable because net sales also decreased over the years. The unfavorable tendencies
indicate that although there is a relative smaller amount of decrease in trade
receivables, the more effective credit, collection and merchandising policies could have
been established and made effective.
- The decline in prepaid expenses and other current assets over the years also indicates
lesser investment in not-so-productive assets. All these declining trends of current
assets reflect a decreasing efficiency of working capital management.

2. Long-term financial position

- A comparison of the trends in total liabilities and equity reveals that the former
increased and the latter declined. As a result of these variations, the creditors’ margin
of safety decreased significantly.
- The expansion in property, plant and equipment which substantially increased was
financed by long-term liabilities.
- A greater reliance on creditor funds rather on equity funds decreased the margin of
safety of the creditors and therefore weakened the financial position of the company
-
3. Profitability

- It will be observed that sales showed a downward trend with a higher rate while
production costs increased in 2017 but declined a smaller rate in 2018. These data
reflect an unfavorable situation from the point of view of managerial ability to control
costs relative to change on sales volume. This more undesirable percentage may have
been result of one or more factors such as unfavorable price-level changes, a not
effective markup policies or lesser efficiency in purchasing.
 - An unfavorable tendency is reflected by the fact that trend percentages for general and
administrative expenses increased at a faster rate with the sales that are decreasing
with a higher rate over the years. GMA Network Inc. could have earned more profit if
better and more effective control over operating expenses were instituted.

ABS-CBN Corporation
TREND PERCENTAGES ANALYSIS AND EVALUATION
Short-Term Solvency

 Current assets increased by 26.54% while current liabilities also increased by 5.93% by 2018. The
current financial position of the ABS-CBN Corporation and Subsidiaries improved as reflected by
the upward trend in total current assets accompanied by the smaller increase in trend rate in
current liabilities. The improvement in the current financial position is also indicated by the fact
that the current assets were 2.02 times the current liabilities as of December 31, 2014 and 2.42
times at the most recent date.
 The trend data revealed that cash and cash equivalents, receivables, and inventory showed
upward tendencies over the years. However, the increase in receivables and inventory is
unfavorable because the trend percentage of revenues decreased. The unfavorable tendency
indicates that more effective credit collection and merchandising policies should be established
and made effective. Although, the relatively smaller amount of trade receivables reflects more
rapid turnover of customer accounts and possibly a large increase in cash sales
 Other current assets may be increasing over the years, but the short-term investments declined
significantly which indicates lesser investment in not-so-productive assets. All these trends in
different directions reflect an increasing efficiency of working capital management.

Long-Term Financial Position

 A comparison of the trends in total liabilities and equity reveals that the former increased at a
faster rate than the latter. As a result of these variations, the creditors' margin of safety decreased
significantly.
 The expansion in property, plant and equipment which substantially increased was financed by
shareholders ' capital through the issuance of additional paid in capital, long term liabilities and
working capital derived from operations.
 A lesser reliance on equity funds rather than on creditor funds decreased the margin of safety of
the creditors and therefore weakened the financial position of the company.
Profitability

 It is observed that revenues declined while production costs, cost of services and cost of sales
showed upward trends. These data reflect an unfavorable situation from the point of view of
managerial ability to control costs relative to change on sales volume. One or more factors such
as favorable price level changes, more effective markup policies or greater efficiency in purchasing
should be improved to achieve a desirable percentage.
 Trend percentages for both selling general and administrative expenses and revenues decreased.
However, an unfavorable tendency is reflected by the fact that trend percentage of revenues is
still less than the expenses in 2018.
 VERTICAL ANALYSIS

GMA NETWORK, INC.

STATEMENTS OF FINANCIAL POSITION

31-Dec
2018 2017 2016
ASSETS
Current Assets
Cash and Cash Equivalents 16.73 15.41 21.29
Trade and Other Receivables 31.47 33.16 32.82
Program and Other Rights 4.82 7.71 5.36
Prepaid Expenses and Other Current Assets 4.22 4.64 5.19
Total Current Assets 57.2% 60.92 % 64.66%

Noncurrent Assets
Property and Equipment:
At Cost 17.28 18.02 17.29
At Revalued Amounts 18.33 12.20 11.24
Available-for-Sale Financial Assets --- 1.66 1.52
FVOCI 1.57 ---- ----
Investments and Advances 1.03 1.02 .9393
Program and Other Rights-net of current portion 1.31 1.39 1.25
Investment Properties .2616 .3451 .3320
Deferred Tax Assets 1.59 1.97 1.82
Other Non-Current Assets 1.39 2.47 .9610
Total NonCurrent Assets 42.77% 39.08% 35.34%

TOTAL ASSETS 100% 100% 100%

LIABILITIES AND EQUITY

Current Liabilities
Trade Payables and Other Current Liabilities 14.13 16.14 15.21
Short-Term Loans 3.27 3.38 4.02
Income Tax Payable 2.78 2.34 3.09
Obligations for Program and Other Rights .7823 .9435 .4785
Dividends Payable .1115 .1044 .0791
Total Current Liabilities 21.07% 22.91% 22.88%

Noncurrent Liabilities
Pension Liability 14.27 11.29 10.24
Other Long-Term Employee Benefits 1.95 1.92 1.77
Total NonCurrent Liabilities 16.23 % 13.21 % 12.01 %

TOTAL LIABILITIES 37.30% 36.12% 34.89 %

EQUITY
Capital Stock: 31.81 32.88 30.29
Additional Paid in Capital 10.85 11.21 10.33

Revaluation Increment on Land-net of tax 11.19 6.88 6.33

Remeasurement Loss on Retirement Plans-net of tax (6.79) (4.50) (4.14)

Net Unrealized Loss on AFS Financial Assets-net of
--- (.0547) (.0630)
tax
Net Unrealized Loss on FA at FVOCI-net of tax (.0330) --- ---
Retained Earnings 15.49 17.38 22.26
Treasury Shares (.1863) (.1925) (.1774)
Underlying Shares of the Acquired Phil. Deposit
(.0379) (.0391) (.0360)
Receipts
Noncontrolling Interest .4106 .3151 .3028

TOTAL EQUITY 62.70 % 63.88% 65.11%

TOTAL EQUITY AND LIABILITIES 100% 100% 100%

 ABS-CBN Corporation and Subsidiaries
Consolidated Statements of Financial Position Common Size Percentages
2016 - 2018

2016 2017 2018

ASSETS
Current assets
Cash and cash equivalents 15.07 16.44 21.41
Short-term investments 4.22 1.81 2.13
Trade and other receivables 14.03 14.15 12.26
Inventories 0.48 0.68 0.80
Program rights and other intangible assets 1.47 1.51 1.61
Other current assets 5.69 6.74 6.37
Total current assets 40.96 41.33 44.59
Noncurrent Assets
Property and equipment 33.70 34.22 32.97
Goodwill, Program rights and other intangible asset- net of
current portion 17.23 17.55 15.74
Available-for-sale investment 0.29 0.32 0.00
FA@FVOCI 0.00 0.00 0.32
Investment properties 0.28 0.27 0.24
Investment in associate and joint ventures 0.73 0.70 0.59
Deferred tax assets 3.44 3.28 3.57
Other noncurrent assets 3.38 2.33 1.99
Total noncurrent assets 59.04 58.67 55.41
TOTAL ASSETS 100 100 100

LIABILITIES AND EQUITY

Current liabilities
Trade and other payables 18.76 17.65 16.13
Contract Liabilities 0.00 0.00 1.05
Income tax payable 0.38 0.35 0.25
Obligations for program rights 0.60 0.47 0.52
Interest-bearing loans and borrowings 0.49 0.47 0.49
Total current liabilities 20.24 18.93 18.44
Noncurrent Liabilities
Interest-bearing loans and borrowings - net of current
portion 27.66 26.68 32.89
Obligations for program rights - net of current portion 0.91 0.74 0.64
Accrued pension obligation and other employee benefits 6.75 7.67 4.77
Deferred tax liability 0.19 0.18 0.16
Convertible note 0.30 0.27 0.26
Other noncurrent liabilities 0.38 0.65 0.59
Total noncurrent liabilities 36.19 36.19 39.31
TOTAL LIABILITIES 56.43 55.11 57.75

EQUITY
Equity attributable to equity holders of the parent company
Capital Stock
Common 1.20 1.16 1.03
Preferred 0.27 0.27 0.24
Additional paid-in capital 6.52 6.32 5.61
Exchange differences on translation of foreign operations -2.25 -2.18 -1.94
Unrealized gain on AFS investments 0.03 0.48 1.09
Share-based payment plan 0.20 0.24 0.00
Retained earnings 0.01 0.00 0.24
Treasury shares and Philippine depository receipts
convertible to common shares 36.72 38.03 35.82
Equity attributable to equity holders of the parent 42.70 44.31 42.10
Non-controlling interests 0.88 0.57 0.15
TOTAL EQUITY 43.57 44.89 42.25
TOTAL LIABILITIES AND EQUITY 100 100 100
GMA NETWORK, INC.
INCOME STATEMENT

31-Dec
2018 2017 2016
REVENUE 100% 100% 100%

PRODUCTION COST 39.17

42.55 42.83
GROSS PROFIT 57.45 57.17 60.83
GENERAL AND ADMINISTRATIVE EXPENSES 36.19 34.51 30.88
OTHER INCOME (EXPENSE)-NET
Interest expense (.2379) (.1475) (.0997)
Interest Income .1670 .1524 .1395
Net foreign currency exchange gain (loss) .1262 .0147 .1241
Equity in net earnings (losses) of joint ventures .0416 .0021 .0162
Others- net .5192 .7628 .5949
.6162 .7846 .7751
INCOME BEFORE TAX 21.87 23.45 30.72
PROVISION FROM INCOME TAX
CURRENT 6.93 7.02 8.91
DEFFERED (.3204) .0217 .2967
6.61 7.04 9.21
NET INCOME 15.25% 16.41% 21.51%
 ABS-CBN Corporation and Subsidiaries
Consolidated Statements of Income Common Size Percentages
2016 - 2018
2016 2017 2018
Revenues 100 100 100
Production Costs 28.85 28.71 30.76
Cost of Services 24.80 26.32 26.88
Cost of Sales 4.07 5.18 6.21
GROSS PROFIT 42.28 39.42 36.15
General and Administrative Expenses 30.41 29.28 30.68
Finance Costs 2.49 2.48 2.80
Interest Income 0.53 0.41 0.51
Foreign Exchange Gains 0.21 0.10 1.01
Equity in net losses of associates and joint
ventures 0.00 0.01 0.07
Other Income 1.12 1.51 0.83
INCOME BEFORE INCOME TAX 11.24 9.67 0.49
Current 2.52 1.49 1.50
Deferred 0.26 0.41 1.32
Provision for Income Tax 2.78 1.90 0.18
NET INCOME 8.47 7.77 4.76
Attributable to equity holders of the Parent
Company 9.33 8.19 52.60
Noncontrolling Interests 0.86 0.42 0.50
 GMA VERTRICAL ANALYSIS INTERPRETATION

Evaluation of Financial Position

1. The GMA Network Inc. statement of financial position showed that there had been substantial
changes in the proportions of current and fixed assets and current and long-term liabilities during
the period from December 31, 2016 to December 31, 2018. The percentage as shown that most
of the assets of the company are liquid that is evident by a 57.2 percent of current asset which is
higher than the non-current assets with 42.77 percent. Together with a small increased in liabilities
over the three-year period.
2. It can be observed that cash and cash equivalents, trade and other receivables as well as other
current assets in relation to total assets had been decreasing. Considering that the volume of
revenues was continuously decreasing, this changes can be viewed as unfavorable to the company.
3. The increasing percentage of total liabilities to total assets further indicates more reliance of the
company from creditors in raising additional capital. This is unfavorable as far as the long-term
financial position of the company is concerned because a smaller margin of safety is provided
among the creditors.

Evaluation of profitability
4. The GMA network Inc. production cost has increased from 39.17 percent of sales in 2016 to 42.83
percent of sales in 2017 and from 2017 to 2018, it showed little decreased in 2018 with 42.55
percent of sales. Thus, it must be the reason why the GMA network Inc. profit continue to decrease
from 2016 to 2018. Unfavorable changes could be observed in the gross profit margin in relation
to revenues. This suggests that the company should improve its mark-up policy or have a better
procurement policy.
5. The network continue to incur more costs, as evidenced by the fact that the general and
administrative expenses were only 30.88 percent in 2016 as compared to 34.51 percent in 2017
and continue to increase in 2018 with 36.19 percent. As a result, the company’s net income
declined from 21.51 percent of sales in 2016 to 16.41 percent of sales in 2017 and from 2017 it
declined to 15.25 percent of sales in 2018. Better control over the selling expenses should be
instituted to further improve the profitability of the company.
ABS-CBN VERTICAL ANALYSIS INTERPRETATION

COMMON SIZE PERCENTAGES ANALYSIS AND EVALUATION:

Evaluation of the Financial Position

 The ABS-CBN Corporation and Subsidiaries' statement of financial position showed that there had
been substantial changes in the proportions of current and fixed assets and current and long-term
liabilities during the period from December 31, 2016 to December 31, 201. The percentages
showed an increasing liquidity in the company's assets accompanied by a small increase in
liabilities over the three-year period.
 It can be observed that cash and cash equivalents, trade and other receivables as well as
investment in inventory in relation to total assets had been increasing. Considering that the
volume of revenues was continuously decreasing, these changes can be viewed as unfavorable to
the company.
 The increasing percentage of total liabilities to total assets further indicates more reliance of the
company from creditors in raising additional capital. This is unfavorable as far as the long-term
financial position of the company is concerned because a smaller margin of safety is provided
among the creditors.

Evaluation of Profitability

 Unfavorable changes could be observed in the gross profit margin in relation to revenues. This
suggests that the company should improve its mark-up policy or have a better procurement policy.
 Production costs , cost of services , cost of sales in relation to revenues show increasing
percentages from 2016 to 2018 while general and administrative expenses had more or less
remain constant. Better control over the selling expenses should be instituted to further improve
the profitability of the company.
 FINANCIAL STATEMENTS OF
GMA AND ABS-CBN

 STATEMENT OF FINANCIAL POSITION

 INCOME STATEMENT
 STATEMENT OF CASHFLOWS
GMA NETWORK, INC.
STATEMENTS OF FINANCIAL POSITION

31-Dec
2018 2017 2016
ASSETS
Current Assets
Cash and Cash Equivalents 2,559,105,322 2,279,838,495 3,419,014,205
Trade and Other Receivables 4,811,973,802 4,905,864,211 5,270,306,881
Program and Other Rights 736,461,608 1,140,223,422 860,369,128
Prepaid Expenses and Other Current Assets 644,937,919 685,992,630 833,817,514
Total Current Assets 8,752,478,651 9,011,918,758 10,383,507,728

Noncurrent Assets
Property and Equipment:
At Cost 2,642,298,449 2,665,618,075 2,776,484,984
At Revalued Amounts 2,803,196,184 1,805,234,093 1,805,146,475
Available-for-Sale Financial Assets --- 245,741,881 243,391,881
FVOCI 240,255,846 ---- ----
Investments and Advances 158,215,331 151,103,271 150,835,949
Program and Other Rights-net of current portion 200,772,808 205,914,090 200,262,381
Investment Properties 40,003,984 51,048,514 53,315,111
Deferred Tax Assets 242,939,864 291,169,389 291,512,030
Other Non-Current Assets 212,372,345 365,366,211 154,319,976
Total NonCurrent Assets 6,540,054,811 5,781,195,524 5,675,267,787

TOTAL ASSETS 15,292,533,462 14,793,114,282 16,058,775,515

LIABILITIES AND EQUITY

Current Liabilities
Trade Payables and Other Current Liabilities 2,160,986,267 2,386,901,598 2,441,945,601
Short-Term Loans 500,000,000 500,000,000 646,360,000
Income Tax Payable 424,940,559 346,686,304 496,104,301
Obligations for Program and Other Rights 119,646,269 139,571,493 76,847,692
Dividends Payable 17,053,776 15,437,102 12,705,059
Total Current Liabilities 3,222,626,871 3,388,596,497 3,673,962,653

Noncurrent Liabilities
Pension Liability 2,182,994,135 1,670,157,190 1,644,323,747
Other Long-Term Employee Benefits 298,843,728 284,654,028 284,556,515
Total NonCurrent Liabilities 2,481,837,863 1,954,811,218 1,928,880,262

TOTAL LIABILITIES 5,704,464,734 5,343,407,715 5,602,842,915

EQUITY
Capital Stock: 4,864,692,000 4,864,692,000 4,864,692,000
Additional Paid in Capital 1,659,035,196 1,659,035,196 1,659,035,196

Revaluation Increment on Land-net of tax 1,710,505,188 1,017,247,029 1,017,247,029

Remeasurement Loss on Retirement Plans-net of

(1,038,041,118) (666,224,427) (664,042,118)
tax
Net Unrealized Loss on AFS Financial Assets-net
--- (8,092,181) (10,113,681)
of tax
Net Unrealized Loss on FA at FVOCI-net of tax (5,051,345) --- ---
Retained Earnings 2,368,404,468 2,570,710,400 3,574,757,302
Treasury Shares (28,483,171) (28,483,171) (28,483,171)
Underlying Shares of the Acquired Phil. Deposit
(5,790,016) (5,790,016) (5,790,016)
Receipts
Noncontrolling Interest 62,797,526 46,611,737 48,630,059

TOTAL EQUITY 9,588,068,728 9,449,706,567 10,455,932,600

TOTAL EQUITY AND LIABILITIES 15,292,533,462 14,793,114,282 16,058,775,515

GMA NETWORK, INC.
INCOME STATEMENT

31-Dec
2018 2017 2016
REVENUE 15,236,192,369 15,602,292,188 16,953,948,299
PRODUCTION COST 6,483,703,064 6,682,296,268 6,641,457,517
GROSS PROFIT 8,752,489,305 8,919,995,920 10,312,490,782
GENERAL AND ADMINISTRATIVE EXPENSES 5,514,342,920 5,384,409,786 5,236,089,061
OTHER INCOME (EXPENSE)-NET
Interest expense (36,251,389) (23,010,666) (16,905,154)
Interest Income 25,455,860 23,776,178 23,650,808
Net foreign currency exchange gain (loss) 19,221,001 2,300,851 21,044,145
Equity in net earnings (losses) of joint ventures 6,351,690 329,580 2,758,875
Others- net 79,113,895 119,017,401 100,865,087
93,891,057 122,413,344 131,413,761
INCOME BEFORE TAX 3,332,037,442 3,657,999,478 5,207,815,482
PROVISION FROM INCOME TAX
CURRENT 1,056,853,906 1,094,886,107 1,510,923,590
DEFFERED (48,828,615) 3,383,736 50,296,632
1,008,025,291 1,098,269,843 1,561,220,222
NET INCOME 2,324,012,151 2,559,729,635 3,646,595,260
GMA NETWORK, INC.
STATEMENTS OF CASH FLOWS

31-Dec
2018 2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Income before Income Tax ₱ 3,332,037,442 ₱3,657,999,478 ₱ 5,207,815,482
Adjustment to Reconcile Income before Income tax to net
cash flows:
Program and other Rights usage 871,451,221 905,254,190 836,176,965
Depreciation and Amortization 586,448,899 631,515,648 723,598,772
Pension Expense 312,489,341 289,541,781 227,546,241
Contributions to retirement plan assets (279,003,770) (259,000,000) (200,000,000)
Provisions for doubtful accounts 109,631,061 8,253,285 25,151,364
Interest Expense 36,251,389 23,010,666 16,905,154
Interest Income (25,455,860) (23,776,17) (23,650,808)
Amortization of software costs 23,173,008 23,362,883 17,173,566
Gain on Sale of Property and Equipment and Investment
(19,829,189) (27,060,463) (29,717,284)
Properties
Net unrealized foreign currency exchange loss (gain) 5,185,384 (59,133,380) (48,144,387)
Equity in net earnings of joint ventures (6,351,690) (329,580) (2,758,875)
Dividend Income (2,499,895) (132,811) (2,550,000)
Provision for impairment of investment properties 2,048,592 - -
Reversal of long-outstanding payables - (32,999,414) (3,233,336)
Working Capital Changes:
Decrease (Increases) in:
Trade and Other Receivables (128,392,550) 346,895,501 (889,975,687)
Program and Other Rights (462,548,125) (1,197,820,078) (704,201,246)
Prepaid Expenses and Other Current Assets 41,054,711 (34,932,681) 235,211,693
Increase (Decreases) in:
Trade Payables and Other Current Liabilities (230,194,345) (24,478,909) 255,213,597
Obligations for Program and other Rights (21,536,158) 75,197,668 (143,634,530)
Other Long-term Employee Benefits 14,189,700 97,513 (11,160,736)
Benefits paid out of Group’s own funds (48,311,185) (7,825,922) (7,646,509)
Cash flows provided by operations 4,109,837,981 4,293,639,197 5,478,119,436
Income taxes Paid (978,599,651) (1,244,304,104) (1,384,682,174)
Interest Received 24,382,746 23,158,153 21,769,542
Net Cash Flow from Operating Activities 3,155,621,076 3,072,493,246 4,115,206,804

CASH FLOW FROM INVESTING ACTIVITIES

Acquisition of:
Property and Equipment (₱519,420,168) (₱523,727,612) (₱444,383,976)
Software Cost (3,504,612) (41,661,384) (454,017)
Land at Revalued Amount (7,593,293) (1,364,718) (2,623,618)
Investments Properties - - (43,811)
Proceeds From:
Sale of Property and Equipment 26,774,646 29,578,786 33,113,635
Sale of Investment properties 4,104,000 - -
Decrease (increase) in other noncurrent asset 87,562,847 (5,824,646) 9,464,489
Return of Investment in Financial Asset at FVOCI 6,089,790 - -
Cash Dividends Received 883,221 132,811 -
Advances to an associate and Joint ventures (1,162,148) - (424,498)
Collections from an associates and Joint ventures 401,778 - -
Net Cash Flows used in Investing Activities (405,863,939) (542,866,781) (405,351,796)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from availments of short-term loans 1,500,000,000 1,500,000,000 500,000,000
Payment of:
Cash Dividends (2,436,132,546) (3,563,062,816) (1,955,312,493)
Short-term loans (1,500,000,000) (1,647,452,000) (1,017,624,500)
Interest Expense (36,125,000) (22,967,610) (17,597,313)
Net Cash flows used in Financing Activities (2,472,257,546) (3,733,482,426) (2,490,534,306)

NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 277,499,591 (1,203,855,961) 1,219,320,702

EFFECT OF EXCHANGE RATE CHANGES 1,767,236 64,680,251 39,395,378
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,279,838,495 3,419,014,205 2,160,298,125
CASH AND CASH EQUIVALENTS AT END OF YEAR ₱2,559,105,322 ₱2,279,838,495 ₱3,419,014,205
FINANCIAL RATIO ANALYSIS

RATIO 2018 2017 2016

LIQUIDITY RATIOS

Current Ratio 2.72 2.66 2.83

Quick Ratio 2.29 2.12 1.44

Cash Flow Ratio .98 .91 1.12

Cash Flow Liquidity Ratio 3.35 3.13 3.59

Cash Ratio 0.79 0.67 0.93

Net Working Capital Ratio .36 .39 .42
Solvency Ratio 2.68 2.77 2.42

LEVERAGE RATIOS
Financial Leverage Ratio 1.59 1.57 1.54
Degree Financial Leverage 1.011 1.006 1.003

CAPITAL STRUCTURE RATIO

Debt Ratio 0.03 0.03 0.16

Debt-to-Equity Ratio 0.59 0.57 0.54

Long-Term Debt to Equity 0.26 0.21 0.18

Ratio

EARNINGS COVERAGE RATIOS

Interest Coverage 92.91 158.94 40.66

OPERATING CYCLE AND CASH
CYCLE

Asset to Equity Ratio 1.59 1.57 1.71

Total Asset Turnover Ratio 1.01 1.01 --

Fixed Asset Turnover Ratio 5.74 5.73 --

PROFITABILITY RATIOS

Gross Profit Margin 57.45% 57.17% 60.82%

Operating Profit Margin 57.45% 57.17% 60.82%

Net Profit Margin 15.25% 16.41% 21.51%

EBITDA Margin Percentage 31.66 34 40.65

Return on Assets 1.01 1.01 1.11

Return on Equity 0.42 0.50 0.51

MARKET RATIOS

Book value per share 2.40 2.36 2.66

Market/Book Ratio 2.22 2.30 1.88

Price/Earnings Ratio 12.32 11.98 8.4

 Basic Earnings per share 0.474 0.523 0.746

Diluted Earnings per share 0.474 0.523 0.746

Earnings Yield 0.09 .10 0.13

GMA Network Inc.
Financial Ratio Interpretations

LIQUIDITY
The company appears to be in a good liquidity position. Their current ratio is consistently in a level of
2:1 normal liquidity ratio, the quick ratio is at state where there is enough cash and other liquid assets to satisfy
immediate liabilities, the cash ratio, their current on hand cash every year is at preferred hold of cash to satisfy
current maturing liabilities, their cash flow ratio indicates that the company generated less cash in a period
than what is needed to pay current liabilities it is because of decreased in earnings and revenues, the cash flow
liquidity of the company indicates good condition and increased in desired state of handling short term debt
with its cash and other liquid assets even though they don’t earn as much as they pay their cash management
and holding is efficient, the net working capital indicates potential future liquidity problem it is consistently at
below 2:1 normal working capital ratio in that large industry it is because of decreasing cash earnings of the
company and if it will continue their holdings of cash can be wiped out because it cannot hold anymore the
current liabilities maturing every year, and as to their solvency ratio it indicates good short term financial
condition because they have the ability to satisfy and meet current debt obligations.

LEVERAGE RATIO

Their financial leverage is at normal of below 2. It indicates good balance of leverage in acquiring new
capital and still capable of meeting current obligations

CAPITAL STRUCTURE

The debt ratio is below 50% of normal it indicates that the company’s asset is primarily financed by
equity rather than debt, the debt to equity ratio and long term debt to equity ratio indicates good managing
condition of company to have sufficient assets to satisfy debt obligations.

EARNINGS COVERAGE
Their interest coverage ratio is declining over 3 years because of decreased in earnings and revenue
generated. It indicates that the company may not meet in time their interest payment obligations and it may
cause serious liquidity problem if it continues to generate less cash and liquid assets.
OPERATING CYCLE

Relative to assets, total average assets consistently generated 1.01 peso in 2-year period, it indicates
no improvement to efficiency in using assets to generate revenue.

PROFITABILITY
The revenue is consistently declining in 3-year period. The gross profit margin, operating profit margin,
and net profit margin are declining but still in average 10% above it indicates that the decreased in revenue is
due to decreased in volume of revenue generation and also decreased in earnings relative to revenue because
of inefficient managing of operating and other expenses.

RETURN ON INVESTED CAPITAL

Return on Equity and Return on Assets are decreasing consistently due to decreased in earnings
coupled with increased expenses.

MARKET RATIO
The stock price of the company significantly increases in 2017 but falls in 2018 because of decreased
in relative earnings. The price to earnings ratio is consistently increasing due to better prospect of earnings
because less debt obligation and increased in equity financing in capital but it can also be a negative indicator
because investor tends to look for cheaper stocks but also a positive indicator for very favorable future
earnings prospect.

SUMMARY

This company is at weak point of generating revenue and earnings, their profitability ratio affects
significantly their company’s performance over the past years but as to managing their leverage and debt
obligation indeed they are strong because they have enough holdings of assets to satisfy occurring obligations
and have minimal debt obligation to pay because they increased equity financing. As to their return on average
assets and equity it is indeed in a stable condition with 1.01 and 0.45 but in a decreasing state. It can be that
in economy downturn this company will continue to deteriorate and have liquidity problem but if economy is
growing and at normal there is favorable future earnings prospect but at this time it is at state of uncertainty.
 ABS-CBN Corporation and Subsidiaries
Consolidated Statements of Financial Position
(amounts in thousands)
2016 2017 2018
ASSETS
Current assets
Cash and cash equivalents 10,964,524 12,346,556 18,104,686
Short-term investments 3,065,793 1,358,429 1,804,041
Trade and other receivables 10,204,118 10,630,014 10,369,080
Inventories 349,821 508,721 680,628
Program rights and other intangible assets 1,067,144 1,137,234 1,359,188
Other current assets 4,141,388 5,062,390 5,383,138
Total current assets 29,792,788 31,043,344 37,700,761
Noncurrent Assets
Property and equipment 24,509,980 25,700,997 27,875,625
Goodwill, Program rights and other intangible asset-
net of current portion 12,530,231 13,181,185 13,310,366
Available-for-sale investment 210,219 242,743 0
FA@FVOCI 0 0 268,304
Investment properties 202,114 200,740 202,763
Investment in associate and joint ventures 530,005 524,963 495,247
Deferred tax assets 2,498,677 2,462,942 3,020,803
Other noncurrent assets 2,459,848 1,748,181 1,685,348
Total noncurrent assets 42,941,164 44,061,741 46,858,456
TOTAL ASSETS 72,733,952 75,105,085 84,559,217

LIABILITIES AND EQUITY

Current liabilities
Trade and other payables 13,648,504 13,252,577 13,637,426
Contract Liabilities 0 0 890,644
Income tax payable 277,239 263,329 208,056
Obligations for program rights 439,316 349,736 441,875
Interest-bearing loans and borrowings 354,950 350,678 414,911
Total current liabilities 14,720,009 14,216,320 15,592,912
Noncurrent Liabilities
Interest-bearing loans and borrowings - net of current
portion 20,117,273 20,036,027 27,810,584
Obligations for program rights - net of current portion 660,667 554,637 541,548
Accrued pension obligation and other employee
benefits 4,906,236 5,757,944 4,029,591
Deferred tax liability 138,271 138,271 138,271
Convertible note 221,063 205,380 221,217
Other noncurrent liabilities 278,730 485,542 500,346
Total noncurrent liabilities 26,322,240 27,177,821 33,241,857
TOTAL LIABILITIES 41,042,249 41,394,141 48,834,769

EQUITY
Equity attributable to equity holders of the parent company
Capital Stock
Common 872,124 872,124 872,124
Preferred 200,000 200,000 200,000
Additional paid-in capital 4,740,811 4,745,399 4,745,399
Exchange differences on translation of foreign
operations -1,638,719 -1,638,719 -1,638,719
Unrealized gain on AFS investments 18,349 359,816 921,624
Share-based payment plan 147,884 180,408 0
Retained earnings 4,588 0 205,969
Treasury shares and Philippine depository receipts
convertible to common shares 26,709,981 28,560,106 30,291,703
Equity attributable to equity holders of the parent 31,055,018 33,279,134 35,598,100
Non-controlling interests 636,685 431,810 126,348
TOTAL EQUITY 31,691,703 33,710,944 35,724,448

TOTAL LIABILITIES AND EQUITY 72,733,952 75,105,085 84,559,217

 ABS-CBN Corporation and Subsidiaries
Consolidated Statements of Income
(amounts in thousands)

2016 2017 2018

Revenues 41,630,599 40,698,244 40,130,592
Production Costs 12,011,950 11,683,615 12,345,277
Cost of Services 10,323,075 10,711,713 10,785,230
Cost of Sales 1,693,608 2,109,942 2,493,359
GROSS PROFIT 17,601,966 16,042,974 14,506,726
General and Administrative Expenses 12,661,479 11,916,759 12,310,128
Finance Costs 1,036,386 1,007,916 1,124,677
Interest Income 220,982 166,788 202,801
Foreign Exchange Gains 89,063 41,194 404,031
Equity in net losses of associates and joint
ventures 1,055 5,052 29,706
Other Income 467,780 614,806 331,253
INCOME BEFORE INCOME TAX 4,680,871 3,936,035 198,030
Current 1,047,055 604,575 600,791
Deferred 108,500 167,883 528,732
Provision for Income Tax 1,155,555 772,458 72,059
NET INCOME 3,525,316 3,163,577 1,908,241
Attributable to equity holders of the Parent
Company 3,885,278 3,333,889 21,110,251
Noncontrolling Interests 359,962 170,312 202,010
 ABS-CBN Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(amounts in thousands)
2016 2017 2018
CASH FLOWS FROM OPERATING
ACTIVITIES
Income before income tax 4,680,871 3,936,035 1,980,300
Adjustments to reconcile income before tax to net
cash flows
Depreciation and amortization 3,401,610 3,666,140 3,819,919
Amortization of
Program rights and other intangibles 1,182,544 1,818,806 1,721,520
Debt issue costs 46,609 40,390 32,927
Deferred charges 6,402 6,993 292
Impairment of Property and Equipment 0 0 9,438
Movements in accrued pension obligation and
other employee benefits 723,243 -439,759 -73,913
Interest expense 968,768 931,459 1,061,666
Interest income -220,982 -166,788 -202,801
Net unrealized foreign exchange loss (gain) 42,624 -55,261 -179,111
Equity in net losses of associates and joint
ventures 1,055 5,052 29,706
Gain on sale of Property and Equipment -3,987 -6,221 -849
Dividend income -14,230 -10,364 -7,651
Working capital changes:
Decrease (increase) in
Trade and other receivables 1,084,131 -662,248 398,356
Other current assets -526,167 -975,176 -208,986
Inventories 328,993 -158,875 -169,576
Increase (decrease) in
Trade and other payables -2,903,438 -683,328 -956,435
Obligations for program rights 427,155 -197,019 -651,615
Contract Liabilities 0 0 790,567
Other noncurrent liabilities 230,664 197,019 -11,573
Cash generated from operations 9,458,865 7,247,530 7,382,181
Income taxes paid -907,865 -618,484 -656,064
Net cash provided by operating activities 8,551,000 6,629,046 6,726,117

CASH FLOWS FROM INVESTING

ACTIVITIES
Additions to
 Property and equipment -5,565,611 -5,058,385 -5,970,703
Goodwill, Program rights and other intangible
assets -1,114,971 -1,944,422 -1,319,100
Decrease (increase) in short-term investments -1,448,248 1,707,364 -445,612
Interest received 222,265 174,369 190,124
Acquisition of a business 0 -350000 0
Increase in other non-current assets 338,551 684,846 406,827
Proceeds from sale of property and equipment 10,967 221,983 18,377
Acquisition of AFS investments -21,008 0 0
Investments in joint ventures and associates -10,062 0 0
Net cash used in investing activities -7,588,117 -4,546,245 -7,120,087

CASH FLOWS FROM FINANCING

ACTIVITIES
Proceeds from Long term debt 8,950,000 3,346,000 8,761,795
Payments of
Interest -871,375 -938,629 -962,001
Long-term debt -8,951,483 -3,457,765 -943,946
Dividends -615,566 -856,938 -766,831
Obligations under finance lease -685 -14,105 -11,986
Bank loans -60,000 0 0
Deposit for future subscription 0 1,220,000 0
Net cash used in financing activities -1,549,109 -701,437 6,077,031

EFFECTS OF EXCHANGE RATE CHANGES AND

TRANSLATION ADJUSTMENTS ON CASH AND CASH
EQUIVALENTS 13,191 18,668 75,069

NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS -573,035 1,382,032 5,758,130

CASH AND CASH EQUIVALENTS AT BEGINNING OF

YEAR 11,537,559 10,964,524 12,346,556

CASH AND CASH EQUIVALENTS AT END OF YEAR 10,964,524 12,346,556 18,104,686

ABS-CBN FINANCIAL RATIOS Analysis of Liquidity or Short-Term Solvency of ABS-CBN

2016 2017 2018

Current Ratio 2.023 2.18 2.42
Quick Ratio 1.65 1.71 1.94
Working Capital Ratio .21 .22 .26
Cash Flow Liquidity 1.53 1.43 1.71
Ratio
Cash Ratio .95 .96 1.28
Cash Flow Ratio .58 .47 .43
Defensive Internal 368.13 362.46 435.14
Revenue

Analysis of Long-term Financial Position or Stability/Leverage

2016 2017 2018

Financial Leverage 2.30 2.23 2.37
Ratio
Debt to Equity Ratio 1.30 1.23 1.37
Debt to Total Asset .56 .55 .58
Ratio
Asset to Equity Ratio 2.30 2.23 2.37
Long-term Debt to .83 .81 .93
Equity Ratio

Analysis of Asset Management Efficiency, Operating Cycle and Earnings Coverage

2016 2017 2018

Total Asset turnover .57 .55 .50
ratio
Fixed asset turnover 1.70 1.62 1.50
ratio
Interest Rate Coverage 5.83 5.22
Ratio
 Analysis of Operating Efficiency and Profitability

2016 2017 2018

Gross Profit Margin .42 .39 .36
Net Profit Margin .08 .08 .05
Cash Flow Margin 21% 16% 17%
Return on Assets 4.21% 4.23% 2.39%
Return on Equity 11.12% 9.67% 5.50%
EBITDA 9.58 9.63 8.053

FINANCIAL LEVERAGE INDEX

2016 2017 2018

11.12%/4.21%= 2.64 9.67%/4.23%= 2.29 5.50%/2.39%= 2.30

Measure Return to Investors

2016 2017 2018

Book Value per share 36.34 38.66 41.43
Market/Book Ratio 1.21 .90 .48
Basic Earnings per share 4.72 4.05 2.56
Diluted Earnings per 4.72 4.05 2.56
share
Price/Earnings per ratio 9.28 8.54 7.81
Price/EBITDA ratio 4.57 3.59 2.48
Earnings Yield .31 .27 .17
INTERPRETATIONS OF FINANCIAL RATIOS

Analysis of Liquidity or Short-Term Solvency of ABS-CBN

Current Ratio is widely regarded as a measure of short-term debt paying ability. Current Liabilities are used as
denominator because they are considered to represent the most urgent debts requiring retirement within 1 year
or one operating cycle. ABS-CBN’s current ratio indicates that at year end of 2018 current assets covered current
liabilities 2.4 times up from 2016 and 2017. The increasing ratio might be the result of improving financial situation.
Its significance could be best evaluated by comparing this industry with GMA over a longer period. As a measure of
short-term liquidity, the current ratio is limited by the nature of component. The current ratio is useful but tricky
to interpret and therefore, the investor must look closely at the individual assets and liabilities involved.

The acid-test (quick ratio) is a much more rigorous test of a company’s ability to meet its short term debts.
Inventories, Intangible Rights and prepaid expenses are excluded from total current assets leaving only the more
liquid assets to be divided by current liabilities. This is designed to measure how well the ABS-CBN can meet its
obligations without having to liquidate or depend too heavily on its inventory. ABS-CBN’s quick ratio indicates an
improvement from 2016 to 2018. The investor might be quite concerned about several disquieting trends revealed
in rising short debts but able to control its quick ratio.

ABS-CBN’s current ratio, quick ratio, working capital ratio, cash flow liquidity ratio, and Defensive Internal revenue
increased indicating an improvement in short-term solvency. Furthermore, the reason for the increase in the
current ratio and quick ratio could be traced to the 55% increase in assets which could actually be a plus if it means
that ABS-CBN strengthened its ability to obtain a high economic status. Also the firm’s cash flow from operating
activities has been stable in positive amount contributed to the stronger short-term solvency in 2018.

Analysis of Long-term Financial Position or Stability/Leverage

The financial leverage ratio indicates a proportion of assets provided by owners. The increased ratio between 2017
and 2018 reflects a financial strength and caution to creditors.

The amount and proportion of debt and equity in a company’s capital structure are extremely important to the
financial analyst because of the tradeoff between risk and return. While debt implies risk, it also provides the
potential for increased benefits to the ABS-CBN’s stockholders. When debt is used successfully, operating earnings
exceed the fixed charges associated with debt, the return to the stockholders are magnified through financial
leverage or “trading on the equity”. The debt to equity ratio measures the riskiness of the firm’s capital structure
in terms of relationship between the funds supplied by creditors (debt) and investors (equity). ABS-CBN’s debt to
equity ratio has increased between 2017 and 2018, implying a slightly riskier capital structure.
The debt to total asset measures the proportion of all assets that are financed with debt. Generally, the higher
proportion of debt, the greater the risk because creditors must be satisfied before owners in the event of
bankruptcy. The use of debt involves risk because debt carries a fixed obligation in the form of interest charges and
principal repayment. Failure to satisfy the fixed charges associated with debt will ultimately result in bankruptcy.
ABS-CBN’s debt ratios in 2016 and 2017 indicate a slightly deteriorate, but in 2018 there’s a heavy reliance on
borrowed capital. Gladly, ABS-CBN did not reach the generally considered maximum ratio of 50% debt and 50%
equity. Because too much debt would pose difficulty in obtaining additional debt financing when needed or that
credit is available only at extremely high rates of interest and most onerous terms.

Analysis of Asset Management Efficiency, Operating Cycle and Earnings Coverage

The total asset turnover ratio is a measure of the efficiency of management to generate sales and thus earn more
profit for the [Link] total asset turnover ratios for 2016, 2017 and 2018 are low relative to the industry or
the firm’s historical record, it could be mean that the investment in assets of ABS-CBN are too heavy and the sales
are sluggish.

The fixed asset turnover is another approach to assessing management’s effectiveness in generating sales from
investments in fixed assets particularly for a capital-intensive firm. For ABS-CBN the fixed asset turnover declined
slightly because of the 4% decreased in sales as compared with 11% increase in fixed assets. This occurrence
however should be further examined within the framework of the overall analysis of the company as well as that
of the industry.

Analysis of Operating Efficiency and Profitability

Gross profit margin which shows the relationship between sales and the cost of services, measure the ability of
ABS-CBN both to control costs and inventories and to pass along revenues increases through sales to customers.
ABS-CBN for 2016, 2017 and 2018 have been deteriorating which is a considered as a negative sign for the economic
status.

Net profit margin measures profitability after considering all revenue and expenses, including interest, taxes and
non-operating items such as extraordinary items, cumulative effect of accounting change, etc. ABS-CBN’s net profit
margin slightly decreased because of increased interest and tax expenses and a reduction in interest revenue for
marketable security investment.

Cash flow margin is another important measure or perspective on operating performance. This measures the ability
of the ABS-CBN to translate revenues to cash to enable it to service debt, pay dividends or invest in new capital
assets. ABS-CBN’s cashflow margin shows a deteriorating impact for the firm. It indicates strong negative generation
of cash. The performance in 2016, 2017 and 2018 represents a failure when the firm failed to generate cash from
operations and had a negative feedback for the margin.
Return on assets and equity are two ratios that measure the overall efficiency of the ABS-CBN in managing its
investment in assets and in generating return to its stockholders. These ratios indicate the amount of profit earned
relative to the level of investment in total assets and investment of common shareholders. These ratios will also
measure how effectively the company is using financial leverage. The financial leverage index is computed as
follows: Return on Equity/ Return on Assets. If the FLI is greater than 1 indicating the return on equity exceeds
return on assets, the firm is using debt effectively. If the FLI is less than 1, the financial leverage is negative which
means that the firm is not using debt successfully.

FINANCIAL LEVERAGE INDEX

ABS-CBN’s FLI of 2.30 in 2018 compared to 2016 which is 2.64 indicates a failure use of financial leverage because
borrowing increased. ABS-CBN generated an insufficient operating returns to more than cover the interest
payments on borrowed funds.

Measure Return to Investors

ABS-CBN’s earnings per ordinary share decreased from 4.72 in 2016 to 2.56 for 2018 which is a clear indication in
the degradation on the investment return of ordinary shareholders,

The price earnings per ratio relates earnings per ordinary share to the market price at which the stock trades,
expressing the “multiple” which the stock market places on a firm’s earnings. It is a combination of a number of
factors such as the quality of earnings, future earnings, and potential and performance history of ABS-CBN. ABS-
CBN’s price to earnings ratio is decreasing throughout the years. This could be because the market is reacting
unfavorably to the firm’s bad year. The issue of ABS-CBN for their franchise is a possible reason why the stocks are
declining its prices.

Conclusion: It appears that ABS-CBN is not in well-positioned for future growth. Close monitoring the firm’s
management of costs are important considering the size of the company’s capital tied up in it. ABS-CBN has financed
much for its debts, with decreasing revenues and so far its shareholders have not yet benefited from the use of
increase in assets and debts. The company should be cautious to the declining revenues and increasing risks
associated with debt financing.
GMA NETWORK INC. CASH FLOW ANALYSIS

CASH FLOW RATIOS

2018 2017 2016

Cash Flow Ratio = Operating Cash Flow 3,155,621,076 3,155,621,076 3,155,621,076
Period-End Current 3,222,626,871 3,388,596,497 3,673,962,653
Liabilities =.98 =.93 =.86

Cash Flow Margin= Operating Cash Flow 3,155,621,076 3,155,621,076 3,155,621,076

Sales 15,236,192,369 15,602,292,188 16,953,948,299
=.21 =.20 =.19
Asset Efficiency= Operating Cash Flow 3,155,621,076 3,155,621,076 3,155,621,076
Average Total Assets 15,042,823,872 15,425,944,898.5 15,237,158,725
=.21 =.20 =.21
Cash Flow Yield = Operating Cash Flow 3,155,621,076 3,155,621,076 3,155,621,076
Net Income 2,324,012,151 2,559,729,635 3,646,595,260
=1.36 =1.23 =.87

 The Cash Flow Ratio over the years is below the standard ratio. Though, it is improving from 2016 to 2018
it still shows that cash flow generated by operations is lesser than the current liabilities of GMA Network
Inc. The company is not generating enough cash from operations to settle their current liabilities.

 The Cash flow Margin from 2016 to 2018 is very low. The company is not that efficient to turns sales into
cash. There was a little actual transfer of money. GMA Network Inc. is not that profitable.

 The Asset Efficiency Ratio is also low. Thus, the amount of cash flow that a GMA network Inc. generating
from its assets is low.

 The Cash Flow Yield Ratio in 2016 was low but increased and improved in succeeding years. It continues to
increase in 2017 with 1.23:1 and 1.36:1 in 2018. The cash flow generated from net income is high.
ABS-CBN CASH FLOW ANALYSIS

CASH FLOW RATIOS

2018 2017 2016

Cash Flow Ratio = Operating Cash Flow 6,726,117 6,629,046 8,551,000
Period-End Current Liabilities 14,720,009 14,216,320 14,720,009
=.46 =.47 =.58

Cash Flow Margin= Operating Cash Flow 6,726,117 6,629,046 8,551,000

Sales 40,130,592 40,698,244 41,630,599
=.17 =.17 =.21
Asset Efficiency= Operating Cash Flow 6,726,117 6,629,046 8,551,000
Average Total Assets 72,733,952 73,919,518.5 79,832,151
=.092 =.089 =.11
Cash Flow Yield = Operating Cash Flow 6,726,117 6,629,046 8,551,000
Net Income 1,908,241 3,163,577 3,525,316
=3.52 =2.10 =2.43

 The Cash Flow Ratio over the years is below the standard ratio. It is decreasing from 2016 to 2018 which is
a bad sign for the investors of ABS-CBN. It shows that cash flow generated by operations is lesser than the
current liabilities of ABS-CBN Inc. The company is not generating enough cash from operations to settle
their current liabilities.

 The Cash flow Margin from 2016 to 2018 are very low. There was a little actual transfer of money. ABS-
CBN is not that profitable.

 The Asset Efficiency Ratio is also low. Thus, the amount of cash flow that ABS-CBN generating from its
assets is low.

 The Cash Flow Yield Ratio over the three years are high, particularly in 2018 with a highest rate. The cash
flow generated from net income is high.
 SUMMARY OF FINDINGS

(Based from our analysis between ABS-CBN’s financial statements and GMA financial statements)

Every investment and every investment decision involves some degree of risk. Regardless of the fact that an
investor can never know for sure, our analysis focuses on fact and an objective pre-purchase analysis can
increase the chances of making a good decision about whether or not to invest in GMA OR ABS-CBN.

Any kind of investment would involve a certain degree of risk. What’s important is that the investor will take
a calculated risk and stick to a risk/reward ratio suitable for your risk appetite. After a disappointing year of
2018, ABS-CBN’stocks lost some of its luster. ABS-CBN generated an insufficient operating returns to more
than cover the interest payments on borrowed funds. Share price of ABS-CBN has been in a continuous decline
since it reached its peak in 2015. The media giant ended 2019 at Php15.80, down by 76% from its all-time high
of Php68.10 a share. By year end 2019, the company is already trading at its 10-year low.

Based from the ratios, ABS-CBN’s debt to equity ratio has increased between 2017 and 2018, implying a slightly
riskier capital structure. The revenues of ABS-CBN are expected to decline in 2020 by 40%-50%- a third
consecutive year of lower sales. The ABS-CBN franchise issue has become more political than anything else. It
appears that ABS-CBN is not in well-positioned for future growth. Close monitoring the firm’s management of
costs are important considering the size of the company’s capital tied up in it. ABS-CBN has financed much for
its debts, with decreasing revenues and so far its shareholders have not yet benefited from the use of increase
in assets and debts. The company should be cautious to the declining revenues and increasing risks associated
with debt financing. The company has been in a continued hot spot since the current administration rose to
power and by this time, everyone is well aware on how the president’s comments can influence market activity
in the stock market.

While the president’s issues can surely be a factor, this seemed to be not the only reason why ABS-CBN has
lost majority of its market value. Although, undeniably, the threat on its franchise renewal contributes to the
decline, as a good investor, one should also look at the underlying fundamentals to determine all probable
cause of price activity. Based on 2018 annual report filed by ABS-CBN, the company has been experiencing
decline in net income starting 2017. From a decline of 11% from 2016 to 2017, the company widened its loss
to 66% in 2018; ABS ended 2018. This was attributed mainly in decline of advertising revenue which accounts
to 50% of the total company revenue for the year. On the other hand, consumer sales increased year-on-year
by 1% which is mainly credited to increase in sales of TVPLUS boxes. Another notable aspect on its finances is
the rise in cost which, according to the report, is due to “separation cost of closing down certain regional
stations of the company”. There was also an increase in general admin expense which goes hand in hand with
the company’s investments on information security and digital initiatives.
In terms of size, ABS-CBN is much bigger than GMA. But, some investors have preferred GMA over ABS-CBN
due to its higher dividends as you can see to the financial statements. This year, the network offered to give
shareholders 0.45 per share, which is around a tenth of the current share price. GMA Network, Inc. is
another media giant and a close rival in business of ABS, which is also listed in PSE. Both GMA and ABS-CBN
have claimed dominance in ratings from time to time which, at some point, even resulted to legal actions.

In terms of net income, although closely ranged, jump in net income of ABS is wider at 35% compared to
GMA7’s 10%. However, despite a great jump from previous year, GMA appears to be more efficient in
utilizing its investments in generating income compared to ABS; this is reflected in GMA7’s ROE and ROA
which stands at .42 and 1.01 respectively.

WE WILL INVEST IN GMA INC.

In terms of stability, GMA is also more stable compared ABS-CBN. This is probably because ABS-CBN is more
diversified and has more businesses compared to GMA making ABS-CBN more exposed to possible losses
and defaults. Between the two media giants, GMA impose less risk compared to ABS, not to mention less
political. Similarly, GMA yields higher dividends with a five-year average of 7.58% compared to ABS who only
yields at an average of 1.87%. The uncertainty of ABS-CBN’s franchise renewal is also a major consideration
especially if we are a risk-averse type of investor.