BM2305
NAME: Jerho J. Abao DATE: SCORE:
CORPORATE FINANCE
Case study: The Philippine Media Industry from 2007 to 2010 (continuation)
Instructions: Download the 05 Task Performance 1 Worksheet file containing the data for your analysis.
You may input your answers in the said worksheet.
Case 1: Cash Conversion Cycle
ABS GMA
CCC Composition
2010 2009 2008 2007 2010 2009 2008 2007
Inventory conversion period 4.03 5.60 6.18 6.52 8.34 8.26 7.29 7.19
Average collection period 71.26 80.25 81.64 88.77 160.12 150.00 158.25 170.54
Average payment period 37.38 33.50 45.18 66.80 30.93 37.39 31.41 26.81
Total CCC 37.91 52.36 42.63 28.50 137.53 120.86 134.13 150.91
Working Capital 3,885.70 2,802.10 1,585.50 2,444.90 5,786.10 6,126.00 5,030.30 4,157.90
Required:
1. Compute both companies' actual cash conversion cycle from 2007 to 2010. Which company fared
worse in terms of CCC?
Based on the data, GMA performed worse in terms of CCC because a lower CCC is more favorable
for a company. Since GMA has a higher CCC compared to ABS-CBN, its performance is inferior.
2. Compute the Working capital of both companies. Prepare a short financial statement analysis
report of the company you answered in #1, focusing on working capital management. Cite specific
ratios from your answers in #1 and refer to the Liquidity Management Ratios and Debt Management
Ratios in 04 Performance Task 2 to support your analysis.
When it comes to liquidity management, ABS-CBN Corporation has a lower liquidity rate compared to
GMA Corporation. GMA has a higher current ratio and quick ratio than ABS-CBN, with GMA's working
capital in 2007 amounting to 5,786.10, while ABS-CBN’s was 3,885.70. However, in terms of debt
management, GMA faces challenges in handling its debt, reflected in a negative increasing ratio that
indicates higher losses rather than profits.
3. Based on your learnings in working capital management, what can you recommend to the company
you answered in #1 to improve its CCC? Prepare a management recommendation report about
your analysis.
Based on my understanding of working capital management, ABS-CBN should improve its financial
management, especially regarding its obligations, to enhance its CCC. Since they have some control
over their CCC, they should evaluate whether their expenditures are necessary and manageable in
their specific areas.
Item Performance Indicators Points
Requirement 1 0.5 points for computing each ratio (3 ratios x 4 years) x 2 12
companies
1 point for computing CCCs (4 years x 2 companies) 8
1 point for selecting which company fared worse in terms of CCC 1
Requirement 2 Provided correct working capital analysis; cited specific ratios on 5
liquidity and debt management ratios in the analysis.
Requirement 3 Provided clear and concrete recommendations based on the 4
working capital and ratio analyses.
Total 30
05 Performance Task 1 *Property of STI
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