MANAGEMENT ACCOUNTING

REFRESHER
TERM PAPER

Submitted by:
Ebbie Jann Loyola

Dra. Erlinda Evangelista

COMPANY BACKGROUND from www.sykes.com

 SYKES Asia has been in operation since 1997 and is officially recognized by the
Philippine Government as the pioneer in the Philippine call center industry. The
company supports over 30 international clients from technology, telecommunications,
financial services, industrial, fast moving consumer goods, retail and travel. Sykes Asia has over
11,000 employees in the Philippines supporting more than 15 languages catering mostly to the
Asia Pacific region.

SYKES Asia is the Asia Pacific arm of Sykes Enterprises, Incorporated, a global
leader in providing customer contact management solutions and services in the business process
outsourcing (BPO) arena. Headquartered in Tampa, Florida, SYKES serves its clients in the
North, South and Central Americas, the Asia Pacific Rim, Europe, Middle East and Africa
through multiple communication channels encompassing phone, e-mail, web and chat delivered
through more than 50 contact centers and over 29,500 employees globally.

In the Philippines, SYKES Asia has 5 support centers in the capital city of Metro
Manila, strategically located in commercial and business hubs, and employing a workforce of
more than 9,000 employees. The company also has a site outside of Manila in the southern
province of Cebu which has over 2,000 employees.

Values, Mission and Vision

What sets us apart from others is not just the diversity of our skills and expertise, but the quality
of employees we attract. SYKES people are real people – motivated, intelligent, resourceful,
caring, and most important, committed to quality service and PRIDE in performance.

P - Professional in everything we do

R - Respectful of the diversity, culture and ideas of others

I - Integrity is the core of our character

D - Dependable to others

E - Excellence is your work’s autograph

Our Mission

Our Mission is to make our clients more efficient and more profitable while improving loyalty to
their company brands.

Our Vision

SYKES will be the Global Standard for delivering value-based customer management solutions
tailored to the unique needs of our clients.

Our People
Management – Our management team is robust in experience and expertise in the call center
industry. Its most important role is to understand and initiate growth with a focus on continuous
people development as the strategy. Through that solid focus, our management team is able to
drive success in meeting and exceeding our clients’ expectations, ensures that our business
objectives are met and that our shareholders’ value increases.

Operations – They are the REAL SOLUTIONS providers. Continuously seeking to proactively
improve and innovate, our Operations team is made up of experts who handle product service
queries, requirements and troubleshooting. Our team boasts of its proficiency in technical &
customer service support with excellent service at its core.
Support Group – The critical backbone of the Operations Team, our support group is the enabler.
Providing various resources such as a trained and well-compensated workforce, IT tools and
equipment, and comfortable facilities, the Support Group aids in the success of each transaction
our people undertake with your customers.
 ANALYSIS

• VERTICAL
A method of financial statement analysis in which each entry for each of the three
major categories of accounts (assets, liabilities and equities) in a balance sheet is
represented as a proportion of the total account. The main advantages of analyzing a
balance sheet in this manner is that the balance sheets of businesses of all sizes can
easily be compared. It also makes it easy to see relative annual changes in one business.
http://www.investopedia.com/terms/v/vertical_analysis.asp

• HORIZONTAL
A procedure in fundamental analysis in which an analyst compares ratios or line items
in a company's financial statements over a certain period of time. The analyst will use
his or her discretion when choosing a particular timeline; however, the decision is often
based on the investing time horizon under consideration.
http://www.investopedia.com/terms/h/horizontalanalysis.asp

• FINANCIAL RATIOS
Financial ratios are useful indicators of a firm’s performance and financial situation.
Most ratios can be calculated from information provided by the financial statements.
Financial ratios can be used to analyze trends and to compare the firm’s financials to
those of other firms. In some cases, ratio analysis can predict future bankruptcy.
http://www.netmba.com/finance/financial/ratios/

• FISCAL FITNESS ANALYSIS

The Z-score formula for predicting bankruptcy was published in 1968 by Edward I.
Altman, who was, at the time, an Assistant Professor of Finance at New York
University. The formula may be used to predict the probability that a firm will go into
bankruptcy within two years. Z-scores are used to predict corporate defaults and an
easy-to-calculate control measure for the financial distress status of companies in
academic studies. The Z-score uses multiple corporate income and balance sheet values
to measure the financial health of a company.

http://en.wikipedia.org/wiki/Z-Score_Financial_Analysis_Tool
VERTICAL ANALYSIS

For every 1$ of the company’s Total Asset, .75 goes to the Current Asset and the remaining .25 to the Non-
current Assets. Components of the .75 Current Assets are: .41 Cash and cash equivalents; .30 Receivables, net , .
01 Prepaid expenses ; .03 Other current assets ; .27 out of the 1$ is accounted to the company’s Total Liabilities,
while .73 for every 1$ is accounted to the Total Shareholder’s equity.
HORIZONTAL

Total Assets for 2008 increased by 4.76% due to the following: increase in Cash and cash
equivalents, 23.28% ; increase Receivables, 7.96% ; Decline in Prepaid expense by 35.04% ;
increase in property and equipment by 2.31% as well as the improvement in Goodwill by 3.22%
Total Revenue increased by 15.36%, main contributor for the increase are: Decrease in Net loss (gain)
on disposal of Property and equipment by -5.01% ; decline in Interest expense by 3.12.93% and
decline in interest expense by -46.08%
Further, Total income before provision for income tax increased by 51.68% which subsequently
increased the Net income by 51.94%
FINANCIAL RATIOS

• Current Ratio – Across years, the company has maintained a competitive level of
Current Ratio. Short-term creditors prefers a high level of ratio since it reduces
the risk, while Shareholders may prefer a lower Current ratio so that more of the
firm’s assets are working to grow the business. For the company’s industry, it has
maintained an optimal Current Ratio since they can remain solvent especially
during downturns.
• Quick Ratio – Considering a stable quick ratio, the company is able to pay off it’s
current liabilities especially if immediate payment is required.
• Gross Profit margin – 2008 Gross profit margin increased for the year 2008,
hence improved the company’s financial health. It also reflects that the company
is able to save pay additional expense while saving for the future.
• Operating profit margin – Since the company’s operating profit margin improved
to 10.01%, it shows fixed costs such as debt and interests are timely realized
 while a portion of the revenue can be maintained for future savings and
investments.
• Net profit margin – this ratio tells how much profit the company makes for every
$1. From the data, it shows a positive trend from 2007 to 2008 since the margin
reached 7.39%
• Return on Assets – ROA improved to 11.70%, hence the company’s ability to
effectively utilize the asset to generate profit also improved.
• Return on equity – ROE significantly increased to 16.16%, hence provides more
confidence to shareholders in measuring the bottom line.
• Debt Ratio – with a very low debt ratio, the company proves to have a very low
portion of its debt relative to its assets. It has a very low rate facing risks relative
to debt.
• Debt-Equity ratio – With its very low debt-to equity ratio, it is evident that the
company’s core assets are being utilized for its financing activities, hence was
able to provide organic growth to sustain the business.
• Interest coverage ratio – Since the company poses no threat on its debt, the
interest coverage ratio has been negative across years.
• Cashflow to debt ratio – Consistent with the findings on the company’s debt
standing, the company is able to satisfy its debt, maximize its own asset in
fulfilling the financing activities for the company.
• PPE turnover – With a significant increase on the PPE ratio, it is evident that the
company is able to generate revenue from the fixed assets investment, specifically
its Property and Equipment.
• Operating Cash flow to sales ratio – With the increasing trend on the Operating
cash flow to sales ratio, and consistent with the improved cashflow to debt ratio,
the company’s cashflow can cover for the current liabilities. It also concludes that
the company is significantly ‘liquid’ to support the activities within the business.
FISCAL FITNESS ANALYSIS

Across years, the company has a very low probability of going into bankruptcy. Its primary strength is
evolving on the consistent findings on having no debt and its ability to maximize its assets to generate
internal growth for the business.