Financial Ratio Analysis

Liquidity Ratios

2014

Current Ratio = Current Assets Current Ratio = P 20 413 000 000

Current Liabilities P 9 105 000 000

= 2.24195497

Current Ratio= 2.24: 1

2015

Current Ratio = Current Assets Current Ratio = P 25 935 000 000

Current Liabilities P 10 263 000 000

= 2.527038878

Current Ratio= 2.53: 1

The current ratio of 2.24:1 in 2014 means that San Miguel Brewery Inc. has 2.24 times
current assets compared to current liabilities. This means that for every P1.00 liabilities is a P2.24
assets. On the other hand, 2015 has the ratio 2.53:1 that means for every P2.53, there will be a
P1.00 liabilities. Comparing these two, it is evident that 2015 is better as it increased its current
ratio, as well as its assets. This means that that SMB Inc. can has increased its ability to pay their
debts in 2015.

2014

Quick Ratio = Cash + Marketable Securities Quick Ratio = P 9 886 000 000 + P 6 005 000 000

Current Liabilities P 9 105 000 000

= 1.745304778

Quick Ratio= 1.75: 1

2015

Quick Ratio = Cash + Marketable Securities Quick Ratio = P 15 850 000 000 + P 5 124 000 000

Current Liabilities P 10 263 000 000

= 2.043651954

Quick Ratio= 2.04: 1

Comparing the two years, 2015 is better as it has higher quick ratio or acid test ratio with
2.04 compared to 2014 with 1.75. Given the meaning or quick ratio, it measures the liquidity of a
company by showing its ability to pay off its current liabilities with quick assets. So, 2015 is better
since more assets will be easily converted in cash if needed. Moreover, having a higher quick ratio
also indicates a healthy investments of the business from every investor.
2014

Receivables Turnover = Net Credit Sales

(Beginning Receivables + Ending Receivables)/2

Receivables Turnover = 79 005 000 000

(6 352 000 000 + 6 005 000 000)/2

=12.78708424

Receivables Turnover: 13 times

2015

Receivables Turnover = Net Credit Sales

(Beginning Receivables + Ending Receivables)/2

Receivables Turnover = 82 374 000 000

(5 124 000 000 + 6 005 000 000)/2

= 14.80348639

Receivables Turnover: 15 times

San Miguel Brewery Inc. has higher receivables turnover in 2015 with 15 times than in 2014
with 13 times. This means that in 2015, it takes 15 times to sell on credit and collect the
receivables, as well as in 2014 with 13 times. Year 2015 is better since the receivables turnover
ratio measures a business' ability to efficiently collect its receivables. The higher the ratio, the more
favorable it is for every business. In addition, accounts receivable turnover also is also an indication
of the quality of credit sales and receivables.

2014

Age of Receivables = 365 Age of Receivables = 365

Receivables Turnover 13 times

= 28.07692308

Age of Receivables: 29 days

2015

Age of Receivables = 365 Age of Receivables = 365

Receivables Turnover 15 times

= 24.3333333333

Age of Receivables: 25 days

 The number of days it takes for a company to collect its receivable from credit sales is
better in year 2015. As from the explanation of age of receivables, the shorter the number of
collection days, the faster it takes for a company to convert its receivables into cash. The results
show that 2015 is better with 25 days of age receivable compared to the 29 days for 2014.

2014

Inventory Turnover = Cost of Goods Sold

(Beginning Inventory + Ending Inventory)/2

Inventory Turnover = 42 794 000 000

(3 460 000 000 + 3 254 000 000)/2

=12.74769139

Inventory Turnover: 13 times

0
2015

Inventory Turnover = Cost of Goods Sold

(Beginning Inventory + Ending Inventory)/2

Inventory Turnover = 44 811 000 000

(3 766 000 000 + 3 460 000 000)/2

=12.40271243

Inventory Turnover: 13 times

It is better to have faster or more times of inventory turnover. In this case, year 2014 and
year 2015 have similar inventory turnover with 13 times. This means that SMB Inc. replaces its
inventory for 13 times every year. Since each turnover means a sale is made and revenue is
realized, SMB did not almost changed regarding its inventory.

2014

Age of Inventory = 365 Age of Inventory = 365

Inventory Turnover 13 times

= 28.07692308

Age of Inventory: 29 days

2015

Age of Inventory = 365 Age of Inventory = 365

Inventory Turnover 13 times

= 28.07692308
 Age of Inventory: 29 days

The average age of inventory for two consecutive years (2014 and 2015) is 29 days. This
result is clear enough to identify that San Miguel Brewery Inc. has a healthy cycle of changing its
inventory. For some, higher age inventory is good but for some it is risky.

Solvency and Stability Ratios

2014

Times Interest Earned = Operating Income Times Interest Earned = P 19 595 000 000

Interest Expense P 6 080 000 000

= 3.222861842

Times Interest Earned: 3.22 times

2015

Times Interest Earned = Operating Income Times Interest Earned = P 19 339 000 000

Interest Expense P 5 821 000 000

= 3.322281395

Times Interest Earned: 3.32 times

Year 2014 and year 2015 has a little margin between the times interest earned yet it is
noticeable that 2015 is higher with 0.10 percent than 2014. From its meaning, the times interest
earned ratio is an indicator of a company's ability to meet the interest payments on its debt. Thus,
the higher the times interest earned ratio, the more likely it is that the corporation will be able to
meet its interest payments.

2014

Debt Ratio = Total Liabilities Debt Ratio = P 50 294 000 000

Total Assets P 88 548 000 000

= 0.5679857253

Debt Ratio: 56.80%

2015

Debt Ratio = Total Liabilities Debt Ratio = P 51 100 000 000

Total Assets P 93 091 000 000

= 0.5489252452

Debt Ratio: 54.89%

 As for the debt ratio, a lower ratio is more favorable than a higher ratio since it is all about
the debts or the liabilities of the business. This shows that 2015 improved its debt ratio with
54.89%, comparing it with 56.80% of 2014. The result clearly shows that SMB Inc. became more
stable in 2015.

2014

Equity Ratio = Total Equity Equity Ratio = P 38 254 000 000

Total Assets P 88 548 000 000

= 0.4320142747

Equity Ratio: 43.20%

2015

Equity Ratio = Total Equity Equity Ratio = P 41 991 000 000

Total Assets P 93 091 000 000

= 0.4510747548

Equity Ratio: 45.11%

Generally, it is favorable for companies to have higher equity ratio as it shows potential
creditors that the company is more sustainable and less risky to lend future loans. From the equity
ratios above, 2015 has higher rate with 45.11% than 2014 with 43.20%. This shows that in terms
of equity ratio, the business has improved.

Profitability Ratios

2014

Gross Profit Margin = Gross Profit Gross Profit Margin= P 36 211 000 000

Net Sales P 79 005 000 000

= 0.4583380799.

Gross Profit Margin: 45.83%

2015

Gross Profit Margin = Gross Profit Gross Profit Margin= P 37 563 000 000

Net Sales P 82 374 000 000

= 0.4560055357

Gross Profit Margin: 45.60%

 A higher gross profit margin indicates that a company can make a reasonable profit on
sales, as long as it keeps overhead costs in control. Investors tend to pay more for a company with
higher gross profit (Wilkinson, 2013). With this, the company has higher gross profit margin in
2014 with 45.83% than in 2015 with 45.60%. This shows that year 2014 has more ability to make
a reasonable profit sale than in 2015. Gross profit margin has lost 0.23% in 2015.

2014

Operating Profit Margin = Operating Profit Operating Profit Margin= P 19 595 000 000

Net Sales P 79 005 000 000

= 0.2480222771

Operating Profit Margin: 24.80%

2015

Operating Profit Margin = Operating Profit Operating Profit Margin= P 19 339 000 000

Net Sales P 82 374 000 000

= 0.2347706801

Operating Profit Margin: 23.48%

Somehow similar to the gross profit margin, the higher the operating profit margin is, the
stable the business is. The operating profit margin in 2014, with rate of 24.80% is higher than
23.48% of 2015. This shows that 2014 is more stable in terms of operating profit margin.
Moreover, the said margin ratio is a key indicator for investors and creditors to see how businesses
are supporting their operations.

2014

Net Profit Margin = Net Income Net Profit Margin= P 13 515 000 000

Net Sales P 79 005 000 000

= 0.1710651225

Net Profit Margin: 17.11%

2015

Net Profit Margin = Net Income Net Profit Margin= P 13 518 000 000

Net Sales P 82 374 000 000

= 0.1641051788

Net Profit Margin: 16.41%

 In general, the net profit margin is an overall measure of profitability. It is evident that San
Miguel Brewery Inc. has lost some of its net profit margin from 17.11% in 2014 down to 16.41% in
2015. The results show that the company is more stable and gained more profit in 2014 than in
2015. Moreover, the company is making enough money from its ongoing operations to pay for its
variable costs as well as its fixed costs in 2014 than last year.

Horizontal Analysis

Income Statement all figures should be expressed in millions

2014 Percentage 2015 Percentage

(%) (%)
Sales P79 005 5.27 P 82 374 4.26
Cost of Sales 42 794 8.60 44 811 4.71
Gross Profit 36 211 1.58 37 563 3.73
Selling and Administrative Expenses (14 132) (0.27) (14 932) (5.66)
Interest Expense and Other Financing Charges (2 722) (-29.70) (2 597) (-4.59)
Interest Income 188 -59.40 261 38.83
Impairment Loss on Noncurrent Assets - - (1 011) -
Other Income (Charges)-Net 50 -117 55 10
Income Before Income tax 19 595 (9.77) 19 339 -1.31
Income Tax Expense 6 080 (14.07) 5 821 -4.45
Net Income P 13 515 7.94 13 518 .02

Vertical Analysis

Balance Sheet all figures should be expressed in millions

2014 Percentage 2015 Percentag

(%) e (%)
ASSETS

Current Assets
Cash and Cash Equivalents P 9886 48.43 P 15 850 61.11
Trade and Other Receivables-net 6 005 29.42 5 124 19.76
Inventories 3 460 16.95 3 766 14.52
Prepaid Expenses and Other Current Assets 1 062 5.20 1195 4.61
Total Current Assets 20 413 100 25935 100

Noncurrent Assets
Investments-net 60 0.9 60 0.10
Property, Plant, and Equipment-net 20 120 29.53 18759 27.93
Investment Property-net 1 416 2.1 1540 2.29
Intangible Assets-net 35 998 52 35987 53.59
Deferred Tax Assets 1 610 2.36 1574 2.34
Other Noncurrent Assets-net 8 931 13.11 9236 13.75
Total Noncurrent Assets 68 135 100 67156 100

LIABILITIES AND EQUITY

Current Liabilities
Accounts Payable and Accrued Expenses 6 455 70.90 7389 72
Income and Other Tax Payable 2 650 29.10 2874 28
Total Current Liabilities 9 105 100 10263 100

Noncurrent Liabilities
Long-term Debt- Net of Debt Issue Costs 37 518 91.09 37 566 92
Deferred Tax Liabilities 383 0.93 114 0.27
Other Noncurrent Liabilities 3 288 7.98 3157 7.73
Total Noncurrent Liabilities 41 189 100 40 837 100

EQUITY
Equity Attributable to Equity
Holders of the Company
Capital Stock P 15 410 40.28 15 410 36.70
Additional paid-in capital 515 1.35 515 1.23
Cumulative translation adjustments (774) (2.02) (708) (1.69)
Reserve for retirement plan (2 498) (6.53) (2 709) (6.45)
Retained earnings 24 164 63.17 27 890 66.42
Treasury Stock (1 029) (2.69) (1 029) (2.45)
Non-controlling interests 2 466 6.44 2 622 6.24
Total Equity 38 254 100 41 991 100