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I. COMPANY PROFILE
Historical Background
ABS-CBN Corporation (“ABS-CBN” or the “Company”) traces its roots from Bolinao
1952, BEC adopted the business name Alto Broadcasting System (ABS) and 7 setting up the country’s
first television broadcast by 1953. On September 24, 1956, Chronicle Broadcasting Network (CBN),
owned by Don Eugenio Lopez Sr. of the Lopez family, was organized primarily for radio broadcasting.
In 1957, Don Eugenio Lopez Sr. acquired ABS and on February 1, 1967, the operations of ABS and
CBN were integrated and BEC changed its corporate name to ABS-CBN Broadcasting Corporation. On
August 16, 2010, the Philippine Securities and Exchange Commission (SEC) approved the change of
Company’s corporate name to ABS-CBN Corporation. This change is a reflection of the Company’s
ABS-CBN achieved many firsts since it started the television industry in the country in 1953. However,
with the imposition of martial law in September 1972, ABS-CBN ceased operations as the government
forcibly took control of the Company. ABS-CBN resumed commercial operations in 1986 after the
Recovery after 14 years of absence was difficult as resources were scarce. Nevertheless, through
relentless effort, ABS-CBN recaptured leadership in the Philippine television and radio industries by
1988. During the 1990s and the early part of the new millennium, the Company expanded and ventured
into complementary businesses in cable TV, international distribution, mobile services, and magazine
Corporate Information
on July 11, 1946. On July 27, 1994, the Philippine Securities and Exchange Commission (SEC)
approved the extension of the corporate term of the Parent Company for another 50 years. The Parent
Company’s core business is television and radio broadcasting. Its subsidiaries and associates are
involved in the following related businesses: cable and direct-to-home (DTH) television distribution and
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telecommunications services overseas, movie production, audio recording and distribution, video/audio
post production and film distribution. Other activities of the subsidiaries include merchandising, internet
The Parent Company is 79%-owned by Lopez, Inc. a Philippine entity, the ultimate Parent
Company.
In 2013, Capital International Private Equity Fund VI, L.P. (CIPEF) subscribed to P2.5 billion
worth of new Philippine Depository Receipts (PDRs) issued by ABS-CBN Holdings Corporation
(ABS-CBN Holdings) which in turn subscribed to the same number of newly issued common shares of
the Parent Company. Lopez, Inc. also subscribed to 34,702,140 common shares and 987,130,246
preferred shares of the Parent Company in 2013. After the subscription, Lopez, Inc.’s economic interest
in the Parent Company decreased to 56% while its voting rights increased from 57% to 79%.
The common shares of ABS-CBN were listed beginning July 8, 1992 and have been traded in
The registered office address of the Parent Company is ABS-CBN Broadcast Center, Sgt.
The accompanying consolidated financial statements were approved and authorized for issuance by the
FOREIGN EXCHANGE GAINS (LOSSES)-net -145,500 -0.44 -31,704 -0.09 113,796 -78.21030928
V. INTERPRETATIONS
The Vertical Analysis of Income Statement shows the proportion of individual accounts such as
all costs, expenses, income, losses or gains, other income and net income to the gross sales. Therefore, the
gross sales is used as the base and all of other components stated are shown as a percentage of sales. On
the other hand, the Horizontal Analysis of the ABS-CBN’s Statement of Income shows changes in the
amounts of each item on the statement over the period of two years. The gross sales in 2014 increased by
P165,724,000 which constitutes a .497% increase after a year. A large portion of this amount came from
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the advertising revenue which constitutes more than half of the gross sales for the two periods. The gross
profit of the network increased by P590,382,000 because of the reduction of costs of production, services
and sales by 1.62%. The pre-operating income increased by P74,476,000 or a percentage change of 2.745.
The increase of this account happened because of large increase of interest income by 63.04% and the
decrease of foreign exchange losses by P113,796,000. Also, the Associates and Ventures, and other
income increased in 2014. Finally, the net income of ABS-CBN in 2014 increased by P1,789,000.
Although the provision for income tax increased by 2.257%, still it resulted to a more amount of net profit
since the pre-operating income of 2014 is more than that of 2013. Indeed, the ABS-CN Corporation and
The vertical analysis of financial position shows the proportion of each line item on the statement
to the amount of total assets. Hence, the total assets or the sum of liabilities and equity is used as the base
and the individual account in the statement is shown as percentage of total assets or sum of liabilities and
equity.
Similar in the statement of income, the horizontal analysis shows the changes or trends in each account of
the balance sheet. All in all, the current assets increased by P5,557,521,000 or a 23.77% change. The
large portion of this amount came from cash and cash equivalents which also increased by
P2,621,522,000.
However, trade and other receivables increased by P2,383,556. Since the cash increased along
with the increase of receivables, it can be inferred that the cash available is idle. In addition, the amount in
program rights and other intangible assets decreased by P69,985,000. This happened may be, some of the
TV programs of the network marked poor ratings in 2014. Under the non-current section of assets, there is
an increase of property, plant and equipment by P2,036,638,000. It may indicate that the network invest
more properties that would help them to be more profitable after a year. All in all, the noncurrent assets of
the network increased by P3,349,483,000 due to the acquisition of property, plant and equipment.
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Under the liability section of financial position, the trade other payables increased by 12.85%. The
possible reason of this is there is an increase of short-term borrowings made by the network. The big
portion of the total amount of noncurrent liabilities came from the interest-bearing loans and borrowings,
which may indicate that there is high rate of interest of the long-term borrowings every month that are
Finally, the equity part of the balance sheet shows no significant difference on common and
preferred shares since amounts there are no changes in the amount of these accounts in the two periods.
The big amount comprising this part goes to retained earnings since income of the network is reflected on
this account. Since the network became profitable in its operation in 2014, the retained earnings increased
LIQUIDITY RATIOS
The current ratio is a liquidity ratio that measures a company’s ability to pay short term and
long-term obligations. The current ratio of statement of financial position of ABS-CBN in the year 2013
is 1.76 and increased by 2.08 in a year 2014, it indicates that company is continuous to have a greater
assets than its liabilities and suggests that the company is stable to pay off its obligation.
The acid-test ratio is a strong indicator whether a firm has sufficient short-term assets to cover
its immediate liabilities. The acid-test ratio of statement of financial position of ABS-CBN in a year 2013
is 1.42 and increased by 1.72 in a year 2014; since they are both lower than their current ratio it means
that the current asset of the company is highly dependent on inventory. Moreover, the company does have
The receivable turnover, it indicates the efficiency of collection of receivables. The receivable
turnover of the statement of financial position of ABS-CBN in a year 2013 is 3.16 and increased by 3.52
in a year 2014; it implies that the company has greater collection of accounts receivable in a prior year
The collection period, it determines the average duration of accounts receivable during a year.
The collection period based on the balance sheet of ABS-CBN in 2013 is 113 days and then drop to 102
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days in 2014; it is good for the company because they are able to collect their receivable in a short period
The inventory turnover is a ratio showing how many times a company's inventory is sold and
replaced over a period. The inventory turnover of ABS-CBN during 2013 and 2014 are 79 and 50.22
respectively, since it is diminished the sales of the company must have been weakened so that it is
unfavorable to the company because the number of products deteriorate are increased as they sit in a
warehouse.
The inventory sales period is a financial measure of a company's performance that gives
investors an idea of how long it takes a company to turn its inventory into sales. The inventory sales
period of ABS-CBN in a year 2013 is 5 days and increased by 7 days in a year 2014. It is unfavorable to
the company because it takes longer than previous year to generate profit using their inventory.
The payable turnover, it short-term liquidity measure used to quantify the rate at which a
company pays off its suppliers. The payable turnover of ABS-CBN from year 2013 to 2014 is 269 to 173
respectively, since the ratio is lowered, it is unfavorable for the company because it is the sign that the
company is taking longer to pay off its supplier than It was before.
The payable payment days tells how long it takes a company to pay its invoices from trade
creditors, such as suppliers. The payable payment days of ABS-CBN from year 2013 to 2014 is 134 to
208 respectively, since it is increased, it is both favorable and unfavorable for the company. Favorable
because the company has more money on hand from which is good for the working capital and free cash
flow. Unfavorable because if the company takes too long to pay its creditors, they will be unhappy. They
may refuse to extend credit in the future, or they may offer less favorable terms.
The Operating turnover, it indicates the number of day cash is invested until the day of its
recovery. The operating turnover of ABS-CBN from year 2013 to 2014 is 109 to 118 respectively, it is
good for the company because the earlier they invest cash the earlier the cash is to be recovered.
The cash turnover measures how many times per year it replenishes its cash balance with its
sales revenue. The cash turnover of ABS-CBN from 2013 to 2014 is 1.13 to 0.85 respectively, since it is
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decreased, it is unfavorable for the company because they turn over their cash balance less times per year
The Days to operating expenses it is a measure of what it costs to operate a piece of property
compared to the income that the property brings in. The days to operating expenses from year 2013 to
2014 is 319 and 423 respectively, it is unfavorable because it takes longer time pay their operating
The working capital turnover, It is the measurement of comparing the depletion of working
capital to the sales over a given period. The working capital turnover of ABS-CBN during 2013 is 0.57.
Obviously, the company is not generating a lot of sales compared to the money it uses to fund the sales.
The ABS-CBN net working capital during 2013 is 10,981,207. The firm uses its net working
capital to fund operations and purchase inventory, the higher the working capital the higher the
The debt ratio is a financial ratio that measures the extent of a company’s or consumer’s
leverage. The debt ratio of ABS CBN during 2013 and 2014 are 56:1 and 60:1 respectively. It indicates
that the company have more assets than debt during those years. Therefore, the company has more
leveraged at the same time implying greater financial risk and probably they find expensive to borrow. A
very low debt ratio is good in the sense that the company’s assets are sufficient to meet its obligations; it
may indicate underutilization of a major source of finance which may result in restricted growth. A very
high debt ratio indicates high risk for both debt-holders and equity investors. Due to the high risk, the
company may not be able to obtain finance at good terms or may not be able to raise any more money at
all.
The debt-to-equity ratio, it is a debt ratio used to measure a company’s financial leverage. The
debt-to-equity ratio of ABS-CBN during 2013 and 2014 are 1.25 and 1.50 respectively. Lower values of
debt-to-equity ratio are favorable indicating less risk. Higher debt-to-equity ratio is unfavorable because it
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means that the business relies more on external lenders thus it is at higher risk, especially at higher
The equity ratio is used to measure a company’s financial leverage. The equity ratio of ABS-
CBN during 2013 is 44% and 40% in 2014. Therefore, the equity ratio in 2013 is more favorable than
2014. Higher investment levels by shareholders shows potential shareholders that the company is worth
investing in since so many investors are willing to finance the company. A higher ratio also shows
potential creditors that the company is more sustainable and less risky to lend future loans. Companies
with higher equity ratios should have less financing and debt service costs than companies with lower
ratios.
The times interest ratio measures a firm's ability to make interest and debt service payments.
The time interest ratios of ABS CBN during 2013 and 2014 are 2.78 and 1.72 respectively. It shows that
ABS CBN is more favorable in 2013 than 2014. Higher value of times interest earned ratio is favorable
meaning greater ability of a business to repay its interest and debt. Lower values are unfavorable.
Fixed assets to non-current debts indicate the percentage of investment in fixed assets
financed from non-current debt. The percentage of fixed assets to non-current debts of ABS-
CBN in a year 2013 is 155% but in a year 2014 it decreased by 124%, it means that the fixed
assets investment arises from non-current portion of liabilities has been reduced which is
Fixed assets to shareholders’ equiy indicate the percentage of investment in fixed assets
CBN from year 2013 to 2014 is 114% and 122% respectively; since it increased it means that
some of the shareholders invested additional fixed assets to the company by use of their shares. It
is good for the company because their total assets have increased. However, the company has to
Fixed assets to total equity indicate the percentage of investment in fixed assets. The
percentage of investment in fixed assets to total equity of ABS-CBN in a year 2013 is 51% but in
2014 it decreased by 49%, it implies there was a depreciation that reduced the value of their fixed
assets. It is good for the company because they could generate profit by using their fixed asset
but since its value has reduced their total assets also decreases.
PROFITABILITY RATIO
The gross profit rate shows the proportion of profits generated by the sale of products or
services, before selling and administrative expenses. It is used to examine the ability of a business to
create sellable products in a cost effective manner. The gross profit rate of ABS-CBN in 2013 reaches to
13% lesser than the rate in 2014 which is 40%. This only shows that the company will have more money
to pay in operating expenses like salaries, utilities, and rent. Since this ratio measures the profits from
selling inventory, it also measures the percentage of sales that can be used to help fund other parts of the
business.
The operating profit margin of ABS-CBN in 2013 is 9.22% and 9.46% in 2014. This means that
the percentage of their profit increase. This indicates that the management is able to control the
The net profit margin of ABS-CBN in 2013 is 6.08 % the same in 2014 which is also 6.05%. It
The return on investment of ABS-CBN in 2013 is 5.3% and in 2014 5.06%. This is not
favorable because every one peso in 2013 and 2014, the return on investment are 5.3 centavos and 5.06
centavos respectively.
The return on shareholder’s equity of ABS-CBN in 2013 is 3% and 8% in 2014 which may
The return on total assets of ABS-CBN in 2013 is 4% and 5% in year 2014. This only shows
that their operating income and usage of assets increases. The return for year 2013 is 4 cents for every one
The return on current asset of ABS-CBN in 2013 is 9% and 8% in 2014 which indicates
decrease in returning the resources in current assets cause by gradual decreasea in operating or increase in
GROWTH RATIO
The basic earnings per share of ABS-CBN in 2014 is 2.87% higher than in 2013 which
is 2.68%. This indicates that the company is capable of generating a significant dividend for
investors. Moreover, the company has a potentially worthwhile investment depending on the
The price earnings per ratio of ABS-CBN in 2014 is 7.3% lesser than in 2013 which is
7.8%. This is an indication of poor current and future performance. This could also prove to be a
poor investment.
The dividend payout ratio of ABS-CBN in 2014 is 2.1% and 1.5% in 2013. It increases
by 6%. A high ratio does not mean that much. Investors are mainly concerned with sustainable
trends. For instance, investors can assume that a company has a payout ratio of 20% for the last
The dividend yield ratio of ABS-CBN in 2014 is 2.8% higher than in 2013 which is
1.9%. This indicates that the company pays its investors a large dividend compared to the fair
market value of the stock. This means that the investors are getting highly compensated for their
The dividend per share of ABS –CBN in 2014 is 5.9%. It increases by 1.9% compared
in 2013 which is 4%. This shows that there is an increase in the company’s net profits out of
which dividends are paid. There may also be a shift in the company’s growth strategy that leads
the company to decide to expend less of its earnings in seeking growth and expansion, thus
leaving a larger share of profits available to be returned to equity investors in the form of
dividends.
The book value per share of ABS-CBN in 2014 is 14.5% higher than in 2013 which is
13.8%. This shows that there is an appraisal and the net worth of the company increases.
Based on our analysis, year 2014 is the better year with a better position for ABS-CBN
Corporation. The operation performance of the company increases gradually. The liability and
equity both increases. The equity for 2013 and 2014 are P25,922,757 and 26,874, 828 while the
liability for 2013 and 2014 are 32,407,059 and 40,361,992. Even though their liabilities
increased, it may imply that creditors trust the company for them to pay on time because of their
improving operating performance. Our group conclude that ABS-CBN corporation is financially
stable.
We recommend that they continue their operations and still find ways to improve to
generate more income and to strengthen the trust and support of their consumers, creditors and
investors. They find ways to lessen cost while not sacrificing their performance to continually
APPENDIX
December 31
2014 2013
ASSETS
Current Assets
Cash and cash equivalents (Note 6) =13,238,377
P =10,616,855
P
Trade and other receivables (Notes 7 and 22) 10,717,317 8,333,761
Program rights and other intangible assets (Note 11) 1,315,987 1,385,972
Other current assets (Note 8) 3,669,314 3,046,886
Total Current Assets 28,940,995 23,383,474
Noncurrent Assets
Property and equipment (Notes 9, 10, 17 and 30) 20,572,543 18,535,905
Program rights and other intangible assets - net of current portion
(Note 11) 6,465,599 5,429,192
Goodwill (Notes 4 and 15) 5,289,956 5,288,350
Available-for-sale (AFS) investments (Note 12) 242,368 219,191
Investment properties (Notes 9, 10 and 17) 198,734 196,916
Investments in associates and joint ventures (Note 13) 199,874 166,591
Deferred tax assets - net (Note 28) 2,858,187 2,530,164
Other noncurrent assets (Note 14) 2,468,564 2,580,033
Total Noncurrent Assets 38,295,825 34,946,342
Noncurrent Liabilities
(Forward)
-2-
December 31
2014 2013
Equity Attributable to Equity Holders of the Parent Company
Capital stock (Note 21):
Common =872,124
P =872,124
P
Preferred 200,000 200,000
Additional paid-in capital (Notes 2, 4 and 21) 4,495,050 4,495,050
Exchange differences on translation of foreign operations (456,773) (270,632)
Unrealized gain on AFS investments (Note 12) 143,281 121,766
Share-based payment plan (Note 21) 34,349 34,349
Retained earnings (Note 21) 21,363,395 19,817,957
Philippine depository receipts convertible to common shares (Note 21) (1,264,096) (1,164,146)
Equity attributable to Equity Holders of the Parent 25,387,330 24,106,468
Noncontrolling Interests (Notes 4 and 23) 1,487,498 1,816,289
Total Equity 26,874,828 25,922,757
REVENUE
Advertising revenue (Note 22) P18,879,946
= =19,331,908
P =16,611,731
P
Sale of services (Note 30) 14,029,684 13,287,245 11,827,501
Sale of goods (Note 22) 351,528 579,140 421,079
Others 282,470 179,611 123,329
33,543,628 33,377,904 28,983,640
PRODUCTION COSTS
(Notes 9, 11, 22, 24, 29 and 30) (11,007,656) (11,499,365) (10,555,162)
COST OF SERVICES
(Notes 8, 9, 11, 14, 22, 25, 29 and 30) (9,045,527) (8,853,440) (8,061,381)
COST OF SALES (Notes 8, 9, 22, 25, 29 and 30) (201,993) (330,029) (292,095)
OTHER INCOME - net (Notes 14, 19, 27 and 30) 652,352 512,322 788,099
Attributable to
Equity holders of the Parent Company (Note 33) =2,387,085
P =2,145,725
P =1,580,623
P
Noncontrolling interests (356,949) (117,378) 37,276
=2,030,136
P =2,028,347
P =1,617,899
P
Attributable to:
Equity holders of the Parent Company =1,895,412
P =2,906,433
P =1,413,954
P
Non-controlling interests (364,669) (67,949) (160,600)
=1,530,743
P =2,838,484
P =1,253,354
P
(Forward)
-2-