Bernard Jayson E.

Merciales
AEC 205 – Class Number 2
Ratio Analysis
Of
Century Pacific Food Inc. and Subsidiaries
As of December 31, 2022

A. Test of Liquidity
1. Working Capital
Working Capital= Current Assets – Current Liabilities
2020 2019 The Working Capital for the 2020 is lower than the previous
year. Low working capital can often mean that the firm is
= P 23,973,474,664 – P 13,746,011,612 = P 21,514,823,423 – P 9 ,703,465,412 barely getting by and has just enough capital to cover its
Working Capital = P 10,227,463,052 Working Capital = P 11,811,358,00 short-term expenses. The firm needs to focus on increasing
their liquidity.

2. Current Ratio
Current Ratio = Current Assets
Current Liabilities
2020 2019 The Current Ratio for 2020 indicates that the
= P 23,973,474,664 = P 21,514,823,423 firm has enough assets to pay its current
P 13,746,011,612 P 9 ,703,465,412 liabilities. The firms current ratio in 2020 is
Current Ratio = 1.74 to 1 Current Ratio = 2.22 to 1 lower than 2019. Despite of this, the firm will
be a to pay its current obligation.

3. Acid Test Ratio

Acid Test Ratio = Quick Assets
Current Liabilities
2020 2019 The Acid Test Ratio for 2020 is
Acid Test Ratio = P 9,110,154,330 Acid Test Ratio = P 8,869,961,093 0.66 to 1 And for 2019 has a
13,746,011,612 9 ,703,465,412 ratio of 0.91 to 1. These ratios
Acid Test Ratio = 0.66 to 1 Acid Test Ratio = 0.91 to 1 indicate that the firm liquid
assets are not enough to pay its
current liabilities.

4. Receivable Turnover
Receivable Turnover = Net Credit Sales
Average Receivables
Average Receivable = Beginning Balance + Ending Balance
2
5. Average Age of Receivables
Average Age of Receivables = Number of Working Days in a Year
Receivable Turnover
2020 The firm has a Receivable Turnover of 7.96
Average Receivable =P5,942,182,397 + P6,195,019,877/ 2 and has an average age of receivables of 45.23
Average Receivable = P12,237,202,274 /2 days for the year 2020. The firm has a slow
Average Receivable = P6,068,601,137 cycle to complete a collection cycle. It takes
Receivable Turnover = P48,301,741,084 45.23 days to collect the receivable.
P6,068,601,137
Receivable Turnover = 7.96 turnovers
Average Age of Receivables = 360 days
7.96 turnovers
Average Age of Receivables = 45.23 Days

6. Manufacturing Firm

Average Inventory Inventory Turnover Average Age of Inventory

Raw materials P 5,910,396,114 + P 7,675,369,911 P 34,940,027,618 360 days Low inventory turnover and
2 P 6,792,883,012.5 5.14 times high average age of inventory.
= P 6,792,883,012.5 = 5.14 times = 70.03 days
Work in process P 76,621,972 + P 162,276,236 P 2,078,533,942 360 days Low inventory turnover and
2 P 238,898,208 8.70 times high average age of inventory
= P 238,898,208 = 8.70 times = 41.38 days
 Finished Goods P 5,594,397,614 + P6,338,087,442 P 4,021,764,098 360 days Low inventory turnover and
2 P 5,966,242,528 0.67 times high average age of inventory
= P 5,966,242,528 = 0.67 times = 537.31 days

7. Payables Turnover
Payables Turnover = Net Credit Purchases
Average Trade Payables
8 . Average Age of Trade Payables
Average Age of Trade Payables= Number of Working Days
Payable Turnover
2020 The Payables 1.61 turnover or 1.61 times to complete
Payables Turnover = P15,578,715,307 the operating cycle. The average age of trade payables
P9,670,565,636 is 223.60 days this indicates that the days which trade
Payables Turnover = 1.61 turnover payable will remain unpaid.
Average Age of Trade Payables= 360 days
1.61
Average Age of Trade Payables= 223.60 days

B. Test of Solvency

1. Times Interest Earned

Times Interest Earned = Income Tax Before + Interest Expense
Interest Expense
2020 The firm times interest earned for 2020 is 21.64%. The figure is still
Times Interest Earned = P 5,388,982,523 + P 261,151,374 quite high and therefore highly satisfactory.
P 261,151,374
Times Interest Earned = 21.64%

2. Debt-equity Ratio
Debt-equity Ratio = Total Liabilities
Total Stockholder’s Equity
2020 2019 The debt ratio for the year 2020 is 69.22%
Debt-equity Ratio = P14,840,155,033 Debt-equity Ratio = P13,434,453,801 and for 2019 is 70.14%. This indicates the
P21,436,210,593 P19,154,317,747 percentage of the total assets that owner’s
Debt-equity Ratio = 69.22% Debt-equity Ratio = 70.14% creditors provided.

3. Debt Ratio
Debt Ratio = Total Liabilities
Total Assets
2020 2019 The debt ratio for the year 2020 is 40.91%
Debt Ratio = P14,840,155,033 Debt Ratio = P 13,434,453,801 and for 2019 is 41.22%. This indicates the
P36,276,365,626 P 32,588,771,548 percentage of the total assets that creditors
Debt Ratio = 40.91% Debt Ratio = 41.22% provided.

4. Equity Ratio
Equity Ratio = Total Stockholder’s Equity
Total Assets
2020 2019 The Equity Ratio for the year 2020 is 59.09%
Equity Ratio =P 21,436,210,593 Equity Ratio = P 19,154,317,747 and for 2019 is 58.76%. This means the
P 36,276,365,626 P 32,588,771,548 creditors is worrying because they invested a
Equity Ratio = 59.09% Equity Ratio = 58.76% large amount of total assets than its
stockholders.
C. Test of Profitability
1. Rate of Return
Rate of Return = Income
Investment
2020 2019 The rate of return for the year 2020 is 64.65%
Rate of Return = P3,879,443,853 Rate of Return = P3,148,597,010 and for 2019 is 52.48%. The profitability in
P6,000,000,000 P6,000,000,000 current year is good they should maintain
Rate of Return = 64.65% Rate of Return = 52.48% this.

2. Return on Sales
Return on Sales = Income
Net Sales
2020 2019 The return on sale for 2020 is 8.03% and for
Return on Sales = P3,879,443,853 Return on Sales = P3,148,597,010 2019 is 7.76%. Return on sale measure of
P48,301,741,084 P40,560,362,956 how efficiently a firm turns sales into profits.
Return on Sales = 8.03% Return on Sales = 7.76%

3. Return on Assets
Return on Assets = Income before Interest and Taxes
Average Total Assets
2020 The Firm return on assets for 2020 is 14.14%. The ROA of this firm
Return on Assets = P5,127,831,149 is less than 20% a way far to a desired rate. They should to better
P36,276,365,626 next year.
Return on Assets = 14.14%

4. Return on Stockholder’s Equity

Return on Stockholder’s Equity =__________Net Income_______
Average Stockholder’s Equity
2020 The Return on Stockholder’s Equity is 19.12%. This firm should
Return on Stockholder’s Equity = P3,879,443,853 prioritize increasing their income to be able to increase its
P20,295,264,170 return.
Return on Stockholder’s Equity = 19.12%

5. Earnings per Share

Earnings per Share = Net Income
Weighted Average Number of Common Shares
2020 2019 These firms’ earnings per share for 2020 is P 1.10
Earnings per Share = P 3,879,443,853 Earnings per Share = P 3,148,597,010 and for 2019 is P 0.889. The earnings per share in
P 3,542,156,120 P 3,542,156,120 2020 is higher than 2019 it is because of the
Earnings per Share = P 1.10 Earnings per Share = P 0.889 increase in income for 2020.

D. Market Tests
1. Price Earnings Ratio
Price Earnings Ratio = Price per Share
Earnings per Share
2020 The price earnings ratio is P 0.91. This means that it will only cost P 0.91
Price Earnings Ratio = P 1 pesos to buy P 1 of this firms annual earnings.
P 1.10
Price Earnings Ratio = P 0.91

2. Dividend Yield
Dividend Yield = Dividends per Share
Price per Share
2020 These firms do not declared dividends regularly. May be because they are
Dividend Yield = P0.36 planning to expand this firm that’s why the dividend yield is 36% only.
P1
Dividend Yield = 36%

3. Dividends Payout
Dividends Payout = Common Dividend per Share
Earnings per Share
2020 The firms Dividend Payout is 32.72%. This means that out of the total
Dividends Payout = P0.36 earnings Century Pacific Food Inc during this year, 32.72% will go
P 1.10 to stockholders dividends and the rest will use in financing the
Dividends Payout = 32.72% growth and expansion projects.