FINANCIAL

ANALYSIS
METRO PACIFIC INVESTMENT CORPORATION

2018

Daarol, Joshua A.

Garcia, Ma. Andrea Romea O.

Go, Anna Bianca C.

Gono, Maria Louella S.

Hernandez, Nisha G.

Hicalde, Trixie B.

Inocencio, Aryela Ivonne

Javier, Luis Philippe P

TABLE OF CONTENTS

I. Problem Statement ----------------------------------------------------------------- 3

II. Statement of the objective ------------------------------------------------------- 3

III. Areas -------------------------------------------------------------------------------- 3

IV. Assumptions ---------------------------------------------------------------------- 4

V. Alternative Courses of Action ------------------------------------------------- 5

VI. Analysis ---------------------------------------------------------------------------- 5

VII. Conclusion ----------------------------------------------------------------------- 6

VIII. Plan of Action ------------------------------------------------------------------- 7

Proforma Income Statement ------------------------------------------------ 8

Proforma Balance Sheet ------------------------------------------------------

IX. Ratios --------------------------------------------------------------------------------

X. Supporting Computations ------------------------------------------------------
Viewpoint:

The Financial Manager’s viewpoint was used in this case since he/she has the
capability to project the approximate future financial performances of Metro
Pacific Investment Corporation through analysis of past information.

Time Context: Present- day

I. PROBLEM STATEMENT

Considering Metro Pacific Investment Corporation’s application of

conservative working capital financing policy wherein it uses primarily long
term investments, large amount of idle cash upsurged on 2017 resulting to
inefficient utilization of liquid assets.

II. STATEMENT OF THE OBJECTIVE

The ultimate goal of this case analysis is to determine the most efficient way of
utilizing large amount of idle cash.

Specifically, the financial manager aims to provide facilitative financial advice

to Metro Pacific Investment Corporation in line with the reduction of excessive
cash and subsequently, seek for the best treatment of idle cash out from those
alternative courses of action as mentioned in the following section.

The target portion of cash balance subject to alternative course of action is

48.04%* of the total balance of cash item which seems idle.

III. AREAS OF CONSIDERATION

STRENGTHS

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  Large quantity of subsidiaries under wide range of industries

 Experienced management team

 Commitment to innovation and ability to take risks

*supporting computations are on the last part of this analysis

WEAKNESSES

 Increasing cost of acquisition and expansions due to Build Build

Build program

 Dependence of subsidiaries on uncontrollable natural resources

that faces possibility of shortage

 Upsurge in amount of debts to finance increasing need on

products and services the company’s subsidiaries offer

OPPORTUNITIES

 Offers products and services that is necessary for human

sustainability

 Absence of competitors in monopolistic subsidiaries

 Acquisition and expansions due to Build Build Build program

THREATS

 Exposing of vulnerable information to public cause risk of

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 data breaches

 Government intervention to monopolistic subsidiaries.

IV. ASSUMPTIONS

The following points are assumed throughout the case to establish

restrictions upon the presentation of the financial analysis:

1. That the firm will continue to incur debts due to its new toll road projects.

2. That the firm will not be able to meet the continuing demand of rise in

power due to minimal progress for new generation projects.

3. That the firm will continue to expand and extend the service coverage of its

hospitals for establishing new service centers for local communities in

ensuring the possibility of having access to world class medical care for
Filipinos.

4. Country’s continuous exposure to climate change and global warming

increases possibility of shortage in natural resources that the company’s

subsidiaries need to produce its products.

V. ALTERNATIVE COURSE OF ACTION:

ACA#1- Transfer of cash on hand to short term deposit to convert unutilized

cash into interest earning asset in short period of time.

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ACA#2- Utilize unused cash to redeem and repurchase outstanding shares that
were originally sold to external investors.

ACA#3- Use idle cash as prepayments for executory costs such as insurance,
maintenance, lease payments, etc.

VI. ANALYSIS

ACA#1

Advantages Disadvantages
 Decreases idle cash  Uses variable rates rather the

 Earn interest fixed rate

 Shorter Maturity compared to Low risk results to lower rates

long term investments
compared to long term investments
 Can cover sudden decrease of
short term deposits

ACA#2

Advantages Disadvantages
 Decreases idle cash  Such action could cause long term
changes
 Raise in stock price pleases the
shareholders  It takes a lot of negotiation to

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 Lower possibility of ownership buy back desired number of shares

 Utilization of cash is questionable

ACA#3

Advantages Disadvantages
 Decreases idle cash  Fund used for prepayments is
considered as sunk cost
 Future payments would not be a
problem anymore  Possibility of insurance to expire
without being utilized
 Amount of current assets is
equitably distributed.

VII. CONCLUSION

Criteria ACA#1 ACA#2 ACA#3

Reduction Idle Cash 50% 3 1 2
Time frame 25% 3 1 2
Soundness in terms of risk 25% 1 3 2
100
Total 7 5 6
%
Weighted Average 2.5 1.5 2.0
*In a scale of 1-3. 3 being the highest and 1 being the lowest

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 The three alternative courses of action were evaluated one by one in terms of
how the action will reduce idle cash to efficiently utilize liquid assets, how the
action can take place immediately and how the company wouldn’t be at risk in
taking the action.

The best option for the company to take based on the total scale per alternative
course of action is to transfer of cash on hand to short term deposit to convert
unutilized cash into interest earning asset in short period of time being mostly
able to reduce idle cash at shortest period of time despite its riskiness compare to
other alternative course of action.

Since the short term deposit massively decreased the same time that the cash
on hand immensely went up, the financial management team have decided that
the best way to cover the declining amount of short term deposit is to utilize the
cash on hand, in that way, both problems of the the working capital can be
resolved simultaneously

VIII. PLAN OF ACTION

Step by step implementation of the chosen course of action

Week 1
Responsible Success Criteria /
Activity Proposed Action
Person Objective
 The problems regarding To understand the
excessive amount of idle problem of the company
cash should be discussed. and come up with an
 Present the proposed idea on how to resolve
Meeting  CEO it.
Alternative Course of
Action which is to invest
portion of idle cash into
short- term deposits.

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 To inform the
 The decisions made by the  Finance appropriate department
Communicating top management should be Department or personnel regarding
disseminated.  CFO the decision made by the
top management.
To clarify the conduct of
 Finalize the analysis and analysis with regards to
other procedures taken in idle cash including
 Finance
Verification relation to chosen computations and
Department
Alternative Course of possible events that
Action (ACA) affect the outcome of
the analysis.
Week 2 - 13
 Carry out the chosen To execute the
ACA. Invest the estimated investment of estimated
idle cash based from the idle cash to marketable
computation amounting to securities to utilize it
Implementation 
P22,389,180 to Unit properly therefore,
Investment Trust Fund increases the value of
(UITF), money market cash through interest
security and time deposits. income upon maturity.
Week 14
 Identifying, recording To reflect the
and analyzing effectiveness of the
accountable events for ACA to the financial
the quarter ended. statements by looking at
 Summarize all the equity accounts that
amounts posted to the might be influence by
general ledger into the expected increase of
Preparation of financial statements  Accounting net income brought by
Financial such as Statement of Department interest income
Statements Income, Statement of  Controller generated from short-
Comprehensive term investment.
Income, Statement of
Financial Position,
Statement of Changes
in Shareholder’s
Equity and Statement
of Cash Flows.
Communication  Transform Financial 
and Presentation Statements into
meaningful and
understandable
financial reports to be
presented to the top
management and

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 become basis of
external stakeholders
like creditors,
investors and the
public.
Week 15
 Review the previous To assess the
discussion about the implication of the
firm’s problem in terms carrying out the chosen
of idle cash. ACA to the performance
 Evaluate the outcome of of MPIC.
the implemented chosen
 Finance To come up with a final
ACA to observe the
Department decision regarding the
Meeting growth expected by the
 Accounting policy initially adapted.
firm.
Department
 Review whether the
policy should be
continued or the
management will adapt
another ACA cited from
Case Analysis.

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PRO FORMA FINANCIAL STATEMENTS

2019-2023

PRO FORMA INCOME STATEMENT

METRO PACIFIC INVESTMENT CORPORATION

FOR THE YEAR ENDED DECEMBER 31, 2019

Sales ₱98,059,258.68

Less: Cost of Goods Sold (51%) 50,010,221.92

Gross Profit ₱48,049,036.75

Less: Operating Expenses (18%) 17,650,666.56

Operating Profit ₱30,398,370.19

Less: Interest Expense (13%) 12,747,703.63

Net Profit Before Tax ₱17,650,666.56

Less: Taxes (30%) 5,295,199.97

Net Profit After Tax ₱12,355,466.59

PRO FORMA INCOME STATEMENT

METRO PACIFIC INVESTMENT CORPORATION

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 FOR THE YEAR ENDED DECEMBER 31, 2020

Sales ₱120,081,919.86

Less: Cost of Goods Sold (51%) 61,241,779.13

Gross Profit ₱58,840,140.73

Less: Operating Expenses (18%) 21,614,745.58

Operating Profit ₱37,225,395.16

Less: Interest Expense (13%) 15,610,649.58

Net Profit Before Tax ₱21,614,745.58

Less: Taxes (30%) 6,484,423.67

Net Profit After Tax ₱15,130,321.90

supporting computations are on the last part of this analysis

PRO FORMA INCOME STATEMENT

METRO PACIFIC INVESTMENT CORPORATION

FOR THE YEAR ENDED DECEMBER 31, 2021

Sales ₱149,099,669.04

Less: Cost of Goods Sold (51%) 76,040,831.21

Gross Profit ₱73,058,837.83

Less: Operating Expenses (18%) 26,837,940.43

Operating Profit ₱46,220,897.40

Less: Interest Expense (13%) 19,382,956.98

Net Profit Before Tax ₱26,837,940.43

Less: Taxes (30%) 8,051,382.13

Net Profit After Tax ₱18,786,558.30

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 PRO FORMA INCOME STATEMENT

METRO PACIFIC INVESTMENT CORPORATION

FOR THE YEAR ENDED DECEMBER 31, 2022

Sales ₱188,823,691.72

Less: Cost of Goods Sold (51%) 96,300,082.78

Gross Profit ₱92,523,608.94

Less: Operating Expenses (18%) 33,988,264.51

Operating Profit ₱58,535,344.43

Less: Interest Expense (13%) 24,547,079.92

Net Profit Before Tax ₱33,988,264.51

Less: Taxes (30%) 10,196,479.35

Net Profit After Tax ₱23,791,785.16

supporting computations are on the last part of this analysis

PRO FORMA INCOME STATEMENT

METRO PACIFIC INVESTMENT CORPORATION

FOR THE YEAR ENDED DECEMBER 31, 2023

Sales ₱240,569,031.47

Less: Cost of Goods Sold (51%) 122,690,206.05

Gross Profit ₱117,878,825.42

Less: Operating Expenses (18%) 43,302,425.67

Operating Profit ₱74,576,399.76

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Less: Interest Expense (13%) 31,273,974.09

Net Profit Before Tax ₱43,302,425.67

Less: Taxes (30%) 12,990,727.70

Net Profit After Tax ₱30,311,697.97

supporting computations are on the last part of this analysis

SUPPORTING COMPUTATIONS

A. Estimated minimum cash balance

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APPENDIX E

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B. Income Statement

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