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    ABAO 05 Performance Task 1 MR

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    ABAO 05 Performance Task 1 MR

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    Jerho
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    ABAO_05_Performance_Task_1_MR

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    Assignment

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    24 views2 pages

    ABAO 05 Performance Task 1 MR

    Uploaded by

    Jerho
    Assignment

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    BM2305

    NAME: Jerho J. Abao DATE: SCORE:

    CORPORATE FINANCE

    Case study: The Philippine Media Industry from 2007 to 2010 (continuation)

    Instructions: Download the 05 Task Performance 1 Worksheet file containing the data for your analysis.
    You may input your answers in the said worksheet.

    Case 1: Cash Conversion Cycle

    ABS GMA
    CCC Composition
    2010 2009 2008 2007 2010 2009 2008 2007
    Inventory conversion period 4.03 5.60 6.18 6.52 8.34 8.26 7.29 7.19

    Average collection period 71.26 80.25 81.64 88.77 160.12 150.00 158.25 170.54

    Average payment period 37.38 33.50 45.18 66.80 30.93 37.39 31.41 26.81

    Total CCC 37.91 52.36 42.63 28.50 137.53 120.86 134.13 150.91

    Working Capital 3,885.70 2,802.10 1,585.50 2,444.90 5,786.10 6,126.00 5,030.30 4,157.90

    Required:
    1. Compute both companies' actual cash conversion cycle from 2007 to 2010. Which company fared
    worse in terms of CCC?
    Based on the data, GMA performed worse in terms of CCC because a lower CCC is more favorable
    for a company. Since GMA has a higher CCC compared to ABS-CBN, its performance is inferior.

    2. Compute the Working capital of both companies. Prepare a short financial statement analysis
    report of the company you answered in #1, focusing on working capital management. Cite specific
    ratios from your answers in #1 and refer to the Liquidity Management Ratios and Debt Management
    Ratios in 04 Performance Task 2 to support your analysis.

    When it comes to liquidity management, ABS-CBN Corporation has a lower liquidity rate compared to
    GMA Corporation. GMA has a higher current ratio and quick ratio than ABS-CBN, with GMA's working
    capital in 2007 amounting to 5,786.10, while ABS-CBN’s was 3,885.70. However, in terms of debt
    management, GMA faces challenges in handling its debt, reflected in a negative increasing ratio that
    indicates higher losses rather than profits.

    3. Based on your learnings in working capital management, what can you recommend to the company
    you answered in #1 to improve its CCC? Prepare a management recommendation report about
    your analysis.
    Based on my understanding of working capital management, ABS-CBN should improve its financial
    management, especially regarding its obligations, to enhance its CCC. Since they have some control
    over their CCC, they should evaluate whether their expenditures are necessary and manageable in
    their specific areas.

    Item Performance Indicators Points


    Requirement 1 0.5 points for computing each ratio (3 ratios x 4 years) x 2 12
    companies
    1 point for computing CCCs (4 years x 2 companies) 8
    1 point for selecting which company fared worse in terms of CCC 1

    Requirement 2 Provided correct working capital analysis; cited specific ratios on 5


    liquidity and debt management ratios in the analysis.

    Requirement 3 Provided clear and concrete recommendations based on the 4


    working capital and ratio analyses.
    Total 30

    05 Performance Task 1 *Property of STI


    Page 1 of 1

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