Holy Cross of Davao CollegeCustoms Administration Department

Davao City

Analysis of Financial Statements:Century Food Specialty and Franchise Services, Inc.

Submitted by:Abdul Khalid D. Sansarona

BSCA 4th Year

Submitted to:Professor Del Monte

October 6, 2015

Balance SheetsAs of December 31, 2014 and 2013

December 31 2014 2013

ASSETSCURRENT ASSETSCash P 447,652.87 P 130,264.24Merchandise Inventory 169,890.40 115,743.75Deferred input tax 3,556.86 Prepaid income tax 3, 284.71 3,284.71Total Current Assets 624,384.84 249,292.70NON-CURRENT ASSETSProperty and Equipment-net 1,795,939.13 1,838,679.05Other Assets 814,159.60 814,159.60Total Non-Current Assets 2,610,098.73 2,652,838.65

TOTAL ASSETS P 3,234,483.57 P 2,902,131.35

LIABILTIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIESIncome tax payable P 9,922.00 P 9,651.84 Trade payables 1,772,365.33 994,880.00Other Liabilities 9,516.71 1,863.00Total Current Liabilities 1,791,804.04 1,006,394.84

STOCKHOLDERS’ EQUITY (Authorized to issue 100,000.00 shares at Php 100 par value Php 10,000,000.00)

Subscribed and paid-up capital 5,000,000.00 5,000,000.00Retained Earnings (3,557,320.47) (3,104,263.49)Total Stockholders’ Equity 1,442,679.53 1,895,736.51TOTAL LIABLITIES AND STOCKHOLDERS’ EQUITY P 3,234,483.57 P 2,902,131.35

RATIO ANALYSIS- TWO-YEAR COMPARISON

Liquidity Ratio-Current Ratio

This measures the ability of the business to pay its current obligations arising from operations.

According to the balance sheet herein provided, the company reported P1, 006,394.84 of current liabilities and only P249, 292.70 of current assets for the year 2013. The company’s current ratio would be calculated like this:

For the year 2014, the computation is as follows:

As illustrated, the company only has enough current assets to pay off 25 percent of his current liabilities for the year 2013 and 35 percent for 2014. This shows that the company is highly leveraged and highly risky. If the company would apply for a loan in a bank, the same would prefer a current ratio of at least 1 or 2, so that all the current liabilities would be covered by the current assets.

Formula:

Current Ratio= Total Current Assets Total Current Liabilities

2013

Current Ratio= 249,292.70 1,006,394.84

= 0.25

2014

Current Ratio= 624,384.84 1,791,804.04

= 0.35

QUICK RATIO

The computation above shown provides that the current ratio for the year 2013, which is 0.13:1, indicates that for every one peso of current liability, there is .13 cents available payment from the current asset. This is a low indicative of the company’s liability to pay maturing obligation. For the year 2014, for every one peso of current liability, there is .25 cents available payment from the current asset which indicates that for the following year, the same would be the inability of the company to pay its obligation.

Formula:

Acid or Quick Ratio= Current Assets – Inventory Current Liabilities

2013

Acid or Quick Ratio= 249,292.70 – 115,743.75 1,006,394.84

= 0.13:1

2014

Acid or Quick Ratio= 624,384.84 – 169,890.40 1,791,804.04

= 0.25:1

Income Statements

For the years ended December 31, 2014 and 2013

(In Philippine Peso)

December 31 2014 2013SALES P 2,371,169.22 P 3,254,778.35

Cost of Sales 1,875,069.69 2,772,186.39

GROSS PROFIT ON SALES 496,099.53 482,591.96

Ad Interest Income on Savings 1, 182.09 Total OPERATING PROFIT 497,281.62 482,591.96

Less: Selling, administrative and General expenses 940,416.60 907,653.22

NET INCOME (LOSS) BEFORE INCOME TAX (443,134.98) (425,061.26)

Add: Provision for Income tax (MCIT) 9,922.00 9,651.84

NET INCOME (LOSS) FOR THE PERIOD P (453,056.98) (434,713.10)

VERTICAL ANALYSIS:

December 31 2014 2013SALES 100% 100%

Cost of Sales 79% 85%

GROSS PROFIT ON SALES 21% 15%

Ad Interest Income on Savings 0.05% Total OPERATING PROFIT 21.05% 15%

Less: Selling, administrative and General expenses 40% 28%

NET INCOME (LOSS) BEFORE INCOME TAX (-18.95%) (-13%)

Add: Provision for Income tax (MCIT) 4% 3%

NET INCOME (LOSS) FOE THE PERIOD (-14.95%) ( -16%)

INVENTORY RATIO

Rate of Inventory Turn-over

The computation for the year 2013 shows a high rate on turn-over which indicates a great demand of the commodities.

As for the following year, the rate indicates fair demand of the commodities.

Formula:

Rate of Inventory Turn Over = Cost of Sales Average Inventory

2013:

Rate of Inventory Turn Over = 2,772,186.39 115,743.75

= 23.95

2014:

Rate of Inventory Turn Over = 1,875,069.69 169,890.40

= 11.04

SOLVENCY OR STABILITY RATIO

DEBT TO ASSSETS RATIO

Formula:

Debt to Total Assets Ratio= TOTAL LIABILITIES TOTAL ASSETS

2013:

Debt to Total Assets Ratio= 1,006,394.84 2,902,131.35

= 0.35

2014:

Debt to Total Assets Ratio= 1,791,804.04 3,234,483.57

= 0.55