Globe Telecom Working Capital
Short Description
Consist of Working Capital and more of the analyzation of how Globe's working capital rise...
Description
1. Based Based on the gather gathered ed company company informa informatio tion, n, describe describe the working working capita capitall pol policy icy of the 2 companies.
The following are the important ratios used by the group to measure the efficiency of working capital. The following, easily calculated, calculated, ratios are important measures of working capital utilization: utilization:
Ratio:
Globe Telecom
P!T
"n#entory T$rno#er %"n days&
'' days
1() days
Globe Telecom’s Telecom’s inventory turns over every ever y 4 inventory is & (#$ ''$ while !"T’s cost of sales is turnover ratio is higher than !"T because it has lo days making the inventory to turn over more fre+ue
Recei#ables ratio %in days&
*+ days
)+ days
Globe has a longer time between making a sale and collecting the cash cash of '( day days com compare pared d to !"T !"T whic which h is only only %( day days. This This means that, !"T is more aggressive to generate cash from their ccount -ece -eceiv ivab able les s than than Glob Globe e Teleco lecom m which may negatively negatively affect the short term debt paying ability of the Globe. This This coul could d have have also also affe affect cted ed thei their r current ratio. The !"T may generate acco accoun unts ts rece receiv ivab able le shor shorte terr than than Globe that made them generate more cash cash to inve invest st in other other inve invest stmen ments ts maki making ng !"T !"T’s ’s curre current nt ratio ratio lowe lower r than Globe’s. /owever, both companies’ period both good and bad, depends on the credit terms allowed by each of them. Globe was said to have & months or )$ days credit terms same as !"T. 0oth companies are doing good for they have number of collection days lower than their credit terms. /owever, /owever, !"T is doing better sinc since e thei theirr ccou ccount nts s -ecei eceiv vable able Turnover is a shorter period compared to Globe.
Payables Ratio %"n days&
1( days
- days
1n terms of ccounts ayable a yable Turnover, Globe’s Globe’s acc *ven if Globe’s accounts payable turnover is longe has higher average accounts payable is that the 5cape36 are estimated to reach 74'$ million to 7 investments in fi3ed line, international cable facilitie
*+ days
/2 days
0$rrent assets
)*,)1,2(2
/,),(((
The current assets of !"T is way more higher than Globe Tel
0$rrent iabilities Working Capital
*',-+-,))1
12-,('/,(((
)*,)1,2(2.((
1,)+',(((
(.*
(.*2
The urrent !iabilities shows that Globe has bigger liability fro its assets. The working capital of Globe and !"T is in negative which and !"T having both negative working capital, essentially 0usiness without any 0apital re$irements . ;ince Globe has credit suppliers obligation. Globe is more li+uid than !"T that is least li+uid even though
Working Cycle Capital in days
Current Ratio
Globe has '( days while !"T has 8& days of co this doesn’t mean that it is more li+uid than Globe b nd when you try to look at !"T’s current ratio its that is 9ust the same as Globe which is in fact has a
Table 1: Globe and Pldt’s ratios related to working capital
Ratios
Computation GLOBE
"n#entory T$rno#er %"n days&
Recei#ables ratio %in days&
Payables Ratio %"n days&
Working Cycle Capital in days Current Ratio
PLDT
)* days %0ost of Goods 3old 4#erage "n#entory&
)* days %0ost of Goods 3old 4#erage "n#entory&
)* %2) 211 *(( 2 +1( **(& )* +.2* '' days
)* %11 +( ((( ) )1* *((& )* ).* 1() days
)* days %3ales 4cco$nts Recei#able&
)* days %3ales 4cco$nts Recei#able&
)* %-* 1'( -+* 1* 2(( -2)& )* .2 *+ days
)* %1+ ))1 ((( 1/ *' (((& )* -.*+ )+ days
)* days %0ost of Goods 3old 4#erage 4cco$nts Payable&
)* days %0ost of Goods 3old 4#erage 4cco$nts Payable&
)* %2) 211 *(( 1( 1+- -)& )* 2.2+ 1( days
)* %11 +( ((( 2 21* *((& )* *.)) - days
Globe5s 6orking 0apital for ) years
Globe Telecom 0.00 2011 -5,000,000.00
2012
2013
-10,000,000.00
Globe Telecom
-15,000,000.00 -20,000,000.00 -25,000,000.00 -30,000,000.00 -35,000,000.00 -40,000,000.00
7a8or 9indings why Globe5s 6orking 0apital has been increasing : < *3isting cash reserves < rofits has been on accounts receivable booming up to &$#% < ayables had been increasing in &$#% up to #$=. < dditional liabilities funding current assets
The firm has a moderate amount of net working capital. 1t is a relatively amount of risk balanced by a relatively moderate amount of e3pected return. This also reflects in their current ratio which tends to be higher than !"T. 6orking 0apital Policy Globe Telecom Restricted4ggressi#e Policy
P!T Restricted4ggressi#e Policy
Globe is having an aggressive working capital policy. -eviewing their ratios, both telecommunications company is having an aggressive approach or restricted working policy. !ooking at the Globe’s working capital, more than half of Globe’s liability can be paid using their current assets which covers )4> of liability over !"T which can only cover '&> of their overall current liabilities that can be paid by their current assets. Their permanent and fi3ed assets are financed by their short term funds which indicates an aggressive policy. This is also proven in the disclosure of their short term ?otes payable in the financial statement that Globe Telecom’s notes payable and accounts payable consists promissory notes from local banks for working capital re+uirements amounting to ',.2$ million. They also have been booming liabilities to support their obligations especially in their system upgrade. 0oth telecommunications company are having aggressive policy which indicates why both have a current ratio less than # and a negative working capital too. /owever, "espite of both having the same working capital policy, Globe is performing average compared to !"T who is performing well since the ratios related to working capital such as receivable turnover and payable deferral conversion is performing better in favor of !"T. Globe despite of being aggressive in terms of financing their fi3ed asset by their short term funds, still is less aggressive in terms of service and meeting credit suppliers obligation.
2. Gather 2 or ) c$rrent articles abo$t each of the three companies that the gro$p belie#es will ha#e an effect on their working capital. Thoro$ghly disc$ss the identified impact together with insights abo$t the s$itability of the company actions abo$t their working capital %and financing& to their nat$re of b$siness. The gro$p m$st be able to pro#ide s$pport in all their answers.
=arch &', &$#% Globe sec$res 1-*7 loan =?1!, hilippines yalaled telecommunications firm Globe Telecom 1nc. obtained a 7#&$ million loan from =etropolitan 0ank and Trust o. 5=etrobank6 to fund its operations. 1n a disclosure to the hilippine ;tock *3change on =onday, =arch &', the company said loan proceeds would be spent for its capital e3penditures in &$#%. Globes capital e3penditures 5cape36 are estimated to reach 74'$ million to 7'$$ million.Thecape3 would include e3penses related to the firms network modernization program, and investments in fi3ed line, international cable facilities and information technology infrastructure. @n =arch 8, Globe received a 78' million loan facility from 0ank of Tokyo =itsubishi ABC, !td. to partially cover its &$#% cape3.DThe term loan facility with =etrobank brings to 7#2' million the total loans signed by Globe for the first +uarter of the year,E the company said. Globe is e3pected to complete the first phase of its 78$$million network modernization and transformation program and its 72$ million 1T upgrade this month. Globes net income dropped %$> to ).('8 billion in &$#& from 2.(%& billion in &$##. The companys 4th +uarter earnings dropped 28> to 42 million from #.( billion. F Source:
http:www!rappler!co"businessindustries1#$%teleco""unications%"edia$'%globe%loan%
operations
Culy 2, &$#%
Globe gets ;* nod to sell 80 bonds
Globe will use the proceeds to finance its capital e3penditures and pare down its debt =?1!, hilippines F The ;ecurities and *3change ommission 5;*6 approved yalaled Globe Telecom 1nc.s plan to issue up to 8 billion worth of bonds to finance its capital e3penditures and prepay e3pensive debt.Globe head of investor relations Cose =ari Ba9ardo told the hilippine ;tock *3change in a disclosure that the ;* issued a permit for the fi3edrate bond sale.Ba9ardo said Globe plans to sell 8 billion worth of bonds due &$&$ and &$&%.
1n =ay, Globes board of directors approved the bond offer, proceeds of which will go to capital e3penditures amounting to as much as 7)'$ million, as well as debt prepayments this year.Globe ended the first +uarter with a net income of about 8$$ million, down 8'> from &.8 billion in the same +uarter of &$#&.ore net income, which e3cluded foreign e3change transactions, marktomarket gains and losses and nonrecurring items, grew #%> to %.# billion from &.84 billion last year.
s of end=arch, Globe subscribers totaled %'.# million, accounting for %%> of the market.
;ource:
http:www.rappler.combusinessindustries#8&telecommunicationsmedia%%&8%globegets
secnodtosellp8bbonds nalysis: @ne of the reasons why Globe telecom’s working capital increases is because of the continuous increase in their liabilities. Globe Telecom 1nc. ac+uired a 7#&$million loan from =etropolitan 0ank and Trust o. also known as =etrobank in &$#%. They also obtained a 78' million loan from 0ank of TokyoH which brings a total of 7#2' million loan signed by globe on &$#%. Globe said that the loan proceeds will be used for Globe’s capital e3penditure like e3penses related to the firms network modernization program which costs 78$$million for the first phase only. apital e3penditures also include investments in fi3ed line, international cable facilities and information technology infrastructure. 1n accordance on the first article, The ;ecurities and *3change ommission approved Globe Telecom 1nc.s plan to issue up to 8 billion worth of bonds due on &$&$ and &$&% to finance its capital e3penditures and to trim down its debt.
The group thinks it is okay to ac+uire such loans and sell bonds for modernization as long as it will produce positive effects on the company. The company already needs to modernize their network but it is really costly. Asing loans and bonds they can already modernize their network at this point in time without paying instantlyH besides globe has the capacity to pay its long term debts.
3mart signs P).*B loan deal with andBank
Iireless services company ;mart ommunications 1nc. has signed a %.' billion term loan facility agreement with the !and0ank of the hilippines 5!06 to finance its network upgrade and e3pansion programs in response to growing demand for faster mobile broadband services in the country.
;mart said the loan facility came in two tranches of % billion and '$$ million and that the agreements were signed last Canuary &2 and Bebruary %, respectively. 0oth loans are payable over seven years with an annual amortization rate of # percent of the principal amount on the first year up to the si3th year, commencing on the first anniversary of the initial drawdown and the balance payable upon maturity on Bebruary ', &$&#. The amount of % billion was fully drawn on Bebruary ', while the second loan of %$$ million was fully drawn on Bebruary 8. ;mart, a unit of local telecom giant hilippine !ong "istance Telephone o. 5!"T6, has set a fullyear capital e3penditure of &2 billion. =eanwhile, !"T announced the rollout of its #billion domestic fiber optic network 5"B@?6 linking alawan rovince to !"T’s broader network infrastructure. The pro9ect consists of )&$ kilometers of stateoftheart fiber optic inland and submarine cables that run from uerto rincesa to Taytay in alawan and ;an Cose de 0uenavista to !a az, 1loilo ity. The company said the "B@? pro9ect was designed to support the increasing demand for reliable telecom and data services in one of the most popular tourist destinations in the country. 1t said "B@? enables !"T to provide fibertothehome 5BTT/6 facilities that deliver multimedia services and highspeed internet connectivity from the comfort of people’s homes in alawan DIith its huge capacity at 4$ Gigabits that can easily be e3panded to #$$ G0; 5Gigabits per second6, alawan "B@? supports the rapidly growing demand for greater bandwidth by corporate and individual subscribers,E !"T president and *@ ?apoleon ?azareno said.
t the end of ;eptember last
year, !"T’s total fiber footprint stood at more than 8',$$$ kilometers, inclusive of 8,&$$ kilometers of international submarine fiber, and over 4,$$$ kilometers of domestic submarine fiber.
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