Activity Ratio 2018 2017 2016
Inventory 18,645,314/4,854,939 13,013,437/3,242,689 11,914,114/4,579,954
Turnover = 3.84 = 4.01 = 2.60
Average 21,112,561/(132,875,310/365) 27,304,288/(127,905,853/365) 26,944,645/(120,588,003/365)
Collection Period = 58 days = 78 days = 82 days
Average Payment 56,219,366/(18,645,314 x . 62,232,862/(13,013,437 59, l37,686/(11,914,114 x .
Period 65)/365 x.80)/365 80)/365
= 1,694 days = 2,182 days = 2,265 days
Total Asset 132,875,310/299,498,109 127,905,853/277,766,288 120,588,003/249,863, 11 0
Turnover = .44 = .46 = .48
Activity Ratio
Globe Telecom. Company typically try to turn their production into cash or sales as fast as possible because
this will generally lead to higher revenues, so analysts perform fundamental analysis by using common ratios
such as the activity ratio. Activity ratios measure the amount of resources invested in a company's collection
and inventory management. Because businesses typically operate using materials, inventory, and debt, activity
ratios determine how well an organization manages these areas.Activity ratios gauge an organization's
operational efficiency and profitability. These ratios are most useful when compared to a competitor or industry
to establish whether an entity's processes are favorable or unfavorable. Activity ratios can form a basis of
comparison across multiple reporting periods to determine changes over time.
Inventory Turnover
This ratio is important because total turnover depends on two main components of performance. The first
component is stock purchasing. If larger amounts of inventory are purchased during the year, the company will
have to sell greater amounts of inventory to improve its turnover. If the company can’t sell these greater
amounts of inventory, it will incur storage costs and other holding costs. The second component is sales. Sales
have to match inventory purchases otherwise the inventory will not turn effectively.
2018 2017 2016
3.84 4.01 2.60
In the year 2016 the company has a 2.60 inventory turns per year. That is a company would take 4 months to
sell and replace all inventories. In 2017, they had 4.01, it means that they would take 3 months to sell and
replace their inventory. And in 2018, they had a ratio of 3.84 which means that they would take 3 months to sell
and replace all of their inventories. For such industry, it is uncommon for them to have an inventory turnover
that is higher as the industry of goods because Globe Telecom. provides more of its services than it inventories
for they are a service providers and not mainly a providers of goods.
Average Collection Period
Using this ratio, the analyst can measure the accounts receivable management efficiency on a firm. This
demonstrates the debtors' influence on the financial condition of a company. The stable ratio indicates company's
thoughtful policy of cooperation with its buyers and other debtors.
2018 2017 2016
58 days 78 days 82 days
This shows that Globe Telecom. Company’s accounts receivable turnover in year 2016 was 82 days. It means
that the company was able to collect its receivables averagely in 82 days that year. In year 2017 this ratio
decreased, indicating that the company needed 78 days to collect its receivables. In year 2018, it further decreased
to 58 days to collect its receivables. Globe yearly improves its collection period without losing its customers.
Average Payment Period
2018 2017 2016
1,694 days 2,182 days 2,265 days
For such industry, it is not usual to have many suppliers and creditors of goods for their company. Globe
Telecom. only provide much of their services rather than goods to their customers. Their long payment period
may be an indication that the company is taking full advantage of the credit terms allowed by their suppliers.
Total Asset Turnover- this measures how efficiently an entity uses its assets to make a sale. Total sales are
divided by total assets to see how proficient a business is in using its assets. Smaller ratios may indicate that
the company is holding higher levels of inventory instead of selling.
2018 2017 2016
.44 .46 .48
A ratio of .48 means that the net sales of a company equals the average total assets for the year. In other
words, the company is generating .48 peso of sales for every peso invested in assets. In their recent years,
they have a more likely the same ratios but are decreasing of only .02 cents per year. This company has a
small returns to its assets but keep in mind that their type of industry varies from the other types of industries.
A more in-depth analysis must be taken to fully analyze how they manage their assets well to create more
returns.
