Waterfront Mactan Casino Hotel, Inc. (WMCHI) ANALYSIS OF FINANCIAL PERFORMANCE Profitability Analysis 2008 0. 084266313 0. 046495453 0. 009816935 0. 027953925 2007 0. 115098173 0. 042234313 0. 018062622 0. 054801237 Profitability Analysis Return on sales Return On Assets Return On Equity WMCHI’s net income for 2008 improved by . 004 points, but reflected a 50% decline on its ability to use its assets as a source of revenue.

Moreover, because of the company’s heavy reliance on borrowings from financial institutions to support its expansion, the return on their stockholder’s equity also went down by more than 50% of 2007’s figures. We can surmise that the company’s operating profit is not sufficient to give its shareholders a satisfying level of retained earnings. What is noticeable is their consistent effort to include the revaluation of surplus property and equipment as an equalizer to their equity level. Liquidity Analysis

Liquidity Analysis Current Ratio Acid Ratio Current Assets to Total Assets Ratio of Each Current Cash and Cash equivalents Trade & other Accounts Receivable – net Inventories Prepaid expenses and other current assets – net(Notes 8 and 14) Due from a related party Receivable TurnOver Merchandise Inventory(Or Finished Goods) TurnOver Number Of Days Sales Number of Days Supply Working Capital Turnover Cash Defensive Ratio Current Liability Turnover 2008 117. 3370297 0. 53553076 0. 527128819 0. 23881858 0. 026967364 0. 072648861 0. 011373797 0. 004315201 0. 884694776 9. 463685998 13. 9827423 38. 04014631 26. 47394764 -0. 976096454 27. 45949741 0. 456322877 2007 99. 48689009 0. 529819623 0. 521567958 0. 253578733 0. 038227289 0. 106578605 0. 010017119 0. 00555736 0. 839619627 15. 82459153 28. 32739213 22. 74940237 12. 7085472 -1. 900492145 17. 57199055 0. 893574113 A closer look at WMCHI’s ability to pay existing financial commitments through its liquid assets reflects a weakness as seen from both 2007 and 2008 computed figures of current ratio and acid test. What is also noticeable is the decreased strength of the company’s current assets against otal assets. Despite the fact that cash and its equivalents, as well as its trade and A/R proceeds for 2008 went down by 11 and 4 points respectively, we can’t ignore the company’s slow A/R collection performance. Though the company collects 9 times in a year as compared to 2007, still the length of time it takes to collect receivables went up by 10 more days. When it is so important to consume their inventory within the prescribed period as reflected in their “number of days sales ratio” for 2008 and 2007, it is noticeable that WMCHI is not able to hit its targets, i. . , the company extended by 12 days and 10 days, respectively. With the accompanying slow turnover of goods for sale, we can likely conclude that they have an over investment on inventory, which also limits their solvency. The 2008 decline in the rate of working capital use and its adequacy, coupled with the growth of operating expenses pose a threat to the business. With this liquidity condition, the company will surely be in trouble the moment creditors demand the full payment of their extended credit.

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Activity Analysis Activity Analysis Asset Turnover Working Capital Efficiency Capital Intensity Ratio 2008 -0. 486815325 0. 214963429 -0. 993783751 0. 141243778 2007 -1. 187472203 0. 428990291 -1. 906330409 0. 289867915 The ratios on activity analysis mirror WMCHI’s less productive use of its total assets to generate their desired level of sales income. Moreover, the company’s ability to effectively use its fixed assets to generate sales declined in 2008 by 15 points from 2007 figures.

Although the bulk of the company’s investment is in the use of its hotel buildings and facilities which generates the biggest slice of their annual profit, we have to remember that their inventory level turnover, as well as their ability to effectively collect account receivables could be better. Leverage (Solvency) Analysis 2008 16. 14179017 1. 67463848 0. 597143809 0. 373882305 0. 626117695 2. 020035627 0. 755255577 9. 807110321 0. 287606355 2007 17. 42714207 2. 033957962 0. 491652246 0. 329602457 0. 670397543 2. 24505446 0. 739975467 10. 33676611 0. 57973583

Solvency Analysis Debt / Equity Ratio Equity / Debt Ratio Propriety (Equity) Ratio Debt Ratio Fixed Assets To Owners Equity Fixed Assets To Total Equity Total Long-term Liabilities Coverage Plant Turnover Assessing WMCHI’s ability to handle maturing debts or loan obligations through their internal financial strength, we notice a strong reliance on borrowed money rather on operating income. Although the margin of safety which provides creditors peace of mind only increased by 11 points in 2008, we can deduce that this improvement will somehow affect the level of shareholder income, i. . , the cash generated from operations might be spent for debt payment. Loans from creditors of WMCHI cover more than 60% of the company’s total assets. Though the exposure of shareholder equity on the company’s total assets continue to be less than 40% of the value of the company’s total assets, we notice a 4% increase in 2008 figures. Remember that we earlier remarked that the company’s consistent effort of revaluating surplus property and equipment, to improve total equity keeps their debt to equity ratio less alarming.

The relationship of the company’s fixed assets to owner’s equity, as well as to total equity has been constant from 2007 to 2008. Whether this scenario is purposeful or not remains to be proven until we compute for previous year’s figures. On another note, the company’s investment on real estate may provide a level of comfort since their long-term debt can be covered by the positive book value of their fixed assets. But if WMCHI shall strive to be more profitable in 2009, it must improve the efficiency of its use of property to not just make both ends meet but to also satisfy the investment appetite of its shareholders.

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