1) What is test of profitability? Give the formula of the financial ratios under test of profitability

Accounting Jan 21, 2023

1) What is test of profitability? Give the formula of the financial ratios under test of profitability.

2. Using a 2-year financial statement (Balance sheet, income statement, cash flow statement)of the Shell Philippines, assess the profitability of the company by using the financial ratios under the test of profitability.

Profitability ratios	Formula	Give 1 example, interpret the result
Gross Profit Ratio
Net Profit Ratio
Operating Cost Ratio
Operating Profit Ratio
Return on Investment Ratio
Return on Capital Employed Ratio
Earnings Per Share Ratio
Dividend Pay Out Ratio
Earning Per Equity Share
Dividend Yield Ratio
Price Earnings Ratio
Net Profit to Net Worth Ratio
Expense Ratio
Return on Equity
Return on sales
Earnings per Share
Return on Assets
Return on Deposits

https://www.wsj.com/market-data/quotes/PH/SHLPH/financials/annual/income-statement

Income Statement of Shell Philippines
Fiscal year is January-December. All values PHP Millions.	2020	2019

Sales/Revenue	156,952	218,403
Sales Growth	-28.14%	-0.21%

Cost of Goods Sold (COGS) incl. D&A	157,155	198,734
COGS excluding D&A	152,851	194,310
Depreciation & Amortization Expense	4,305	4,424
Depreciation	4,301	4,418
Amortization of Intangibles	3	5
COGS Growth	-20.92%	0.38%

Gross Income	-204	19,669

Gross Income Growth	-101.03%	-5.81%

Gross Profit Margin	-0.13%	-

SG&A Expense	9,922	10,729
Research & Development	186	235
Other SG&A	9,736	10,494
SGA Growth	-7.52%	-18.00%

Other Operating Expense	1	-
EBIT	-10,126	8,940

Unusual Expense	11,108	164

Non Operating Income/Expense	436	1,056

Non-Operating Interest Income	6	2
Interest Expense	2,236	1,813
Interest Expense Growth	23.35%	182.61%
Gross Interest Expense	2,236	1,813
Pretax Income	-23,028	8,021

Pretax Income Growth	-387.09%	10.00%

Pretax Margin	-14.67%	-

Income Tax	-6,846	2,400

Income Tax - Current Domestic	232	2,222
Income Tax - Deferred Domestic	-7,077	178

Consolidated Net Income	-16,183	5,621

Net Income	-16,183	5,621

Net Income Growth	-387.89%	10.73%

Net Margin	-10.31%	-

Net Income After Extraordinaries	-16,183	5,621

Net Income Available to Common	-16,183	5,621

EPS (Basic)	-10.03	3.48

EPS (Basic) Growth	-387.88%	10.73%

Basic Shares Outstanding	1,613	1,613
EPS (Diluted)	-10.03	3.48

EPS (Diluted) Growth	-387.89%	10.73%

Diluted Shares Outstanding	1,613	1,613
EBITDA	-5,822	13,363

EBITDA Growth	-143.56%	35.45%

EBITDA Margin	-3.71%	-

EBIT	-10,126	8,940

Balance Sheet
Assets

Fiscal year is January-December. All values PHP Millions.	2020	2019
Cash & Short Term Investments	6,291	4,779
Cash Only	6,291	4,779
Short-Term Investments	-	-
Cash & Short Term Investments Growth	31.63%	7.27%

Cash & ST Investments / Total Assets	7.27%	4.64%
Total Accounts Receivable	11,738	15,960
Accounts Receivables, Net	8,751	12,313
Accounts Receivables, Gross	9,127	12,614
Bad Debt/Doubtful Accounts	-376	-301

Other Receivables	2,988	3,648
Accounts Receivable Growth	-26.45%	13.38%

Accounts Receivable Turnover	13.37	13.68
Inventories	10,016	25,423
Finished Goods	9,855	25,171
Raw Materials	162	252
Progress Payments & Other	-	-
Other Current Assets	1,857	1,308
Prepaid Expenses	1,510	989
Miscellaneous Current Assets	347	319
Total Current Assets	29,903	47,469
Net Property, Plant & Equipment	37,642	43,575
Property, Plant & Equipment - Gross	81,105	79,346
Machinery & Equipment	36,822	35,088
Construction in Progress	2,896	6,476
Transportation Equipment	99	112
Other Property, Plant & Equipment	26,781	25,021
Accumulated Depreciation	43,463	35,771
Machinery & Equipment	29,466	23,708
Transportation Equipment	96	108
Other Property, Plant & Equipment	13,901	11,956
Total Investments and Advances	622	615
LT Investment - Affiliate Companies	41	31
Other Long-Term Investments	581	584
Long-Term Note Receivable	5,427	4,420
Intangible Assets	1	103
Net Other Intangibles	1	103
Other Assets	6,722	6,614
Deferred Charges	6,722	6,578
Tangible Other Assets	-	37
Total Assets	86,550	102,919
Assets - Total - Growth	-15.90%	28.38%

Asset Turnover	1.66	-
Return On Average Assets	-17.08%	-

Liabilities & Shareholders' Equity
All values PHP Millions.	2020	2019
ST Debt & Current Portion LT Debt	14,459	11,334
Short Term Debt	13,000	9,752
Current Portion of Long Term Debt	1,459	1,582
Accounts Payable	13,745	22,396
Accounts Payable Growth	-38.63%	16.07%

Income Tax Payable	-	-
Other Current Liabilities	5,191	5,723
Dividends Payable	17	17
Accrued Payroll	287	-
Miscellaneous Current Liabilities	4,886	5,706
Total Current Liabilities	33,394	39,453
Current Ratio	0.9	1.2
Quick Ratio	0.6	0.56
Cash Ratio	0.19	0.12
Long-Term Debt	22,019	19,477
Long-Term Debt excl. Capitalized Leases	9,000	9,000
Non-Convertible Debt	9,000	9,000
Provision for Risks & Charges	4,014	2,171
Deferred Taxes	-6,233	877

Deferred Taxes - Credit	-	1,000
Deferred Taxes - Debit	6,233	123
Other Liabilities	3,491	990
Other Liabilities (excl. Deferred Income)	3,491	990
Total Liabilities	62,918	63,091
Total Liabilities / Total Assets	72.70%	61.30%
Common Equity (Total)	23,632	39,828
Common Stock Par/Carry Value	1,681	1,681
Additional Paid-In Capital/Capital Surplus	26,162	26,162
Retained Earnings	-4,304	11,938

Unrealized Gain/Loss Marketable Securities	470	473
Other Appropriated Reserves	130	82
Treasury Stock	-507	-507

Common Equity / Total Assets	27.30%	38.70%
Total Shareholders' Equity	23,632	39,828
Total Shareholders' Equity / Total Assets	27.30%	38.70%
Total Equity	23,632	39,828
Liabilities & Shareholders' Equity	86,550	102,919
Liabilities & Shareholders' Equity	86,550	102,919

Cash Flow Statement
Operating Activities

Fiscal year is January-December. All values PHP Millions.	2020	2019
Net Income before Extraordinaries	-23,028	8,021

Net Income Growth	-387.09%	10.00%

Depreciation, Depletion & Amortization	4,305	4,362
Depreciation and Depletion	4,301	4,356
Amortization of Intangible Assets	3	5
Other Funds	12,831	2,562
Funds from Operations	-5,892	14,945

Changes in Working Capital	11,235	-8,879

Receivables	17,699	-10,255

Accounts Payable	-6,331	1,471

Other Assets/Liabilities	-133	-95

Net Operating Cash Flow	5,342	6,065
Net Operating Cash Flow Growth	-11.92%	-55.28%

Net Operating Cash Flow / Sales	3.40%	2.78%
Investing Activities
All values PHP Millions.	2020	2019
Capital Expenditures	-4,039	-4,728

Capital Expenditures (Fixed Assets)	-4,039	-4,728

Capital Expenditures Growth	14.58%	-19.92%

Capital Expenditures / Sales	-2.57%	-2.16%

Sale of Fixed Assets & Businesses	1	2
Other Uses	-	-233

Net Investing Cash Flow	-4,037	-4,960

Net Investing Cash Flow Growth	18.60%	-14.22%

Net Investing Cash Flow / Sales	-2.57%	-2.27%

Financing Activities
All values PHP Millions.	2020	2019
Cash Dividends Paid - Total	-	-4,839

Common Dividends	-	-4,839

Change in Capital Stock	-	-
Sale of Common & Preferred Stock	-	-
Proceeds from Stock Options	-	-
Issuance/Reduction of Debt, Net	3,248	6,491

Change in Current Debt	3,248	6,491

Change in Long-Term Debt	-	-

Issuance of Long-Term Debt	-	-
Reduction in Long-Term Debt	-	-

Net Financing Cash Flow	206	-782

Net Financing Cash Flow Growth	126.37%	92.95%

Net Financing Cash Flow / Sales	0.13%	-0.36%

Exchange Rate Effect	0	0

Net Change in Cash	1,512	324

Free Cash Flow	1,304	1,337
Free Cash Flow Growth	-2.51%	-86.10%

Free Cash Flow Yield	3.91%	-