Introduction
PLDT is the Philippines’ leading and the largest fully integrated
telecommunications company. It offers a wide range of telecommunications and digital
services across the Philippines’ most extensive fiber optic backbone, as well as fixed
line and cellular networks through its core businesses segments from fixed lines
telecommunications to wireless, mobile telephony services, broadband through its
subsidiary Smart — wireless services and internet of things services under various
brands.
A. PLDT shows a net profit margin of 3.06%, 12.59%, and 9.75% for 2018, 2019
and 2020 respectively. For the return on asset, the company shows 3.46% for
2018, 8.13%% for 2019 and 6.79% for 2020. Also, return on equity of the PLDT is
computed which shows 4.27%%, 18.28% and 14.96% respectively.
● PLDT increased its net sales and net profit from 2018 to 2020 that shows
good performance initially. This might be due to the impact of Covid-19
pandemic. In other sectors, it has a bad impact but the pandemic creates
new opportunities for the telecommunication company. The society’s
needs for internet and communication increased rapidly since individuals
and businesses relied much on it as lockdown started. However, upon
computing the net profit margin, the results increased from 2018 to 2019
and decreased from 2019 to 2020 and it might still decline for the next few
years if such factors won’t be observed. If this happened the company
would not be efficient in converting their revenue or sales into profit.
● Return on assets shows fluctuations from the previous year up to the
current year. In 2019, PLDT is more efficient and effective in converting
their investment on assets into profit. In 2020 it shows declining return on
assets that must not continue for the next few years as it may bring trouble
to the company.
● Same as observed in return on assets, the return on equity shows
dramatic increase in 2019 from the previous year. It shows the good
performance of PLDT on how they use their capital or shareholder’s equity
in generating profits. But it is a contrast in the next year (2020) as it
declined suddenly, which means that they are earning little compared to
its shareholder’s equity for that year.
B. Some of the factors are considered in the financial statements which might affect
the performances of the PLDT Company as large growth was seen in 2018 to
2019 but declined in 2020.
● Income statement shows that sales revenue increased from the previous
year until 2020 however, net income only increased in 2019, declined in
2020 and 2018 shows the least net income. Cost of services and the
operating expenses had a huge impact in the observed fluctuations of net
income and affected the net profit margin. It's good that in 2019 the costs
are minimized. 2018 incurred the highest cost of goods sold and 2020 for
the operating expenses. PLDT in these two years (2018 & 2020), incurred
higher costs related to selling and administrative expenses, service costs,
marketing and advertising expenses, salaries to personnel and to the
labor doing the installation and customization, and the cost of equipment
and supplies.
● The amount of total assets and earnings before interests and taxes
affected the changes in return on assets. Balance sheet shows that the
non-current assets contributed to the large amount of total assets which
can be a factor that the return on assets would decline. PLDT invested
more on non-current assets as it increased from 2018 to 2020. Earnings
before taxes and interests are also affected by the higher amount of
operating expenses, which contributed to the increased and declined
return on assets.
● The inconsistent net income of PLDT is observed in the income
statements. In 2018 net income is too low and computed after preferred
dividends that affected the return on equity of the company. In 2019 return
on assets dramatically increased and somehow declined in 2020.
C. It’s best to compare the main company with the same industry to determine how
profitable the main company is upon computing the net profit margin, return on
assets and return on equity.
● One of the biggest competitors of PLDT is Converge ICT. Comparing the
financial statements and computed returns of the two companies,
Converge ICT has better performance than the PLDT. From 2018 to 2020,
PLDT’s subscribers increased and this is due to the occurrence of
pandemic and people relied much through online, however more of the
individuals and businesses demand for affordable and high-speed internet
connectivity at the same time so more people switch to Converge ICT.
Competition between these two companies affects the profitability of the
PLDT. It might also be possible that the investors in PLDT are less than
the investors of Converge ICT.
D. Points of improvement for better performance of PLDT:
● PLDT must be more efficient in using their assets and equity in generating
profits.
● Increase the sales and minimize the costs and expenses of operations.