Financial performance of abubot lending corporation in Rizal calendar years 2012-2014 Marijoy G. Bueno, Christian Paul S. Cortez, Renz Gellie L. Villarin, Dycel H. Vocal

Thesis BSBA-FM University of Rizal System, Binangonan 2017

includes bibliographical references

This study aimed to evaluate the Financial Performance of Abubot Lending Corporation in Rizal Calendar Years 2012 to 2014. The descriptive method was used to determine the financial performance of Abubot Lending Corporation. The researchers utilized the financial statements given by the Abubot Lending Corporation to determine the financial performance using horizontal analysis, vertical analysis and financial ratio analysis. The researchers also used different references like books, websites and undergraduate thesis. The study was based on Wheelen and Hunger's Theory of Financial Performance which states that dozens of financial ratios may obtain from a company's financial performance. This theory is related to this study since the researchers measured the financial performance of Abubot Lending Corporation using the Horizontal Analysis, Vertical Analysis and Ratio Analysis. In vertical analysis of Abubot Lending Corporation's statement of comprehensive income, the company's rate of improvement in the operation or the effective management in reducing their ratio of expenses from the Year 2012 to 2014 is the reason for the increase in their net income. In the statement of financial position, Abubot Lending Corporation's receivables from the Year 2012 to 2013 decreased and increased in the Year 2014 on total assets. It may be suggested that more clients avail of a financial service through loan. The corporation's liabilities is greater than their capital. In the point of view of the owners, it is favorable but in the point of view of their creditors, it will be a risk because in case the corporation becomes bankrupt, creditors' loss is bigger than the owner. This is because owners of corporations are only liable up to the extent of their capital contribution and not up to their personal properties. The researchers suggested that the corporation must look for another source or provide their own funds for their operation of the business to lessen the risk. This might also help the corporation to attract more investors. In horizontal analysis of Abubot Lending Corporation's statement of comprehensive income, there was a continuous increase in gross income from the Year 2012 to 2014. There was also a continuous increase in expenses from the Year 2012 to 2014. The increase in gross income and expenses are favorable to the corporation due to the continuous increase in net income over the Years. In statement of financial position, the increase in cash on hand/in bank in Year 2012 is favorable to the corporation since the increase in cash connotes that the corporation is liquid. The decrease in cash on hand/in bank in the Year 2014 is still favorable to the corporation because cash on hand/in bank in 2014 is greater than the cash on hand/in bank in the Year 2012. The continuous increase in liability is favorable to the corporation since then capital also increased over the Years. The result inferred that the corporation earned income because the money they borrowed was allocated effectively. In financial ratios in terms of liquidity, Abubot Lending Corporation is considered liquid because it has sufficient assets to pay their liabilities. In the ratio of current assets to total assets, Abubot Lending Corporation is considered liquid because most of their assets can easily be converted into cash. In terms of stability, Abubot Lending Corporation's debt utilization is at high percentage while their equity ratio is at low percentage; it indicates that Abubot Lending Corporation is being finance by their creditors; it may bring about some difficulty on the part of management to borrow when they need it. In terms of profitability, Abubot Lending Corporation is considered profitable because they have the ability to generate more income for the incoming Years. The low ratio of return on assets reflects an unattractive image for the corporation to encourage more investors to invest to their corporation. The corporation's return on equity increased from 2012 to 2013 and decreased in the Year 2014. This result expressed that the corporation managed their total asset invested by the shareholders efficiently that leads to a high return on equity. In terms of solvency, Abubot Lending Corporation's debt to net worth ratio has a decreasing percentage over the Years. The high percentage of debt to net worth ratio indicates that the corporation is at high risk but as they continue to operate, their debt to net worth ratio decreases, this means that the corporation became mindful of using their borrowings in improving their operations. Thus, the corporation is considered solvent because they have the ability to survive over a long period of time. In light with the findings of the study, the following recommendations were given by the researchers: They could not operate continuously if no financial support from their creditors. They must look for another source or provide their own funds for the operation of the business to lessen the risks; Lending Corporation X, as having a high percentage of current ratio may serve as an indicator for the Abubot Lending Corporation to improve their ability to pay short-term obligations; The corporation as being finance by their creditors is natural to have a high debt to net worth ratio. It indicates that they are at risk but as they continue to operate, their debt to net worth ratio decreases; The researchers recommended that the corporation must maintain the continuous decrease in their debt to net worth ratio; they must be mindful in using their borrowings to generate higher income; the corporation must think of strategies to encourage their customers to pay their debts before or on maturity, with this the corporation may generate the returned money; and they must convert their assets into cash by selling their non-performing assets to have an additional income which will be used for the continuous operation of the business.