Philip Inc., and Morris Company: Case Study
ACTBAS1 INDIVIDUAL BUSINESS CASE
1ST Term, Academic Year 2012-2013
Williams, J., Haka, S., Bettner, M., & Carcello, J. (2012) Financial Accounting, 15th edition, McGraw-Hill Irwin (with modifications)
David Montinola is employed as a bank loan officer for Bank of Philippine Islands. He is comparing two companies that have applied for loans, and he wants your help in evaluating those companies. The two companies- Philip Inc., and Morris Company – are approximately the same size and had approximately the same cash balance at the beginning of 2011. Because the total cash flows for the three-year period are virtually the same, David is inclined to evaluate the two companies as equal in terms of their desirability as loan candidates. Abbreviated information (in thousands of pesos) from Philip, Inc., and Morris Company is as follows:
PHILIP, INC. MORRIS COMPANY
| |2009 |2010 |2011 |2009 |2010 |2011 |
|Cash flows from: | | | | | | |
| Operating activities |P100 |P130 |P150 |P80 |P30 |P(20) |
| Investing activities |( 50) |(80) |(100) |(70) |(50) |80 |
| Financing activities |80 |(30) |10 |120 |40 |0 |
|Net cash flows from all activities |P130 |P20 |P60 |P130 |P20 |P60 |
Instructions: a. Do you agree with David’s preliminary
1ST Term, Academic Year 2012-2013
Williams, J., Haka, S., Bettner, M., & Carcello, J. (2012) Financial Accounting, 15th edition, McGraw-Hill Irwin (with modifications)
David Montinola is employed as a bank loan officer for Bank of Philippine Islands. He is comparing two companies that have applied for loans, and he wants your help in evaluating those companies. The two companies- Philip Inc., and Morris Company – are approximately the same size and had approximately the same cash balance at the beginning of 2011. Because the total cash flows for the three-year period are virtually the same, David is inclined to evaluate the two companies as equal in terms of their desirability as loan candidates. Abbreviated information (in thousands of pesos) from Philip, Inc., and Morris Company is as follows:
PHILIP, INC. MORRIS COMPANY
| |2009 |2010 |2011 |2009 |2010 |2011 |
|Cash flows from: | | | | | | |
| Operating activities |P100 |P130 |P150 |P80 |P30 |P(20) |
| Investing activities |( 50) |(80) |(100) |(70) |(50) |80 |
| Financing activities |80 |(30) |10 |120 |40 |0 |
|Net cash flows from all activities |P130 |P20 |P60 |P130 |P20 |P60 |
Instructions: a. Do you agree with David’s preliminary