FINAL DEFENSE PRESENTATION SCRIPT

Person 1: A pleasant morning to everyone! Today we will present and discuss the research analysis
we have conducted regarding the financial strength of selected food franchise businesses in the
Philippines.

Person 2: Now it’s fair to wonder why we have chosen this particular topic. Business’ financial
strength is an important concern to owners and managers.  Efficiency and cost control are keys to
success in many businesses throughout the world.  Determining the business’ financial strength is a
great factor to know whether the business has a potential for longevity in operations. No business
wants to shut down after starting operations that’s why one of their goals is to survive in the business
industry to better expand their transactions and make a trademark to customers.

Person 3: We also decided that the food franchise business to be our subject since franchise
businesses are evidently perceived and widely dispersed in the vicinity. There had been also been a
significant increase in franchise business in the Philippines notably in the food industry. However
there are instances that some franchise business shuts down after operating in a short period of time.

Person 1: In the analysis of more than 20,500 small businesses, it was found out that 65.3 percent of
franchises survived after four years, compared to 72 percent of independent businesses. By late
2006, 34.7 percent of the franchises and 28 percent of the nonfranchise young firms active in 2000s
had discontinued operations. After further investigation, these were caused by low financial strength
of the franchise businesses that resulted to unfavourable profits and slow return of investment.

Person 2: We, researchers conducted this study aiming to analyze the financial strength of selected
food franchise businesses in the Philippines in order to know how financial strength affects their
ability to maintain and improve their longevity in operations. They had this status of financial strength
that’s why they had been operating until now.

Person 3: To express our view in a clearer manner, we answered these specific objectives to better
justify our main objective.

Person 1: Profile of the Selected Food Franchise Businesses in terms of:

Number of employees: It had resulted to a minimum of 1218.00 and maximum of 35579.00

Years of Operation: The research came up with a minimum of 9.00 years and maximum of
49.00 years having a mean of 24.30 years. It is also noticed to have a standard deviation of
12.40116.

Number of franchise branches: It resulted to a minimum of 29.00 and maximum of 916.00

Person 2: Next is the financial strength of selected food franchise businesses in terms of: Liquidity

As to current ratio, the research resulted that on 2013 it had the most favorable current ratio
of 1.94 which is higher than the standard ratio of 1.00 This indicates that th e food franchise
 business’ ability to pay its short-term liabilities with short-term assets or how much of current
assets are available to cover each of current liabilities. However, way back 2011; it had the
lowest current ratio of 1.289 which is still above the standard. As observed from the graph, the
trend of the current ratio is increasing from 2011-2013 then suddenly decrease from 2013-
2015 resulting to 1.591 at the last year.

As to cash flow liquidity ratio, the research resulted to a ratio of 1.194 on 2013 again which

is the highest in years 2011-2015. It infers that the short-term liquidity by considering cash flow

from operating activities in addition to truly liquid assets, cash and marketable securities is

enough to satisfy the current liabilities. Notwithstanding, in the year 2015, it has set the highest

decreased of ratio to 0.649 which implies that food franchise businesses have generated less

cash in the period than it needs to pay off its short-term liabilities. On 2015, it is the least

favorable since it is lower than the preferred ratio of 1.00 in the industry.

Person 3: Financial strength of the food franchise businesses in terms of: Solvency

As to debt ratio, it is observed in the periods that it generally have an uneven trend but it is

above the 50 percent mark. A decreasing character of the ratio is observed from the beginning

of the year then it increases. The most favourable year as to debt ratio is on 2014 with a ratio

of 0.548. This signifies that the proportion of debt as to assets is lower compared to the other

years and it means that it has lower risk as to its creditors and lenders. On 2011, the debt ratio

is 0.673 which is the least favourable in comparison to the other years. This means that most

of the assets are financed through debt and has a greater risk because creditors must be

satisfied owners in the event of bankruptcy.

As to debt to equity ratio, it shows a progressive trend on the debt to equity ratios from the

years 2011-2015. This clearly shows that more debts are used to fund the business rather than

the equity of the owners. The most favourable debt to equity ratio was on the year 2011 with a

ratio of 0.591. It indicates that food franchise businesses are able to lower their debts in

relation to their equity and has a lower risk of debt defaults. On 2015, the debt ratio was 2.191

which is the least favourable because it means that food franchise businesses has been

aggressive in financing its growth with debt, and there may be greater potential for financial

distress.

Person 1: Financial strength of the food franchise business in terms of: Profitability

As to net profit margin, financial year 2013 is the most profitable year for the food franchise

businesses with a net profit margin of 0.083. It implies that food franchises during this year are
 more efficient at converting sales into actual profit. It can also be observed that after a gradual

increase until 2013, net profit margin ratio started to fall during the financial year 2014 and

2015 down to 0.021.

As to return on investment, it showed a gradual increase in return on investment from year

2011 with a ratio of 0.053 to year 2013 with 016. However it suddenly dropped to 0.48 in year

2014 and to 0.41 in 2015. This shows that food franchise businesses were not able to maintain

an efficient management on their assets resulting to an uneven trend on their return on

investment.

Person 2: Financial strength of the food franchise business in terms of: Operating Efficiency

As to accounts receivable turnover, in year 2012, the highest number of turnover resulted to

10.564 times. It signifies that the food franchise businesses have been efficient in collecting

their credit sales from customers. However, on the following years, there is a continuous

decrease on the ratio down to 3.556 times in 2015. It may infer that the collection of accounts

receivable had not been productive.

As to inventory turnover, inventory turnover on the first three years doesn’t have much

change and then suddenly increases on the year 2013. This indicates that food franchise

businesses are able to improve the efficiency and management of their inventories. On the

year 2015, it has set the highest turnover amounting to 29.299 times. It implies that the food

franchise businesses have strong sales and able to sell their inventories rapidly. However, on

2013, it has an inventory turnover of 19.105 which is the least desirable because it signifies

that the food franchise businesses may carry too much inventory or it has been obsolete, slow

moving or inferior to inventory stock.

Person 3: Then the effect of the business profile to the Financial Strength of Food Franchise

Business

The results of the study showed that the business profile has\d no effect on the financial

strength of the food franchise businesses in terms of current ratio, cash flow liquidity ratio, and

debt ratio, debt to equity ratio, net profit margin, and return on investment, accounts

receivable turnover and inventory turnover having a value of less than 5 percent.

Person 1: Then, the correlation among the financial strength ratios.

Pearson coefficient of 0.623 and current ratio and debt to equity ratio with a Pearson

coefficient of 0.533.

Person 2: There is an inverse relationship among the inventory turnover and cash flow liquidity ratio

with a Pearson coefficient of -0.281, inventory turnover and debt ratio having a Pearson coefficient of

-0.370 and inventory turnover and net profit margin with a Pearson coefficient of -0.288.

Person 3: There is an inverse relationship between return on investment and inventory turnover with

a Pearson coefficient of -0.307 and direct relationship between return on investment and net profit

margin having a Pearson coefficient of 0.912.

Person 1: And lastly, we, researchers would proposed a brochure for the food franchise businesses.

After in-depth research, the study revealed that the financial strength of the selected food franchise

businesses in the Philippines affects the ability of the business to maintain and improve their longevity

in operations. If the business had a favorable financial strength with regards to liquidity, solvency,

profitability and operating efficiency, they would able to survive in the business industry. The

researchers conceptualized a proposed material for the food franchise businesses to improve their

financial strength to be able to operate in longer period of time.

Person 3: As we bring our research analysis on the financial strength of the food franchise

businesses to close, we once again thank you for allowing us to be here and hope this study has

given you a much clearer understanding.