IF you are among the more informed consumers who try to decipher the prices you pay for your purchases from department stores and grocery stores, you could end up suspecting that the business establishments that you patronize don’t spend anything on their business but pass on all expenses to their customers like you.
Try reviewing the financial filings of companies. Examine their revenues and expenses and from your reading, you might conclude that retailers also factor in taxes when pricing every item that they sell. Of course, you are right; they do. What else in new in business?
In short, you, as consumer and patron, shoulder every single centavo of business expenses except for the capital. And by tracing where this capital came from, you may find that it also came from the dividends distributed to stockholders who invest them as capital in new ventures.
To find out your participation in the profitability of these establishments, take a look at the consolidated financial statement of Puregold Price Club Inc. The choice does not mean Due Diligencer is picking on Lucio Co, who owns the store. Rather, the audit by R.G. Manabat & Co. of his retail chain is being used here for illustration purposes only.
As a layman, you would prefer the shortest mathematical formula to arrive at net income, which is revenue minus expenses. But wait. It is not as simple as suggested here because the formula involves a more complicated process. First, you add the revenues from all sources (x) then add all the expenses (y) and, second, deduct the latter from the sum of all revenues (x-y). All expenses cover cost of sales, interest expense, bank charges on borrowings, et cetera. If possible, these should also include bribes demanded by corrupt government regulators and other officials, top-ranking or not. Unfortunately for businesses, bribes may be regular expenses in this country but are not allowed as an expense entry in the financial statements.
Of course, members of the team of certified public accountants of R.G. Manabat, led by one Arthur Z. Machacon, follow certain auditing procedures to get the net income. But Due Diligencer abbreviated the route to find the net income, also sometimes wrongly referred to as “bottom line.” What is “bottom” about net income?
In its audited financial statements for 2013, Puregold reported a total of P75.7 billion as “all revenues from all sources (x)” and P71.7 billion as “all expenses (y)”. Then x – y equals P3.9 billion, which tallies with the consolidated net income reported in the financial filing. It is really that simple but, again, the computation involves more than addition and subtraction of revenues and expenses.
The total expenses reported by Puregold also included taxes of P1.6 billion, which is equivalent to 2.2 percent of all expenses. To get consumers’ contribution in Puregold’s tax payments, divide P1.6 billion by P75.7 billion total revenues and you get 2.13 centavos per peso that you spent in buying items sold by Puregold.
Translated, this means that for every peso a consumer spends at Puregold stores, 2.13 centavos go to the Bureau of Internal Revenue. Hopefully his or her participation in Puregold’s tax payments would not be wasted in bribing lawmakers in the form of generous distribution of pork barrel, as what had happened in the ouster of Chief Justice Renato Corona.
While this piece is all about financial performance of a retailer, it does not mean doing business in this country is all about profit. Like all other businesses, Puregold has its own capital.
Puregold’s 2013 audited financial statement had two entries under equity, such as capital of P2.8 billion and additional paid-in capital of P20.8 billion. The first represents the paid-up portion of the company’s authorized capital stock of 3 billion shares with a par value of P1 per share, while APIC refers to the premium over par value paid by stockholders. Adding the two amounts will give you P23.6 billion, which is the total amount invested by Puregold’s stockholders led by the Co family.
If you ask whether Puregold is profitable, you will find the answer in the latest quarterly filing showing the company’s retained earnings amounting to close to P10 billion, which is the accumulation of net profits over the years minus dividends, either in cash or in stock, distributed to stockholders.
Who owns Puregold? You will find the answer in the composition of the seven-man board that shows the Cos’ 100 percent ownership of the retail store. Mr. and Mrs. Co control the board together with their two children and their three nominees, including Leonardo B. Dayao.
Dayao has been the president of the company since 1988, when he was 44 years old. The latest filing listed his age at 70 but it said nothing about him retiring soon. Puregold must be doing profitably well under him.
Meanwhile, retailers like Puregold should know that the take-home pay of salaried workers shrink because of the BIR’s tax impositions and the taxes tucked into the prices of commodities that they sell. Does anyone among these business establishments have a heart for the poor consumers?