Name Shilpi Gautam

Question 1

1)$226 thousand profit estimated for the year 2006E would translate to the “Cash flow
from Operations” for the same year.

2) Investing cash flow has contributed majorly to the decrease in “change in cash” by
the company from the year 2003- 2006(E).

Trend in cash flow from the “Operating Activity “is decreasing from 2003 to 2006 (E).
Reason: Due to the Increase in Accounts Payable and Decrease in Accounts Receivable.

For Years Ending December 31 2003 2004 2005 2006E

Change in Accounts Receivable -920 -2,416 -3,465 -4,185
Change in Accounts Payable 939 1,926 1,761 2,765

Trend in “Investing Activity” is Decreasing from 2003 to 2006(E)

Reason: Due to investment in Property, Plant and Equipment and some Investment in
Land as well.

For Years Ending December 31 2003 2004 2005 2006E

Investment in PP&E -835 -734 -1,215 -1,398
Investment in Land -1,300 -1,103 0 0

Trend in “Financing Activities” is constant.

 Reason: As Retirement of Debt and Dividends are almost similar hence there is not much
change in the Financing activities

For Years Ending December 31 2003 2004 2005 2006E

Debt Issuance 1,494 1,850 2,128 2,006
Retirement of Debt -315 -352 -525 -730
Dividends -226 -224 -298 -307
Financing Cash Flow
953 1,274 1,306 969

The Cash Flow Profile of the company for the year of 2006(E) is Negative.

Self-Financing of Investments: The Cash flow from the operations are high and it is able
to finance its growth the bar of operating activities is higher than the other activities,
CFO ($226 thousand) >CFI (-1398) +CFF (969)

Hence it can self-finance its own investments.

Funding of Investment: The Funding of Investment as shown by the graph is done by

both Cash flow from Operations and cash flow from financing activities.

Cash Position of the Company: The Cash position of the company is Negative which is
calculated by adding CFO+CFI+CFF=negative.

Free cash flow: The company has no free cash flow as it is Negative positions-CFI=
Negative free cash flow

Question 2

Year 2002 2003 2004 2005 2006E

Accounts Receivable 3,485 4,405 6,821 10,286 14,471
Inventories 3,089 2,795 3,201 3,291 3,847
 Accounts Payable 2,034 2,973 4,899 6,660 9,424
Operating Working
Capital=
Accounts receivables +
Inventory - Accounts
payables 4,540 4,227 5,122 6,917 8,894

2A-

Year 2002 2003 2004 2005 2006E

Operating Working
Capital=Accounts receivables + Inventory –
Accounts payables 4,540 4,227 5,122 6,917 8,894
Sales 24,652 26,797 29,289 35,088 42,597
operating working capital/sales ratio 0.184162 0.157726 0.174893 0.197137 0.208789
2B-

Year 2002 2003 2004 2005 2006E

Inventories 3,089 2,795 3,201 3,291 3,847
56.8369 60.2930 66.2257 79.4359 97.5001
COGS/day (360) 9 9 8 5 7
Outstanding=Inventory/Cost of goods sold per 54.3484 46.3561 48.3287 41.4246 39.4520
day 1 6 7 6 5

2C-----DIO

Year 2002 2003 2004 2005 2006E

Accounts Receivable 3,485 4,405 6,821 10,286 14,471
74.43591 81.35845
Sales revenue/day (360) 68.4783 21 193 97.46742541 118.3254544
Days Sales
Outstanding=Accounts
receivables/Sales revenue per 50.89203 59.17808 83.83561
day 441 219 644 105.5342466 122.3013699

DSO

DPO
Year 2002 2003 2004 2005 2006E
 Accounts Payable 2,034 2,973 4,899 6,660 9,424
56.8369 60.293 66.2257 79.4359 97.5001
COGS/day (360) 89 0888 7987 5171 7446

Days Payables Outstanding=Accounts payables / Cost 35.7865 49.315 73.9726 83.8356 96.6575
of goods sold per day 5442 06849 0274 1644 3425

2D- The Implication of long credit given to Dealers lead to the negative change in cash which is not
profitable for the company if there is a delay in payment by the customers the OWC is renewed, and its
requirement increases which causes loss for the company. The OWC shows that it is increasing which
says that sales are happening, but the dealers are delaying the payment which shows in the DSO it is in
Increasing trend, but DIO is decreasing showing sales are good

Question 3

Economic Balance Sheet-

Year 2002 2003 2004 2005 2006E

Capital Employed          

Accounts Receivable 3,485 4,405 6,821 10,286 14,471

Inventories 3,089 2,795 3,201 3,291 3,847
Plant, Property, & Equipment (net) 2,257 2,680 2,958 3,617 4,347
Other Assets 645 645 645 645 645
Land 450 1,750 2,853 2,853 2,853
Accounts Payable 2,034 2,973 4,899 6,660 9,424
Total Capital Employed 7,892 9,301 11,578 14,032 16,738

Capital Invested          
Long-Term Debt 3,258 4,400 5,726 7,123 8,480
Shareholders’ Equity 5,024 6,091 7,146 8,336 9,563
Current Portion of Long-term Debt 315 352 525 730 649
Cash 705 1,542 1,818 2,158 1,955
Total Capital Invested 7,892 9,301 11,578 14,032 16,738

Question 4
 200 200 200
Year 2002 2003 4 5 6E
0.18 0.18 0.17
Variable Margin=(Sales revenue - cost of goods sold) / Sales 0.17 0.19 6 5 6
0.066 0.08 0.08 0.08 0.07
Operating Margin=Operating income / Sales 58 72 2 1 1
0.21 0.17 0.17
Return on Equity=Net profit / Owners' equity 0.237 23 9 8 0.16
Return on Average Capital Employed=Earnings after taxes before 0.174 0.17 0.14 0.14 0.13
interest / {(Opening capital employed + Closing capital employed)/2} 57 65 8 5 1
4A-

The Trend in RoE is decreasing.

Reason: Due to the Increase in Equity of the shareholders from 2003 -2006 the company’s Return of
Equity is decreasing which is not good and to Leverage the Finances we can borrow from the banks
and get an optimum leverage which will decrease the shareholders equity and keep a balance between
the bank and the shareholders.

Shareholders’ Equity: 5,024 6,091 7,146 8,336 9,563

The trend in RoACE is constant and the drivers of the Operating Margin Ratio

the margins of the company are constant but the efficiency which is calculated as EBIT/(1-T)*100 this
will be the earnings after the taxes before interest/ (capital employed beginning+ capital employed
ending)/2 this is RoACE of the company which is increasing showing the efficiency of the company
Question 5

Pros of the Get Ceres Program:1.Get Ceres program sales had increased to $35.1
million dollars in 2005 to$42.6million in 2006, approximately 80% of sales were to
dealers.2.The Company was very excited as it had done well with financial viability with
the breakeven point approximately $30 million of revenues under the current cost
structure

Cons of the Get Ceres Program1.Regardless of the payment terms given to the dealers,
the payment were delayed by thecustomers to 120 days which affected the business
drastically. Many dealers did not payuntil they sold the product.2 Higher the price point
of the organic seedling meant even more dollars would be tiedup in the inventory which
the dealers were reluctant to do so. Recommedation: Though The Idea of Get Ceres
program was exciting but I would notrecommend to continue with this program as the
long term debt taken by the companywill land the company paying higher interest and
will affect the profit margins and theaccount receivables of the company are increasing
in the negative manner due to whichit will go in major losses and the dealers are also
facing problems in managing theinventory as the sales increase during the seasonal
dating which can affect the dealers toinvest in more.