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Name Sunil Kumar Chippa

Question 1

Write your answer for Part A here.

Due to increase in the accounts receivables from $ 2019 in year 2003 to $226 in year 2006 the
operating cash flow has been reduced 8.9 times, which majorly contributed to the decrease in
the Change in cash.

Trend Reason Explanation

Extension of Credit
Operating Cash Increase of period to dealers to 120
Flow Cash Flow Accounts days. Delay payment s
Decreasing Receivables by the dealers
The company added the
new farm and
distribution centre in
2003 & 2004 in
lanchester and
pensulvania to expand
the distribution system
Investing Cash Flow
out side the core
region.Hence for 2003
to 2004 there was a
Reduction in cash out flow and later
investment in land the reduction in cash out
from year 2003 & flow has impacted the
Cash Flow Increasing 2004 to 2006. cash flow positively
Financing Cash Flow Cash Flow Increasing Though the Though the company
increase in cash has the cash in flow by
flow from issuing the Debt, the
financing activity same was consumed by
is nominal, debt the impact of the debt &
issuance is the dividend repayment.
reason for the Hence resulting the
increase of cash
 flow. minimal impact.

Write your answer for Part C here.

Question 2

Write your answer for Part A here. Paste the excel sheet containing your calculations
here.

Year Operating working capital

2002 4,540
2003 4,227
2004 5,122
2005 6,917
2006E 8,894

Write your answer for Part B here. Paste the excel sheet containing your calculations
here.

Year Operating working capital Sales OWC Ratio

2002 4,540 24652 0.18
2003 4,227 26797 0.16
2004 5,122 29289 0.17
2005 6,917 35088 0.20
2006E 8,894 42597 0.21

Write your answer for Part C here. Paste the excel sheet containing your calculations
here.

Year DIO DSO DPO

2002 54 51 36
 2003 46 59 49
2004 48 103 74
2005 41 106 84
2006E 39 122 97

Write your answer for Part D here.

The Operating working capital has been increased from 2002 to 2006. In order to
increase the sales, the company has increased the credit period to 120 days, which
resulted in increase in sales. However the same has also resulted in increase in Day
sales out standing. In order to meet this gap, the company had to increase its working
capital.

Question 3

Write your answer for Part A here. Also, paste the economical balance sheet prepared by
you here.

2002
Capital Employed Capital Invested
Plant, Property, & Equipment
2,257 5,024
(net) Shareholders Equity
Accounts Receivable 3,485 Long-Term Debt 3,258
Inventories 3,089 Current Portion of Long-term Debt 315
(less) Accounts Payable 2,034 (less)Cash 705
OWC 4,540 Net Debt 2,868
Other Assets 645
Land 450
Capital Employed 7,892 Capital Invested 7,892

2003
Capital Employed Capital Invested
Plant, Property, & Equipment (net) 2,680 Shareholders Equity
Accounts Receivable 4,405 Long-Term Debt
Inventories 2,795 Current Portion of Long-term Debt
(less ) Accounts Payable 2,973 (less)Cash
OWC 4,227 Net Debt
Other Assets 645
Land 1,750
Capital Employed 9,301 Capital Invested

2004
Capital Employed Capital Invested
Plant, Property, & Equipment (net) 2,958 Shareholders Equity 7,146
Accounts Receivable 6,821 Long-Term Debt 5,726
Current Portion of Long-term
3,201 525
Inventories Debt
(less ) Accounts Payable 4,899 (less)Cash 1,818
OWC 5,122 Net Debt 4,433
Other Assets 645
Land 2,853
Capital Employed 11,578 Capital Invested 11,578

2005
Capital Employed Capital Invested
 3,617 8,336
Plant, Property, & Equipment (net) Shareholders Equity
Accounts Receivable 10,286 Long-Term Debt 7,123
Current Portion of Long-term
3,291 730
Inventories Debt
(less ) Accounts Payable 6,660 (less)Cash 2,158
OWC 6,917 Net Debt 5,696
Other Assets 645
2,853
Land
Capital Employed 14,032 Capital Invested 14,032

2006
Capital Employed Capital Invested
Plant, Property, & Equipment (net) 4,347 Shareholders Equity 9,563
Accounts Receivable 14,471 Long-Term Debt 8,480
Current Portion of Long-term
3,847 649
Inventories Debt
(less ) Accounts Payable 9,424 (less)Cash 1,955
OWC 8,894 Net Debt 7,175
Other Assets 645
Land 2,853
Capital Employed 16,738 Capital Invested 16,738

Question 4

Paste the excel sheet containing the final answers for Part A here.
 Key Financial Indicators
Variable Operating Return on Avg Capital
Year Margin Margin Return on Equity Employed
2002 17.00 6.66 23.70 15.09
2003 19.00 8.72 21.23 13.90
2004 18.60 8.22 17.90 11.05
2005 18.50 8.08 17.85 10.60
2006 17.60 7.09 16.04 9.16

Write your answer for Part B here.

The return on equity is on decreasing trend. The increase in tax has impacted the net
profit negatively.

Write your answer for Part C here.

The RoACE is in decreasing trend and the company has been consuming more capital to
generate the income. The increase of the credit period to the dealers is the root cause to
the increase in the capital employed thus the decrease in the RoACE over the years

Question 5

Write your answer for Part A here.