Most

One Year Two years Three

Financial Position Recent
Ago Ago years Ago
Year
USD USD USD USD
Assets
Cash 1 1.3 1.7 2.2
Marketable Securities 0.5 0.8 1 0
Accounts Receivable 8.3 7.4 6.2 4.1
Inventories 5.2 4.5 3.4 2.3
Total Current Assets 15 14 12.3 8.6
Fixed Assets GBV 19.4 20.2 21.5 22.4
Accumulated Depreciation -10.1 -9.2 -8 -5.1
Fixed Assets NBV 9.3 11 13.5 17.3
Other Assets 3.7 4 4.2 6.1
Total Assets 28 29 30 32
Liabilities and Equity
Accounts Payable 1.3 1.2 0.8 1
Notes Payable 3.9 3.4 3.2 2.7
Taxes Payable 0.1 0.2 0.1 0.8
Total Current Liabilities 5.3 4.8 4.1 4.5
Long-term Debt 12.2 13.2 12.5 11.4
Other Liabilities 0 0.4 3.5 6.1
Total Liabilities 17.5 18.4 20.1 22
Common Stock 1 1 1 1
Paid-in Surplus 3 3 3 3
Retained Earnings 6.5 6.6 5.9 6
Total Net Worth 10.5 10.6 9.9 10

USD USD USD USD

Income Statement Items
Net Sales 32 30 28 31
Less: Cost of Sales -18 -16 -15 -14
Gross Profit 14 14 13 17

Selling, admin and other expenses -9 -9 -8 -11

Depreciation -3 -3 -3 -2
Net Operating income 2 2 2 4
Interest Expense -2 -1 -2 -2
Net Income Before Tax 0 1 0 2
Income Tax -0.1 -0.3 -0.1 -0.2
Net Income After Tax -0.1 0.7 -0.1 1.8
Profitability Measures
Sales Growth 6.67% 7.14% -9.68% 0.00%
Cost of Sales 12.50% 6.67% 7.14% 0.00%
Gross Profit Margin 43.75% 46.67% 46.43% 54.84%
Net Profit Margin -0.31% 2.33% -0.36% 5.81%
ROA Before Tax 0.00% 3.45% 0.00% 6.25%
After Tax Income / Total Assets -0.36% 2.41% -0.33% 5.63%
ROCE 8.81% 8.26% 7.72% 14.55%
ROE (After TAX) -0.95% 6.60% -1.01% 18.00%

Before Tax Income / Net Worth 0.00% 9.43% 0.00% 20.00%

- 14.10 - 13.30 - 13.10 - 15.20

Efficiency measures

Fixed Assets Turnover 3.44 2.73 2.07 1.79

Total Assets Turnover 1.14 1.03 0.93 0.97

Liquidity Indicators
2.83 2.92 3.00 1.91
Current Ratio
1.85 1.98 2.17 1.40
Acid Test Ratio
4.5 4.7 4.8 1.8
Net Liquid assets

Net Working capital 9.7 9.2 8.2 4.1

Inventory Turnover Ratio 3.46 3.56 4.41 6.09

Average Collection Period 93.38 88.80 79.71 47.61

Leverage Indicators
Leverage Ratio 62.5% 63.4% 67.0% 68.8%
Total Liabilities / Net Worth 1.67 1.74 2.03 2.20
Capitalization Ratio 53.74% 55.46% 55.80% 53.27%
Debt to Sales Ratio 54.69% 61.33% 71.79% 70.97%

Interest Coverage Ratio 1 2 1 2

Coverage of Interest and Principal Payments 0.29 0.80 0.65 1.01

Principal Repayment 4.83 1 1.1 1.30

Tax Rate 0 34% 0 34%

 Most
Cash Flow Statements Recent
Year
USD
Cash flow from Operations
Net Income (loss) -0.1
Adjustments to be reconciled
Add; Depreciation 3
Changes in Assets and liabilities
(increase) / Decrease in other assets 0.3
(Decrease) / increase in Accounts payable 0.1
(increase) in Accounts Receivable -0.9
(Increase) in Inventories -0.7
(Decrease)/ Increase in Taxes Payable -0.1
Net Cash flow from Operations 1.6
Cash flows from Investment activities
Sell/ (Purchase) of new machinery -1.3
Redemption of marketable securities 0.3
Net Cash flow from investment activities -1
Cash flows from Financing activities
Increase in Notes payable 0.5
Repayment of long term debt -1
Repayment of other liabilities -0.4
dividends paid 0
Net cash flow from Financing activities -0.9
Net Increase/(decrease) in cash for the year -0.3
Opening Cash Balance - Closing Cash Balance ( -0.3

Two years Ago One Year Ago Most Recent Year

Net Income After Tax Net Increase/(decrease) in cash for the year
 Net Income After Tax Net Increase/(decrease) in cash for the year
Although there are slight improvements in the sales growth rate & and much better
improvements in efficiency indicators, Profitability indicators are declinging
particularly the GPM and NPM, this can be attributed to the followings:
- The % increase which is more than proportionate in COGS as opposed to
the growth in sales particularly in year 2, indicating that the Company
suffers from operational inefficiency in addition to the fact that there is no
control over the variable expenses which are clearly increasing significantly,
- The flat increase in the sales raises concern as to the improved efficiency
ratios, the sale of the asset before 3 years and the increased depreciation
afterwards contributed to the improvement of the ratios in addition to the
assumption that the BG have not replaced worn out plants and equipments,
- Similar reasons apply to the TA Turnover (fixed assets fall in value) - although
the Company sold certain assets three years ago, however depreciation
expenditures remain constant,
Similarly The Company does not seem to have proper control over its fixed
expenses such as the admin, depreciation etc which incresed in the period under
review,

Three years Ago Two

Although there are improvements in the liquidity ratios in general, deeper analysis More investigation on t
of the reasons behind the improvement reveals that the increase in the Inventory - Ineffective pricing & in
and Receivable balances evidenced by the deterioration in the average - Ineffective credit colle
collection period of Accounts Receivable and Inventory Turn Over (which are a
warning signs that BLACK GOLD is tying up cash in past due receivable accounts Investigations as to the
and inventory items that may be subject to considerable fall in value), actual conditions) as it
The Company sold Fixed assets in the first year under review only to raise Loan officer should be
$0.8m (which can be indicated by the cash flow statements), this particular sale collaterals particularly w
transaction besides the constant use of debt improved the overall WC. questionable. and the f
The Company's main sources of liquidity are the short term Notes payable Balance sheet,
and the cash generated from the liquidation of other assets, this raises Loan Officer should em
concern as the cash needed from operating activities is considered to be the main efficiently utilizes the re
source of funds for repaying the loan interests and the principal amount for BG should also enhanc
obligations in both the short and long term, due invoices to make s
maturing short term ob
It is apparent that the Company is highly geared and depend on Short term loans - The Co's dependence
considerably finding it difficult to arranege for the necessary liquidity to pay off the in the leverage levels a
amounts due within one year, The Company seems to renew both LT and ST debt generated income - R
on an annual basis to be able to pay the due amounts within the short term (Short dividends in the last fou
term portion). as the debt level constitutes almost half of the capital structure and '- Debts don't seem to
the company's assets are financed mainly by debt rather than equity, it is cost of raissing debt w
understood why the Company pays significant interest payments and principal forms real pressure on
portions on a yearly basis, as it would be obvious why lenders would ask for and principal which nee
higher interest rates to compensate for the increasing risks of default particularly collateral unlike Invento
with the fact that the collaterals are not strong enough. '- Equity seems to be a
consequences associa
However it is alarming
clear indication that BL
they fall due.
 Two
One Year
years
Ago
Ago
USD USD

0.7 -0.1

3 3

0.2 1.9
0.4 -0.2
-1.2 -2.1
-1.1 -1.1
0.1 -0.7
2.1 0.7

-0.5 0.8
0.2 -1
-0.3 -0.2

0.2 0.5
There is new issue of debt together with a repayment of
0.7 1.1
portion of the earlier LT Obligation
-3.1 -2.6
0 0
-2.2 -1
-0.4 -0.5
-0.4 -0.5
2

1.5

0.5

0
go Most Recent Year

-0.5

-1

ase) in cash for the year

 -0.5

-1

ase) in cash for the year

35

30

25

20
Net Sales
Gross Profit
Net Operating income
15

10

0
Three years Ago Two years Ago One Year Ago Most Recent Year

More investigation on the deteriorating of Inventory TO and Receivable collection period:

- Ineffective pricing & inventory control policies
- Ineffective credit collection procedures and follow up

nvestigations as to the value of the inventory and receivables (whether they reflect the
actual conditions) as it is likely that the balances are overstated, 4.1
Loan officer should be concerned as to the use of Inventory and Receivable as 3.4
collaterals particularly with the fact that cash flow from operations and liquidity status are
questionable. and the fixed assets are not the main asset element in BLACK GOLD's 2.3
Balance sheet,
Loan Officer should emphasize that BG empowers its earnnig records by boosting sales,
efficiently utilizes the resources namely the fixed assets, inventory and Receivables.
BG should also enhance the credit collection control procedures and follow up the past
due invoices to make sure that another short term financing is in place to settle the
Three years Ago Two
maturing short term obligations
- The Co's dependence on debt is slightly reduced evidenced by the slight improvement
Use of retained earnings
n the leverage levels and capitalization. The company seems to depend on internally
generated income - Retained earnings, this is substantiated by the non payment of 10
Use of less debt ( more sto
dividends in the last four years.
- Debts don't seem to be the most appropriate source of capital assuming that the Restructure the debt level
cost of raissing debt will be higher now at increasing leverage level, moreover debt
orms real pressure on the company due to the recurring obligations - interest (mainly)
and principal which needs positive cash flows and adequate as well as high quality
collateral unlike Inventory and Receivables (for cheaper debts),
- Equity seems to be an alternative in the time being taking into consideration the
consequences associated with issuing stocks.
However it is alarming that the Company's interest coverage ratio is very low and it gives
22
clear indication that BLACK GOLD will not be able to pay the interest and principal when
hey fall due.

Three years Ago Two ye

 - Although Expenses ratios, Selling, Admin and other Expenses and taxes relative
to net sales have declined, The Company is Inable to reduce its overall expenses in
the face of the relatively flat sales

9
8.3
8
7.4
7
6.2 6
5.2 5
4.5
4.1 4
3.4
3
2.3
2
Three years Ago
1

Three years Ago Two years Ago One Year Ago Most Recent Year

Accounts Receivable Inventories

 100%

90%
Use of retained earnings
10 9.9 80%
Use of less debt ( more stockholders' equity) 10.6 10.5

Restructure the debt level 70%

60%

50%

40%

22 20.1 30%
18.4 17.5
20%

10%

0%

Three years Ago Two years Ago One Year Ago Most Recent Year

Total Liabilities Total Net Worth

 25

20

15

10

Three years Ago Two years Ago One Year Ago Most Recent Year
-5

-10

-15