Name Nagalakshmi P

Question 1

Question 1A:

1) $226k will be the profits estimated for the year 2006€ that will translate to the 'cash
flow from operations' for the same year.

2) Investing activities has majorly led to decrease in ‘change in cash’.

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

Question 1B:

1)Cash flow from operations – Cash flow from operations is in a Decreasing trend
from 2003 to 2006(E)
Reason for Trend: Accounts Receivables for the companies increasing day by day
every year, which indicates that the company is not able to realize those receivables on
time leading to a negative impact on working capital and cash flow is also decreasing
from operations
2)Cash flow from investing activities – Cash flow from investing activities partial
decline can be seen in year 2005 and 2006(E).
Reason for Trend: There is a substantial Investment in the buildings in the year 2003
and 2004, which is leading to a high investment cash outflows

3)Cash flow from financing activities – Cash flow from financing is in a mix trend
Ratio from year 2003 to 2006(E).
Reason for Trend: The amount at which the Debt and Dividends are almost similar
hence there is no major change in the Financial activities. This happened because of
large debt from investors.

Question 1C:

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

1)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 activites.
CFO ($226 thousand) >CFI( -1398)+CFF(969)
Hence it can self-finance its own investments.

2)Funding of Investment :
a. CFO $226
b. CFF $969
The Funding of Investment as shown by the graph is done by both Cash flow from Operations and
cash flow from financing activities

3) Cash Position of the Company:

CFO + CFI + CFF = $226 + (-$1398) + $969 = -$203
The Cash position of the company is Negative

Question 2

Question 2A:

Operating Working Capital=Accounts receivables + Inventory - Accounts payables

Question2B:

OWC/Sales Ratio:

Question 2C:

1) DSO-Day Sales Outstanding

2) DIO-Day Inventory Outstanding

3) DPO-Days Payable Outstanding

Question 2D:Working Capital (OWC) has gone down between Yr2003 to Yr2006 (E) due
to decreasing inventory which in turn is indicating that the company is not converting its
inventory into cash as quickly as it was doing before.

Long credit period line on all the accounts receivables lead to a delay in cash inflow
which further impacted the working capital.
Question 3:

Please note Cap employed in assets is equal to the liabilities and equity

Question 4

Question 4A

1)Variable Margin
2) Operating Margin

3) Return on Equity (ROE)

4) ROACE

Question 4B

RoE is decreasing/declining in trend from year 2002 to 2006€.To finance a given set of
assets, a company with a flexible debt strategy will need more stock.
As a result, the lower the ROE, the bigger the equity ratio of the company.
Because of the GetCeres campaign, the company gave a lot of credit to dealers in this
period, therefore we needed more funds to run the operations,
Which will result in raised shareholder equity and decreased ROE.
Question 4C:The trend in RoACE is constant

Margin Ratio the margins of the company are constant but the efficiency which is
calculated that is 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 thus reflecting the efficiency of the company.

Key drivers of RoACE is

1. Operating Margin (EBIT/Sales)
2. Efficiency (Sales/CE)

Question 5

.Question 5

Pros Of Get Ceres Program:

1. The company has done well with the financial aspect with the break even point with
almost $30 million of revenues in the present cost structure.

2. Get Ceres Program had sales increased to $35.1 million in 2005 to $42.6 million in
2006(E), almost 80% of the sales were increased with the help of dealers and the
traders.

Cons Of Get Ceres Program:

1. The higher the cost of the organic seedling results in more investment that would be
used up for the inventory.( Dealers and traders are not willing to do so)

2. The payment is being more delayed by the customers to 120 days or more which will
further affect the business drastically. Many dealers and traders did not pay until the
products are sold in the market.

Recommendation for the program continuation :- The program should not be

continued as the cashflow is decreasing and investment is increasing . We have the
payment terms also increasing along with which again delays the payments. This will
lead to dealers not paying till the goods are sold in the market resulting in drastic shut
down of manufacturing plants