Name Ranjit Kumar Jha

Question 1

Write your answer for Part A here.

The actual cash flow from the operation is 226.

Company has made large investment in fixed assets and also given long term credit to its
debtors. Hence, Cash Flow from Operations and from Investing Cash Flow has lead to the
decrease in “Change in Cash”.

Write your answer for Part B here.

Cash Flow from Operating Activities: The trend of cash flow from the operating activities
is southward (decreasing). There is increase in account receivable and account payable,
which means company is taking fund to run its operation.

Cash flow from investing activity: The cash outflow is decreasing trend, Company invested
initially in the fixed assets and later continued its investment only in PP&E.

Cash Flow from Financing Activities: This showed increasing trend till 2005 due to higher
Debt Issuance. Good news is company was able to pay higher dividend YoY.

Write your answer for Part C here.

Self-Financing of Investment: Company had very little cash flow from operating activities,
also we see positive cash flow from financing activities. Shareholder or bank had to
reinvest to keep safe cash position

Cash Position: At the end of the period the cash flow of the company is negative. Company
don’t have sufficient fund to run its operation.

Funding of investment: Company can either liquidate its assets or invest from its surplus
money to reduce the debt and reduce cash outflow.
Question 2

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

2002 2003 2004 2005 2006E

Operating Working Capital
(Inventories+AR-AP) 4540 4227 5122 6917 8894

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

2002 2003 2004 2005 2006E

Operating Working Capital
(Inventories+AR-AP) 4540 4227 5122 6917 8894
operating working
capital/sales ratio 0.18 0.16 0.17 0.20 0.21

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

2002 2003 2004 2005 2006E

Cost of Goods Sold Per Day 56.84 60.29 66.23 79.44 97.50
Sales Revenue Per Day 68.48 74.44 81.36 97.47 118.33
DIO 54.35 46.36 48.33 41.42 39.45
DSO 50.89 59.18 83.84 105.53 122.30
DPO 35.79 49.32 73.97 83.84 96.66

Write your answer for Part D here.

Company has increasing DSO which means company is selling with longer credit period
which will have cash flow issue. This might result in consuming financial resources or
going for higher debt.
Question 3

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

Economic Balance Sheet (consolidated as advised for year 2002 to 2006E)

Capital Employed Invested Capital

Assets 29,842 Shareholder Equity 36,160.08
Inventory 16,222 Long Term Debt 28,987.66
Account Receivable 39,468 Short Term Debt 2,571.42
Account Payable -25990 Cash -8,177
Operating Working Capital 29,700 Net Debt 23,381.64
Capital Employed 59,542 Invested Capital 59,542

Question 4

Paste the excel sheet containing the final answers for Part A here.

For Years Ending

December 31 2002 2003 2004 2005 2006E
Variable Margin % 17.00% 19.00% 18.60% 18.50% 17.60%
Operating Margin % 8.07% 10.26% 9.77% 9.67% 8.66%
RoE 23.70% 21.23% 17.90% 17.85% 16.04%
Capital Employed 8,597 10,843 13,396 16,190 18,693
Average Capital
Employed 8282.0 9386.6 11681.4 14165.6 16751.5
RoACE 20% 24.91% 16.84% 20.02% 18.02%

Write your answer for Part B here.

In the above table we can see the RoE is on decline because of increased Shareholder
Equity YoY. As shareholders are infusing more working capital the shareholder equity is
increasing more than the net income.
 Write your answer for Part C here.

RoACE is inconsistently up and down. In 2003 it was highest as EBIT was high.

Question 5

Write your answer for Part A here.

Pros

1. Fast Growth, better market capture

2. Penetrating into new untapped organic product segment

Cons

1. Long term credit resulting to lower working capital and higher debt issuance
2. Decreased RoE from 23% to 16%, resulting from declined profit margin

Considering the level of stress that this brought into company in-terms of high untastable
growth and higher debt on company I would stop the GetCeres program.