Name Ananth Shrenik Reddy

Question 1

The estimated profit for the year 2006E is 1534 where as net profit is the actual profit
once its all the expenditures are deducted. Out of the net profit the amount that has been
translated from cash flow from operations is 226

The major decline is seen after 2003 that is because of investments in fixed assets and
giving credit to the suppliers

Cash flow from operating activities- The accounts receivable has been increasing over
the years , this says that most of the transactions had been on credit but tge liabilities
increased which has helped them for funding. So by this the change of cash in and cash
outflow is because of the change in working capital which in other terms explained the
financing activity too

Investing acvtivity- The have been investing heavily in property plants and equipment’s is
the reason for cash outflow but which is also helpful for future as it is a fixed asset.

Cash position – The cash balance at the end of the year is negative which says not
sufficient balance but the assets can liquidated which generates cash

Self financing of investments – The sale their old assets to buy new one ,which reduce the
cash outflow of the company
Funding of investment – They can use the reserve and surplus for investment instead of
giving debts and borrowing money

Question 2

Formula – Accounts Receivable + inventory – accounts payable

2002- 3485+ 3089 – 2034 =4540

2003 – 4405+ 2795- 2973=4227

2004- 6281+3201-4899=4583

2005 – 10286+3291- 6660=6917

2006 – 14471+3847-9424=8894

Formula – operating working capital / sales

2002 – 4540/24652=18.4

2003- 4227/26797=15.8

2004- 4583/ 29289=15.7

2005- 6917/ 35088=19.8

2006- 8894/ 42597=20.9

DIO formula – inventory / cost of goods sold per day

2002- 3089/20461*365= 55
 2003- 2795/21706*365=47

2004- 3201/23841*365= 49

2005-3291/28597*365=42

2006- 3847/35100*365=40

DSO FORMULA- Accounts receivable / sales revenue per day

2002- 3485/24652*365= 52

2003- 4405/26797*365= 60

2004- 6821/29289*365= 85

2005- 10286/35088*365= 107

2006- 14471/ 42597*365= 125

DPO Formula – Accounts payable / cost of goods sold per day

2002 – 2034/ 20461*365= 36

2003- 2973/ 21706*365=50

2004- 4899/23841*365= 75

2005- 6660/28597*365= 85

2006- 9424/35100*365=98

Question 3
 Write your answer for Part A here. Also, paste the economical balance sheet prepared by
you here.

Question 4

ROE has been declining over the from 2002 t0 2006 due to inconsistent increase in the
share holders equity and the increase in the net profit of the company. Equity is
increasing at higher rate compared to net income during the same period which leading
to decline in the ratio. The increase in equity is resulting to change in working capital

ROCE has been changing over the period which is never demonstrated a straight line
trend . the 2003 was due to the account of higher EBIT and lower average capital
employed due to effect of 2002. The decline after 2003 in ROCE is due to decline in
variable margin and further took it to EBIT level .

Question 5

Pros – 1 By reducing the temperature saving on air conditioning

2 overall heat absorption of building and isulate it against heat and colds

Cons – 1 The process of receiving payment from the suppliers.

2. Using debts to finance their business