Name Aditya Rounak Mishra

Question 1

A. $226 thousands profits estimated for the year 2006 (E) would translate to "cash flow
from operations" for the same.

Investing cash flow has contributed majority to the decrease in "change in cash" by the
company from the year 2003-2006 (E).

B.

Year 2003 2004 2005 2006

Accounts -920 -2416 -3465 -4185

receivables in
thousands

1. Trend in cash flow from the “operating activity” is decreasing from 2003 to 2006
(E). Reason : Due to the increase in accounts receivables.
2. Trend in “Investing Activity” is decreasing from 2003 to 2006 (E)
Reason: Due to investment in property. Plant and Equipment and some
investment in land as well.
Year 2003 2004 2005 2006

-835 -734 -1215 -1398

Investment in
property,
plant &
equipment
 -1300 -1103
Investment in
land

Debt Issuance 1494 1850 2128 2005

Retirement of 315 352 525 730

Debt

Dividendes 226 224 298 307

Financing 953 10274 1306 969

Cash Flow

3. Trend in “Financing Activities” is constant

Reason : As Retirement of Debt and Dividends are almost similar hence thre is
not much change in the Financing activities.

C. The cash flow Profile of the company fpr the year of 2006 (E) is Negative.

Self Financing of Investment 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 activities.

CFO ($226 thousands) > CFI(-1398)+CFF(969) Investment in thousands

Hence it can self finance its own investments.

Funding of investment : The Funding of investment as shown by the graph is dione by

both cash flow from operations and cash flow from financing activities.
 Cash Position of the company : The cash position of the company is Negative which is
calculated by adding CFO+CFI+CFF = negative

Free Cash Flow : The company has no free cash flow as it is Negative position

CFO -CFI = Negative free cash flow.

Question 2

A.

Operating Working Capital = Account Receivables + Inventory-Accounts Payable

Year 2002 2003 2004 2005 2006

Account
Receivable 3485 4405 6821 10286 14471
Inventory 3089 2795 3201 3291 3847
Account Payable 2034 2973 4899 6660 9424
OWC 4540 4227 5122 6917 894

B.

Operating Working Capital Ratio = Operating Working Capital

Year 2002 2003 2004 2005 2006

Operating Working
Capital 4540 4227 5122 6917 8894
Sales 24652 26797 29289 35088 45997
5 6 6 5

C.

DSO = Accounts 2002 2003 2004 2005 2006

Receivables Sales Revenue Per Day
Accounts Receivables 3485 4405 6821 10286 14471
sales revenue per day= 69 75 81 98 118
sales/360 days
DSO 51 59 84 105 123
DIO = Inventory/cost of goods sold per day
DIO=Inventory/COGS per day
 Year 2002 2003 2004 2005 2006
Inventory 3089 2795 3201 3291 3847
cost of goods per day = COGS/360 57 60 66 80
DIO 54 47 48 41

The implication of long credit given to Dealers lad to the negative change in cash which is
not profitable for the company if there is a delay in payment by the customers the OWC is
renewed and its requirement increases which causes loss for the company.The OWC
shows that it is increasing which says that sales are happening but the dealers are delaying
the payment which shows in the DSO it is in increasing trend but DIO is decreasing
showing sales are good.

year 2002 2003 2004 2005 2006

Accounts
Payable 2034 2973 4899 6660 9424
COGS/360 = 57 60 66 80 98
DPO 36 50 74 83 96

Question 3

Economical Balance Sheet

At December 31 2002 2003 2004 2005 2006

Capital Employed
Operating working capital 4540 4227 5122 6917 8894
Accounts Receivable 3485 4405 6821 10286 14471
Inventories 3089 2795 3201 3291 3847
Other Assets 645 645 645 645 645
Plant,Property & Equipment
(net) 2257 2680 2958 3617 4347
Accounts Payables 2034 2973 4899 6660 9424
Land 450 1750 2853 2853 2853
Total Capital Employed 13761 18044 23417 27609 35056
Capital Invested
net debt 2868 3211 4433 5696 7175
cash 705 1542 1818 2158 1955
Current Portion of Long term
debt 315 352 525 730 649
Long Term Debt 3258 4400 5726 7123 8480
Shareholders Equity 5024 6091 7146 8336 9563
Total Capital Invested 13761 18044 23417 27609 35056
Question 4

4.A.

Year 2002 2003 2004 2005 2006

Variable Margin 6% 5% 5% 5.40% 5.60%
Operating Margin 15% 11% 12% 12% 14%
Return On Equity 0.24 0.21 0.18 0.18 0.16
Return on Average Capital
Employed 9.70% 10.40% 13.24% 13.84% 20.40%

B.

The trend in ROE is decreasing.

Reason: Due to the increase in equity of the share holders from 2003-2006 the company’s
return pf equity is decreasing which is not good and to leverage the finances we can
borrow from the banks and get an optimum leverage which will decrease the shareholders
equity and keep a balance between the bank and the shareholders.

Shareholders Equity : 5024 6091 7146 8336 9563

C.

The trend in RoACE is constant and the drivers of the Operating Margin Ratio

2002 2003 2004 2005

6.60% 8.70% 8.20% 8%

The margins of the company are aonstant but the efficiency which is calculated as EBIT (
1-T)*100 this will be the earings after the taxes before interest (capital employed
beginning +capital employed ending)/2 this is RoACE of the company which is
increasing showing the efficiency of the company.
5.

Pros of the Get Ceres Program :

1. Get Ceres program sales had increased to $35.1 million dollars in 2005 to $42.6
million in 2006 approximately 80% of sales were to dealers.
2. The Company was very excited as it had done well with financial viability with
the break even point approximately $30 million of revenues under the current cost
structure.

Cons of the Get Ceres Program

1. Regardless of the payment terms given to the dealers,the payment were delayed
by the customers to 120 days which affected the business drastically. Many
dealers did not pay until they sold the product.
2. Higher the price point of the organic seeding meant even more dollars would be
tied up in the inventory which the dealers were relucant to do so.

Recommendation : Through the idea of Get Ceres program was exciting but I
would not recommend to continue with this program as the long term debt taken by the
company will land the company paying higher interest and will affect the profit margins
and the account receivables of the company are increasing in the negative manner due to
which it will go in major losses and the dealers are also facing problems in managing the
inventory as the sales increases during the seasonal dating which can affect the dealers to
invest in more.