‘Statement Analysis (Total 55 Marks) ‘You are required to read the following case carefully and anywer the following questions: At the end of financial year 2019-20, CEO of Aqua Manufacturing Ltd, (AML) was wondering about the decline in the profit margin as compared to the year 2018-19. Listed in the year 2012 AML is an established player in the garment industry. The decline in profit margin by 15.7% was also reflected in its stock price decline by close to 45%. The closing stock price was Rs.355 and Rs. 196 as on March 31, 2019 and March 31, 2020, respectively. The results were surprising as AML has taken lot of measures for its capacity expansion and store chain expansion during the year 2019-20. After deliberating on the financial figures with the company’s financial expert, CEO had decided to hire a reputed consultant to do an independent analysis of the company’s recent financial performance and provide suggestions for future actions. The recent financial figures extracted fiom the 2019-20 annual reports are as follows: ‘Aqua Wanafactaring Lea Balance Sheets (in Rs. Lakhs) 31 March 3020 Si Marck 309 EQUITIES AND LIABILITIES 'SHARFHOLDER'S FUNDS. Fquity Share Capital a 720, Reserves and Suplus 34721 B66 NON-CUKKENT LIABILITIES ‘Long Term Borrowings 17500 T1302 ‘CURRENT LIABILITIES Short Term Borrowings sea ae Trade Payables. B01 Toss ‘Other Curent Tabiies 7305 O25 Short Term Provisions 468 1215 Total Capital and Liabilities 73181 S60 ASSETS ‘NON-CURRENT ASSETS Tangible Assets Taos 12253 Inangible Asse 3256 SSI Capital Work-In-Progress 3212 1470 Intangible Asses Under Development S665 SOL ‘Non-Current Investments T5606 16978 Tong Term Doans and Advances 2969 2363 ‘Other Non-Curent ASSES 2850, 17 CURRENT ASSETS ‘Current investments as TSS Inventories 5803 4502 Trade Reosivables 2027 1568; Cash and Cash Fquivalons aIse 452 Short Term Loans and Advances 1673, Tt ‘Other Curent Assets 3742, 1336) Prepaid Expenses 6 24 ‘Total Assets 73781 53360‘Aqua Manufacturing Eta Siatement of Profit and Loss (in Rs- Tak) ‘31 March 2020 3 March 7019 INCOME Revenue fom Operations [Ne TRIAD 207 ‘Other income 354 12174 Total Revenue 226714 Bwsid EXPENSES, Cost of Materials Consumed Tae Taos Purclase of Stock-in Trade 22012 29847 ‘Changes in Inventores of FG, WIP and Siockin Trae =1257 1583 Employee Benefit Fapenses 17793 16562 Finance Cass 7951 SKS Depreciation an Amorisiion Expeases 14847 13097 Oither Expenses 3487 5209) Total Expenses OSE T9385 Froft (Loss) Before Taw 25600 229 Total Tax Expenses 5265 T1535 Profi (Loss) ter Tax 13355) 17498 Statement of Changesin Equity is i jet endd Dc 2030 — Ga LE) A_TUITY START CARTAT ans Changs tsar ice alo R10) ing the yar é Gh toguy car eapea ic tt of 10) rng he yar 3 H_-OTHirR FgUITY roe SS Toate aa aw a THT Orercomshonns Teadcempcbenine incon sat oo Di ey share ftv ans Dred dition tx 33 “rer tne! Ket each IT 100 a S00 a3 9 aren Tea cechnene cone oo TrmsrtoOiher saree 148 ua Dire ret shares Divi tren an AcatSi March 3020256 mw 1 46 um Taformation from the Cash Flow Statement of AML (2019-20) (in RS. Lakhs) Net cash (used in) / generated from operating activities 12,253 Net cash (used in) / generated from investing activities 9393 Net cash (used in)/generated financing act 1,158‘Assume that applicable tax rate is 35%, Assume all the purchases and sales are made on credit, AML has hired a reputed consulting firm for its financial performance evaluation. Assuming that you are working there as an intern. Apart from the balance sheet, income statement, and statement of owner's equity of the company for the past two years, you have also collected some additional information related to the company, and from the industry competitors: Peer Group Financials/industry Averages Return on Capital Emploved (6) 56 Return on Assets (a) 38 Return on Equity (6) 33 Gross Profit Margin 2 ‘Operating Profit Margin (6) is ‘Net Profit margin ©) i Working capital tumover 236 Current Ratio (times) 136 ‘Deb Fguity Ratio (ames) 036 Price to Earnings Rati (mms) 083 Dividend Pay-out ratio (%) 183 ‘Acecunts Receivable Turnover (imei) ¥5.32 Inventory Turnover (Ges) 25.35 ‘Accounts Payable [urnover (imeS) 3032 ‘You are required to caleulate (formulas to be mentioned) and comment on the following ratios for the financial year ending 2019-20. Key Historical Performance Indicators: ‘Aquat (ROE) ‘agate po ‘Aeutteala (etait te) ae ara)gates peter Acs tect (et tea) soetsessse vb PEepgagers WH ta aie har)