Name

SRINIDHI PATTABIRAMAN

Question 1

Write your answer for Part A here. - Investing cash flow has contribute majorly
to the decrease in change in case by the company from 2003-2006,

we can see that the major contributor to the decrease in the 'change in
cash' is the change in accounts receivable

Write your answer for Part B here.

1. Trend in cashflow from the operating activity is decreasing from 2003

to 2006., owing to increase in account receivables.

2. Trend in investing activity is decreasing from 2003 to 2006 because

of investment in property, plant and equipment’s along with some
investments as well.

3. Trend in financing activities, is actually constant., because of the

retirement of debt and dividends, as they are almost similar and so
there are no changes in the financing activities.

Write your answer for Part C here.

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 Thant the other activities.

Hence it can self-finance its own investments.

 2. Funding of Investment : 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: 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

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

Operating Working Capital= Account Receivables +Inventory-

AccountsPayable.

Year
202002
2003
2004
2005
2006
account receivable
3,485
4,405
6,821
10,286
14,471
inventory
3,089
2,795
3,201
3,291
3,847
accounts payable
2,034
2,973
4,899
6,660
 9,424
OWC
4,540
4,227
5,122
6,917
8,894

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

Operating Working Capital Ratio = Operating Working Capital/ Sales

YEAR
2002
2003
2004
2005
2006
op.working.capt
4540
4227
5122
6917
8894
sales
24,652
26,797
29,289
35,088
42,597
ratio
5
6
6
5
5

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

DSO=Accounts Receivables/Sales revenue per day

DIO=inventory /COGS per day
DPO=Accounts payables/COGS per year
account receivable
3,485
4,405
6,821
10,286
14,471
sales revenue per day
69
75
81
98
118
DSO
51
59
84
105
123

Inventory
3,089
2,795
3,201
3,291
3,847
COGS per day
57
60
66
80
98
DIO
54
47
48
41
40
accs.payables
2,034
2,973
4,899
6,660
9,424
cogs per year
57
60
66
80
98
DPO
36
50
74
83
96

Write your answer for Part D here.

The Implication of long credit given to Dealers lead 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.

Question 3

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

YEAR
2002
2003
 2004
2005
2006
capital emp

OWC
4540
4227
5122
6917
8894
accs receivable
3,485
4,405
6,821
10,286
14,471
inventories
3,089
2,795
3,201
3,291
3,847
other assets
645
645
645
645
645
plant,property & equipment (net)
2,257
2,680
2,958
3,617
4,347
accs payable
 2,034
2,973
4,899
6,660
9,424
land
450
1,750
2,853
2,853
2,853
total capital employed
13,761
18,044
23,417
27,609
35,056
capital invested

net debt
2,868
3,211
4,433
5,696
7,175
cash
705
1,542
1,818
2,158
1,955
current portion of long term debt
315
352
525
730
 649
longterm debt
3,258
4,400
5,726
7,123
8,480
shareholders equity
5,024
6,091
7,146
8,336
9,563
total capital invested
13,761
18,044
23,417
27,609
35,056

Question 4

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

YEAR
2002
2003
2004
2005
2006
Variable Margin (Sales revenue-COGS)/sales X 100
6%
5%
5%
5.40%
5.60%
Operating Margin( Operating Income or EBIT /sales Revenue)
 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%

Write your answer for Part B here.

The Trend in RoE is decreasing.

Reason: Due to the Increase in Equity of the share holders from 2003 -
2006 the company’s Return of 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.

Share holders Equity : 5,024 6,091 7,146 8,336 9,563

Write your answer for Part C here.

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

the margins of the company are constant but the efficiency which is
calculated as  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 showing
the efficiency of the company.

2002
2003
2004
2005
2006
6.60%
8.70%
8.20%
8%
7.90%

Question 5

Write your answer for Part A here.

Pros of the Get Ceres Program:

1.Get Ceres program sales had increased to $35.1 million dollars in

2005 to $42.6million 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 seedling meant even more
dollars would be tied up in the inventory which the dealers were
reluctant to do so.

Recommendation: Though 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 increase during the seasonal
dating which can affect the dealers to invest in more.