Name Shubham madan

Question 1

1534/- will be the profits translating into cash from operations,investing cash flow has
contributed the most

Operating cash flow- the trend here is decreasing as we can see through the data over
the period of time. The cash generation from operating activities is decreasing year by
year. Increase in net income isn’t the best but there is a constant increase in the
depreciation and holding up more inventory is also a reason

Investing cash flow- it has always generated a negative figure in the cash flow statement
but in the initial 2 years it was because of the purchase of land, later it decreased with
the years as we see, overall it’s an improving trend

Financing cash flow- in the first three years they have incurred a lot of debt therefore
there Is a positive slope but in the fourth year the figure has decreased because of with a
little of a downfall can be noticed but over the 4 years it has always added cash in the
cash flow statement

“self financing of investments”- there assets are not all self financed as there operating
cash flow isnt enough to support there investments and they are incurring a lot of debt
every year, so clearly they are investing out of the debt money they receive

‘cash position of the company”- as I anaylise the cash position of the company I see that
its not the best, by the yeaar 2006 they went negative in cash flow which can hinder there
module of the get ceres program, so they really need to keep it in the positive for the
betterment of the company
‘free cash flow”- they clearly don’t have free cash flow in 2006, because they are
negative with there cash flow, but they had a good free cash flow in 2005, I think its
because of the get ceres program they shrinked there cash flows because it increased
there accounts receiveables and they need a lot of capital to maintain the cash flow with
that model

Question 2

Accounts
3,485 4,405 6,821 10,286 14,471
Receivable
Inventories 3,089 2,795 3,201 3,291 3,847
Accounts
2,034 2,973 4,899 6,660 9,424
Payable
o.w.c 4,540 4,227 5,122 6,917 8,894

Year 2002. 2003. 2004. 2005 2006E

o.w.c stands for – operating working capitals for the years,we can see that it is
increasing with each year mostly because of the get ceres program

Accounts
3,485 4,405 6,821 10,286 14,471
Receivable
Inventories 3,089 2,795 3,201 3,291 3,847
Accounts
2,034 2,973 4,899 6,660 9,424
Payable
o.w.c 4,540 4,227 5,122 6,917 8,894
Sales 24,652 26,797 29,289 35,088 42,597
ratio 0.18416215 0.15772603 0.17489315 0.19713699 0.20878904

Year 2002 2003 2004 2005 2006E

YEAR 2002 2003 2004 2005 2006E
Inventories 3,089 2,795 3,201 3,291 3,847
Cost of
20,461 21,706 23,841 28,597 35,100
Goods Sold
COGS PER
DAY 56.0584001 59.4671561 65.3185774 78.347788 96.1645556
DIO 55.1032494 47 49 42 40

THIS WAS THE DIO

YEAR 2002 2003 2004 2005 2006E

Accounts
3,485 4,405 6,821 10,286 14,471
Receivable
Sales 24,652 26,797 29,289 35,088 42,597
S.R PER
DAY 67.5402411 73.4162421 80.2439526 96.1322552 116.704558
DSO 51.5988682 60 85 107 124

THIS WAS THE DSO

For Years
Ending
December
31 2002 2003 2004 2005 2006E
Accounts
2,034 2,973 4,899 6,660 9,424
Payable
Cost of
20,461 21,706 23,841 28,597 35,100
Goods Sold
COGS PER
DAY 56.0584001 59.4671561 65.3185774 78.347788 96.1645556
DPO 36.2835899 50 75 85 98

THIS WAS THE DPO

THERE WORKING CAPITAL NEEDS WILL INCREASE AS THERE DSO WILL

INCREASE WHEREAS THERE DPO WILL STAY THE SAME FOR THE FUTURE
 YEARS SO THEY’LL NEED MORE WORKING CAPITAL TO SUPPORT THIS TYPE
OF BUSINESS MODEL

Question 3

At
December
31 2002 2003 2004 2005 2006E
CAPITAL
EMPLOYED
Accounts
3,485 4,405 6,821 10,286 14,471
Receivable
Inventories 3,089 2,795 3,201 3,291 3,847
Accounts
2,034 2,973 4,899 6,660 9,424
Payable
Current
Assets 4,540 4,227 5,122 6,917 8,894
Plant,
Property, &
2,257 2,680 2,958 3,617 4,347
Equipment
(net)
Other
645 645 645 645 645
Assets
Land 450 1,750 2,853 2,853 2,853
Non-
Current
Assets 3,352 5,075 6,456 7,115 7,844
CAPITAL
EMPLOYED 7,892 9,301 11,578 14,032 16,738
INVESTED
CAPITAL
Current
Portion of
315 352 525 730 649
Long-term
Debt
Long-Term
3,258 4,400 5,726 7,123 8,480
Debt
 Cash 705 1,542 1,818 2,158 1,955
NET DEBT 2,868 3,211 4,433 5,696 7,175
Shareholde
5,024 6,091 7,146 8,336 9,563
rs Equity
INVESTED
CAPITAL 7,892 9,301 11,578 14,032 16,738

THIS IS THE ECONOMICAL BALANCE SHEET

Question 4

VARIABLE MARGIN

At
December
31 2002 2003 2004 2005 2006E
Sales 24,652 26,797 29,289 35,088 42,597
Cost of
20,461 21,706 23,841 28,597 35,100
Goods Sold
V.M 17 19 18.6 18.5 17.6

OPERATING MARGIN

At
December
31 2002 2003 2004 2005 2006E
Net Income 1,191 1,293 1,279 1,488 1,534
Sales 24,652 26,797 29,289 35,088 42,597
O.M 4.830045755 4.825022942 4.366714011 4.240383302 3.601383557

RETURN ON EQUITY

At
December
31 2002 2003 2004 2005 2006E
Net Income 1,191 1,293 1,279 1,488 1,534
 Shareholder
5,024 6,091 7,146 8,336 9,563
s Equity
R.O.E 23.70047691 21.22843023 17.89808923 17.84851309 16.04121402

RETURN ON AVERAGE CAPITAL EMPLOYED

At December 31 2002 2003 2004 2005 2006E

EATBI 1,378 1,642 1,719 2,034 2,192
9301.26589 11578.4421 14032.0441
0 7892 2 2 7
CAPITAL 9301.26589 11578.4421 14032.0441 16737.9702
EMPLOYED 7892 2 2 7 9
8596.63294 12805.2431 15385.0072
ACE 3946 6 10439.854 4 3
34.9141398 19.0957089 16.4665361 15.8873448 14.2488561
ROACE 9 9 5 1 2

THE R.O.E IS DECREASING FROM. 2002 TO 2006E AS THE EQUITY IS

INCREASING IN EVERY YEAR BUT THE OPERATING INCOME DERIEVED IS NOT
SUFFICIENT, WHICH IS RESULTING IN A DECREASING TREND OF THE R.O.E

THE R.O.A.C.E IS ALSO DECREASING FROM 2002 TO 2006E AND THIS IS ALSO
BECAUSE THE CAPITAL EMPLOYED IS INCREASING BUT E.A.T.B.E ISNT
INCREASING MUCH, WHICH IS WHY ITS RESULTING IN A DECLINE TREND

Question 5

TWO PROS OF THE GET CERES PROGRAM

1.THEY MANANGED TO GET THE MARKET SHARE WITH THERE ORGANIC

PRODUCTS EVEN WITH A MORE EXPENSIVE PRODUCT, NOW THERE 80% SALES
ARE FROM THERE RETAIL COUNTERS SO THIS HAS GIVEN THERE BUSINESS A
BIG BOOST

2.DUE TO WORD OF MOUTH AND A GOOD PRODUCT THEY’LL RECEIVE

REGULAR AND REPEATED CUSTOMER AND THIS RETAIL MARKET MOVE WILL
HELP THEM SCALE EVEN MORE AND THEY’LL BE ABLE TO BECOME A BIG
COMPANY AS THEY VISIONED IT

THE TWO CONS ARE-

1.THIS INCREASES THERE WORKING CAPITAL BY HUGE PERCENTAGE AS

THERE ACCOUNT RECIEVEABLE INCREASES BECAUSE THEY ARE NOW GIVING
120 DAYS OF CREDIT, IT INCREASES FINANCIAL LOAD AS THEY ARE USING
LINE OF CREDIT FROM THE BANK FROM WHICH THEY ARE CHARGED
INTERESTS PLUS THERE R.O.E AND R.O.A.C.E IS DECREASING BECAUSE OF IT

2.IF ANY OF THE AMOUNTS RECIEVABLE TURNS TO A BAD DEBT, THEN ITS
GONNA BE A BIG ISSUE FOR THE COMPANY AS THEY ARE TRUSTING THE
DEALERS A LOT. SO THIS RISK FACTOR IS ALWAYS THERE WITH THEM