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    IMT Ceres

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    AKHIL REDDY
    The document analyzes the cash flow statement and financial performance of a company from 2002-2006. It finds that the company's cash flow from operations declined significantly over this period due to increases in accounts receivable. Despite making a profit, the company relied more on taking on debt to fund investments, putting it at risk of debt issues. The document also examines the company's declining returns on equity and capital employed, driven by a decrease in its operating margin over time.

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    IMT Ceres

    Uploaded by

    AKHIL REDDY
    16 views7 pages
    The document analyzes the cash flow statement and financial performance of a company from 2002-2006. It finds that the company's cash flow from operations declined significantly over this period due to increases in accounts receivable. Despite making a profit, the company relied more on taking on debt to fund investments, putting it at risk of debt issues. The document also examines the company's declining returns on equity and capital employed, driven by a decrease in its operating margin over time.

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    IMT_Ceres

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    The document analyzes the cash flow statement and financial performance of a company from 2002-2006. It finds that the company's cash flow from operations declined significantly over this period due to increases in accounts receivable. Despite making a profit, the company relied more on taking on debt to fund investments, putting it at risk of debt issues. The document also examines the company's declining returns on equity and capital employed, driven by a decrease in its operating margin over time.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    16 views7 pages

    IMT Ceres

    Uploaded by

    AKHIL REDDY
    The document analyzes the cash flow statement and financial performance of a company from 2002-2006. It finds that the company's cash flow from operations declined significantly over this period due to increases in accounts receivable. Despite making a profit, the company relied more on taking on debt to fund investments, putting it at risk of debt issues. The document also examines the company's declining returns on equity and capital employed, driven by a decrease in its operating margin over time.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 7

    Question 1

    Koya Akhil Reddy


    Name

    Just 226 of the predicted net income of 1,534 will be translated into 'cash flow from
    operations' in 2006. This indicates that just 14.73% of net income will be converted into
    'cash flow from operations.' Of of the three categories, 'Operating Cash Flow' has
    contributed significantly to the company's drop in 'change in cash' from 2003 to 2006.
    Decrease in cash flow from 'operation activities' - The cash flow from operating
    activities has been steadily declining throughout the years. 'Increase in Accounts
    Receivable' is the explanation for the decrease in cash flow from operational operations.
    Trend in cash flow from 'investment activities' - Cash flow from investing activities has
    increased over the years. The decrease in land investment throughout the years is the
    reason for the increase in cash flow from investing activities. Cash flow from 'financial
    activities' trend - From 2003 through 2005, cash flow from financial activities climbed
    steadily, but fell in 2006. . The amount of debt issued by the corporation each year is the
    reason for the initial growth and subsequently decline in cash flow from investment
    operations.
    Company cash situation - The company's cash condition is unsatisfactory. Despite
    making a net income of 1,534 in 2006, the firm earned just 226 in cash flow from
    operating operations . This resulted in a negative cash change of -203 in 2006.
    Investment funding - The firm is now reliant on debt issuance to fund its investment. In
    2006, the firm issued 2,006 in debt to support their PP&E investment of -1,398. This
    might lead to the firm falling into debt. Alternatively, the corporation can fund its
    investments using its accrued profits and reserves. Operational Cash Flow - Capital
    Expenditures = Free Cash Flow - Free Cash Flow (2006)
    Question 2

    2002 2003 2004 2005 2006

    Operating
    Working
    Capital 2000 3000 4000 5000 8000
    Write your answer for Part B here. Paste the excel sheet containing your calculations
    here.

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

    Write your answer for Part D here.

    Question 3

    Capital Employed = Total


    Assets - Current Liabilities
    = $28,117
    - 10,074
    = $15,043
    Capital Employed = Total
    Assets - Current Liabilities
    = $28,117
    - 10,074
    = $15,043
    Capital Employed = Total
    Assets - Current Liabilities
    = $28,117
    - 10,074
    = $15,043
    Capital Employed = Total
    Assets - Current Liabilities
    = $28,117
    - 10,074
    = $15,043
    Capital Employed = Total
    Assets - Current Liabilities
    = $28,117
    - 10,074
    = $15,043
    Capital Employed = Total Assets - Current Liabilities = $28,117 - 10,074 =
    $15,043
    Assets = $28,117
    Debt = $18,554
    Equity = $9563

    Question 4
    Variable margin = (Sales revenue - cost of goods sold) / Sales
    Operating margin = Operating income / sales
    Return on Equity = Net Profit/Owners Equity
    ROACE = Earnings after taxes before Interest/Average capital Employed
    The trend in ROE from 2002 to 2006(E) shows decreasing over the years. The reason for
    decrease in ROE is the decrease in performance of the operations of the company.
    The performance of operations of the company measured using Return on Capital
    Employed (ROCE).
    ROCE for the company is decreasing over the years.
    ROCE
    2003: 22.29%
    2004: 18.71%
    2005: 18.34%
    2006E: 16.73%

    The trend in ROACE from


    2002 to 2006(E) shows
    Decreasing over years.

    The Drivers for ROACE are


    Operating Margin and
    Efficiency.
    The reason for decreasing
    ROACE is the decrease in
    operating margin of the
    company.
    Operating margin for the
    company is decreasing over
    the years. On 2003 the
    operating
    margin was 8.72% and on
    2006(E) it reduced to 7.09%
    The trend in ROACE from 2002 to 2006(E) shows Decreasing over years. The Drivers for ROACE
    are Operating Margin and Efficiency. The reason for decreasing ROACE is the decrease in the
    operating margin of the company. The operating margin for the company is decreasing over the
    years. On 2003 the operating margin was 8.72% and in 2006(E) it reduced to 7.09%
    Question 5

    Pros: Constant Growth in Sales


    Cons: Insufficient Distribution.

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