Management Decision Making - MGMT 1020
CASE STUDY THREE: ANANDAM
Professor: Victor Goodman
FILE MUST BE SAVED WITH ALL LAST NAMES AND SUBMITTED TO BLACKBOARD BY
ONE TEAM MEMBER
PLEASE DO NOT CONTACT THE PROFESSOR IF YOU ARE HAVING DIFFICULTY WITH THE RATIO
FORMULAS. THE WHOLE IDEA IS FOR STUDENTS TO COLLABORATE WITH THEIR TEAM
JULY 7th, 2021
STUDENT NAME (S)
ANANDAM
QUESTION # 1
CASH FLOW STATEMENT
Cash flow is the net amount of cash being transferred into and out of a business.
A company’s ability to create value for shareholders is determined by its ability to
generate positive cash flows
DEPRECIATION
Reduction in value of an asset.
Recorded as a “non-cash” expense in Income statement that was subtracted
(Add back to calculate cashflow)
ACCOUNTS RECEIVABLE
Amounts owed to a company by its customers (Subtract what you sold on credit)
The money is owed to you but you haven’t received the cash yet
INVENTORIES
Raw goods, in-progress goods, and finished goods that are on hand, in stock
(Subtract as there was an outflow of cash to purchase the inventory)
ACCOUNTS PAYABLE
Money owed by a business to its suppliers. (Add back what you didn’t pay out in cash)
You owe the money but you haven’t paid it out yet in cash
NET CASH FLOW
A positive cash flow, it means the company's assets are increasing.
Operating cash flow includes all cash generated by a company's main business activities
Net Profit
+ Depreciation
– Accounts Receivable
– Inventories
+ Accounts Payable
_____________________
A. Net Cash Flow from Operations
B. Cash from Investing in Assets Activity
– Purchase of Fixed Assets
C. Cash from Financing Activity
+ Inflow from issue of equity shares
+ Borrowings
_____________________
NET CASH INFLOW / OUTFLOW
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(A) Cash from operations 2012–13 2013–14 2014–15
Net profit as per income statement
ADD: Non-operating expenses (Depreciation)
Increase in current assets and decrease in current liabilities
LESS: Accounts receivable (Current less prev yr)
LESS Inventories (Current less previous year)
Decrease in current assets and increase in current liabilities
ADD: Accounts payable
(Current Liabilities less previous year)
Net cash inflow/outflow from operations (A)
B) Cash from investing activity
LESS - Purchase of fixed assets (the outflow of cash)
(add back depreciation less previous year)
Net cash outflow from investing activity (B)
(Same # as above)
(C) Cash from financing activity
ADD: Inflow from the issue of equity shares
(Current year less previous years)
ADD: Borrowings (long term)
(Current year less previous year)
Net cash inflow from financing (C)
(Equity + Borrowings)
Net cash inflow/outflow
A+B+C
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QUESTION # 2
COMMON SIZE BALANCE SHEET (%)
2012 - 13 2013 -14 2014 - 15
ASSETS
Fixed Assets
Cash and Cash Equivalence
Accounts Receivable
Inventories
TOTAL
LIABILITIES
Equity Share Capital
Reserve and Surplus
Long term borrowings
Current liabilities
TOTAL
COMMON SIZE INCOME STATEMENT (%)
2012 - 13 2013 -14 2014 - 15
Total Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses:
General, Admin and selling
Depreciation
Interest Expense (on Borrowing)
Profit before tax (PBT)
Tax @ 30%
Profit after tax (PAT)
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QUESTION #3
TREND ANALYSIS OF INCOME STATEMENT (%)
2012 - 13 2013 -14 2014 - 15
Total Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses:
General, Admin and selling
Depreciation
Interest Expense (on Borrowing)
Profit before tax (PBT)
Tax @ 30%
Profit after tax (PAT)
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QUESTION #4
TREND ANALYSIS OF INCOME STATEMENT (%)
RATIO Year 1 Year 2 Year 3 Industry
Calculation Calculation Calculation Average of
Ratio
Current ratio
Acid test ratio
Receivable turnover ratio
Receivable days
Inventory turnover ratio
Inventory days
Long-term debt to total capital
Debt-to-equity ratio
Gross margin ratio
Net margin ratio
Return on equity
Return on fixed assets
Return on total assets
Interest coverage ratio
Total assets turnover ratio (Total
revenue ÷ Total assets)
Fixed assets turnover ratio
(Revenue ÷ Fixed assets)
Current assets turnover ratio
(Revenue ÷ Current assets
Working capital turnover ratio
(Revenue ÷ Working capital)
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