1. Identify the major factors influencing Riley?s cash flow. Use the cash flow statements together with the ratios and common-size statements.
2. What is the length of Riley?s cash conversion cycle? Does it take a long time for Riley to go from spending cash to receiving cash? Why?
3. What are the implications of Riley?s cash flow for the financing needs of the firm?

2004 2005 2006 Category In/Out-Flow 04-05 In/Out-Flow 05-05 Cash Accounts receivable Inventory Prepaids Net fixed assets Total 75 1,206 1,377 36 285 2,979 90 1,440 1,683 60 321 3,594 66 1,875 2,091 102 360 4,494 CASH CFO CFO CFO CFI outflow outflow outflow inflow outflow outfloe outflow inflow Bank loan Accounts payable Misc. accruals Mortgage Equity Total 750 645 120 150 1,314 2,979 831 1,050 168 144 1,401 3,594 1,020 1,737 102 138 1,497 4,494 CFF CFO CFO CFF CFF inflow inflow inflow outflow inflow inflow inflow outflow outflow inflow CFO outflow outflow 2004 Sales Cost of goods sold Gross profit Operating expenses Selling expense Salaries Interest General expenses Depreciation Total Earnings before tax Tax Net income 2005 2006 7,260 5,874 1,386 9,075 7,440 1,635 11,370 9,438 1,932 567 315 83 140 45 1,149 237 93 144 696 411 89 173 36 1,404 231 84 147 843 492 105 201 48 1,689 243 87 156 Cash Flow Statement 2004-2005 CFO Net Income 147 A. Receivables 234 Inventories 306 Prepaid Expenses 24 A. Payable 405 Misc. Accruals 48 Depreciation (9) Total CFO 45 Cash Flow Statement 2005-2006 CFO Net Income 156 A. Receivables 435 Inventories 408 Prepaid Expenses 42 A. Payable 687 Misc. Accruals (66) Depreciation 12 Total CFO (96) CFI Net Fixed Asset Total CFI 36 36 CFI Net Fixed Asset Total CFI CFF Bank Loan Mortgage Dividends Total CFF 81 (6) 60 27 CFF Bank Loan Mortgage Dividends Total CFF 39 39 189 (6) 60 123 Common Sized Income Statement 2004 Cost Of Goods Sold Gross Profit Operating Expenses Selling Expenses Salaries Interest General Expenses Depreciation TOTAL Earnings Before Tax Tax Net Income 2005 2006 80.91% 19.09% 81.98% 18.02% 83.01% 16.99% 7.81% 4.34% 1.14% 1.92% 0.62% 15.83% 3.26% 1.28% 1.98% 7.67% 4.53% 0.98% 1.90% 0.40% 15.47% 2.55% 0.93% 1.62% 7.41% 4.33% 0.92% 1.77% 0.42% 14.85% 2.14% 0.77% 1.37% Financial Ratios 2004 2005 Current Ratio: Quick Ratio: AP Days: Gross Profit Mar ROE: Operating Mar. Net Profit Mar TAT: FAT: ACP: Iventory days: Cash Conversion 2006 3 1.4393443 40.08 0.1909091 0.109589 4.40% 0.0198347 2.4370594 25.473684 60.63 85.56 106.12 2 1.033383915 67.18 0.1699208443 0.1042084168 3.06% 0.0137203166 2.5300400534 31.5833333333 60.19 80.87 73.88 2 1.167401 51.51 0.180165 0.104925 3.52% 0.016198 2.525042 28.27103 57.92 82.57 88.97