Table 7.3 Dytex Ltd.s Financial Performance

Dytex Ltd. Statements of Cash Flows for the period ending December 31 (in $000s)
		2013 Forecast		2014 Budget
Operating activities		6,650		13,580
Profit for the year		3,000		5,000
Depreciation		(4,900)		(430)
Adjustments in non-cash working capital accounts
Cash flow from operating activities		4,750		18,150
Financing activities
Share capital		5,000		1,000
Long-term borrowings		3,600		3,000
Cash flow from financing activities		8,600		4,000
Cash flow from investing activities		(13,000)		(22,000)
Increase in cash and cash equivalent accounts		(350)		(150)
Cash, beginning of year		1,100		1,450
Cash, end of year		1,450		1,600
Financial Performance Measures
	2012 Actual		2013 Forecast	2014 Budget
Liquidity ratios
Current ratio (times)	1.78		2.26	2.15
Quick ratio (times)	1.13		1.45	1.40
Debt/Coverage ratios
Debt-to-total-assets ratio (%)	50.46		46.80	43.14
Times-interest-earned (times)	5.05		5.85	8.76
Fixed-charges coverage ratio (times)	3.70		4.19	6.11
Asset-management ratios
Average collection period (days)	32.21		42.53	39.92
Inventory turnover (times)	11.83		9.13	9.65
Capital assets turnover (times)	1.46		1.36	1.32
Total assets turnover (times)	1.18		1.06	1.05
Profitability ratios
Gross profit to revenue (%)	30.39		33.03	35.94
Operating income to revenue (%)	9.80		12.20	16.95
Return on revenue (%)	4.71		6.10	10.61
Return on total assets (%)	5.56		6.50	11.19
Return on equity (%)	11.21		12.21	19.67
Economic value added (in 000s)	248		707	4,631
Sustainable growth rate	12.63		13.91	24.49
Companys growth rate	N/A		6.86	17.43
Financial health score	2.54		2.66	3.00

Most significant were the statements of cash flows for the years 2013 and 2014 (Table 7.3). Dytex was planning to invest $22 million in capital assets and over 82% of the sources of financing would be generated internally (profit for the year for $? million, depreciation for $? million, and a small outflow in working capital accounts for $000,000).

All financial ratios appeared to be going in the right/wrong direction. Liquidity, debt/coverage, asset-management, and profitability were showing improvements/decline. The company financial health also showed a positive/negative direction from ? in 2012 to ? in 2014 a target that Lipton was shooting for. Also, the financial results showed that the company would (not or would) have a problem growing by ?% in revenue since the sustainable growth rate was ?%.