Take a look at the cash flow profile of the company, and analyse the cash flow statement step by step through the following questions.

Note: Use tab 3 of the Excel file attached above to access the cash flow statement of the company.

Question 1A: The companys profits have increased by ~30% from 2002 to 2006(E). How much of the profits estimated for the year 2006(E) will translate to the 'cash flow from operations' for the same year? Which of the three categories in the cash flow statement has contributed majorly to the decrease in the 'change in cash' by the company from 2003 to 2006(E)? (1+1 marks)

(Note: 'Change in cash' is the same as 'Total cash generated'. The (E) beside a year indicates that the figures are expected in the future, i.e. the case study analysis is taking place before the year.)

Question 1B: What is the trend in cash flow from 'operating activities', 'investing activities' and 'financing activities' over the years? Identify at least one reason for the increase/decrease in each of the three categories of the cash flow statement. Explain your answer. (Note: Trend indicates whether the numbers are increasing/decreasing over the years) (2+3 marks)

Question 1C: Given below is the expected cash flow profile of the company for the year 2006(E).

Cash Flow Profile

Analyse the expected cash flow profile of the company for the year 2006(E) and comment on any 3 of the following factors: 'self-financing of investments', 'funding of investments', 'cash position of the company' and 'free cash flow'. (3 marks)

As a part of the GetCeresTM program, Ceres Gardening Company started extending an increased credit period to its dealers. Look at the operating working capital of the company and analyse the impact of this decision on its operating working capital step by step through the following questions.

Question 1D: Calculate the operating working capital of Ceres Gardening Company for 20022006(E). (2 marks)

Question 1E: Calculate the operating working capital/sales ratio of Ceres Gardening Company for 2002 to 2006(E). (2 marks)

Question 1F: Calculate the DIO, DSO and DPO for the company from 2002 to 2006(E). (2+2+2 marks)

Question 1G: What is the implication of the long credit period given to dealers by Ceres Gardening Limited on its working capital? Explain your answer by specifying at least one reason. (1 mark)

Question 1H : Prepare and present the economic balance sheet for Ceres Gardening Company and calculate the capital employed by the company.

Question 1I : Analyse the key profitability ratios and identify the reason for the change in them by answering the following questions.

Note the following assumptions for solving this question:

• The key profitability ratios are Variable Margin (as a % of sales), Operating Margin, Return on Equity and Return on Average Capital Employed.

• Assume that there is no change in the capital employed during the year 2002 so that the capital employed at the beginning of the year is the same as that during the ending of the year.

• The gross profit is also known as the variable margin.

Question 1J: Calculate the key profitability ratios for the years 2002 to 2006(E). (8 marks, 2 for each key ratio)

Question 1K: What is the trend in RoE from 2002 to 2006(E)? List down at least one reason for the increase/decrease in RoE by assessing the drivers of RoE. Explain your answer in not more than 30 words. (1+1 marks)

Question 1L: What is the trend in RoACE from 2002 to 2006(E)? List down at least one reason for the increase/decrease in RoACE by assessing the drivers of RoACE. Explain your answer in not more than 30 words. (1+1 marks)

Question 1M : List down at least two pros and two cons of the GetCeres program for Ceres Gardening Company. Would you recommend continuing with the program? Justify your answer.