BHARAT LAWN MOWERS LTD.

Problems faced by BLML: Sluggish Demand Exceeding Inventory norms and even cash credit limits Financing of modernization of the plant Weaknesses: Short on cash on capital expenditure

Group 9A

Strengths: Increasing market Share Good Reputation Good product quality at low price Diversification to secateurs (60% market share) and shears (40% market share)

External Threats: Greater competition - 4 in lawn mowers, secateurs 3 and shears has 10 competitors Seasonal Demand Shift from Household to Institutional sector

We need to show National Bank some ratios to convince them to extend line of credit next year as well. Debt Assets Ratio: This ratio tells us how much of the company's assets have been financed by debt and is used to measure company financial risk. In this case the estimate was as low as 41% which turned out to be 48% in Q1, though in Q1 and Q4 the difference between pro forma and Actual was not much. The min shift b/w actual and estimated is found to be 2% and maximum of 7%. Though the debt/ Assets ratio is not low so there is a risk involved with the company as approximately around 45% of the asset is on debt.
Actual Working Capital Turnover 4.00 3.50 3.00 2.50 Year ended 31.3.10 Year ended 31.3.11 Proforma Working Capital Turnover

Debt/Assest Ratio based on Actual data Debt/Assest Ratio based on Pro forma 0.60 0.40 0.20 0.00 Q1 Q2 Q3 Q4

Actual Working Capital Turnover Proforma Working Capital Turnover 1.45 0.95 0.45 Q1 Q2 Q3 Q4

Working Capital Turnover (WCT): On analyzing yearly WCT, we can see that there has been a marked increase (40.29 in pro forma and 41% in actual). This shows that their working capital management has increased from last year. The quarterly trend in WCT shows that due to seasonality effects, the working capital varies quarterly, but the actual and proforma ratios show almost similar trends. Thus, working capital management has not reduced from last year.

BHARAT LAWN MOWERS LTD.

Current Ratios throughout the four quarters are very strong. Though, the ratios calculated out of Pro forma Balance Sheet reflect even stronger financial position with ratio higher than 2. 6 5 4 3 2 1 0 Q1 Quick Ratio shows a good immediate liquidity position of the company. Trends throughout the four quarters are very strong. Though, the ratios calculated out of Pro forma Balance Sheet reflect even stronger financial position. 6 5 4 3 2 1 0 Q1 Holding Period for Raw Material, WIP & Inventory Bank Limit 2.75 1.25 Q2 Q2

Group 9A

Estimated Actual

Q3

Q4

Estimated Actual

Q3

Q4

No of Months Raw Mat WIP Finished Goods+Account Recievable Usage of Cash CASH OUTFLOW Actual Cash Outflow (Operating) 1652 1809 1387 1097 Cash Outflow (Financing) 220 218 201 284 0.38 1.60

Holding period for Raw material and FG + Inventory is more than the banks limit. This can be reduced in future to improve the credibility of the company.

4.41

3.25

TOTAL Cash Outflow (Investing) 879 10 -31 -28 Cash Balance 2751 2037 1557 1353 288 271 284 286

CASH INFLOW SALES CASH INFLOW Credit 1,040 820 517 872

Total

Q1 Q2 Q3 Q4

1425 2424 2121 1281

2,465 3,244 2,638 2,153

The credit obtained from bank and cash from sales is not only used in operating activities, but also to finance the dividend payments (Rs 400 lac) and investing in the change in net block (Rs 830 lac). Moreover, the company is keeping a ready pile of cash. This shows that the company has a healthy credibility if it becomes a bit less conservative about its outlooks.