Anandam Manufacturing Company

Problem Statement:

1. The core issue identified in the case is regarding the additional financing of 50 million from bank.
2. This money is required to carry out smooth operations and expand the business.

Important ratios to be considered:

Anandam's financial Ratios Industry Average ratios

2012- 2013-
2013 2014 2014-2015 2014-2015

Current Ratio 2.53:1 1.79:1 1.60:1 2.30:1

Quick Ratio 1.30:1 0.92:1 0.79:1 1.20:1
2.88
Accounts Receivables 6 Times times 3.42 times 7 times
Debt to Equity ratio 47.06% 46.89% 64.50% 35%
Net Profit ratio 18.20% 14.00% 10.50% 18%
3.11
Inventory Turnover ratio - times 2.56 times 4.85 times
Return on Equity ratio 30.3% 42% 42% 22%
60.83 126.73
Collection period days days 106.45 days 52 days
9.66 7.07
Industry coverage ratio times times 4.52 times 10 times
Working Capital turnover ratio - 5.42 2.21 8

Debt to Equity Ratio

Increasing trend in the Debt to Equity Ratio, it means that the company is financing more from its
creditors, rather than investors.
Receivable Collection Period
In the case study, it is mentioned that one major challenge faced by Anandam is proper
structuring of the credit periods.
The less is the receivables collection period, the better it is.
It can be seen that there is an increase in the receivables collection period, which shows that
it takes a lot of time by the customer to pay the company.
Industry average is 52 days, whereas for Anandam in FY 2014-15 it is around 106 days
Interest Coverage Ratio
Even though the business was generating profits, the companys ability to make interest
payments to its creditors showed a declining trend.
Also, it is very less when compared to the industry average ratio.
Decision Rejection of loan proposal.