Balance Sheet, Cash Flow Statement, Profit and Loss Statement Example

THE PROBLEM

You are launching into a business in the name and style of your choice. It has to be a manufacturing business. It means that your business would involve, buying materials, transforming it using plant and machinery, and selling it. Keep in mind the conditions given in this assignment. Strictly adhere to the conditions.

ASSUMPTIONS AND REQUIREMENTS

You can make any assumption, provided they are reasonable in an actual business situation, subject to the conditions 1 to 11 (detailed below). Realistic nature of the assignment would involve factors such as volume of turnover, cost structure, type and nature of transaction. Please draw up the accounts and reports in proper form as if they were made out for a real life business.

CONDITIONS

1. Date of commencement of business is to be your date of birth.

For example, if your date of birth is 10^th January 1981 then your date of commencement will be 10th January.

2.1 Capital to be contributed will depend on the last three digits of your SMS Id as listed below:

· 001 to 200: Your Register/roll number multiplied by Rs 6

· 201 to 400: Your Register/roll number multiplied by Rs 4

· 401 to 600: Your Register/roll number multiplied by Rs 3

· 601 to 800: Your Register/roll number multiplied by Rs 2

· All others: Your Register/roll number multiplied by Rs 7

So, SMS Id 2215595 will have a contributed capital of Rs. 6,646,785.

2.2 Long term loans equal to maximum of 2 times the capital is available at the rate of 10% per annum. Long term loan has to be at least equal to capital.

3. Every student will have at least 30% of his total assets invested in fixed assets. Depreciation on monthly basis is to be computed using the straight line method of depreciation. Life of asset can vary between 5 to 10 years for different assets.

4. Credit sales can be seven times cash sales.

5. Credit purchase can be eight times cash purchase.

6. Wage cost could be 10% to 30% of sales.

7. Cash balance at the end of any year is to be maximum of 4 month and minimums of 1 month cash expenses. Deployment of surplus cash on short term inter-corporate market at 6% per annum is possible.

8. Sales volume will increase by 10% over the previous month, sale price will increase by 5% over the previous month and purchase price will increase by 5% every 15 days, all reckoned on a calendar month basis.

9. All other costs will remain stable over the period.

10. Assume no gestation period. That is, the business starts operations from day one. Irrespective of your starting date of business – your first accounting period would end on 31st march of that year [with a condition of business running for at least 3 months].

For example:

If you start a business on 10 Jan. 1981, then your first accounting period will end on 31

March 1982.

If you start a business on 31 Dec. 1980, then your first accounting period will end on 31

March 1981.

11. You need to have at least 10 transactions per accounting period.

REQUIRED: Part I (Compulsory and worth 30 marks)

1) You are required to prepare the accounts of the business as if owned by you as an individual proprietorship in any name and style of your choice, with in the frame work of the conditions one through eleven detailed above, for three accounting periods.

2) Prepare a precise chronological statement of all transactions.

3) Prepare all the three financial statement [i.e. Balance Sheet, Income Statement and Cash Flow Statement] for each accounting period. You need to have three periods.

REQUIRED: Part II (Compulsory and worth 10 marks)

1) Analyze the financial statement of the company using common ratios discussed in the class, for the above three accounting periods.

2) Analyze the cash flow statement of the company, prepared as above.

THE ANSWER

THE BUSINESS

The demand for flex printing / digital printing is increasing day by day as the number of self proclaimed leaders / social workers / Gods / Avatars are increasing. Big banners, cut outs with the smiley faces and crossed hands became a common entity in almost all the places for all the festivals or celebrations.

My business named ’DigitalPrinters’ will take the orders from the customers and print and deliver the banners or posters to them. The cost of the deliverables will be calculated on the basis of the size of the poster, type of the printing and the amount of ink used.

COMPLIANCE STATEMENTS

1. Date of Commencement of business is the Date of Birth.

Date of Birth 06-01-1982.

So, the business should start on 6^th January.

2. Initial Capital to be contributed.

Calculated based on the SMS ID: 110421

Initial Captial will be 110421*3 = 331263 Rs

PART I: CHRONOLOGICAL STATEMENTS AND FINANCIAL STATEMENTS

1. PERIOD 06-01-1982 TO 31-03-1983

CHRONOLOGICAL STATEMENT OF TRANSACTIONS FOR THE PERIOD 06-01-1982 TO 31-03-1983

Sl No	Date	Transaction
22400	6th Jan 2000	Started the business 'DigitalPrinter' with initial Capital 331236 Rs.
2	15th Jan 2000	Bank loan of 500000 Rs at an interest rate of 10% PA for 10 Years.
3	30th Jan 2000	Bought GARROS EJ-1601B Printer for 490800 Rs with life time 10 Years on cash basis.
4	2nd Feb 2000	Bought Furnitures and other items worth 20000 Rs on credit with life time 5 Years.
5	5th Feb 2000	Bought 10000 ltr Ink worth 4000 Rs on Credit. 1/2 ltr will be used for priting one square feet canvas and 1/4 ltr will be used for printing 1 square feet paper.
6	5th Feb 2000	Bought 10000 suqare feet Paper on Credit at the rate of 1 Rs per 10 square feet.
7	5th Feb 2000	Bought 1000 suqare feet canvas on Credit at the rate of 1 Rs per square feet.
8	20th Feb 2000	Printed two 50 square feet flex in canvas for the advertisement of the Company DigitalPrinters
9	21st Feb 2000	Paid 200 Rs for installing the flex.
10	3rd March 2000	Delivered 50 sqaure feet flex using canvas to local leader at the rate of 50 Rs per square feet on cash basis.
11	10th April 2000	Delivered two 30 square feet flex using canvas to local club for their annual celbration at th rate of 53 Rs per square feet on credit basis.
12	5th May 2000	Delivered 1000 notices of 1 sqaure feet to new firm for their advertisement at the rate of 5 Rs per square feet on cash basis
13	10th June 2000	Delivered 1500 notices of 1 sqaure feet to new firm for their advertisement at the rate of 8 Rs per square feet on cash basis.
14	2nd Aug 2000	Delivered two 50 square feet flex using canvas to local political leader at the rate of 55 for Independence Day wishes on cash basis.
15	10th Aug 2000	Delivered 2000 notices of 1 sqaure feet to school for Independence day celebration at the rate of 9 Rs per square feet on cash basis.
16	10th Sep 2000	Received the amount from local club for the flex delivered on credit basis on 10th April
17	15th Nov 2000	Paid 500 Rs for the paper and canvas bought on credit basis on 5th February
18	15th Dec 2000	Delivered three 50 square feet flex using canvas to local political leader at the rate of 58 for X'Mas and New Year wishes on cash basis.
19	20th Dec 2000	Delivered four 50 square feet flex using canvas to local club at the rate of 58 for X'Mas and New Year wishes on credit basis.
20	15th Jan 2001	Paid 50000 Rs to Bank as a interest of last year
21	31st March 2001	Adjustment on Depreciation of Printer for 2000_2001
22	31st March 2001	Adjustment on Depreciation of Furniture for 2000_2001
23	31st March 2001	Took a Dividend of 10000 Rs

Table 1.1 Transactions for Period 06-01-1982 to 31-03-1983

BALANCE SHEET FOR THE PERIOD 06-01-1982 TO 31-03-1983

Digital Printers Balance Sheet for the Period 06-01-1982 to 31-03-1983
Assets		Liabilities and Owner's Equity
Cash	783936	Payables	25500
Inventory	4308	Loan	500000
Prepaid Rent	0
		Total Liabalities	525500
Total Current Assets	788244
		Capital	708636
Fixed Assets	510800	Profit	64908
Total Fixed Assets	510800	Total Owners Equity	773544
Long Term Assets	0
Total Long Term Assets	0
Total Assets	1299044	Total Liabalities and Owners Equity	1299044

Table 1.2 Balance Sheets for Period 06-01-1982 to 31-03-1983

PROFIT AND LOSS STATEMENT FOR THE PERIOD 06-01-1982 TO 31-03-1983

Digital Printers Profit and Loss Statement for the Period 06-01-1982 to 31-03-1983
Item	Amount
Sales	66480
Less : Cost of Good Sold	-1572
Gross Profit	64908
Less : Sales Expenses	0
Less : Administration Expense	0
Less : General Expense	-320
EBIDTA	64588
Less : Depreciation Expenses	-53080
Operating Profit	11508
Add : Other Income	0
Adjusted for Extraordinary & Past Period Items	0
EBIT	11508
Less : Interest Expenses	-50000
PBT	-38492
Less : Income Tax Expenses	0
PAT	-38492
Less : Dividends for the period	-10000
Profit / Loss Transferred to Balance Sheet	-48492

Table 1.3 Profit and Loss Statement for Period 06-01-1982 to 31-03-1983

CASH FLOW STATEMENT FOR THE PERIOD 06-01-1982 TO 31-03-1983

Digital Printers Cash Flow Statement for the Period 06-01-1922 to 31-03-19833
Operating Activities		Amount
	Cash received from customers	54880
	Cash paid to suppliers	-500
	Interest Paid	-50000
	Expense	-320
A) Net Cash Flow from Operating Activities		4060
Investing Activities
	Printer Purchase	490800
	Furniture Purchase	0
B) Net Cash Flow from Investing Activities		490800
Financing Activities
	Equity Invested	331236
	Loan Taken	500000
C) Net Cash Flow from Financing Activities		831126
Starting Cash Balance		0
Changes in the cash during the Year due to above activities (A+B+C)		1325986
Ending Cash Balance		1325986

Table 1.4 Cash Flow Statements for Period 06-01-1982 to 31-03-1983

2. PERIOD 01-04-1983 TO 31-03-1984

CHRONOLOGICAL STATEMENT OF TRANSACTIONS FOR THE PERIOD 01-04-1983 TO 31-03-1984

Sl No	Date	Transaction
1	2nd April 1983	Paid 4000 for the Ink bought on 5th Feb 1982
2	2nd April 1983	Bought 5000 ltr Ink worth 4200 Rs on Credit.
3	15th April 1983	Delivered three 60 square feet flex using canvas to local temple at the rate of 65 Rs per square feet for festivals on credit basis.
4	7th Sept 1983	Bought 1500 square feet canvas on credit basis at the rate or 3.5 Rs per square feet.
5	7th Sept 1983	Delivered 2500 1 square feet notice using paper to local party at the rate of 10 Rs per square feet for elections on cash basis.
6	19th Oct 1983	Paid 5000 Rs for the furniture bought on credit basis on 2nd February
7	28th Oct 1983	Delivered ten 40 square feet flex using canvas at the rate of 68 Rs per square feet for elections on cash basis.
8	3rd Nov 1983	Paid 1000 Rs for Canvas bought on 5th Fe 2012
9	3rd Nov 1983	Delivered fifteen 30 square feet flex using canvas to local party at the rate of 68 Rs per square feet for elections on cash basis.
10	5th Dec 1983	Delivered 3000 notices of 1 sqaure feet at the rate of 10.50 Rs per square feet on cash basis.
11	8th Dec 1983	Bought 10000 square feet paper on credit basis at the rate or 2.5 Rs per square 10 feet.
12	10th Dec 1983	Delivered 3200 notices of 1 sqaure feet at the rate of 10.50 Rs per square feet on cash basis.
13	15th Dec 1983	Delivered ten 50 square feet flex using canvas at the rate of 70 Rs per square feet for elections on credit basis.
14	3rd Jan 1984	Received 11600 Rs for the item sold on 20th Dec 2012
15	10 th Jan 1984	Paid 50000 Rs to Bank as a interest of last year
16	31st March 1984	Adjustment on Depreciation of Printer for 12 Months at the rate of 4090 per month (Strainght Line Method)
17	31st March 1984	Adjustment on Depreciation of Furniture for 12 Months at the rate of 333.33 per month (Strainght Line Method)

Table 2.1 Transactions for Period 01-04-1983 to 31-03-1984

BALANCE SHEET FOR THE PERIOD 01-04-1983 TO 31-03-1984

Digital Printers Balance Sheet for the Period 01-04-1983 to 31-03-1984
Assets		Liabilities and Owner's Equity
Cash	983216	Payables	49950
Inventory	35182	Loan	450000
Prepaid Rent	0
		Total Liabalities	499950
Total Current Assets	1018398
		Capital	667156
Fixed Assets	404640	Profit	255932
Total Fixed Assets	404640	Total Owners Equity	923088
Long Term Assets	0
Total Long Term Assets	0
Total Assets	1423038	Total Liabalities and Owners Equity	1423038

Table 2.2 Balance Sheets for Period 01-04-1983 to 31-03-1984

PROFIT AND LOSS STATEMENT FOR THE PERIOD 01-04-1983 TO 31-03-1984

Digital Printers Profit and Loss Statement for the Period 01-04-1983 to 31-03-1984
Item	Amount
Sales	194600
Less : Cost of Good Sold	-3576
Gross Profit	191024
Less : Sales Expenses	0
Less : Administration Expense	0
Less : General Expense	0
EBIDTA	191024
Less : Depreciation Expenses	-53080
Operating Profit	137944
Add : Other Income	0
Adjusted for Extraordinary & Past Period Items	0
EBIT	137944
Less : Interest Expenses	-50000
PBT	87944
Less : Income Tax Expenses	0
PAT	87944
Less : Dividends for the period	0
Profit / Loss Transferred to Balance Sheet	87944

Table 2.3 Profit and Loss Statement for Period 01-04-1983 to 31-03-1984

CASH FLOW STATEMENT FOR THE PERIOD 01-04-1983 TO 31-03-1984

Digital Printers Cash Flow Statement for the Period 01-04-1983 to 31-03-1984
Operating Activities		Amount
	Cash received from customers	159500
	Cash paid to suppliers	-10000
	Interest Paid	-50000
	Expense	0
A) Net Cash Flow from Operating Activities		99500
Investing Activities
	Printer Purchase	0
	Furniture Purchase	0
B) Net Cash Flow from Investing Activities		0
Financing Activities
	Equity Invested	0
	Loan Taken	0
C) Net Cash Flow from Financing Activities		0
Starting Cash Balance		1325986
Changes in the cash during the Year due to above activities (A+B+C)		99500
Ending Cash Balance		1425486

Table 2.4 Cash Flow Statements for Period 01-04-1983 to 31-03-1984

3. PERIOD 01-04-1984 TO 31-03-1985

CHRONOLOGICAL STATEMENT OF TRANSACTIONS FOR THE PERIOD 01-04-1984 TO 31-03-1985

1	5th April 1984	Took a dividend or 50000 Rs
2	10th April 1984	Started a Fixed Account and Invested Rs 10000 for 10 Years for 6% per annum.
3	3rd May 1984	Bought new furnitures worth Rs 1000 on credit with lifetime 5 Years
4	5th May 1984	Bought new set of electrical items for Rs 750 on credit with lifetime 5 Years
5	1st June 1984	Apponited a new employee with salary 15% of total year’s sales.
6	10th July 1984	Bought 10000 square feet of canvas worth 55000 Rs at the rate of 5.5 Rs per square feet on credit basis.
7	30th July 1984	Maintenance work for Printer for Rs 2500
8	5th Aug 1984	Maintenance work for Press for Rs 2000
9	6th Sep 1984	Received Rs 11700 for the sale on 15th April 1983
10	5th Oct 1984	Delivered seventeen 50 square feet flex using canvas at the rate of 75 Rs per square feet on credit basis.
11	10th Nov 1984	Delivered twentty 50 square feet flex using canvas at the rate of 78 Rs per square feet on cash basis.
12	1st Dec 1984	Received Rs 35000 for the sale on 15th Dec 1983
13	20th Dec 1984	Paid a salary of 1500 to employee.
14	25th Dec 1984	Delivered 3500 notices of 1 sqaure feet at the rate of 11 Rs per square feet on cash basis.
15	30th Jan 1985	Delivered twentty five 50 square feet flex using canvas at the rate of 80 Rs per square feet on cash basis.
16	26th Feb 1985	Delivered thirty 50 square feet flex using canvas at the rate of 85 Rs per square feet on cash basis.
17	1st March 1985	Paid 50000 Rs to Bank as a interest of last year
18	31st March 1985	Adjustment on Depreciation of Printer for 12 Months at the rate of 4090 per month (Strainght Line Method)
19	31st March 1985	Adjustment on Depreciation of Furniture for 12 Months at the rate of 333.33 per month (Strainght Line Method)

Table 3.1 Transactions for Period 01-04-1984 to 31-03-1985

BALANCE SHEET FOR THE PERIOD 01-04-1984 TO 31-03-1985

Digital Printers Balance Sheet for the Period 01-04-1984 to 31-03-1985
Assets		Liabilities and Owner's Equity
Cash	1321666	Payables	106700
Inventory	64132	Loan	400000
		Total Liabalities	506700
Total Current Assets	1385798
		Capital	604776
Fixed Assets	353310	Profit	637632
Total Fixed Assets	353310	Total Owners Equity	1242408
Long Term Assets	10000
Total Long Term Assets	10000
Total Assets	1749108	Total Liabalities and Owners Equity	1749108

Table 3.2 Balance Sheets for Period 01-04-1984 to 31-03-1985

PROFIT AND LOSS STATEMENT FOR THE PERIOD 01-04-1984 TO 31-03-1985

Digital Printers Profit and Loss Statement for the Period 01-04-1984 to 31-03-1985
Item	Amount
Sales	407750
Less : Cost of Good Sold	-26050
Gross Profit	381700
Less : Sales Expenses	0
Less : Administration Expense	0
Less : General Expense	-4500
EBIDTA	377200
Less : Depreciation Expenses	-53080
Operating Profit	324120
Add : Other Income	0
Adjusted for Extraordinary & Past Period Items	0
EBIT	324120
Less : Interest Expenses	-50000
PBT	274120
Less : Income Tax Expenses	0
PAT	274120
Less : Dividends for the period	-50000
Profit / Loss Transferred to Balance Sheet	224120

Table 3.3 Profit and Loss Statement for Period 01-04-1984 to 31-03-1985

CASH FLOW STATEMENT FOR THE PERIOD 01-04-1984 TO 31-03-1985

Digital Printers Cash Flow Statement for the Period 01-04-1984to 31-03-1985
Operating Activities		Amount
	Cash received from customers	355700
	Cash paid to suppliers	0
	Interest Paid	-50000
	Expense	-4500
A) Net Cash Flow from Operating Activities		301200
Investing Activities
	Electric Items Purchase	0
	Furniture Purchase	0
B) Net Cash Flow from Investing Activities		0
Financing Activities
	Equity Invested	10000
	Loan Taken	0
C) Net Cash Flow from Financing Activities		10000
Starting Cash Balance		1425486
Changes in the cash during the Year due to above activities (A+B+C)		311200
Ending Cash Balance		1736686

Table 3.4 Cash Flow Statements for Period 01-04-1984 to 31-03-1985

PART II: FINANCIAL STATEMENT ANALYSIS AND CASH FLOW ANALYSIS

1. FINANCIAL RATIOS ANALYSIS

Financial Ratios Digital Printers FY1983 to FY1985
Solvency		FY1983(15M)	FY1984(12M)	FY1985(12M)
	Short Term Solvency
	Net Working Capital	262744	518448	879098
	Current Ratios	1.49	2.03	2.73
	Quick Ratios	1.49	1.96	2.6
	Average Daily Expense	141.11	135.62	74.05
	Cash Cover for Daily Expense	5555.49	7249.78	17848.29
	Quick Asset Cover for Daily Expense	5555.49	7249.78	17848.29
	Current Asset Cover for Daily Expense	5586.02	7509.2	18714.35
	Current Liabalities Cover for Daily Expense	180.71	368.3	1440.91
	Operating Cycle Activities
	Accounts Receivable Turnover	5.73	4.16	6.39
	Average Collection Period (Days)	78.35	87.74	57.12
	Inventory Turnover	0.72	0.2	0.81
	Inventory Conversion Period (Days)	11.82	3.29	28.7
	Average Payable Period	7483.33	5214.28	1520.83
	Long Term Solvency
	Total Debt to Total Capital	0.67	0.54	0.4
	Long-Term Debt to Total Capital	0.64	0.48	0.32
	Long-Term Debt to Fixed Assets	0.97	1.11	1.13
	Times Interest Covered	0.23	2.75	6.48
	Times Fixed Charge Covered	0.23	2.75	6.48
	Equity Multiplier	1.67	1.54	1.4
	Gearing (%)	64.63	48.74	32.19
Profitability		FY1983(15M)	FY1984(12M)	FY1985(12M)
	Margin on Sales
	Gross Profit Margin (%)	97.63	98.16	93.61
	Operating Profit Margin (%)	17.31	70.88	79.48
	Net Profit Margin (%)	-57.9	45.19	67.22
	Earnings Before Interest and Tax	11508	137944	324120
	Profit Before Tax	-38492	87944	274120
	Return on Investment
	Operating Profit to Operating Asset (%)	1.77	10.13	20.5
	Net Income to Total Asset (%)	-7.46	6.46	14.17
	Return on Equity (%)	-9.84	9.94	24.87
	Efficiency of Use of Assets
	Total Asset Turnover	0.1	0.14	0.25
	Operating Asset Turnover	0.1	0.14	0.25
	Working Capital Turnover	0.17	0.22	0.36
	Shareholder Equity Turnover	0.17	0.22	0.37
	Returns per Share of Equity
	Earnings per Share	-38492	87944	274120
	Dividens per Share	10000	0.0	50000

2. CASH FLOW STATEMENT ANALYSIS

1. Profitability

· Margin on Sales

Margin on Sales	FY1983(15M)	FY1984(12M)	FY1985(12M)
Gross Profit Margin (%)	97.63	98.16	93.61
Operating Profit Margin (%)	17.31	70.88	79.48
Net Profit Margin (%)	-57.9	45.19	67.22
Earnings Before Interest and Tax	11508	137944	324120
Profit Before Tax	-38492	87944	274120

During the first financial period, the company was in loss and during the subsequent periods, the company turned into a complete profitable one. In FY1983, the sales were very less, which causes the company to be in loss. Increase in sales in the last two periods made the company to comback from the initial loss and made the company to more profitable one.

· Return on Investment

Return on Investment	FY1983(15M)	FY1984(12M)	FY1985(12M)
Operating Profit to Operating Asset (%)	1.77	10.13	20.5
Net Income to Total Asset (%)	-7.46	6.46	14.17
Return on Equity (%)	-9.84	9.94	24.87

While setting up the company, the fixed asset (Printer) was bought using the cash borrowed as long term loan. And since the sales during the first period was very less when compared to the last two periods, the return on investment during the first period was very less. In the subsequent periods, there was no additional purchase of the assets and the increase in the sales volume made the company more profitable.

· Efficiency of Use of Assets

Efficiency of Use of Assets	FY1983(15M)	FY1984(12M)	FY1985(12M)
Total Asset Turnover	0.1	0.14	0.25
Operating Asset Turnover	0.1	0.14	0.25
Working Capital Turnover	0.17	0.22	0.36
Shareholder Equity Turnover	0.17	0.22	0.37

During the first period, evnthough the fixed assets were new and without the depreciation, the total production was very low. But for the subsequent periods, the production was increased tremendously and hence the sales. And there were no addition to the operating assets and to the fixed assets. All these factors made the increase in Efficiency of use of assets.

· Returns per Share Equity

Returns per Share of Equity	FY1983(15M)	FY1984(12M)	FY1985(12M)
Earnings per Share	-38492	87944	274120
Dividens per Share	10000	0.0	50000

Since the compnay was in loss during the first period, the Earnings per Share were very low compared to the last two periods. But as the compnay moved from loss to profit, the Earnings per Share also increased.

Dividends were taken only during two periods.

2. Solvency

· Short Term Solvency

Short Term Solvency	FY1983(15M)	FY1984(12M)	FY1985(12M)
Net Working Capital	262744	518448	879098
Current Ratios	1.49	2.03	2.73
Quick Ratios	1.49	1.96	2.6
Average Daily Expense	141.11	135.62	74.05
Cash Cover for Daily Expense	5555.49	7249.78	17848.29
Quick Asset Cover for Daily Expense	5555.49	7249.78	17848.29
Current Asset Cover for Daily Expense	5586.02	7509.2	18714.35
Current Liabalities Cover for Daily Expense	180.71	368.3	1440.91

The company has taken an aggressive approach in working capital financing and hence there is an increase in the Net Working Capital, Current Ratios and Quick Ratios during these periods.

The Average Daily expense is declaining for these periods from 141.11 to 135.62 to 74.05. The overall increase in sales and decrease in Average Daily Expense leads to the increase in Cash Cover, Quick Asset Cover, Current Asset Cove and Current Liabalities Cover.

· Operating Cycle Activities

Operating Cycle Activities	FY1983(15M)	FY1984(12M)	FY1985(12M)
Accounts Receivable Turnover	5.73	4.16	6.39
Average Collection Period (Days)	78.35	87.74	57.12
Inventory Turnover	0.72	0.2	0.81
Inventory Conversion Period (Days)	11.82	3.29	28.7
Average Payable Period	7483.33	5214.28	1520.83

Since there was no standard meassures for collecting the money of the goods sold on credit basis Accounts Receivable Turnover and Average Collection Period are fluctuating for the three periods.

Inventory Turnover is also fluctuating for the three years. During the second period, a lot of invenories were bought and hence the turnover is decreased. A lot of additional Inventories decreased the Inventory Conversion Period of the second Period.

Since the company has decided to pay back the money for the purchased done on credit basis, the Average Payable Period is decreased during the three years.

· Long Term Solvency

Long Term Solvency	FY1983(15M)	FY1984(12M)	FY1985(12M)
Total Debt to Total Capital	0.67	0.54	0.4
Long-Term Debt to Total Capital	0.64	0.48	0.32
Long-Term Debt to Fixed Assets	0.97	1.11	1.13
Times Interest Covered	0.23	2.75	6.48
Times Fixed Charge Covered	0.23	2.75	6.48
Equity Multiplier	1.67	1.54	1.4
Gearing (%)	64.63	48.74	32.19

Company is moving towards a good position as the Debits Ration is decreasing and the Interest Coverage and Fixed Charge Coverage are increasing. The Equity Multiplier is decreased from 1.67 in 1983 to 1.4 in 1985. This shows that the company’s dependency on debits is decreasing as the sales and cash inflow is increasing.

The Gearing Percentage ((Long Term Liabalities/Capital Emplyoed)*100) is decresing as the company moving forward and coming out of the financial risk due to the long term liabalities.

Overall, the Company Digital Printers is moving to complete pforitable one since the starting in 1982. In the first year, the main source of the cash was from the iniitial investement and the bank loan. In the following years, there was no long term liabalities and the main source of cash was from the net earnings from the sales. Since the company is single ownered and single employed for the first two periods, the cash outflow in the form of dividends and salary was very less. Cash outflow in the form of taxes is also not present since the company started as sole propreitership company.