CASE STUDY

INGEX is a limited company specialized in manufacturing high precision mechanical for the
automotive and aeronautics industries. The company also follows up the resale of lubricants
on French territory. It generates its sales in its own national territory but developed these last
few years export sales.
In a process of re-organization, the company wants to study in a more detailed and specific
manner its changes in cash flow. Mister JAMES asks you to establish a complete financial
performance analysis of its company.

Other information to be added:

▪ In N, only one borrowing has been contracted: a bond issue with a value of 16 200 K€
called annual payment.
▪ There is no new investment grant.
▪ Accruals and prepaid expenses & incomes are related to operating
▪ Marketable securities are money market mutual funds easily convertible in cash against
a financial penalty.
▪ Operating grants (522K€) are considered as an operating inflow of money allowing the
payments of several operations of different natures.
▪ Each value in the notes are in thousands of Euros.

1. Calculate the intermediate management balances and the operating cash flow.

2. Construct the functional balance sheet and calculate the Working Capital, Operating
Working Capital Requirements, Non-Operating Working Capital Requirements,
Working Capital Requirements & the Cash Flow. Are we facing a critical point?

3. Establish a diagnosis on WCR through flow times (Raw material & good storage,
DIO, DSO, DPO)

4. Establish a diagnosis on WC through the financing statement (part 1 & 2)

To help you:

▪ Dividend payments N = profit N-1 + (Retained earnings N-1 - Retained earnings N)

– (Reserves N-1 – Reserves N)
▪ Increase of financial debts = bond issue (annual debt payment) – increase in
redemption premium
▪ Payment of financial debts = annual debt payment – changes in debts
▪ Changes in debts = Changes in long-term debts – changes in accrued interests
5. Calculate other significant ratios to analyze liquidity & solvency risks, financial
structure of the company and operating conditions.

RATIOS
N Units
Financial autonomy
Financial debts / Equity %
Financial debts / OCF years
WC/ TOTAL ASSETS %
Investment efforts
years
Fixed-assets acquisition (except financial assets) / DAP
Capital assets age
%
Tangible assets amortizations / gross value of tangible assets
VALUE ADDED / Sales ex. VAT %
GOS / Sales ex. VAT %
Raw materials storage / DIO (days inventories outstanding)
days
(RM average inventory / costs of RM) * 360
DIO
days
(FG average inventory / costs of P) * 360
DSO
days
(Trade & other receivable / Sales incl. VAT)*360
DPO
days
(Trade and other payables / Purchases incl. VAT)*360

6. Comment the global financial evolution of the INGEX company (do not exceed 30
lines)
 NOTE 1: BALANCE SHEET

Period N Period N-1 Period Period

ASSETS LIABILITIES
Gross Value A&D Net Value Net Value N N-1
Subscribed & non-called capital 2 700 2 700
FIXED-ASSETS EQUITIES
Intangible assets Issued capital (including 21 690 paid) 24 390 18 990
Set-up costs Premium of merger, contribution 13 158 11 358
Research & development 2 170 1 000 1 170 1 458 Statutory reserves 1 004 886
Concessions, patents, licenses 1 066 203 863 666 Regulatory reserves 3 278 2 817
Tangible assets Retained earnings 81 13
Land 378 378 567 Profit/loss 1 215 2 360
Building 22 734 9 166 13 568 11 182 Investment grants 1 091 1 278
Machinery & equipment 9 670 5 924 3 746 4 721 Regulatory provisions 9 13
Property, plant & equipment 5 512 3 672 1 840 2 185 TOTAL I 44 226 37 715
Property, plant and equipment in progress 290 290 500
Financial assets
Participation 19 267 3 607 15 660 11 180 PROVISIONS
Loans 990 990 1 350 Provisions for risks / contingencies 2 641 2 864
Other financial assets 340 80 260 140 Provisions for charges / losses
TOTAL I 62 417 23 652 38 765 33 949 TOTAL II 2 641 2 864

CURRENT-ASSETS DEBTS
Inventories Financial Debts
Inventories of raw materials 4 195 760 3 435 4 250 Bond issue 22 570 10 910
Inventories of finished goods 2 952 2 952 2 802 Borrowings from credit institutions (1) 1 148 2 143
Inventories of goods 270 270 225 Other financial debts 6 180 7 600
Operating receivables
Trade and other receivable 22 626 3 262 19 364 27 153 Operating Debts
Other receivable 9 382 9 382 1 800 Trade and other payables 11 803 12 856
Advances and prepayments on orders Social and tax payables 2 732 2 802
Advances and deposits received on orders
Subscribed, called and non-paid capital
Other debts
Marketable securities 6 790 6 790 4 592 Fixed assets payable
Cash & cash equivalent 5 587 5 587 1 632 Taxes payable 60 100
Other debts 365 436
Adjustment accounts Adjustment accounts
Accruals and prepaid expenses 2 048 2 048 1 667 Accruals and prepaid incomes 906 803
TOTAL II 53 850 4 022 49 828 44 121 TOTAL III 45 764 37 650
Expenses to be accrued over several fiscal years 990 990 367
Redemption premium (Premium for bond
726 726 461
reimbursement)
Currency translation adjustments assets Currency translation adjustments liabilities
TOTAL 120 683 27 674 93 009 78 898 TOTAL 92 631 78 229
(1) including short term bank loans and overdrafts 378 669
 NOTE 2: INCOME STATEMENT

EXPENSES N INCOMES N
OPERATING EXPENSES OPERATING INCOMES
Purchases of goods 1 737 Sales of goods 4 534
Changes in goods inventory - 45 Sales of finished goods 35 567
Purchases of raw materials 13 348 Sales of services 1 853
Change in raw materials inventory 658 Stored production 150
Purchases of equipment and supplies not held in inventory 1 500 Fixed-assets production 135
External services 2 534 Operating grants 522
Payroll taxes 500 Reversals of impairment and provisions 1 422
Other taxes and duties recoverable 296 Other incomes 147
Wages 6 445
Employer and employee contributions 2 994
Depreciations & amortizations for fixed-assets 9 319
Depreciations for current assets 980
Provisions 737
Other expenses 20
TOTAL I 41 023 TOTAL I 44 330

FINANCIAL EXPENSES FINANCIAL INCOMES

Depreciations, amortizations & provisions 3 275 Interest incomes 1 114
Interest expenses 510 Positive currency translations 117
Negative currency translations 42
TOTAL II 3 827 TOTAL II 1 231

EXTRAORDINARY EXPENSES EXTRAORDINARY INCOMES

Expenses from previous years 1 015 Income from disposals 5 460
Net book value for fixed asset disposal 3 990 Investment grants written back to income 187
Depreciations, amortizations & provisions 3 Reversals of impairment and provisions 632
TOTAL III 5 008 TOTAL III 6 279

Employee profit sharing for the financial 362

Profit tax 405
TOTAL EXPENSES 50 625 TOTAL INCOMES 51 840
Profit 1 215 Loss
TOTAL 51 840 TOTAL 51 840
 NOTE 3: FIXED-ASSETS

Gross value at Acquisitions, Gross value

Decreases through Decrease through
FIXED-ASSETS the beginning of creations,
writing games disposals
at the end of
N loans granted N
Intangible assets
Research & development 1 933 237 2 170
Concessions, patents, licenses 765 301 1 066
TOTAL I 2 698 538 - - 3 236

Tangible assets -
Land 567 189 378
Building 17 986 9 481 4 733 22 734
Machinery & equipment 9 144 3 605 3 079 9 670
Transport equipment 2 489 88 36 2 541
Office equipment, hardware and software 2 775 288 92 2 971
Property, plant and equipment in progress 500 135 345 290
TOTAL II 33 461 13 597 345 8 129 38 584

Financial assets -
Participation 11 777 7 490 19 267
Loans & other financial assets 1 525 165 360 1 330
TOTAL III 13 302 7 655 - 360 20 597

TOTAL 49 461 21 790 345 8 489 62 417

 NOTE 4: AMORTIZATIONS

Cumulated
Cumulated at Decreases:
amortization Straight-line
AMORTIZATIONS the beginning of Amortizations disposal &
at the end of amortizations
N reversals
N
Intangible assets
Research & development 475 525 1 000 525
Concessions, patents, licenses 99 104 203 104
TOTAL I 574 629 - 1 203 629
-
Tangible assets
Land
Building 6 804 4 992 2 630 9 166 4 992
Machinery & equipment 4 423 2 928 1 427 5 924 2 928
Transport equipment 1 181 218 27 1 372 218
Office equipment, hardware and software 1 898 457 55 2 300 457
Property, plant and equipment in progress
TOTAL II 14 306 8 595 4 139 18 762 8 595
-
Financial assets -
Participation -
Loans & other financial assets -
TOTAL III - - - - -
-
TOTAL 14 880 9 224 4 139 19 965 9 224

Net value at the Net value at

Other information Increases Decreases
beginning of N the end of N
Expenses to be accrued over several fiscal years 367 718 95 990
Redemption premium 461 485 220 726
 NOTE 5: DEPRECIATIONS
Value at
Value at the
DEPRECIATIONS beginning of N
Increases Decreases the end of
N
Intangible assets
Tangible assets
Financial assets -
Participation 597 3 010 3 607
Other financial assets 35 45 80
TOTAL III 632 3 055 - 3 687
Inventories 603 157 760
Account receivables 2 808 823 369 3 262
TOTAL 4 043 4 035 369 7 709
Including
Operating 980 369
Financial 3 055
Extraordinary

NOTE 6: PROVISIONS
Value at the Decreases = Value at the
PROVISIONS beginning of N
Increases
reversals end of N
Regulated provisions -
For price increase 4 1 5
For tax depreciation 9 2 7 4
-
Provisions for risks -
For litigations 297 635 58 874
For warranties 1 752 102 277 1 577
For fines and penalties 815 625 190
TOTAL 2 877 740 967 2 650
Including
Operating 737 335
Financial
Extraordinary 3 632
 NOTE 7: DBPM & Accrued interests

Other information N N-1

Discounted bills pending maturity 5 400 4 500
Accrued interests on financial debts 459 342