MORE VINO LTD.

- EXPANSION PROPOSAL

Submitted by:
Adyay Pramanick 19PGDM128
Alisha Sheikh 19PGDM130
Pritha Chakraborty 19PGDM157
Priyanshi Kanoongo 19PGDM158
Sayandeep Dastidar 19PGDM168
Sulagna Pathak 19PGDM178
 1. CASH FLOW AND RATIO ANALYSIS

PARTICULARS 2017 2016

Net Income (987122) (2015034)
• Although the Net Income has increased from 2016, the company is still unprofitable over the years span.

Accounts Receivable:
PARTICULARS 2017 2016
Accounts Receivable 14316 (25380)
Receivable Turnover (in days) 0.47  2.1
• Their accounts receivables are decreasing since the receivable turnover days are decreasing from 2 to 0.
• The change in retail requires their customers to pay upfront for their order, versus wholesale, where a customer
would buy products on credit. This also would cause their average collection period to become 0, because they
no longer need to collect credit payment from customers. Only a small percentage of the company’s sales have
customers that buy for resale purposes, the majority sales are cash retail
Inventory
Particulars 2017 2016
Inventory 650160 (1359144)
Inventory Turnover (in days) 45.9 148.9

• Their inventory significantly decreases, the yearly accounts don’t change much. 
• Their inventory days decreased from149 to 46 days. 
• The significant change in inventory is simply because they don’t require that much product for a retail business as
they would for a wholesale business.

Accounts Payable
Particulars 2017 2016
Accounts Payable 817134 391932
Accounts Payable Turnover (in days) 88.4 30.5

• Accounts Payable Days is increasing from 31 to 88 days from 2016 to 2017. 

• Their suppliers have granted More Vino extended payment terms to pay off their accounts going forward.
Net Cash Flow from Operating Activity

Particulars 2017 2016

Net Cash Flow from operating Activity 726592 (2918738)

Analysis:
More Vino’s Net Income is improving, and their net cash flows from operations is positive, which shows optimism for
the future. This also indicates that the brothers are managing their activities well and are able to generate cash by the
regular operating activities of the business.

Net Cash Flow from Financing Activity

Particulars 2017 2016
Net Cash Flow from Financing Activity 258740 3773492

Analysis:
The company is relying heavily on external investments into the company. It has taken a huge amount of loan in 2016
and in 2017 it took additional shareholder's loan of $666,000 just within a year of operations. 
Net Cash Flow from Investing Activity

Particulars 2017 2016

Net Cash Flow from Investing Activity (Fixed Assets) (991512) (827868)
Asset Turnover Ratio 3.9 2.0

Analysis:
The fixed assets do increase significantly due to their shift from wholesale to retail.
Their Total Asset Turnover improves from 2.0% to 3.9% in 2016 to 2017. This concludes that they manage their fixed
assets well for a shifting company. 

Profitability Analysis
The company has had a negative profit from 2016 to 2017, but this is because the company has expenses that are higher
than their sales and they are only two years old. Their decreasing cash flow from operations and fixed asset investments
are being funded by debt.
Liquidity Analysis:
Particulars 2017 2016
Current Ratio 0.26:1 0.71:1
Acid Test Ratio 0.01:1 0.03:1

The ideal current ratio of a company is 2:1 and for Acid test Ratio it is 1:1. 
Here the low current ratio and acid test ratio is very risky. They could possibly become bankrupt if they need to sell their
fixed assets to pay for short-term obligations.
 3. MORE VINO'S FUTURE FINANCIAL REQUIREMENTS

 They needed an additional funding of $1060000 to help finance the renovation of an outdoor patio area. Out of the whole amount, they
arranged $200000 from their mother, $130000 were contributed by each and they neeeded $600000 more from Greenway.
 The Stone brothers had aspirations to sell accessories (such as glasses, gifts baskets, wine bottle holders and openers) and to offer wine-
testing events, special promotions and a More Vino wine club to attract and retain a regular clientele. For these activities they needed
additional fundings.
 The future projections also required financing for:

     - $300000 for wages

     - 20% increase in rent
     - 3.5% increase in marketing and advertisement budget (of sales)
     - $120000 for additional Working Capital needs for peak seasons
     - 15% - 30% increase in excise duty tax.
     - 10% - 15% increase in inventory cost. 
4. FOUR C'S CREDIT ASSESSMENT

Character:   Mostly financed by debt

Capacity:   Since the company is incurring losses, and most of the income is going towards debt
payments, it will be tough for them to get loans.

Capital:   The Stone brothers contributed $720000 along with 1/3rd ownership.

 Collateral:   There is no collateral as such which can act as a security for the loan. The building in
which they operated was rented and the other Fixed Assets that they had were less valuable..
5. OPTIONS FOR GREENWAY

Decisions

To lend
Not to lend any
$600000 to
money to More
More Vino Ltd. 
Vino Ltd.
at 9% p.a
 6. RECOMMENDATIONS

 All ratios show improvement, which is a positive for More Vino’s future. Although the company is still
unprofitable over the years span, the ratios show positivity and the company has become less unprofitable.This
suggests that the Stone brothers have applied better management to the company, and if this continues then the
company will be profitable in the near future. It is also seen that the company is completely financed by debt. 
 The company is not making enough to cover interest payments. An unprofitable company cannot afford to have
interest expenses along with their accrued debt.
 Although there was 101% growth in sales, the strong growth results are not enough to say that More Vino is ready
to expand their business further with more external financing. Putting personal factors aside, Greenway should not
provide extra financing to the Stone brothers.
 They are requesting to finance their expansion, which will require them to purchase further fixed assets, when
they currently are not profitable with the fixed assets that are available to them. Once they are profitable with their
financing and debt lowered, then it would be safe for them to expand and finance again. More Vino is currently
too risky to expand and add more debt to their company.
THANK  YOU