sowmya- raghuram

SIKKIM-MANIPAL UNIVERSITY

A Project report on Ration Analysis

A Case study of the Company Kampala Nissan Limited

By: SOUMYA RAGHURAM

OCTOBER 2007

1.0 INTRODUCTION

Financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company's financial statements. The level and

historical trends of these ratios can be used to make inferences about a company's financial condition, its operations and attractiveness as an investment.

Financial ratios are calculated from one or more pieces of information from a company's financial statements. For example, the "gross margin" is the gross profit from operations divided by the total sales or revenues of a company, expressed in percentage terms. In isolation, a financial ratio is a useless piece of information. In context, however, a financial ratio can give a financial analyst an excellent picture of a company's situation and the trends that are developing.

A ratio gains utility by comparison to other data and standards.

Ratio analysis has a very broad scope. One aspect looks at the general (qualitative) factors of a company. The other side considers tangible and measurable factors (quantitative). This means crunching and analyzing numbers from the financial statements. If used in conjunction with other methods, quantitative analysis can produce excellent results.

Ratio analysis isn't just comparing different numbers from the balance sheet, income statement, and cash flow statement. It's comparing the number against previous years, other companies, the industry, or even the economy in general. Ratios look at the relationships between individual values and relate them to how a company has performed in the past, and might perform in the future.

For example current assets alone don't tell us a whole lot, but when we divide them by current liabilites we are able to determine whether the company has enough money to cover short term debts.

The biggest part of fundamental analysis involves delving into the financial statements. Also known as quantitative analysis, this involves looking at revenue, expenses, assets, liabilities and all the other financial aspects of a company. Fundamental analysts look at this information to gain insight on a company's future performance. A good part of this tutorial will be spent learning about the balance sheet, income statement, cash flow statement and how they all fit together.

Ratio analysis serves to answer questions, such as:

Is the company’s revenue growing? Is it actually making a profit? Is it in a strong-enough position to beat out its competitors in the future? Is it able to repay its debts? Is management trying to "cook the books"?

Of course, these are very involved questions, and there are literally hundreds of others you might have about a company. It all really boils down to one question: Is the company’s stock a good investment? Think of fundamental analysis as a toolbox to help you answer this question.

When it comes to analyzing fundamentals, the income statement lets investors know how well the company’s business is performing - or, basically, whether or not the company is making money. Generally speaking, companies ought to be able to bring in more money than they spend or they don’t stay in business for long. Those companies with low expenses relative to revenue - or high profits relative to revenue - signal strong fundamentals to investors.

Financial ratio analysis groups the ratios into categories which tell us about different facets of a company's finances and operations. An overview of some of the categories of ratios is given below.

Leverage Ratios which show the extent that debt is used in a company's capital structure.

Liquidity Ratios which give a picture of a company's short term financial situation or solvency.

Operational Ratios which use turnover measures to show how efficient a company is in its operations and use of assets.

Profitability Ratios which use margin analysis and show the return on sales and capital employed.

Solvency Ratios which give a picture of a company's ability to generate cash flow and pay it financial obligations

What do the Users of Accounts Need to Know?

Investors to help them determine whether they should buy shares in the

business, hold on to the shares they already own or sell the

shares they already own. They also want to assess the ability

of the business to pay dividends.

Lenders to determine whether their loans and interest will be paid

when due

Managers might need segmental and total information to see how they

fit into the overall picture

Employees information about the stability and profitability of their

employers to assess the ability of the business to provide

remuneration, retirement benefits and employment

opportunities

Suppliers and

other trade

creditors

businesses supplying goods and materials to other businesses

will read their accounts to see that they don't have problems:

after all, any supplier wants to know if his customers are going

to pay their bills!

Customers the continuance of a business, especially when they have a

long term involvement with, or are dependent on, the

business

Governments

and their

agencies

the allocation of resources and, therefore, the activities of

business. To regulate the activities of business, determine

taxation policies and as the basis for national income and

similar statistics

Local

community

Financial statements may assist the public by providing

information about the trends and recent developments in the

prosperity of the business and the range of its activities as

they affect their area

Financial

analysts

they need to know, for example, the accounting concepts

employed for inventories, depreciation, bad debts and so on

Environmental

groups

many organizations now publish reports specifically aimed at

informing us about how they are working to keep their

environment clean.

Researchers researchers' demands cover a very wide range of lines of

enquiry ranging from detailed statistical analysis of the

income statement and balance sheet data extending over

many years to the qualitative analysis of the wording of the

statements

1.2 REASONS FOR CHOOSING THE TOPIC:

Ratio analysis has always fascinated me as it is an area through which we can understand the overall business of a company. It tells a layman how a company is performing using simple analysis and with numbers.

1.3 AIMS AND OBJECTIVES OF THE STUDY

The study seeks to investigate the various relationships between the variables in the financial statements of Kampala Nissan Limited and interpret them.

The interpret the main accounting ratios in terms of what they tell the observer about liquidity, profitability, etc. of Kampala Nissan Limited

The reason for changes in accounting ratios over time and its consequences on the affairs of the company.

The use and limitations of ratio analysis in decision making as applied to a number of different businesses .

To interpret the profitability, solvency, liquidity, operational and leverage ratios of Kampala Nissan Limited and a similar company in the industry and find reasons for the differences.

Explain how financial ratio analysis helps financial managers assess the health of a company.

1.5 LIMITATIONS OF THE STUDY

During the course of the study, the following limitations were encountered.

Non availibality of Accurate Information: Since the project study was taken up during the time which happened to be the year end for the companies, more details could not be collected because the staff were obviously busy with the closure of books of accounts.

Time constraintGiven the limited time in which the research was to be done, I could not collect data from all the divisions. However, I ensured that the headquarter was targeted since this is where the major operations are done

Confidential InformationSome of the company information’s were highly confidential and hence these were not availed to me.

As I lived abroad it was difficult to get answers to all the questions I wanted from the company based in Kampala

Since am an amateur in doing Projects some ratios I couldn’t do an indept analysis.

Despite the above constraints, I was able to work hard and achieve the reliable results so as to complete the research successfully.

SECTION 2

2.0 METHODOLOGY USED TO GATHER INFORMATION:

2:1 RESEARCH DESIGN

The study used a blend of descriptive and analytical designs, well aware that none of them singly would give sufficient/reliable findings in a study of this nature. Consequently, both quantitative and qualitative methods were employed in data collection and analysis.

2:2 sampling method

The use of financial statements for 2 years and industry average has been covered and are interpreted in this project study.

2:2:1 sampling size

Analyzed and interpreted 20 ratios of the company

2:3 DATA COLLECTION: SOURCES, METHODS AND INSTRUMENTS

2:3:1Sources

The study used both primary and secondary sources because the latter were considered to be insufficient for this study, if used alone.

2:3:2Primary Sources

The audited financial statements of the company and the annual reports and basic documents were collected.

2:3:3Secondary Sources

I had a face to face chat with the financial controller of the company and with his assistant accountants. Also used financial information from other companies in the same industry.

2:4: Data Collection Methods

A number of methods were used during data collection because no single method can appropriately give concrete findings singly. Methods used included interviews and observations.

I also used secondary data mainly from textbooks and journals.

2:5 DATA PROCESSING AND ANALYSIS

Data collected in 2.4 above were edited with a view of checking for completeness and accuracy. This was done with corresponding to their tax auditors and to the Uganda Revenue Authority.

The statistical package for social scientists (SPSS) for windows release 6.1 was used for the main data analysis. Frequencies, groups and tables were produced from these data and used to enhance understanding of father discussion in the subsequent chapter.

The data collected was edited, coded and summarized into tables. Frequencies and percentages were used to code the data and to ensure completeness and accuracy. 2.5 STUDY AREA

The study was conducted completely focusing on the financial information of the company. The particular departments examined were the accounting and auditing departments.

Section 3

THEORETICAL ANALYSIS OF THE FINANCIAL RATIOS

Financial ratios are widely used for modelling purposes both by practitioners and researchers. The firm involves many interested parties, like the owners, management, personnel, customers, suppliers, competitors, regulatory agencies, and academics, each having their views in applying financial statement analysis in their evaluations. Practitioners use financial ratios, for instance, to forecast the future success of companies, while the researchers' main interest has been to develop models exploiting these ratios. Many distinct areas of research involving financial ratios can be discerned. Historically one can observe several major themes in the financial analysis literature. There is overlapping in the observable themes, and they do not necessarily coincide with what theoretically might be the best founded areas, ex post. The existing themes include

the functional form of the financial ratios, i.e. the proportionality discussion, distributional characteristics of financial ratios, classification of financial ratios, comparability of ratios across industries, and industry effects, time-series properties of individual financial ratios, bankruptcy prediction models, explaining (other) firm characteristics with financial ratios, stock markets and financial ratios, forecasting ability of financial analysts vs. financial models, Estimation of internal rate of return from financial statements.

The history of financial statement analysis dates far back to the end of the previous century (see Horrigan, 1968). However, the modern, quantitative analysis has developed into its various segments during the last two decades with the advent of the electronic data processing techniques. The empiricist emphasis in the research has given rise to several, often only loosely related research trends in quantitative financial statement analysis. Theoretical approaches have also been developed, but not always in close interaction with the empirical research.

Technically, financial ratios can be divided into several, sometimes overlapping categories. A financial ratio is of the form X/Y, where X and Y are figures derived from the financial statements or other sources of financial information. One way of categorizing the ratios is on the basis where X and Y come from (see Foster, 1978, pp. 36-37, and Salmi, Virtanen and Yli-Olli, 1990, pp. 10-11). In traditional financial ratio analysis both the X and the Y are based on financial statements. If both or one of them comes from the income statement the ratio can be called dynamic while if both come from the balance sheet it can be called static (see ibid.). The concept of financial ratios can be extended by using other than financial statement information as X or Y in the X/Y ratio. For example, financial statement items and market based figures can be combined to constitute the ratio.The traditionally stated major purpose of using financial data in the ratio form is making the results comparable across firms and over time by controlling for size. This basic assertion gives rise to one of the fundamental trends in financial ratio analysis (or FRA for short, in this paper). The usually stated requirement in controlling for size is that the numerator and the denominator of a financial ratio are proportional. The seminal paper is this field is Lev and Sunder (1979). They point out, using theoretical deduction, that in order to control for the size effect, the financial ratios must fulfill very restrictive proportionality assumptions (about the error term, existence of the intercept, linearity, and dependence on other variables in the basic financial variables relationship models Y = bX + e and its ratio format Y/X = b + e/X). It is shown that the choice of the size deflator (the ratio denominator) is a critical issue. Furthermore, Lev and Sunder bring up the problems caused in multiple regression models where the explaining variables are ratios with the same denominator. This is a fact that has been discussed earlier in statistics oriented literature like in Kuh and Meyer (1955).In finance, a financial ratio is a ratio of selected values on a enterprise's financial statements. There are many standard ratios used to evaluate the overall financial condition of a corporation or other organization. Financial ratios are used by managers within a firm, by current and potential stockholders (owners) of a firm, and by a firm's creditors. Security analysts use financial ratios to compare the strengths and weaknesses in various companies.[1] If shares in a company are traded in a financial market, the market price of the shares is used in certain financial ratios.Values used in calculating financial ratios are taken from the balance sheet, income statement, cash flow statement and (rarely) statement of retained earnings. These comprise the firm's "accounting statements" or financial statements.Ratios are always expressed as a decimal value, such as 0.10, or the equivalent percent value, such as 10%.

Financial ratios quantify many aspects of a business and are an integral part of financial statement analysis. Financial ratios are categorized according to the financial aspect of the business which the ratio measures. Liquidity ratios measure the availability of cash to pay debt. Activity ratios measure how quickly a firm converts non-cash assets to cash assets. Debt ratios measure the firm's ability to repay long-term debt. Profitability ratios measure the firm's use of its assets and control of its expenses to generate an acceptable rate of return. Market ratios measure investor response to owning a company's stock and also the cost of issuing stock.

Financial ratios allow for comparisons between companies between industries between different time periods for one company between a single company and its industry average.

The ratios of firms in different industries, which face different risks, capital requirements, and competition, are not usually comparable.

Profitability ratios

Profitability ratios measure the firm's use of its assets and control of its expenses to generate an acceptable rate of return.

Gross margin Profit margin Operating margin Net margin

Gross profit margin = (Sales - Cost of goods sold) / Sales

Operating profit margin or Return on Sales (ROS) = Earnings before interest and taxes / Sales

Net profit margin = Net profits after taxes / SalesReturn on equity (ROE)

= Net profits after taxes / Stockholders' equity or tangible net worth = Net profit / Equity Return on investment (ROI ratio or Du Pont ratio) = Net income / Total assets

Asset turnover = Sales / Assets

Risk adjusted return on capital (RAROC)

Return on capital employed (ROCE) Cash flow return on investment (CFROI) Efficiency ratio

A Pictorial View of Profitability Ratio

Liquidity ratios

Liquidity ratios measure the availability of cash to pay debt.

Current ratio = Current assets / Current liabilities

• Looks at the ratio between Current Assets and Current Liabilities• Current Ratio = Current Assets : Current Liabilities• Ideal level? – 1.5 : 1• A ratio of 5 : 1 would imply the firm has £5 of assets to cover every £1 in

liabilities

• A ratio of 0.75 : 1 would suggest the firm has only 75p in assets available to cover every £1 it owes

• Too high – Might suggest that too much of its assets are tied up in unproductive activities – too much stock, for example?

• Too low - risk of not being able to pay your way

Acid-test ratio (Quick ratio) = (Current assets - Inventories) / Current liabilities

• Also referred to as the ‘Quick ratio’• (Current assets – stock) : liabilities• 1:1 seen as ideal• The omission of stock gives an indication of the cash the firm has in relation

to its liabilities (what it owes)• A ratio of 3:1 therefore would suggest the firm has 3 times as much cash as

it owes – very healthy!• A ratio of 0.5:1 would suggest the firm has twice as many liabilities as it

has cash to pay for those liabilities. This might put the firm under pressure but is not in itself the end of the world!

Below is a Pictorial view of Liquidity Ratio

Activity ratios

Activity ratios measure how quickly a firm converts non-cash assets to cash assets.

Average collection period = Accounts receivable / (Annual credit sales / 360 days)

Collection period (period end) Average payment period = Accounts payable / (Annual credit purchases /

360 days) Inventory turnover ratio = Cost of goods sold / Average inventory Inventory conversion ratio = Inventory conversion to cash period (days) =

360 days / Inventory turnover days Inventory

Gearing ratiosDebt ratios measure the firm's ability to repay long-term debt. Debt ratios measure financial leverage.

Debt ratio = Total liabilities / Total assets

Debt to equity ratio = (Long-term debt + Value of leases) / Stockholders' equity

Long-term debt/Total asset (LD/TA) ratio = long-term debt / Total assets

Times interest-earned ratio = Earnings before interest and taxes EBIT / Annual interest expense

Overall coverage ratio = Cash inflows divided by Lease expenses plus Interest charges plus Debt repayment / (1-t) plus Preferred divident / (1-t)

A Pictorial view of Gearing Ratio

Market ratios

Market ratios measure investor response to owning a company's stock and also the cost of issuing stock.

Payout ratio = Dividend / Earnings, or = Dividend per share / Earnings per share

Note: Earnings per share is not a ratio, it is a value in currency. Earnings per share = Expected earnings / Number of outstanding shares

P/E ratio = Price / Earnings per share

Cash flow ratio or Price/cash flow ratio = Price of stock / present value of cash flow per share Price to book value ratio (P/B or PBV) = Price of stock / Book value per share

A Pictorial View of Market ratios

SECTION 4

PROFILE OF THE COMPANY

Kampala Nissan Limited was incorporated on 5th April 2000 under the laws of Uganda.

The registered office address of the company is 32, Jinja Road, P.O.Box 2692, Kampala, Uganda.

The principal activity of the company is to carry on the business of buying, selling, repairing and servicing of new and used vehicles mainly dealing in Nissan Vehicles.

The share capital of the company is Shs. 1,000,000 divided into 1000 ordinary shares of Shs. 1000 each.

The directors of the company are Mr. Salim Punjani and Mr. Shafiq Punjani who have equal shares in the company.

The company’s finance controller is Mr. H Raghuram and the Sales Manager is MR. Valerie Makerie.

The Finance controller is backed by 2 assistants and same for Sales Manager.

The other workers are in the workshops who are casual laborers.

The company auditors are PKF Uganda.

The company’s year ending is 31st December.

SECTION 5

ANALYSIS, INERPRETTION AND GRAPHICAL REPRESENTION OF THE RATIOS OF KAMPALA NISSAN LIMITED

1) Profitability Ratios (ALL FIGURES IN SHS’000)

a) Gross Profit Margin ratio

How to calculate???

GP Ratio = Gross profit for the year / Net sales for the year *100

2005 2004

= 814,856 *100 1,001,497 *1009,105,037 12,674,280

= 8.95% 7.90%

According to the market report competition in the year 2005 was much higher than in 2004. There were many new entrants in the motor vehicle market, which led to intense competition for bidding purposes. And so the company lost out on some important tenders, which can attribute to the reduction in sales in 2005. The cost of sales went down by 29%. This was due to high closing stock compared to 2004 and so unsold stock was held up in the bond. Hence, even with a fall in sales the gross profit margin increased.

b) Net Profit margin ratio

How to calculate??

NP ratio = Net Profit for the year/ net sales for the year *100

2005 2004

= 305,680 *100 517,756 *1009,105,937 12,674,280

= 3.36% 4.09%

The net profit for the year has decreased by around 40%. This was due to low sales in the year compared to 2004. There was no major decrease in administrative expenses. The decrease in turnover of over 28% is the major contributor for the fall in net profit ratio.

c) Administrative expense ratio

How to calculate???

Administrative expense ratio = Administrative expenses/ net sales *100

2005 2004

= 435,545 * 100 430,567 *1009,105,937 12,674,280

= 4.78% 3.40%

There were no major increases in administrative expenses. It increased by a small margin of only 1.1%. The increase in the ratio is due to the effect of the decrease in sales of 28%.

d) Operating expenses ratio

How to calculate???

Operating expense ratio = operating expenses / sales *100

2005 2004

= 73,622 *100 80,468 *1009,105,937 12,674,280

= 0.8% 0.6%

There is no significant increase in this ratio. Expenses have decreased by 9%. This was mainly contributed by no rent in the period.

e) Finance expense ratio

How to calculate????

Finance expense ratio = finance expenses/ net sales *100

2005 2004

= 56,994 *100 39,631 *1009,105,937 12,674,280

= 0.62% 0.31%

Finance expense constitutes of interest and exchange fluctuation differences. The increase in the ratio is due to realized exchange losses made during the year due to purchases made in different currencies and their subsequent fluctuations in the market.

f) Return on Capital employed

How to calculate???

ROCE = Net profit before tax and interest / capital employed +fixed borrowings *100

2005 2004

= 305680 *100 517,756 *100931,551+462,442

766,017+394,165

= 21.79% 44.50%

The drastic reduction in the ROCE is due to the high decrease in net profits by almost 50%. This profit reduction was due to low turnover due to competition in the market by new and existing entrants in motor industry. And the finance controller also quoted that the sedan cars and the 4 wheel station wagon sales very low than budgeted and also prices had to be reduced to face the increasing competition. The company was doing well in the pick up category of its vehicles. The company had better retained earnings because of the previous year’s accumulated profits. In addition, ROCE also declined due to an increase in fixed assets, which were funded by borrowings. The increased borrowings resulted an increase in interest charge, which in turn reduced the profit after tax.

g) Return on Investment

How to calculate???

ROI = Net profit after tax/ shareholders fund *100

2005 2004

= 165,534 *100 333,803 *100931,551 766,017

= 17.77% 43.58%

The decrease in the ratio is due to drop in profits by over 50%. This was the major reason in the poor ratio. The major factor leading to this was due to the decrease in turnover by over 28%.

h) Return on Total assets

How to calculate???

ROA = Income before tax and interest/ total assets *100

2005 2004

= 305,689 *100 517,756 *1003,104,396 2,288,617

= 9.8% 22.62%

This ratio has declined due to the reduction in profits, which was caused, by a 28% decline in turnover for 2005. This could be attributed to factors such as increased competition, reduced selling prices, and low sales of some of the units.

2) Liquidity ratios (ALL FIGURES IN SHS’000)

a) Current ratio

How to calculate???

Current ratio = current assets / current liabilities

2:1 is the ideal ratio

2005 2004

= 3,104,396 2,288,6171,778,893 1,183,399

= 1.75: 1 1.93: 1

Generally there has been a decline in the liquidity of the company. This is because of the increase in trade and other payables that is due to the change in the creditor’s payment period from 40 to 50 days. The increase was not fully matched with the increase in trade and other receivables due to the changed debtor’s payment period. When enquired with the financial controller the reason he said for the increase in debtor period was due to payments due from government that was delayed and it resulted in the delay in payment to creditors.

This ratio shows that the company has inadequate working capital.

b) Quick ratio

How to calculate???

Quick ratio= Current assets- (stock + prepaid expenses)/ current liabilities

1: 1 is the ideal ratio

2005 2004

= 3,104,396-1,850,250 2,288,617-1,290,6591,778,893 1,183,399

= 0.71: 1 0.84: 1

The company has high value closing stock. This was because of unexpected low sales of units in the year. There was high competition and so all the tenders were not rewarded to the company. This ratio is below the recommended ratio of 1:1 signifying the company’s incapability to pay off creditors there and then if a need arises.

3) Efficiency ratios (ALL FIGURES IN SHS’000)

a) Assets Turnover ratio

How to calculate???

= Cost of sales / net assets Or sales/ net assets

2005 2004

= 9,105,937 12,674,28077,580+3,104,396

58,154+2,288,617

= 286.17% 540.07%

There are 2 major factors that led to the decline of the ratio. Firstly, as explained the decrease in sales of over 28% and secondly increase in stock of over 43%. Due to the declined sales stock was held up. And also debtor’s days were increased so that the company can meet the competitor’s debtor day’s policies.

b) Fixed assets turnover ratio

How to calculate???

Fixed assets turnover ratio = Sales/ net fixed assets

2005 2004

= 9,105,937 12,674,28077,580 58,154

= 117.37% 217.94%

Additions to fixed assets were made during the year through borrowings. The major reason the ratio has fallen down is due to drop in sales by over 28%.

c) Stock turnover ratio

How to calculate???

Stock turnover ratio = cost of goods sold/ average inventory

Or sales/ closing stock

2005 2004

= 8,291,061 11,672,7831,850,250+1,290,659 1,290,659+2,507,176

2 2

= 5.27 times 6.15 times

The company had stocked a lot of car units in anticipation of winning the tenders. But due to high competition not all the stocks could be sold. SO at the year-end the company had a lot of stock held up at their bond and warehouse. And so closing stock value at hand is very high. So hence is the decline in the ratio.

d) Age of inventory

How to calculate???

Age of inventory = no: of days in a year/ inventory turnover ratio

= (Average stock / cost of goods sold) *365

2005 2004

= 1,570,455 *365 1,898,918 *3658,291,081 11,672,783

= 69 days 59 days

As discussed earlier, due to the increased competition the sales were not high as expected and so the stock was held up at the year-end. So the number of days it took to recycle the stock to sales increased.

e) Debtors turnover ratio

How to calculate???

Debtors turnover ratio = credit sales/ closing Debtors

2005 2004

= 9,105,937 12,674,280951,773 895,156

= 9.56 times 14.16 times

The company has to give more credit facilities to customers to compete with other companies in the same industry. Hence the debtors have increased by around 6%. According to the finance controller in motor industry 90% of the sales are in credit terms as it involves huge amounts of cash. The ratio has declined as an effect of reduction in turnover compared to the previous years. This was due to increased competition.

f) Debtors collection period

How to calculate???

= Closing debtors/ Net credit sales *365

2005 2004

= 951,773 *365 895,156 *3659,105,937 12,674,280

= 38.15 days 25.78 days

As explained earlier, the company had to increase its debtor’s days, as there were many competitors in the market. This strengthened the bargaining power of buyers and credit facility was used as one of the strategies in attracting the customers.

g) Creditors turnover ratio

How to calculate???

= Net credit purchase / accounts payable

2005 2004

= 8,291,081 11,672,783995,227 470,458

= 8.33 24.8

This ratio indicates that the creditors are not paid in time. This was because the debtor payment period increased and so the liquidity position also weakened. And according to the accountant since the company does regular business with the suppliers the creditors payment period was extended.

h) Creditors payment period

How to calculate???

= Accounts payable/ purchases *365

2005 2004

= 995,227 *365 470,458 *3658,291,081 11,672,783

= 43.8 days 15 days

The payment period has increased by around 29 days. This was because the debtor collection days had gone up and so the company’s liquidity position had weakened and it could not meet its creditors in time. Available cash was limited. It was lying in debtors. But since the company has a good reputed position in the market the suppliers were not worried in receiving the cash later. When checked in 2006 the company is back in a good position and creditor days have reduced significantly.

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