Financial Management RNOA - Essay Example

Powell Panther Corporation Cash flow ment For the year ended 31st December 2001 I. Cash Flow Operating Activities $ $ Cash receipt from operations 200Cash paid to suppliers and employees 170Cash generated from operation 30Income taxes paid (41.9)Interest paid (15)Net cash from operating activities (13.4)II. Cash flow from investing activitiesDivided received 54.1Account received 30Purchase of inventory 20Cash flow investing activities 104.1III. Cash flow from financing activitiesProceeds from retained earnings 26.

5Proceeds from long term bonds 150.0 280.6Net increase in cash and cash equivalent 294.0Add cash and cash equivalents at the beginning of the period 10Cash and equivalent at the end of the period 304 Du Pont analysis model usually provide a look that is unique into an operations financial structure and operating efficiency. With specific focus on ROA and ROE, the model is used to troubleshoot structural or operational problems from a financial perspective. Du Pont analysis decomposes return-on-net-operating assets (RNOA) into two multiplicative components: profit margin and asset turnover, both of which are largely driven by industry membership.

The analysis is a useful tool in predicting future changes in RNOA. We can use the model to predict future changes in RNOA in both in-sample and out-of-sample forecasting tests.For the case of return-on-net-operating assets (RNOA) for the period 2001-2002 it shows that since:-NOA = Total assets - current assetsFor year 2001 = 672 - (108+67+72) =425RNOA= net profit after tax/net operating assets x 100%= 77/425 x 100%= 18%For year 2000RNOA= net profit after tax/net operating assets x 100%62.9/408.

5 x 100 = 15.4%RNOA indicate the efficiency with which the firm is utilizing its operating net assets to generate profits. In the year 2000, Powell Panther Corporation generated $15.4 as profit after tax for every $100. In the year 2001, RNOA increased to $18, this being an upward trend at the rate of 16.8% as shown below.(18-15.4/15.4 x 100) = 16.8%Using the above rate of increase in RNOA, the 2002 RNOA can be predicted as:(16.8/100x18) + 18%= 21.024%