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GIVE AWAY ALERT:: Company A is a 10-year-old Indian technology services company that provides specialized software solutions to manufacturers of hardware equipment used in sugarcane factories. It holds patented software, has 100% domestic market share (monopoly) and high stable margins. The company began overseas expansion 2 years ago into South America, North America, Europe, Middle East. Foreign subsidiaries are operationally cash positive in local currency. Over the past year, Company A has pursued aggressive acquisitions funded through Short-term debt & Convertible notes. Despite skepticism from trade analysts and caution from marquee investors, the company’s stock price has risen 35% in the last 12 months. The CEO is now seeking approval to acquire a European technology firm for ₹3,000 crore (10× EBITDA), fully funded by additional short-term debt. 📊 Consolidated Balance Sheets (₹ Crore) Q3 – Year 9 Assets Cash & Cash Equivalents 820 Trade Receivables 1,150 Other Current Assets 240 Total Current Assets 2,210 PPE 600 Capitalized Software Development 950 Goodwill 1,100 Other Intangibles 420 Deferred Tax Assets 180 Total Non-Current Assets 3,250 TOTAL ASSETS 5,460 Equity & Liabilities ₹ Cr Equity Share Capital 400 Securities Premium 1,000 Retained Earnings 1,520 FX Translation Reserve +90 Total Equity 3,010 Short-Term Debt 650 Trade Payables 520 Other Current Liabilities 310 Total Current Liabilities 1,480 Convertible Notes 720 Other Long-Term Liabilities 250 Total Non-Current Liabilities 970 TOTAL EQUITY & LIABILITIES 5,460 --- Q4 – Year 9 Assets Cash & Cash Equivalents 760 Trade Receivables 1,420 Other Current Assets 280 Total Current Assets 2,460 PPE 640 Capitalized Software Dev 1,080 Goodwill 1,450 Other Intangibles 610 Deferred Tax Assets 220 Total Non-Current Assets 4,000 TOTAL ASSETS 6,460 Equity & Liabilities ₹ Cr Equity Share Capital 400 Securities Premium 1,000 Retained Earnings 1,610 FX Translation Reserve +40 Total Equity 3,050 Short-Term Debt 1,020 Trade Payables 690 Other Current Liabilities 390 Total Current Liabilities 2,100 Convertible Notes 1,000 Other Long-Term Liabilities 310 Total Non-Current Liabilities 1,310 TOTAL EQUITY & LIABILITIES 6,460 --- Q1 – Year 10 Assets Cash & Cash Equivalents 690 Trade Receivables 1,780 Other Current Assets 340 Total Current Assets 2,810 PPE 700 Capitalized Software Dev 1,240 Goodwill 1,820 Other Intangibles 840 Deferred Tax Assets 290 Total Non-Current Assets 4,890 TOTAL ASSETS 7,700 Equity & Liabilities ₹ Cr Equity Share Capital 400 Securities Premium 1,000 Retained Earnings 1,660 FX Translation Reserve -60 Total Equity 3,000 Short-Term Debt 1,450 Trade Payables 820 Other Current Liabilities 470 Total Current Liabilities 2,740 Convertible Notes 1,420 Other Long-Term Liabilities 540 Total Non-Current Liabilities 1,960 TOTAL EQUITY & LIABILITIES 7,700 --- Q2 – Year 10 (Latest) Assets Cash & Cash Equivalents 610 Trade Receivables 2,160 Other Current Assets 380 Total Current Assets 3,150 PPE 760 Capitalized Software Dev 1,420 Goodwill 2,150 Other Intangibles 1,050 Deferred Tax Assets 360 Total Non-Current Assets 5,740 TOTAL ASSETS 8,890 Equity & Liabilities ₹ Cr Equity Share Capital 400 Securities Premium 1,000 Retained Earnings 1,690 FX Translation Reserve -210 Total Equity 2,880 Short-Term Debt 1,980 Trade Payables 1,020 Other Current Liabilities 520 Total Current Liabilities 3,520 Convertible Notes 1,900 Other Long-Term Liabilities 590 Total Non-Current Liabilities 2,490 TOTAL EQUITY & LIABILITIES 8,890 --- Additional Information Overseas revenue growth: mid single digit. INR appreciated 8–12% against BRL and EUR during the period. Convertible notes conversion price: ₹920/share Current market price: ₹870/share. Target Company: EBITDA: ₹300 crore Cash flow negative (working capital heavy) Purchase price: ₹3,000 crore To be funded entirely through short-term debt 🧠 QUESTIONS: Analytical 1. Over the four quarters, has the company’s tangible net worth strengthened or weakened? Show reasoning. 2. What percentage of total assets does goodwill represent in Q3 Year 9 vs Q2 Year 10? What does this indicate? 3. Trade receivables have increased significantly. What possible balance sheet risks does this signal? 4. The FX Translation Reserve moved from +90 to -210. What does this mean economically & Why is this important despite subsidiaries being operationally cash positive? 5. Does liquidity appear comfortable? Risk Identification 6. Which of the following is the most concerning structural change? A. Rising PPE B. Growing goodwill C. Falling FX reserves D. Increasing cash Strategic Judgment 7. If the ₹3,000 crore acquisition is funded entirely by short-term debt, What structural risks would increase? 8. Given the balance sheet trend, would you: A. Approve the acquisition B. Reject the acquisition Justify your decision using balance sheet evidence only (no P&L assumptions). POST YOUR ANSWERS