Amber Grid Is Profitable and Nearly Out of Cash
Finance
medium30 min0 submissionsMorgan Stanley
Scenario
Amber Grid is a utilities business in Europe. Last year it reported €293 M of revenue, a gross margin of 25%, and a net profit margin of 12% — its third consecutive profitable year.
The CEO is baffled. The company has €7 M in the bank, has drawn €84 M of its overdraft facility, and has twice delayed supplier payments this quarter.
Balance sheet metrics:
- Days sales outstanding: 104 days
- Days inventory outstanding: 49 days
- Days payables outstanding: 37 days
Revenue grew 28% last year, and the sales team is targeting similar growth again.
Supporting data
liquidity
- cash m
- 7
- overdraft drawn m
- 84
working capital
- days sales outstanding
- 104
- days payables outstanding
- 37
- cash conversion cycle days
- 116
- days inventory outstanding
- 49
income statement
- revenue m
- 293
- net margin pct
- 12
- gross margin pct
- 25
- revenue growth pct
- 28
Your task
Explain to the CEO what is happening and what to do about it. Provide:
- Analysis — why a profitable company is short of cash.
- Risks — what happens if nothing changes.
- Recommendation — the specific actions you would take, in priority order.
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How you'll be graded
100 points, 60% to pass.
- diagnosis30
- recommendation25
- risk assessment15
- financial analysis30
Hint
Reveal suggested structure
- Cash conversion cycle = DSO + DIO − DPO = 104 + 49 − 37 = 116 days.
- Cash tied up ≈ (CCC ÷ 365) × revenue.
- Growth makes it worse — every extra unit of revenue funds more receivables and inventory before it produces cash.
- Levers, in order of speed: collections, inventory, payment terms.
- Quantify the cash released by improving each lever.