I.

ENNAKL AUTOMOBILES DATA:

Accounts Accounts
2023 2022 2021 2020
Names Names
Total Assets Total des actifs 510945642 495308667 345355683 366199208
Total Total passifs 258383051 290923651 165667192 202955633
Liabilities
Total Total des capitaux 252559470 203382280 179686332 163241693
Shareholder's propres
Equity consolidés
Current Assets Actifs courants 338163990 351484567 202464859 222805265
Intangible Immobilisations 1355866 1717565 1465168 836164
Assets incorporelles
Current Passifs courants 245509883 278782079 152062989 177472920
Liabilities
Net Créances clients 140366008 137707019 78981502 95705268
Receivables (net)
Allowance for Provisions sur 4905292 6420955 4391706 2413659
Doubtful les clients
Accounts
Accounts Créances clients 145271300 144127974 83373208 98118927
Receivable (net) +
Gross Provisions sur
les clients
Inventory Stocks 166770120 177510324 94691496 83376923
Cost of Goods Coûts des ventes 578664846 447599097 446032620 364186502
Sold

Marketables N/A N/A N/A N/A

Securities
Cash and Liquidités et 18154340 17503836 19959755 36654124
Cash équivalents de
Equivalents liquidités
Accounts Dettes 152625266 191615266 111524197 148235679
Payable fournisseurs
Interest Charges 7572045 4967279 3088927 928915
Expense financières
Non Cash Dotations aux 4907848 12191929 11294084 14288737
Expense Amortissement
& aux
Provisions

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 Net Sales Produits issus 714912828 568542801 538114892 448683874
des contrats
avec les clients
EBIT Résultat 64578341 58023135 42784072 36416164
Opérationnel
Net Income Résultat net de 41695448 37369083 31834632 14083691
l'exercice
Total Debt Dettes Nettes- 207264574 234288386 114384079 109400298
Liquidités et
équivalents de
liquidités
Operating Flux de 17666648 -15801927 -3694518 50756219
Cash flow trésorerie liés
aux activités
opérationnelles
Depreciation Amortissements 4043345 11000540 2578724 13472552
and et provisions
Amortization
Long-Term Emprunts à 3047966 3407526 4251779 10714855
Debt Long Terme
Fixed Obligations 2392108 1045724 952887 1124426
Charges Locatives
(Lease
Obligations)

II. AUDIT OPINION:

The Auditor states on Each Accounting Period :
" A notre avis, les états financiers consolidés ci-joints présentent sincèrement, dans tous
leurs aspects significatifs, la situation financière consolidée du groupe ENNAKL
AUTOMOBILES au 31 décembre 2021, ainsi que sa performance financière consolidée et
ses flux de trésorerie consolidés pour l’exercice clos à cette date, conformément aux
Normes internationales d’information financière (IFRS) "
“A notre avis, les états financiers consolidés ci-joints présentent sincèrement, dans tous
leurs aspects significatifs, la situation financière consolidée du groupe ENNAKL
AUTOMOBILES au 31 décembre 2022, ainsi que sa performance financière consolidée et
ses flux de trésorerie consolidés pour l’exercice clos à cette date, conformément aux
Normes internationales d’information financière (IFRS).”

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“A notre avis, les états financiers consolidés ci-joints présentent sincèrement, dans tous leurs
aspects significatifs, la situation financière consolidée du groupe ENNAKL AUTOMOBILES au
31 décembre 2023, ainsi que sa performance financière consolidée ses flux de trésorerie
consolidés pour l’exercice clos à cette date, conformément aux Normes internationales
d’information financière (IFRS).”
Which Translates to:
"In our opinion, the accompanying consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the ENNAKL AUTOMOBILES
group as of Accounting Period, as well as its consolidated financial performance and
consolidated cash flows for the year then ended, in accordance with International Financial
Reporting Standards (IFRS)."
The audit opinion issued for each period is unqualified. Which indicates that the auditors found
the financial statements to be free from material misstatements, whether due to error or fraud, and
compliant with the applicable financial reporting framework (IFRS).

The opinion also identifies key audit matters (revenues and fair value of financial assets through
OCI....) which are areas of significant judgment or complexity, addressed sufficiently by the
auditors, but these do not modify the overall audit opinion.

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 III. LIQUIDITY:
To assess the liquidity of ENNAKL Automobiles, we will calculate key important liquidity ratios.
These ratios will investigate the company's ability to meet its short-term obligations using its most
liquid assets, which is critical for operations.
1. Current Ratio

Formula:

Current Assets / Current Liabilities

Explanation: The current ratio compares a company's current assets (assets expected to be
converted to cash or used within a year) to its current liabilities (debts due within a year). A ratio
greater than 1 generally indicates that the company has more assets than liabilities and is in a good
position to cover short-term obligations. However, an excessively high ratio may signal
inefficiency in using resources.

Ratio Analysis:

 2021:
Current Assets / Current Liabilities = 202,464,859 / 152,062,989 = 1.33
 2022:
Current Assets / Current Liabilities = 351,484,567 / 278,782,079 = 1.26
 2023:
Current Assets / Current Liabilities = 338,163,990 / 245,509,883 = 1.38

ENNAKL’s current ratio has fluctuated over the years, from 1.33 in 2021 to 1.26 in 2022, and
then improving to 1.38 in 2023. While the ratio remained above 1 throughout, indicating the
company could meet its short-term obligations, the slight decline in 2022 suggests a minor
weakening of liquidity, which was subsequently corrected in 2023 with an improved ratio,
signaling a stronger position for the company to cover its liabilities.

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 2. Quick Ratio (Acid-Test Ratio)

Formula:

(Current Assets - Inventory) / Current Liabilities

Explanation: The quick ratio provides a stricter measure of liquidity than the current ratio because
it excludes inventory from current assets. Inventory may not always be easily liquidated in the
short term, so excluding it offers a clearer picture of the company's ability to meet liabilities with
cash or near-cash assets.

Ratio Analysis:

 2021:
(Current Assets - Inventory) / Current Liabilities = (202,464,859 - 94,691,496) / 152,062,989 =
0.71
 2022:
(Current Assets - Inventory) / Current Liabilities = (351,484,567 - 177,510,324) / 278,782,079 =
0.62

 2023:
(Current Assets - Inventory) / Current Liabilities = (338,163,990 - 166,770,120) / 245,509,883 =
0.71

The quick ratio decreased from 0.71 in 2021 to 0.62 in 2022, signaling a decline in the
company's ability to meet its short-term liabilities using only liquid assets, excluding inventory.
However, the ratio improved to 0.71 in 2023, indicating a slight recovery. While the
ratio is still below 1, suggesting reliance on inventory, the trend shows an improvement in liquidity
management over the period.

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 3. Cash Ratio

Formula:

(Cash + Marketable Securities) / Current Liabilities

Note: Marketable Securities are not communicated in the Financial Statements Posted
Explanation: The cash ratio is a conservative measure of liquidity, focusing solely on cash and
marketable securities. A ratio of 1 or higher indicates that a company can cover its current
liabilities using only cash or near-cash assets.

Ratio Analysis:

 2021:
(Cash + Marketable Securities) / Current Liabilities = 19,959,755 / 152,062,989 = 0.13
 2022:
(Cash + Marketable Securities) / Current Liabilities = 17,503,836 / 278,782,079 = 0.06
 2023:
(Cash + Marketable Securities) / Current Liabilities = 18,154,340 / 245,509,883 = 0.07

ENNAKL’s cash ratio has remained low throughout the period, starting at 0.13 in 2021,
declining slightly to 0.06 in 2022, and then rising slightly to 0.07 in 2023. This indicates limited
liquidity in terms of cash and marketable securities, suggesting that the company may struggle to
cover its short-term liabilities without selling other assets. The slight improvement in 2023
indicates a minor increase in cash reserves, but it still highlights a potential area of concern for
liquidity management.

4. Sales to Working Capital

a. Working Capital

Formula:

Current Assets -Current Liabilities

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Explanation: Working capital is a measure of the company's short-term financial health and
operational efficiency. Positive working capital indicates that ENNAKL has enough assets to cover
its current liabilities, while negative working capital suggests potential liquidity issues.

 2021:
Current Assets - Current Liabilities = 202,464,859 - 152,062,989 = 50,401,870
 2022:
Current Assets - Current Liabilities = 351,484,567 - 278,782,079 = 72,702,488
 2023:
Current Assets - Current Liabilities = 338,163,990 - 245,509,883 = 92,654,107

ENNAKL’s working capital has consistently increased from 50,401,870 in 2021 to 72,702,488 in
2022, and further to 92,654,107 in 2023. This positive trend indicates that the company is in a
stronger position to cover its short-term obligations and invest in operations. The steady increase
in working capital reflects a growing capacity to fund its daily operations and handle potential
financial challenges.

b. Sales to Working Capital

Formula:

Sales / Working Capital

Explanation: This ratio measures how efficiently the company uses its working capital to
generate sales. A higher ratio is favorable, as it indicates that the company ENNAKL is utilizing
its working capital effectively to drive sales.

Ratio Analysis:

 2021:
Sales / Working Capital = 538,114,892 / 50,401,870 = 10.68
 2022:
Sales / Working Capital = 568,542,801 / 72,702,488 = 7.82
 2023:
Sales / Working Capital = 714,912,828 / 92,654,107 = 7.72

The sales to working capital ratio has been declining, from 10.68 in 2021 to 7.82 in 2022, and
then slightly further to 7.72 in 2023. This decrease suggests that the company has become
slightly less efficient in using its working capital to generate sales. While the ratio is still

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above 7, the downward trend signals that ENNAKL could improve its use of working capital to
boost revenue generation.

5. Accounts Receivable Turnover

Formula:

Net Credit Sales / Average Accounts Receivable

Explanation: This ratio measures how quickly the company collects its receivables. A higher
ratio indicates better credit management and efficient collection of payments from customers.

Ratio Analysis:

 2021:
Net Credit Sales / Average Accounts Receivable = 538,114,892 / 83,373,208 = 6.16
 2022:
Net Credit Sales / Average Accounts Receivable = 568,542,801 / 89,134,767 = 5.25
 2023:
Net Credit Sales / Average Accounts Receivable = 714,912,828 / 139,444,282 = 5.14

ENNAKL’s accounts receivable turnover ratio has declined from 6.16 in 2021 to
5.25 in 2022, and further to 5.14 in 2023. This indicates a steady decrease in the efficiency of
collecting receivables, as the company is taking longer to convert receivables into cash. The
declining trend could point to relaxed credit policies or potential difficulties in collecting
outstanding payments, which could affect liquidity.

6. Inventory Turnover

Formula:

Cost of Goods Sold / Average Inventory

Explanation: The inventory turnover ratio measures how efficiently inventory is sold or used. A
higher ratio indicates faster inventory turnover, which is favorable as it minimizes the risk of
obsolete or unsold inventory.

Ratio Analysis:

 2021:
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Cost of Goods Sold / Average Inventory = 446,032,620 / 94,691,496 = 5.01
 2022:
Cost of Goods Sold / Average Inventory = 447,599,097 / 111,372,212 = 3.29
 2023:
Cost of Goods Sold / Average Inventory = 578,664,846 / 166,770,120 = 3.36

The inventory turnover ratio has decreased significantly from 5.01 in 2021 to
3.29 in 2022, and then slightly improved to 3.36 in 2023. This indicates a slowdown in inventory
movement, with inventory being held longer before being sold. While the slight improvement in
2023 suggests some recovery, the overall trend indicates challenges in inventory management or
a shift in demand that requires attention to prevent overstocking.

7. Days' Sales in Receivables

Formula:

(Average Accounts Receivable / Net Credit Sales) * 365

Explanation: This ratio measures the average number of days it takes the company to collect its
receivables. A longer period indicates inefficiency in collecting payments, which could affect cash
flow.
Current Ratio Analysis:

 2021:
(Average Accounts Receivable / Net Credit Sales) * 365 = 83,373,208 / 538,114,892 * 365 = 59
 2022:
(Average Accounts Receivable / Net Credit Sales) * 365 = 89,134,767 / 568,542,801 * 365 = 70
 2023:
(Average Accounts Receivable / Net Credit Sales) * 365 = 139,444,282 / 714,912,828 * 365 =
71

The days' sales in receivables has increased from 59 days in 2021 to 70 days in 2022, and
slightly further to 71 days in 2023. This indicates that ENNAKL is taking longer to collect
payments from its customers over the period. The increase in days' sales in receivables could
signal issues with credit control or customer payment delays, which may affect the company's
cash flow and working capital.

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 1. Days' Sales in Inventory

Formula:
(Average Inventory / Cost of Goods Sold) * 365

Explanation: This ratio measures the average number of days it takes the company to sell its
inventory. A higher number indicates slower inventory turnover, which could be a sign of
overstocking or slower sales.
Ratio Analysis:

 2021:
(Average Inventory / Cost of Goods Sold) * 365 = 94,691,496 / 446,032,620 * 365 = 73
 2022:
(Average Inventory / Cost of Goods Sold) * 365 = 111,372,212 / 447,599,097 * 365 = 111
 2023:
(Average Inventory / Cost of Goods Sold) * 365 = 166,770,120 / 578,664,846 * 365 = 109

ENNAKL’s days' sales in inventory increased from 73 days in 2021 to 111 days in 2022, and
then slightly improved to 109 days in 2023. This reflects a slowdown in inventory turnover, with
products sitting on shelves for longer periods. The improvement in 2023 indicates some
recovery, but overall, the trend shows a concern over inventory management, possibly due to
overstocking or weaker sales growth.
IV. LONG-TERM DEBT
1. Debt Ratio

Formula:

Total Liabilities / Total Assets

Explanation: The debt ratio shows the proportion of a company's total assets financed by debt.
A ratio higher than 1 indicates that the company’s assets are more funded by debt than equity,
which may increase financial risk. A ratio below 1 suggests that the company is less reliant on
debt.

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Ratio Analysis:
 2021:
Total Liabilities / Total Assets = 165,667,192 / 345,355,683 = 0.48
 2022:
Total Liabilities / Total Assets = 290,923,651 / 495,308,667 = 0.59
 2023:
Total Liabilities / Total Assets = 258,383,051 / 510,945,642 = 0.51

The debt ratio increased from 0.48 in 2021 to 0.59 in 2022, indicating that ENNAKL's reliance
on debt increased, which may raise financial risk. In 2023, the ratio decreased slightly to 0.51,
showing a minor reduction in the company's debt dependency. Although the company still has a
moderate reliance on debt, the decline in 2023 signals a healthier position compared to the prior
year.
2. Debt-to-Equity Ratio

Formula:

Total Liabilities / Total Equity

Explanation: This ratio compares a company's total liabilities to its shareholder equity. A higher
ratio suggests that the company is heavily reliant on debt to finance its operations, increasing
financial leverage and risk. A lower ratio indicates that the company is more equity-funded,
implying a lower risk of default.

Ratio Analysis:

 2021:
Total Liabilities / Total Equity = 165,667,192 / 179,686,332 = 0.92
 2022:
Total Liabilities / Total Equity = 290,923,651 / 203,382,280 = 1.43
 2023:
Total Liabilities / Total Equity = 258,383,051 / 252,559,470 = 1.02

The debt-to-equity ratio significantly increased from 0.92 in 2021 to 1.43 in 2022, suggesting that
ENNAKL relied more on debt financing in 2022. However, it improved in 2023, falling to 1.02,
indicating a reduction in debt usage relative to equity. While the ratio is still above 1, showing a
moderate reliance on debt, the trend toward lower debt financing is a positive sign for the
company's financial health.

3. Times Interest Earned (Interest Coverage) Ratio

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 Formula:

EBIT / Interest Expenses

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Explanation: The times interest earned ratio measures the company's ability to cover interest
expenses with its earnings before interest and taxes (EBIT). A higher ratio indicates better ability
to meet interest obligations from operating income.

Ratio Analysis:

 2021:
EBIT / Interest Expenses = 42,784,072 / 3,088,927 = 13.85

 2022:
EBIT / Interest Expenses = 58,023,135 / 4,967,279 = 11.68

 2023:
EBIT / Interest Expenses = 64,578,341 / 7,572,045 = 8.53
ENNAKL’s interest coverage ratio has declined from 13.85 in 2021 to 8.53 in 2023. This
indicates a reduction in the company’s ability to cover interest expenses with operating income.
The decline suggests that ENNAKL may face increased challenges in meeting interest payments,
which could be a sign of tightening financial flexibility.

4. Fixed Charge Coverage Ratio

Formula:

(EBIT + Fixed Charges Before Tax) / (Interest + Fixed Charges)

Explanation: This ratio indicates the company's ability to cover its fixed charges (interest and
lease obligations) with EBIT, providing a broader measure of financial stability.
Ratio Analysis:
 2021:
(EBIT + Fixed Charges Before Tax) / (Interest + Fixed Charges) = (42,784,072 + 952,887) /
(3,088,927 + 952,887) = 10.82

 2022:
(EBIT + Fixed Charges Before Tax) / (Interest + Fixed Charges) = (58,023,135 + 1,045,724) /
(4,967,279 + 1,045,724) = 9.82

 2023:

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(EBIT + Fixed Charges Before Tax) / (Interest + Fixed Charges) = (64,578,341 + 2,392,108) /
(7,572,045 + 2,392,108) = 6.72
ENNAKL’s fixed-charge coverage ratio has declined over the period, from 10.82 in 2021 to 6.72
in 2023. This decline indicates that the company is becoming less capable of covering fixed
charges with operating earnings, which may point to increased financial risk if operating income
does not improve.
5. Long-Term Debt to Total Capitalization Ratio

Formula:

Long-Term Debt / (Long-Term Debt + Equity)

Explanation: This ratio shows the proportion of a company’s capital structure that is financed
through long-term debt. A lower ratio indicates lower financial leverage and, therefore, lower
financial risk.

Ratio Analysis:

 2021:
Long-Term Debt / (Long-Term Debt + Equity) = 4,251,779 / (4,251,779 + 179,686,332) = 0.03

 2022:
Long-Term Debt / (Long-Term Debt + Equity) = 3,407,526 / (3,407,526 + 203,382,280) = 0.01

 2023:
Long-Term Debt / (Long-Term Debt + Equity) = 3,047,966 / (3,047,966 + 252,559,470) = 0.01
The long-term debt to total capitalization ratio is very low and has remained stable at 0.01 in
both 2022 and 2023, indicating that ENNAKL has very little long-term debt relative to its equity
base. This suggests that the company is less reliant on long-term borrowing, reducing its
financial risk.
6. Fixed Charge Coverage Ratio

Formula:

Total Liabilities / (Equity - Intangible Assets)

Explanation: This ratio measures the proportion of total liabilities to tangible equity (equity minus
intangible assets). A higher ratio suggests more reliance on debt to fund tangible assets, which may
indicate financial risk.

Ratio Analysis:

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  2021:
Total Liabilities / (Equity - Intangible Assets) = 165,667,192 / (179,686,332 - 1,465,168) = 0.93

 2022:
 Total Liabilities / (Equity - Intangible Assets) = 290,923,651 / (203,382,280 - 1,717,565)
= 1.44
 2023:
Total Liabilities / (Equity - Intangible Assets) = 258,383,051 / (252,559,470 - 1,355,866) = 1.03
ENNAKL’s debt to tangible net worth ratio has increased from 0.93 in 2021 to
1.03 in 2023. This suggests that, relative to its tangible net worth, the company has become more
reliant on debt over the period. However, the ratio is still below 1 in 2023, indicating that debt is
not excessively high compared to tangible equity.
V. IN THE NOTES
a. Liquidity Analysis
ENNAKL's liquidity remains adequate due to strong cash flow management, though rising
receivables and inventory levels need to be monitored closely. Effective receivables collection and
inventory turnover strategies are essential to improve liquidity.

1. Cash Flow Projections

ENNAKL emphasizes the importance of monthly cash flow forecasts to maintain adequate
liquidity:

 These projections are vital for planning and meeting cash needs to address short-term
obligations like trade payables.
 2023 Notes Observation: Despite improvements in operational cash flow (17.67M TND
vs. -15.8M TND in 2022), fluctuations in inventory levels and receivables remain
significant challenges.

2. Receivables and Working Capital

Receivables rose considerably over the period:

 2021: 78.98M TND

 2022: 137.71M TND (+74.4%)
 2023: 140.37M TND (+1.93%)
 The increase in 2022 reflects longer collection cycles, potentially straining liquidity. Notes
suggest that ENNAKL employs active receivables management to mitigate risks.

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3. Inventory Management

Inventory levels increased sharply from 2021 to 2022, and slightly reduced in 2023:

 2021: 94.69M TND

 2022: 177.51M TND (+87.4%)
 2023: 166.77M TND (-6%)
 Efficient inventory turnover is essential for liquidity. The notes attribute this rise to
strategic stocking of vehicle models, though it ties up cash that could otherwise enhance
liquidity ratios.

4. Supplier Payment Terms

Negotiating extended payment terms with suppliers helps conserve cash for short-term obligations:

 This approach directly impacts the Current Ratio and Quick Ratio by reducing
immediate cash demands.

5. Liquidity Risk Mitigation

ENNAKL Automobiles works on many key strategies such as:

 Optimizing cash inflows from receivables collection and operational efficiency

improvements like the introduction of the “AUTOLINE” system in 2022.
 Cash and cash equivalents remained steady, indicating stable immediate liquidity:
o 2021: 19.96M TND
o 2022: 17.50M TND (-12.34%)
o 2023: 18.15M TND (+3.71%).

b. Long-Term Debt-Paying Ability

ENNAKL’s long-term debt-paying ability is adequate, with prudent management of provisions

and a focus on stable cash flow. However, rising financial costs warrant monitoring to avoid
stress on interest coverage and solvency ratios.

1. Debt Levels and Composition

Total liabilities fluctuated over the period:

 2021: 165.67M TND

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  2022: 291.92M TND (+76.2%)
 2023: 258.38M TND (-11.5%)
 The rise in 2022 reflects increased short-term debt and trade payables, likely linked to
higher operational expenses and inventory investments.

2. Provisions for Risks and Long-Term Obligations

The company maintains consistent provisions:

 Provisions for Risks and Charges: Decreased slightly in 2023 to 6.71M TND from
7.58M TND in 2022.
 This indicates prudence in managing potential long-term obligations like retirement
indemnities and contingent liabilities.

3. Interest Coverage and Solvency

Net financial charges increased over the period:

 2021: 3.09M TND

 2022: 4.97M TND
 2023: 7.57M TND
 The rising financial costs may pressure solvency ratios. However, EBIT growth in 2023
(64.58M TND) suggests sufficient earnings to cover interest payments.

4. Risk Mitigation Strategies

The measures that ENNAKL Automobile is taking are:

 Diversifying funding sources to balance short-term and long-term financing needs.

 Collaborating with solvent banks to mitigate credit risk and maintain favorable credit terms.
 Monitoring interest rate sensitivity, as highlighted in notes where a 0.5% rate change
impacts profit by approximately 76 thousand TND.

5. Cash Flow Management

Operational cash flow rebounded in 2023 (17.67M TND from -15.8M TND in 2022), supported
by improved receivables collection practices. And controlled spending on provisions and
investment in long-term assets.

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You May Find Attached the Excel Sheet Where Work to confirm This Analysis Has been done.

Rihem Hamza | FIN/BA & Roua Marouani | FIN/BA

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