1 Analysis on Cash Flow 2 9. Interpretation on Cash Flow Chart 1) Analysis on Cash Flow from Operating Activity 2) Cash Flow after Operating Activity 3) Interest Expense and Dividend Payment 4) Cash Flow after Interest Payment 5) Repayment of Current Portion of Long-Term Borrowings 6) Cash Flow after Repayment of Current Portion of Long-Term Borrowings 7) Investment Consumption of Fixed Asset 8) Cash Flow before Procurement of External Fund 9) Procurement of External Fund 10) Possession of Cash 10. Ratio of Analysis on Cash Flow 1) Debt Service Coverage Ratio 2) Capability for Repayment Borrowing 3) Cash Flow/Total Borrowings from Operating Activities 4) Cash Flow/ Liabilities on Profit and Loss Activities 5) Financial Ratio relevant to Other Cash Flow

2 9. Interpretation of Cash Flow Chart It is possible by comparing and analyzing the procuring agency and procuring scale of fund, operating agency and operating scale of fund. Main point lies in determination of financial status of company through this. Theoretically, level where all fund consumed in investment activity and financial activity of company are preserved with cash flow from operating activities is determined to be the most excellent cash flow Cash flow in the level where investment activity is completed with cash flow from operating activity and all cash outflow on financial activity can be reserved with cash inflow on financial activity is determined to be fair When cash consumption for investment and financial activity is procured through investment and financial activity with small scale of cash flow from sales activity, it can be considered that cash flow has been worsened. Especially, fund flow is inferior when fund input for operating activity and investment activity depends on financial activity Looking into the studies, in case cash flow (net cash flow) from operating activities is inferior, possibility for bankruptcy is very high, cash flow from operating activities of over 3 years presents (-) value and most of the company faces bankruptcy when the scale exceeds 20% of total asset. (1) Analysis on cash flow from operating activities ① Analysis on cash flow analysis (direct method) Cash inflow through sales Calculation by adding or subtracting increase or decrease of trade receivables (including increase or decrease in advance) to sales of income statement. → Increase in sales or trade receivables Cost of Sales for Cash Outlays Cost of sales on income statement – non-cash expense ± increase or decrease in inventory ± increase or decrease in trade payables Cash Selling and Management Expense Selling and management expense on income statement – non-cash expense ± increase or decrease in advance expense ± increase or decrease in non- payment expense Cash Flow from other Operating Activity Non-operating profit and special profit – non-operating expense and special loss ± increase or decrease in other sales relevant current asset, current liabilities and fixed liabilities – corporate tax payment (except non-cash profit, expense and interest expense) ② Analysis on cash flow analysis (indirect method) ▶ Source from operating activity - Source of cash from operating activity : operating profit on income statement + manufacturing cost and non-cash expense included in selling and management expense – non-cash profit ▶ Operation of operating activity - Operating asset investment : Relevant to most core activity of corporate activity Means the investment to current asset and current liabilities that is directly operated to production and sales activity of company → increase in trade receivables, inventory and advance – increase in trade payables and advance

3 A. Company presenting the trend of increase in operating asset exceeding the increase rate in sales ※ Relation between increase in sales and operating fund Optimism for Market Purchase of Raw Material and Expansion in Production Stagnation In Market Increase in Inventories Exclusion Sales Increase in Trade Receivables Long-Term Inventories/ Trade Receivables Increase in Operating Asset Worsening of Cash Circulation Possibility for Financial Stress B. Company presenting the trend of increase in operating asset that is less than increase in sales Fair Market Status Expansion In Sales Decrease In Stock Increase in Cash from Operating Activity Small Increase In Operating Fund Surplus of Cash (Fund) (2) Cash flow after operating activity - It presents how much interest on borrowings of financial institution, dividend on shareholders and current portion of long-term borrowings repaid to current term can be covered with cash created as a result of main profit activity of company. ※ Elements to determine the cash flow of operating activity ① Gross profit rate ② Selling and management ratio ③ Collection period of trade receivables ④ Inventory turnover period ⑤ Trade payables payment period ⑥ Change in operation relevant to asset and liabilities Amount is (-) with Continuance of Situation Possibility of the Company ’ s Exposure to Risk (3) Interest expense and dividend payment -Interest expense : Interest on borrowings procured from outside including financial institution - Dividend : Fee on capital procured from shareholders ☞ It calculates percentage of interest expense and dividend payment to cash flow after operating activity, it can not be considered to be fair if the ratio is too high or size is expanding (4) Cash flow after interest payment : Value presenting the capacity to perform operating activity without inflow of additional external fund, It presents how much current portion of long-term borrowings shall be repaid (-) Value is Continued Possibility of the Company ’ s Exposure to Risk

4 (6) Cash flow after repayment of current portion of long-term borrowings When the amount present (+) value continuously, the company is evaluated to present fair cash flow → Means to have capacity for repayment of current asset, investment asset and external borrowings (5) Repayment of current portion of long-term borrowings Long-term borrowing to be paid during current term based on repayment plan of long-term borrowings at the end of previous term is substituted (classified) as current liabilities and current portion of long-term borrowings shall be repaid during the current term. (7) Investment consumption of fixed asset ① Increase in current asset : Disposition of current asset of current term – purchase of current asset in current term √ In case expense toward facility investment has increased, examination on efficiency shall be carried out. √ Utilization of total asset turnover rate √ Inspection on procurement of facility investment fund with long-term fund, etc * Utilization of fixed assets to stockholder’s equity and long-term liabilities[= fixed asset/(equity+ fixed liabilities)] √ Inspection on acquisition of non-work related real-estate ② Increase in investment asset : Disposition of investment asset – purchase of investment asset √ It is stable when investment on investment asset is achieved with fund including the cash from operating activity, increase of capital, etc ③ Increase in intangible asset : Investment of intangible asset √ Estimation of cash flow in future due to investment including the goodwill or industrial right, development, etc (8)Cash flow before procurement of external fund Remaining of fund from operating activity after company pays interest expense, dividend, repays current term of long-term liabilities and executes the investment on facility investment and investment asset (9) Procurement of external fund Short-term operating fund and facility investment fund shall be procured with short-term borrowings and long-term borrowings or increase in fund respectively Value is (+) continuously Excellent Company Determination on integrated consideration including the scale, industry, financial status, etc of company (10) Possession of cash * Cash Possession Rate = Cash & cash equivalent/total asset or cash & cash equivalent/sales Method to Grasp Cash Possession ☞ Method to view 1 cycle consumed operating fund as appropriate cash possession level ☞ Method to calculate cash possession rate and compare with industrial average

5 8. Cash Flow Analysis Ratio (1) Debt Service Coverage Ratio Financial ratio utilized to determine repayment capability of principal and interest of borrowing with short-term repayment stress based on fund created from operating activities Debt Service Coverage Ratio = (Net Operating Activity Procurement Cash+ Interest Expense) (Interest Expense + Short-Term Borrowings + Current Long-Term Borrowings) X 100 (2) Capability for Repayment Borrowings : Financial index that determines the repayment capability of company to repay borrowings to be repaid within 1 year Capability for Borrowings = (Cash, Saving, Securities + Cash Flow from Operating Activities) (Current Long-Term Borrowings + Short-Term Borrowings × 0.2) X 100 (3) Cash Flow/ Total Borrowings from Operating Activities : Ratio presenting capability for cash flow from operating activity regarding borrowings : Ratio analyzing how much fixed liabilities or total liabilities can be repaid with total cash flow procured from operating activity as a source · Cash Flow on Profit and Loss Activity (Total Cash Flow) / Total Liabilities · Cash Flow on Profit and Loss Activity (Total Cash Flow) / Fixed Liabilities (4) Cash Flow/ Liabilities on Profit and Loss Activities Cash Flow from Operating Activities Total Borrowings (5) Other Cash Flow relevant Financial Ratio Cash Flow / Total Asset = (Cash Flow on Profit and Loss Activity / Total Asset) × 100 Cash Flow / Sales = (Cash Flow on Profit and Loss Activity / Sales) × 100 Cash Flow / Tangible Asset Investment = (Cash Flow on Profit and Loss Activity / Tangible Asset Investment) × 100 Cash Flow / Operating Fund Investment = (Cash Flow on Profit and Loss Activity / Increase in Operating Fund) × 100