Guna Fibres Essay

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Table of Contents Executive Summary Introduction Recommendations Analysis 1. Analysis of Guna’s Current Situation 2. Evaluation of the transportation manager’s proposal 3. Accept the transportation manager’s proposal and halt dividend payouts until bank loan is repaid 4. Results of our recommendation 5. Evaluation of the operations manager’s proposal 6. Cautions to be taken in inventory management Implementation Conclusion Exhibits 3 4 5 5 5 6 6 2 6 7 7 8 8 9 Executive Summary 1. Guna Fibres, Ltd.’s Current Financial Situation Guna Fibres, Ltd. (Guna) is heavily dependent on its bank loan to fund its short-term operations. The terms of All-India Bank & Trust Company’s (All-India) bank loan specify that Guna must reduce its…show more content…
Alternatively, the second option will increase its bank loan to 111.9 million by 2012 and does not help improve Guna’s debt position at all. The third option helps the company to increase the cash at hand. Therefore, we recommend Guna to adopt option 1 and 3 such that the company is able to clear its bank loan by the end of 2012 and subsequently gain the lending officer’s approval to extend its seasonal credit in order for the company to continue to operate. 3. Implementation The implementation timeline of the above recommendations is specified in Exhibit 7 detailing the amount required for each account per month from January 2012 to December 2012. 3 Introduction Guna Fibres, Ltd. (Guna) is a company based in India that supplies synthetic fiber yarns to domestic textile mills. The synthetic textile market is a stable one and is increasingly growing as the population and national income of India grows. While Guna is experiencing consistent growth and profitability as sales grow at a significant rate of 18%, the company is encountering difficulties in its short-term bank loan repayment. This is due in part to lower profit margins in 2011 despite the rapid rise in sales. The lower profit margins can be attributed to an increase in both operating expenses and interest expenses. Guna’s financial statement

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