Kota Fibres Ltd Case Analysis Essay

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Name:Xiangwen Li Course:Financial Policy Tutor:Dr.John Thornton Date:2012/10/8 Kota Fibres LTD Case Analysis Executive summary Kota is experiencing a number of problems. The manage director to prevent over production and over stocking has resulted to a sequence of hiring and layoffs each year. And the company is suffering from liquidity challenges because it is not in a position to finance its day-to-day activities, so its bank account stands over drawn. This situation has impacted negatively on the company's ability to repay its earlier loans and customers are upset because of delayed delivery. Mr. Mehta and Ms. Pundir introduced a new quality control unit and hired two sales representatives and three nephews with …show more content…

This situation has impacted negatively on the company’s ability to repay its earlier loans and customers are upset because of delayed delivery. The third major problem relates to its distribution system. The company had two distribution warehouses. However, it suffered significant challenges in moving the yarn from the factory to the customers with a single trip taking between 10 to 15 days. The roads were impassable with only one lane. In addition, in 2001, a number of problems emerged that include: inability to pay excise tax before the yarns are transported, the company is not repaying its loans as scheduled, its request for a new loan may not be granted by the All-India Bank & Trust Company, and it projects that because of inflationary pressures, interest charged on its previous loans in the subsequent year may increase. Analysis From the 2001 projections, the company`s sales revenues reached the 90.9 million mark in 2001 representing a 15 million rupees growth over the previous year. Despite this remarkable increase, there are a number of financial challenges that must be taken into account when evaluating the forecast. For example, based on the company`s total assets turnover which tells how efficient the company is using its assets to generate sales, Kota`s total assets turnover ratio is suboptimal. In 2000, the

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