The company have generated very low operating cash flows, which is caused by a negative net income(16, 55) in 94,95, again with sales going down and cost of goods sold increasing. The company current ratio (2.3, 2.1, 2.5) in 93, 94, 95 are indicating satisfactory but when analyze quick ratio (1.1, 1.1, 1.3), and we also know that sales are down which mean more inventories. Now the account payable days has been increasing (49, 62, and 66). They have been delaying there payment which mean more cash on
Guna Fibres, Ltd is a textile manufacturing company founded in 1972 and situated at Guna, India. Ms Surabhi Kumar is the managing director and principal owner while Mr Malik is the bookkeeper. This company utilizes the technology and domestic raw materials to expand its franchises. It supplies fibre yarns used to weave colourful cloth for saris, a traditional wear of Indian women. Guna Fibres usually utilized a line of credit from All India Bank & Trust to finance its business during its peak sale season which is usually on summer.
Company Credit Assessment: For the Cartwright Lumber could get 2% discount payment within 10 days from suppliers, but it had taken few purchase discount because of the shortage of funds, while there was no bad record of lagged payment, so the company still owned good credit assessment.
Although the company did show an increased gross profit of $8,255,000 with $6,358,000 less Net Sales in 2013 versus 2012, that increase is due to the reduction in product Cost of Goods Sold by $14,613,000. Since increases in product price will negatively affect sales, one of management’s primary goals is to keep prices stable. This objective is achieved through implementation of cost cutting programs, investing in more efficient equipment, and automation of more steps in the production process.
This means that under the company’s current policy, revenue is recognized too early, before delivery, while actual payment is not received until 30 days after customer acceptance or until the 90-day warranty period has ended. Furthermore, the 90 day warranty provision creates an uncertainty in the collectibility of sales proceeds.
Although the company seems to be profitable, it has faced shortage of cash. It happened due to increase in Accounts Receivable as well as Inventories. On the other hand, Accounts Payable does not increase that rapidly and difficulties regarding cash collection become evident. Furthermore, the cash collection cycle becomes larger (59 days in year 2003, while more than 70 in year 2006).
Even though the company has been turning in profits, the ineffective collection practice, not availing trade discounts on time and ineffective inventory management has led the company in need of larger financing needs.
The company’s day-to-day operations did not change significantly over the last few years. Average collection period, inventory turnover, accounts payable, accounts receivable as well as cash conversion cycle all went up and down over the last four years but mainly stayed in the same range. So, there is no any significant change in operations. Mr. Cartwright has a very sound control over operations of the firm. Therefore, I believe, the company needs few more years to recover from the debts
The company has been functioning well in terms of generating profit and demand so far. However, there will be a 20% increase in demand for the next month of operations as predicted by management, and the production and supply management's problems may come as a problem they can no longer afford.
The accounts-payable policy Maggie Brown has adopted will not be sustainable in the years to come as they have a massive liquidity problem at hand. The suppliers have credit terms allowing them 30 days to payback for purchased goods, and Maggie should be taking advantage of that.
The existing policies being followed by Dakota regarding Accounts receivables are a major issue, which is affecting its payment of working capital line of credit (@10%). Customer A pays its bill within 30 days, whereas B takes up 90 days or more. Dakota can achieve sufficient liquidity, if it tightens its credit policy.
Siyaram is always the first to introduce the latest fashion trends and concepts – specializing in futuristic weaves, designs and colours. In the year 1995 Siyaram’s had tied up with J.HAMPSTEAD, England for marketing of a very fine premium wool suitings in India . These suitings are woven from the exclusive and rich natural fibres – merino wool, cashmere, kidmohairwool and wool silk. Looking to the increasing demand for the wool blended suitings, Siyaram’s has started m anu facturing of finest wool blended suitings under J.HAMPSTEAD brand using fine micron merino wool imported from Australia and super fine polyester with technical assistance from J.Hampstead. Siyaram Silk Mills Ltd. A leading textile company in India. Siyaram’s has undertaken an extensive advertising multimedia campaign to strengthen its marketing network and to increase its awareness among the consumers. n the textile industry, apart from Raymond’s, Siyaram’s is the only other brand to have such a consistent theme. “Coming home to Siyaram’s” is now part of advertising folklore and according to the advertising expert, it is a remarkable achievement given the fickle nature of consumer mind space. Siyaram’s is today a household brand with over 18 years of high volume advertising using the Electronic media. Siyaram’s always use the most happening models and brand ambassadors and make ad films in the choicest of locations, with the best available talent to create lasting