Kota Fibres

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KOTA FIBRES What does the forecast show? Do you like how it is constructed? The company has projected gross sales to reach 90.9 million rupees in 2001, an forecasted growth of approximately 15 million rupees over the previous year. In spite of the large increase, there are several additional financial factors which need to be taken into account in evaluating the forecast. For instance, Total asset turnover gives an understanding of the efficiency with which the firm uses its assets to generate sales. Total Asset Turnover in this particular case is suboptimal at best. In 2000, Kota had a total asset turnover ratio of .18, with a ratio value of .17 in projected for 2001. This shows major inefficiencies in the management of assets by the…show more content…
As her management style relies directly on delegation, it is important that she analyzes the financial shortcomings before making any decisions. Overall, Kota Fibres, Ltd. is doing a good job at managing their liquidity, although the projection does show a slight decline in this area. This means they could have potential issues with paying their bills on time and converting their assets to cash if they follow the 2001 projection. Kota Fibres must also recognize the shortage of cash for the company. This is due to the firm’s inability to use their assets to generate sales revenues. Kota Fibres should boost this number by increasing their amount of total assets. Their Debt-to-equity ratio reflects another sign of how they can increase their usable cash on hand. Kota Fibres will need to improve their operating efficiencies and levels of leverage used to increase their bottom line to ensure the continued ability to make their creditors and shareholders content. This may allow for another management focus instead of Ms. Pundir’s main concern of maximizing shareholder (family) wealth. Understanding the gravity of the liquidity situation Kota Fibres is in with regards to paying their bills on time and future forecasts, speaking to the shareholders about ensuring the long-term viability of Kota Fibres should be a priority. The firm’s ability to survive moving forward is not only dependent on the liquidity issues

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