Varun Nagar Case

1866 Words Nov 18th, 2012 8 Pages
Executive summary: Varun Nagar Agriculture cooperative society (VNACS) has two assets which include, Rs 5, 00,000 in cash and a paddy stock which is worth Rs 5, 00,000. The liabilities of VNACS include, Rs 5,00,000 to be paid for procurement of paddy to farmers, and Rs 5,29,167 to be paid towards over draft amount this also includes the accrued interest over the period of seven months(Rs 29,167 is the interest to be paid for seven months from September 1990 to march 1991) as the over draft has been drawn September last year. Mr. Agarwal the Manager of VNACS has two make decisions about two business proposals in front of him, whether he should retain paddy stock and whether he should buy fertilizer stock. Mr. Agarwal taking all the option …show more content…
He should make a decision which would lead to maximum benefit for farmer members in financial terms, as that was the aim with which VNACS was set up. In the given scenario it is very difficult for the society to get a loan of substantial amount, though society can ask for a small additional loan given the good terms which society has with the bank.
Taking above discussed criteria into consideration we can prioritize them as
* Payment for the procured paddy should be made to the farmers on or before the
Due date
* Maximum benefit to the farmers, whether in terms of getting higher price for their agricultural produce of providing access to agricultural inputs at a cheaper price.
* To maintain credit worthiness with bank. Society has already taken an over draft of R 5 lakhs, so it is likely that only small amount can be sought as loan from the banks.
* To maximize the total revenue for the Co-operative society

2. Decision process:
a) Generating Alternatives: Mr. Agarwal has two confront with two decision problem, Should he retain paddy stock? Should he buy fertilizer? From these two decision problems we can generate four different alternatives.
I. Sell paddy stock now and do not buy fertilizer.
II. Retain paddy stock till September/ October, and purchase fertilizer now.
III. Retain paddy stock till September/ October, but do not purchase fertilizer.…

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