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Kota Fibres Ltd Summary

Autor:   •  March 8, 2011  •  Essay  •  317 Words (2 Pages)  •  2,130 Views

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Summary

Kota Fibres, Ltd. is a family business founded in 1962 and located in Kota, India. It supplied synthetic fiber yarns used to weave colorful cloths for making saris, the traditional women's dress of India. In early January 2001, Ms. Pundir, the managing director and principal owner of Kota Fibres, Ltd. had discovered a problem. The government tax inspector would not clear the trucks for departure because the excise tax had not been paid. The tax inspector required a cash payment, but in seeking to draw the funds, Mr. Mehta, the bookkeeper, discovered that the company had overdrawn its bank account again, the third time in as many weeks.

Kota Fibres had a line of credit at the All-India Bank & Trust Company and before granting a loan to pay the excise tax, the branch manager of All-India had requested a meeting with Pundir the next day. Kota's cleanup requirement to the bank is in October but last time, they had failed to make full repayment on time and even after the bank agreed to extend the clean up until November and December, Kota's credit needs still did not abate as rapidly as expected. Now, the bank was refusing to extend any more seasonal credit until Pundir presented a reasonable financial plan for the company that demonstrated its ability to clean up loan by the end of 2001.

Pundir and her bookkeeper hurriedly developed a monthly forecast of financial statements using the current operating assumptions. After studying the forecast, Pundir find that they can't repay All-India's loan by the end of 2001 and the loan officer will not accept this forecast as a basis for more credit. Pundir then suggest that they go over the forecast again in detail and look for any opportunities to improve their debt position. She also is considering some of the proposals in hope for a way to help them out.

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