Kota Fibres Ltd Case Analysis
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 the objective of creating commitment to the Pundir family. From the case, no audit or analysis was undertaken to ascertain whether the company needed a quality control unit. This is an example of how the company is increasing its operating costs which has contributed to its current liquidity challenges. Ms. Pundir is biased toward addressing shareholders’ needs rather than pursue what is good for business survival. It is reported that the company had previously declared high dividend payments to its shareholders because Pundir believed that it was risky to leave excess funds to the company. Similarly the company does not value its employees, the company prefers hire people in high season, and firing them in low seasons. Ms. Pundir is confronted with the challenge of addressing a unique cash shortage and this has to be done immediately. As a whole, the projections indicate that Kota Fibres limited is performing well in managing their financial assets. However, the company is facing some challenges in the area of liquidity management. The company should increase its total assets. Ms. Pundir’s should engage the stockholders in seeking a lasting solution to the company`s problems. It the shareholders are involved, perhaps they
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 the objective of creating commitment to the Pundir family. From the case, no audit or analysis was undertaken to ascertain whether the company needed a quality control unit. This is an example of how the company is increasing its operating costs which has contributed to its current liquidity challenges. Ms. Pundir is biased toward addressing shareholders’ needs rather than pursue what is good for business survival. It is reported that the company had previously declared high dividend payments to its shareholders because Pundir believed that it was risky to leave excess funds to the company. Similarly the company does not value its employees, the company prefers hire people in high season, and firing them in low seasons. Ms. Pundir is confronted with the challenge of addressing a unique cash shortage and this has to be done immediately. As a whole, the projections indicate that Kota Fibres limited is performing well in managing their financial assets. However, the company is facing some challenges in the area of liquidity management. The company should increase its total assets. Ms. Pundir’s should engage the stockholders in seeking a lasting solution to the company`s problems. It the shareholders are involved, perhaps they