Kota Fiber Case

610 Words3 Pages
1. Kota is a case of a dysfunctional financial plan, which is out of sync with the firm’s business plan: fast sales growth; seasonal sales; mandatory on the spot tax payments; limited bank support for credit lines. 2. Therefore, we study and analyze the structure of the financial plan to identify its pathologies and inadequacies. We use ratios, cash budget and cash flow analysis to do that (i.e., the tools of financial analysis and planning). (Read Note) 3. Pay attention to how you identify the Main Problem. In this case all is related to the bank requirement to clean up the credit line. Inability to do so somehow will unhinge Kota’s operations. Hence we need to review the financial plan (pro forma statements) to verify whether it cleans up the bank loan in 2001 and if not to devise a plan to correct that. Hence, the Main Problem/Decision is: Does the current financial plan clean up the bank debt? If not, what should we do to that effect?” 4. Issues for analysis: These are the steps (blueprint of action) that will give you answers to the Main Problem/Decision. You have listed enough issues only if you are convinced that analysis of (and answers to) issues will ENABLE you to make a Final Decision that gives resolution to the Main Problem. 5. After you have stated the Issues for Analysis, then you analyze each issue in depth. 6. Once all the steps/issues have been analyzed, you determine what they suggest for your decision or solution to the problem. 7. No matter what your “Main Problem” is, your case analysis will still be evaluated with respect to how well you have done the analysis that is appropriate to that Problem. 8. Distinguish between Profits and Cash Flows or Profitability and Liquidity. A company may be profitable and yet fail for lack of cash. That’s Kota’s problem. Profits (as part of revenues) are parked in accounts receivable or
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