Sengupta Fibres, Ltd - The Case Centre

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Case

Reference no. UVA-F-0935

Subject category: Finance, Accounting and Control

Authors: Bob Bruner (Darden School of Business, University of Virginia); Thien T Pham (Darden School of Business, University of Virginia)

Published by: Darden Business Publishing

Originally published in: 1990

Version: 3 July 2012

Revision date: 2-Nov-2012

Length: 18 pages

Data source: Field research

Topics: Banking, Loan evaluation; Financial-statement analysis; Forecasting; Inventory management; Diverse protagonist, female; Seasonality; International case; Diversity case; Derivatives; Diversity; International

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Abstract

In January 1990, the chief executive of this small yarn-production company must resolve a surprising cash shortage. The tasks for the student are to evaluate the causes of this shortage (using a complete base case forecast given in the case) and then to assess the usefulness of various possible remedies suggested by company managers. In essence, the company is unable to liquidate a seasonal working-capital loan for the requisite 30 days each year. This situation arises from two classic causes: secular growth of the company, and declining profitability. Possible remedies include reducing finished-goods inventory through more efficient transportation and warehousing, reducing credit terms to customers, just-in-time (JIT) raw-materials supply, and switching from seasonal to level production. This case provides a thorough exercise of working-capital analysis and concepts.

Industry:

Manufacturing