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  • Questions For Case 1

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    bhavanand
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    Kota Fibers ran out of cash due to a decline in sales and poor working capital management. Mehta's financial forecast shows that Kota will continue to have negative cash flow for the coming year without additional financing. Based on the forecast, Kota will need to arrange debt of $2 million for the coming year and will not be able to repay its existing line of credit. Pundir is considering operating proposals that could impact Kota's financial needs, but action is needed to obtain a bank waiver or new financing to continue operations.

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    Questions for Case 1

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    Kota Fibers ran out of cash due to a decline in sales and poor working capital management. Mehta's financial forecast shows that Kota will continue to have negative cash flow for the coming year without additional financing. Based on the forecast, Kota will need to arrange debt of $2 million for the coming year and will not be able to repay its existing line of credit. Pundir is considering operating proposals that could impact Kota's financial needs, but action is needed to obtain a bank waiver or new financing to continue operations.

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    37 Ansichten1 Seite

    Questions For Case 1

    Hochgeladen von

    bhavanand
    Kota Fibers ran out of cash due to a decline in sales and poor working capital management. Mehta's financial forecast shows that Kota will continue to have negative cash flow for the coming year without additional financing. Based on the forecast, Kota will need to arrange debt of $2 million for the coming year and will not be able to repay its existing line of credit. Pundir is considering operating proposals that could impact Kota's financial needs, but action is needed to obtain a bank waiver or new financing to continue operations.

    Copyright:

    © All Rights Reserved
    Als PDF, TXT herunterladen oder online auf Scribd lesen
    Markieren Sie unangemessene Inhalte
    von 1

    Kota Fibers, Ltd.

    1. What is the current situation? Why did the company run out of cash? What are the
    consequences for the company?
    2. What does Mehtas financial forecast show? How was the forecast constructed? Using
    the financial forecast, prepare to show the cash cycle of the firm (i.e., the flow of funds
    through the working-capital accounts of the firm)
    3. Examine the exhibits in the case. On the basis of Mehtas forecast, how much debt will
    Kota need to arrange for the coming year? Will Kota be able to repay the line of credit
    this year?
    4 What are Pundirs alternatives for action? What impact might the four operating
    proposals have on the financial needs of the firm?
    5. What action should Pundir take?
    6. Why does the bank require a 30-day clean-up of the loan? Should the bank continue to
    waive compliance with this covenant?

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