Case Name :      Sengupta Fibres Ltd.

Authors :           Thien T. Pham, Robert F. Bruner

Source :             Darden School of Business

Case ID :           UV2264

Discipline :        Finance

Case Length :    18 pages

Solution Sample availability : YES

Plagiarism : NO (100% Original work)

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.