Kota Fibres

OUTLOOK 2001
Andy Wibisono
Marchell Wu
Steven Hu
Andre Cipta
Christianto
O v e r v i e w

Suppliers
KOTA
FIBRES
LTD.


Merchants


End
User

Mills
Polyester Pellets
and other Raw
Materials
Spools of
Yarn
Textiles
Saris
and
Textiles
KOTA FIBRES Ltd
Growing Yarn Industry with expected annual
demand increase of 15%
Established Yarn manufacturer since 1962
Annual sales growth rate 18%
Inventory policy 60 days
Credit trem to Distributor 45 days

90.9 million Rupees in projected sales



The Major Concern
KOTA faces ONE major concern

Cash flow
$$$

Cash Flow Timeline
A/P turnover = 18.55
Inventory turnover =
41.39
A/R period = 44
Time
Inventory sold
Inventory Purchased
Cash Received
Cash paid for Inventory
Operating cycle = 85
Cash cycle = 67
Cashflow is out of sync!
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
Jan Feb Mar April May June July Aug Sept Oct Nov Dec
Sales
A/R
Inv
A/P
N/P
The following issues surfaced in
2001 with Kota Fibres, Ltd.:

1. Payment of excise tax to move their
product
2. Line of credit not being repaid according
to the term.
3. Request for new loans from All-India
Bank & Trust Company.
4. Due to inflation, interest rate may be
higher in upcoming year on the loans

Forecast Assumption 2001
Exhibit 11
KOTA FIBRES, LTD.
Assumptions
Debt Balance Summary
Jan '01 1,146,268
June '01 32,950,665
Dec '01 3,463,701
Ratio of:
Income Tax/Profit Before Tax 30%
Excise Tax/Sales 15%
This Month Collections of Last Month's Sales 40%
This Month Collections of Month-before-Last Sales 60%
Purchases/ Sales two months later 55%
Wages/Purchases 34%
Annual Operating Expenses/Annual Sales 6.00%
Capital Expenditures (every third month) 350,000
Interest Rate on Borrowings (and deposits) 14.5%
Minimum Cash Balance 750,000
Depreciation/Gross PP&E (per year) 10%
(per month) 0.83%
Dividends Paid (every third month) 500,000
Exhibit 3
KOTA FIBRES, LTD.
Historical Balance
Sheets (in Rupees)
2000 2001
(Actual) (Forecast)
Cash 762,323 750,000
Accounts Receivable 2,672,729 3,715,152
Inventories 1,249,185 2,225,373
Total Current Assets 4,684,237 6,690,525
Gross PP&E 10,095,646 11,495,646
Accumulated
Depreciation 1,484,278 2,558,009
Net PP&E 8,611,368 8,937,637
Total Assets 13,295,604 15,628,161
Accounts Payable 759,535 1,157,298
Notes to Bank (Deposits
at Bank) 684,102 3,463,701
Accrued Taxes 0 (180,654)
Total Current
Liabilities 1,443,637 4,440,345
Owners' Equity 11,851,967 11,187,816
Total Liabilities and
Equity 13,295,604 15,628,161
Memos From Management
Field Sales Manager, the extended credit term of
80 days net requested by Ponticherry Textiles
Transportation Manager, proposed raw inventory
requirement from 60 days to 30 days.
Purchasing Agent, new supplier willing to provide
just in time inventory for 35% of material
purchase
Operation Manager, estimate production efficiency
will gain several advantages:
GPM would rise 2 3 %, refelcting labor saving and
production efficiencies

Financial Analysis Liquidity
Pada Th 2000, Current ratio sebesar 3.2,
berarti kemampuan perushaan utk
membayar kewajiban jangka pendek
sudah mencukupi. Akan tetapi forecast
current ratio Th 2001 turun menjadi 1.5,
yang mana dibawah dari batas ideal (2.0)
Ini menandakan mereka akan menghadapi
kesulitah membayar kewajiban dan
tagihan jangka pendek tepat waktu.
Quick Ratio
Quick ratio mengambarkan seberapa cepat
perusahaan dapat mengkonversi aset
menjadi kas. Inventory tidak termasuk dalam
perhitungan quick ratio.Kota Fibres pd th
2000 memiliki ratio sebesar 2.38; dimana
diatas batas ideal (1.0). Akan tetapi Forecast
menunjukkan penurunan pd th 2001 menjadi
1.37. Sekali lagi ini menunjukkan perushaan
akan mengalami masalah dalam melunasi
kewajiban jangka pendek.
Debt Ratio
Jika dilihat dari Debt ratio sebenarnya tidak
ada masalah dengan kondisi financial
leverage perusahaan. Dimana pd th 2000,
Kota Fibres memiliki Debt ratio sebesar 11%.
Dan berdasarkan forecast pd th 2001 akan
menjadi sebesar 28%. Yang berati,
perusahaan ini akan lebih banyak membiayai
financing nya dengan hutang. Bagi Kota
Fibres, jika mereka menggunakan hutang
untuk membiayai proyek mereka perusahaan
ini akan mungkin dapat mengenerate earning
daripada pembiayaan dari luar.
Conclusions
Dengan kesuksesan yang diraih perusahaan ini
selama 40th, Ms. Pundir lebih menitikberatkan
kepentingan Shareholders daripada Liquiditas dan
Forecast ke depan perusahaan ini.
Secara keseluruhan, Kota Fibres sudah cukup
bagus dalam menangani liquiditas saat ini,
walaupun kedepannya menunjukan akan ada
penurunan yang cukup signifikan. Ini bisa berarti
mereka akan menghadapi permasalahan dalam
membayar tagihan mereka tepat waktu dan juga
mereka akan menghadapi kesulitan dalam Cash
Convertion Cycle.
Our Recomendation For The
Solution
+ Reject the offer for credit
extention 80 days
+ 30 day Inventory Policy
+ Partial JIT
+ Level Production Efficiency
+ 0 Dividends for the year!
Further Recommendations...
Propose 2%-5% discount-NET30, to the
customers (Pondicherry Textile)

Offer 3-5 term year (seasonal) contracts to
employees