Fibres City

LOGO

Kota Fibres

Syndicate 3

Tomi Kuspratama - 29113021

Christian Hamonangan – 29113025

Mattheus Biondi – 29113056

Aditya Ismoyo Achmad - 29113065

Irsyad Ahmadi – 29113072

Lea Shaula Salim – 29113126

LOGO

O v e r v i e w

SuppliersKOTA

FIBRES

LTD.

Merchants End

UserMills

Polyester Pellets

and other Raw

Materials

Spools of

Yarn

Textiles

Sari’s

and

Textiles

LOGO

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

LOGO

The Major Concern

KOTA faces ONE major concern

Cash flow

Cannot Pay Excise Tax

Too Much borrowing

money to bank

LOGO

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

LOGO

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

LOGO

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

LOGO

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

LOGO

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

LOGO

Critical Questioning

• Why the company still lend the money to the bank?

Beside, in 2000 the company has a good financial

condition or in state gaining profit.

• Mrs. Pundir believe if we stick on the Mr. Metha

forecast model, the bank will not lend the money

again to us. So, Mrs. Pundir wants to modified the

forecast model. Which is the best modified forecast

model for our company?

LOGO

The Result (Original Model) ORIGINAL MODEL (MR MEHTA)

Origin Model

Base Case


Early Year 2001 838,005

Mid Year 2001 33,009,219

End Year 2001 3,054,055

Gross Sales 90,900,108

Excise Taxes 13,635,016

Net Sales 77,265,092

Cost of Goods Sold 66,993,380

Gross Profit 10,271,712

Operating Expenses 5,454,006

Depreciation 1,073,731

Interest Expense (Income) 1,816,638

Profit Before Taxes 1,908,354

Income Taxes 572,506

Net Profit 1,335,848

Balance New Borrowings 2,678,103 Note :

1. Net Profit vs Net Profit Original Model, it describe the different value (net profit) between original model with the modified model

2. Balance New Borrowing, Its describe the amount of money that company must borrowing to the bank in one year period to finance

the company business and operational activities.

LOGO

The Result (Pondicherry)ACCUQIRED PONDICHERRY

Exihibit 4

Pondicherry


Early Year 2001 1,024,993

Mid Year 2001 35,804,700

End Year 2001 3,591,694












Net Profit vs Net Profit Origin Model 107,116

Balance New Borrowings 2,407,591

LOGO

The Result (Inventory)

30 DAY INVENTORY

Exhibit 5

Inventory


Early Year 2001 848,785

Mid Year 2001 22,987,471

End Year 2001 2,533,979














LOGO

The Result (Hibachi JIT)

HIBACHI JIT

Exhibit 6

Hibachi JIT


Early Year 2001 1,053,956

Mid Year 2001 25,873,621

End Year 2001 3,070,901














LOGO

The Result (Report From OM)

EFFICIENCY CALCULATION

Exhibit 7

Report From OM


Early Year 2001 838,005

Mid Year 2001 33,009,219

End Year 2001 3,054,055














LOGO

The Result (Unified Model)

MERGE MODEL

(Exhibit 4 + 5 + 6 +7)

Unified (P+I+H+E) Model


Early Year 2001 796,767

Mid Year 2001 20,079,404

End Year 2001 2,046,685














LOGO

The Result (Comparasion Model)

Model Net Profit

Net Profit vs Net Profit

Origin Model

Balance New

Borrowings

Base Case 1,335,848 2,678,103

Pondicherry 1,442,965 107,116 2,407,591

Inventory 1,712,271 376,423 1,644,098

Hibachi JIT 1,583,768 247,920 2,181,020

Efficiency 1,564,841 228,993 2,678,103

Unified (P+I+H+E) Model 2,274,799 938,951 1,691,074

LOGO

Final Analysis

1. In inventory models based on comparasion model

Table, we see in comparasion model table the

value of “new balance borrowing” which is

1,644,098 in the lowest amount for the company

should lend the money to the bank.

2. In unified (Pondicherry + Inventory + Hibachi + Eficiency) models based on comparasion

model Table , we see in comparasion model table

the value of “ne net profit “ which is 2,274,799 are

in the highest amount for the company can gain in

the period 2001.

LOGO

Conclussion (Part 1)

1. If the company wants reduce the money should lend to the bank as less as possible, the forecast model we recommended to the Mrs.Pundir are “Inventory Model”.

2. If the company wants had a good financial performance, the model we recommended to the Mrs.Pundir are “Unified Model”. Which is provide the largest profit and can be a good promised for submit the loan proposal to the bank.

LOGO

Conclussion (Part 2)

MODEL DEBT RATIO

Inventory 61%

Unified 51%

1. The lowest debt ratio, it means the better financial company

performance and the better company has the power to pay

the debt.

2. So, we concluded the unified model is the best model. We

recommended Mrs. Pundir to accept Pondicherry textile

proposal, changing raw material requirement 30 days,

accept Hibachi’s proposal just in time, and do the production

efficiencies reflecting the labor service.

Fibres City

Education

Transcript of Fibres City