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Kota Fibres

Kota Fibres. OUTLOOK 2001. Andy Wibisono Marchell Wu Steven Hu Andre Cipta Christianto. Polyester Pellets and other Raw Materials. Textiles. Suppliers. Merchants. End User. KOTA FIBRES LTD. Mills. Spools of Yarn. Sari’s and Textiles. O v e r v i e w. KOTA FIBRES Ltd .

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Kota Fibres

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  1. Kota Fibres OUTLOOK 2001 Andy Wibisono Marchell Wu Steven Hu Andre Cipta Christianto

  2. Polyester Pellets and other Raw Materials Textiles Suppliers Merchants End User KOTA FIBRES LTD. Mills Spools of Yarn Sari’s and Textiles O v e r v i e w

  3. 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

  4. The Major Concern KOTA faces ONE major concern Cash flow $$$

  5. Cash Flow Timeline Inventory Purchased Inventory sold Cash Received Inventory turnover = 41.39 A/R period = 44 Time A/P turnover = 18.55 Cash paid forInventory Operating cycle = 85 Cash cycle = 67

  6. Cashflow is out of sync!

  7. The following issues surfaced in 2001 with Kota Fibres, Ltd.: • 1. Payment of excise tax to move their product2. 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

  8. Forecast Assumption 2001

  9. 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

  10. 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.

  11. 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.

  12. 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.

  13. 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.

  14. Our Recomendation For The Solution + Reject the offer for credit extention 80 days + 30 day Inventory Policy + Partial JIT + Level ProductionEfficiency + 0 Dividends for the year!

  15. Further Recommendations... • Propose 2%-5% discount-NET30, to thecustomers (Pondicherry Textile) • Offer 3-5 termyear (seasonal) contractsto employees

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