Case: GUNA FIBRES, LTD.

Study Questions:

1- Examine Malik's monthly financial forecast. Why do Guna's financial

requirements vary across the year? What are the key determinants of Guna's

borrowing needs?

2- On the basis of Malik's forecast how much debt will Guna need to arrange

for the coming year? Will Guna be able to zero out the line of credit this year? If not,

what is the cause of Guna's ongoing need for debt?

3- Use your intuition to assess the desirability of the two proposals. Do you

expect these proposals to relieve or worsen Guna's ability to clean up its bank loan?

What other alternatives should Malik consider?

4- Using the monthly forecast, model the proposal from the transportation

manager. How helpful is this proposal in relieving Guna's reliance on debt financing?

How would you assess the costs and benefits of this proposal?

5- Using the monthly forecast, model the proposal from the operations manager.

How helpful is level production in relieving Guna's reliance on debt financing? How

would you assess the costs and benefits of this policy?

6- What are your recommendations for Kumar?