Ques ons for Guna Fibres

1. Analyse the seasonality of the capital employed by the firm. What key elements of the
current cash conversion cycle have a bigger impact on the firm’s seasonal financing needs?

2. Analyse the company’s current financing policy. Is it wise to rely so much on short term
Notes Payable? Does the company have sufficient Net Working Capital? What are the risks?
Would you recommend and alterna ve debt policy for this firm?

3. What is your opinion on the current dividend policy? Is it wise? What are its poten al costs
and benefits?

4. Suppose banks are unwilling to extend the short term credit line above 375 million rupees.
Assuming nothing will change on the current cash conversion cycle, could the company
afford the es mated growth? Would it be wise to fund all the growth with such credit line?

5. Please produce new financial forecasts under the proposed new raw material inventory
policy (Exh 3). Take in considera on the cost savings men oned in the case. How much peak
short term funding would you need in this scenario?

6. Please produce new financial forecasts under a level produc on system. Take in
considera on the cost savings men oned in the case. How much peak short term funding
would you need in this scenario?

7. If growth could pose some poten al challenges, would you recommend keep sales at the
same level as before (zero growth). Could this, combined with one of the policies proposed,
solve the company’s financial issues?

8. What is your recommenda on? Should the company adopt one of the alterna ves? Should it
stop growing? What financial policy would be required to sustain this growth?