Business Case Studies & Business Publications

Katni Fibres, Ltd.

Schill, Michael J.

Case

Katni Fibres, Ltd.

Schill, Michael J.

F-2142 | Published March 11, 2026 | 11 Pages Case

Collection: Darden School of Business

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In January 2025, the chief executive of a small yarn-production company in India must resolve an unexpected cash shortage. The task for the student is to evaluate the causes of this shortage (using a completed “base-case” forecast given in the case) and assess the usefulness of various possible remedies suggested by managers in the company. In essence, the company is unable to zero out a seasonal working-capital loan for the requisite 30 days each year. This difficulty arises from two classic causes: secular growth of the company and declining profitability. Possible remedies include reducing inventory through more efficient transportation and warehousing, reducing credit terms to customers, switching from seasonal to level production, improving profitability, decreasing dividends, and reducing sales growth. The case is an updated and simplified version of an antecedent case, Kota Fibres, Ltd. (UVA-F-1359). At the University of Virginia Darden School of Business, this case is used in the core MBA finance curriculum in a module on financial forecasting.

The objectives of the case are threefold: (1) To explore a range of issues in working-capital management, with a primary focus on accounts receivable and inventory. The case illustrates how management choices about trade credit, inventory policy, production policy (i.e., producing to order versus producing to stock), and expense management influence the financing needs of the firm. The case’s financial forecast gives students the opportunity to discuss the cash cycle of the firm. (2) To extend students’ skills in financial-statement modeling and analysis. This case demonstrates the technique of forecasting with T-accounts, which may be contrasted with percentage-of-sales forecasting illustrated in other cases. (3) To illustrate some of the challenges in the financial (and general) management of firms in developing countries. These challenges include transportation and logistic problems, the availability of credit to merchants and consumers, high real rates of growth, government tax practices, and dramatic swings in demand induced by local customs and holidays.