Business Case Studies & Business Publications

Sengupta Fibres, Ltd.

Bruner, Robert F.,...

Case

Sengupta Fibres, Ltd.

Bruner, Robert F.; Pham, Thien T.

F-0935 | Published March 29, 1990 | 18 pages Case

Collection: Darden School of Business

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Learning Objectives

In January 1990, the chief executive of this small yarn-production company must resolve a surprising cash shortage. The tasks for the student are to evaluate the causes of this shortage (using a complete base case forecast given in the case) and then to assess the usefulness of various possible remedies suggested by company managers. In essence, the company is unable to liquidate a seasonal working-capital loan for the requisite 30 days each year. This situation arises from two classic causes: secular growth of the company, and declining profitability. Possible remedies include reducing finished-goods inventory through more efficient transportation and warehousing, reducing credit terms to customers, just-in-time (JIT) raw-materials supply, and switching from seasonal to level production. This case provides a thorough exercise of working-capital analysis and concepts.