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KOTA FIBRES LTD.

Ms. Pundir, the managing director and principal owner of Kota Fibres, Ltd., discovered the
problem when she arrived at the parking lot of the companys plant one morning in early January
2001. Trucks filled with rolls of fiber yarns were being unloaded, but they had been loaded just the
night before and had been ready to depart that morning. The fiber was intended for customers who
had been badgering Pundir to fill their orders in a timely manner. The government tax inspector,
who was stationed at the companys warehouse, would not clear the trucks for departure because the
excise tax had not been paid. The tax inspector required a cash payment, but in seeking to draw
funds for the excise tax that morning, Mr. Mehta, the bookkeeper, discovered that the company had
overdrawn its bank account againthe third time in as many weeks. The truck drivers were
independent contractors who refused to wait while the company and government settled their
accounts. They cursed loudly as they unloaded the trucks.

This shipment would not leave for at least another two days, and angry customers would no
doubt require an explanation. Before granting a loan with which to pay the excise tax, the branch
manager of the All-India Bank & Trust Company had requested a meeting with Pundir for the next
day to discuss Kotas financial condition and its plans for restoring the firms liquidity.
Pundir told Mehta, This cash problem is most vexing. I dont understand it. Were a very
profitable enterprise, yet we seem to have to depend increasingly on the bank. Why do we need more
loans just as our heavy selling season begins? We cant repeat this blunder.

Company Background
Kota Fibres, Ltd., was founded in 1962 to produce nylon fiber at its only plant in Kota, India,
about 100 kilometers (km) south of New Delhi. By using new technology and domestic raw
materials, the firm had developed a steady franchise among dozens of small, local textile weavers. It
supplied synthetic fiber yarns used to weave colorful cloths for making saris, the traditional
womens dress of India. On average, each sari required eight yards of cloth. An Indian woman
typically would buy three saris a year. With Indias female population at around 500 million, the
demand for saris accounted for more than 12 billion yards of fabric. This demand was currently

-2being supplied entirely from domestic textile mills that, in turn, filled their yarn requirements from
suppliers such as Kota Fibres.
Synthetic-Textile Market
The demand for synthetic textiles was stable with year-to-year growth and
predictable seasonal fluctuations. Unit demand increased with both population and
national income. In addition, Indias population celebrated hundreds of festivals each
year, in deference to a host of deities, at which saris were traditionally worn. The most
important festival, the Diwali celebration in mid-autumn, caused a seasonal peak in the
demand for new saris, which in turn caused a seasonal peak in demand for nylon textiles
in late summer and early fall. Thus, the seasonal demand for nylon yarn would peak in
mid-summer. Unit growth in the industry was expected to be 15% per year.
Consumers purchased saris and textiles from cloth merchants located in the
villages around the country. A cloth merchant was an important local figure usually well
known to area residents; the merchant generally granted credit to support consumer
purchases. Merchants maintained relatively low levels of inventory and built stocks of
goods only shortly in advance of and during the peak selling season.
Competition among suppliers (the many small textile-weaving mills) to those
merchants was keen and was affected by price, service, and the credit that the mills could
grant to the merchants. The mills essentially produced to order, building their inventories of
woven cloth shortly in advance of the peak selling season and keeping only maintenance
stocks at other times of the year.
The yarn manufacturers competed for the business of the mills through responsive
service and credit. The suppliers to the yarn manufacturers provided little or no trade credit.
Being near the origin of the textile chain in India, the yarn manufacturers essentially banked
the downstream activities of the industry.
Production and Distribution System
Thin profit margins had prompted Pundir to adopt policies against overproduction and
overstocking, which would require Kota to carry inventories through the slack selling season.
She had adopted a plan of seasonal production, which meant that the yarn plant would
operate at peak capacity for two months of the year and at modest levels the rest of the year.
That policy imposed an
annual ritual of hirings and layoffs.
To help ensure prompt service, Kota Fibres maintained two distribution warehouses,
but getting the finished yarn quickly from the factory in Kota to the customers was a
challenge. The roads were narrow and mostly in poor repair. A truck could take 10 to 15 days
to negotiate the trip between Calcutta and Kota, a distance of about 1,100 km, and except
when they passed through cities and highways had only one lane. When two cars or trucks
met, they had to slow down and squeeze past each other or else stop and wait for traffic to pass.
Journeys were slow and dangerous, and accidents were frequent.

Company Performance
Kota Fibres had been consistently profitable. Moreover, sales had grown at an
annual rate of 18% in the year 2000. Gross sales were projected to reach (Indian rupees)
INR90.9 million in the fiscal year that ended December 31, 2001 (see Exhibit 1).1 Net
profits reached INR2.6 million in 2000. Exhibits 2 and 3 present recent financial
statements for the firm.

Reassessment
After the episode in the parking lot, Pundir and her bookkeeper went to her office to
analyse the situation. She pushed aside the several items on her desk to which she had intended
to devote her morning: a letter from a field sales manager requesting permission to grant
favorable credit terms to a new customer (see Exhibit 4); a note from the transportation manager
regarding a possible change in the inventory policy (Exhibit 5); a proposal from the purchasing
agent regarding the delivery lead times of certain supplies (Exhibit 6); and a proposal from the
operations manager for a scheme of level annual production (Exhibit 7).
To prepare a forecast on a business-as-usual basis, Pundir and Mehta agreed on
various parameters. Cost of goods sold would run at 73.7% of gross salesa figure that
was up from recent years because of increasing price competition. Operating expenses
would be about 6% of sales also up from recent years to include the addition of a
quality-control department, two new sales agents, and three young nephews with whom she
hoped to build an allegiance to the Pundir family business. The companys income tax rate was
30% and, although accrued monthly, was actually paid quarterly in March, June, September, and
December. The excise tax (at 15% of sales) was different from the income tax and was collected
at the factory gate as trucks left to make deliveries to customers and the regional warehouses.
Pundir proposed to pay dividends of INR500,000 per quarter to the 11 members of her extended
family who held the entire equity of the firm. For years Kota had paid high dividends. The Pundir
family believed that excess funds left in the firm were at greater risk than if the funds were
returned to shareholders.

Mehta observed that sales collections in any given month had been running
steadily at the rate of 40% of the last months sales plus 60% of the sales from the month
before last. The value of the raw materials purchased in any month represented on
average 55% of the value of sales expected to be made two months later. Wages and
other expenses in a given month were equivalent to about 34% of purchases in the
previous month. As a matter of policy, Pundir wanted to see a cash balance of no less
than INR750,000.
1

At the time, the rupee was pegged to the U.S. dollar at the rate of 46.5 rupees per dollar.

Kota Fibres had a line of credit at the All-India Bank & Trust Company, where it also
maintained its cash balances. All-Indias short-term interest rate was currently 14.5%, but Mehta
was worried that inflation and interest rates might rise in the coming year. The seasonal line of
credit had to be cleaned up for at least 30 days each year. The usual cleanup month had been
October,2 but Kota Fibres had failed to make a full repayment at that time. Only after strong
assurances by Pundir that she would clean up the loan in November or December had the bank
lending officer reluctantly agreed to waive the cleanup requirement in October. Unfortunately,
the credit needs of Kota Fibres did not abate as rapidly as expected in November and December,
and although his protests increased each month, the lending officer agreed to meet Kotas cash
requirements with loans. Now he was refusing to extend any more seasonal credit until Pundir
presented a reasonable financial plan for the company that demonstrated its ability to clean up
the loan by the end of 2001.
Financial Forecast
Mehta hurriedly developed a monthly forecast of financial statements using the current operating
assumptions (see Exhibit 8). As an alternative way of looking at the forecasted fund flows, Mehta also
prepared a forecast of cash receipts and disbursements (Exhibit 9). The monthly T-accounts underlying the
forecasts are given in Exhibit 10, and a summary of the forecast assumptions is in Exhibit 11.

Mehta handed over the forecast to Pundir with a graph showing projected sales and
month-end debt outstanding (Exhibit 12). After studying the forecasts for a few moments,
Pundir expostulated:
This is worse than I expected. The numbers show that we cant repay All- Indias loan by
the end of December. The loan officer will not accept this forecast as a basis for more credit. We
need a new plan, and fast. We need those loans in order to scale up for the most important part of
our business season. Lets go over these assumptions in detail and look for any opportunities to
improve our debt position.
Then, casting her gaze toward the stack of memos she had pushed aside earlier, she muttered,
Perhaps some of these proposals will help.
2 The selection of October as the loan-cleanup month was imposed by the bank on the grounds of tradition. Seasonal
loans of any type made by the bank were to be cleaned up in October. Pundir had seen no reason previously to
challenge the banks tradition.

-5-

Exhibit 1
KOTA FIBRES, LTD.
Summary of Monthly Sales,
Actual for 2000 and Forecast for
2001 (in rupees)

2000

2001

(historical)

(forecast)

January
February
March
April
May
June
July
August
September
October
November
December

2,012,400
2,314,260
3,421,080
7,043,400
12,074,400
15,294,240
14,187,420
7,144,020
4,024,800
3,421,080
2,716,740
2,213,640

2,616,120
2,892,825
4,447,404
8,804,250
13,885,560
17,588,376
16,315,533
8,572,824
5,031,000
4,447,404
3,531,762
2,767,050

Year

75,867,480

90,900,108

-6Exhibit 2
KOTA FIBRES, LTD.
Historical and Forecast Annual Income Statements
(in rupees)

Gross Sales
Excise Tax
Net Sales
Cost of Goods
Gross Profits
Operating Expenses
Depreciation
Interest Expense
Profit Before Tax
Income Tax
Net Profit

1999

2000

2001

(Actual)

(Actual)

(Forecast)

64,487,358
9,673,104
54,814,254
44,496,277
10,317,978
3,497,305

75,867,480
11,380,122
64,487,358
53,865,911
10,621,447
4,828,721

90,900,108
13,635,016
77,265,092
66,993,380
10,271,712
5,454,006

769,103
910,048
5,141,521
1,542,456
3,599,065

908,608
1,240,066
3,644,052
1,093,216
2,550,837

1,073,731
1,835,620
1,908,355
572,506
1,335,848

-7Exhibit 3
KOTA FIBRES, LTD.
Historical and Forecast Balance Sheets
(in rupees)

2000

2001

(Actual)

(Forecast)

Cash
Accounts Receivable
Inventories
Total Current Assets
Gross PP&E
Accumulated Depreciation
Net PP&E
Total Assets

762,323
2,672,729
1,249,185
4,684,237
10,095,646
1,484,278
8,611,368
13,295,604

750,000
3,715,152
2,225,373
6,690,525
11,495,646
2,558,009
8,937,637
15,628,161

Accounts Payable
Notes to Bank (Deposits at Bank)
Accrued Taxes
Total Current Liabilities
Owners' Equity
Total Liabilities and Equity

759,535
684,102
0
1,443,637
11,851,967
13,295,604

1,157,298
3,463,701
(180,654)
4,440,345
11,187,816
15,628,161

-8Exhibit 4
KOTA FIBRES, LTD.
Memo from Field Sales Manager

To:
From:

G. Pundir
A. Bajpai

January 7, 2001
As you know, Pondicherry Textiles is considering making us their prime yarn
supplier for this year. Purchases would be in the neighborhood of INR 6 million and are
not reflected in our current sales forecast. Pondicherry would be one of our largest
accounts. They have accepted our terms on price, but have asked for credit terms of 80
days, net. Unless we extend our credit terms, Pondicherry will not do business with us.
We can expect that Pondicherry will purchase our yarn across the year in about the same
pattern as our other customers.
If you approve this exception to our standard terms (45 days), the Pondicherry district
sales office will meet its quarterly sales quota immediately. Please indicate your approval
below.

Approved:

-9Exhibit 5
KOTA FIBRES, LTD.
Memo from Transportation Manager
To:
From:

G. Pundir
R. Sikh

January 2, 2001
As you asked me to, I have been tracking our supply shipments in the last six
months. The new road between Kota and New Delhi has improved reliability of the
shipments significantly. Our suppliers new manufacturing equipment is now running
consistently, and they have been meeting their shipment dates consistently. As a result,
I would propose that we reduce our raw-material inventory requirement from 60 days
to 30 days. This would reduce the amount of inventory we are carrying by one month,
and should free up a lot of space in the warehouse. I am not sure if that will affect any
other department since we will be buying the same amount of material, but it would
make inventory tracking a lot easier for me. Please let me know so we can implement
this in January.

-10Exhibit 6
KOTA FIBRES, LTD.
Memo from Purchasing Agent

To:
From:

G. Pundir
R. Mohan

January 5, 2001
Hibachi Chemicals of Yokohama has approached us with a proposal to supply us with polyester
pellets on a just-in-time basis from their plant in Majala (20 km away). Those pellets account
for 35% of our raw - material purchases. I am looking into the feasibility of this schemein
particular, whether Hibachi can actually perform on that basisand will report back in two
weeks . If the proposal is feasible, it would reduce our inventory of pellets from 60 days
outstanding to only 2 or 3 days

-11Exhibit 7
KOTA FIBRES, LTD.
Memo from Operations Manager
To:
From:

G. Pundir
L. Gupta

January 7, 2001
You asked me to estimate the production efficiencies arising from a scheme of level annual
production. In essence, there are significant advantages to be gained:

Gross profit margin would rise by 2% or 3%, reflecting labor savings and production
efficiencies gained from a stable work force and the absence of certain seasonal training
and setup costs.

Seasonal hirings and layoffs would no longer be necessary, permitting us to cultivate a


stronger work force and, perhaps, to suppress labor unrest. You will recall that the unions
have indicated that reducing seasonal layoffs will be one of their major negotiating
objectives this year.

Level production entails lower manufacturing risk. With the load spread throughout the
year, we would suffer less from equipment breakdowns and could better match the routine
maintenance with the demand on the plant and equipment.

-12-

Exhibit 8
KOTA FIBRES, LTD.
Monthly Forecast of Income Statements and Balance Sheets for 2001
(in rupees)

January

February

March

April

May

June

July

August

September

Gross Sales

2,616,120

2,892,825

4,447,404

8,804,250 13,885,560

17,588,376 16,315,533

8,572,824

Excise Taxes
Net Sales
Cost of Goods
Sold
Gross Profit
Operating
Expenses

392,418
2,223,702

433,924
2,458,901

667,111 1,320,638 2,082,834


3,780,293 7,483,613 11,802,726

2,638,256 2,447,330
14,950,120 13,868,203

1,285,924 754,650
7,286,900 4,276,350

1,928,080
295,622

2,132,012
326,889

3,277,737 6,488,732 10,233,658


502,557
994,880 1,569,068

12,962,633 12,024,548
1,987,486 1,843,655

454,501

454,501

454,501

454,501

454,501

454,501

454,501

84,130

84,130

87,047

87,047

87,047

89,964

89,964

11,058

24,825

70,867

158,210

268,352

362,187

October

November

December

3,531,762

2,767,050

667,111
3,780,293

529,764
3,001,998

415,058
2,351,993

6,318,171 3,707,847 3,277,737


968,729 568,503
502,557

2,602,909
399,089

5,031,000 4,447,404

454,501 454,501

2,039,316
312,677

454,501

454,501

92,880

92,880

92,880

95,797

363,212

259,568 145,898

80,686

50,025

40,731

Depreciation
Interest Expense (Income)
(1)
Profit Before
Taxes

(254,068)

(236,566)

(109,858)

295,123

759,168

1,080,835

935,979

164,697 (124,776)

(125,510)

(198,317)

(278,352)

Income Taxes
Net Profit

(76,220)
(177,847)

(70,970)
(165,596)

(32,957)
(76,900)

88,537
206,586

227,751
531,418

324,251
756,585

280,794
655,185

49,409 (37,433)
115,288 (87,343)

(37,653)
(87,857)

(59,495)
(138,822)

(83,506)
(194,847)

(1) Interest expense = Notes Payable * 14.5%/12 months.

89,964

454,501

J
u
n
e

-13Exhibit 8 (continued)

January

February

March

April

May

June

July

August

750,000
750,000
17,997,155 24,748,757
19,666,227 14,469,652

750,000
25,697,603
6,815,272

750,000
17,191,189
3,883,970

38,413,382

33,262,875 21,825,159

September

October

November

December

Assetsis
Cash (1)
Accounts Receivable (2)
Inventories (3)

750,000
2,773,349
2,308,135

750,000
3,291,542
5,850,125

750,000
750,000
5,012,144 10,301,737
11,855,841 17,637,315

750,000
9,003,739
2,950,257

750,000
6,295,049
1,854,837

750,000
5,029,249
1,639,892

750,000
3,715,152
2,225,373

Not

Total Current Assets


NetforProp. Plant & Equip. (4)
Total Assets

5,831,484

9,891,667

17,617,985

28,689,052

8,527,237

8,443,107

8,706,060 8,619,013

14,358,721

18,334,774

26,324,045

1,614,553
1,146,268
(76,220)

4,010,818
2,962,622
(147,190)

6,805,539
8,842,088
8,767,030 17,419,379
(180,148)
(91,611)

6,826,250
11,508,524

15,392,421
10,931,623

26,169,856
11,138,209

35,275,720
11,669,627

18,334,774

26,324,045

37,308,065

46,945,348

37,308,065

39,968,409

12,703,996

8,899,886

7,419,142

6,690,525

8,792,002

8,702,038

8,612,075

8,869,194

8,776,314

8,683,434

8,937,637

46,945,348

48,760,411

41,964,914

30,437,233

21,573,190

17,676,200

16,102,575

15,628,161

3,883,534
1,935,531
32,950,665 27,167,192
0
280,794

1,614,553
15,795,793
330,203

1,110,950
8,352,899

36,834,199 29,383,517
11,926,212 12,581,397

17,740,548
12,696,685

9,463,849
12,109,341

5,654,715
12,021,484

4,219,913
11,882,662

4,440,345
11,187,816

30,437,233

21,573,190

17,676,200

16,102,575

15,628,161

8,531,966

Liabilities and Owners' Equity


Accounts Payable (5)
Note Payable- Bank (6)
Accrued Taxes (7)

Total Current Liabilities


Shareholders' Equity (8)
Total Liabilities & Equity
. .
(1) See Exhibit 9.
(2) See panel 1, Exhibit 10.
(3) See panel 2, Exhibit 10.
(4) See panel 6, Exhibit 10.
(5) See panel 3, Exhibit 10.
(6) Plug figure.
(7) See panel 5, Exhibit 10.
(8) See panel 4, Exhibit 10.

2,684,601
11,674,120
14,358,721

8,142,024
26,997,556
136,140

48,760,411

41,964,914

690,358
5,002,010
(37,653)

1,039,007
3,278,054
(97,148)

1,157,298
3,463,701
(180,654)

-14Exhibit 9
KOTA FIBRES, LTD.
Schedule of Cash Receipts and Disbursements for 2001
(in rupees)

January
Assume:

Sales

2,616,120

February

March

2,892,825

4,447,404

April
8,804,250

May

June

13,885,560

17,588,376

8,973,543 4,715,053
26,997,556 32,950,665

July

August

September

October

November December

16,315,533

8,572,824

5,031,000

4,447,404

3,531,762

2,767,050

2,767,050
2,446,072
27,167,192 15,795,793

1,942,469
8,352,899

1,521,878
5,002,010

1,870,526
3,278,054

1,988,817
3,463,701

15,366,686 17,079,239 13,218,449 7,156,094 4,797,562


(5,783,473) (11,371,400) (7,442,894) (3,350,889) (1,723,956)

4,081,147
185,647

Purchases (1)
Debt Outstanding

2,446,072
1,146,268

4,842,338 7,637,058 9,673,607


2,962,622 8,767,030 17,419,379

Receipts:

Accts Rcvble Collected


New Borrowings (Repayments)

2,515,500
462,166

2,374,632 2,726,802
1,816,354 5,804,408

3,514,657
8,652,349

6,190,142 10,836,774
9,578,178 5,953,108

Disburs.:

Accounts Paid (2)


Capital Expenditures
Interest Payments
Excise Tax Paid

1,591,054
0
11,058
392,418

2,446,072 4,842,338
0
350,000
24,825
70,867
433,924
667,111

7,637,058
0
158,210
1,320,638

9,673,607 8,973,543
0
350,000
268,352
362,187
2,082,834 2,638,256

4,715,053
0
363,212
2,447,330

2,767,050
0
259,568
1,285,924

2,446,072
350,000
145,898
754,650

1,942,469
0
80,686
667,111

1,521,878
0
50,025
529,764

1,870,526
350,000
40,731
415,058

Operating Expenses
Accrued Income Tax Paid
Wages
Dividends
Subtotal: Disbursements

454,501
0
540,958
0
2,989,989

454,501
454,501
454,501
0
0
0
831,665 1,646,395 2,596,600
0
500,000
0
4,190,986 8,531,210 12,167,005

454,501
454,501
0
460,390
3,289,026 3,051,005
0
500,000
15,768,320 16,789,882

454,501
0
1,603,118
0
9,583,214

454,501
0
940,797
0
5,707,839

454,501
292,770
831,665
500,000
5,775,555

454,501
0
660,439
0
3,805,206

454,501
0
517,438
0
3,073,606

454,501
0
635,979
500,000
4,266,794

Receipts - Disbursements

(12,323)

BOP Cash Balance

762,323

750,000

750,000

750,000

750,000

750,000

750,000

750,000

750,000

750,000

750,000

750,000

EOP Cash Balance

750,000

750,000

750,000

750,000

750,000

750,000

750,000

750,000

750,000

750,000

750,000

750,000

(1) Equal to 55 percent of sales in period (T+2).


(2) Equal to purchases in period (T-1).

-15Exhibit 10
KOTA FIBRES, LTD.
Forecast T-Accounts Supporting Financial Statements
(in rupees)

1.

Jan.

Feb.

Mar.

Apr.

May

June

July

Aug.

Sept.

Oct.

Nov.

Dec.

Beginning of Period

2,672,729

2,773,349

3,291,542

5,012,144

10,307,737

17,997,155

24,748,757

25,697,603

17,191,189

9,,003,739

6,295,049

5,029,249

+ Sales

2,616,120

2,892,825

4,447,404

8,804,250

13,885,560

17,588,376

16,315,533

8,572,824

5,031,000

4,447,404

3,531,762

2,767,050

Schedule of Accounts receivables

Less Collection Last Month (1)

2.

885,456

1,046,448

1,157,130

1,778,962

3,521,700

5,554,224

7,035,350

6,526,213

3,429,130

2,012,400

1,778,962

1,412,705

Less Collection Month before


last (2)

1,630,044

1,328,184

1,569,672

1,735,695

2,668,442

5,282,550

8,331,336

10,553,026

9,789,320

5,143,694

3,018,600

2,668,442

End of period

2,773,349

3,291,542

5,012,144

10,301,737

17,997,155

24,748,757

25,697,603

17,191,189

9,003,739

6,295,049

5,029,249

3,715,152

Beginning of Period

1,249,185

2,308,135

5,850,125

11,855,841

17,637,315

19,666,227

14,469,652

6,815,272

3,883,970

2,950,257

1,854,837

1,639,892

+ purchases (3)

2,446,072

4,842,338

7,637,058

9,673,607

8,973,543

4,715,053

2,767,050

2,446,072

1,942,469

1,521,878

1,870,526

1,988,817

Schedule of Inventories

+ Labour

3.

540,958

831,665

1,646,395

2,596,600

3,289,026

3,051,005

1,603,118

940,797

831,665

660,439

517,438

635,979

Less: Shipments (COGS)

1,928,080

2,132,012

3,277,737

6,488,732

10,233,658

12,962,633

12,022,548

6,318,171

3,707,847

3,277,737

2,602,909

2,039,316

End of period

2,308,135

5,850,125

11,855,841

17,637,315

19,666,227

14,469,652

6,815,272

3,883,970

2,950,257

1,854,837

1,639,892

2,225,373

Schedule of Accounts Payable


Beginning of Period

(1)
(2)
(3)
(4)
(5)

759,535

1,614,553

4,010,818

6,805,539

8,842,088

8,142,024

3,885,534

1,935,531

1,614,553

1,110,950

690,358

1,039,007

+ Purchases (4)

2,446,072

4,842,338

7,637,058

9,673,607

8,973,543

4,715,053

2,767,050

2,446,072

1,942,469

1,521,878

1,870,526

1,988,817

Less Payments (5)

1,591,054

2,446,072

4,842,338

7,637,058

9,673,607

8,973,543

4,715,053

2,767,050

2,446,072

1,942,469

1,521,878

1,870,526

End of Period

1,614,553

4,010,818

6,805,539

8,842,088

8,142,024

3,883,534

1,935,531

1,614,553

1,110,950

690,538

1,039,007

1,157,298

40% of sales in period (T-1)


60% of Sales in period (T-2)
Equal to 55% of sales in period (T+2)
Equal to 55% of sales in period (T+2)
Equal to purchases in period (T-1)

-16Exhibit 10 (continued)
January

February

March

April

May

June

July

August

September

October

November

December

11,851,967

11,674,120

11,508,524

10,931,623

11,138,209

11,669,627

11,926,212

12,581,397

12,696,685

12,109,341

12,021,484

11,882,662

(177,847)

(165,596)

(76,900)

206,586

531,418

756,585

655,185

115,288

(87,343)

(87,857)

(138,822)

(194,847)

00

00

500,000

00

00

500,000

00

00

500,000

00

00

500,000

11,674,120

11,508,524

10,931,623

11,138,209

11,669,627

11,926,212

12,581,397

12,696,685

12,109,341

12,021,484

11,882,662

11,187,816

00

(76,220)

(147,190)

(180,148)

(91,611)

136,140

00

280,794

330,203

00

(37,653)

(97,148)

+ Monthly Tax Exp. @30%

(76,220)

(70,970)

(32,957)

88,537

227,751

324,251

280,794

49,409

(37,433)

(37,653)

(59,495)

(83,506)

Less: Quarterly Tax Payments

00

00

00

00

00

460,390

00

00

292,770

00

00

00

(76,220)

(147,190)

(180,148)

(91,611)

136,140

00

280,794

330,203

00

(37,653)

(97,148)

(180,654)

10,095,646

10,095,646

10,095,646

10,445,646

10,445,646

10,445,646

10,795,646

10,795,646

10,795,646

11,145,646

11,145,646

11,145,646

00

00

350,000

00

00

350,000

00

00

350,000

00

00

350,000

10,095,646

10,095,646

10,445,646

10,445,646

10,445,646

10,795,646

10,795,646

10,795,646

11,145,646

11,145,646

11,145,646

11,494,646

84,130

84,130

87,047

87,047

87,047

89,964

89,964

89,964

92,880

92,880

92,880

95,797

Less Cumulative Dep.

1,568,408

1,652,339

1,739,586

1,826,633

1,913,680

2,003,643

2,093,607

2,183,571

2,276,451

2,369,332

2,462,212

2,558,009

Ending Net PP&E

8,527,237

8,443,107

8,706,060

8,619,013

8,531,966

8,792,002

8,702,038

8,612,075

8,869,194

8,776,314

8,683,434

8,937,637

4. Schedule of Shareholders Equity


Beginning of Period
+ Net Profit
Less: Dividend
End of Period

5. Schedule of Accrued Taxes


Beginning of Period

End of Period

6. Schedule of Property, Plant & Equipments


Beginning Gross PP&E
+ capital Expenditure
Ending Gross PP&E
Monthly dep. Exp.

-17Exhibit 11
KOTA FIBRES, LTD.
Forecast Assumptions

Ratio of:
Income Tax/Profit Before Tax
Excise Tax/Sales
This Month Collections of Last Month's Sales
This Month Collections of Month-before-Last Sales
Purchases/ Sales two months later
Wages/Purchases
Annual Operating Expenses/Annual Sales
Capital Expenditures (every third month)
Interest Rate on Borrowings (and deposits)
Minimum Cash Balance
Depreciation/Gross PP&E (per year)
(per month)
Dividends Paid (every third month)

30%
15%
40%
60%
55%
34%
6.00%
350,000
14.5%
750,000
10%
0.83%
500,000

-18Exhibit 12
KOTA FIBRES, LTD.
Trend of Certain Financial Accounts by Month
(in millions of rupees)

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