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KOTA FIBRES, LTD.

Summary of monthly sales: Actual for 2000 and Forecast for 2001

2000 2001 2001


(historical) (forecast) (new forecast)

January 2,012,400 2,616,120 2,788,801


February 2,314,260 2,892,825 3,083,770
March 3,421,080 4,447,404 4,740,962
April 7,043,400 8,804,250 9,385,388
May 12,074,400 13,885,560 14,802,098
June 15,294,240 17,588,376 18,749,324
July 14,187,420 16,315,533 17,392,465
August 7,144,020 8,572,824 9,138,686
September 4,024,800 5,031,000 5,363,079
October 3,421,080 4,447,404 4,740,962
November 2,716,740 3,531,762 3,764,881
December 2,213,640 2,767,050 2,949,693

Year 75,867,480 90,900,108 96,900,108


Supporting Calculations for Exhibit 1

HISTORICAL CYCLE 100


FORECAST CYCLE 130

TOTAL
2000 (historical) 75,867,480 2,012,400

2001 (forecast) 90,900,108 2,616,120

GROSS UP RATIO

monthly sales to total sales 0.0287802

Additional sales 172681

new sales forecast 96,900,108 2,788,801


115 170 350 600 760 705 355 200 170
125 130 125 115 115 115 120 125 130

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

2,892,825 4,447,404 8,804,250 13,885,560 17,588,376 16,315,533 8,572,824 5,031,000 4,447,404

0.0318242 0.0489263 0.0968563 0.15275625 0.19349126 0.1794886 0.0943104 0.0553465 0.0489263

190945 293558 581138 916538 1160948 1076932 565862 332079 293558

3,083,770 4,740,962 9,385,388 14,802,098 18,749,324 17,392,465 9,138,686 5,363,079 4,740,962


135 110
130 125

2,716,740 2,213,640

3,531,762 2,767,050

0.0388532 0.0304406

233119 182643

3,764,881 2,949,693
KOTA FIBRES, LTD.
Historical Annual Income Statements ( in Rupees)

1999 2000 2001


(Actual) (Actual) (Forecast)

Gross Sales 64,487,358 75,867,480 96,900,108


Excise Tax 9,673,104 11,380,122 14,535,016
Net Sales 54,814,254 64,487,358 82,365,092
Cost of Goods 44,496,277 53,865,911 68,508,376
Gross Profits 10,317,978 10,621,447 13,856,715
Operating Expenses 3,497,305 4,828,721 5,814,006
Depreciation 769,103 908,608 1,073,731
Interest Expense 910,048 1,240,066 1,366,524
Profit Before Tax 5,141,521 3,644,052 5,602,454
Income Tax 1,542,456 1,093,216 1,680,736
Net Profit 3,599,065 2,550,837 3,921,718
KOTA FIBRES, LTD.
Historical Balance Sheets (in Rupees)

2000 2001
(Actual) (Forecast)

Cash 762,323 750,000


Accounts Receivable 2,672,729 4,424,472
Inventories 1,249,185 4,499,916
Total Current Assets 4,684,237 9,674,388
Gross PP&E 10,095,646 11,495,646
Accumulated Depreciation 1,484,278 2,558,009
Net PP&E 8,611,368 8,937,637
Total Assets 13,295,604 18,612,025

Accounts Payable 759,535 927,372


Notes to Bank (Deposits at Bank) 684,102 3,989,390
Accrued Taxes 0 (78,422)
Total Current Liabilities 1,443,637 4,838,340
Owners' Equity 11,851,967 13,773,685
Total Liabilities and Equity 13,295,604 18,612,025
KOTA FIBRES, LTD.
Monthly Forecast of Income Statements (in Rupees)
Pro Forma

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

Gross Sales 2,788,801 3,083,770 4,740,962 9,385,388 14,802,098 18,749,324 17,392,465 9,138,686 5,363,079 4,740,962 3,764,881 2,949,693 96,900,108
Excise Taxes 418,320 462,566 711,144 1,407,808 2,220,315 2,812,399 2,608,870 1,370,803 804,462 711,144 564,732 442,454 14,535,016
Net Sales 2,370,481 2,621,205 4,029,817 7,977,580 12,581,783 15,936,925 14,783,595 7,767,883 4,558,617 4,029,817 3,200,149 2,507,239 82,365,092
Cost of Goods Sold 1,971,682 2,180,226 3,351,860 6,635,469 10,465,083 13,255,772 12,296,472 6,461,051 3,791,697 3,351,860 2,661,771 2,085,433 68,508,376
Gross Profit 398,799 440,979 677,958 1,342,110 2,116,700 2,681,153 2,487,122 1,306,832 766,920 677,958 538,378 421,806 13,856,715
Operating Expenses 484,501 484,501 484,501 484,501 484,501 484,501 484,501 484,501 484,501 484,501 484,501 484,501 5,814,006
Depreciation 84,130 84,130 87,047 87,047 87,047 89,964 89,964 89,964 92,880 92,880 92,880 95,797 1,073,731
Interest Expense (Income) (1) 16,290 25,896 55,390 104,062 176,711 263,188 270,245 184,555 105,699 65,616 50,668 48,205 1,366,524
Profit Before Taxes (186,122) (153,548) 51,020 666,501 1,368,442 1,843,501 1,642,413 547,813 83,841 34,961 (89,671) (206,697) 5,602,454
Income Taxes (55,837) (46,064) 15,306 199,950 410,532 553,050 492,724 164,344 25,152 10,488 (26,901) (62,009) 1,680,736
Net Profit (130,286) (107,483) 35,714 466,551 957,909 1,290,451 1,149,689 383,469 58,688 24,473 (62,770) (144,688) 3,921,718

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

Forecasted Monthly Balance Sheets for 2001 (in Rupees)

January February March April May June July August September October November December
Assets
Cash (1) 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000 750,000
Accounts Receivable (2) 2,946,030 3,655,168 5,669,328 11,367,378 19,788,388 27,407,380 28,852,020 19,994,930 10,978,612 7,486,548 5,888,005 4,424,472
Inventories (3) 1,493,460 2,159,113 3,853,261 5,767,319 7,267,991 7,087,048 4,746,903 4,211,493 4,397,092 4,231,090 4,116,491 4,499,916
Total Current Assets 5,189,490 6,564,281 10,272,589 17,884,697 27,806,379 35,244,428 34,348,923 24,956,423 16,125,704 12,467,638 10,754,496 9,674,388
Net Prop. Plant & Equip. (4) 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
Total Assets 13,716,727 15,007,388 18,978,649 26,503,710 36,338,345 44,036,430 43,050,961 33,568,498 24,994,899 21,243,952 19,437,930 18,612,025

Liabilities and Owners' Equity


Accounts Payable (5) 702,753 1,351,981 3,331,372 6,161,898 8,615,748 8,890,512 5,678,591 2,739,959 1,790,747 1,322,041 842,716 927,372
Note Payable- Bank (6) 1,348,129 2,143,110 4,583,959 8,611,992 14,624,336 21,781,095 22,365,134 15,273,490 8,747,481 5,430,280 4,193,254 3,989,390
Accrued Taxes (7) (55,837) (101,901) (86,595) 113,356 523,888 0 492,724 657,068 0 10,488 (16,413) (78,422)
Total Current Liabilities 1,995,045 3,393,190 7,828,736 14,887,246 23,763,972 30,671,607 28,536,449 18,670,516 10,538,229 6,762,809 5,019,557 4,838,340
Shareholders' Equity (8) 11,721,682 11,614,198 11,149,913 11,616,464 12,574,373 13,364,823 14,514,512 14,897,982 14,456,670 14,481,143 14,418,373 13,773,685
Total Liabilities & Equity 13,716,727 15,007,388 18,978,649 26,503,710 36,338,345 44,036,430 43,050,961 33,568,498 24,994,899 21,243,952 19,437,930 18,612,025

(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.
KOTA FIBRES, LTD.
Schedule of Cash Receipts and Disbursements (in Rupees)

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

Assume: Sales 2,788,801 3,083,770 4,740,962 9,385,388 14,802,098 18,749,324 17,392,465 9,138,686 5,363,079 4,740,962 3,764,881 2,949,693 3,625,441 3,854,713
Purchases (1) 1,639,292 2,288,520 4,267,911 7,098,437 9,552,287 9,827,051 6,615,130 3,676,498 2,727,286 2,258,580 1,779,255 1,863,911
Debt Outstanding 1,348,129 2,143,110 4,583,959 8,611,992 14,624,336 21,781,095 22,365,134 15,273,490 8,747,481 5,430,280 4,193,254 3,989,390

Receipts: Accts Rcvble Collected 2,515,500 2,374,632 2,726,802 3,687,338 6,381,088 11,130,332 15,947,824 17,995,776 14,379,397 8,233,026 5,363,424 4,413,226
New Borrowings (Repayments) 664,026 794,981 2,440,849 4,028,034 6,012,344 7,156,758 584,039 (7,091,644) (6,526,009) (3,317,201) (1,237,025) (203,865)

Disburs.: Accounts Paid (2) 1,696,074 1,639,292 2,288,520 4,267,911 7,098,437 9,552,287 9,827,051 6,615,130 3,676,498 2,727,286 2,258,580 1,779,255
Capital Expenditures 0 0 350,000 0 0 350,000 0 0 350,000 0 0 350,000
Interest Payments 16,290 25,896 55,390 104,062 176,711 263,188 270,245 184,555 105,699 65,616 50,668 48,205
Excise Tax Paid 418,320 462,566 711,144 1,407,808 2,220,315 2,812,399 2,608,870 1,370,803 804,462 711,144 564,732 442,454
Operating Expenses 484,501 484,501 484,501 484,501 484,501 484,501 484,501 484,501 484,501 484,501 484,501 484,501
Accrued Income Tax Paid 0 0 0 0 0 1,076,938 0 0 682,220 0 0 0
Wages 576,665 557,359 778,097 1,451,090 2,413,469 3,247,778 3,341,197 2,249,144 1,250,009 927,277 767,917 604,947
Dividends 0 0 500,000 0 0 500,000 0 0 500,000 0 0 500,000
Subtotal: Disbursements 3,191,849 3,169,613 5,167,651 7,715,371 12,393,432 18,287,090 16,531,864 10,904,132 7,853,388 4,915,825 4,126,399 4,209,361

Receipts - Disbursements (12,323) 0 0 0 0 0 0 0 0 0 0 0

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).
KOTA FIBRES, LTD.
Forecasted T-Accounts Supporting Financial Statements (in Rupees)
January February March April May June July August September October November December
1. Schedule of Accounts Receivable
Beginning of Period 2,672,729 2,946,030 3,655,168 5,669,328 11,367,378 19,788,388 27,407,380 28,852,020 19,994,930 10,978,612 7,486,548 5,888,005
Plus 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
Additional Sales 172,681 190,945 293,558 581,138 916,538 1,160,948 1,076,932 565,862 332,079 293,558 233,119 182,643
Less Collections, Last Month (1) 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 Collections, 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
Less Collection, Pondicherry 0 0 0 172,681 190,945 293,558 581,138 916,538 1,160,948 1,076,932 565,862 332,079
End of Period 2,946,030 3,655,168 5,669,328 11,367,378 19,788,388 27,407,380 28,852,020 19,994,930 10,978,612 7,486,548 5,888,005 4,424,472
(1) 40% of sales in period (T-1).exclude Pondicherry
(2) 60% of sales in period (T-2).exclude Pondicherry

2. Schedule of Inventories
Beginning of Period 1,249,185 1,493,460 2,159,113 3,853,261 5,767,319 7,267,991 7,087,048 4,746,903 4,211,493 4,397,092 4,231,090 4,116,491
Plus Purchases (1) 1,639,292 2,288,520 4,267,911 7,098,437 9,552,287 9,827,051 6,615,130 3,676,498 2,727,286 2,258,580 1,779,255 1,863,911
Plus Labor 576,665 557,359 778,097 1,451,090 2,413,469 3,247,778 3,341,197 2,249,144 1,250,009 927,277 767,917 604,947
Less Shipments (COGS) 1,971,682 2,180,226 3,351,860 6,635,469 10,465,083 13,255,772 12,296,472 6,461,051 3,791,697 3,351,860 2,661,771 2,085,433
End of Period 1,493,460 2,159,113 3,853,261 5,767,319 7,267,991 7,087,048 4,746,903 4,211,493 4,397,092 4,231,090 4,116,491 4,499,916
(1) Equal to 55 percent of sales in period (T+2).

3. Schedule of Accounts Payable


Beginning of Period 759,535 702,753 1,351,981 3,331,372 6,161,898 8,615,748 8,890,512 5,678,591 2,739,959 1,790,747 1,322,041 842,716
+ Purchases (1) 1,639,292 2,288,520 4,267,911 7,098,437 9,552,287 9,827,051 6,615,130 3,676,498 2,727,286 2,258,580 1,779,255 1,863,911
- Payments (2) 1,696,074 1,639,292 2,288,520 4,267,911 7,098,437 9,552,287 9,827,051 6,615,130 3,676,498 2,727,286 2,258,580 1,779,255
End of Period 702,753 1,351,981 3,331,372 6,161,898 8,615,748 8,890,512 5,678,591 2,739,959 1,790,747 1,322,041 842,716 927,372
(1) Equal to 55 percent of sales in period (T+2).
(2) Equal to purchases in period (T-1).

4. Schedule of Shareholder's Equity


Beginning of Period 11,851,967 11,721,682 11,614,198 11,149,913 11,616,464 12,574,373 13,364,823 14,514,512 14,897,982 14,456,670 14,481,143 14,418,373
Plus Net Profit (130,286) (107,483) 35,714 466,551 957,909 1,290,451 1,149,689 383,469 58,688 24,473 (62,770) (144,688)
Less Dividends 0 0 500,000 0 0 500,000 0 0 500,000 0 0 500,000
End of Period 11,721,682 11,614,198 11,149,913 11,616,464 12,574,373 13,364,823 14,514,512 14,897,982 14,456,670 14,481,143 14,418,373 13,773,685

5. Schedule of Accrued Taxes


Beginning of Period 0 (55,837) (101,901) (86,595) 113,356 523,888 0 492,724 657,068 0 10,488 (16,413)
Plus Monthly Tax Expense (@ 30%) (55,837) (46,064) 15,306 199,950 410,532 553,050 492,724 164,344 25,152 10,488 (26,901) (62,009)
Less Quarterly Tax Payments 0 0 0 0 0 1,076,938 0 0 682,220 0 0 0
End of Period (55,837) (101,901) (86,595) 113,356 523,888 0 492,724 657,068 0 10,488 (16,413) (78,422)

6. Schedule of Property, Plant and Equipment


Beginning Gross PP&E 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
Plus Capital Expenditures 0 0 350,000 0 0 350,000 0 0 350,000 0 0 350,000
Ending Gross PP&E 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 11,495,646
Monthly Depreciation Expense 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 Depr'n. 1,568,408 1,652,539 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
KOTA FIBRES, LTD.
Assumptions

Debt Balance Summary


Jan '01 1,348,129
June '01 21,781,095
Dec '01 3,989,390
Ratio of:
Income Tax/Profit Before Tax 30%
Excise Tax/Sales 15%
This Month Collections of Last Month's Sales 40%
This Month Collections of Month-before-Last Sales 60%
Purchases/ Sales two months later 55%
Wages/Purchases 34%
Annual Operating Expenses/Annual Sales 6.00%
Capital Expenditures (every third month) 350,000
Interest Rate on Borrowings (and deposits) 14.5%
Minimum Cash Balance 750,000
Depreciation/Gross PP&E (per year) 10%
(per month) 0.83%
Dividends Paid (every third month) 500,000

Proposal 1
Additional sales from Pondichery Textile 6,000,000
Collection period 80 days

Proposal 2 (shipment advancement)


inventory requirement 30 days

Proposal 3 (Purchasing agents)


35% of raw materials 3 days

proposal 4 (operation manager)


gross profit margine 3.00% rise
65% of raw materials 35.75% purchase / sales next month

35% of raw materials 19.25% purchase / sales current month


KOTA FIBRES, LTD.
Trend of Certain Financal Accounts by Month

January February March April May June July August September October November December
35,000,000 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
A/R 2,946,030 3,655,168 5,669,328 11,367,378 19,788,388 27,407,380 28,852,020 19,994,930 10,978,612 7,486,548 5,888,005 4,424,472
30,000,000 Inv 1,493,460 2,159,113 3,853,261 5,767,319 7,267,991 7,087,048 4,746,903 4,211,493 4,397,092 4,231,090 4,116,491 4,499,916
A/P 702,753 1,351,981 3,331,372 6,161,898 8,615,748 8,890,512 5,678,591 2,739,959 1,790,747 1,322,041 842,716 927,372
25,000,000 n/p 1,348,129 2,143,110 4,583,959 8,611,992 14,624,336 21,781,095 22,365,134 15,273,490 8,747,481 5,430,280 4,193,254 3,989,390
Sales

20,000,000 A/R
Inv
15,000,000 A/P
n/p
10,000,000

5,000,000

0
y ry h il ly t r er r r
ar c r ay ne us be be be
ua ar Ap M Ju Ju g ob
nu br M Au te
m ct em e m
Ja Fe p O ov ec
Se N D
FINANCIAL ANALYSIS
a. Liquidity Ratios
Current Ratio Current assets / Current liabilities
Quick Ratio (Current assets - Inventories) / Current liabilities

b. Asset Management
Total Asset Turnover Sales / Total assets
Fixed Asset Turnover Sales / Net fixed assets
Days Sales Outstanding Receivables / (Annual sales / 365)
Inventory Turnover COGS / Inventories

c. Debt Management
Debt to asset ratio Total debt / Total assets
times interest earned Earning before interest and tax (EBIT) / Interest charge

d. Profitability
Profit margin on sales Net income / Sales
Basic earning power EBIT / Total assets
Return on total asset (ROA) Net income / Total assets
Return on common equity (ROE) Net income / Equity

The DuPont Analysis


a. Asset Efficiency
Total asset turnover Sales / Total assets

b. Profitability
Profit margin Net income / Sales

c. Financial Leverage
Equity Multiplier Total assets / Common equity

The DuPont Equation ROE = Total asset turnover x Profit margin x Equity multiplier
2.00
1.07

5.21
10.84
16.67
15.22

0.26
5.10

0.04
0.37
0.21
0.28

5.21

0.04

1.35

0.28