Financial

Management
Clarkson Lumber
Submitted By-: Meghna
Thapliyal(2015PGP136)
Case
Mohit

Submitted To-: Mrs Nalini Prava

Tripathi
Professor
IIM Shillong

Kanjwani(2015PGP137)
Neha
Mehta(2015PGP138)
Niharika
Srivastava(2015PGP139)
Nikhil
Dalvi(2015PGP140)
Nilay Sharma

Case Background
Anita Mills
Limited, a
medium-size mill
manufacturing
coarse cloth was
engaged in
assessing the cash
requirements for
the operating year
2012

The
physical
facilities presently
at the command
of the company
were considered
adequate
to
sustain twice the
2011 level of
production.

The sales during

the
quarters
ending September
and
December
were twice as
much as those in
the
first
two
quarters of the
year leading to
cash deficit and
surplus
throughout year.

nalysis & Credit Policy

Key takings from the slide
Sales are made on 30 days credit, and
the companys experience in seasonal
demand leads to deficit in cash
availability for 6 months and heavy
surplus for next 6 months
Surplus/(Deficit) in Cash Flow s

Sales are made on 30 days credit

The company purchased cotton, dyes and
chemicals and general maintenance stores
on 60 days credit

The Company experiences seasonal

fluctuations as part of its sales, as a
result of which the first two quarters
sell half of what the last two
quarters do
Generally, the collections from
January and from July- December
are most astounding which is an
after effect of 1. 30-day deals credit
policy

Analysis
Surplus/(Deficit) in Cash Flow s

Due to an increase in payments and a

relatively less cash collection in first 6
months of the year, the deficit aggregating
itself rises to its maximum amount for the
entire year for July.
The net cash flow for the month of
December is negative as a result of the
operational tax payment and also payments
like unclaimed dividends and dividends for
the year are to be paid in December which
again adds pressure to the cash flow.
From the graph its visible that the
company needs some extra source of cash

Conclusion
Clearly there is a seasonality factor in the business of Anita
Mills ltd and such can be reduced by diversification. The
company can look up to cotton clothes manufacturing so as to
achieve the following-:
1. Utilise the capacity of the plant in first 6 months of the
year, when demand is low by
producing for manufacturing
purpose.
2. Meet its cash requirements by freeing its cash blocked in
inventory by way of using it in
manufacturing purpose
3. Diversify in a new market and explore new opportunities

Thank You