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UV0012

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

This case was written by Thien T. Pham under the direction of Robert F. Bruner as a basis for class discussion rather than
to illustrate effective or ineffective handling of an administrative situation. The financial support of the Batten Institute is
gratefully acknowledged. Copyright 2001 by the University of Virginia Darden School Foundation, Charlottesville,
VA. All rights reserved. To order copies, send an e-mail to sales@dardenpublishing.com. No part of this publication may
be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means
electronic, mechanical, photocopying, recording, or otherwisewithout the permission of the Darden School
Foundation.

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being 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

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cities, the 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 the 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 analyze
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

1
At the time, the rupee was pegged to the U.S. dollar at the rate of 46.5 rupees per dollar.

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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.

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.

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

2000 2001
(historical) (forecast)

January 2,012,400 2,616,120


February 2,314,260 2,892,825
March 3,421,080 4,447,404
April 7,043,400 8,804,250
May 12,074,400 13,885,560
June 15,294,240 17,588,376
July 14,187,420 16,315,533
August 7,144,020 8,572,824
September 4,024,800 5,031,000
October 3,421,080 4,447,404
November 2,716,740 3,531,762
December 2,213,640 2,767,050

Year 75,867,480 90,900,108

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

1999 2000 2001


(Actual) (Actual) (Forecast)

Gross Sales 64,487,358 75,867,480 90,900,108


Excise Tax 9,673,104 11,380,122 13,635,016
Net Sales 54,814,254 64,487,358 77,265,092
Cost of Goods 44,496,277 53,865,911 66,993,380
Gross Profits 10,317,978 10,621,447 10,271,712
Operating Expenses 3,497,305 4,828,721 5,454,006
Depreciation 769,103 908,608 1,073,731
Interest Expense 910,048 1,240,066 1,835,620
Profit Before Tax 5,141,521 3,644,052 1,908,355
Income Tax 1,542,456 1,093,216 572,506
Net Profit 3,599,065 2,550,837 1,335,848

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

2000 2001
(Actual) (Forecast)

Cash 762,323 750,000


Accounts Receivable 2,672,729 3,715,152
Inventories 1,249,185 2,225,373
Total Current Assets 4,684,237 6,690,525
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 15,628,161

Accounts Payable 759,535 1,157,298


Notes to Bank (Deposits at Bank) 684,102 3,463,701
Accrued Taxes 0 (180,654)
Total Current Liabilities 1,443,637 4,440,345
Owners' Equity 11,851,967 11,187,816
Total Liabilities and Equity 13,295,604 15,628,161

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

To: G. Pundir
From: 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 INR6 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:

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Exhibit 5
KOTA FIBRES, LTD.
Memo from Transportation Manager

To: G. Pundir
From: 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.

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Exhibit 6
KOTA FIBRES, LTD.
Memo from Purchasing Agent

To: G. Pundir
From: 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.

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Exhibit 7
KOTA FIBRES, LTD.
Memo from Operations Manager

To: G. Pundir
From: 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.

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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 October November December

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 5,031,000 4,447,404 3,531,762 2,767,050
Excise Taxes 392,418 433,924 667,111 1,320,638 2,082,834 2,638,256 2,447,330 1,285,924 754,650 667,111 529,764 415,058
Net Sales 2,223,702 2,458,901 3,780,293 7,483,613 11,802,726 14,950,120 13,868,203 7,286,900 4,276,350 3,780,293 3,001,998 2,351,993
Cost of Goods Sold 1,928,080 2,132,012 3,277,737 6,488,732 10,233,658 12,962,633 12,024,548 6,318,171 3,707,847 3,277,737 2,602,909 2,039,316
Gross Profit 295,622 326,889 502,557 994,880 1,569,068 1,987,486 1,843,655 968,729 568,503 502,557 399,089 312,677
Operating Expenses 454,501 454,501 454,501 454,501 454,501 454,501 454,501 454,501 454,501 454,501 454,501 454,501
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
Interest Expense (Income) (1) 11,058 24,825 70,867 158,210 268,352 362,187 363,212 259,568 145,898 80,686 50,025 40,731
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 (76,220) (70,970) (32,957) 88,537 227,751 324,251 280,794 49,409 (37,433) (37,653) (59,495) (83,506)
Net Profit (177,847) (165,596) (76,900) 206,586 531,418 756,585 655,185 115,288 (87,343) (87,857) (138,822) (194,847)

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

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Exhibit 8 (continued)

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) 2,773,349 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
Inventories (3) 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
Total Current Assets 5,831,484 9,891,667 17,617,985 28,689,052 38,413,382 39,968,409 33,262,875 21,825,159 12,703,996 8,899,886 7,419,142 6,690,525
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 14,358,721 18,334,774 26,324,045 37,308,065 46,945,348 48,760,411 41,964,914 30,437,233 21,573,190 17,676,200 16,102,575 15,628,161

Liabilities and Owners' Equity


Accounts Payable (5) 1,614,553 4,010,818 6,805,539 8,842,088 8,142,024 3,883,534 1,935,531 1,614,553 1,110,950 690,358 1,039,007 1,157,298
Note Payable- Bank (6) 1,146,268 2,962,622 8,767,030 17,419,379 26,997,556 32,950,665 27,167,192 15,795,793 8,352,899 5,002,010 3,278,054 3,463,701
Accrued Taxes (7) (76,220) (147,190) (180,148) (91,611) 136,140 0 280,794 330,203 0 (37,653) (97,148) (180,654)
Total Current Liabilities 2,684,601 6,826,250 15,392,421 26,169,856 35,275,720 36,834,199 29,383,517 17,740,548 9,463,849 5,654,715 4,219,913 4,440,345
Shareholders' Equity (8) 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
Total Liabilities & Equity 14,358,721 18,334,774 26,324,045 37,308,065 46,945,348 48,760,411 41,964,914 30,437,233 21,573,190 17,676,200 16,102,575 15,628,161

(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.

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(8) See panel 4, Exhibit 10.
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-14- UVA-F-1359

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

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

Assume: 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
Purchases (1) 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
Debt Outstanding 1,146,268 2,962,622 8,767,030 17,419,379 26,997,556 32,950,665 27,167,192 15,795,793 8,352,899 5,002,010 3,278,054 3,463,701

Receipts: Accts Rcvble Collected 2,515,500 2,374,632 2,726,802 3,514,657 6,190,142 10,836,774 15,366,686 17,079,239 13,218,449 7,156,094 4,797,562 4,081,147
New Borrowings (Repayments) 462,166 1,816,354 5,804,408 8,652,349 9,578,178 5,953,108 (5,783,473) (11,371,400) (7,442,894) (3,350,889) (1,723,956) 185,647

Disburs.: Accounts Paid (2) 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
Capital Expenditures 0 0 350,000 0 0 350,000 0 0 350,000 0 0 350,000
Interest Payments 11,058 24,825 70,867 158,210 268,352 362,187 363,212 259,568 145,898 80,686 50,025 40,731
Excise Tax Paid 392,418 433,924 667,111 1,320,638 2,082,834 2,638,256 2,447,330 1,285,924 754,650 667,111 529,764 415,058
Operating Expenses 454,501 454,501 454,501 454,501 454,501 454,501 454,501 454,501 454,501 454,501 454,501 454,501
Accrued Income Tax Paid 0 0 0 0 0 460,390 0 0 292,770 0 0 0
Wages 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
Dividends 0 0 500,000 0 0 500,000 0 0 500,000 0 0 500,000
Subtotal: Disbursements 2,989,989 4,190,986 8,531,210 12,167,005 15,768,320 16,789,882 9,583,214 5,707,839 5,775,555 3,805,206 3,073,606 4,266,794

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

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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).
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Exhibit 10
KOTA FIBRES, LTD.
Forecast 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 2,773,349 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
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
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
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
(1) 40% of sales in period (T-1).
(2) 60% of sales in period (T-2).

2. Schedule of I nventories
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
Plus Purchases (1) 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
Plus Labor 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 12,024,548 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
(1) Equal to 55 percent of sales in period (T+2).

3. Schedule of Accounts Payable


Beginning of Period 759,535 1,614,553 4,010,818 6,805,539 8,842,088 8,142,024 3,883,534 1,935,531 1,614,553 1,110,950 690,358 1,039,007
+ Purchases (1) 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
- Payments (2) 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 1,110,950 690,358 1,039,007 1,157,298
(1) Equal to 55 percent of sales in period (T+2).
(2) Equal to purchases in period (T-1).

This document is authorized for use only by Utomo Sarjono Putro in 2017.
For the exclusive use of U. Putro, 2017.
-16- UVA-F-1359

Exhibit 10 (continued)

January February March April May June July August September October November December
4. Schedule of Shareholder's Equity
Beginning of Period 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
Plus Net Profit (177,847) (165,596) (76,900) 206,586 531,418 756,585 655,185 115,288 (87,343) (87,857) (138,822) (194,847)
Less Dividends 0 0 500,000 0 0 500,000 0 0 500,000 0 0 500,000
End of Period 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

5. Schedule of Accrued Taxes


Beginning of Period 0 (76,220) (147,190) (180,148) (91,611) 136,140 0 280,794 330,203 0 (37,653) (97,148)
Plus Monthly Tax Expense (@ 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 0 0 0 0 0 460,390 0 0 292,770 0 0 0
End of Period (76,220) (147,190) (180,148) (91,611) 136,140 0 280,794 330,203 0 (37,653) (97,148) (180,654)

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

This document is authorized for use only by Utomo Sarjono Putro in 2017.
For the exclusive use of U. Putro, 2017.
For the exclusive use of U. Putro, 2017.

-17- UVA-F-1359

Exhibit 11
KOTA FIBRES, LTD.
Forecast Assumptions

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

This document is authorized for use only by Utomo Sarjono Putro in 2017.
For the exclusive use of U. Putro, 2017.

-18- UVA-F-1359

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

35,000,000

30,000,000

25,000,000
Sales

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

5,000,000

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This document is authorized for use only by Utomo Sarjono Putro in 2017.