Sengupta Fibers Ltd. - Producing Nylon Fiber, Facing Liquidity Issue, Essay.

Question:

Discuss about the Case Study of Corporate Liquidity and Capital Structure.

The Sengupta Fibers Ltd. is engaged in the production of nylon fiber and it was incorporated in 1962. Mrs. Sharma who is the owner and the managing director of the company manages the business. The company has a plant in Kota, which uses modern and innovative textile technologies. It sources raw material from local supplier and due to its quality product and cheap price it has become extremely popular among small textile weavers.

The product of the company synthetic fiber is in great demand in the country because of traditional Indian attire sari. The company purchases raw material from local suppliers, it process the raw material and sells the end product to the textile weavers. The textile owners manufactures sari and sells them to end consumers. In the local market the demand of the sari is rising in each passing year. The result for such increase in demand of the sari is the increased demand of the synthetic fiber.

The company has been performing consistently well and it has made continuous profit throughout the year. The sale of the company has grown at an impressive rate of 18% and the estimated sales figure is impressive. Among all the positive indications about the company the event in the parking lot has highlighted a major problem that the company is currently facing.

 The company produces roll of fibers which are stored at ware house and from there it is loaded in the truck and distributed to the customers. As the company is engaged in manufacturing it is required to pay excise duty to the government before the truck leaves the factory gate. In a morning in January 1990 the company was supposed to deliver the goods to customer for that truck was loaded the night before. In the morning the truck was being unloaded because the company has not paid excise duty on those goods and consequently the tax inspector has not cleared the goods for departure. In the process of arranging cash for paying the taxes due it came to the knowledge of the bookkeeper Mr. Ashoka and the owner Mrs. Sharma that the company has overdrawn its bank account. In order to pay the taxes the company is required to arrange loan from the All India Bank & Trust Company.

In spite of the good demand and sales of the product the company is currently facing acute liquid crunch which is evident from the above stated event.

The Sengupta Fibers is engaged in the manufacturing of Fibers and has strong demand for its product among local weavers. Further the overall situation of textile market is also very encouraging but still the company is facing shortage of cash, the possible reasons for such situation are given below:

The profit margin of the company is thin so it can be implied that the earnings received is mostly used up in paying expenses.

The company has declared and paid high dividends to share holders for many consecutive years.

Product Demand and Market Condition

The sales collection from customers has remained the same and no measures has been undertaken to improve that. The credit policy of the company can be described as 40% is collected in next month and the remaining 60% is collected the month after.

The company receives a line of credit from All India Bank & Trust company so that it can maintain its liquidity. According to the bank policy it is required to be repaid at the end of October but the company failed to do so as a result the manager of the bank is not willing to extend any further loan to the company.

Improper allocation of working Capital.

Therefore in order to avoid such situation the company should consider revising the credit policy allowed to the customer so that reasonable cash in hand could be maintained.

The liquidity is very important because it ensures that short term obligations of the company are fulfilled and it also helps the company to grab the available opportunities (Kiyotaki and Moore 2012). The cash is the liquid assets and the unavailability of cash means company is going through liquidity risk.  In the given case, Sengupta Fibers is facing problems relating to low liquidity as a result the company has to face various adverse consequences. The Sengupta Fibers has existing market and steady demand for its product among local weavers. The product was also ready and stored in warehouse but the company failed to deliver merchandise on time to its customer because of low liquidity of the company. The consequence that the company faced due to low liquidity is that it failed to arrange cash for making payment of excise duty as the bank accounts were over drawn. As a result the tax officer did not allow the truck to leave the ware house so the company failed to meet the expectation of customer and failed to deliver goods on time. In the long run this might hurt the reputation of the company and adversely affect the business (Liang et al. 2012). The company had to arrange for loan to make the tax payment so it increases its interest costs and further reduces the already thin profit margin. In conclusion it can be said that the low liquidity does not only costs reputation of the company but financially it is also very costly (Drehmann and Nikolaou 2013).

2. The Sengupta Fibers was unable to arrange cash for making tax payment so decided to arrange for loan from All India Bank & Trust Company. The manager of the bank agreed to provide loan only if the company produces a projected financial statement of the company. Therefore Mr. Ashoke the bookkeeper of the company prepared a financial forecast of the company.

The lack of financial planning with improper use of cash resource is the main reason for companies becoming insolvent (Radulescu and Nistor 2014). The financial forecasting is therefore very important to reduce the insolvency risk of the company. The analysis of the financial forecast prepared by the Sengupta fibers will help to understand the overall financial condition of the business, estimated cash needs for future activities, estimated cash sources and other important financial information’s.

The monthly Sales forecast prepared by Sengupta Fibers shows that the overall sales is expected to increase from Rs. 6,53,49,336.00 to Rs. 78,256,870.00 which is an expected increase of 19.75% in sales figure. The expected growth rate of 20% in sales is an impressive figure but to achieve this company is required to increase its production and that requires increase in availability of cash for working capital (Cavander et al. 2015).

Liquidity Crunch and Reasons

The company has prepared a forecast income statement as shown in exhibit 2. On preparing a comparative income statement and analyzing the same will provide valuable insight that is very important in decision making (Tan, Zhang and Liu 2013). The actual changes shown in the comparative income statement is calculated by comparing the figures of1988 with 1989 and 1989 with 1990 and the percentage change is calculated by diving actual changes with the figures of 1988 and 1989 and multiplying it with 100.   The comparative Statement is provided below:

Comparative Income Statement
Particulars	Actual		Forecast	Actual Change		% Change
	1988	1989	1990	between 1988-89	between 1989-90	between 1988-89	between 1989-90
Gross Sales	55546936.00	65349336.00	78256870.00	9802400.00	12907534.00	18%	20%
Excise Tax	8332040.00	9802400.00	11738530.00	1470360.00	1936130.00	18%	20%
Net Sales	47214896.00	55546936.00	66518339.00	8332040.00	10971403.00	18%	20%
Cost Of Goods sold	38327385.00	46398029.00	57675313.00	8070644.00	11277284.00	21%	24%
Gross Profit	8887510.00	9148907.00	8843026.00	261397.00	-305881.00	3%	-3%
Operating expenses	3012444.00	4159275.00	4695412.00	1146831.00	536137.00	38%	13%
Depreciation	662476.00	782640.00	924600.00	120164.00	141960.00	18%	18%
Interest expenses	910000.00	1240000.00	1830001.00	330000.00	590001.00	36%	48%
Profit Before Tax	4965066.00	3749632.00	1400013.00	-1215434.00	-2349619.00	-24%	-63%
Income Tax	1489520.00	1124890.00	420004.00	-364630.00	-704886.00	-24%	-63%
Net Profit	3475546.00	2624742.00	980009.00	-850804.00	-1644733.00	-24%	-63%

On analyzing the comparative income statement it can been seen that although it is estimated that sales will increase by 20% in 1990 but the gross profit of the company in the same period is expected to reduce by 3%. The main reason for such decrease in Gross profit is the increase of Cost Of Goods sold by 24% in 1990 which increased by 21% between 19888-89 period so there was cumulative increase of 3% in COGS.

The analysis of expenses in the comparative income statement shows that the interest expense of the company has hugely increased by 48% from last year 1990 and by 36% between1988-89. This shows that the loan burden of the company is continuously rising and the company has to repay loans along with increasing interests which is further draining out the cash resources of the company. In the year 1988-89 the operating expenses of the company increased by 38% which adversely affected the net profit of the company. It is also further expected that the operating expenses of the company will increase by 18% during 1990. This huge increase in operating expenses and interest expenses has adversely affected the Net profit of the company (Bradbury and Scott 2014). It is expected that in the year 1990 the Net Profit will decrease by 63% which is very alarming for any company. The Net Profit of the company reduced by 24% between the years 1988-89 which by itself was alarming but as no corrective measures were undertaken it is expected that profit will further dip by 63%.

In order to analyze the estimated financial position of the company a comparative balance sheet is prepared (Louis et al. 2014). The actual changes are calculated by comparing the figures of 1989 with 1990 and the percentage change is calculated by diving actual changes with the figures of 1989 and multiplying it with 100.  The comparative statement is given below.

Comparative Balance Sheet
Particular	1989	1990	Actual Change	% Change
Cash	64123.00	64000.00	-123.00	-0.19%
Accounts Receivable	2302186.00	3205619.00	903433.00	39.24%
Inventories	1076000.00	1806344.00	730344.00	67.88%
Total Current Assets	3442309.00	5075963.00	1633654.00	47.46%
Plant Equipments	8969000.00	9896000.00	927000.00	10.34%
Accumulated Depreciation	1278500.00	2203100.00	924600.00	72.32%
Net Fixed Assets	7417500.00	7692900.00	275400.00	3.71%
Total Assets	11436809.00	13344864.00	1908055.00	16.68%
Accounts Payable	654234.00	998962.00	344728.00	52.69%
Notes to Bank	587575.00	3135569.00	2547994.00	433.65%
Accrued Taxes	0.00	-164667.00	-164667.00
Total Current Liability	1241809.00	3969855.00	2728046.00	219.68%
Owners Equity	10195000.00	9375009.00	-819991.00	-8.04%
Total Liabilities and Equities	11436809.00	13344864.00	1908055.00	16.68%

The company is currently facing low liquidity and the analysis of the statement further shows that the cash in hand is expected to reduce by 0.19%. It shows that the liquidity position of the company is not expected to improve. It is expected that Inventories will increase by 67.88% from last year it means that company has to bear high inventory carrying cost which will further affect the liquidity of the company. The Notes to Bank has increased by 433.65% which shows that company has become highly dependent on loan fund in carrying out day to day expenses. The overall financial position on conducting Horizontal Analysis does not show a very encouraging picture of the company. Further, for Vertical analysis a common size statement is prepared.  The common size statement is calculated by taking sales as 100% and representing all figures taking that as the base. The calculations are given below:

Common Size Income Statement
Particulars	Actual				Forecast
	1988		1989		1990
Gross Sales	55546936.00	100%	65349336.00	100%	78256870.00	100%
Excise Tax	8332040.00	15%	9802400.00	15%	11738530.00	15%
Net Sales	47214896.00	85%	55546936.00	85%	66518339.00	85%
Cost Of Goods sold	38327385.00	69%	46398029.00	71%	57675313.00	74%
Gross Profit	8887510.00	16%	9148907.00	14%	8843026.00	11%
Operating expenses	3012444.00	5%	4159275.00	6%	4695412.00	6%
Depreciation	662476.00	1%	782640.00	1%	924600.00	1%
Interest expenses	910000.00	2%	1240000.00	2%	1830001.00	2%
Profit Before Tax	4965066.00	9%	3749632.00	6%	1400013.00	2%
Income Tax	1489520.00	3%	1124890.00	2%	420004.00	1%
Net Profit	3475546.00	6%	2624742.00	4%	980009.00	1%

Recommendations

The Common Size Income Statement shows that forecasted Net profit has become 1% the situation is continuously decorating as exhibited from Net Profit Percentage of 6% in 1988 to 4% in 1989 and 1% in 1990. The common size balance sheet is prepared by taking total assets and liabilities as 100% and all assets and liabilities are represented taking it as base. The calculation is given below.

Common Size Balance Sheet
Particular	1989		1990
Cash	64123.00	1%	64000.00	0.48%
Accounts Receivable	2302186.00	20%	3205619.00	24.02%
Inventories	1076000.00	9%	1806344.00	13.54%
Total Current Assets	3442309.00	30%	5075963.00	38.04%
Plant Equipment	8969000.00	78%	9896000.00	74.16%
Accumulated Depreciation	1278500.00	11%	2203100.00	16.51%
Net Fixed Assets	7417500.00	65%	7692900.00	57.65%
Total Assets	11436809.00	100%	13344864.00	100.00%
Accounts Payable	654234.00	6%	998962.00	7.49%
Notes to Bank	587575.00	5%	3135569.00	23.50%
Accrued Taxes	0.00	0%	-164667.00	-1.23%
Total Current Liability	1241809.00	11%	3969855.00	29.75%
Owners Equity	10195000.00	89%	9375009.00	70.25%
Total Liabilities and Equities	11436809.00	100%	13344864.00	100.00%

The common size statement shows that estimated cash flow is reducing in terms of total assets. It is a negative sign because the company is already suffering from liquidity crisis further reduction will hamper the operating capacity of the company.

In conclusion, it can be ascertained after Horizontal and Vertical Analysis is that the position of the company is not very encouraging.

The forecast prepared by the bookkeeper is based on certain assumptions which fail to address the current situation of the company. The liquidity of the company is low so to improve the position Mrs. Sharma is required to adopt alternative methods and take concrete steps to rectify the situations (Brigham and Ehrhardt 2013).

The first thing that Mrs. Sharma should consider to change is the credit policy of the company. The company is currently facing shortage of cash so to improve the situation company should focus on increasing cash sales and decreasing credit period (Owolabi and Obida 2012). This could be done by considering the alternative of providing heavy discount to customers for cash sales and credit sales with credit period of less than one month. This heavy discount will reduce the profitability of the company but it will help to ensure that cash is available in the hands of the company because it is the need of the hour.

The company has the policy of purchasing material two month in advance. This policy is helpful in maintaining smooth production but keeping in view the current position of the company an alternative of maintaining one month material in advance should be considered.

The forecast shows that the company is expected to incur a capital expenditure of Rs. 300000.00 every three month.  Mrs. Sharma should consider the alternative of reducing the capital expenditure so that liquidity position of the company could be improved (Anderson, R.W. and Carverhill 2012).

The company has the policy of paying dividend of Rs. 450000.00 every three month. An alternative Dividend policy should be followed till the cash position of the company is improved (Murto and Terviö 2014).

These are the alternative actions that Mrs. Sharma may take so that the liquidity position of the company could be improved.

A table showing current Assumption and another table is provided for Alternative assumption and its effect is given below demonstrating the positive effect of alternative action suggested above.

Particulars	Current Assumption
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	30%
Annual Operating Expenses/Annual Sales	3.00%
Capital Expenditures (every third month)	100,000
Interest Rate on Borrowings (and deposits)	16%
Minimum Cash Balance	640,000
Depreciation/Gross PP&E (per year) (per month)	10%
Dividends Paid (every third month)	50,000

A table showing effect of Alternative Assumptions

Particulars	Alternative Assumption	Effects
Cash Sales and Credit Policy	Increasing cash sales and decreasing credit period to 1 month	It will increase cash availability in the hands of the company
Purchase policy	Maintaining one month material in advance	It will reduce carrying costs and reductions in cash out flow as less payment are to be made to suppliers.
Capital expenditure	Reducing the capital expenditure	It will improve the liquidity position of the company.
Dividend Policy	To reduce or stop payment of dividend.	This will improve cash in hand of the company as a result the company could operate effectively.

Mrs. Sharma is the owner and managing director of the company and she has received various operating proposals from various departments of the company. The proposal includes a letter from sales manager requesting favorable credit terms for customers, a note for change in inventory policy from transportation manager, demand from suppliers to increase their lead time and a suggestion by operation manger to adopt the scheme of maintaining even annual production. In the following paragraphs the viability of the proposals and their impact on the financial needs of the company is discussed.

Importance of Financial Planning

The Field Sales Manager gave a proposal to increase the credit limit from 45 days to 80 days for a customer in Pondicherry. It is expected that if the credit period is revised then the sales from Pondicherry will considerably increased. The primary motive of the business is to expand the market and increase its sales but it is important for the company to maintain its liquidity (Jimenez Ramirez et al. 2013). The company is currently facing an acute shortage of liquid fund under this circumstances the proposal of the sales manager to increase credit period will further diminish the cash availability of the company. It is in best interest of the company not to implement the proposal of the company.

The proposal submitted by the Transport manager if implemented will enable the company to maintain a raw material inventory of one month. This will reduce the inventory carrying costs and help tracking of inventory much easier. The liquidity of the company is low so maintaining an inventory of one month will reduce the blockage of fund thus improving the financial condition (Dekker et al. 2013). As this proposal is expected to have positive impact on the financial condition of the company it should be adopted.

The proposal of a purchase agent to purchase a material on “just in time” basis will reduce the inventory holding period from 60 days to just 2 to 3 days. This will greatly reduce the inventory carrying costs thus improving the financial performance of the company (Chen Simchi-Levi 2012). It is recommended that if the proposal is feasible then it should be adopted because it will increase cash availability in the hand of the company.

The operation manager has submitted a proposal for maintaining a steady production level throughout the year. The proposal sighted various advantages like increased gross profit; stronger, stable & efficient workforce; reduction in training and setup costs; reduction in manufacturing costs; efficient utilization of plant & equipments and etc. On considering the advantages the proposal has offered in terms of financial and operational efficiency it should be accepted.

5. The Sengupta Fibers has a very low cash reserve so it requires an in depth analysis of the financial structure. The Bank being a lender is primarily interested in analyzing the liquidity and financial performance of the company. The liquidity ratio measures the company’s ability to pay its current obligations (van den End and Kruidhof 2013). The low liquidity is very risky because it may lead to insolvency of the company. An important liquidity ratio is the current ratio it is measured by dividing current assets with current liability (Heikal et al. 2013). A low Current ratio indicates that there is a high probability that the company may be unable to pay its current obligations whereas a high current ratio indicated that the company is under utilizing its assets. The ideal current ratio is taken as 2 times which means a company should ideally have two times the current assets than its current liability.  In the given case the Sengupta Fibers had a Current Ratio of 2.77 times in 1989 which reduced to 1.28 times in 1990. As a banker this expected reduction of Current ratio is an alarming signal and it is advised that the company should devise a strategy to increase its working capital thus improving the current ratio (Saleem and Rehman 2011).

The profitability ratio is also an important indicator that the banker is required to consider in evaluating the performance of the company (Komala and Nugroho 2013). The Gross profit ratio of the company was 14% in 1989 which became 11% in 1990 it shows the costs burden of the company is increasing. The Net Profit margin of the company has reduced from 4% in 1989 to 1% in 1990. The profit margin of the company has become extremely thin so the company should adopt a strategy to control and reduce costs.

It is important for a banker to consider the long-term solvency of the company. The most important ratio that a banker considers is debt to equity ratio. It indicates whether the assets of the company are financed by own fund or debt. A low debt to equity ratio is naturally good because it represents the higher possibility of the company to repay its debt (Delen et al. 2013). In the given case Sengupta Fibers have a debt ratio of 0.12 in 1989 which is expected to increase to 0.42 in 1990. The company should develop a strategy to reduce its dependent on debt capital for financing assets and paying day to day expenses.

In conclusion it can be argued that to regain the confidence the company it is required to develop strategies to improve its working capital, improving current ratio, improve profit margin and reduce its dependent on debt for financing.

Financing various projects require huge amount of investment, an organization generally use any of the following sources to arrange the required amount of investments for investing in different projects.

1. Retained earnings of the organization.
2. Loans from financial institutions, banks or other such organizations.

In case an organization has necessary funds available in the form of retained earnings for making investments in desirable projects then the question of arranging loans from different financial institutions or banks does not arise. However often organizations find it difficult to finance a whole project from its retained earnings due to various reasons ranging from insufficient funds to operating leverage issues etc. Either under such situations, an organization would arrange loans for the finance of the project or projects as the case may be, or it may arrange part of the investment from retained earnings and other part from loans from financial institutions and banks (Finnerty 2013). If the management of the organization decides to take loans from financial institutions or banks then necessary procedures have to be fulfilled by the organization before applying for the loan from the respective institutions or banks as the case may be. Different financial institutions and banks have different standard procedures that are to be fulfilled by an organization to apply for loans. However, there may be some variations between the standard procedures amongst different financial institutions and banks but generally the standard criterions needed to be fulfilled by an organization applying for loans would be almost similar (Quercia 2012).

A financial institution or bank would appraise the financial statements of the loan seeking organization to assess the financial strengths and weaknesses of the organization to verify whether the organization has the liquidity strengths required for repayment of the loan in future (Rad et al. 2013). However, the future cannot be predicted with cent percent certainty yet the financial statements of an organization would provide a certain degree of assurance to the financial institutions or banks, as the case may be, before taking the decisions in respect of providing the required financial assistance to the organization for investment in different projects (Nilsson and Öhman 2012). The financial institutions would verify the statement of financial position, i.e. the Balance Sheet of the organization, to assess the amount of fixed assets, current assets, long-term loans, short-term loans and retained earnings. Financial analysts would be able to understand the soundness of the financial strengths of the organization after analyzing the statement of financial position of the organization (Healy and Palepu 2012). The statement of operating results of an organization would also enlighten the financial institutions and banks about the profitability of the organization as to how much profit the organization has earned over the years. Proper analyzing of the financial statements of an organization would help the financial institutions and banks to assess the financial strengths and ability to earn profit over the years. The financial statements also include cash flow statement apart from statement of financial position and statement of operating results of an organization (Louis et al. 2013). Cash flow statement is a very important part of the overall financial statements of an organization (Ogneva 2012). The statement of operating results of an organization tells the analyst about the profitability of the organization, and often the profitability is not the right measure to analyze the ability of an organization of paying its debts.  Since generally the organization used accrual basis of accounting to record the transactions in the books of account of an organization to prepare the financial statements of the organization (Kaplan and Atkinson 2015). The cash flow statement on the other hand tells an analyst about the cash position of the organization; the sources from which the cash flowed into the organization under operating, financial and investing heads and similarly the areas in which the cash has been spent under operating, financial and investing heads (Farshadfar and Monem 2013). These are the normal financial analysis which the experts have used over the years to assess the financial condition and soundness of the business of an organization by the financial institutions before deciding on the application of loans of such organizations. Uncovering cash and insights from working capital is a new and improved procedure used by financial analysts to understand the liquidity position of an organization better for forecasting the ability of an organization to repay its debt in the future. In case of Sengupta Fibers Limited Ryan Devies and David Merin have carried out the above procedure of uncovering cash and insights from working capital, the basic objective of this exercise is to find out whether the organization. In this specific case Sengupta Fibers Limited, can generate the required amount of cash from the working capital to avail the benefits of positive market analysis by taking loans using the positive outlook from the same. One of the toughest and certainly not a glamorous task from any stretch of imagination is the task of managing the working capital of an organization. It involves lot of planning on the part of the executives to draw a suitable working capital plan to for the organization to follow. The problem with planning is that the planning is made on the basis of certain assumptions which may not hold well in the future, in fact often the situation turns out completely different from the expectation (Garcia 2013). Under such situation it is the responsibility of the management to take necessary action to ensure that the working capital of the organization is maintained. Otherwise the operations of the organization will be negatively influenced if there is a negative working capital as the organization will not be able to carry out its regular business operations effectively (Healy 2012). The financial institutions or banks, which will be providing financial assistance to any organization, would be very careful about the liquidity position of the organization and the efficiency of the management in managing the working capital of the organization effectively. The better the working capital management the better the chances that the organization will not be out of funds when needed, such organizations will get a head start compare to other organization in case of availing loans from financial institutions and banks (Baños-Caballero et al. 2014). A proper planning as to the future requirements of cash for various purposes and the sources from which the probable inflow of cash will take place in the organization would help the management to manage its working capital better. Subsequently the chances of the organization to avail loan from financial institutions and banks would also increase. Considering all these variables the ability of the Sengupta Fibers Limited to manage its working capital effectively would influence its chances to avail loan from financial institutions and banks under suitable terms and conditions (Manjhi and Kulkarni 2012). As can be seen from the report prepared by the Ryan Davies and David Merin on working capital management of the organization in question, i.e. the Sengupta Fibres Limited, the working capital requirements and net working capital of the organization have shown considerable variations over the years. This is certainly not a positive finding for the organization; since having different working capital is still understandable as the an organization may decides to increase its scope of operations year after year and this will obviously influenced the working capital requirement of the organization in different years. But the variation in net working capital, especially if the variation is not in favor of the organization, then it is a huge cause of concerned as in the case of Sengupta Fibers Limited. But the only silver lining in this case is that even the working capital requirement of the industry in which the organization works is quite differing over the years. The financial institutions or banks as the case maybe who ever will provide the required financial assistance to the organization for financing the projects of the organizations would obviously take into consideration this aspect. Management of working capital and net working capital balances over the years to make certain assertions on the workings of the organization and this will have a huge bearing in the overall decision of the financial institutions or banks as the case may (Awad and Jayyar 2013). Thus, the management of Sengupta Fibres Limited has to take correct decisions in the future to manage its working capital better so as to make it a stronger point for the organization for availing loans from financial institutions. The manager who has been given responsibility to manage the working capital has to more pro-active in his or her approach to ensure better parity between the working capital planning and actual working capital management (Tauringana and Adjapong Afrifa 2013). With the report in hands of the organization in question it is safe to say that uncovering cash and insights from working capital there is nothing alarmingly wrong but at the same time there is nothing which enhances the trust of the financial institutions or the banks on the loan seeking organization (Michalski 2014). It is the fact that the organization belongs to an industry, which is known for its differing working capital requirements, and management is something which will help the organization to present its case in a determined way in front of the financial institutions and banks while applying for the financial assistance.

References

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