khanna company Essay examples

2493 Words Jan 15th, 2015 10 Pages
I. COMPANY BACKGROUND
Khanna Manufacturing Company Limited (KMC) is engaged in manufacturing rubber-based products used in a variety of commercial applications. The company is located in Noida near Delhi and is one of the leading suppliers of these products to a large number of companies engaged in manufacturing automobile accessories, electronic and light engineering products. In recent years, KMC has been able to face the intensified competition in this business and has been growing rapidly. The main reasons for its growth have been its good image for quality products, technological improvements leading to increased production capacity, cost advantage and strong marketing team.

II. ISSUES AND CONCERN During the last two years of
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c. The company’s liquidity may be improved by the amount and timing of its cash inflows and outflows. Disadvantage:
a. Company’s employees as well as the customers might not immediately adapt the changes in policies.

VIII. RECOMMENDATION
We, the consultants, highly recommend the alternative course of action #2 which is to formulate new set of policies which would enhance the company’s ability in collecting cash and paying its obligations.

IX. PLAN OF ACTION Cash inflows and outflows should be synchronized to effect a harmonious cash position and excellent cash management. Balancing cash flows is a delicate task that has a direct impact on the liquidity and profitability status of the business. Thus, the attitude of the management towards an efficient operating cash flow should be to speed up collections and maximize timing of cash payments. This could be done by crafting and instituting effective credit and collection policies and techniques with the end view of stabilizing cash streams from customers. The collectability of accounts receivable depends to large extent on the quality of customers and the quality of customers depends on the policies established by the company.

Furthermore, the following may be considered:
The credit period should be changed from three months to two-month collection period. Customers could be offered a 2% discount if they avail in cash basis and if they are able to pay the full

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