Kwality Ltd.: the banker’s dilemma
Publication date: 31 January 2020
Abstract
Learning outcomes
The case provides an opportunity to the students to learn some of the analytical processes in making a credit decision, including interpretation of financial ratios for credit analysis, forecasting a stress scenario, analysing cash flow adequacy, assessment of financial flexibility and, finally, recommend a credit decision.
Case overview/synopsis
The case discusses the analytical challenges facing a bank credit officer while assessing the credit quality of Kwality Ltd., an India-based dairy product manufacturer. Kwality Ltd. had undertaken a significant capacity expansion and business transformation to strengthen its market position in value-added dairy products business and improve its profit margins. The capacity expansion had recently been completed and the management, credit rating agency, equity analysts and investors appear to be optimistic regarding the company’s prospects. However, the capital investment had been almost entirely debt-funded and large long-term debt repayments would have become due shortly. The company had also built up large trade receivables. The banker had to assess if Kwality would be in a position to repay its debt and should his bank increase working capital disbursement to the company.
Complexity academic level
Complexity: Academic level. Applicability: MBA, Executive MBA.
Supplementary materials
Teaching Notes are available for educators only.
Subject code
CSS1: Accounting and Finance.
Keywords
Acknowledgements
Disclaimer. This case is written solely for educational purposes and is not intended to represent successful or unsuccessful managerial decision-making. The authors may have disguised names; financial and other recognisable information to protect confidentiality.
Citation
Mathur, S. (2020), "Kwality Ltd.: the banker’s dilemma", , Vol. 10 No. 1. https://doi.org/10.1108/EEMCS-05-2019-0096
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited