The chief executive of a small yarn-production company in India must resolve an unexpected cash shortage. The task for the student is to evaluate the causes of this shortage (using a completed “base-case” forecast given in the case) and assess the usefulness of various possible remedies suggested by managers.The company is unable to liquidate a seasonal working-capital loan for the requisite 30 days each year, a difficulty arising from two classic causes: secular growth of the company and declining profitability. Possible remedies include reducing inventory through more efficient transportation and warehousing, reducing credit terms to customers, switching from seasonal to level production, improving profitability, decreasing dividends, and reducing sales growth. Excerpt UVA-F-1687 Rev: Apr. 4, 2017 Guna Fibres, Ltd. Surabhi Kumar, managing director and principal owner of Guna Fibres, Ltd. (Guna), discovered the problem when she arrived at the parking lot of the company's plant one morning in early January 2012. Customers for whom rolls of fiber yarn were intended had been badgering Kumar to fill their orders in a timely manner, yet trucks that had been loaded just the night before were being unloaded because the government tax inspector, stationed at the company's warehouse, would not clear the trucks for departure. The excise tax had not been paid; the inspector required a cash payment, but in seeking to draw funds that morning, Vikram Malik, the bookkeeper, discovered that the company had overdrawn its bank account—the third time in as many weeks. The truck drivers, independent contractors, cursed loudly as they unloaded the trucks, refusing to wait while the company and government settled their accounts. 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 Kumar for the next day to discuss Guna's financial condition and its plans for restoring the firm's liquidity. Kumar told Malik, “This cash problem is most vexing. I don't understand it. We're 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 can't repeat this blunder.” . . .