Managerial Analysis and Communication
Case Teaching Note1: Describing the Managerial Analysis
framework with the use of the case ‘Varun Nagar Agricultural
Cooperative Society (VNACS)’.
The Situation:
VNACS has Rs 5,00,000 in cash and paddy worth Rs. 5,00,000. It owes Rs. 5,00,000 to
farmer members for which payment is due on 1st April. The Overdraft inclusive of
interest is Rs 5,29,167 (calculated for 7 months). This overdraft has been drawn since
September of last year; this is over and above the credit limit permissible under the cash
credit arrangement. Mr. Agarwal, as Manager & Chief Executive of VNACS, has two
business propositions to consider. Given the resources (both in terms of cash and funds)
at VNACS’ disposal he may not be able to act on both simultaneously. But with some
stretching of resources or creative resource mobilisation he might, just!
VNACS
Balance Sheet 2 as on 31st March 2001
Liabilities (Rs)
Assets (Rs)
1. Bank
1. Cash
a. Loan
5,00,000
2. Paddy
b. Accrued Interest
29,167
2. Farmer-members
5,00,000
3. From P&L
(29,167)
10,00,000
5,00,000
5,00,000
10,00,000
Broadly, the question is, What could/ should Mr. Agarwal do? He is faced with a
decision problem because, as Manager VNACS, he sees at least two business
opportunities, which could contribute towards VNACS’s objective of serving members’
interests better, and his objective of serving VNACS’s interests better. But the limited
resources available with VNACS gives rise to this situation in which Mr. Agarwal is
faced with a decision problem. He has the option of holding the paddy for sale in October
in order to get a better realisation, as well as the option of buying the Fertiliser now so
that it could be supplied cheaper to the farmer members, again in October. But he does
not have the funds internally to do both. The farmer members are obviously anxious to
receive their payments by the due date, i.e., 1st April. He knows how important...