Abstract

The finance manager of a major pharmaceutical company in India had to take a decision on whether to increase the credit limit to its major distributor in Africa which distributed around 64% of its products in that part of the world. On one side, he faced the pressure to increase revenue and market presence in Africa – which was not possible without this distributor, while on the other, he had to do a proper credit evaluation and assessment in order to ensure there were no defaults.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• To understand issues in working capital management and receivable management
• Learn the credit appraisal procedure used in non-financial firm.
• Understand the issues which are too kept in mind before doing Credit appraisal of non-financial firm.
• Challenges to be overcome while weighing the option of taking more risk on one side and losing business on the other side

Keywords

Credit Limit, Distributor, Working Capital, Pharmaceuticals, Africa, WHO, simplified Joint stock Company, West Africa, Credit Cover, Dun & Bradstreet, Days Beyond Terms, D&B Payment Score, Maximum Credit, Capital Rating, Risk Indicator, tangible net worth, interest Payable to Operating Income, Sales Turnover, Acid Test, Collection Period, Current Ratio, Payment Term