Unfastening the Financial Knots: A Critical Analysis of Right Tight Fasteners Pvt. Ltd.’s Financial Statements

Right Tight Fasteners Private Limited is a mid-sized fastener manufacturing company with a 30-year track record. Operating in a working capital-intensive and low-margin business, the company manages to safeguard its profitability by passing on cost increases resulting from steel price volatility, thanks to its irreplaceable position as a proven vendor. But the COVID-19 pandemic had drastically reduced demand, pushing the industry into turbulent times marked by declining revenues and a liquidity crunch. This situation has forced the firm’s chief executive officer and chief financial officer to consider how Right Tight Fasteners Private Limited would manage this liquidity crisis. Could the company survive without defaulting or restructuring? What rescue options were available to them?

This case is well suited for integration into core finance and strategy courses within a Master of Business Administration program and executive education. It is particularly relevant for courses, such as financial management, corporate finance, and strategic management, providing students with a comprehensive view of the interplay of financial decision-making, risk management, and operational efficiency in a mid-sized company. After working through the case and assignment questions, students will be able to do the following: <ul><li>Explore how a mid-sized company like Right Tight Fasteners Private Limited makes strategic financial decisions to maintain solvency in the face of uncertain market conditions.</li> <li>Discuss the challenges of operating in a low-margin, working capital-intensive industry and the importance of maintaining a reliable customer base and quality standards for long-term sustainability.</li> <li>Develop a basic understanding of a financial model that includes essential concepts, such as financial ratios, debt-service calculations, break-even analysis, and sensitivity analysis.</li> <li>Learn how the granular components in a financial statement are input into a financial model.</li> <li>Learn how the three financial statements—profit and loss, balance sheet, and cash flow statement—are linked.</li> <li>Understand the calculation and relevance of financial ratios in assessing a company’s performance, liquidity, solvency, and profitability.</li> <li>Apply these ratios to evaluate Right Tight Fasteners Private Limited's financial health, focusing on cash flow management in a working capital-intensive business.</li></ul>

• Liquidity Crisis
• Working Capital Management
• Financial Modelling