Finance Lab · Case study
Growing revenue, shrinking cash
Revenue is up sharply, yet cash has fallen. Customers are taking longer to pay, and the plant has been building inventory to avoid stock-outs. The company is profitable on paper and tight on cash.
Nova ManufacturingIntermediate12 min
Growing revenue, shrinking cash
Nova has just posted its strongest quarter of order growth in three years. The sales team is celebrating, but the finance director is worried about the bank balance.
The situation
Revenue is up sharply, yet cash has fallen. Customers are taking longer to pay, and the plant has been building inventory to avoid stock-outs. The company is profitable on paper and tight on cash.
Constraints
- The bank will not extend further unsecured lending this quarter.
- Production cannot be cut without affecting delivery promises already made.
- Suppliers are already paid at 44 days and will resist further delays.
The numbers
- Revenue growth
- +22% quarter on quarter
- Cash
- ৳2,100,000 → ৳1,518,000
- Falling while profit rises
- Receivable days
- 58 → 74 days
- Customers are paying more slowly
- Inventory days
- 96 → 118 days
- Stock is building faster than sales
- Net margin
- 9.8%
- Healthy
- Current ratio
- 1.9×
- Looks comfortable on the surface
Your decision
What should Nova do first?
What strong reasoning looks like
- Identify that profit and cash are different measures.
- Link the cash decline to the working-capital build, not to sales.
- Prioritise the fastest, least costly release of cash.
- Recognise that borrowing treats the symptom, not the cause.
Reflect
- Which single number would you watch weekly to catch this earlier?
- What would have happened if Nova had kept the cash conversion cycle flat while growing?