A textile mill has approached a financial institution for an additional working capital loan of Rs.60 lakhs. The case highlights the problem arising from poor fund generation relative to fixed costs. The gross profit of the company is insufficient to meet the interest burden, which has substantially increased because a large volume of investment has failed to generate adequate returns. The problem of a poor investment decision is worsened by unsound decisions of financing such an order of investment. Thus, the company's poor fund generation has contributed to poor liquidity, which in turn affects its profitability. The discussion, then, is about whether the loan of Rs.60 lakhs will help the company improve its fund generation. The case brings out the point that a financial institution will also have to consider the management's capacity to change the product-mix to improve fund generation.