際際滷

際際滷Share a Scribd company logo

Working Capital Management by Asik

Download as PPT, PDF
A
abmasik31

The document presents findings from a study on working capital management at Beximco Pharmaceuticals Limited. Key findings include: - The company has a large amount of working capital but performed comparatively weaker in 2011 than previous years. - Inventory management was somewhat inefficient, with high inventory levels. - Z-score analysis showed the company was in distress from 2011-2007. - Collection periods were long, impacting cash flow. - Recommendations focus on reducing collection days, improving inventory management, utilizing liquid assets better, and investing properly in current and fixed assets.

1 of 24
Downloaded 23 times
Working Capital Management by Asik
Presentation on A Study on Working Capital Management of Public Limited Pharmaceuticals Company (Beximco Pharmaceuticals limited)
Working Capital Management by Asik
To find out the existing working capital planning process of the company To find out the existing working capital controlling system of the company. To detect the bottlenecks involved in the process of working capital i.e. Planning and Controlling. To advocate the steps to be taken to increase the efficiency in management of working capital
Methodology of the Study Literature study Analysis of secondary data of financial report of the company by calculating ratios Limitations of the Study The study duration was very short and it was not possible to cover and analyze every part of the working capital management practice
Rational of the Study The investment of the company are made in two ways in an organization that is- a)Working Capital b)Fixed Investment or Long Term Investment Efficient management of working capital as well as fixed investment are equally important to achieve the desired objective of the company
Beximco Pharmaceuticals Limited Registered as a company in 1976 as a member of Beximco Group Began in 1980 when BPLs first product made under license of Bayer AG, Germany rolled out of a small manufacturing plant in Tongi, Dhaka. Launching of its own products in 1983 Listing in the Dhaka Stock Exchange as a Public Limited Company as well as the member of Chittagong Stock Exchange Won the first prize of ICAB National Awards 2000 for Best Published Accounts and Reports in Non-Financial Sector Category in 2002 Listing in the London Stock Exchange (LSE) in 2005 Blockbuster Products are Neoceptin R, Napa, Amdocal, Filmet, Neoflox, Azmasol
Accounts Payable Value Addition Raw WIP Materials THE WORKING CAPITAL Cash CYCLE Finished (OPERATING CYCLE) goods Accounts SALES Receivable
Data Analysis Inventory Management
Inventory Management Inventory as a proportion of Current Asset of BEXIMCO Pharmaceuticals Limited SL Current Asset 2011 2010 2009 2008 2007 1 Inventories 36.64 36.5 28.50 60.94 56.51 2 Accounts Receivable 13.68 13.26 10.03 17.00 17.09 3 Loans, Advances & Deposits 11.75 12.60 10.10 19.02 22.53 4 Short-Term Investment 30.68 13.88 36.07 0.1 - 5 Cash & Cash Equivalents 7.25 23.76 15.03 2.94 2.93 6 Gross Working Capital 100 100 100 100 100
Inventory Management Composition of Inventory Name of elements in SL. 2011 2010 2009 2008 2007 Inventory 1 Finished Goods 27.90 29.14 32.17 23.78 22.54 2 Work in Process 7.38 9.83 11.00 11.40 9.70 3 Raw Material 64.724 62.66 56.83 64.82 67.73 4 Stores & Spares 3.95 3.9 3.5 5.02 4.23 4 Total Inventory 100 100 100 100 100
Raw Materials Storage Period Raw Materials Storage Period= Average stock of Raw Materials/ Average cost of raw materials per day Particulars 2011 2010 2009 2008 2007 Average Stock Raw 295163921 286673911 284271612 278681856 235556789 Material 5 9 1 4 9 Average Cost of Raw 7854080 7854080 6571863 7635119 6453611 Material per day Raw Material Storage 376 365 433 365 365 Period (Days)
Finished Goods Conversion Period Finished goods conversion period= Average stock of finished goods/Average cost of goods sold per day Particulars 2011 2010 2009 2008 Average Stock of finished goods 559721452 456201878.5 344724356 364770493 6259010.69 Average Cost of goods sold per day 10166232 8060064.219 5438878.3 5 Finished Goods Conversion Period (days) 55.06 56.60 55.08 67.07
Stores & Spares Conversion Period Stores and spares conversion period= Average stock of Stores and spares/Average consumption per day Particulars 2011 2010 2009 2008 Average Stock of store and spares 215036533 183998556 168056628 150397257 Average Consumption per day 589141.19 502597.066 460429.12 412047.28 Store & spares conversion period 365.00 366.10 365.00 365.00 (days)
W-I-P Holding Period W-I-P Holding Period= Average w-i-p in inventory/ average cost of production per day 2011 2010 2009 2008 182228787 103280829 180522329 157195606 Average W-I-P in Inventory Average Cost of Production 10567895.77 8574498.421 6715980.67 5488502.937 per Day W-I-P Holding period (days) 17.24 12.05 26.88 28.64
Comment about Inventory Management
Credit Management
Average Collection period Average Collection Period= 365 days/ Accounts Receivable Turnover 2011 2010 2009 2008 2007 =365/8.7689 =365/8.5661 =365/8.1271 =365/7.9915 =365/7.7361 =41.62 days =42.61days =44.91days =45.67days =47.18 Days
Return on Investment Return on Investment = Net Profit Before Taxes/ Total assets 2011 2010 2009 2008 2007 =1198525342/ =1051648808/ =624740307/ =545341273/ =353067878/ 23093340533 21372399509 19891933422 14819665441 11953418940 5.19% 4.92% 3.14% 3.68% 2.95%
Z -Score Analysis Z= 1.2T1+ 1.4T2 + 3.3T3 + 0.6T4 +0.999T5 T1= Working Capital/ Total Asset (Working Capital= Current Assets Current Liabilities) T2= Retained Earnings/ Total Assts T3= Earnings before Income Tax/ Total Assets T4=Market value of equity/ Total liabilities [Number of Shares * Current Share Price] T5= Sales/ Total Assts. Formula =If (B9>2.99,"SAFEzone", IF (B9>1.81,"GREYZone","DISTRESS")) Year Z-Score Value Remarks 2011 1.1269 Distress 2010 1.0445 Distress 2009 0.9840 Distress 2008 0.5828 Distress 2007 0.8800 Distress
Findings BEXIMCO Pharmaceuticals has large amount of capital; According to ratio analysis the companys stand on a comparatively weak position in 2011 than previous year To some extent Inefficient management of working capital especially on inventory part From the result of Z -Score model, BEXIMCO Pharma places on DISTRESS zone After analysis the financial data, the company is ruling the market by their brand name, not by their performance They are lagging behind for time management about collecting money from the creditors Its also bearing a large amount of money in inventory sector, which create an impact on product price
SWOT Analysis Strengths Weakness Opportunities Threats Recommendations Reduce the days of collection period to collect money from creditors Efficient management should be ensured for operating inventory sector Proper utilization of liquid asset to ensure maximum profitability; Keep concentration on every part of operations viz: cash management, sale increase, credit terms; Proper measures should be taken to invest in different assets (current and fixed).
Working Capital Management by Asik
Question ???

More Related Content

Working Capital Management by Asik

  • 2. Presentation on A Study on Working Capital Management of Public Limited Pharmaceuticals Company (Beximco Pharmaceuticals limited)
  • 4. To find out the existing working capital planning process of the company To find out the existing working capital controlling system of the company. To detect the bottlenecks involved in the process of working capital i.e. Planning and Controlling. To advocate the steps to be taken to increase the efficiency in management of working capital
  • 5. Methodology of the Study Literature study Analysis of secondary data of financial report of the company by calculating ratios Limitations of the Study The study duration was very short and it was not possible to cover and analyze every part of the working capital management practice
  • 6. Rational of the Study The investment of the company are made in two ways in an organization that is- a)Working Capital b)Fixed Investment or Long Term Investment Efficient management of working capital as well as fixed investment are equally important to achieve the desired objective of the company
  • 7. Beximco Pharmaceuticals Limited Registered as a company in 1976 as a member of Beximco Group Began in 1980 when BPLs first product made under license of Bayer AG, Germany rolled out of a small manufacturing plant in Tongi, Dhaka. Launching of its own products in 1983 Listing in the Dhaka Stock Exchange as a Public Limited Company as well as the member of Chittagong Stock Exchange Won the first prize of ICAB National Awards 2000 for Best Published Accounts and Reports in Non-Financial Sector Category in 2002 Listing in the London Stock Exchange (LSE) in 2005 Blockbuster Products are Neoceptin R, Napa, Amdocal, Filmet, Neoflox, Azmasol
  • 8. Accounts Payable Value Addition Raw WIP Materials THE WORKING CAPITAL Cash CYCLE Finished (OPERATING CYCLE) goods Accounts SALES Receivable
  • 10. Inventory Management Inventory as a proportion of Current Asset of BEXIMCO Pharmaceuticals Limited SL Current Asset 2011 2010 2009 2008 2007 1 Inventories 36.64 36.5 28.50 60.94 56.51 2 Accounts Receivable 13.68 13.26 10.03 17.00 17.09 3 Loans, Advances & Deposits 11.75 12.60 10.10 19.02 22.53 4 Short-Term Investment 30.68 13.88 36.07 0.1 - 5 Cash & Cash Equivalents 7.25 23.76 15.03 2.94 2.93 6 Gross Working Capital 100 100 100 100 100
  • 11. Inventory Management Composition of Inventory Name of elements in SL. 2011 2010 2009 2008 2007 Inventory 1 Finished Goods 27.90 29.14 32.17 23.78 22.54 2 Work in Process 7.38 9.83 11.00 11.40 9.70 3 Raw Material 64.724 62.66 56.83 64.82 67.73 4 Stores & Spares 3.95 3.9 3.5 5.02 4.23 4 Total Inventory 100 100 100 100 100
  • 12. Raw Materials Storage Period Raw Materials Storage Period= Average stock of Raw Materials/ Average cost of raw materials per day Particulars 2011 2010 2009 2008 2007 Average Stock Raw 295163921 286673911 284271612 278681856 235556789 Material 5 9 1 4 9 Average Cost of Raw 7854080 7854080 6571863 7635119 6453611 Material per day Raw Material Storage 376 365 433 365 365 Period (Days)
  • 13. Finished Goods Conversion Period Finished goods conversion period= Average stock of finished goods/Average cost of goods sold per day Particulars 2011 2010 2009 2008 Average Stock of finished goods 559721452 456201878.5 344724356 364770493 6259010.69 Average Cost of goods sold per day 10166232 8060064.219 5438878.3 5 Finished Goods Conversion Period (days) 55.06 56.60 55.08 67.07
  • 14. Stores & Spares Conversion Period Stores and spares conversion period= Average stock of Stores and spares/Average consumption per day Particulars 2011 2010 2009 2008 Average Stock of store and spares 215036533 183998556 168056628 150397257 Average Consumption per day 589141.19 502597.066 460429.12 412047.28 Store & spares conversion period 365.00 366.10 365.00 365.00 (days)
  • 15. W-I-P Holding Period W-I-P Holding Period= Average w-i-p in inventory/ average cost of production per day 2011 2010 2009 2008 182228787 103280829 180522329 157195606 Average W-I-P in Inventory Average Cost of Production 10567895.77 8574498.421 6715980.67 5488502.937 per Day W-I-P Holding period (days) 17.24 12.05 26.88 28.64
  • 18. Average Collection period Average Collection Period= 365 days/ Accounts Receivable Turnover 2011 2010 2009 2008 2007 =365/8.7689 =365/8.5661 =365/8.1271 =365/7.9915 =365/7.7361 =41.62 days =42.61days =44.91days =45.67days =47.18 Days
  • 19. Return on Investment Return on Investment = Net Profit Before Taxes/ Total assets 2011 2010 2009 2008 2007 =1198525342/ =1051648808/ =624740307/ =545341273/ =353067878/ 23093340533 21372399509 19891933422 14819665441 11953418940 5.19% 4.92% 3.14% 3.68% 2.95%
  • 20. Z -Score Analysis Z= 1.2T1+ 1.4T2 + 3.3T3 + 0.6T4 +0.999T5 T1= Working Capital/ Total Asset (Working Capital= Current Assets Current Liabilities) T2= Retained Earnings/ Total Assts T3= Earnings before Income Tax/ Total Assets T4=Market value of equity/ Total liabilities [Number of Shares * Current Share Price] T5= Sales/ Total Assts. Formula =If (B9>2.99,"SAFEzone", IF (B9>1.81,"GREYZone","DISTRESS")) Year Z-Score Value Remarks 2011 1.1269 Distress 2010 1.0445 Distress 2009 0.9840 Distress 2008 0.5828 Distress 2007 0.8800 Distress
  • 21. Findings BEXIMCO Pharmaceuticals has large amount of capital; According to ratio analysis the companys stand on a comparatively weak position in 2011 than previous year To some extent Inefficient management of working capital especially on inventory part From the result of Z -Score model, BEXIMCO Pharma places on DISTRESS zone After analysis the financial data, the company is ruling the market by their brand name, not by their performance They are lagging behind for time management about collecting money from the creditors Its also bearing a large amount of money in inventory sector, which create an impact on product price
  • 22. SWOT Analysis Strengths Weakness Opportunities Threats Recommendations Reduce the days of collection period to collect money from creditors Efficient management should be ensured for operating inventory sector Proper utilization of liquid asset to ensure maximum profitability; Keep concentration on every part of operations viz: cash management, sale increase, credit terms; Proper measures should be taken to invest in different assets (current and fixed).