...Two Readings on Working Capital Management Keys To Successful Working Capital Management From the perspective of the Chief Financial Officer (CFO), the concept of working capital management is relatively straightforward: to ensure that the organization is able to fund the difference between short-term assets and short-term liabilities. In practice, though, working capital management has become the Achilles' heel of scores of finance organizations, with many CFOs struggling to identify core working capital drivers and the appropriate level of working capital. As a result, companies can be limited in their ability to weather unforeseen or adverse events and ensure that cash is readily available where it is needed, regardless of the circumstances. By understanding the role and drivers of working capital management and taking steps to reach the "right" levels of working capital, companies can minimize risk, effectively prepare for uncertainty and improve overall performance. Factors Influencing Working Capital Performance For most CFOs, the greatest challenge with respect to working capital management is the need to understand and influence factors that are out of their direct control, in order to obtain a complete picture of the company's needs. The CFO's span of control can be limited in terms of functional silos, though corporate finance may well have some powers of influence over operating units. While organizations generally concentrate on the right processes...
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...August 23, 2015 M. Shahjahan Mina Professor, Department of Finance University Of Dhaka Subject: Letter regarding Submission of report on Working Capital Management Of M.I. Cement Factory Ltd Dear sir, With due respect, we, a study group of six members of B.B.A. Program (18th Batch) under Department of Finance, University of Dhaka, submit the report entitled “Working Capital Management of M.I. Cement Factory Ltd.” that you have assigned us as the partial course requirement of the respective semester. We thank you, sir, for this assignment which has enriched our knowledge of this topic. Also, our involvement with little field study has nurtured our understanding, which will undoubtedly help us in the coming semesters and further. Respectfully ………………………………… Md. Akramuzzaman On behalf of the group, Roll: 18-113, Section: A Department of Finance University of Dhaka Working capital management is the management of current assets and liabilities of an organization. It is extremely important for any manufacturing company. WC represents a large portion of the total investment in assets. This clearly indicates that the finance manager should pay a close attention to the management of current assets on a continuing basis. Besides, there is a direct relationship between a firm’s growth and its working capital needs. As sales grow, the firm needs to invest more in inventories and debtors. In this report, we have...
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...Finance / under West Bengal State University, Barasat) Title of the Project WORKING CAPITAL MANGEMENT IN MARUTI SUZUKI INDIA.LTD Submitted by Name of the Candidate: TANUMOY ROY Registration No. : 13611131114020870 OF 2011-12 Name of the College: RBC EVENING COLLEGE College Roll No: 21 Supervised by Name of the Supervisor MR RANJIT KUMAR DUTTA Name of the College: RBC EVENING COLLEGE Month & Year of Submission FEB 2014 ACKNOWLEDGEMENT I would like to thank our head of the department (HOD) Mr. Ranjit Kumar Dutta, for giving necessary support during the course. Chapter No. | Particulars | Page No. | 1. | INTRODUCTION | 4-7 | 2. | AUTOMOBILE INDUSTRY SCENARIO IN INDIA | 8 | 3. | PRESENTATION OF DATA, ANALYSIS, FINDING | 9-11 | 4. | CONCLUSION,RECOMMENDATION,LIMITATION | 12 | 5. | BIBLOGRAPHY AND REFERANCES | 13 | 6. | SUPERVISER CERTIFICATE | 14 | 7. | STUDENT DECLARATION | 15 | CONTENTS INTRODUCTION 1.1CONCEPT OF WORKING CAPITAL The term working capital is used to mean that proportion of working capital of a business which is employed in short Term or current operations. There are two type of working capital: gross and net. Gross working capital is the sum total of all current asset, while net working capital is the difference between current asset and current liabilities. IMPORTANCE OF WORKING CAPITAL * The business can avail the advantages of cash discount facilities offered...
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...IJMBs Vol. 1, Issue 3, septeMBer 2011 I S S N : 2 3 3 0 - 9 5 1 9 (O n l i n e ) | I S S N : 2 2 3 1-2463 ( P r in t) Working Capital Management in Cement Company a Study 1 1 T.Chandrabai, 2Dr.K.Venkata Janardhan Rao Dept. of Mgmt. Studies, Padmasri Dr.B.V.Raju Institute of Tech., Narsapur, Medak, AP, India 2 Dept. of Commerce and Business Management, Kakatiya University, Warangal, AP, India Abstract Working capital is considered to be life-giving force to an economic entity and managing working capital one of the most important functions of corporate management. Working capital management (WCM) is the management of short-term financing requirements of a firm which includes maintaining optimum balance of working capital components – receivables, inventory and payables – and using the cash efficiently for day-to-day operations. The main objectives of this study are to examine and evaluate the working capital management in ACC Limited, examine the management pattern of inventory, liquidity, cash position and receivables management. This also finds the relationship between Working Capital Efficiency and Profitability, Profitability and Market ratios. Keywords Working Capital, Liquidity, Profitability, Market ratios, Inventory I. Introduction Global slowdown that severely affected several countries had its invariable effect on Indian Industrial production as also on other important sectors of Indian Economy. The Cement Industry, which exhibited...
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...Money and Currency Market Assessment Working Capital Management Report #3 Faculty of Business Field of Study: Money and Currency Market Kozminski University, Warsaw Handed in by: Ewa Dembska, Jennifer March, Sarah Steinberger Course: WIB-bi 13 Academic tutor: Prof. Dr. Mieczysław Grudziński Warsaw, 25th March 2015 | Introduction to the problem You are the Chief Financial Officer (CFO) of BP. This afternoon you played golf with a member of the company’s board of directors. Somewhere during the back nine, the board member enthusiastically described a recent article she had read in a leading management journal. This article noted several companies that had improved their stock price performance through effective working capital management, and the board member was intrigued. She wondered whether BP was managing its working capital effectively and, if not, whether BP could accomplish something similar. How was BP managing its working capital, and how does it compare to its competitors? Upon returning home, you decide to do a quick preliminary investigation using information freely available on the Internet. Task 1 Obtain BP’s financial statements for the past four years from Yahoo! Finance (http://finance.yahoo.com). See attachments Excel File: Case#3 Spreadsheet Task 2 Obtain the competitors' ratios for comparison from Yahoo! Finance (http://finance.yahoo.com). See attachments Excel File: Case#3 Spreadsheet Task 3 Compute the cash conversion cycle for BP for each of the...
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...Working Capital Management FIN/571 Introduction Managing working capital is a critical success factor for all companies no matter the shape and size. This is especially critical for the longevity of a small business operation whose cash conversion cycle and current ratios is key to the success and life of the business. So when Alan Litchman and Laura Trust left the corporate world to buy Finagle-a-Bagel, they were able to take key lessons that they learned in managing working capital (Wiley, 2016). There are four key lessons that need to be understood when managing working capital which includes managing the cash flow of the business, understanding and leveraging your debt options, successful capital investment, and utilizing credit. Cash Flow in Business Many have heard the saying," Cash is King!" In a business, "working capital management involves two fundamental questions: (1) What is the appropriate amount and mix of current assets for the firm to hold? (2) How should these current assets be financed?" (Parrieno, Kidwell, & Bates, 2011, p. 442). Although the video did not discuss in detail those fundamental questions since, the Litchman's simply referred to cash flow as, "red is when you don't have cash flow and black is when you do have cash flow" (Wiley, 2016). Successful strategies include commencing with a reputable bank and to comprehend the model of the business (Wiley, 2016). In addition, a successful business strategy should have current assets to...
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...Two Readings on Working Capital Management Keys To Successful Working Capital Management From the perspective of the Chief Financial Officer (CFO), the concept of working capital management is relatively straightforward: to ensure that the organization is able to fund the difference between short-term assets and short-term liabilities. In practice, though, working capital management has become the Achilles' heel of scores of finance organizations, with many CFOs struggling to identify core working capital drivers and the appropriate level of working capital. As a result, companies can be limited in their ability to weather unforeseen or adverse events and ensure that cash is readily available where it is needed, regardless of the circumstances. By understanding the role and drivers of working capital management and taking steps to reach the "right" levels of working capital, companies can minimize risk, effectively prepare for uncertainty and improve overall performance. Factors Influencing Working Capital Performance For most CFOs, the greatest challenge with respect to working capital management is the need to understand and influence factors that are out of their direct control, in order to obtain a complete picture of the company's needs. The CFO's span of control can be limited in terms of functional silos, though corporate finance may well have some powers of influence over operating units. While organizations generally concentrate on the right processes, such as...
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...on Working Capital Management Prepared for Prof. M Shahjahan Mina Department of finance University of dhaka Prepared by Asif Mohammad Bakar (ID # 15065) Fahad Zaman Chowdhury (ID # 21034) Submitted on: 19-8-2013 Letter of Transmittal 19th August, 2013 Prof. M. Shahjahan Mina Department of Finance, University of Dhaka. Subject: Submission of term paper Dear Sir: We, a group of EMBA Program, Department of Finance, have prepared a term paper on “Working Capital Management” as per your guideline. We have prepared this report using financial statements of Heidelberg Cement Bangladesh Limited using data from year 2008 to year 2012. We, therefore, lay our highest level of gratitude to you to consider our limitations and restrictions and grant this report. Sincerely Yours, Fahad Zaman Chowdhury Asif Mohammad Bakar EMBA Program Department Of Finance. University Of Dhaka. Table of Contents Serial No. | Chapter Name | Page No. | 1 | Introduction | 01 | 2 | Company profile | 02 | 3 | Statement of Problem | 03 | 4 | Methodology of Analysis | 04 | 5 | Theoretical Background | 05 | 6 | Working Capital of HEIDELBERG CEMENT BANGLADEHS LTD. | 07 | 7 | Cash Flow | 09 | 8 | Ratio Analysis | 11 | 9 | Cash Conversion Cycle | 13 | 10 | Recommendations of HCBL for better Working Capital Management | 15 | 11 | Conclusion | 16 | 12 | Bibliography | 17 | Executive Summary Working Capital refers...
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...CHAPTER-I INTRODUCTION 1.1 MEANING OF WORKING CAPITAL “Working Capital is the Life-Blood and Controlling Nerve Center of a business” Working capital (abbreviated WC) is a financial metric which represents operating liquidity available to a business, organization or other entity, including governmental entity. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. Net working capital is calculated as current assets minus current liabilities. It is a derivation of working capital that is commonly used in valuation techniques such as DCFs (Discounted cash flows). If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable, and cash. Current assets and current liabilities include three accounts which are of special importance. These accounts represent the areas of the business where managers have the most direct impact: Accounts receivable (current asset) Inventory (current assets), Accounts payable (current liability) ...
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...The Effects of Working Capital Management on Firm Profitability A study examining the impacts of different company characteristics Authors: Hampus Björkman & Micael Hillergren Supervisor: Lars Lindbergh Student Umeå School of Business and Economics Spring semester 2014 Degree project, 30 HP Abstract Many argue that there is a trade off between profitability and liquidity. However, many studies have found that the profitability can increase with an efficient Working Capital Management. Correctly allocating cash flows to where and when it is needed increases liquidity and simultaneously increasing profitability. The purpose of this study is to develop the research on the relationship between Working Capital Management and profitability by investigating how it is affected by different company characteristics. A quantitative method was applied with philosophical stances in objectivism and positivism and deductive theory was used to approach the subject. From the theoretical framework, five hypotheses were established and statistically tested in order to answer our research question. The first hypothesis was formulated to confirm previous research, while the remaining two aimed at providing both a theoretical and practical contribution to existing knowledge. The thesis centers on the Cash Conversion Cycle, a metric of how fast a company turns purchased products into profit, with Gross Profit Margin as the measure of profitability. The...
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...Introduction Berger Paints Bangladesh Limited (BPBL) is a renowned paint company in Bangladesh. The Company was introduced on 6 June 1973 as a private co. limited by shares registered under the Company Act. In December 2005, the company issued 5% shares to the public and listed with Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). BPBL previously was known by Jenson & Nicholson (J & N). The name of the company was changed from J& N (Bangladesh) Limited to Berger Paints Bangladesh Limited on January 1, 1980. Currently BPBL’s number of shares is 23,188,940. Its Authorized capital is Taka 400 million and its paid up capital is Taka 232 million. Historical Overview Berger, the market leader in the Bangladesh paint market is one of the oldest names in the paint Industry and the country’s major specialty paints business with products and ingredients dating back more than 249 years to 1760. Louis Berger, a Germen national founded dye and pigment making business in England. Louis Berger and sons grew rapidly with a strong reputation for innovation and entrepreneurship culminating in perfecting the process of making Prussian blue, a deep blue dye- a colour widely used for the uniforms of many European Armies. Production of dyes and pigments evolved into production of paints and coating, which till today, remains the core business of Berger. The company grew rapidly by establishing branches all over the world and through mergers and acquisitions with all other...
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...Working Capital Management of Square Textile Limited Introduction: This report focuses on the working capital management of a reputed textile firm of Bangladesh. In this regard, we have selected Square Textile Ltd. We tried to link our findings in working capital in Square Textile Ltd. and theoretical aspects. We have found some similarities and some dissimilarity in this regard. We have particularly pointed in the inventory management, liquidity management and credit policy of the company. Overall working capital management of square textile has been stated in detailed. Objectives of the Study: The purpose of the study is to analyze the working capital management practices of Square textile ltd. THEORETICAL OVERVIEE There are different theoretical developments and empirical issues but there is no unified rule that can determine the optimal level of working capital. From the viewpoint of developing country like Bangladesh the role of working capital should be highly emphasized. Working Capital Management The second function involves the capital structure and dividend issues. The third one deals with management of working capital or current assets and current liability management issues. The working capital of a firm includes: a) Current Assets b) Current Liability Approaches of Working Capital Management • Conservative Approach • Matching Approach • Aggressive Approach Necessity of working capital Current Assets & Liabilities. But in real world situation...
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...Submitted To: Submitted By: Prof. R. Srinivasan Gulshan Sharma FPG1113/021 Impact of working capital on the profitability of the firm | Table of Content Topic.............................................................................................................................Page No. Acknowledgement........................................................................................................ 3 Executive Summary...................................................................................................... 4 Company Profile........................................................................................................... 5 Introduction.................................................................................................................. 10 Objective...................................................................................................................... 19 Research Methodology................................................................................................ 19 Limitation..................................................................................................................... 19 Data Analysis............................................................................................................... 20 Findings............................................................................................
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...Major: Finance Treasury WORKING CAPITAL MANAGEMENT IN THIET BI Y KHOA COMPANY Student Intake : VU NHAN NGHIA : 2 (2012-2013) Supervisor : NGUYEN VIET DZUNG Ho Chi Minh city, December 2013 Table of Contents INTRODUCTION ....................................................................................................................3 1. THEORETICAL BACKGROUND ................................................................................5 1.1. Concept of working capital management ................................................................5 Working capital definition .................................................................................5 Working capital management............................................................................5 1.1.1. 1.1.2. 1.2. 1.3. Role of working capital management .......................................................................6 Components of working captial management .........................................................7 Account receivables ............................................................................................7 Account payables ..............................................................................................10 Inventories .........................................................................................................12 Optimal level of working capital .....................................................................14 Working capital measurement ...........
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...from Efficient Working Capital Management • A lot of corporate organizations could not live to achieve their objectives due to inefficiency in the management of its working capital. Every organization, both private and public needs sufficient working capital to enable it meet up with its daily basic financial obligations. • The objectives of this research work are: to examine efficient working capital management as a prerequisite to corporate survival and growth; to find out what makes up working capital and if possible the best combination; and to suggest some measures for improvement in working capital management. • Efficient working capital management involves themix of the current assets, current liabilities and fixed assets of the business in order to meet up with the day to day need of the business in question or in order words to keep the business going with less waste especially in terms of time, energy and goodwill. Nwankwo (2005) . • efficient working capital is based on the decision of themanagement of the company in determining the volume of current assets over current liabilities that the company is prepared to have in the company’s balance sheet. Ibenta (2005, p. 406) Working Capital Theories and Implications There are basically three theories of working capital, which includes the conservative approach, the aggressive approach and the moderate approach (Nwankwo, 2005). - The Conservative Approach: In this approach permanent capital is being used to ...
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