A Research Proposal on

An Analysis of the Working Capital Management of the Food Industry of Bangladesh

Prepared For:

Dr. Sheikh Abu Taher

Lecturer and

Course Teacher, Working Capital Management

Prepared By:

Zinat Ferdous (ID: 1249)Nazia Ahmed (ID: 1254)Eshat Bintay Kamal (ID: 1261)

BBA Program, First Batch,

Department of Finance & Banking

Jahangirnagar University, Savar, Dhaka -1342

July 20, 2012

1. Title of the Research

An analysis of the working capital management of the food industry of Bangladesh

2. Theme and Objective of the Research

The basic theme of this report is:

“Analyzing the trend of working capital management practice in the food sector of Bangladesh”

To accomplish this we shall explore the following points:

The role of cash management in working capital management The role of receivables management in working capital management The role of payables management in working capital management The role of inventory management in working capital management The impact of working capital management on profitability

3. Scope of the Research

As our research will be confined to the food industry of Bangladesh; all of our analysis will be centered on food based companies in Bangladesh. All our analysis will be based on the financial statements of the chosen companies.

4. Methodology

The research is mainly descriptive in nature. Other relevant issues regarding the research are briefly presented in the following section.

4.1. Sources of data

This research is solely based on secondary data, namely the financial statements of the chosen companies.

4.2. Methods of data collection

We have chosen the following ten companies to base our research:

PRAN Limited Apex Foods Limited Bangas Limited Bengal Biscuits Limited National Tea Company Limited Gemini Sea Food Limited Alpha Tobacco Manufacturing Company Limited Aman Sea Food Industries Limited Bangladesh Leaf Tobacco Company Limited Hill Plantation Limited

Our analysis will be based on financial data of the above companies from the years 2002 to 2011. We have chosen a very reliable source of the Dhaka Stock Exchange Limited’s Data Archives to collect the financial statements.

5. Method of Analysis

We will analyze the working capital management practices of the food industry of Bangladesh by analyzing the financial statements of the chosen companies. The analysis will comprise of ratio analysis and trend analysis. First we will conduct ratio analysis and trend analysis of the companies individually and then we will go for a comparative analysis of the ratios. The findings will be systematically presented in tables, graphs and charts.

6. Report Preview

As a preview of the report, we have presented the things we wish to include in the research paper by a table of contents. We have also presented a sample of the data analysis of ten years for two companies and an industry analysis.

6.1. Proposed Table of Contents

Serial Subject Page

Executive Summary

IntroductionOrigin and backgroundResearch questionsSignificance of the researchScope of the researchMethodologyLimitations and delimitationDefinition of terms and acronymsReport preview

PRAN Limited2.1. Company background2.2. Working capital components2.3. Cash management2.4. Receivables management2.5. Payables management2.6. Inventory management2.7 Working capital management and profitability2.8 Chapter Summary

Serial Subject Page

Apex Foods LimitedCompany backgroundWorking capital componentsCash managementReceivables managementPayables managementInventory managementWorking capital management and profitabilityChapter Summary

Bangas LimitedCompany backgroundWorking capital componentsCash managementReceivables managementPayables managementInventory managementWorking capital management and profitabilityChapter Summary

Bengal Biscuits LimitedCompany backgroundWorking capital componentsCash managementReceivables managementPayables managementInventory managementWorking capital management and profitabilityChapter Summary

National Tea Company LimitedCompany backgroundWorking capital componentsCash managementReceivables managementPayables managementInventory managementWorking capital management and profitabilityChapter Summary

Gemini Sea Food Limited

Company backgroundWorking capital components

Cash managementReceivables managementPayables managementInventory managementWorking capital management and profitabilityChapter Summary

Alpha Tobacco Manufacturing Company LimitedCompany backgroundWorking capital componentsCash managementReceivables managementPayables managementInventory managementWorking capital management and profitabilityChapter Summary

Aman Sea Food Industries LimitedCompany backgrounWorking capital componentsCash managementReceivables managementPayables managementInventory managementWorking capital management and profitabilityChapter Summary

Bangladesh Leaf Tobacco Company LimitedCompany backgroundWorking capital componentsCash managementReceivables managementPayables managementInventory managementWorking capital management and profitabilityChapter Summary

Hill Plantation LimitedCompany backgroundWorking capital componentsCash managementReceivables managementPayables managementInventory management

Working capital management and profitabilityChapter Summary

12.0 Industry AnalysisCash managementReceivables managementPayables managementInventory managementWorking capital management and profitability

Appended PartReferencesBibliographyAnalysis of data

6.2. Sample of Data Analysis

Here we have presented a sample analysis of the data of ten years (2002-2011) of two companies namely PRAN Limited and Apex Foods Limited and the comparative analysis. A detailed breakdown of the analysis is presented in the Microsoft Excel file (named ‘BD Food Sector Working Capital Analysis’)

6.2.1. Data Analysis: PRAN Limited

6.2.1.1. Current Asset management

6.2.1.1.1. Receivables management

The trend of day’s sales outstanding of PRAN limited is as follows:

From the trend, we can observe that in the years 2007 and 2008 the receivable collection period was abnormally high and also in the long run the receivables collection period is increasing. This could be a problem for the company.

6.2.1.1.2. Inventory management

The trend of inventory turnover (days) of PRAN limited is as follows:

From the trend, we can observe that over the years, the inventory turnover time is increasing. This could be a bad indication to the company.

6.2.1.1.3. Cash management

The trend of cash conversion cycle of the company is as follows:

The increasing time of the cash conversion cycle is concerning. Also during 2007 and 2008 the CCC increased abnormally. This is due to the abnormal increase of DSO.

6.2.1.2. Current Liabilities management

6.2.1.2.1. Payables management

The trend of day’s payables outstanding of PRAN limited is as follows:

The increasing trend of payables deferral period is satisfying because the company will have more working capital.

6.2.1.3. Combined Analysis

6.2.1.3.1. Current Ratio

The trend of the current ratio of the company is as follows

The current ratio of the company is relatively stable at around 1.3 which is satisfactory.

6.2.1.3.1. Quick Ratio

The trend of the quick ratio of the company is as follows

Despite the abnormal jump of the quick ratio on 2004, the trend is decreasing which is a concern for the company.

6.2.2. Data Analysis: Apex Foods Limited

6.2.2.1. Current Asset management

6.2.2.1.1. Receivables management

The trend of days sales outstanding of PRAN limited is as follows:

From the trend, we can observe although some abnormal jump and slump in some years the receivables collection trend is stable which is satisfactory.

6.2.2.1.2. Inventory management

The trend of inventory turnover (days) of Apex foods limited is as follows:

From the trend, we can observe that the inventory turnover trend is very volatile and also high throughout the period which is a concern for the managers.

6.2.2.1.3. Cash management

The trend of cash conversion cycle of the company is as follows:

The cash conversion cycle is rather volatile and also high which is a concern for the company.

6.2.2.2. Current Liabilities management

6.2.2.2.1. Payables management

The trend of day’s payables outstanding of Apex Foods limited is as follows:

The decreasing trend of payables deferral period is disconcerting because the company will have less working capital.

6.2.2.3. Combined Analysis

6.2.2.3.1. Current Ratio

The trend of the current ratio of the company is as follows

The trend of the current ratio is rather volatile but it has stayed in satisfactory limits.

6.2.2.3.1. Quick Ratio

The trend of the quick ratio of the company is as follows

The trend of the quick ratio is extremely volatile for the company. This is due to the combined volatility of current assets, current liabilities and inventories.