working capital management of pran bd ltd
DESCRIPTION
A firm must have adequate working capital, i.e.; as much as needed the firm. It should be neither excessive nor inadequate. Both situations are dangerous. Excessive working capital means the firm has idle funds which earn no profits for the firm. Inadequate working capital means the firm does not have sufficient funds for running its operations. It will be interesting to understand the relationship between working capital, risk and return. The basic objective of working capital management is to manage firms current assets and current liabilities in such a way that the satisfactory level of working capital is maintained, i.e.; neither inadequate nor excessive. Working capital some times is referred to as “circulating capital”. Operating cycle can be said to be t the heart of the need for working capital. The flow begins with conversion of cash into raw materials which are, in turn transformed into work-in-progress and then to finished goods. With the sale finished goods turn into accounts receivable, presuming goods are sold as credit. Collection of receivables brings back the cycle to cash. The company has been effective in carrying working capital cycle with low working capital limits. It may also be observed that the PBT in absolute terms has been increasing as a year to year basis as could be seen from the above table although profit percentage turnover may be lower but in absolute terms it is increasing. In order to further increase profit margins, SSL can increase their margins by extending credit to good customers and also by paying the creditors in advance to get better ratesTRANSCRIPT
WELCOME TO OUR PRESENTATION
We are …..
Tajuddin Ahmed 14-09
Md. Mazher Hossain 14-013
Md. Tozam Uddin 14-073
Khaleda Yesmin 14-121
A.S.M. Saiduzzaman 14-157
Presented by: Group-11
Working Capital Management of
PRAN AMCL
Roll: 14-121
Now Presenting…..
KHALEDA YESMIN
Company Profile
PRAN is the pioneer in Bangladesh to be involved in contract farming and procures raw material
directly from the farmers and processes through state of the art machinery at their several factories
into packed food and drinks products.
1985:Incorporation of the AMCL Group in Bangladesh, as private Ltd co. under the companies Act
1913.
1985:Inception of PRAN foods and beverage as the Brand name of AMCL in Bangladesh.
Largest exporter of processed agro products with compliance of HALAL & HACCP to more than 70
countries from Bangladesh.
It also has the distinction of achieving prestigious certificate like ISO 9001:2000.
MAJOR PRODUCTS
• JUICE
• BEVERAGE
• DRINK
• CONFECTIONERY
• CULINARY
• SNAKES
• BISCUITS & BAKERY
• DAIRY
Exported items & Countries
Fruit Juices in Aseptic Pack & Glass Bottle, Fruit Drinks in Plastic Bottle, Pickles in Glass Jar & bulk,
Canned Fruits & Vegetables, Extruded & Bangladeshi Snacks, Tea, Rice, Puffed Rice, Flatten Rice, Jam
Jelly in Glass Jar, Cup & bulk, Spices, Mustard Oil, Mineral Water, Spices, Dehydrated Fruits,
Tomato Ketchup / sauce in Glass Jar, Candies, Bubble Gum, Ball Gum, Molasses, Lollipop, Cup Jelly,
and Vita Plus etc.
PRAN has also been exporting to:
USA, Canada, Austria, France, Germany, Belgium, Switzerland, Singapore, Malaysia, Korea, Japan, Australia, Qatar, UAE, Kuwait, Oman, Bahrain, Lebanon, Angola, Congo, Ghana, Senegal, RCA, Gabon, Cameroon, Togo, Benin, Mayotte, Mali, Mauritania, Cabo Verde Islands, Reunion Islands, Nepal, Bhutan, Sri Lanka, Pakistan & Myanmar.
Fin’l Performance of PRAN
COMPETITIVE CONDITIONS IN THE BUSINESS
Year 2010 2009 20082007
2006
Market Value Per Share 1363.00 1142.00 382.63386.00
519.25
Book Value Per Share 449.96 428.39 409.91422.11
412.55
1 2 3 4 50
500
1000
1500
2000
2500
Year
Market Value Per Share
Book Value Per Share
Roll: 14-073
Now Presenting…..
Md. Tozam Uddin
Inventory Policies of PRAN
Inventories are stated at the lower of cost and net realizable value.
Costs incurred in bringing the inventories to their present location and
conditions are accounted for as follows:
Raw materials – purchase costs on a weighted average basis
Finished goods and work-in-progress – costs of direct materials and labor
and a proportion of manufacturing overheads based on normal operating
capacity.
Net realizable value is the estimated selling price in the ordinary course of
business, less estimated costs of completion & sale.
Provision is made if necessary, for obsolete and slow-moving item.
Inventories…Average Inventory:2006 491608049 4916080492007 (491608049+496023771)/2 4938159102008 (496023771+483346039)/2 4896849052009 (481449833+483346039)/2 4823979372010 (484200145+481449833)/2 482824990
Inventory Turnover : Inventory Period:
2006 1.21 times
2007 1.35
2008 1.46
2009 1.58
2010 1.78
2006 302 days
2007 270
2008 250
2009 231
2010 205
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and at bank and demand deposits.
These also include bank overdrafts that form an integral part of the company’s cash
management.
1 2 3 4 5
Year 2009 2008 2007 2006 2005
Cash & Cash Equivalence 40968825 16173069 32660159 39484215 33184149
2500000
7500000
12500000
17500000
22500000
27500000
32500000
37500000
42500000
Cash analysis of AMCL
Tak
a
Summary of Cash Accounts
2010 2009 2008 2007 2006
Net changes in cash and cashequivalents
26685799 -14243538 11697887 5671480 14034123
Cash and cash equivalents at beginning of the year 39941087 54184625 42486738 36815258 22781135
Cash and cash equivalents at end of the year 66,626,886 39,941,087 54,184,625 42,486,738 36,815,258
Roll: 14-013
Now Presenting…..
Md. Mazher Hossain
A/R Management Receivables are direct result of credit sale. The main objective of receivables management is to
promote sales and profits.
Average receivables Receivables Turnover
Receivables Period
2006 42501462
2007 44002771 Tk
2008 52608030
2009 51977440
2010 40763640
2006 18.77 times
2007 19.70 times
2008 17.60 times
2009 18.96 times
2010 27.00 times
2006 19.45 days
2007 18.53
2008 20.74
2009 19.25
2010 13.52
A/p Management
Accounts Payable Turnover: Accounts Payable Period
2006 65 times
2007 60
2008 56
2009 56
2010 55
2006 3.98 days
2007 6.10
2008 6.52
2009 6.25
2010 6.64
Measurement of Liquidity & Ratio
Major tools of financial analysis are ratio analysis and funds flow
analysis.
2010 2009 2008 2007 2006
Current Ratio 1.28 1.32 1.26 1.29 1.26
Quick Ratio .36 .37 .36 .34 .32
Accounts Receivable Turnover Ratio
12.13 16.16 23.23 18.89 19.18
Inventory Turnover Ratio 1.78 1.57 1.48 1.35 1.21
Asset Turnover Ratio 3.36 3.94 3.29 2.73 2.38
Accounts Payable turnover ratio 9.19 14.44 - - -
Risk factors
PRAN faces following risk factors:
Interest rate risk
Industry risk
Market & Technology related risk
Potential or existing Government regulations
Potential changes in global or national policies
Operational Risk:
Roll: 14-009
Now Presenting…..
Md. Tajuddin Ahmed
Working Capital Needs
PRAN has been operating at 80,000 units per week with the following cost structure.
Raw materials Tk.100 Per unitDirect labor (50% fixed) 70 Factory overhead (80% fixed) 50Admin & Selling cost 60Total cost 280 Profit 20 Selling Price 300 Per unit The company has the following balances as on the last week: Raw material Inventory 700,000 Tk.Finished goods Inventory 1400,000 Tk.Work-in –process 1000,000 Tk.
Working Capital Needs(cont’d)
a. The company plans to production by 5 percent next week.b. Direct material cost will be same.c. Credit Period to debtors 35 days.d. Creditors allowed 30 days.e. Lag in payment of wages 10 days.f. Lag in payment of other expenses 07 days.g. The company plans to invest 2 core tk in marketable securities & to pay
expenses in advance tk 15 lakh.
If the company plans to retain minimum cash balance to be Tk. 30 lakh the working capital requirement would be:
Working Capital Needs(cont’d)
Raw material conversion period
= (Raw material Inventory * 360) / Raw material consumption
= (7000,00 * 360 ) / 80,000*100
= 31.5 days
Work in process conversion period
= (Work in process inventory *360) /cost of production
= (1000,000*360) /80,000* 220
= 20.45days
Finished goods conversion period
= (Finished goods inventory *360) /Total cost
= (1400,000*360) / 220*80,000
= 28.64 days.
Roll: 14-157
Now Presenting…..
A.S.M Saiduzzaman
Working Capital Needs(cont’d)
Inventory conversion period
1.Raw material conversion period 31.50
2. Work in process conversion period 20.45
3. Finished goods conversion period 28.64
Total Inventory conversion period 80.59
Book debt conversion period 35.00
Gross Operating Cycle 115.59
Payable Deferred period 30.00
Net Operating Cycle 85.59
Working Capital Needs(cont’d)
Revised Cost Sheet For 84000 Units:
Direct materials = Tk. 100 84,000*100 84,00,000 Tk.
Direct wages: Fixed Tk. 35 80,000*35 28,00,000
Variable Tk. 35 84,000*35 294,00,00
1,4140000
Prime cost
Factory overhead:
Variable Tk. 10 80,000*10 800000
Fixed Tk. 40 84,000*40 3360000
Cost of production 18300000
Admin cost Tk. 60 84,000*60 5040000
Total cost 23340000
Investment in Inventory:
Raw material: (8400,000*31.5)/360 735,000 Work in process (18300,000*20.45)360 10,34,458 Finished goods (1,830,0,000*28.64)360 1455,867 Investment in Inventory 3225325
Investment in Debtors ( 23340000* 35)/360 2269167 Investment in marketable 20000000 Securities Cash balance requirement 3000000
Estimated prepaid expense 1500000
Total investment in current assets 29994492 Current Liabilities Creditors (84,00,000*30)/360 700000 Deferred wages (5740,000*10)/360 159444 Deferred overhead expenses (4160000+5040000)*07/360 178889 Total current Liabilities 1038333 Net Working capital 28956160
Estimating working capital requirements for 84,000units:
Findings
Analyzing the whole report we can obtain following findings:
Pran AMCL is one of the leading manufacturing business institutions of Bangladesh.
PRAN AMCL use traditional & improved technique of working capital management.
PRAN employed renowned and efficient professionals to conduct their management
specially WC management.
Liquidity condition of the company is satisfactory.
PRAN meets their short term financing needs through short term bank loan from 6
branches of 3 popular banks.
Use of latest manufacturing Technology at PRAN makes work easy and fast.
PRAN makes an important role in our economy.
Thanks