...htm Working Capital Management and Corporate Performance of Manufacturing Sector in Pakistan Abdul Raheman PhD Scholar, Department of Management Sciences, COMSATS Islamabad & Asst. Professor, University Institute of Management Sciences PMAS-Arid Agri. University Rawalpindi E-mail: abdulrehman@uaar.edu.pk Talat Afza Professor & Dean, Faculty of Management Sciences, COMSATS Lahore, Pakistan E-mail: talatafza@ciitlahore.edu.pk Abdul Qayyum Professor / Registrar, Pakistan Institute of Development Economics, Islamabad E-mail: abdulqayyum@pide.org.pk Mahmood Ahmed Bodla Professor & Director, COMSATS Sahiwal, Pakistan E-mail: director@ciitsahiwal.edu.pk Abstract Working capital management plays a significant role in better performance of manufacturing firms. This paper analyzes the impact of working capital management on firm’s performance in Pakistan for the period 1998 to 2007. For this purpose, balanced panel data of 204 manufacturing firms is used which are listed on Karachi Stock Exchange. The results indicate that the cash conversion cycle, net trade cycle and inventory turnover in days are significantly affecting the performance of the firms. The manufacturing firms are in general facing problems with their collection and payment policies. Moreover, the financial leverage, sales growth and firm size also have significant effect on the firm’s profitability. The study also concludes that firms in Pakistan are following conservative working capital management...
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...Lawrence Sports Simulation Lawrence Sports experienced difficult times in March and April when their biggest consumer could not pay for its products. Because of this, the cash conversion cycle was examined as well as the working capital management presently used. Additional views were studied to determine the best course of action for the company. Although multiple factors play a role in determining the best working capital management policy, Team D will offer recommendations and how each philosophy would be beneficial for Lawrence Sports. Cash Conversion Cycle Emery, Finnerty, and Stowe (2007) summarized that “the cash conversion cycle is the length of time between when a firm pays its accounts payable and when it collects on its accounts receivable and is equal to the inventory conversion period plus the receivables collection period minus the payables deferral period” (p. 659). The initial start for the cash implementation plan would be to create and demonstrate a vendor program, such as a payable deferral period program and create longer cash conversion cycles for floating payment programs for payments going to the banks. Next pre-arrange the short term borrowing program by using short term marketable securities. The Lawrence Sports Company financial departments need to begin following strict money formulas before any transactions pertaining to the market are made. Then it would be smart to hold cash balances for pertinent needs. This will allow and open doors for...
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...BETWEEN WORKING CAPITAL MANAGEMENT AND PROFITABLITY OF LISTED MANUFACTURING COMPANIES IN GHANA Agyemang Badu Ebenezer Lecturer, Department of Business Administration Presbyterian University College, Ghana Michael Kwame Asiedu Lecturer, Department of Business Administration Presbyterian University College, Ghana ABSTRACT This study examines the effect of working capital management on the profitability of companies listed on the Ghana Stock Exchange. Secondary data from the Ghana Stock Exchange on manufacturing companies within the Accra metropolis was used to examine whether working capital management influence the profitability of manufacturing companies in the country. The study found out that, the major component of working capital management such as inventory days, account payable and cash conversion cycle have influence on the profitability of manufacturing companies. The study recommended that, manufacturing companies should adopt efficient and effective ways of efficiently managing these components of working capital management. KEY WORDS: Working capital management, profitability, net operating profit 1.1 INTRODUCTION Working Capital Management has become very important in financial management because of its effects on the firm’s profitability, risk and consequently its value. There are several important reasons why the management of working capital is important to both small and large organisations. (Smith, 1980). A well designed and implemented working capital management...
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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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...2013 Project on “Working Capital” Sumit Singh Registration No:-016-1121-0250-10 Roll No: - 301-0063 B-com (Honours), 3rd year Syma Prasad College 1 [Type the author name] 1/1/2013 DECLARATION I am Sumit Singh Student of SYMA PRASAD COLLEGE Of B-com( Honours) 3rd Year hereby declare that the project report entitled Working Capital the outcome of my own work and the same has not been submitted to any University / Institute for the award of any degree. Sumit Singh Registration No:-016-1121-0250-10 Roll No: - 301-0063 B-com (Honours), 3rd year Syma Prasad College 2 ACKNOWLEDGEMENT Success is the outcome of diligence & perseverance, I, Sumit Singh, student of SYMA PRASAD COLLEGE Of B-com( Honours) of 3rd Year would, like to ascribe to my success in completing my project’ “Working Capital” and to my project supervisors My College Faculties who have extended their sincere help in accomplishing my project. I really want to thank the above mentioned to all my faculties and my mentors for their continuous support & guidance during the project, without their help my project would have been a distant dream. Sumit Singh Registration No:-016-1121-0250-10 Roll No: - 301-0063 B-com (Honours), 3rd year Syma Prasad College 3 Table of Contents 1. 2. 3. 4. 5. 6. 7. 8. 9. Executive Summary………………………………………………………………………………………5 Company Overview………………………………………………………………………………….……6 Research Methodology……………………….……….………………………………………….....….….8 Objective ………………………………………………………………………...
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...CONTENTS 1. Introduction …………. Page 3 2. Cash Operating Cycle …………. Page 3 2.1 Figure of Cash Operating Cycle …………. Page 3 2.2 Financial Indicators (Ratios) …………. Page 4 2.3 Stock Turnover …………. Page 4 2.4 Debtor Turnover …………. Page 4 2.5 Creditor Turnover …………. Page 5 2.6 Find the Number of Turnover days …………. Page 5 2.7 Example …………. Page 5 2.7.a Calculation of Stock Turnover according to formula …………. Page 6 2.7.b Calculation of Debtors Turnover according to formula …………. Page 6 2.7.c Calculation of Creditors Turnover according to formula …………. Page 6 2.7.d Cash Operating Cycle period in days …………. Page 7 3. Conclusion …………. Page 7 1. Introduction When we begin our discussion on the role of financial indicators (ratios) in the monitoring of business performance, its means we discuss cash operating cycle. Cash operating cycle contains the elements of working capital which shows company`s financial position ie how the company earns profit and loss at the starting and ending of financial year. 2. Cash Operating Cycle The cash operating cycle summarizes the various statistics of cash flow and calculates the changes in cash position during financial year. The figure 2.1 shows the elements of Cash Operating Cycle. 2.1 Figure The analysis of figure 2.1: We can state that the cash operating cycle operates the activities of Stock turnover, Cash receipts from...
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...CHAPTER 22 Working Capital and Cash Management TEST BANK Define working capital. Working capital is the difference between current assets and current liabilities. What is the purpose of working capital? It is through its working capital that a health care organization collects its funds, pays its employees and creditors and buys supplies. 3. What is the working capital cycle and why must it be managed? Also known as the cash conversion cycle- it represents the time it takes a firm to go from an outlay of cash to purchase the needed factors of production, such as labor and supplies, to the actual collection of cash for the produced product or service. The objectives of cash management is to minimize the collection period and to maximize the payment period. The working capital cycle looks at the four major phases of the inflows and outflows of cash: 1) Obtaining cash, 2) turning cash into resources and paying bills, 3) using the resources to provide services, 4) billing and collecting revenues earned so that the cycle can be continued. It is important to manage the working capital cycle in order to insure that cash is available when needed 4. Describe the two major components of a working capital management strategy? Working capital management strategy has two components: asset mix and financing mix. Asset mix refers to the amount of working capital the organization keeps on hand relative to its potential working capital obligations. Financing mix...
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...Finance and Management Sciences September 2012, Vol. 5 (2) The Effect of Working Capital Management on the Profitability of Turkish SMEs Ece C. KARADAGLI Cankaya University, Department of Banking and Finance Eskisehir Yolu 29. km, Ankara, 06810, Turkey Phone: (90) 312 233 12 04; Fax: (90) 312 233 10 27 E-mail: ece@cankaya.edu.tr 36 Abstract This paper focuses on the effects of working capital management as measured by cash conversion cycle and net trade cycle on the firm performance for a sample of Turkish listed companies and searches for potential differences between the profitability effects of working capital management for the SMEs and for the bigger companies with an accompanying aim to examine whether net trade cycle can efficiently substitute for cash conversion cycle as a measure of working capital management. The research is conducted for the period of 2002-2010 by using pooled panel analysis with annual data. The findings suggest that an increase in both the cash conversion cycle and the net trade cycle improves firm performance in terms of both the operating income and the stock market return for SMEs where as for bigger companies a decrease in cash conversion cycle and net trade cycle is associated with enhanced profitability. Besides, the findings also imply that managers can use net trade cycle instead of cash conversion cycle confidentially. Keywords: cash conversion cycle, net trade cycle, firm performance, SMEs, emerging economies, panel data 1. Introduction...
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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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...Questions 1. Calculate HBS's cash cycle for the fourth quarter Inventory Period= 90 / (1149.9 / 1302.1) = 101.91 Average collection period= 90 / (1543.9 / 1338.8) = 78.04 Average Payment Period= 90 / (1149.9 / 304.4) = 23.82 Cash Cycle= 101.91-78.04-23.82 = 156.13 (B) Explain the Meaning of your estimated. | 31/3 | 30/6 | 30/9 | 31/12 | IP | 171.7959 | 81.73759 | 65.3962 | 101.9123 | ACP | 80.67912 | 78.71666 | 56.2496 | 78.04391 | APP | 63.78734 | 44.73063 | 21.33667 | 23.82468 | CC | 188.69 | 115.72 | 100.31 | 156.13 | Cash Cycle has a decreasing trend during 1995. It happens due to the decrease in the duration of higher inventory turnover and customer revenues than during the rotation of payments to suppliers. However, it is observed that in the last quarter growth cycle occurs from 100.31 to 156.13 cash days due to increasing IP and ACP and because of remaining approximately constant value of APP. This means that during the time of payment of cashing supply to the increased sales. So now need to attract resources for operational cycle for a longer period. Also it can be seen that during the collection of clients is larger than the period of payment of suppliers (78.04> 23.82). This is not good because normally these two durations should be close in value, and ideally during payment providers should be higher than during the collection of customers. The low level of cash cycle in the second and third quarter can be explained by the fact that...
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...Lawrence Sports: Determination of Working Capital Policy University of Phoenix: Corporate Finance FIN/571 January 27, 2013 Course Facilitator: Troy Mahone Lawrence Sports is a multi-million dollar company that prides itself on its ability to manufacture and distribute quality sports equipment and protective gear. Their principal Customer, Mayo Corporation, has recently requested a repayment extension on their loan with the company. Mayo would like to pay 80% of the payments due for the weeks of March 17-23 and March 24-30 and no payments would be made prior to April 14-20. To allow this payment arrangement, Lawrence Sports would have a deficit cash position for the weeks of March 31-April 6, where they would have to take an additional loan to cover the $307,000 deficit. Additionally, they would incur an interest payment of $3,150 on the loan. For the week of April 7-13, a loan would have to be made to cover the $411,000 deficit with an additional interest payment of $3,690. Lawrence Corporation has already reached their $1.2 million credit limit level and they would, according to company policy, be unable to make additional loans. Lawrence Corporation greatly values the business relationship with Mayo Corp, and a decision must be made determining whether to allow a repayment extension based on the terms Mayo has stated, or come up with an acceptable plan, not only for Mayo Corp, but a plan that would be agreeable with all the parties involved. Allowing any extension...
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...International Review of Business Research Papers Vol.3 No.1. March 2007, Pp.279 - 300 Working Capital Management And Profitability – Case Of Pakistani Firms Abdul Raheman* and Mohamed Nasr ** Working Capital Management has its effect on liquidity as well on profitability of the firm. In this research, we have selected a sample of 94 Pakistani firms listed on Karachi Stock Exchange for a period of 6 years from 1999 – 2004, we have studied the effect of different variables of working capital management including the Average collection period, Inventory turnover in days, Average payment period, Cash conversion cycle and Current ratio on the Net operating profitability of Pakistani firms. Debt ratio, size of the firm (measured in terms of natural logarithm of sales) and financial assets to total assets ratio have been used as control variables. Pearson’s correlation, and regression analysis (Pooled least square and general least square with cross section weight models) are used for analysis. The results show that there is a strong negative relationship between variables of the working capital management and profitability of the firm. It means that as the cash conversion cycle increases it will lead to decreasing profitability of the firm, and managers can create a positive value for the shareholders by reducing the cash conversion cycle to a possible minimum level. We find that there is a significant negative relationship between liquidity and profitability. We also find that...
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...program, I was placed in M.M. ISPAHANI Ltd. for completing my term paper. I was rotated in almost every desk of the organization and all over the factory. Statement of the Problem: The efficient management of working capital is very vital for a business survival. This is premised on the fact having too much working capital signifies inefficiency, whereas too little cash at hand signifies that the survival of business is shaky. Here I focus on working capital management practices in M. M. ISPAHANI Ltd. to evaluate the real condition that are existing. Objectives of the study: The main objective of the study is to gather practical knowledge about working capital management of M.M. ISPAHANI Ltd. My study covers the following areas: * To Study the working capital policies of the sample company. * To study the structure of working capital. * To measure the utilization of working capital of the sample company. * To examine the impact of working capital on profitability. * To identity the problems facing the sample company. * To suggest the recommendation of measuring working capital Management efficiency. Scope of the Study: In my term paper the sample size was one and M.M. ISPAHANI Ltd. was selected as a sample and my topic was working capital management. For gathering more about my requirements I have scheduled my time in various departments, such as Department | Days | Executive Officer | 07 | Finance & Accounts | 15 | Marketing &...
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...This study empirically investigated impact of working capital management on profitability of Nigeria Breweries Plc. This research expands the horizon of knowledge in this area by shedding more light on working capital management as measured by the components of working capital, and how the individual components influence the profitability of Nigeria Breweries Plc. Using the ex-post factor research design, secondary data were extracted from the company’s annual report and accounts for the relevant period. The Ordinary Least Square (OLS) analytical technique was adopted for data analysis. The findings from this study indicate that current ratio positively correlate with profitability of Nigeria Breweries Plc which is proxied by return on capital...
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...Working Capital Management In the chapters on ‘Planning an SSI Unit’ and ‘ Business Plan’, a discussion was made on the fixed capital and the working capital. Every business,needs investment to procure fixed assets, which remain in use for a longer period. Money invested in these assets is called ‘Long term Funds’ or ‘Fixed Capital’. Business also needs funds for short-term purposes to finance current operations. Investment in short term assets like cash, inventories, debtors etc., is called ‘Short-term Funds’ or ‘Working Capital’. The ‘Working Capital’ can be categorised, as funds needed for carrying out day-to-day operations of the business smoothly. The management of the working capital is equally impor-tant as the management of long-term financial investment. Every running business needs working capital. Even a business which is fully equipped with all types of fixed assets required is bound to collapse without (i) adequate supply of raw materials for processing; (ii) cash to pay for wages, power and other costs; (iii) creating a stock of finished goods to feed the market demand regularly; and, (iv) the ability to grant credit to its customers. All these require working capital. Working capital is thus like the lifeblood of a business. The business will not be able to carry on day-to-day activities without the availability of adequate working capital. The diagram shown on the next page clarifies it: Working capital cycle involves conversions and rotation of various con-stituents/components...
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