Beximco Textile’s Working Capital Management

Executive Summary This report is presenting the boilersuit operative majuscule management of BeximcoTextiles Limited. In this report all of the teaching is collected from secondary data. As, Primary data was too much confidential, the political party didnt disclose it to us. In this report the terms and conditions that we obtain intentional in FIN 406 has implemented. In this report financial analysis and recommendations be given. Introduction part Company overview The Beximco Textiles Ltd. was incorporated in Bangladesh as a Public Ltd.Company with peculiar(a) liability on 1994 & commenced commercial physical process in 1995. The project was set up as a accede of the art fabric twine, dyeing & finishing facilities for production of heights fiber shirting fabric, unique wrinkle free fabric (Cortex-2000, cotra DP 3. 5 +) & other fabrics. BTL has an installed capacity of 288 high-speed air-jet looms in its weaving section & a high-tech dyeing & finishing section with a cap acity of 100,000 yards of stainless fabric per day.It is a member enterprise of the Beximco conglomerate. During the socio-economic class the association produced and exchange high quality shirting and other fabric and bringing frontward all the latest in hard and soft technologies in weaving and finishing of fabric. It is the most modern composite mill in the region. They shoot leveraged Bangladeshs labor equal advantage export competitiveness to the maximum. Beximco Textiles Limited engages in manufacturing and marketing yarn, woven, knit, and denim fabrics in Bangladesh.The company offers yarn products, such as front, fiber, CVC, and TC yarn products fabric products comprising solid dyed, yarn dyed, finishing, dobby designs, and yarn count products and denim products. It also provides special yarn products consisting of plied yarn, fancy yarn, slub yarn, perfume spun, multi count, and multi twist products, as well as wrinkle-free products. The company was formerly cogn ize as Padma Textile Mills Limited and changed its name to Beximco Textiles Limited in 2006. Mission Each of our activities must benefit and add quantify to the commonalty wealth of our society.We firmly believe that, in the final analysis we be accountable to each of the constituents with whom we interact namely our employees, our customers, our business associates, our fel show condemnation citizens and our shareholders. bearing of this Study This study has been designed in such a management that students are going to learn the in-depth knowledge about a companys financial condition. The main purpose of this report is to reinforce the design of financial policy of Beximco Textiles ltd. along with its all working cap proportionalitys, short-run financing and long-term financing. etc.Overall, this study will help a finance student to familiar with the practical scenario. Limitation The report is limited to the data that are available in the annual reports and in the website connect to Beximco textiles. Primary data was not available as they didnt disclose. Finally, we afford used our own judgments in many ways from our Business finance courses in order to simplify the research, evaluate, calculation and advising. Financial Analysis workings Capital of Beximco Textiles ltd. works capital is defined as stream (expected to be consumed or converted into cash within one division) assets minus current liabilities. workings capital swage indicates how efficiently the company generates gross with its working capital. class Current Assets Current Liabilities Working Capital of particular year 2006 7572906611 5961381357 1605525254 2007 7881489387 8058498925 -177009538 2008 7230982538 7906937639 -675955101 2009 8677166758 4834823994 3842342764 2010 9031547621 6944110703 2087436918 catalogue Inventories are carried at the lower of cost and net doable value as prescribed by IAS 2Inventories, cost is hardened on weighted average cost basis.The cost of inve ntories comprises of expenditure incurred in the normal course of business in bringing the inventories to their present localization principle and condition. network realizable value is based on estimated selling cost less any further costs expected to be incurred to take for the sale. Beximco textile ltd. Holds 5 types of armoury * Raw material take stock (Fibre, yarn, blue-eyed(a) fabric, dyes chemicals) * Work in process inventory * Finished goods inventory * pugilism materials * Stores and Spares add of inventory in five years class Amount of inventory 006 3414768025 2007 3688016341 2008 2733063864 2009 2742675600 2010 2994596746 Accounts due Their accounts due are recognized at cost which is fair value of the consideproportionn given for them. 5 years accounts receivable of Beximco Textile Year Amount of Accounts receivable 2006 3407687731 2007 3451582241 2008 3765912622 2009 4986086053 2010 5040220480 Current ratio Year proportion 2006 1. 27 2007 . 97 2008 . 91 20 09 1. 79 2010 1. 3 good example Quick Ratio Year Ratio 2006 . 69 2007 . 52 2008 . 56 009 1. 22 2010 . 86 Illustration Activity ratios Working capital perturbation Year ratio 2006 3. 23 2007 -24. 11 2008 -7. 04 2009 2. 04 2010 6. 98 Illustration Working Capital Turnover Inventory Turnover year ratio 2006 . 92 2007 . 81 2008 1. 13 2009 1. 79 2010 3. 15 Illustration Days of inventory on hand ( doh) Assuming that, Beximco Textiles number of age in period is 360. Then the DOH would be Year DOH 2006 391. 30 2007 444. 44 2008 318. 58 2009 201. 11 2010 114. 29 Illustration Receivable turnoverYear ratio 2006 1. 52 2007 1. 23 2008 1. 26 2009 1. 57 2010 2. 89 Illustration Days sales outstanding(DSO) Year Ratio 2006 235. 85 2007 291. 20 2008 284. 80 2009 228. 19 2010 124. 51 Illustration immediate payment change roulette wheel (Inventory conversion period+ Receivables conversion period)-Payables conversion period Year three hundred 2006 523. 12 2007 594. 16 2008 417. 5 2009 387. 17 2010 143. 36 entreaty Disbursement capital Inflow and Cash Outflow by operate Activities (in tk. ) 2010 2009 2008 2007 2006Cash received from customers others 145187023 664608431 3190602600 4223133089 4887688455 Cash paid to suppliers Employees 898661193 535932698 3043303205 3788738872 3703613507 Cash Generated from Operations 5532091050 1286757473 147299395 434394217 1184074948 touch on Paid 1445098454 2006166127 1261679027 766830156 906788267 Income Tax Paid 43025787 56338512 20396366 74934103 8084912 Net Cash Generated from Operating Activitie 4043966809 775747166 1134775998 407370042 269201769 fooling Cash Generated from Operating Activities 11233241. 4 2154853. 24 3152155. 55 1131583. 45 747782. 6917 Cash Flows from Investing Activities (in tk. ) 2010 2009 2008 2007 2006 Acquisition of Property, Plant Equipment 3231593528 2381789851 986841760 39250045 205811905 Long-term security deposit - - - - 46064 Net Cash employ in Investing Activities 3231593528 2381789851 986841760 39250045 205857969 workaday Cash Used in Investing Activities 8976648. 69 6616082. 92 2741227. 1 1090279028 571827. 917 Cash Flows from support Activities (in tk. ) 2010 2009 2008 2007 2006 Allotment of shares - 6351789302 - - 1050000000 (Decrease)/Increase in Long Term Borrowings 594878760 1605294361 1945272911 74392816 1273417109 (Decrease)/Increase in Short Term Borrowings 201830690 1578840462 181255969 511187488 118194147 Dividend Paid - - - - 30405375 Net cash Generated from Financing Activities 796709450 3167654479 2126528880 436794672 135628337 Daily Net cash Generated from Financing Activities 2213081. 81 8799040. 22 5907024. 67 1213318. 3 376745. 3806 Increase or decrease in cash and cash equivalents 15663831 10117462 4911122 9825415 72284537 Cash and Cash Equivalents at Beginning of Year 27249672 1713221o 12221088 22046503 94331040 Cash and Cash Equivalents at End of Year 42913503 27249672 17132210 12221088 22046503 Interpretations 1. Working capital In 2007 an d 2008 working capital of Bextex ltd. was negative. That means current assets bear been lower than the current liabilities. So, the company was in a risky position in terms of liquidity.But from 2009, it started to be substantiating and the company is in a stable position. 2. Current ratio This ratio expresses current assets in relation to current liabilities. Current Ratio of bextex ltd. is highest in 2009 which indicates that the company has higher level of liquidity and it can resonate short term obligations. But during 2007 and 2008 the ratio had a smaller value than one, indicating that Bextex ltd. had lower liquidity to meet its short term obligations. However, over the by-line years Beximco Textiles managed to solve this issue. 3.Quick ratio The rapid ratio is much conservative than current ratio, because it only includes the more liquid current assets in relation to current liabilities. Beximco Textiles Ltd. reached its peak in 2009 in terms of quick ratio but yet agai n it dropped in 2010. Apart from that, there has been a steady improvement in this smell. 4. Activity Ratios a. Working capital Turnover working capital turnover indicates how efficiently the company generates revenue with its working capital. Bextex ltd. was in the worst situation in 2007, that the ratio was -24. 11 this ratio was negative in 2008 as well.The main reason dirty dog it was that the current asset remained lower than the current liabilities. The negativity in this aspect simply depicts that the company took a very high amount of loans during those years. Yet, the operations were efficient enough to improve that risky position over the years. b. Inventory Turnover Ratio Inventory turnover ratio shows the timesa companysinventory is sold and replaced over a financial period. A low turnover implies poor sales and, therefore, excessiveness inventory. A high ratio implies either strong sales or ineffective buying.During 2006 and 2007 the annual inventory on hand was way higher than the following years. Consequently, the turnover was high as well. During the following years the management took new measures and managed to reduce the excess the inventory. However, the total amount of inventory in 2010 was higher than that of 2009. Yet, the inventory turnover almost doubled during 2010 which is a strong indication that the sales is increase in number. c. Days Sales Outstanding Ratio It indicates the elapsed time between a sale and cash collection. Bextex ltd. ad the lowest DSO in 2010, which indicates a better situation than that of the previous years. In 2007, the ratio was the highest indicating the capacity lapse in cash collection during that period. 5. Cash Conversion cycle This metric indicates the amount of time that elapses from the point when a company invests in working capital until the point at which the company collects cash. Bextex ltd. had 523. 12 CCC in 2006 which indicates poor position and in 2010 they have decreased it from 523. 12 to 143. 36. So, it is a good indication for the company.Basic reason behind this positive trend is that Beximco Textiles has improved the Inventory conversion and receivables Collection operations dramatically. some(prenominal) the Inventory conversion period and the Receivable conversion period has been halved from the year 2006 to 2010. 6. Cash-Flow Cash flow activities show that both the income from operational activities and the return from investments have been increasing over the years. The Payables are being paid out and the kept up(p) earnings are being reinvested heavily to increase the efficiency to a higher level.This can be a reason why Beximco Textiles have refrained from giving out dividends since 2007. References 1. BEXIMCO TEXTILES Ltd. (2007). Auditors Report 2. BEXIMCO TEXTILES Ltd. (2009). Auditors Report 3. BEXIMCO TEXTILES Ltd. (2010). Auditors Report 4. Fredric C. Scherr, Modern Working Capital Management, Prentice Hall International Editions. 5. Ross, S. A, Westerfield, R. W & Jaffe, J. (2005). Corporate pay 7th Edition. New Delhi McGraw Hill Publishing Company Limited. 6. Financial coverage and Analysis CFA (level-1) 2011