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A report on
Working CapitalManagement of
Jun 05, 2012Date of Submission: 07
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A report on
Working CapitalManagement ofGlaxoSmithKline
Submitted to:M. Shahjahan Mina
Professor
Department of Finance
University of Dhaka
Submitted by:
NameIDMd. Rakib15-047Md.
Sahiduzzaman15-071A.T.M. RajibulAkbar15-097Md. Sabuj Miah15-107Md.
Shah Jalal15-258Mohammad Al-Mamun14-
133
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Letter of Transmission
Jun 07, 2012
M. Shahjahan Mina
Professor
Department of Finance
University of Dhaka
Dear Sir,
We are very happy to state that the report on Working Capital Management of
GlaxiSmithKline, that you had asked us to prepare, is completed and ready for your
viewing.
We are glad to submit it as part of completion of the requirements for our Working Capital
Management (405) course with you. We have tried our best to put up a good report with asmuch information as we could gather during the short time span allotted for preparing this
report.
Thank you for your kind support and help throughout the course, we received.
We hope you will appreciate this sincere effort.
Very sincerely yours,
..
Md. Sahiduzzaman
On behalf of Group:
Sec: A, 15TH Batch (BBA) Department of Finance
University of Dhaka
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Acknowledgement
This report paper entitled Working Capital Management of GlaxiSmithKline is submitted
as the requirement of a part of the study of Working Capital Management (405) course with
you in the BBA program conducted by Department of Finance, Dhaka University. To prepare
this assignment an intensive study was made.
At first we want to pay our gratitude to all mighty Allah for preparing the report successfully.
We are extremely grateful to our honorable course teacher M. Shahjahan Mina, for his
painstaking guidance, suggestion and all type of support & supervision to prepare this report
paper. He continuously reminded us for the preparation of this report paper and finally gave
an outline to write down the paper spending her valuable time. Without her untiring efforts,
completion of this report paper would have been impossible.
Above all this report paper is a combined effort of the sincerity, efficiency and determination
of all the group members.
Table of Contents
Executive summary.. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . 02
CHAPTER-ONE
A Brief Concept of Working CapitalManagement . . . . . . . . 03-08
CHAPTER -TWO
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ABC. .. . . . . . . . . . . . . . . . . . . . . . . .. .
. . . . . . . . . . . . . . .. . . . . 09-12
CHAPTER -THREE
DEF . . . . . . . . . . . . . . . . . . . . . . . . .. . .
.. . . . . . . . . . . . . . . . . . . .13-15
CHAPTER - FOUR
GHI . . . . . . . . . . . . . . . . . . . . . . .. . . . .
. . . . . . . . . .. . . . . . . . . . 16-17
CHAPTER - FIVE
BACPS & BEFTN . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . 18-23
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EXECUTIVE SUMMARY Decisions relating to working capital and short term
financing are referred to as working capital
management. These involve managing the relationshipbetween a firm's short-term assets and its short-term
liabilities. The goal of working capital management is to
ensure that the firm is able to continue its operations
and that it has sufficient cash flow to satisfy both
maturing short-term debt and upcoming operational
expenses.
To understand practical implication of Working Capital
Management theory we choose Gsk Limited. Gsk
Limited.Glaxosmithkline(gsk) bangladesh limited carries
with it an enviable image and reputation for the past 6
decades. A subsidiary of glaxosmithkline plc- one of the
world's leading research-based pharmaceutical and
healthcare companies gsk bangladesh, continues to be
committed to improving the quality of human life by
enabling people to do more, feel better and live longer.
The companys principle activities include secondary
manufacture of pharmaceutical products and marketing
of vaccines, pharmaceutical healthcare products and
healthfood drinks
In Gsk, 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 on a weighted average basis. Net realizable
value is the estimated selling price in the ordinary
course of business, less estimated costs of completion
and the estimated costs necessary to make the sale.
Provision is made if necessary, for obsolete and slow-
moving item.
Receivables occupy the second place, in order of
investment, among the various components of working
capital in manufacturing concerns. The manipulation of
receivables is to push up sales and ultimately profits by
allowing certain credit to the potential customers who
otherwise may find it difficult to make cash purchases.
Moreover, receivables are being near cash item
improved the liquidity position of an enterprise. As we
know, the emergence of receivables in business
operation cerates revenue and cost. Hence, the volume,composition and movements of receivables are required
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to be so designed and maintained that these ultimately
helps maximization of the value of a firm which is the
long standing and accepted principle of financial
management.Cash and cash equivalents of Glaxo
Smithkline Bangladesh Limited comprise of the cash on
hand and at bank and demand deposits. These also
include bank overdrafts that form an integral part of the
companys cash management.GSK BD Ltd. uses the
different components of spontaneous sources for
financing investment in current assets. They use trade
credit and outstanding expenses to support their working
capital needs.
Part one of this report consists of origin, objectives,
scope, limitations, and sources. Part two for
company overview, Part three for defining working
capital, Part four-Part nine represent Descriptive
analysis of the companys working capital
management. Part ten-eleven consists of findings,
conclusion, appendix & bibliography. At last we
have drawn our conclusion on the overall term
paper.
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C Management
1IntroductionNow a days education is not just limited to books and classrooms. In todays
world, education is the tool to understand the real world and apply
knowledge for the betterment of the society as well as business. From
education the theoretical knowledge is obtained from courses of study, which
is only the half way of the subject matter. Practical knowledge has no
alternative. The perfect coordination between theory and practice is of
paramount importance in the context of the modern business world in order
to resolve the dichotomy between these two areas. Therefore, for the B.B.A.program we are assigned to prepare a report on the internet marketing. It is
an important Working Capital Management (405) and it also plays a vital role
on the over all corporate world.
Our objectives are..
To show the over all operational procedure, benefit,safety and its limitations.
To increase our experience in the working capitalmanagement.
To know the efficient tools and use of working capitalmanagement technique.
To get the overall scenario of working capitalmanagement ofGlaxiSmithKline.
To find out the report requirements we had to analyze and some
comparisons the information about the different tools that are used to
manage the working capital efficiently. We also have collected some
information from different books, periodicals, websites and specially the
annual report of GlaxiSmithKline. We would like to mention that this report
Page 17
Origin of the Report
Objective of the Report
Scope of the Report
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basically focuses only on the working capital management. A sincere effort
had been placed while the information was collected and a careful study of
them made this report loaded with information and several
recommendations when there is also pointed out decisions made.
While preparing this report, we have faced some problems. The main
problem was to co-ordination all the group members. Moreover, during
data collection we faced several problems.
Due to limited access of the data, this study may not be
perfect to the scent percent.
Lack of enough experience in analyzing a huge volume of
data
Limitation of time to prepare the report.
Due to inadequate information, in-depth analysis could
not be done in the report
This reports research focuses on present condition and use of working
capital management ofGlaxiSmithKline. For the purposes of the report some
data are collected from given study sheet by our honorable course instructor
and the annual report of GlaxiSmithKline. The data types are primary that is
collected through survey and Secondary types of data is collected through
different publications, here we have used only secondary data and only that
one was possible and related with our topics.
Secondary sources:
Given study sheet by our honorable course instructor
Records and documents.
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Limitations of the Report
Sources and Methodology
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C Management
Books, texts, and publications.
Associations and Institutions
Websites.
Annual report ofGlaxiSmithKline
2overview of glaxosmithklineCorporate status and background
Glaxosmithkline(gsk) bangladesh limited carries with it an enviable image
and reputation for the past 6 decades. A subsidiary of glaxosmithkline plc-
one of the world's leading research-based pharmaceutical and healthcarecompanies gsk bangladesh, continues to be committed to improving the
quality of human life by enabling people to do more, feel better and live
longer. The companys principle activities include secondary manufacture of
pharmaceutical products and marketing of vaccines, pharmaceutical
healthcare products and healthfood drinks
In 1949 the company commenced its journey in bangladesh with its
corporate identity as glaxo in chittagong as an importer of products from
the glaxo group companies. It started spreading its spectrum from being an
importer to a manufacturer by establishing its own manufacturing unit at
chittagong in 1967. The facility till date is considered as one of the centres of
excellence in global manufacturing & supply network of the group.
The global corporate mergers and acquisitions has seen the evolution of the
companys identity in the past 6 decades. In line with mergers and
acquisitions the identity changed from glaxo to glaxo wellcome bangladesh
limited following the burroughs wellcome acquisition in 1995 and finally to
glaxosmithkline bangladesh limited during 2002 after merger with
smithklinebeecham in december 2000. The mega merger of the company
enables it to deliver cutting edge advancements in health care solutions. The
relentless commitment, setting of standards of ethical standards and quality
backed leading edge technology of the company has built a strong
relationship between the stakeholders and gsk bangladesh. With the ever
committed 615 numbers of personnel all over the country gsk bangladesh,
which now comprises of both pharma and consumer, continually strive to
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meet the glaxosmithkline mission to improve the quality of human life by
ensuring healthcare products, health drinks and different corporate social
responsibility programs.
Gsk is committed to developing new and effective healthcare solutions. The
values on which the group was founded have always inspired growth and willcontinue to do so in times to come.
Gsk products
Gsk bangladeshs portfolio includes both pharmaceutical products and
consumer products. The pharmaceutical side includes prescription
medicines,vaccines and non prescrition medicines. Our prescriptionmedicines range across therapeutic areas such as anti-bacterial, respiratory,
dermatology,oncology, gastro- intestinal, cardiovascular and other diseases.
The company is the market leader in most of the therapeutic categories in
which it operates. We offer a range of vaccines, for the prevention of
hepatitis a, hepatitis b, invasive disease caused by h, influenzae, chickenpox,
diphtheria, pertussis, tetanus and others.
In bangladesh, gsk's consumer brands are the major players in the health
food drink category. The powerful portfolio includes horlicks, boost, maltova
and viva which owns an enviable market share of 85%. Among them,
horlicks, a trusted & heritage brand, enjoys 76% market share. Horlicks
which has been re-launched in 2008, following intense market research and
product development activities, with an improved formulation is clinically
tested to make children taller, sharper & stronger".
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3BASICS OF WORKING CAPITALMANAGEMENT
Working capital
Definition of working capital
Working capital is the fund invested in current assets and is needed for
meeting day to day expenses. It occupies an important place in a firms
balance sheet.
Working capital is the capital required to meet the day to day operational
expenditures of a company. In other words, working capital is the capital
needed to purchase the current assets of a company.
Gross working capital:
Gross working capital is the summation of the total current assets.
Net working capital:
Net working capital is the difference between total current assets (gross
working capital) and total current liabilities.
items of working capital:
cash
Account receivables
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Gross working
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Inventory
Pre-paid expenses
Marketable securities
Items of current liabilities:
Accounts payable
Accrued expenses
Short term bank loan
Bills payable,
Bank overdraft, etc.
The working capital is the finance required to meet the costs involved during
the operating cycle or business cycle. Operating cycle or working capital
cycle is the period involved from the time raw materials are purchased to the
time they are converted into finished goods and the same are finally sold
and realized. The need for current assets arises because of operating cycle.
The operating cycle is a continuous process and therefore the need for
current assets is felt constantly. Each and every current asset is nothing but
blockage of funds. Therefore, these current assets need to be financed which
is done through working capital financing which is a specialized area and isdesigned to meet the working requirements of a business.
In the figure below, we can see that the firm needs cash to purchase raw
materials as inputs for the finished products. The firm also incurs some cash
expenses in the work in progress stage of the production and finally
produces finished goods to be sold to customers. From the purchase of raw
material to the sale of the finished goods to the customers at cash firm
usually does not get any cash. If firm sells on credit to customers then it also
does not receive cash for the sale of the goods immediately. During this
period firms investment in the production of goods remained tied up. This is
why the firm needs working capital financing for the smooth run of
production process and the operation of the business firm continuously.
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Figure: cash flow and the working capital cycle
Sources of working capital
Working capital can be financed mainly from two sources which has been
shown below-
Fluctuating or temporary working capital
The extra working capital needed to support the changing production and
sales is called fluctuating or variable or temporary working capital. This has
to be financed on short term basis. The main sources for financing this
portion are shown below-
Spontaneous financing:
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Cas
h
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Trade credit
Advance from customers
Accrued expenses
Money market credit:
Commercial paper
Bankers acceptance
Short term bank loan :
Line of credit
Revolving credit
Single payment credit transaction loan
Others-
Accounts receivable financing
Factoring
Inventory financing
Permanent or fixed working capital
There is always a minimum level of current assets or working capital which is
continuously required by the firm to carry on its business operations. This
minimum level of current assets is known as permanent or fixed working
capital. It is permanent in the same way as the firms fixed assets are. This
portion of working capital has to be financed by permanent sources of funds
such as; share capital, reserves, debentures and other forms of long term
borrowings.
Therefore, we see that the main sources of working capital financing include
trade credit, bank credit, factoring, accounts receivable financing and
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commercial paper. Out of all these, this paper is related only to bank credit
which represents the most important source for financing of current assets.
The firms generally enjoy easy access to the bank finance for meeting their
working capital needs. It is in this context that bank financing assumes
significance in the working capital financing of business firms.
Working capital management
Decisions relating to working capital and short term financing are referred to
as working capital management. These involve managing the relationship
between a firm's short-term assets and its short-term liabilities. The goal of
working capital management is to ensure that the firm is able to continue its
operations and that it has sufficient cash flow to satisfy both maturing short-
term debt and upcoming operational expenses.
Major areas ofwc management
Guided by the above criteria, management will use a combination of policies
and techniques for the management of working capital. These policies aim at
managing the current assets (generally cash and cash equivalents,
inventories and debtors) and the short term financing, such that cash flows
and returns are acceptable.
cash management. Identify the cash balance which allows for the business
to meet day to day expenses, but reduces cash holding costs.
inventory management. Identify the level of inventory which allows for
uninterrupted production but reduces the investment in raw materials - and
minimizes reordering costs - and hence increases cash flow.
credit management. Identify the appropriate credit policy, i.e. Credit terms
which will attract customers, such that any impact on cash flows and the
cash conversion cycle will be offset by increased revenue and hence return
on capital (or vice versa).
short term financing. Identify the appropriate source of financing, given the
cash conversion cycle: the inventory is ideally financed by credit granted by
the supplier; however, it may be necessary to utilize a bank loan (or
overdraft), or to "convert debtors to cash" through "factoring". Financial
statements have been prepared and disclosures of information made in
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accordance with the requirements of the companies act 1994, the securities
and exchange rules 1987, and international accounting standards (iass)
adopted by the institute of chartered accountants of bangladesh (icab) as
bangladesh accounting standards (bass) and bangladesh financial reporting
standards (bfrss).
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4Overall Working Capital
management of Gsk
Sl
Particulars
200
9
201
0
201
1
i Raw materialsconversion period 60 51 60 days
ii
WIP conversion period 22 34 35
day
s
iii Finished goods
conversion period 45 42 48
day
s
iv Inventory conversionperiod [i+ii+iii] 126 127 144 days
v
A/R conversion period 51 48 11
day
s
Vi Gross Working Capital
Cycle [iv+v] 178 175 154
day
s
vi
i A/P conversion period 65 111 110
day
s
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vi
iiNet Working Capital
Cycle or Cash conversion
cycle [vi-vii] 112 64 45
day
s
There is no significant fluctuation in raw materials conversion period of Gsk
in the last three years. Work-in-process conversion period increases slightly
after the year 2009 and finished goods conversion period remains as usual.
As a result there is slightly increase in inventory conversion period over the
last three years.
Accounts receivable conversion period decreases over the years. There is asignificant decrease in 2011 due to tight credit policy and good collection
effort.
As a result gross working capital cycle decreases over the years. But this
significantly decreased in 2011 due to significant decrease in accounts
receivable conversion period.
Accounts payable conversion period has been increased significantly after
2009. It may be due to availability of raw materials or high bargaining power
of supplier.
As a result Net Working Capital Cycle or Cash conversion cycle
decreases over the years. But this significantly decreased after 2009 due to
significant increase in accounts payable conversion period.
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82 46 1
Work in Process 9926
4
1739
61
26985
8
Finished goods 2459
13
2648
09
41900
1
Total Inventory 5897
59
6746
16
11158
40
Raw materials:
2009 2010 2011
Opening raw & packaging
materials
30072
1
24458
2
23584
6
Purchased 14127
24
16401
84
27596
29
Raw & packaging
materials available
17134
45
18847
66
29954
75
Closing raw & packagingmaterials
(244582)
(235846)
(426981)
Raw & packaging
materials consumed
14688
63
16489
20
25684
94
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Based on the above information raw materials conversion period of Gsk is
calculated. Raw materials conversion period of Gsk is shown below
year 2009 2010 2011
RMCP 60 51 60 days
From the above graph we see that there is slight fluctuation in raw materials
conversion period of Gsk. Raw materials conversion period of Gsk decreased to 51
days from 60 days in 2010 and increased to 60 days in 2011.
Work-in-process:
2009 2010 2011Total costs 17161
65
19121
08
28477
46
Opening inventory of Work-in-
process
42990 99264 17396
1
Closing inventory of Work-in-
process
(9926
4)
(17396
1)
(26985
8)
Costs of productions 16598
91
18374
11
27518
49
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Based on the above information work-in-process conversion period of Gsk is
calculated. work-in-process conversion period of Gsk is shown below
Year 2009 2010 2011
WIPCP 22 34 35 days
From the above graph we see that work-in-process conversion period of Gsk is
increasing over the years.there is a slight increase to 35 days from 34 days in 2011.
Finished goods:
2009 2010 2011
Costs of productions 16598
91
18374
11
27518
49
Opening inventory of finished
products
23196
2
24591
3
26480
9
finished products purchased
44756
9
58229
3
82590
6
finished products avilable
23394
22
26656
17
38425
64
Closing finished goods
(24591
3)
(26480
9)
(41900
1)
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Replacement, medical
attention, and others issues
(14120
)
(11066
)
(36893
)
Cost of goods sold
20793
89
23897
42
33866
70
Based on the above information finished goods conversion period of Gsk is
calculated. finished goods conversion period of Gsk is shown below
year 2009 2010 2011
FGCP 43 40 45 days
From the above graph we see that there is slight fluctuation in finished goods
conversion period of Gsk. Finished goods conversion period of Gsk decreased to 40
days from 43 days in 2010 and increased to 45 days in 2011.
Based on the above information inventory turnover and inventory conversion periodare calculated
200
9
201
0
201
1
Inventory turnover 2.90 2.87 2.58 Time
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s
Inventory processing
period 124 125 140
days
From the above graph we see that inventory turnover of Gsk is decreasing over the
years and this happens due to higher inventory processing period over the years.
From the above graph we see that inventory processing period is increasing over
the years. There was a slight increase to 125 days from 124 days in 2010.
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6Receivable management ofgsk
Receivables occupy the second place, in order of investment, among the various
components of working capital in manufacturing concerns. The manipulation of
receivables is to push up sales and ultimately profits by allowing certain credit to
the potential customers who otherwise may find it difficult to make cash purchases.
Moreover, receivables are being near cash item improved the liquidity position of an
enterprise. As we know, the emergence of receivables in business operation cerates
revenue and cost. Hence, the volume, composition and movements of receivables
are required to be so designed and maintained that these ultimately helps
maximization of the value of a firm which is the long standing and accepted
principle of financial management.
Credit Granting Decision: One of the major aspects of Accounts Receivables is
Credit Granting Decision. If the firm fails to identify the appropriate customers, it
faces severe problem to sustain in the long run. There are different approaches to
Credit Granting Decisions. The traditional method is 5 Cs (Capital, Character,
Collateral, Capacity and Condition), which is very popular method for quick credit
granting measuring creditworthiness of applicant. An alternative to this traditional
approach is Judgmental Scoring approach. There are two basic versions of these
systems. One is Checklist System and the other one is Weighted Scoring System.
2009 2010 2011
Accounts receivables
3696
61
4102
86
1305
65
Prepaid expenses
3980
3
5261
8
8079
9
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Total trade and other receivables
4094
64
4629
04
2113
64
Based on the above information accounts receivables turnover and averagecollection period of Gsk are calculated. Accounts receivables turnover and average
collection period of Gsk are shown below
200
9
201
0
201
1
A/R turnover
7.0
3
7.5
6
33.
17
Time
s
A/R Collection
period 51 48 11
days
From the above graph we see that A/R turnover is increasing over the years. There
is a remarkeble increase to 33.17 times from 7.56 times in 2011. This happens due
to lower average collection in 2011.
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From the above graph we see that A/R collection period of Gsk is decreasing over
the years. There is a remarkeble decrease to 11 days from 48 days in 2011. This
happens due to tight credit policy in 2011.
7Management of Accruals and
Payable of gsk
Accounts Payable:A firm can utilize this fund for financing purpose since it istermed as cost free source of fund. Proper Management of Accruals, in fact, can
reduce the dependency on Bank loan. The trade credit is one of the main tools for
financing working capital.
Accruals: However, firms also incur other types of liabilities for which immediate
payments are not required, like the labor of executive and hourly employees,
accumulate interest expense on borrowed funds etc. Any such accrual involves a
delay in payment and thus it is a potential source of financing.
2009 2010 2011
Trade payables
2565
00
5045
01
8419
70
Expenses payables
7896
7
9598
9
9729
6
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Others payables
2599
6
3238
9
5582
8
Total trade and others payables
3614
63
6328
79
9950
94
Based on the above information accounts payable turnover and payable payment
period of Gsk are calculated. Accounts receivables turnover and average collection
period of Gsk are shown below
200
9
201
0
201
1
A/P turnover 5.51 3.25 3.28Time
s
A/P payment period 65 111 110 days
From the above graph we see that A/P turnover is decreasing over the years. There
is a slight increase to 3.28 times from 3.25 times in 2011.
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From the above graph we see that A/P collection period of Gsk is increasing over the
years. There is a remarkeble increase to 111 days from 65 days in 2010. This
happens due to the bargaining power of Gsk and good relation with the suppliers.
8cash management ofgsk
Cash is the important current asset for the operation of the business. The
firm should keep sufficient cash, neither more nor less. Cash shortage will
disrupt the firms manufacturing operations while excessive cash will simplyremain idle, without contributing anything towards the firms profitability.
Thus, a major function of a financial manger is to maintain a sound level of
cash position.
Cash management is concerned with the managing of cash flows into and
out of cash flows into and out of the firm, cash flows within the firm, and
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cash flows within the firm. Cash management ensures adequate control over
cash position to keep the firm sufficiently liquid and to use excess cash in
some profitable way.
Cash and cash equivalents
Cash and cash equivalents of Glaxo Smithkline Bangladesh Limited comprise
of the cash on hand and at bank and demand deposits. These also include
bank overdrafts that form an integral part of the companys cash
management.
Composition of Cash and Cash Equivalents
Particulars 2009 2010 2011
Term deposit with scheduled CBs 81,961 515,281 556,500
SND accounts with scheduled CBs 216,255 100,491 13,703
Current account with scheduled
CBs
15,586 49,747 199,018
Cash, cheques & draft in hand 493 524 1,363
Total Cash and Cash Equivalents 314,295 666,043 770,584
Changes in the Cash and Cash
Equivalents
312,358 351,748 104,541
From above table, we see that the GSK BD ltd. has maintained its major
portion of cash and cash equivalents in the term deposits with the scheduled
commercial banks. Second major part of the cash and cash equivalents is
kept as the special notice deposit accounts with the scheduled commercial
banks. The company also maintains cash in the current accounts with the
scheduled banks and in hand.
One of the imperative aspects of Cash Management is Cash Collection
Mechanism. Float is considered to be one of the important aspects of
Collection Mechanism. Cash from the credit sales are collected throughmarketing agent that means the Billing & Mail float for these firms are zero.
The Bank Processing Float for these firms is on an average less than 2 days.
GSK BD ltd. uses the Banks with accelerated clearing capabilities for
controlling the movement of funds and minimizing idle cash balances.
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Cash Forecasts: GSK BD Ltd. forecast cash to anticipate cash surplus and
shortage, estimate timing of borrowing and lending of funds and have better
control over funds. For this purpose they prepare Cash Forecasting
Statements on half yearly basis. The company maintains a line of credit
arrangement with banks to meet any contingencies.
GSK BD Ltd. actually does not use any specific models of cash management
such as the Baumol Mode, the Beranek Model, the Miller-Orr Model, and the
Stone Model. The companies experienced continuous cash flow.
9Measurement of Liquidity
of gsk
We have examined the following Ratios of Glaxo Smithkline Bangladesh
Limited for the years ended 31 December 2009 through 2011 based on its
financial statements for those years.
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2009 2010 2011
Current Ratio 3.06 2.56 2.03
Quick Ratio 1.69 1.60 0.95
Cash Ratio 0.73 0.95 0.75
Inventory turnover Ratio 2.90 2.87 2.58
Inventory processing period (in days) 124 125 140
A/R turnover Ratio 7.03 7.56 33.17
A/R Collection period (in days) 51 48 11
A/P turnover Ratio 5.51 3.25 3.28
A/P payment period (in days) 65 111 110
Cash Conversion Cycle or Net Working
Capital Cycle
110 62 41
Current assets to Total assets ratio 0.78 0.82 0.81
Current ratio has decreased over the years due to increased current
liabilities over the years.
Quick ratio has decreased significantly due to significant increase in
inventories over the years.
Cash ratio has slightly increased with little fluctuations over the years as
cash and cash equivalents have fluctuated over the years.
Inventory Turnover has decreased over the years and inventory conversion
period has increased over the years.
Receivable turnover has increased significantly due to the changes in the
credit policy (Tighten up of the Credit Policy) and this collection period hasalso decreased.
Payable turnover has decreased due to increased amount of trade payables
compare to the increase of cost of raw material purchased. As a result
Payable payment period has increased.
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Cash conversion cycle has decreased over the years due to increase in
accounts payable payment period with the increase in accounts receivable
collection period.
Current assets to total assets ratio has increased very slightly over the three
years period which is good for the companys liquidity position.
Therefore, we can say that overall liquidity position of GSK BD Ltd. is at
satisfactory level and has more liquidity than the industry average.
10Financing Current
Assets
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Glaxo SmithKline Bangladesh Limited finance their working capital from the
following three sources-
Long term sources
GSK BD Ltd. finances major part of their investment in current assets fromtheir internal sources such as reserve and surplus. They do not use any long
term debt to finance the investment in working capital.
Short term sources
Usually, GSK BD Ltd. do not take short term bank loans to finance the
investment in current assets. But if the face any difficult situation then they
use the line of credit facility to the contingent needs.
Spontaneous sources
GSK BD Ltd. uses the different components of spontaneous sources for
financing investment in current assets. They use trade credit and
outstanding expenses to support their working capital needs.
11findings &
conclusion
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Findings
analyzing the whole report we can obtain following findings:
Gsk employed renowned and efficient professionals to conduct their
management specially wc management. As a manufacturing business they consider different types of raw
materials and WIP and various product as inventories.
They maintain their accounts receivable considering their distributorsas debtors.
Liquidity condition of the company is satisfactory.
Gsk limited meets their short term financing needs through short termbank overdraft from banks banks.
Use of information technology at Gsk limited makes work easy andfast.
Gsk makes an important role in our economy.
Conclusion
Now a days education is not just limited to books and classrooms. In todays
world, education is the tool to understand the real world and apply
knowledge for the betterment of the society as well as business. From
education the theoretical knowledge is obtained from courses of study, which
is only the half way of the subject matter. Practical knowledge has no
alternative. The perfect coordination between theory and practice is of
paramount importance in the context of the modern business world in order
to resolve the dichotomy between these two areas. Therefore, for the B.B.A.
program we are assigned to prepare a report on the internet marketing. It is
an important Working Capital Management (405) and it also plays a vital role
on the over all corporate world. To find out the report requirements we had
to analyze and some comparisons the information about the different toolsthat are used to manage the working capital efficiently. We also have
collected some information from different books, periodicals, websites and
specially the annual report of GlaxiSmithKline. We would like to mention that
this report basically focuses only on the working capital management. A
sincere effort had been placed while the information was collected and a
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careful study of them made this report loaded with information and several
recommendations when there is also pointed out decisions made.
This reports research focuses on present condition and use of working
capital management of GlaxiSmithKline. For the purposes of the report some
data are collected from given study sheet by our honorable course instructorand the annual report of GlaxiSmithKline. The data types are primary that is
collected through survey and Secondary types of data is collected through
different publications, here we have used only secondary data and only that
one was possible and related with our topics.
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12appendix
b i b l i o g r a p h yb i b l i o g r a p h y
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Persons
M. Shahjahan Mina
Professor
Department of Finance
University of Dhaka
Books
Financial Management by I M Pandey Nine Edition
Working Capital Management and Control ( Principles & Practice) by Satish
B. Mathur
Working Capital Management (A Comparative Study) by Vijayakumar
Websites
www.gsk.com
www.investopedia.com
www.investinganswers.com
Others
Annual Report and Publications ofGlaxiSmithKline.
Bangladesh Information and Technology (IT) Firm owners Association
Microsoft Student 2008. 1993-2008 Microsoft Corporation
Microsoft Math 2008. 2007-2008 Microsoft Corporation
http://www.gsk.com/http://www.investopedia.com/http://www.investinganswers.com/http://www.gsk.com/http://www.investopedia.com/http://www.investinganswers.com/