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Final 405 net working capital

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A report on

Working Capital Management of 

 Jun 05, 05, 2012

Date of Submission: 07

A report on

Working Capital Management of  GlaxoSmithKline

Submitted to: M. Shahjahan Mina Professor Department of Finance University of Dhaka

Submitted by: NameID Md. Rakib15-047Md. Sahiduzzaman15-071A.T.M. Rajibul Sahiduzzaman15-071A.T.M. Akbar15-097Md. Sabuj Miah15-107Md. Shah Jalal15-258Mohammad Al-Mamun14133

Letter of Transmission Jun 07, 2012

M. Shahjahan Mina Professor  Department of Finance University of Dhaka

Dear Sir, We are are very very happ happy y to stat statee that that the the repo report rt on “W “Wor orki king ng Capi Capita tall Mana Manage geme ment nt of  GlaxiS GlaxiSmit mithKl hKline ine”, ”, that that you had asked asked us to prepar prepare, e, is comple completed ted 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 as much 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, 15 TH Batch (BBA) Department of Finance University of Dhaka

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 Capital Management . . . . . . . . 03-08

CHAPTER -TWO

ABC. .. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . .. . . . . 09-12

CHAPTER -THREE DEF . . . . . . . . . . . . . . . . . . . . . . . . .. . . .. . . . . . . . . . . . . . . . . . . .13-15

CHAPTER - FOUR GHI . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . .. . . . . . . . . . 16-17

CHAPTER - FIVE BACPS & BEFTN…………… . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18-23

EXECUTIVE SUMMARY  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.  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 company’s 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 slowmoving 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

C Management 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).

Page 26

C Management

4

Overall Working Capital

management of Gsk 

Sl Particulars i

Raw materials conversion period

200 201 201 9 0 1 60

51

day 60 s

34

day 35 s

42

day 48 s

ii WIP conversion period iii Finished goods conversion period iv Inventory conversion period [i+ii+iii]

22 45

day 126 127 144 s

v A/R conversion period

51

48

day 11 s

Vi Gross Working Capital Cycle [iv+v]

day 178 175 154 s

vi i A/P conversion period

day 111 110 s

Page 27

65

C Management

vi Net Working Capital ii Cycle or Cash conversion cycle [vi-vii]

112

64

day 45 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 a significant 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.

Page 28

C Management careful study of them made this report loaded with information and several recommendations when there is also pointed out decisions made.  This report’s 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 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.

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C Management

12

appendix

b i b l i o g r a p h y Page 47

C Management

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 of GlaxiSmithKline. Bangladesh Information and Technology (IT) Firm owners Association Microsoft ® Student ® 2008. © 1993-2008 Microsoft Corporation Microsoft ® Math ® 2008. © 2007-2008 Microsoft Corporation

Page 48

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