1.0. Introduction 1.1.

Origin of the study: This report is originated as per the course work of Working Capital management In BBA program. Working Capital management is an introductory course to get familiar with the knowledge of how a firm manages its working capital. The basic reason behind this report is to analyze the financial statements including its working capital of Orion Infusion Ltd. The report is completed based on the course teachers direction and the analysis results are well found.

1.2. Objective of the study: The main purpose of this course work is to analyze the financial statements and working capital management of several years of Orion infusion which is a part of Orion pharmaceutical

1.3.

Methodology:

Report design: The report is of analytical type which is focused on the analysis of working capital and the financial statements of Orion Infusion ltd. Several years (FY 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2010, 2011 & FY 2012) of financial data are used to complete the analysis which have shown how the Co is managing its working capital and also performing and marching forward with its capital structure. Sources of data: In preparing the report and accomplishing the analysis, secondary data have been used which were mainly collected from Internet, books and Journals to give shape to the report.

2.0. Over view of Orion Infusion Ltd Company overview Company Name Location of Production plant Corporate Office Corporate setup Production Area Dosage Forms Product Categories Orion Infusion Ltd Maikuli, P.S.-Rupgani, District-Narayanganj, Bangladesh 153-154, Tejgaon Industrial Area, Dhaka-1208, Bangladesh Public Ltd Company 7171 Square meters Large Volume parenterals Fluid, Nutrient & Electrolyte Replenishers, Antimicrobials, Antiulcerant, Osmic Diuretic, Amino Acid Supplement, plasma Substitute

ORION GROUP is one of the leading industrial conglomerates in Bangladesh over the years. With the support of a highly skilled management structure and 18000 dedicated professionals, ORION has achieved a degree of success that is unparalleled in the countrys business history. ORION has assumed the leadership role with its operations in the Pharmaceuticals, Cosmetics & Toiletries, Infrastructure Development, Real Estate & Construction, Power, High-tech Agro Products, Hospitality, Textiles & Garments, Aviation Management sectors. Some of the units are successfully listed in the Stock Exchange. ORION is the market leader in Pharmaceuticals and Cosmetics & Toiletries sectors over the years in the country. Besides these, ORION has extensively focused on Infrastructure Development and Power Generation businesses through major investment undertakings and significantly contributed to the countrys national economy's stability through the right business to business strategy. The Groups main objective follows the principle to reduce rural poverty and foster sustainable economic development of the country

3.0. Introduction: Working Capital management 3.1. Definition of Working Capital Working capital (abbreviated WC) is a financial metric that represents the operational liquidity of a business, organization, or other entity. Along with fixed assets, such as property, plant, and equipment, working capital is considered a part of operating capital. Positive working capital is required to ensure that a firm is able to continue its operations and has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. A company can be endowed with assets and profitability but short on liquidity if its assets cannot be converted into cash. Working capital= Current Assets Current Liabilities

3.2. Working Capital cycle:

3.3. Objectives of working capital management To be effective, working capital management requires a clear specification of the objectives to be achieved. The two main objectives of working capital management are to increase the profitability of a company and to ensure that it has sufficient liquidity to meet short-term obligations as they fall due and so continue in business (Pass and Pike 1984). Profitability is related to the goal of shareholder wealth maximization, so investment in current assets should be made only if an acceptable return is obtained. While liquidity is needed for a company to continue in business, a company may choose to hold more cash than is needed for operational or transaction needs, for example for precautionary or speculative reasons. The twin goals of profitability and liquidity will often conflict since liquid assets give the lowest returns. Cash kept in a safe will not generate a return, for example, while a six-month bank deposit will earn interest in exchange for loss of access for the six-month period.

3.4. Uses of Working Capital Net working capital is calculated as current assets minus current liabilities. It is a derivation of working capital commonly used in valuation techniques such as discounted cash flows (DCFs). If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. The ability to meet the current portion of debt (payable within 12 months) is critical because it represents a short-term claim to current assets and is often secured by long term assets. Common types of short-term debt are bank loans and lines of credit.

3.5. Evaluating Working Capital Management Cash flows can be evaluated using the cash conversion cycle -- the net number of days from the outlay of cash for raw material to receiving payment from the customer. Because this number effectively corresponds to the time that the firm's cash is tied up in operations and unavailable for other activities, management generally aims for a low net count. Profitability can be evaluated by looking at return on capital (ROC). This metric is determined by dividing relevant income for the 12 months by the cost of capital used. When ROC exceeds the cost of capital, firm value is enhanced and profits are expected in the short term. Working capital management basically shows the amount of current assets and current liabilities a company manages to run the firms short term investment and activities. The Goal of Capital Management is to manage the firms current assets &liabilities, so that the satisfactory level of working capital is maintained. If the firm cannot maintain the satisfactory level of working capital, it is likely to become insolvent & may be forced into bankruptcy. To maintain the margin of safety current asset should be large enough to cover its current assets. Main theme of the theory of working capital management is interaction between the current assets & current liabilities.

4.0. Major Working Capital Data Years 2012 2011 2010 2006 2005 2004 2003 2002 2001 2000 Current Assets 232,818,649 269,439,790 229,864,086 147,757,984 150,587,991 91,254,406 71,015,513 97,242,746 117,125,693 122,636,214 Current Liabilities: 214,084,150 222,517,056 338,366,043 195,660,030 182,567,010 173,020,283 214,453,730 704,468,939 520,928,584 609,619,696 operating profit 64,499,674 55,959,336 58,905,017 15,710,629 11,583,390 12,043,547 (7,764,038) (95,095,576) (22,188,889) (28,416,398)

The working Capital management is based on the current assets and current liabilities through which the operating profit is earned. Orion Infusions overall Current asset is greater than the current liabilities from the FY 2004 to 2012 which is a positive outlook for the firms working capital structure. The greater operating profit means that the firm has less change to default in case of short term liquidity arrangement. In this perspective, Orion infusion is managing learning to manage its working capital effectively.

5.0. Ratio analysis based on Working Capital Data

5.1. Current ratio: Year s 2012 2011 2010 2006 2005 2004 2003 2002 2001 2000 Current assets 232,818,649 269,439,790 229,864,086 147,757,984 150,587,991 91,254,406 71,015,513 97,242,746 117,125,693 122,636,214 Current liabilities 214,084,150 222,517,056 338,366,043 195,660,030 182,567,010 173,020,283 214,453,730 704,468,939 520,928,584 609,619,696 Current ratio 1.087 1.210 0.679 0.755 0.824 0.527 0.331 0.138 0.224 0.201

Interpretation: When all the years are compared it is found that the current ratio of the company was better in 2011 and 12 as they are higher than 1. This entails the fact that the overall situation of the company is not good as the ratios of other years are less than 1. The ideal Current Ratio is 2:1 but here the current ratio shows that it is not a good situation for the organization at past though it has managed to turn around at present

5.2. Acid test ratio:

year 2012 2011 2010 2006 2005 2004 2003 2002 2001 2000

Quick assets 125,176,192 132,072,993 142,163,576 68,759,476 72,382,563 47,217,529 40,082,589 29,473,317 43,273,424 50,291,843

Current liabilities 214,084,150 222,517,056 338,366,043 195,660,030 182,567,010 173,020,283 214,453,730 704,468,939 520,928,584 609,619,696

Quick ratio 0.584 0.593 0.420 0.351 0.396 0.272 0.186 0.041 0.083 0.082

Interpretation: The quick ratios of the co. are increasing every year which is a good signal for the working capital management of the firm. The highest quick ratio holding year is the year 2011 which is 0.593. It can be said that the overall liquidity position of the company is not good. It has a very unpredictable future as it might find it difficult to pay its current liabilities on time. There is a major chance of failure as the liquidity ratio is low all the way through. 5.3. Cash ratio: Year 2012 2011 2010 2006 2005 2004 2003 2002 2001 2000 Cash 6,085,023 29,801,666 29,801,666 7,069,656 1,480,395 5,089,683 3,224,430 2,176,458 582,791 1,020,491 Current liabilities 214,084,150 222,517,056 338,366,043 195,660,030 182,567,010 173,020,283 214,453,730 704,468,939 520,928,584 609,619,696 Cash Ratio 0.02842351 0.133929805 0.088075227 0.036132346 0.008108776 0.029416684 0.015035551 0.003089502 0.001118754 0.00167398

Interpretation: Orion Infusion limited has a volatile cash ratio which means that the company faces difficulties in managing its cash over the liabilities. The highest cash over liabilities generating period is FY 2011 where the ratio is 0.1339 and it decreases in the FY 2012 and became .0284 which is not good for managing the working capital.

5.4. Receivable Turnover Ratio: year 2012 2011 2010 2006 2005 2004 2003 2002 2001 2000 net credit sales 589,543,586 594,103,378 527,530,042 233,857,748 358,576,114 157,690,079 57,053,798 572,566,456 20,451,129 27,903,727 account receivables 72,347,455 60,474,635 58,222,456 33,825,550 32,779,422 16,791,135 13,715,007 4,943,237 14,707,791 16,575,142 Rec. turnover 8.149 9.824 9.061 6.914 10.939 9.391 4.160 15.828 1.390 1.683

Interpretation: It can simply be stated that the receivable turnover is not stable and they are fluctuating every year. It can be seen that the best year regarding receivable turnover of the firm is FY 2001 where the ratio is only 1.390. The last years receivable turnover is 8.149. The financial situation regarding the working capital is better off if the receivable turnover is less. The amount of receivables simply suggests how much money the organization is supposed to receive from outside. It is better if the company has less cash involved outside.

5.4. Inventory Turnover ratio: Years COGS Avg. Inventories 107,642,457 137,366,797 87,700,510 78,998,508 78,205,428 44,036,877 30,932,924 67,769,429 73,852,269 72,344,371 Inventor y turnover 3.477 2.757 3.918 2.836 1.985 2.333 1.581 0.545 0.347 0.351

2012 2011 2010 2006 2005 2004 2003 2002 2001 2000

374,335,973 378,855,587 343614502 224,097,190 155,278,202 102,764,066 48,924,408 36,986,928 25,688,404 25,416,076

Interpretation: It simply entails how efficient the business is at maintaining the appropriate level of inventory. Here the inventory turnover is better in 2010 than other years as it suggest

that the company is having an increased involvement outside. But a reduction in inventory turnover can lead to liquidity crisis. The higher the Inventory turnover ratio, the better it is for the firm. it can be interpreted that the firms overall inventory turnover is good.

5.5. Inventory holding Period: Years Inventory turnover 3.4775 2.757985 3.918045 2.836727 1.985517 2.333591 1.581629 0.545776 0.347835 0.351321 Inventory holding period 3.450669 4.351002 3.062752 4.230228 6.043766 5.142289 7.587115 21.98704 34.49912 34.15682

2012 2011 2010 2006 2005 2004 2003 2002 2001 2000

Interpretation: The inventory holding period is decreasing every year. In the FY 2000 it is 24.15 where in the FY 2012, it is only 3.45. It means the company is able to turn its inventory to finished goods and can sell it efficiently. This holds a significant impact in the firms working capital management.

5.6. Net profit Margin: Years 2012 2011 2010 2006 2005 2004 2003 2002 2001 2000 Net Income 35,272,194 32,834,544 30,182,990 15,335,549 11,732,692 7,346,797 21,436,060 116,890,939 103,586,773 95,167,663 Net sales 601,416,406 596,355,557 541,672,423 359,622,242 249,846,035 159,766,207 66,825,568 45,624,741 29,771,078 21,116,941 NPM 0.059 0.055 0.056 0.043 0.047 0.046 0.321 2.562 3.479 4.507

Interpretation: The Net Profit Margin of Orion Infusion is going through a bad financial situation. A higher profit margin indicates a more profitable company. It can be seen that the net profit margin of FY 2012, 11 and 10 are 0.059, 0.055, and 0.056 accordingly which is not good for Orion Infusion. It was good in FY 2010 which is 4.507

5.7. Working capital turnover ratio: Years Net sales Net WC WC turnove r 32 13 (5) (8) (8) (2) (0) (0) (0) (0)

2012 2011 2010 2006 2005 2004 2003 2002 2001 2000

601,416,406 596,355,557 541,672,423 359,622,242 249,846,035 159,766,207 66,825,568 45,624,741 29,771,078 21,116,941

18,734,499 46,922,734 -108,501,957 -47,902,046 31,979,019 81,765,877 -143,438,217 -607,226,193 -403,802,891 -486,983,482

Interpretation: A high working capital turnover ratio indicates efficiency in utilization of resources and the ratio has improved from 13 in 2011 to 32 in 20012. The ratios other years are in negative form as the firms current assets are lower than the current liabilities from FY 2000 to FY 2006. 5.8. Total Asset Turnover Ratio: Year s 2012 2011 2010 2006 2005 2004 2003 2002 2001 2000 Net sales 601,416,406 596,355,557 541,672,423 359,622,242 249,846,035 159,766,207 66,825,568 45,624,741 29,771,078 21,116,941 Total Assets 619,014,970 739,022,003 708,560,585 736,066,216 724,074,692 451,546,465 353,418,394 387,478,149 207,754,189 207,754,189 TAT 0.971 0.806 0.764 0.488 0.345 0.353 0.189 0.117 0.143 0.101

Interpretation:

The asset turnover ratio is high as the company suggests having high ratio which simply entails the fact that company is being able to maintain the assets on the basis of its income. The overall asset turnover of Orion infusion is increasing every year. In FY 2012, it is 0.971 where in FY 2000 it is 0.101.

5.9. Return on Asset: Years 2012 2011 2010 2006 2005 2004 2003 2002 2001 2000 Net Income 35,272,194 32,834,544 30,182,990 15,335,549 11,732,692 7,346,797 21,436,060 116,890,939 103,586,773 95,167,663 Total Assets 619,014,970 739,022,003 708,560,585 736,066,216 724,074,692 451,546,465 353,418,394 387,478,149 207,754,189 207,754,189 ROA Ratio 0.0569 0.0444 0.0425 0.020 0.0162 0.0162 0.0606 0.3016 0.4986 0.4580

Interpretation: The return on asset is very low this simply says that the company is not having a good return all the way through the investment of its assets. The mainframe work is mostly not a good one for the company as the Ratios are only 0.0569, 0.0444, 0.0425 in the FY 2012, 11 and 10 respectively.

5.10. Return on Equity: Years 2012 2011 2010 2006 2005 2004 2003 2002 2001 2000 Net Income 35,272,194 32,834,544 30,182,990 15,335,549 11,732,692 7,346,797 21,436,060 116,890,939 103,586,773 95,167,663 total equity 177,497,306 189,818,199 206,116,683 203,597,600 25,741,388 37,124,233 41,087,336 316,892,790 207,754,189 207,754,189 ROE 0.198 0.172 0.14 0.075 0.455 0.197 0.521 0.368 0.498 0.458

Interpretation:

The return on equity was being fluctuating from FY 2000 to 2005 and in the FY 2006 it started to decrease and after FY 2010 it again made adverse direction and started to increase. The return on asset of Orion Infusion in FY 2012 is 0.198 and this simply says that the company is having a unstable return all the way through. The whole work of the yearly return entails that the company might have to gain more sustainability on the basis of its existence. 5.11. Earnings per Share: Years 2012 2011 2010 2006 2005 2004 2003 2002 2001 2000 Net Income 35,272,194 32,834,544 30,182,990 15,335,549 11,732,692 7,346,797 21,436,060 116,890,939 103,586,773 95,167,663 No. of stock 2,035,976 2,035,976 2,035,976 2,035,976 2,035,976 2,035,976 2,035,976 2,035,976 2,035,976 2,035,976 EPS 17.3 16.12 14.82 7.53 5.76 3.68 10.52 57.41 50.87 46.74

Interpretation: Earnings per share mean how the co. is earning over its operation in a fiscal year per share. The higher earnings per share is, the strong working capital managing co. it is. The table shows that the firms earning per share was higher in the FY 2002 and then it started to decrease. However the firm has been pooling its tail to make itself more profitable over the year and the EPS of FY 2012 is 17.3 per common stock.

5.12. Price Earnings Ratio: Years price per share 100 100 100 100 100 100 100 100 100 100 EPS PER

2012 2011 2010 2006 2005 2004 2003 2002 2001 2000

17.324 16.127 14.824 7.5322 5.7626 3.608 10.528 57.412 50.878 46.74

5.772 6.200 6.745 13.27 17.35 27.71 9.497 1.741 1.965 2.139

Interpretation: Orion Infusion has highest PER in the FY 2004 and then it started to decrease where in FY 2012 it became 5.772. This signifies that the companys ability to provide more benefits over its share price has been decreasing for which it would have to give more dividend to customer to be attractive and to provide more dividend, it would have to manage less working capital.

5.13. Debt. To Total asset Ratio: Years Total Debt. Total Assets Debt to Asset Ratio 0.713 0.7431 0.709 0.723 0.7188 1.0822

2012 2011 2010 2006 2005 2004

441,517,664 549,203,804 502,443,902 532,468,616 520,477,092 488,670,698

619,014,970 739,022,003 708,560,585 736,066,216 724,074,692 451,546,465

Interpretation: Orion Infusion has stable trend of Debt to asset ratio but it is not good enough to make the working capital stronger. The highest debt to asset ratio holding year is FY2004 but after then, the ratio started to drop and the ratio of FY2012 is 0.713 where debt is TK 441,517,664 and asset is TK 619,014,970 5.14. Debt to equity Ratio: Year s 2012 2011 2010 2006 2005 2004 Total Debt. total Equity Debt to Equity 2.48 2.89 2.43 2.61 20.21 13.16

441,517,664 549,203,804 502,443,902 532,468,616 520,477,092 488,670,698

177,497,306 189,818,199 206,116,683 203,597,600 25,741,388 37,124,233

Interpretation: The D/E ratio is 1:1; it implies that for every Tk of outside liability. In case of Orion Infusion ltd the ratio is decreasing every year. The firm is trying to increase its equity and for which the risk of debt is decreased. There is continuous decrease in total debt and there is continuous increase in shareholder s equity (i.e. Reserves and Surpluses) with increasing rate so the co. is able to take more loads and decrease the risk. It makes the working capital management of the firm stronger.

5.15. Time interest Earned Ratio: Years 2012 2011 2010 2006 2005 2004 EBIT+ Interest 65,462,150 57,009,214 59,564,493 48,584,253 28,103,239 12,883,889 Int. Expenses 28,426,346 22,532,943 27,872,354 32,481,927 15,783,912 5,537,092 TIE Ratio 2.302 2.530 2.137 1.495 1.780 2.326

Interpretation: In case of Orion Infusion Ltd, in the year 2005-06 there was a decrease in interest and increase in EBIT so ratio increased from 1.495 to 1.780. There was a decrease in interest as well as EBIT but the decrease rate is higher than the decrease rate of EBIT, so the ratio increased from 2.137 to 2.530 and in the year 2010-11. The ratio is 2.30 in the FY 2012.

6.0. Regression Analysis: In this chapter, several regression analysis based on the Net Income & Net Working Capital, net Income & Liquidity ratios and Net Income & profitability ratios are discussed.

6.1. Net Working Capital with net Income Regression Analysis

Net WC 18,734,499 46,922,734 -108,501,957 -47,902,046 -31,979,019 -81,765,877 -143,438,217 -607,226,193 -403,802,891 -486,983,482 Net Income 35,272,194 32,834,544 30,182,990 15,335,549 11,732,692 7,346,797 21,436,060 116,890,939 103,586,773 95,167,663
Hypothesis Null Hypothesis: Net Income(dependent variable) correlation with Net working capital Alternative Hypothesis: Net Income(dependent variable) has no correlation with Net working capital SUMMARY OUTPUT
Regression Statistics Multiple R 0.914275458 R Square 0.835899613 Adjusted R Square 0.815387064 Standard Error 17831142.58 Observations 10 ANOVA df Regression Residual Total SS 1 1.29567E+16 8 2.5436E+15 9 1.55003E+16 MS F Significance F 1.29567E+16 40.75065 0.000212818 3.1795E+14

Intercept Net WC

Coefficients Standard Error 16429787.88 7395672.997 -0.165491791 0.025924429

t Stat P-value 2.221540607 0.057045 -6.383623316 0.000213

Lower 95% Upper 95% Lower 95.0% Upper 95.0% -624664.6337 33484240.4 -624664.63 33484240.4 -0.225273632 -0.10571 -0.2252736 -0.10570995

Interpretation of Regression Statistics: Multiple R indicates the correlation between Y & . Here the correlation between Y and is .9147 that means it shows correlations between these two. Standard error indicates the variation between actual and predicted value. Here standard deviation is 17831142 R square is .8358 which means 83.58% independent variable can be explained by dependent variable Interpretation of Anova table: The value of F from the table is 5.19 and from the Anova table it is seen that the value of F is 40.75. here the F value from the Anova table is greater than the F value from the table. So Null Hypothesis is Accepted and alternative Hypothesis is regected

Interpretation of Coefficient Table: =a +b1x1+b2x2+bnxn net income= 16429787.88 - 0.165491(Net working capital) the relationship between the net working capital and Net income is negative that means we can say that the current asset is lower than the current liabilities. So the Co. should increase its current asset in comparison with the current liabilities If Net working capital decreases, then the Net working capital loan will decrease.

6.2. Net profit margin with liquidity ratio analysis:

year 2012 2011 2010 NPM 0.059 0.055 0.056 Cash Ratio 0.0284 0.1339 0.088 Quick ratio 0.584 0.593 0.42 Current ratio 1.087 1.21 0.679
Hypothesis

2006 2005 2004 0.043 0.047 0.046 0.036 0.0081 0.02941 0.351 0.396 0.272 0.755 0.824 0.527

2003 2002 2001 2000 0.321 2.562 3.479 4.507 0.015 0.00308 0.00111 0.00167 0.186 0.041 0.083 0.082 0.331 0.138 0.224 0.201

Null Hypothesis: Net profit margin(dependent variable) has no correlation with Current ratio, Quick Ratio & Cash Ratio Alternative Hypothesis: Net profit margin(dependent variable) has correlation with Current ratio, Quick Ratio & Cash Ratio

SUMMARY OUTPUT Regression Statistics Multiple R 0.783581 R Square 0.613999 Adjusted R Square 0.420999 Standard Error 1.308429 Observations 10 ANOVA df Regression Residual Total SS MS F Significance F 3 16.33921 5.446405 3.181338 0.105905 6 10.27191 1.711986 9 26.61113 P-value Lower 95%Upper 95% Lower 95.0% Upper 95.0% 0.012806 0.884281 4.988646 0.884281128 4.988645615 0.571657 -12.625 20.79311 -12.62499878 20.79311231 0.308956 -46.591 17.48752 -46.59103874 17.48752335 0.819099 -31.4901 38.30587 -31.49012358 38.30586913

Intercept Current ratio Quick ratio Cash Ratio

Coefficients Standard Error t Stat 2.936463 0.838683 3.501281 4.084057 6.82863 0.598079 -14.5518 13.09376 -1.11135 3.407873 14.26206 0.238947

Interpretation of Regression Statistics: Multiple R indicates the correlation between Y & . Here the correlation between Y and is 0.783 that means it shows high correlations between these two. Standard error indicates the variation between actual and predicted value. Here standard deviation is 1.30 R square is 0.61which means 61.39% independent variable can be explained by dependent variable

Interpretation of Anova table: The value of F from the table is 4.76 and from the Anova table it is seen that the value of F is 3.18. Here the F value from the Anova table is less than the F value from the table. So Null Hypothesis is accepted and alternative Hypothesis is rejected.

Interpretation of Coefficient Table: =a +b1x1+b2x2+bnxn Net profit margin=2.93+4.084(CR)-14.55(QR)+3.40(CR) The relationship between the Current Ratio, Cash ratio and net profit Margin is positive where the relation between Quick ratio and net profit margin is negative that means the firm has positive current and cash assets. So the Co. should increase its quick asset in comparison with the current liabilities.

6.3. EPS and capital structure regression analysis Hypothesis Null Hypothesis: EPS (dependent variable) has correlation with ROA and ROE Alternative Hypothesis: EPS (dependent variable) has no correlation with ROA and ROE

SUMMARY OUTPUT Regression Statistics Multiple R 0.925101 R Square 0.855811 Adjusted R Square 0.814615 Standard Error 8.773138 Observations 10 ANOVA df Regression Residual Total SS MS F Significance F 2 3197.829 1598.914 20.77377 0.001138 7 538.7756 76.96794 9 3736.604 P-value Lower 95%Upper 95% Lower 95.0% Upper 95.0% 0.105121 -3.08599 25.86897 -3.08599 25.86897 0.000848 60.22179 149.2724 60.22179 149.2724 0.547359 -64.3805 37.2185 -64.3805 37.2185

Intercept ROA Ratio ROE

Coefficients Standard Error t Stat 11.39149 6.122528 1.860585 104.7471 18.82976 5.562848 -13.581 21.48313 -0.63217

Interpretation of Regression Statistics: Multiple R indicates the correlation between Y & . Here the correlation between Y and is 0.925 that means it shows strong correlations between these two.

Standard error indicates the variation between actual and predicted value. Here standard deviation is 8.77 R square is .8147 which means 81.47% independent variable can be explained by dependent variable

Interpretation of Anova table: The value of F from the table is 4.74 and from the Anova table it is seen that the value of F is20.77. Here the F value from the Anova table is greater than the F value from the table. So Null Hypothesis is accepted and alternative Hypothesis is regected

Interpretation of Coefficient Table: =a +b1x1+b2x2+bnxn EPS= 11.39+104.74(ROA)-13.58(ROE) The relationship between the Earning per share and return on asset is positive that means the Co. ha positive outlook regarding the return on Asset with the Earning per share. On the other hand the EPS and the ROE has negative correlation. So the Co. should increase its Net Income to increase its return on the quantity of equity issued. To increase the EPS, Orion Infusion has to increase its operating profit and Net income

7.0. Cash inflow outflow model Cash is important to every organization. It is critical for companies to hold cash for payments but at the same time avoid holding excess cash, as this is a non-earning asset. Cash management is therefore a balance between liquidity and profitability. There are 4 models regarding the cash flow which are discussed belowBaumol Model Baumols cash management model helps in determining a firms optimum cash balance under certainty. As per the model, cash and inventory management problems are one and the same. There are certain assumptions that are made in the model. They are as follows: 1. The firm is able to forecast its cash requirements with certainty and receive a specific amount at regular intervals. 2. The firms cash payments occur uniformly over a period of time i.e. a steady rate of cash outflows. 3. The opportunity cost of holding cash is known and does not change over time. Cash holdings incur an opportunity cost in the form of opportunity foregone. 4. The firm will incur the same transaction cost whenever it converts securities to cash. Each transaction incurs a fixed and variable cost. For example, let us assume that the firm sells securities and starts with a cash balance of C rupees. When the firm spends cash, its cash balance starts decreasing and reaches zero. The firm again gets back its money by selling marketable securities. As the cash balance decreases gradually, the average cash balance will be: C/2. This can be shown in following figure:

The Beranek model: Beranek hypothesized firms where the cash inflows were steady but the outflows are periodic. This is the mirror image within the time pattern of cash flows within the baumol model where the inflows are periodic and the outflows were steady where balances are built over time and disbursed all at once

The Miller-Orr model: The Miller-Orr Model rectifies some of the deficiencies of the Baumol Model by accommodating a fluctuating cash flow stream that can be either inflow or outflow. The Miller-Orr Model has an upper limit U and lower limit L When there is too much cash and U is reached, cash is taken out (to buy short-term securities to earn interest) such that the cash balance goes to a return (R) point. Otherwise, if there is too little cash and L is reached, cash is deposited (from the shortterm investments) to replenish the balance to R. The equations of the Miller-Orr Model are: Where R = the return point, f = the fixed cost for each transaction to withdraw or deposit cash, s 2 = the variance of the cash flows, i = the interest rate per same time period as s 2 , U = the upper limit and L is determined by other means, for example, compensating balance requirement, minimum balance to avoid bank service charges on checking account, or zero.

The STONE MODEL: The Stone Model is somewhat similar to the Miller-Orr Model insofar as it uses control limits. It incorporates, however, a look-ahead forecast of cash flows when an upper or lower limit is hit to take into account the possibility that the surplus or deficit of cash may naturally correct itself. If the upper control limit is reached, but is to be followed by cash outflow days that would bring the cash balance down to an acceptable level, then nothing is done. If instead the surplus cash would substantially remain that way, then cash is withdrawn to get the cash balance to a predetermined return point. Of course, if cash were in short supply and the lower control limit was reached, the opposite would apply. In this way the Stone Model takes into consideration the cash flow forecast.

8.0. Recommendation: Analyzing all the data and ratios regarding the working capital management of Orion Infusion Limited several recommendations pops up which are discussed below o Current asset should be increased to make the cash management more easy and liquid Orion Infusion should be more conscious about the level of credit sales to make the cash management more strong Focus on working capital should be given to remain risk free in the volatile market Orion Infusion should choose between the best cash and short term investment model for its capital structure and working capital management The company has higher debt than equity. Though it works as tax shield, the common stockholders dont get enough return on their investment whi ch makes the investors less attractive. So Orion Infusion should increase its equity and decrease the total amount of debt EPS is very low which the investor would be less attractive, so Orion infusion ltd should try to increase its operating profit and net income or to give more dividend as possible The working capital turnover rate is very volatile which means that the company doesnt practices the working capital management much to improve it. This makes the forecasting more unpredictable for the investors Net profit margin is very low which means that the company is failing to get enough profit from the production and selling. The co. should try to improve standards of the products

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9.0. Conclusion Several types of ratio regarding the working capital and capital structure has been analyzed with additional regression analysis tool to come to some clear findings and the results are well found The Orion infusion ltd has some advantage and also some disadvantage regarding their capital structure and working capital management policy. The company is trying to improve its performance regarding the share market and also in accordance with the product development. Receivable turnover is very good that proves it receives payment from its customers or debtors within time. The company is failing to increase its Net income that is affecting its EPS and Net working capital which should be their no.1 concern to attract more investor in the capital market. So analyzing the related data and after completing the regression analysis it can be concluded that the overall financial performance of the Orion Infusion ltd should be increased.