ACKNOWLEDGEMENT

For the completion of this report we can’t deserve all praise. There were a lot of people who
helped us by providing valuable information, advice and guidance for the completion of this
report in the scheduled time.

Course report is an essential part of BBA program as one can gather practical knowledge within
the short period of time by observing and doing the works of chosen organizations. In this regard
our report has been arranged from practical sense to develop business idea.

At first we like to pay our thanks to almighty God, for helping us to do all the works with
perfection.

We would like to pay our gratitude to our supervising course teacher Prof. M. Shahjahan Mina,
who instructs us in the right way and give us proper guidelines for preparing this report.

At last we must mention the wonderful working environment and group commitment of this
organization that has enabled a lot deal to do and observe the process during our time.

This report is prepared by us to meet only for our academic purpose and not for any other reason.
It might not be used for the benefit of any other purpose.
Methodology:

The report in this study is basically an analytical one. Two different types of systems have been
selected here based on convenience. The report is based on both primary and secondary
information.

Primary Information: The primary data have been collected from our class lecture, various
types of individual professionals and from the industry by us.

Secondary Information: The secondary information has been extracted from various textbooks
of working capital management. Other notable information that was used for this report was the
information gathered from different web sites.

Limitation:

In spite of having the wholehearted effort, there were some limitations, which acted as a barrier
to conduct the program and for doing an empirical research work, such as:

Time Constraint:

The study is based on the working capital management. But this allocated time is not enough for
a complete and fruitful study.

Lack of Experience:

Due to lack of experience, there is a chance of having some mistake in the report though best
effort has been applied to avoid any kind of mistake.

Secrecy:

Most adequate, exact and updated data have not been available due to the secrecy of the
organization.
Introduction
Working capital management refers to all management decisions and actions that ordinarily
Influence the size and effectiveness of the working capital. It is concerned with the most
effective choice of working capital sources and the determination of the appropriate levels of the
current assets and their use. It focuses attention to the managing of the current assets, current
liability and their relationships that exist between them. In other words, working capital
management may be defined as the management of a firm’s liquid assets like cash, marketable
securities, accounts receivable and inventories. In the present day context of rising capital cost
and scarce funds, the importance of working capital needs special emphasis. It has been widely
accepted that the profitability of a business concern likely depends upon the manner in which its
working capital is managed. The inefficient management of working capital not only reduces
profitability but ultimately may also lead a concern to financial crisis. On the other hand, proper
of working capital leads to a material savings and ensures financial returns at the optimum level
even on the minimum level of capital employed. We also know that both excessive and
inadequate working capital is harmful for a firm. Excessive working capital leads to un-
remunerative use of scarce funds. On the other hand inadequate working capital usually
interrupts the normal operations of a business and impairs profitability. There are many instances
of business failure for inadequate working capital. Further, working capital has to play a vital
role to keep pace with the scientific and technological developments that are taking place in the
concerned area of pharmaceutical industry. If new ideas, methods and techniques are not injected
or brought into practice for want of working capital, the concern will certainly not be able to face
competition and survive. In this context, working capital management has a special relevance
and a thorough investigation regarding working capital practice in the pharmaceutical industry is
of utmost importance. An attempt has, therefore, been made to undertake an in-depth study on,
working capital practices by Bangladeshi firms in pharmaceutical industry enlisted in DSE.
Theoretical Part
Types of Capital & Definition of Working capital

Capital required for a business can be classified under two main categories via,

1) Fixed Capital 2) Working Capital

Fixed Capital

Every business needs funds for two purposes for its establishment and to carry out its day- to-day
operations. Long terms funds are required to create production facilities through purchase of
fixed assets such as p&m, land, building, furniture, etc. Investments in these assets represent that
part of firm’s capital which is blocked on permanent or fixed basis and is called fixed capital.

Working Capital

Funds are also needed for short-term purposes for the purchase of raw material, payment of
wages and other day-to-day expenses etc. These funds are known as working capital. In simple
words, working capital refers to that part of the firm’s capital which is required for financing
short- term or current assets such as cash, marketable securities, debtors & inventories. Funds,
thus, invested in current assts keep revolving fast and are being constantly converted in to cash
and this cash flows out again in exchange for other current assets. Hence, it is also known as
revolving or circulating capital or short term capital.

Concepts of Working Capital

There are two concepts of working capital. They are:

1) Gross working capital

2) Net working capital

Gross working capital: The gross working capital is the capital invested in the total current
assets of the enterprises current assets are those assets which can convert in to cash within a short
period normally one accounting year.

Net working capital: In a narrow sense, the term working capital refers to the net working. Net
working capital is the excess of current assets over current liability, or, say:

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES.

Net working capital can be positive or negative. When the current assets exceeds the current
liabilities are more than the current assets. Current liabilities are those liabilities, which are
intended to be paid in the ordinary course of business within a short period of normally one
accounting year out of the current assts or the income business
The gross working capital concept is financial or going concern concept whereas net working
capital is an accounting concept of working capital. Both the concepts have their own merits.

List of current assets & liabilities

Current Assets

1) Cash in hand and cash at bank

2) Bills receivables
3) Sundry debtors
4) Short term loans and advances.
5) Inventories of stock as:
o Raw material
o Work in process
o Stores and spares
o Finished goods

Current liabilities

1) Accrued or outstanding expenses

2) Short term loans, advances and deposits.
3) Dividends payable
4) Bank overdraft
5) Provision for taxation, if it does not amt. to app. of profit.
6) Bills payable
7) Sundry creditors

Classification of Working Capital

Working capital may be classified in two ways:

1) On the basis of concept

2) On the basis of time

On the basis of concept working capital can be classified as gross working capital and net
working capital. On the basis of time, working capital may be classified as:

1) Permanent or fixed working capital

2) Temporary or variable working capital

Permanent or fixed working capital: Permanent or fixed working capital is minimum amount
which is required to ensure effective utilization of fixed facilities and for maintaining the
circulation of current assets. Every firm has to maintain a minimum level of raw material, work-
in-process, finished goods and cash balance. This minimum level of current asst is called
permanent or fixed working capital as this part of working is permanently blocked in current
assets. As the business grow the requirements of working capital also increases due to increase in
current assets.

Temporary or variable working capital: Temporary or variable working capital is the amount
of working capital which is required to meet the seasonal demands and some special exigencies.
Variable working capital can further be classified as seasonal working capital and special
working capital. The capital required to meet the seasonal need of the enterprise is called
seasonal working capital. Special working capital is that part of working capital which is
required to meet special exigencies such as launching of extensive marketing for conducting
research, etc.

Temporary working capital differs from permanent working capital in the sense that is required
for short periods and cannot be permanently employed gainfully in the business.

Importance of Working Capital

Proper management of working capital leads to a material savings and ensures financial returns
at the optimum level even on the minimum level of capital employed. We also know that both
excessive and inadequate working capital is harmful for a firm. Excessive working capital leads
to un-remunerative use of scarce funds. On the other hand inadequate working capital usually
interrupts the normal operations of a business and impairs profitability. The importance of
adequate working capital is given below:

Solvency of the Business: Adequate working capital helps in maintaining the solvency of the
business by providing uninterrupted of production.

Goodwill: Sufficient amount of working capital enables a firm to make prompt payments and
makes and maintain the goodwill.

Easy Loans: Adequate working capital leads to high solvency and credit standing can arrange
loans from banks and other on easy and favorable terms.

Cash Discounts: Adequate working capital also enables a concern to avail cash discounts on the
purchases and hence reduces cost.

Regular Supply of Raw Material: Sufficient working capital ensures regular supply of raw
material and continuous production.

Regular Payment of Salaries, Wages and Other Day to Day Commitments: It leads to the
satisfaction of the employees and raises the morale of its employees, increases their efficiency,
reduces wastage and costs and enhances production and profits.
Exploitation of Favorable Market Conditions: If a firm is having adequate working capital
then it can exploit the favorable market conditions such as purchasing its requirements in bulk
when the prices are lower and holdings its inventories for higher prices.

Ability to Face Crises: A concern can face the situation during the depression.

Quick And Regular Return On Investments: Sufficient working capital enables a concern to
pay quick and regular of dividends to its investors and gains confidence of the investors and can
raise more funds in future.

High Morale: Adequate working capital brings an environment of securities, confidence, high
morale which results in overall efficiency in a business.

Working Capital Management

Management of working capital is concerned with the problem that arises in attempting to
manage the current assets, current liabilities. The basic goal of working capital management is to
manage the current assets and current liabilities of a firm in such a way that a satisfactory level
of working capital is maintained. It is neither adequate nor excessive as both the situations are
bad for any firm. There should be no shortage of funds and also no working capital should be
ideal. WORKING CAPITAL MANAGEMENT POLICES of a firm has a great on its
probability, liquidity and structural health of the organization. So working capital management is
three dimensional in nature as

1. It concerned with the formulation of policies with regard to profitability, liquidity and risk.
2. It is concerned with the decision about the composition and level of current assets.
3. It is concerned with the decision about the composition and level of current liabilities.

Working capital management includes receivable management, cash management and inventory
management. All are described below:

Cash management: The most important of all the liquidity responsibilities of the financial
manager is the managing of cash, both flows and balances. Cash is the benchmark of liquidity.
This underscores the fact that the most important test of a financial manager is to maintain an
adequate reserve of cash for all times so as to absorb the shocks of sporadic receipts and
payments and meet the needs of emergency situation, otherwise paucity of cash even on a
temporary phase may be cause a trouble.

Receivable management: 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.
Inventory Management: Inventory represents an investment and must therefore compete with
other investment of the firm. As a consequence, total investment in inventories must be related to
some optimum investment level that contributes to the overall wealth maximization object of the
shareholders. Since the proper management of inventory has significant influence on profitability
and liquidity, to a large extent, the success and failure of a business depends upon its inventory
management performances.

Sources of Short-term Finance

Spontaneous Financing

1) Trade credit
o Open account
o Notes payable
o Trade acceptances
2) Advances from customer and deferred income
3) Accrued expense

Money market securities

1) Commercial paper
2) Bankers acceptance

Short-term Unsecured Bank Loan

1) Line of credit.
2) Revolving credit. 3) Single payment credit transaction loan.

Secured Short-term Bank Loan

1) Assigning account receivable.

2) Factoring
Working Capital Management of Renata Limited

Company Chronology

Renata Limited has created a new vista in manufacturing Pharmaceutical,

Animal Health Medicine, Nutritional and Vaccines. Its year of Incorporation is1 9 9 7 2 : a s
Pfizer laboratories (Bangladesh) Limited, subsidiary of
P f i z e r   corporations, USA. In 1993 it renamed as “Renata Limited” after divestment
of s h a r e h o l d e r s b y P f i z e r c o r p o r a t i o n s , U S A . R e n a t a ’ s 1 0 p r o d u c t s h a v e b e e n
licensed to M/s Deurali-Janta pharmaceutical Ptv. Ltd., Nepal for manufacture, m a r k e t i n g
and distribution in Nepal. Renata Limited is giving technical
assistances for upgrading their manufacturing plant to WHO GMP standards. Renata Limited
is dedicated to serving its valued customers with products of  excellent quality
through continuous improvement in process and technology; complain with the
guidelines of good manufacturing process (GMP) and the r e q u i r e m e n t s of
ISO 9110:1999 quality management system. Its top
management is committed to ensure that quality policy is adopted and practice i n a l l
p h a s e s o f c o m p a n y a c t i v i t i e s a n d u r g e a l l c o n c e r n e d t o p e r f o r m t h e i r   duties
by following the principles. A sound system of internal and financial control has been
established by Renata L i m i t e d , w h i c h i n v o l v e s p e r i o d i c a l r e p o r t i n g , c o n t i n u o u s
a u d i t o f d i f f e r e n t segments of the business and budgetary control to ensure optimum
utilization of the company’s resources. Renata Limited is a highly professionally
managed organization. A team of skilled professionals has been dedicating their efforts in order
to achieve the corporate objectives
Now we are dealing with Working Capital Policy and their Practical Implication for Renata
Limited. As usual, we have gone through four main dimensions of Working Capital
Management: Cash Management, Management of Accounts Receivables, Management of
Inventory and Management of Accounts Payables.

Cash Management
The most important of all the liquidity responsibilities of the financial manager is the managing
of cash, both flows and balances. Cash is the benchmark of liquidity. This underscores the fact
that the most important test of a financial manager is to maintain an adequate reserve of cash for
all times so as to absorb the shocks of sporadic receipts and payments and meet the needs of
emergency situation, otherwise paucity of cash even on a temporary phase may be cause a
trouble. Renata Limited manages liquidity to provide a smooth production process and to reduce
the cost of inefficient management. Renata has determined optimum level of liquidity. 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. Renata sells goods on credit and collect
cash through marketing 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.

Concentration banking: It refers to a system of centralizing corporate cash with a goal of

controlling the movement of funds and minimizing idle cash balances. For reducing collection
float of check Renata uses the Banks with accelerated clearing capabilities.

Cash Forecasts: A firm should forecast cash to anticipate cash surplus and shortage, estimate
timing of borrowing and lending of funds and have better control over funds. Renata prepares
cash forecasting Statements. Many firms follow Budgetary Method for controlling of cash.
Renata prepares cash forecasting Statement 30% on monthly Basis.

Models of Cash Management: There are different models that address the issue like proper
management of temporary cash surplus and shortage. These models provide optimum strategies
for a given time pattern of future cash flows. These Models are the Baumol Mode, the Beranek
Model, the Miller-Orr Model, and the Stone Model. As Renata experiences a continuous cash
flow, miller-orr or stone model can be best applicable here.

Receivable Management:
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. The financial significance of credit transaction is
evidenced by statistics reporting that 20 to 25 percent of the typical manufacturer's total asset is
receivables. 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.
Trade and other receivables

Description 2010 2009

Trade debtors-unsecured (Note 9.1) 258,649,437 188,061,402

Less: Provision for doubtful debts (10,570,342) (7,468,662)

Trade debtors considered good 248,079,095 180,592,740

Sundry debtors - unsecured considered good 119,842,403 76,580,355

Value Added Tax (VAT) recoverable 110,442,977 86,697,246

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. Renata uses the
traditional method that is 5 C’s (Capital, Character, Collateral, Capacity and Condition), which is
very popular method for quick credit granting measuring creditworthiness of applicant.
Sometimes it uses judgmental Scoring approach to grant credit.
Renata determines the appropriate terms of sale based on the buyer’s financial conditions and
firms expected cash flow. The net period in terms of sales is less than 30 days.

Factoring:
In advanced countries Factoring is gaining more and more popularity. In factoring the firm sells
its’ receivable asset to the financial intermediary (the factor) and obtain financing. Generally
Renata does not use factoring as a means of financing.

Default in Accounts Receivable:

The important policy implication from firm’s point of view is that when the buyer defaults,
future cash flows to the seller are delayed, and their amount may be reduced relative to payment
in non-default. Thus default to payment may lead a firm to financial crisis. Pharmaceutical
industry result shows that 50% firms have bad debts less then or within estimated figure and 50%
have more. Ranata has bad debt less than 5%. Ranata has recovery rate more than 75% of the
default amount. Ranata has separate controlling and monitoring mechanism for Bad debts. These
results show that the Ranata is not more prone to financial crisis.

Controlling & Monitoring Accounts Receivables:

In monitoring the collection (turnover) of accounts receivable, management wants to use a

methodology that measures the relationship between the firm’s receivables and their sales,
regardless of fluctuations in sales level. Ideally, the methodology meets at least three criteria; it
should not signal a deviation from expectations in the payments behavior of the firm’s customers
when none has occurred. It should signal a deviation when one has occurred. It should be simple
to implement and to understand. Two common methods of receivables monitoring are:
1) Days Sales Outstanding Statistics (Also known as average collection period) and
2) The Aging Fraction Statistics.
Renata follows both the DSO and Aging Fractions Statistics as a device of motoring Accounts
Receivables. Remaining 20% of the firms responded that they follow only DSO as a device for
monitoring Accounts Receivables.

L\C Management
Renata imports its raw materials from overseas market also exports quality products to US
Europe and Middle East. As exporter it opens a L/C by simply pledging his export bills. The
Renata are granted 85% of total amount of export bills submitted to the bank for opening back to
back L/C. the Renata can cash out the later 15% if he wishes. But it must pay commission to the
bank. Rate of commission varies customer to customer and depends on the relationship with the
customer.

Inventory Management
Inventory represents an investment and must, therefore, compete with other investment of the
firm's. As a consequence, total investment in inventories must be related to some optimum
investment level that contributes to the overall wealth maximization object of the shareholders.
Since the proper management of inventory has a significant influence on profitability and
liquidity, to a large extent, the success and failure of a business depends upon its inventory
management performances.

Finished goods -Pharmaceutical 324,757,865 351,714,028

(Unit-1) 351,714,028
-Premix (Unit-2) 166,438,190 47,263,025 166,438,190
-Contract Manufacturing (Unit-3) - 63,748,087
-Potent Product Facility (Unit-4) 20,216,213 14,616,205
14,616,205
-Cepha Plant 61,479,449
517,464,639 532,768,423
Work-in-progress 79,865,978 70,578,009
Raw materials 78,300,537 65,690,623
Bulk materials 93,447,964 103,773,861
Packing materials 74,676,790 62,898,497
 Raw and packaging materials-Premix 76,369,039 56,102,900
(Unit-2)
Raw and packaging materials- 16,898,990 7,533,464
Contract manufacturing (Unit-3)
Raw and packaging materials-Potent 29,559,690 16,566,688
Product Facility (Unit-4)
Raw and packaging materials-Cepha 67,559,430
plant -
Consumable stores and spares 9,049,888 5,325,749
Less: provision for slow moving and (7,781,871) (15,558,619)
obsolete items
Stock in transit 260,444,090 169,630,986
1,295,855,164 1,075,310,581
Inventories
2010 2009

Composition of Inventory:
In most of the case, a firm maintains raw material, Working-in-process and Finished goods as
inventory. Depending on the nature of Business, proportion of inventory held by the firm varies.
Even the composition of inventory also varies. Renata holds a huge proportion of Inventory in
Current Assets. The proportional investment in Raw Material is highest among the inventories.
The main reason behind such huge investment is that in pharmaceutical business the firms make
every attempt to retain their customers. Renata does not want to face any stock out situation.
Because, in such case the doctors will not prescribe the product of the firm anymore and a
substitute product would replace their existing market segment.

Procurement of Inventory:
Procurement of inventory is another important aspect of Inventory Management. For
Pharmaceutical industry the proportion of Import to Local procurement varies within the range
of 60% to 40%, 75% to 25%, and 80% to 20%.

Costing Policy of Inventory:

There are costs involved in maintaining Inventory. The main two costs are: Carrying cost and
Ordering Costs. Carrying costs are directly proportional to the level of inventory carried by the
firm and include the opportunity cost of inventory investment, insurance on the inventory,
storage costs of inventory investment, and so forth. Order costs are directly proportional to the
number of orders and incurs in placing & checking an order. Renata incurs some costs like set-up
costs on machines to produce inventory, costs of generating a purchase order for the inventory in
managing its inventory. In addition to these there are Obsolesces costs and Stock out costs.

Lead Time for Inventory:

The lead-time for inventory, in four out of five cases, it was found that it takes 1 to 4 months to
import raw material through ship, while in case of procurement the raw material from local
market usually it takes 15 days on an average for Renata.

Safety Stock Determination:

Although Renata maintains the huge level of safety stock to avoid stock out situations, it does
not follow any structured or any other policy in determining the safety stock level. Past
experience of the manager and their subjective judgments are the main to parameters considered.

Stock out Situation:

Since these firms maintain a large safety stock, they have yet to face any major stock out
situation.

Inventory Controlling Mechanism:

If the firm fails to control the flow of inventory, it will definitely incur some cost in operation
process. There are different methods available for inventory controlling. Physical control and
Stock verification are the two most popular methods. Renata is currently using both the physical
control and stock verification method. A few firms are also using budgetary control. It uses
“First in First out” or FIFO method for valuation inventory. Renata determines the level of
inventory to be maintained on the basis of production target and current position of stock.

Accounts Payable:
A firm can utilize this fund for financing purpose since it is termed 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. There are three typical policies for
the payment of invoices. The First policy of payment is made on the latest date will allow the
buyer to take the cash discount offered in the sellers terms of sale. The Second way of generating
additional short –term financing form trade creditors is to delay payment to trade creditors
beyond the discount date. The Third policy is to pay the suppliers beyond the due date. This
strategy is called stretching accounts payable. Renata follows a consistent policy in case of
payment of invoices. Renata uses Inventory as security collateral incase of borrowing from
banks.

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. In case of accruals payment Renata usually pays on due date. Again a
review of the financial statements of Renata indicates that on an average these firms have a lower
percentage (ranging from 7.5% to 9%) of accruals to the total current liability.
Determining Working Capital of Renata Limited

PROFOR MA FINANCIAL STATE MENT OF RENATA

2011E 2012E 2013E 2014E 2015E

Assets
4,842,863,138 8951755673 13787981708 19365372343 25888555370
Cash
550,118,600.00 632,636,400 727,531,800.00 836,661,600 962,160,900
A/R
112,492,000 11,429,200 11,612,100 11,797,900 11,986,600
Other current asset
1,529,108,900 1,804,348,500 2,129,131,200 2,512,374,900 2,964,602,300
Inventories
7,034,582,638 11,400,169,773 16,656,256,808 22,726,206,743 29,827,305,170
Current asset
3,276,812,664 3,925,982,664 4,575,152,664 5,224,322,664 5,873,492,664
PP&E
588,092,535 748,267,535 903,637,535 1,054,345,535 1,200,532,535
Other investment

10,899,487,837 16,074,419,972 22,135,047,007 29,004,874,942 36,901,330,369

total asset

Liabilities & equity

 796,254,278 -
Bank overdraft
196,180,000 196,180,000 196,180,000 196,180,000 196,180,000
Accrued Taxes
35,879,620 40,544,100 45,814,900 51,770,800 58,501,000
A/P
$595,808,000 703,063,400 829,603,000 978,931,500 1,155,139,200
Other current li
1,624,121,898 939,787,500.00 1,071,597,900.00 1,226,882,300.00 1,409,820,200.00
Total current liabilities
4,949,099,493 8,732,135,531 12,131,697,160 15,871,268,700 19,988,370,218
Noncurrent liabilities
6,573,221,391 9,671,923,031 13,203,295,060 17,098,151,000 21,398,190,418
Total liabilities
2,142,461,081 2,142,461,081 2,142,461,081 2,142,461,081 2,142,461,081
Share capital
2,183,805,365 4,260,035,865 6,789,290,865 9,764,262,865 13,360,678,870
Retained earnings
4,326,266,446 6,402,496,946 8,931,751,946 11,906,723,946 15,503,139,951
total equity
Total liabilities & 10,899,487,837 16,074,419,977 22,135,047,006 29,004,874,946 36,901,330,369
equity

Year wise working capital requirement

Year Net working capital(CA-CL)

2011 5,410,460,740
2012 10,460,382,273
2013 15,584,658,908
2014 21,499,324,443
2015 28,417,484,970

Working Capital Finance of Renata

Renata Limited mainly finances its working capital by bank loans. The limit and the
amount taken as loans from its different banks are given below in tabular format.

Name of the Bank Limit Taka Taka(2010)

Eastern Bank Limited, 375,000,000 98,369,080
Dhaka
The Hongkong Shanghai 750,000,000 284,724,860
Banking
Corporation Ltd., Dhaka
City Bank Limited 500,000,000 53,839,973
Standard Chartered Bank, 1,065,000,000 367,782,782
Dhaka
Citibank N. A., Dhaka 500,000,000 323,757,486
 Agrani Bank 940,703
Total 3,190,000,000 1,129,414,884

Gross and net working capital cycle

Based on financial statement data of the year 2010, the calculation of net and gross working
capital cycle of Renata limited are shown below:

Raw material inventory 436,812,440

Raw material consumption 1,664,716,203
closing stocks of finished goods 517,464,639
Cost of goods sold 2,405,361,976
closing stocks of work in process 79,865,978
Cost of goods produced 1,655,428,234
Credit sales 5,090,318,113
Debtors 478,364,475
Creditor 31,752,362

Working capital cycle

Raw material consumption period 94.4620339 94

Work in process conversion 17.36816583 17
period
Finished goods conversion period 77.44666786 78
Inventory conversion period 189.2768676 189
Recivable conversion period 33.83112945 34
Deferred payment period 6.389653007 -6
Net working capital cycle 217
Gross working capital cycle 223
all sales credit sale assuming
assuming all purcsase in credit