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1.0 Introduction:

Capital is the keynote of economic development. In this modern age,

the level of economic development is determined by the proportion of capital

available.

1.1 Meaning of Capital:

In the ordinary sense of the word Capital means initial investment invested

by businessman or owner at the time of commencing the business.

Capital (economics), a factor of production that is not wanted for itself but for

its ability to help in producing other goods.

Definition:

Capital is a factor of production with a specific, changeable value attached to

it that could, potentially, provide its owner with more wealth. It is an abstract

economic concept, and, as such, has many different definitions and

classifications, but the unifying feature of capital is that it has a certain value, so

it in itself is a type of wealth, and it has the potential of generating more wealth.

1.2 Features of Capital:

Capital has the following features.

1. Capital is a man made.

2. Capital is a perishable.

3. Capital is a human control possible.

4. Capital is a mobile.

5. Capital is a human sacrifice.

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6. Capital is a scarce.

7. Capital is a passive factor.

1.3 INTRODUCTION OF WORKING CAPITAL:

Working capital is the life blood and nerve centre of a business. Just as

circulation of blood is essential in the human body for maintaining life, working

capital is very essential to maintain the smooth running of a business. No business

can run successfully without an adequate amount of working capital.

There is operative aspects of working capital i.e. current assets which is known as

funds also employed to the business process from the gross working capital

Current asset comprises cash receivables, inventories, marketable securities held

as short term investment and other items nearer to cash or equivalent to cash.

Working capital comes into business operation when actual operation takes

place generally the requirement of quantum of working capital is determined

by the level of production which depends upon the management attitude

towards risk and the factors which influence the amount of cash, inventories,

receivables and other current assets required to support given volume of

production.

Working capital management as usually concerned with administration of the

current assets as well as current liabilities. The area includes the requirement of

funds from various resources and to utilize them in all result oriented manner. It

can be stated without exaggeration that effective working capital

management is the short requirement of long term success.

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The importance of working capital management is indisputable; Business liability

relies on its ability to effective management of receivables, inventory, and

payables. By minimizing the amount of funds tied up in current assets. Firms are

able to reduce financing costs or increase the funds available for expansion.

Many managerial efforts are put into bringing non-optimal level of current assets

and liabilities back towards their optimal levels.

1.4 MEANING OF WORKING CAPITAL

Working capital means the funds (i.e.; capital) available and used for day

to day operations (i.e.; working) of an enterprise. It consists broadly of that

portion of assets of a business which are used in or related to its current

operations. It refers to funds which are used during an accounting period to

generate a current income of a type which is consistent with major purpose of a

firm existence.

In Accounting:

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2.0 About Company:

Fine Foods Limited started as a Public limited company in

2002 aiming to contribute to the local development through

meeting the nutrition demand. It started its business activity

by a Fish project in the village Mondolbhog of Manikkhali UP

under PS Kotiadi, District: Kishorgoanj. Alongside its

abundant production of common water fish in the said

project it gradually bloomed through production and

marketing of fish feed, greens, cow, milk and trees of

different species. Fine Foods Limited now has launched its

another fish project by purchasing lands in village Masera of

Chandpur Union under PS Tarakanda, District: Mymensing.

The important persons and board of Directors of fine foods limited are Md.

Nazrul Islam: Chairman and Managing Director, Md. Zakir Hossain : Independent

Director, Md. Angur Khan:Independent Director, Ansar Uddin Ahmed :Sponsor,

K.M Tanjibul Alam :Sponsor.

2.1 Products:

Fine Foods Limited has mainly produced many kind of local fish.

That’s are

1. Telapia Fish

2. Rui Fish

3. Katla Fish

4. Mrigel Fish

5. Pangash Fish

6. Common Carp Fish

7. Finger link etc.

There are more items which

are under project and fine

foods limited recently launch

these kinds of products like

poultry firm, Dairy firm and

others. So though these are

current products but they are

working with a lot of other

products.

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2.2 Projects:

Fine foods Limited has operated 2 (two) Number of project.

No. 1 is situated at Village Mondolvog

P.O - Manikkhali

P.S - Katiadi

Dist – Kishorgonj

No.2 is Situated at Villag Machhera

P.O - Chandpur

P.S - Tarakanda

Dist - Mymensingh

3.0 Trend Analysis:

In the trend analysis the trend of various important financial statement

particulars are analyzed in a time series to observe the growth and tendency of

movement of those particulars to understand their relationship with other

important factors.

3.1 Sales:

Fine Foods Limited is a rapidly growing company and it is also reflected in their

annual sales record. There are ten years data from 2002-2011. In 2010 and 2011

the graph shows the highest sell which are close to 60000000. And 2010 has the

great sell among all these ten years. But from 2004-2009 the sale was too low

compared with 2010and 2011. In that time they cannot touch the 20000000

figure.

0

10000000

20000000

30000000

40000000

50000000

60000000

70000000

1 2 3 4 5 6 7 8 9 10

Sales

Series1

6

3.2 EPS:

Fine Foods Limited sales have increased a lot in last three years. So their profit

has increased at a high percentage too. Its EPS was Tk. 1.008 in 2010 and It has

increased Tk.3.108 in 2010 although it has decreased to TK 1.58 in 2012.

3.3 Cash and cash equivalents:

The company has held regular amount of cash and cash equivalents

throughout the years. It has increased massively at early of starting the company

approximately 16000000 but from 2003 to 2011 it was too low. Though the cash

has became increase slightly from 2003 to 2011. But in 2003 a huge fall is located

in the cash sight.

-0.5

0

0.5

1

1.5

2

2.5

3

3.5

1 2 3 4 5 6 7 8 9 10

EPS

Series1

7

3.4 Inventories:

Year by year the inventory held by Fine Foods Limited has increased. It has

shown a 42.64% growth over four years. It may signal to increased demand of

the company’s product which requires holding more raw materials, work in

process and finished goods.

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

18000000

1 2 3 4 5 6 7 8 9 10

Cash & Bank Balance

Series1

0

5000000

10000000

15000000

20000000

25000000

30000000

35000000

40000000

45000000

1 2 3 4 5 6 7 8 9 10

Inventories

Series1

8

3.5 Liabilities for Expenses:

As the company’s sales has increased year by year its trade and other liabilities

has also increased. Its liabilities were Tk 250000 in 2010 and Tk 200000 in 2011

which shows a 20% decrease but from 2002 to 2011 it has decreased

approximately 50%.

3.6 Total Current Assets:

Total current assets hold by Fine Foods limited has been raised from Tk. 36000000

to TK. 50000000 in 2011. As the company has seen more purchase of their

product it is normal for to hold more current assets.

0

50000

100000

150000

200000

250000

300000

1 2 3 4 5 6 7 8 9 10

Liabilities for Expenses

Series1

0

10000000

20000000

30000000

40000000

50000000

60000000

1 2 3 4 5 6 7 8 9 10

Total Current Assets

Series1

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3.7 Trade Creditors:

Fine Foods Limited had huge amount of borrowings in 2007 which was repaid in

2011. After that the company had again short term borrowing of Tk. 3427419 in

2007 and Tk. 3105210 in 2011.

3.8 Proposed Dividends:

Fine Foods Limited trade and others payables have decreased by a huge

margin over the years which indicates company is paying its suppliers in cash.

This means the company needed to hold more cash throughout the year to pay

the payments in cash. And after that they propose their yearly dividends which

are given in this chart. In the first year the propose dividends was huge but it

vary on the following years after that.

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

1 2 3 4 5 6 7 8 9 10

Trade Creditors

Series1

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

1 2 3 4 5 6 7 8 9 10

Proposed Dividends

Series1

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3.9 Total Current Liabilities:

Total liability of the company was Tk. 13333107 in 2002 which dropped to Tk.

1689897 in 2008 but then it rose again and in 2011 the total liability held by the

company was Tk 6016053. So Fine Foods Limited holding of total liabilities was

quite stable throughout the years.

3.10 Trend Analysis:

There is a similar trend between the gross working capital and sales for

Fine Foods Limited over the year. Gross working capital is calculated by

summing up the total current assets and total current liabilities. Although

total current liabilities for the year 2009 had dropped whereas total

current assets had increased but gross working capital for the company

has increased each year. At the same time sales volume for each year

has also increased for Fine Foods Limited. So it is showing a very similar

trend and signals to a positive relationship among these variables.

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

1 2 3 4 5 6 7 8 9 10

Total Liabilities

Series1

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There is also a very similar trend between net working capital and profit for

each year. Net working capital has increased from 2009 to 2011 and so as

profit from 2008 to 2010. But in 2011 net working capital has decreased

and profit has decreased too. A highly significant relationship is revealed

through.

0

10000000

20000000

30000000

40000000

50000000

60000000

70000000

1 2 3 4 5 6 7 8 9 10

Current Asset vs Current Liabilities vs Sales

Series1 Series2 Series3

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

18000000

1 2 3 4 5 6 7 8 9 10

Opening cash & closing cash

Series1 Series2

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Cash inflow and outflow of Fine foods limited in the first of 2002 was too

high. In 2002 there was huge cash inflow but the next year in 2003 there

was a great fall and a huge cash outflow is shown in the graph. But the

less of the year the cash inflows are shown as similar to each year. But

in2010 the cash inflow is slightly increased.

Retained earnings are gradually increased in the fine foods limited. In the

first 7 years it was too low but gradually it becomes increase from the year

of 2009 to 2011. The highest retained earnings is shown in 2010. It is more

than 20000000 and in 2011 it is slightly decreased. But the total retained

earnings is in good position for the Fine foods Limited.

-2000000

-1500000

-1000000

-5000000

0

5000000

10000000

15000000

20000000

1 2 3 4 5 6 7 8 9 10

Cash Inflow & Outflow Model

Series1

0

10000000

20000000

30000000

1 2 3 4 5 6 78

910

Retained Earnings

Series1

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4.0 Ratio Analysis:

In this section some of the major and relevant ratios to working capital and

profitability of the company have been analyzed. These ratios have been

calculated from 2009 to 2011. The mean, median of the company has been

measured too. Following are some of the major and relevant ratios to working

capital management are given.

2002(TK)

2003 (TK)

2004 (TK)

2005 (TK)

2006(TK)

2007(TK)

2008(TK)

2009(TK)

2010(TK)

2011(TK)

Current ratio

2.740942

2.758325

12.22184

12.87438

10.32572

6.699736

20.17254

15.86437

12.04758

8.334317

Quick Ratio

2.15719

1.496218

6.897596

7.193647

6.089656

4.240008

9.820334

2.160634

2.189264

1.657893

Cash Ratio

1.222618

0.033525

0.23149 0.306767

0.248522

0.148347

0.313988

0.598568

0.74049

0.385354

Net working Capital to sales

0.88592

0.750756

1.642877

1.639106

1.829155

1.968528

2.610197

1.268625

0.646442

0.743879

Inventory turnover in days

198.0768

264.6711

407.8898

377.1675

315.1428

325.6347

643.484 710.9407

397.2697

385.244

Accounts receivable turnover in days

88.62688

63.69707

84.16469

74.47254

87.00375

89.10723

107.0943

24.44583

22.18347

8.511956

Operating Cycle

286.7037

328.3682

492.0545

451.64 402.1466

414.7419

750.5783

735.3865

419.4532

393.756

EPS 1.18 0.57 0.3 0.303 -0.145 -0.139 0.099 1.008 3.108 1.57

ROA 0.085519

0.042866

0.022103

0.023833

-0.0099

9

-0.009

47

0.007704

0.071222

0.199107

0.122322

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5.0 Correlation:

Current ratio

Quick Ratio

Cash Ratio

Net working Capital to sales

Inventory turnover in days

Accounts receivable turnover in days

Operating Cycle

EPS ROA

Current ratio

1

Quick Ratio

0.64 1

Cash Ratio

-0.131 -0.359 1

Net working Capital to sales

0.59 0.89 -0.41 1

Inventory turnover in days

0.877 0.31 -0.089 0.403 1

Accounts receivable turnover in days

0.019 0.69 -0.177 0.723 -0.19 1

Operating Cycle

0.899 0.47 -0.13 0.56 0.97 0.017 1

EPS -0.06 -0.6 0.5723 -0.747 -0.008 -0.75 -0.172 1

ROA -0.09 -0.63 0.57 -0.77 -0.017 -0.78 -0.18 0.99 1

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6.0 FINDINGS.

Working capital of the Fine Foods Limited was increasing and showing

positive working capital per year.

The Fine Foods Limited has higher current and quick ratios are i.e., 20.1725

and 9.82 respectively.

Inventory turnover ratio is very low in the year 2002-03. In the year 20010-11 it

has increased by 6.32 times as compared to 2007-08 and in the last year 2009-10

it has again increased by 3.26 times as compared to 2008-09.

Debtor’s turnover ratio is very high in the year 2007-08. In the year 2008-09 it

has decreased by 5.28 times as compared to 2007-08 and in the last year 2009-

10 it has again decreased by 0.44 times as compared to 2008-09.

Creditor’s turnover ratio has increased in the years of 2007-08 and 2008-09. It

is same in the last year 2009-10 as compared to 2008-09.

Working capital turnover ratio is very low in the year 2007-08. In the year

2008-09 it has increased by 0.95 times as compared to 2007-08 and in the last

year 2009-2010 it has again increased by 0.03 times.

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7.0 SUGGESTIONS.

Working capital of the company has increasing every year. Profit also

increasing every year this is good sign for the company. It has to maintain it

further, to run the business long term.

The Current and quick ratios are almost up to the standard requirement. So

the Working capital management Fine Foods Limited is satisfactory and it has to

maintain it further.

The company has sufficient working capital and has better liquidity position.

By efficient utilizing this short-term capital, then it should increase the

turnover.

The company should take precautionary measures for investing and

collecting funds from receivables and to reduce the bad debts.

The company has sufficient working capital and has better liquidity position.

By efficient utilizing this short-term capital, then it should increase the

turnover.

Creditor’s turnover ratio has increasing from 2007-08 to 2008-09 and in the last

year 2009-2010 it is same as compared to 2008-09. Company is making

prompt payment to its creditors. This is good sign for the company. On-time

payment to suppliers will increase the credibility of the firm. It has maintained

it further to survive in the market.

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The company is utilizing working capital effectively this is good for the

company. It has to maintain it further.

8.0 CONCLUSIONS.

The study on working capital management conducted in Fine Foods

Limited to analyze the financial position of the company. The company’s

financial position is analyzed by using the tool of annual reports from 2002to

2011.

The financial status of Fine Foods Limited is good.

In the last year the inventory turnover has increased, this is good sign for the

company.

The company’s liquidity position is very good With regard to the investments in

current assets there are adequate funds invested in it. Care should be taken by

the company not to make further investments in current assets, as it would block

the funds, which could otherwise be effectively utilized for some productive

purpose. On the whole, the company is moving forward with excellent

management.