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Dhaka University Department of Accounting & Information Systems EMBA Program Course Code: 5414 (Working Capital Management)

(A FINANCIAL RATIO BASIS APPROACH)

Prepared For: Ms. Rumana Ahmed Lecturer Dept. of Accounting & Information Systems University of Dhaka Prepared By: Tanvir Rahman (11018045) Md. Ehaque Fahad (11018046)

Date of Submission: February 5, 2013

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Table of Contents

Topic

Page No.

01. Abstract

3

02. Introduction

4

03. Objective of the Report

4

04. Scope of the Report

5

05. Limitations of the Report

5

06. Company Overview (Apex Foods Ltd.)

5

07. Literature Review

6-9

08. Financial Ratio Analysis of Apex Foods Ltd.

9-11

09. Findings and Analysis of Financial Ratios

12-16

10. Conclusion

17

11. Bibliography and Reference

17

12. Annexure

18-20

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ABSTRACT In the era of 21 st century, the business world is at its zenith with adoption of dynamism and rapid changes in technology. Today no such industry is uncompetitive with the bless ings of open market system and customer oriented business structure. The industries in Bangladesh are of no exception in this regard. Most of the industries in our country are competing with various other industries worldwide. However, to survive in a rattle race of global competition, a business organization under a certain industry has to substantially consider the cost structure and the working capital of it. Working capital management has now become a common issue for every financial manager of an organization to deal with. Whether it is a small scale operation oriented or a large scale, management of working capital is an imperative requirement for every business organization. Without working capital management, a firm might not run properly and/or sometimes might need to terminate its operation and sack out of the market. The basic objective of this report is to link up the theory of working capital management with the practice of it in an organization. As a research oriented report, we have conducted our study on the “Working Capital Management of Apex Foods Ltd.”. Apex Foods Ltd. is one of the subsidiary companies of Apex Group that produces and processes food items and delivers them nationwide. They also have exporting channels for processed food item s. In this report, we focused on the financial ratio as a determinant of the working capital management. We have calculated the solvency, profitability and performance ratios which indicate how Apex is in managing its working capital. The financial statem ents and necessary information on the basis of which the financial ratios are calculated are attached in the annexure. For validity of our report, we have used the annual report of 2010 -11 for accounting figures. Like any other report for academic purpose, this report has some limitations and scope which is discussed the scope and limitation part. The literature review briefs the introduction of the financial ratios. Graphical demonstrations are provided supporting the financial ratios for the convenience in comprehension of the working capital management of Apex.

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INTRODUCTION

The term working capital is commonly used for the capital required for day-to-day working in a business concern, such as purchasing raw material, for meeting day-to-day expenditures on salaries, wages, rents, advertising etc. But the academic definition of working capital is: “Working capital refers to the circulating capital required to meet the day-to-day operations of a business firm”. The term circulating capital is referred to that type of capital that changes with relative speed from one form to another. The cycle of circulating capital starts with cash, changes to raw material, converts into work-in-progress and finished goods, sale of finished goods and realization of cash from debtors. Thus, working capital is defined as the “life blood” of any business which is apt because it constitutes...
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