Current (for fiscal year 2007 & 2008) Working Capital Management:
1. Working capital (WC) for year 2007 and 2008 are negative, primarily due to increased current liabilities from short term borrowings. These short term borrowings have been taken partly to repay previous year’s short term borrowing and partly to finance increased non-cash working capital.
2. Number of days of inventory is decreased for 63 to 55 days. This level of inventory implies that on an average the inventory is blocked for lesser days now.
3. For 2007 number of days of a/c payables is 36 days while of a/c receivables is 12. This policy requires company to receive early and pay later which make the company to borrow for short term to cover the gap. However, in 2008 the days of a/c payables have decreased to 26 days.
4. There has been decrease in net cash in both years 2007 & 2008. However this change is primarily due to the gap between the repaid long term debt and issued new long term debt.
|Working Capital Ratios | |Year |2008 |2007 | |Liquidity ratio | | | |Working capital |($441.70) |($459.10) | |Non-cash working |($50.30) |($187.50) | |Change in Non-cash WC |$137.20 | | |Current ratio |0.8 |0.79 | |Acid test ratio |0.48 |0.47 | |Efficiency ratios | | | |Accounts receivable turnover |31.51 |32.69 | |Inventory turnover |6.7...