Bextex Wcm Final

8/3/2019 Bextex Wcm Final

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1

Executive Summary

This report is presenting the overall working capital management of BeximcoTextiles

Limited. In this report all of the information is collected from secondary data. As, Primary

data was too much confidential, the company didnt disclose it to us. In this report the

terms and conditions that we have learned in FIN 406 has implemented. In this report

financial analysis and recommendations are given.



2

Introduction part

Company overview

The Beximco Textiles Ltd. was incorporated in Bangladesh as a Public Ltd. Company with

limited liability on 1994 & commenced commercial operation in 1995. The project was set

up as a state of the art fabric weaving, dyeing & finishing facilities for production of high

quality shirting fabric, unique wrinkle free fabric (Cortex-2000, cotra DP 3.5 +) & other

fabrics. BTL has an installed capacity of 288 high-speed air-jet looms in its weaving section

& a high-tech dyeing & finishing section with a capacity of 100,000 yards of finished fabric

per day. It is a member enterprise of the Beximco conglomerate. During the year the

company produced and sold high quality shirting and other fabric and bringing forth all the

latest in hard and soft technologies in weaving and finishing of fabric. It is the most modern

composite mill in the region. They have leveraged Bangladesh's labor cost advantage &

export competitiveness to the maximum.

Beximco Textiles Limited engages in manufacturing and marketing yarn, woven, knit, and

denim fabrics in Bangladesh. The company offers yarn products, such as count, fiber, CVC,

and TC yarn products; fabric products comprising solid dyed, yarn dyed, finishing, dobby

designs, and yarn count products; and denim products. It also provides special yarn

products consisting of plied yarn, fancy yarn, slub yarn, core spun, multi count, and multi

twist products, as well as wrinkle-free products. The company was formerly known asPadma Textile Mills Limited and changed its name to Beximco Textiles Limited in 2006.

Mission

Each of our activities must benefit and add value to the common wealth of our society. We

firmly believe that, in the final analysis we are accountable to each of the constituents withwhom we interact; namely: our employees, our customers, our business associates, our

fellow citizens and our shareholders.



3

Purpose of this Study:

This study has been designed in such a way that students are going to learn the in-depth

knowledge about a companys financial condition. The main purpose of this report is to

reinforce the concept of financial policy of Beximco Textiles ltd. along with its all working

capital ratios, short-term financing and long-term financing. etc. Overall, this study will

help a finance student to familiar with the practical scenario.

Limitation:

The report is limited to the data that are available in the annual reports and in the

website related to Beximco textiles. Primary data was not available as they didnt disclose. Finally, we have used our own judgments in many ways from our Business

Finance courses in order to simplify the research, evaluate, calculation and advising.



4

Financial Analysis

Working Capital of Beximco Textiles ltd.:

Working capital is defined as current (expected to be consumed or converted into cash

within one year) assets minus current liabilities. Working capital turnover indicates how

efficiently the company generates revenue with its working capital.

Year Current Assets Current Liabilities Working Capital of

particular year

2006 7572906611 5961381357 1605525254

2007 7881489387 8058498925 -177009538

2008 7230982538 7906937639 -675955101

2009 8677166758 4834823994 3842342764

2010 9031547621 6944110703 2087436918

Inventory:

Inventories are carried at the lower of cost and net realizable value as prescribed by IAS

2:Inventories, cost is determined on weighted average cost basis. The cost of inventories

comprises of expenditure incurred in the normal course of business in bringing the

inventories to their present location and condition. Net realizable value is based on

estimated selling price less any further costs expected to be incurred to make the sale.

Beximco textile ltd. Holds 5 types of inventory:

i Raw material inventory (Fibre, yarn, gray fabric, dyes & chemicals)

i Work in process inventory

i Finished goods inventory

i Packing materials



5

i Stores and Spares

Amount of inventory in five years:

Year Amount of inventory

2006 3414768025

2007 3688016341

2008 2733063864

2009 2742675600

2010 2994596746

Accounts Receivable:

Their accounts receivable are recognized at cost which is fair value of the

consideration given for them. 5 years accounts receivable of Beximco Textile:

Year Amount of Accounts receivable

2006 3407687731

2007 3451582241

2008 3765912622

2009 49860860532010 5040220480

Current ratio:

Year Ratio

2006 1.27

2007 .97

2008 .91

2009 1.792010 1.3

Illustration:



6

Quick Ratio:

Year Ratio2006 .69

2007 .52

2008 .56

2009 1.22

2010 .86

Illustration:

1.3

1.79

0.910.97

1.27

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

CurrentRatio

2010

2009

2008

2007

2006



7

Activity ratios:

Working capital turnover:

Year ratio

2006 3.23

2007 -24.11

2008 -7.04

2009 2.04

2010 6.98

Illustration:

0.86

1.22

0.560.52

0.69

0

0.2

0.4

0.6

0.8

1

1.2

1.4

QuickRatio

2010

2009

2008

2007

2006



8

Inventory Turnover:

year ratio

2006 .92

2007 .81

2008 1.13

2009 1.79

2010 3.15

Illustration:

6.98

2.04

-7.04

-24.11

3.23

-30

-25

-20

-15

-10

-5

0

5

10

20

20

20

20

20

Working Capital Turnover



9

Days of inventory on hand (DOH):

Assuming that, Beximco Textiles number of days in period is 360. Then the DOH

would be:

Year DOH2006 391.30

2007 444.44

2008 318.58

2009 201.11

2010 114.29

3.15

1.79

1.13

0.810.92

0

0.5

1

1.5

2

2.5

3

3.5

InventoryTurnover

20

20

20

20

20



10

Illustration:

Receivable turnover:

Year ratio

2006 1.52

2007 1.232008 1.26

2009 1.57

2010 2.89

114.29

201.11

318.58

444.44

391.3

0

50

100

150

200

250

300

350

400

450

500

days of inventory on hand

20

20

20

20

20



11

Illustration:

Days sales outstanding(DSO):

Year

Ratio

2006 235.85

2007 291.20

2008 284.80

2009 228.19

2010 124.51

Illustration:

2.89

1.57

1.26 1.23

1.52

0

0.5

1

1.5

2

2.5

3

3.5

Receivable turnover

20

20

20

20

20



12

Cash conversion cycle:(Inventory conversion period+ Receivables conversion period)-Payables

conversion period

Year CCC2006 523.12

2007 594.16

2008 417.5

2009 387.17

2010 143.36

114.29

228.19

284.8 291.2

235.85

0

50

100

150

200

250

300

350

days sales outstanding

20

20

20

20

20



13

Collection & Disbursement

Cash Inflow and Cash Outflow by Operating Activities (in tk.):

2010 2009 2008 2007 2006

Cashreceived

from

customers& others

145187023 664608431 3190602600 4223133089 4887688455

Cash paid

tosuppliers

&

Employees

898661193

535932698

3043303205 3788738872 3703613507

Cash

Generatedfrom

Operations

5532091050 1286757473 147299395 434394217 1184074948

Interest

Paid

1445098454 2006166127 1261679027 766830156 906788267

Income

Tax Paid

43025787 56338512 20396366 74934103 8084912

124.51

387.17417.5

594.16

523.12

0

100

200

300

400

500

600

700

cash conversion cycle

20

20

20

20

20



14

Net Cash

Generated

from

Operating

Activitie

4043966809 775747166 1134775998 407370042 269201769

Daily CashGeneratedfrom

Operating

Activities

11233241.14 2154853.24 3152155.55 1131583.45 747782.6917

Cash Flows from Investing Activities (in tk.):

2010 2009 2008 2007 2006

Acquisition of Property, Plant

& Equipment

3231593528 2381789851 986841760 39250045 205811905

Long-term

security

deposit

- - - - 46064

Net Cash Usedin Investing

Activities

3231593528 2381789851 986841760 39250045 205857969

Daily CashUsed in

InvestingActivities

8976648.69 6616082.92 2741227.1 1090279028 571827.917

Cash Flows from Financing Activities (in tk.):

2010 2009 2008 2007 2006

Allotment of shares - 6351789302 - - 10500000

(Decrease)/Increase

in Long Term

Borrowings

594878760 1605294361 1945272911 74392816 12734171

(Decrease)/Increase

in Short Term

Borrowings

201830690 1578840462 181255969 511187488 11819414

Dividend Paid - - - - 30405375

Net cash Generated

from Financing

796709450 3167654479 2126528880 436794672 13562833



15

Activities

Daily Net cashGenerated from

Financing Activities

2213081.81 8799040.22 5907024.67 1213318.53 376745.38

Increase or

decrease in cashand cash

equivalents

15663831 10117462 4911122 9825415 72284537

Cash and Cash

Equivalents at

Beginning of Year

27249672 1713221o 12221088 22046503 94331040

Cash and Cash

Equivalents at End

of Year

42913503 27249672 17132210 12221088 22046503



16

Interpretations:

1. Working capital: In 2007 and 2008 working capital of Bextex ltd. was negative.

That means; current assets have been lower than the current liabilities. So, the

company was in a risky position in terms of liquidity. But from 2009, it started to be

positive and the company is in a stable position.

2. Current ratio: This ratio expresses current assets in relation to current liabilities.

Current Ratio of bextex ltd.is highest in 2009 which indicates that the company has

higher level of liquidity and it can meet short term obligations. But during 2007 and

2008 the ratio had a smaller value than one, indicating that Bextex ltd. had lower

liquidity to meet its short term obligations. However, over the following years;

Beximco Textiles managed to solve this issue.

3. Quick ratio: The quick ratio is more conservative than current ratio, because it only

includes the more liquid current assets in relation to current liabilities. Beximco

Textiles Ltd. reached its peak in 2009 in terms of quick ratio but yet again it

dropped in 2010. Apart from that, there has been a steady improvement in this

aspect.

4. Activity Ratios:

a. Working capital Turnover: working capital turnover indicates how efficiently

the company generates revenue with its working capital. Bextex ltd. was in the

worst situation in 2007, that the ratio was -24.11; this ratio was negative in 2008

as well. The main reason behind it was that the current asset remained lower

than the current liabilities. The negativity in this aspect simply depicts that the

company took a very high amount of loans during those years. Yet, the

operations were efficient enough to improve that risky position over the years.

b. Inventory Turnover Ratio: Inventory turnover ratio shows the times a company's inventory

is sold and replaced over a financial period. A low turnover implies poor sales and,

therefore, excess inventory. A high ratio implies either strong sales or ineffective buying.During 2006 and 2007; the annual inventory on hand was way higher than the following

years. Consequently, the turnover was high as well. During the following years; the

management took new measures and managed to reduce the excess the inventory.

However, the total amount of inventory in 2010 was higher than that of 2009. Yet, the

inventory turnover almost doubled during 2010; which is a strong indication that the sales is

increasing in number.



17

c. Days Sales Outstanding Ratio: It indicates the elapsed time between a sale and

cash collection. Bextex ltd.had the lowest DSO in 2010, which indicates a better

situation than that of the previous years. In 2007, the ratio was the highest

indicating the efficiency lapse in cash collection during that period.

5. Cash Conversion cycle: This metric indicates the amount of time that elapses from

the point when a company invests in working capital until the point at which the

company collects cash. Bextex ltd. had 523.12 CCC in 2006 which indicates poor

position and in 2010; they have decreased it from 523.12 to 143.36. So, it is a good

indication for the company. Basic reason behind this positive trend is that; Beximco

Textiles has improved the Inventory conversion and receivables Collection

operations dramatically. Both the Inventory conversion period and the Receivable

conversion period has been halved from the year 2006 to 2010.

6. Cash-Flow: Cash flow activities show that both the income from operational

activities and the return from investments have been increasing over the years. ThePayables are being paid out and the retained earnings are being reinvested heavily

to increase the efficiency to a higher level. This can be a reason why Beximco

Textiles have refrained from giving out dividends since 2007.



18

References

1. BEXIMCO TEXTILES Ltd. (2007). Auditors Report



4. Fredric C. Scherr, Modern Working Capital Management, Prentice Hall International

Editions.

5. Ross, S. A, Westerfield, R. W & Jaffe, J. (2005). Corporate Finance 7th Edition. New Delhi:

McGraw Hill Publishing Company Limited.

6. Financial Reporting and Analysis CFA (level-1) 2011

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