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A report on

Working CapitalManagement of

Jun 05, 2012Date of Submission: 07


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A report on

Working CapitalManagement ofGlaxoSmithKline

Submitted to:M. Shahjahan Mina

Professor

Department of Finance

University of Dhaka

Submitted by:

NameIDMd. Rakib15-047Md.

Sahiduzzaman15-071A.T.M. RajibulAkbar15-097Md. Sabuj Miah15-107Md.

Shah Jalal15-258Mohammad Al-Mamun14-

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Letter of Transmission

Jun 07, 2012

M. Shahjahan Mina

Professor


University of Dhaka

Dear Sir,

We are very happy to state that the report on Working Capital Management of

GlaxiSmithKline, that you had asked us to prepare, is completed and ready for your

viewing.

We are glad to submit it as part of completion of the requirements for our Working Capital

Management (405) course with you. We have tried our best to put up a good report with asmuch information as we could gather during the short time span allotted for preparing this

report.

Thank you for your kind support and help throughout the course, we received.

We hope you will appreciate this sincere effort.

Very sincerely yours,

..

Md. Sahiduzzaman

On behalf of Group:

Sec: A, 15TH Batch (BBA) Department of Finance

University of Dhaka


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Acknowledgement

This report paper entitled Working Capital Management of GlaxiSmithKline is submitted

as the requirement of a part of the study of Working Capital Management (405) course with

you in the BBA program conducted by Department of Finance, Dhaka University. To prepare

this assignment an intensive study was made.

At first we want to pay our gratitude to all mighty Allah for preparing the report successfully.

We are extremely grateful to our honorable course teacher M. Shahjahan Mina, for his

painstaking guidance, suggestion and all type of support & supervision to prepare this report

paper. He continuously reminded us for the preparation of this report paper and finally gave

an outline to write down the paper spending her valuable time. Without her untiring efforts,

completion of this report paper would have been impossible.

Above all this report paper is a combined effort of the sincerity, efficiency and determination

of all the group members.

Table of Contents

Executive summary.. . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . 02

CHAPTER-ONE

A Brief Concept of Working CapitalManagement . . . . . . . . 03-08

CHAPTER -TWO


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ABC. .. . . . . . . . . . . . . . . . . . . . . . . .. .

. . . . . . . . . . . . . . .. . . . . 09-12

CHAPTER -THREE

DEF . . . . . . . . . . . . . . . . . . . . . . . . .. . .

.. . . . . . . . . . . . . . . . . . . .13-15

CHAPTER - FOUR

GHI . . . . . . . . . . . . . . . . . . . . . . .. . . . .

. . . . . . . . . .. . . . . . . . . . 16-17

CHAPTER - FIVE

BACPS & BEFTN . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . 18-23


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EXECUTIVE SUMMARY Decisions relating to working capital and short term

financing are referred to as working capital

management. These involve managing the relationshipbetween a firm's short-term assets and its short-term

liabilities. The goal of working capital management is to

ensure that the firm is able to continue its operations

and that it has sufficient cash flow to satisfy both

maturing short-term debt and upcoming operational

expenses.

To understand practical implication of Working Capital

Management theory we choose Gsk Limited. Gsk

Limited.Glaxosmithkline(gsk) bangladesh limited carries

with it an enviable image and reputation for the past 6

decades. A subsidiary of glaxosmithkline plc- one of the

world's leading research-based pharmaceutical and

healthcare companies gsk bangladesh, continues to be

committed to improving the quality of human life by

enabling people to do more, feel better and live longer.

The companys principle activities include secondary

manufacture of pharmaceutical products and marketing

of vaccines, pharmaceutical healthcare products and

healthfood drinks

In Gsk, Inventories are stated at the lower of cost and

net realizable value. Costs incurred in bringing the

inventories to their present location and conditions are

accounted on a weighted average basis. Net realizable

value is the estimated selling price in the ordinary

course of business, less estimated costs of completion

and the estimated costs necessary to make the sale.

Provision is made if necessary, for obsolete and slow-

moving item.

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. As we

know, the emergence of receivables in business

operation cerates revenue and cost. Hence, the volume,composition and movements of receivables are required


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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.Cash and cash equivalents of Glaxo

Smithkline Bangladesh Limited comprise of the cash on

hand and at bank and demand deposits. These also

include bank overdrafts that form an integral part of the

companys cash management.GSK BD Ltd. uses the

different components of spontaneous sources for

financing investment in current assets. They use trade

credit and outstanding expenses to support their working

capital needs.

Part one of this report consists of origin, objectives,

scope, limitations, and sources. Part two for

company overview, Part three for defining working

capital, Part four-Part nine represent Descriptive

analysis of the companys working capital

management. Part ten-eleven consists of findings,

conclusion, appendix & bibliography. At last we

have drawn our conclusion on the overall term

paper.


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1IntroductionNow a days education is not just limited to books and classrooms. In todays

world, education is the tool to understand the real world and apply

knowledge for the betterment of the society as well as business. From

education the theoretical knowledge is obtained from courses of study, which

is only the half way of the subject matter. Practical knowledge has no

alternative. The perfect coordination between theory and practice is of

paramount importance in the context of the modern business world in order

to resolve the dichotomy between these two areas. Therefore, for the B.B.A.program we are assigned to prepare a report on the internet marketing. It is

an important Working Capital Management (405) and it also plays a vital role

on the over all corporate world.

Our objectives are..

To show the over all operational procedure, benefit,safety and its limitations.

To increase our experience in the working capitalmanagement.

To know the efficient tools and use of working capitalmanagement technique.

To get the overall scenario of working capitalmanagement ofGlaxiSmithKline.

To find out the report requirements we had to analyze and some

comparisons the information about the different tools that are used to

manage the working capital efficiently. We also have collected some

information from different books, periodicals, websites and specially the

annual report of GlaxiSmithKline. We would like to mention that this report

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Origin of the Report

Objective of the Report

Scope of the Report


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C Management

basically focuses only on the working capital management. A sincere effort

had been placed while the information was collected and a careful study of

them made this report loaded with information and several

recommendations when there is also pointed out decisions made.

While preparing this report, we have faced some problems. The main

problem was to co-ordination all the group members. Moreover, during

data collection we faced several problems.

Due to limited access of the data, this study may not be

perfect to the scent percent.

Lack of enough experience in analyzing a huge volume of

data

Limitation of time to prepare the report.

Due to inadequate information, in-depth analysis could

not be done in the report

This reports research focuses on present condition and use of working

capital management ofGlaxiSmithKline. For the purposes of the report some

data are collected from given study sheet by our honorable course instructor

and the annual report of GlaxiSmithKline. The data types are primary that is

collected through survey and Secondary types of data is collected through

different publications, here we have used only secondary data and only that

one was possible and related with our topics.

Secondary sources:

Given study sheet by our honorable course instructor

Records and documents.

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Limitations of the Report

Sources and Methodology


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Books, texts, and publications.

Associations and Institutions

Websites.

Annual report ofGlaxiSmithKline

2overview of glaxosmithklineCorporate status and background

Glaxosmithkline(gsk) bangladesh limited carries with it an enviable image

and reputation for the past 6 decades. A subsidiary of glaxosmithkline plc-

one of the world's leading research-based pharmaceutical and healthcarecompanies gsk bangladesh, continues to be committed to improving the

quality of human life by enabling people to do more, feel better and live

longer. The companys principle activities include secondary manufacture of

pharmaceutical products and marketing of vaccines, pharmaceutical

healthcare products and healthfood drinks

In 1949 the company commenced its journey in bangladesh with its

corporate identity as glaxo in chittagong as an importer of products from

the glaxo group companies. It started spreading its spectrum from being an

importer to a manufacturer by establishing its own manufacturing unit at

chittagong in 1967. The facility till date is considered as one of the centres of

excellence in global manufacturing & supply network of the group.

The global corporate mergers and acquisitions has seen the evolution of the

companys identity in the past 6 decades. In line with mergers and

acquisitions the identity changed from glaxo to glaxo wellcome bangladesh

limited following the burroughs wellcome acquisition in 1995 and finally to

glaxosmithkline bangladesh limited during 2002 after merger with

smithklinebeecham in december 2000. The mega merger of the company

enables it to deliver cutting edge advancements in health care solutions. The

relentless commitment, setting of standards of ethical standards and quality

backed leading edge technology of the company has built a strong

relationship between the stakeholders and gsk bangladesh. With the ever

committed 615 numbers of personnel all over the country gsk bangladesh,

which now comprises of both pharma and consumer, continually strive to

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C Management

meet the glaxosmithkline mission to improve the quality of human life by

ensuring healthcare products, health drinks and different corporate social

responsibility programs.

Gsk is committed to developing new and effective healthcare solutions. The

values on which the group was founded have always inspired growth and willcontinue to do so in times to come.

Gsk products

Gsk bangladeshs portfolio includes both pharmaceutical products and

consumer products. The pharmaceutical side includes prescription

medicines,vaccines and non prescrition medicines. Our prescriptionmedicines range across therapeutic areas such as anti-bacterial, respiratory,

dermatology,oncology, gastro- intestinal, cardiovascular and other diseases.

The company is the market leader in most of the therapeutic categories in

which it operates. We offer a range of vaccines, for the prevention of

hepatitis a, hepatitis b, invasive disease caused by h, influenzae, chickenpox,

diphtheria, pertussis, tetanus and others.

In bangladesh, gsk's consumer brands are the major players in the health

food drink category. The powerful portfolio includes horlicks, boost, maltova

and viva which owns an enviable market share of 85%. Among them,

horlicks, a trusted & heritage brand, enjoys 76% market share. Horlicks

which has been re-launched in 2008, following intense market research and

product development activities, with an improved formulation is clinically

tested to make children taller, sharper & stronger".

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3BASICS OF WORKING CAPITALMANAGEMENT

Working capital

Definition of working capital

Working capital is the fund invested in current assets and is needed for

meeting day to day expenses. It occupies an important place in a firms

balance sheet.

Working capital is the capital required to meet the day to day operational

expenditures of a company. In other words, working capital is the capital

needed to purchase the current assets of a company.

Gross working capital:

Gross working capital is the summation of the total current assets.

Net working capital:

Net working capital is the difference between total current assets (gross

working capital) and total current liabilities.

items of working capital:

cash

Account receivables

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Gross working


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Inventory

Pre-paid expenses

Marketable securities

Items of current liabilities:

Accounts payable

Accrued expenses

Short term bank loan

Bills payable,

Bank overdraft, etc.

The working capital is the finance required to meet the costs involved during

the operating cycle or business cycle. Operating cycle or working capital

cycle is the period involved from the time raw materials are purchased to the

time they are converted into finished goods and the same are finally sold

and realized. The need for current assets arises because of operating cycle.

The operating cycle is a continuous process and therefore the need for

current assets is felt constantly. Each and every current asset is nothing but

blockage of funds. Therefore, these current assets need to be financed which

is done through working capital financing which is a specialized area and isdesigned to meet the working requirements of a business.

In the figure below, we can see that the firm needs cash to purchase raw

materials as inputs for the finished products. The firm also incurs some cash

expenses in the work in progress stage of the production and finally

produces finished goods to be sold to customers. From the purchase of raw

material to the sale of the finished goods to the customers at cash firm

usually does not get any cash. If firm sells on credit to customers then it also

does not receive cash for the sale of the goods immediately. During this

period firms investment in the production of goods remained tied up. This is

why the firm needs working capital financing for the smooth run of

production process and the operation of the business firm continuously.

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Figure: cash flow and the working capital cycle

Sources of working capital

Working capital can be financed mainly from two sources which has been

shown below-

Fluctuating or temporary working capital

The extra working capital needed to support the changing production and

sales is called fluctuating or variable or temporary working capital. This has

to be financed on short term basis. The main sources for financing this

portion are shown below-

Spontaneous financing:

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Cas

h


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Trade credit

Advance from customers

Accrued expenses

Money market credit:

Commercial paper

Bankers acceptance

Short term bank loan :

Line of credit

Revolving credit

Single payment credit transaction loan

Others-

Accounts receivable financing

Factoring

Inventory financing

Permanent or fixed working capital

There is always a minimum level of current assets or working capital which is

continuously required by the firm to carry on its business operations. This

minimum level of current assets is known as permanent or fixed working

capital. It is permanent in the same way as the firms fixed assets are. This

portion of working capital has to be financed by permanent sources of funds

such as; share capital, reserves, debentures and other forms of long term

borrowings.

Therefore, we see that the main sources of working capital financing include

trade credit, bank credit, factoring, accounts receivable financing and

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commercial paper. Out of all these, this paper is related only to bank credit

which represents the most important source for financing of current assets.

The firms generally enjoy easy access to the bank finance for meeting their

working capital needs. It is in this context that bank financing assumes

significance in the working capital financing of business firms.

Working capital management

Decisions relating to working capital and short term financing are referred to

as working capital management. These involve managing the relationship

between a firm's short-term assets and its short-term liabilities. The goal of

working capital management is to ensure that the firm is able to continue its

operations and that it has sufficient cash flow to satisfy both maturing short-

term debt and upcoming operational expenses.

Major areas ofwc management

Guided by the above criteria, management will use a combination of policies

and techniques for the management of working capital. These policies aim at

managing the current assets (generally cash and cash equivalents,

inventories and debtors) and the short term financing, such that cash flows

and returns are acceptable.

cash management. Identify the cash balance which allows for the business

to meet day to day expenses, but reduces cash holding costs.

inventory management. Identify the level of inventory which allows for

uninterrupted production but reduces the investment in raw materials - and

minimizes reordering costs - and hence increases cash flow.

credit management. Identify the appropriate credit policy, i.e. Credit terms

which will attract customers, such that any impact on cash flows and the

cash conversion cycle will be offset by increased revenue and hence return

on capital (or vice versa).

short term financing. Identify the appropriate source of financing, given the

cash conversion cycle: the inventory is ideally financed by credit granted by

the supplier; however, it may be necessary to utilize a bank loan (or

overdraft), or to "convert debtors to cash" through "factoring". Financial

statements have been prepared and disclosures of information made in

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accordance with the requirements of the companies act 1994, the securities

and exchange rules 1987, and international accounting standards (iass)

adopted by the institute of chartered accountants of bangladesh (icab) as

bangladesh accounting standards (bass) and bangladesh financial reporting

standards (bfrss).

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4Overall Working Capital

management of Gsk

Sl

Particulars

200

9

201

0

201

1

i Raw materialsconversion period 60 51 60 days

ii

WIP conversion period 22 34 35

day

s

iii Finished goods

conversion period 45 42 48

day

s

iv Inventory conversionperiod [i+ii+iii] 126 127 144 days

v

A/R conversion period 51 48 11

day

s

Vi Gross Working Capital

Cycle [iv+v] 178 175 154

day

s

vi

i A/P conversion period 65 111 110

day

s

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vi

iiNet Working Capital

Cycle or Cash conversion

cycle [vi-vii] 112 64 45

day

s

There is no significant fluctuation in raw materials conversion period of Gsk

in the last three years. Work-in-process conversion period increases slightly

after the year 2009 and finished goods conversion period remains as usual.

As a result there is slightly increase in inventory conversion period over the

last three years.

Accounts receivable conversion period decreases over the years. There is asignificant decrease in 2011 due to tight credit policy and good collection

effort.

As a result gross working capital cycle decreases over the years. But this

significantly decreased in 2011 due to significant decrease in accounts

receivable conversion period.

Accounts payable conversion period has been increased significantly after

2009. It may be due to availability of raw materials or high bargaining power

of supplier.

As a result Net Working Capital Cycle or Cash conversion cycle

decreases over the years. But this significantly decreased after 2009 due to

significant increase in accounts payable conversion period.

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82 46 1

Work in Process 9926

4

1739

61

26985

8

Finished goods 2459

13

2648

09

41900

1

Total Inventory 5897

59

6746

16

11158

40

Raw materials:

2009 2010 2011

Opening raw & packaging

materials

30072

1

24458

2

23584

6

Purchased 14127

24

16401

84

27596

29

Raw & packaging

materials available

17134

45

18847

66

29954

75

Closing raw & packagingmaterials

(244582)

(235846)

(426981)

Raw & packaging

materials consumed

14688

63

16489

20

25684

94

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Based on the above information raw materials conversion period of Gsk is

calculated. Raw materials conversion period of Gsk is shown below

year 2009 2010 2011

RMCP 60 51 60 days

From the above graph we see that there is slight fluctuation in raw materials

conversion period of Gsk. Raw materials conversion period of Gsk decreased to 51

days from 60 days in 2010 and increased to 60 days in 2011.

Work-in-process:

2009 2010 2011Total costs 17161

65

19121

08

28477

46

Opening inventory of Work-in-

process

42990 99264 17396

1

Closing inventory of Work-in-

process

(9926

4)

(17396

1)

(26985

8)

Costs of productions 16598

91

18374

11

27518

49

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Based on the above information work-in-process conversion period of Gsk is

calculated. work-in-process conversion period of Gsk is shown below

Year 2009 2010 2011

WIPCP 22 34 35 days

From the above graph we see that work-in-process conversion period of Gsk is

increasing over the years.there is a slight increase to 35 days from 34 days in 2011.

Finished goods:

2009 2010 2011

Costs of productions 16598

91

18374

11

27518

49

Opening inventory of finished

products

23196

2

24591

3

26480

9

finished products purchased

44756

9

58229

3

82590

6

finished products avilable

23394

22

26656

17

38425

64

Closing finished goods

(24591

3)

(26480

9)

(41900

1)

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Replacement, medical

attention, and others issues

(14120

)

(11066

)

(36893

)

Cost of goods sold

20793

89

23897

42

33866

70

Based on the above information finished goods conversion period of Gsk is

calculated. finished goods conversion period of Gsk is shown below

year 2009 2010 2011

FGCP 43 40 45 days

From the above graph we see that there is slight fluctuation in finished goods

conversion period of Gsk. Finished goods conversion period of Gsk decreased to 40

days from 43 days in 2010 and increased to 45 days in 2011.

Based on the above information inventory turnover and inventory conversion periodare calculated

200

9

201

0

201

1

Inventory turnover 2.90 2.87 2.58 Time

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s

Inventory processing

period 124 125 140

days

From the above graph we see that inventory turnover of Gsk is decreasing over the

years and this happens due to higher inventory processing period over the years.

From the above graph we see that inventory processing period is increasing over

the years. There was a slight increase to 125 days from 124 days in 2010.

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6Receivable management ofgsk

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. 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.

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. The traditional method is 5 Cs (Capital, Character,

Collateral, Capacity and Condition), which is very popular method for quick credit

granting measuring creditworthiness of applicant. An alternative to this traditional

approach is Judgmental Scoring approach. There are two basic versions of these

systems. One is Checklist System and the other one is Weighted Scoring System.

2009 2010 2011

Accounts receivables

3696

61

4102

86

1305

65

Prepaid expenses

3980

3

5261

8

8079

9

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Total trade and other receivables

4094

64

4629

04

2113

64

Based on the above information accounts receivables turnover and averagecollection period of Gsk are calculated. Accounts receivables turnover and average

collection period of Gsk are shown below

200

9

201

0

201

1

A/R turnover

7.0

3

7.5

6

33.

17

Time

s

A/R Collection

period 51 48 11

days

From the above graph we see that A/R turnover is increasing over the years. There

is a remarkeble increase to 33.17 times from 7.56 times in 2011. This happens due

to lower average collection in 2011.

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From the above graph we see that A/R collection period of Gsk is decreasing over

the years. There is a remarkeble decrease to 11 days from 48 days in 2011. This

happens due to tight credit policy in 2011.

7Management of Accruals and

Payable of gsk

Accounts Payable:A firm can utilize this fund for financing purpose since it istermed 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.

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.

2009 2010 2011

Trade payables

2565

00

5045

01

8419

70

Expenses payables

7896

7

9598

9

9729

6

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Others payables

2599

6

3238

9

5582

8

Total trade and others payables

3614

63

6328

79

9950

94

Based on the above information accounts payable turnover and payable payment

period of Gsk are calculated. Accounts receivables turnover and average collection

period of Gsk are shown below

200

9

201

0

201

1

A/P turnover 5.51 3.25 3.28Time

s

A/P payment period 65 111 110 days

From the above graph we see that A/P turnover is decreasing over the years. There

is a slight increase to 3.28 times from 3.25 times in 2011.

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From the above graph we see that A/P collection period of Gsk is increasing over the

years. There is a remarkeble increase to 111 days from 65 days in 2010. This

happens due to the bargaining power of Gsk and good relation with the suppliers.

8cash management ofgsk

Cash is the important current asset for the operation of the business. The

firm should keep sufficient cash, neither more nor less. Cash shortage will

disrupt the firms manufacturing operations while excessive cash will simplyremain idle, without contributing anything towards the firms profitability.

Thus, a major function of a financial manger is to maintain a sound level of

cash position.

Cash management is concerned with the managing of cash flows into and

out of cash flows into and out of the firm, cash flows within the firm, and

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cash flows within the firm. Cash management ensures adequate control over

cash position to keep the firm sufficiently liquid and to use excess cash in

some profitable way.

Cash and cash equivalents

Cash and cash equivalents of Glaxo Smithkline Bangladesh Limited comprise

of the cash on hand and at bank and demand deposits. These also include

bank overdrafts that form an integral part of the companys cash

management.

Composition of Cash and Cash Equivalents

Particulars 2009 2010 2011

Term deposit with scheduled CBs 81,961 515,281 556,500

SND accounts with scheduled CBs 216,255 100,491 13,703

Current account with scheduled

CBs

15,586 49,747 199,018

Cash, cheques & draft in hand 493 524 1,363

Total Cash and Cash Equivalents 314,295 666,043 770,584

Changes in the Cash and Cash

Equivalents

312,358 351,748 104,541

From above table, we see that the GSK BD ltd. has maintained its major

portion of cash and cash equivalents in the term deposits with the scheduled

commercial banks. Second major part of the cash and cash equivalents is

kept as the special notice deposit accounts with the scheduled commercial

banks. The company also maintains cash in the current accounts with the

scheduled banks and in hand.

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. Cash from the credit sales are collected throughmarketing 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.

GSK BD ltd. uses the Banks with accelerated clearing capabilities for

controlling the movement of funds and minimizing idle cash balances.

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Cash Forecasts: GSK BD Ltd. forecast cash to anticipate cash surplus and

shortage, estimate timing of borrowing and lending of funds and have better

control over funds. For this purpose they prepare Cash Forecasting

Statements on half yearly basis. The company maintains a line of credit

arrangement with banks to meet any contingencies.

GSK BD Ltd. actually does not use any specific models of cash management

such as the Baumol Mode, the Beranek Model, the Miller-Orr Model, and the

Stone Model. The companies experienced continuous cash flow.

9Measurement of Liquidity

of gsk

We have examined the following Ratios of Glaxo Smithkline Bangladesh

Limited for the years ended 31 December 2009 through 2011 based on its

financial statements for those years.

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2009 2010 2011

Current Ratio 3.06 2.56 2.03

Quick Ratio 1.69 1.60 0.95

Cash Ratio 0.73 0.95 0.75

Inventory turnover Ratio 2.90 2.87 2.58

Inventory processing period (in days) 124 125 140

A/R turnover Ratio 7.03 7.56 33.17

A/R Collection period (in days) 51 48 11

A/P turnover Ratio 5.51 3.25 3.28

A/P payment period (in days) 65 111 110

Cash Conversion Cycle or Net Working

Capital Cycle

110 62 41

Current assets to Total assets ratio 0.78 0.82 0.81

Current ratio has decreased over the years due to increased current

liabilities over the years.

Quick ratio has decreased significantly due to significant increase in

inventories over the years.

Cash ratio has slightly increased with little fluctuations over the years as

cash and cash equivalents have fluctuated over the years.

Inventory Turnover has decreased over the years and inventory conversion

period has increased over the years.

Receivable turnover has increased significantly due to the changes in the

credit policy (Tighten up of the Credit Policy) and this collection period hasalso decreased.

Payable turnover has decreased due to increased amount of trade payables

compare to the increase of cost of raw material purchased. As a result

Payable payment period has increased.

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Cash conversion cycle has decreased over the years due to increase in

accounts payable payment period with the increase in accounts receivable

collection period.

Current assets to total assets ratio has increased very slightly over the three

years period which is good for the companys liquidity position.

Therefore, we can say that overall liquidity position of GSK BD Ltd. is at

satisfactory level and has more liquidity than the industry average.

10Financing Current

Assets

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Glaxo SmithKline Bangladesh Limited finance their working capital from the

following three sources-

Long term sources

GSK BD Ltd. finances major part of their investment in current assets fromtheir internal sources such as reserve and surplus. They do not use any long

term debt to finance the investment in working capital.

Short term sources

Usually, GSK BD Ltd. do not take short term bank loans to finance the

investment in current assets. But if the face any difficult situation then they

use the line of credit facility to the contingent needs.

Spontaneous sources

GSK BD Ltd. uses the different components of spontaneous sources for

financing investment in current assets. They use trade credit and

outstanding expenses to support their working capital needs.

11findings &

conclusion

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Findings

analyzing the whole report we can obtain following findings:

Gsk employed renowned and efficient professionals to conduct their

management specially wc management. As a manufacturing business they consider different types of raw

materials and WIP and various product as inventories.

They maintain their accounts receivable considering their distributorsas debtors.

Liquidity condition of the company is satisfactory.

Gsk limited meets their short term financing needs through short termbank overdraft from banks banks.

Use of information technology at Gsk limited makes work easy andfast.

Gsk makes an important role in our economy.

Conclusion

Now a days education is not just limited to books and classrooms. In todays

world, education is the tool to understand the real world and apply

knowledge for the betterment of the society as well as business. From

education the theoretical knowledge is obtained from courses of study, which

is only the half way of the subject matter. Practical knowledge has no

alternative. The perfect coordination between theory and practice is of

paramount importance in the context of the modern business world in order

to resolve the dichotomy between these two areas. Therefore, for the B.B.A.

program we are assigned to prepare a report on the internet marketing. It is

an important Working Capital Management (405) and it also plays a vital role

on the over all corporate world. To find out the report requirements we had

to analyze and some comparisons the information about the different toolsthat are used to manage the working capital efficiently. We also have

collected some information from different books, periodicals, websites and

specially the annual report of GlaxiSmithKline. We would like to mention that

this report basically focuses only on the working capital management. A

sincere effort had been placed while the information was collected and a

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careful study of them made this report loaded with information and several

recommendations when there is also pointed out decisions made.

This reports research focuses on present condition and use of working

capital management of GlaxiSmithKline. For the purposes of the report some

data are collected from given study sheet by our honorable course instructorand the annual report of GlaxiSmithKline. The data types are primary that is

collected through survey and Secondary types of data is collected through

different publications, here we have used only secondary data and only that

one was possible and related with our topics.

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12appendix

b i b l i o g r a p h yb i b l i o g r a p h y

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Persons

M. Shahjahan Mina

Professor


University of Dhaka

Books

Financial Management by I M Pandey Nine Edition

Working Capital Management and Control ( Principles & Practice) by Satish

B. Mathur

Working Capital Management (A Comparative Study) by Vijayakumar

Websites

www.gsk.com

www.investopedia.com

www.investinganswers.com

Others

Annual Report and Publications ofGlaxiSmithKline.

Bangladesh Information and Technology (IT) Firm owners Association

Microsoft Student 2008. 1993-2008 Microsoft Corporation

Microsoft Math 2008. 2007-2008 Microsoft Corporation
http://www.gsk.com/http://www.investopedia.com/http://www.investinganswers.com/http://www.gsk.com/http://www.investopedia.com/http://www.investinganswers.com/

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Final 405 net working capital

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