Assignment

1309 words - 6 pages

ASSIGNMENT OF
SEMINAR IN WORKING CAPITAL MANAGEMENT

DATE: 29/09/2013


1. BACKGROUND OF THE STUDY:

Bottler's Nepal is one of the leading company is supply of bottlers and also it has better prospect for future profitability. The profitability trend is also good but not up to the market this can be because of lack of competition in the market. The current ratio company seems to be in the growing trend which implies that the firm is able to repay back its debts in time. Somehow, the company faces risk in the overall performance but cannot be considered as a risky business because it is earning a healthy profit. The variables are ...view middle of the document...

* To know the regression analysis of liquidity, profitability, size and leverage section of the Bottlers Nepal Limited.

3. DATA COLLECTION AND METHODOLOGY
Population: 20 manufacturing firms being listed in the (NEPSE)
Sample: The sample of the study covers only one manufacturing company to attain the above mentioned objectives with time duration of 4 years i.e. 2006- 2010 years Methodology
* Microsoft excel
* Balance sheet of Bottlers Nepal
* Secondary data
* Descriptive statistics
* Correlation
* Multiple regressions analysis
* Cash conversion cycle
* Inventory Conversion Period (ICP)
* Account Receivable Period (ARP)

Some common formulas used to calculate the findings are as follows
* Return on assets (ROA)=Net Profit/Total Assets
* ARP =Account Receivables *360/Sales
* Inventory turnover period (ITP) =Inventory *360/Cost of Sales
* Average payable period (APP) =Accounts Payables *360/Cost of Sales
* Cash Conversion Cycle (CCC) =ARP+ITP-APP
* Size= Ln(Total sales)
* Current ratio (CR) = Current assets/Current Liabilities.
* Debt ratio (DR) = Total liabilities/Total assets

DESCRIPTIVE ANALYSIS

The minimum value of ROA as measure of the profitability is -2.17% but the maximum value of ROA is 12.15%. While the mean of ROA is 3.61% of total assets and the standard deviation is 5.22%.
The Account Receivable Period (ARP) has 8 days (approximately) as minimum to collect its receivables from the purchasers but it takes 34.42 days as maximum to collect its receivables. In addition, the Inventory Conversion Period (ICP) takes about 113 days to sell its entire inventory as minimum and takes 181 days as maximum. The mean days to sell the inventory are 142 days with standard deviation of 32 days. About the Account Payable Period (APP), the firm has a minimum 104 days to pay its purchases on account and 236 days as a maximum time. It takes an average 154 days to pay its purchases with standard deviation of 54 days.
The Cash Conversion Cycle(CCC) has -39 days as minimum time and it is illogical value, may be referred to that the account payable period (APP) is larger than both the account receivables and inventory conversion period. The firm needs 107 days as a maximum time from making its payments to receive its cash inflow. It takes an average 8 days from making its payment to receive its cash inflow with standard deviation of 61 days.

Correlation coefficient analysis

We can see that the ROE and CCC share a low significant positive relationship as the correlation is less than 0.5; similarly the Debt ratio (leverage) and CCC share a significant negative relationship as correlation is more than 0.5.
Similarly there is significant positive relationship between ROE and Debt ratio as correlation is above 0.5. This means with the raise in the leverage we see that the profits also increase.ROE, size and liquidity also share a strong significant positive...

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