Course Code: FIN301 Semester: Autumn’21

Group name

Alpha Finance

Topic: Working Capital Performance Analysis of Mir Akhter Hossain

Limited.

Group Representative / Leader Name: Bushra Haque

ID # 1930306

Phone Number: +8801992177175

Submitted By

Name ID contribution

1) Labiba Anjumi Kabir 1910042 Executive summary, Literature

Review, Operating cycle
2) Ummaye Mayesha Manna 1930085 Accounts Receivable Period

3) Bushra Haque 1930306 Days in Inventory, Conclusion

(Excel)

4) Tahfima Mahmuda 1931038 Cash cycle

5) Anisuzzaman Rohan 2020134 Current Ratio

6) Saifinatun Nur Hafsa 2021980 Payable Period

(Graph & Excel)

Date of submission: 4th December 2021.

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Letter of Transmittal
To,
Mr. Anwar Zahid,
Department of Finance,
Independent University, Bangladesh,
Dhaka, Bangladesh.

Date: 4th December 2021.

Subject: Submission of report on Working Capital Performance Analysis of Mir Akhter Hossain
Limited.

Sir,

With due respect, it is our pleasure and honor to be your students and have the opportunity to
present the report on Working Capital Performance Analysis of Mir Akhter Hossain Limited . While
preparing the report, we have given our best to exhibit and highlight the analysis based on
operating cycle, inventory period, payable period, accounts receivable period, current ratio, and
cash cycle of Mir Akhter Hossain Limited before and during covid-19 pandemic on the working
capital performance. We believe we have provided adequate information on our observation and
suggestions about the company in the report.

We gave our best to accumulate required information and we will be more than happy to answer
any queries and clarify it to your full understanding. Thank you for all your help and support in
preparing this report.

Sincerely,

Alpha Finance.
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Acknowledgement
With great pleasure and honor, we want to express our heartiest gratitude and obligation to our
course instructor Mr. Anwar Zahid sir. His valuable guidance and advice have inspired us greatly
to work in this project. His willingness to help and support us throughout the project has
motivated us to contribute to the project to our fullest.

We would like to thank the authority of Independent University, Bangladesh for providing us
with the tools and facilities to complete this project.

Lastly, we are grateful to those who have directly and indirectly contributed towards the
preparation of this project, especially our group members and our peers who helped us along.
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Table of Contents
LETTER OF TRANSMITTAL...................................................................................................................................1
ACKNOWLEDGEMENT............................................................................................................................................2
WORKING CAPITAL PERFORMANCE ANALYSIS OF MIR AKHTER HOSSAIN LIMITED...................4
EXECUTIVE SUMMARY..........................................................................................................................................5
COMPANY OVERVIEW............................................................................................................................................5
LITERATURE REVIEW............................................................................................................................................6
INVENTORY PERIOD................................................................................................................................................8
ACCOUNT RECEIVABLE PERIOD......................................................................................................................10
OPERATING CYCLE...............................................................................................................................................12
PAYABLE PERIOD...................................................................................................................................................13
CASH CYCLE............................................................................................................................................................14
CURRENT RATIO.....................................................................................................................................................16
CONCLUSION...........................................................................................................................................................16
REFERENCE..............................................................................................................................................................18
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Working Capital Performance Analysis of Mir Akhter Hossain Limited

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Executive Summary
Working capital management is the activity of firms ensuring availability of net current assets for
daily operating activities while keeping other resources invested as productively as possible. 
While proper management of working capital can bring success of firms, shortage of it can lead
to failure of them. The cardinal objective of working capital management is to meet obligations,
grow business and optimize capital performance. 
Managing working capital effectively requires proper balance. And this management includes
the management of current assets and current liabilities. While companies need to have enough
cash available to cover planned and unplanned costs, they must also ensure proper use of funds
available. This can be achieved by optimizing management of accounts receivable, payable,
inventory and cash. 
Throughout the paper, we studied the trend of these measures of working capital management,
which includes: operating cycle, inventory period, accounts receivable period, payable period,
cash cycle and current ratio of Mir Akhter Hossain Ltd. 
While analyzing the trends of these ratios, we saw certain discrepancies before and during the
COVID-19 pandemic. While analyzing days in inventory, the best year was 2016, worst was
2020 which was during pandemic. Days in receivable was higher in 2017, and lower in 2018
which was a good sign. But the company had no receivables in 2016, 2019 and 2020. The best
year for operating cycle was 2016, while the worst was again, during pandemic, in 2020. When it
comes to days in payable, the more the better. Which is why, for the company, 2019 was worst
year, while 2020 was best. The higher the current ratio of a company, the better pf it is. So, for
Mir Akhter Hossain, the company had the best year in terms of current ratio in 2019 and worst
was again during pandemic. 

Company overview
Mir Akhter Hossain Ltd. is a private limited company, which has turned into the forefront of
construction industry in Bangladesh.  The company has their own experienced and dedicated
civil, electrical and mechanical engineers, management personnel and skilled technicians. Mir
Akhter Hossain Ltd. has adequate facilities to undertake precision engineering projects of
considerable magnitude.
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Since inception,the company has executed many successful projects as construction of

international standard highways, bridges, factory for sugar mills and textile ,ills, pharmaceutical
complexes, functional buildings, 5-Star hotels, auditoriums, warehouses, Food and Fertilizer
warehouses, railway tracks, power stations and many more. The company has executed several
international standard roads, highways and bridges individually and via joint venture with
companies like F.F. Cruz & Co. Inc. of Philippines, Samwhan Corporation of Korea as well as
China Harbour Engineering Company and H.H. Consortium of China. Some of the most
successful projects of Mir Akhter Hossain Company are 5-Star Hotel Sheraton, 5-Star Hotel
Radisson at Dhaka, 18-storied Islami Bank Tower of Islami Bank Bangladesh Ltd. at Dilkusha,
Dhaka, Pharmaceutical Complex of Rhone Poulenc Rorer Bangladesh Ltd. at Tongi, Gazipur;
concrete, New Elementary School/Library and physical facilities building of American
International School at Baridhara, Dhaka, British High Commissioner’s New Residence and
British High Commission’s Amenities Centre at Baridhara, etc and are now executing
Independent University, Bangladesh (IUB) at Bashundhara, Dhaka, 500 bed Hospital at
Khilgaon Dhaka and more.

Literature Review
Working capital management is a business tool activity of firms ensuring the availability of net
current assets for day-to-day operating activities while keeping other resources invested as
productively as possible. 
Working Capital = Current Assets - Current Liabilities.
Here, current assets include cash, accounts receivable, and inventories while current liabilities
include accounts payable, short-term borrowings, and accrued liabilities. 
To ensure proper availability of appropriate resources for daily activities of a firm to protect the
company’s existence is crucial. Unchecked  cashflow, uncontrolled company policies, limitations
in short-term financing can result in restructuring, liquidation of assets, and in extreme cases,
even liquidation of the firm.
Effective management of working capital is imperative, but due to potential interactions between
its factors, small mistakes can result in extreme measures. 
Factors That Affect Working Capital Needs
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However, working capital requirements vary for every firm. The factors that cause these
discrepancies can be divided in 2 categories: 
Endogenous factors: There are certain factors that are dependent on variables within the firm.
These factors are known as endogenous factors. Endogenous factors that can cause discrepancies
in working capital needs of firms are the firm’s size, structure, and strategy.
Exogenous factors: The independent factors that don’t depend  on variables within the company
are called exogenous factors. Exogenous factors that can cause differences in working capital
needs of firms are accessibility of banking services, interest rates, economic conditions etc.
Objectives of working capital management
So far, we can agree how crucial effective management of working capital really is. Working
capital management has 2 key objectives: 
Ensure liquidity: The first objective of working capital management is to ensure liquidity. Any
business with insufficient working capital is incapable of meeting obligations when they’re due.
This inevitably leads to delay in payments to employees, suppliers and credit providers, resulting
in loss of employee loyalty, supplier discounts and damaged credit rating. In extreme cases, no
payment can lead to the compulsory liquidation of company assets to pay off creditors. 
Profitability: The second objective of working capital management is profitability. As funds
tied to working capital can generate very little or none at all, firms with high working capital
may fail to meet expectations of investors.
Managing working capital properly requires a trade-off between liquidity and profitability. One
of the more obvious trade-offs is holding of cash. While cash can provide liquidity to a firm, it
generates low return, when held in form of cash and cash equivalents as treasury bills and notes,
commercial paper, certificates of deposit, money market funds etc. 
Although optimal availability of working capital exists in theory, it is not as easily achievable
due to factors beyond a firm’s management control. Currently, due to the pCOVID-19 pandemic,
we see certain bumps in supply chain influencing inventory levels in every sector starting from
food, medical supplies to electronics, automobiles etc. But that cannot be a reason for ill-
maintained working capital for a firm. Hence, businesses must at the very least avoid the
extremes:
Overtrading: Overtrading is the event of excessive trading and insufficient working capital to
support daily business activities. Overtrading, also known as under-capitalization can be
characterized by high proportion of short-term finance to long-term finance. This can lead to
decreased quality, increased wait time, impatient supply, threat of late payments and increased
stress level for a firm.
Over-capitalisation: As opposed to overtrading, firms tend to raise excessive working capital
compared to its requirements in the event of overcapitalisation. Overcapitalization can damage
reputation and goodwill of firms and cause difficulty in raising additional funds when needed,
leading to declined share value and decreased credit standing etc.
Managing Liquidity
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Proper management of liquidity is an imperative part that ensures the possession of enough cash
resources for the company’s primary business needs and unexpected needs of a reasonable
amount and accounts for the creditworthiness of the firm, which contributes to determining its
success. Proper liquidity management is achieved at an appropriate availability of cash and the
firm's capability to efficiently generate resources to finance its business needs.
Lower liquidity often leads to financial distress of a firm, other conditions being equal. But
again, excessive capital parked in low- or non-earning assets reflects a poor allocation of
resources.
Managing Accounts Receivables
Firms and companies tend to give customers flexibility of credit while ensuring right amount of
cash flow through operations. Companies can determine the credit terms to offer based on the
financial capability of customers, industry policies, and the competitors.
These credit terms can be minimal, such as, the customer is generally given a set number of days
to clear the invoice (between 30 and 90). These terms are cash before delivery, cash on delivery,
bill-to-bill, or periodic billing etc which can be determined by company’s policies and manager’s
discretion.
Managing Inventory
Aim of inventory management is to ensure the company is keeping adequate level of inventory
to deal with primary operations and fluctuations without having to invest too much capital in the
asset.
However, an excessive level of inventory means an excessive amount of capital tied to it, which
increases the risk of unsold inventory at the end of each period and plumet the value of it. But
shortage of inventory would result in lost sales for the company.
Managing Short-Term Debt
Similar to liquidity management, managing short-term financing also focuses on ensuring
possession of enough liquidity to finance short-term operations without increasing excessive risk.
The proper management of short-term financing involves using the right financing instrument
and accessing proper amount of funds through each of them. These sources include regular credit
lines, revolving credit agreements, discounted receivables, and collateralized loans etc. A firm
must ensure proper liquidity access to deal with needs. 
Managing Accounts Payable
Accounts payable comes from on credit sales granted by a company’s suppliers, as part of the
normal operations. Here a balance between early payments and commercial debt is crucial.
While early payments can reduce availability of liquidity unnecessarily, which could have been
put to productive use. And late payments can damage the company’s reputation and goodwill,
while a high level of commercial debt could reduce its creditworthiness.
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Working capital performance of Mir Akhter Hossain LDT

Inventory period
Days in inventory is a ratio which measures efficiency of a firm. It measures the average number
of days the company holds its inventory before selling it. The formula we used is Days in
inventory= 365/Inventory turnover period.We have calculated inventory turnover by 
sales/inventory. If the inventory turnover decreases, the days in inventory will increase. And if
the inventory turnover increases, the days in inventory will decrease. If the days in inventory are
less, it is good. The company is managing their inventory  properly.
Normally a small average inventory period indicates that a business is more efficient in terms of
sales performance & inventory management. Firms with lower inventory period reflect fast sales
of inventory stocks so would minimize handling costs like warehouse rent. There is also a risk
involved when you keep your inventory for a longer period. 
On the other hand, firms with high inventory period indicate either a slow sales performance or
an excess of purchased inventory. However, it can also mean the firm is keeping high inventory
levels to meet high customer demand.Moreover the average inventory period varies from
industry to industry.

Year Inventory Turnover Days In Inventory

2016 1.76 208

2017 1.50 243

2018 1.48 247

2019 1.72 213

2020 0.88 417

 
We can see the data in 2016, inventory turnover is 1.76 times which has resulted in the days in
inventory. In 2017 the inventory turnover declined to 1.50. And we know, the less inventory
turnover causes a higher inventory period. So, because of the decrease in inventory turnover in
2017, the days in inventory increased to 243 days. By this we can say that the company did not
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manage their inventory properly in 2017. In 2018 the inventory turnover again plunged to 1.48
times which resulted in the days in inventory to grow at 247 days. That means that year, the
company again did not manage to direct the inventory properly. Then we come to 2019, in this
year surprisingly the company has managed their inventory perfectly and that’s why the
inventory turnover has increased to 0.24 times. The inventory turnover was 1.72 and because of
the increase, days in inventory have dropped to 213 days which is a very good sign for the
organization. All types of businesses worldwide have suffered because of Covid-19 pandemic. 

Mir Akhter Hossain Ltd also faced the impact of Corona. In 2020 there was a huge impact in
inventory turnover. It has decreased to .88 times which is .84 times less than 2019. And because
of this huge decrease, days in inventory have jumped up to 417 days which is a bad sign for the
company. Because of Covid pandemic Mir Akhter Hossain company LDT could not sell their
products on time Thus the products stayed in the inventory. That’s why they had to hold the
inventory for a long period.

Account receivable period

Days in receivable is the number of days that a customer invoice is outstanding before it is
collected. It helps you work out how long it takes to clear your accounts receivable. The formula
we have used is Days in receivables = 365/account receivable turnover. The formula we used for
account receivable turnover is credit sales/account receivable. Receivable turnover indicates, if a
company is high in this turnover or not. High receivable turnover means, high portion of
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customers pays their debt quickly. If the receivable turnover is high, then the days in receivable
will be low which is good for a company.

Year Receivable turnover Days In receivable

2016 0 0

2017 5.39006050 68

2018 6.50114192 57

2019 0 0

2020 0 0

 
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From the company data, we can see that in 2016 the company had no Account receivable
turnover and because of that the company didn’t have to collect money from their customers or
debtors. That has resulted in the days receivable to be at 0 days. In 2017 the Account receivable
turnover was 5.39006050 times. And the days in receivable was 68 days. Means the company's
debtors pay their debt to the company in around 68 days. The less the days receivable, the better.
In 2018 the Account receivable turnover climbed up to 6.50114192 times. And this makes the
days in receivable go down to 57 days, which is 11 days lesser than the previous year. That
means the company collected their debt in lesser days in 2018. After that, in 2019 there was 0
Account receivable turnover, so the days in receivable was also 0. Means in this year they had no
receivables and they had not to collect money from anyone. In 2020, the company had 0 Account
receivable turnover and which resulted in receivable to 0 days. Means during Corona they did
not have any debtors who had to pay to the company.

Operating cycle
The operating cycle is the sum (in days) of the inventory and accounts receivable periods. So the
operating cycle can be broken down into two distinct components; inventory period and account
receivable period. The inventory period is the time it takes for a company to acquire its inventory
and sell it. The account receivable period is the amount of time it takes to obtain the money for
the sold goods from inventory.
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Year Days in inventory Days in account receivable Operating cycle

2016 208 0 208

2017 243 68 311

2018 247 57 304

2019 213 0 213

2020 417 0 417

How a product moves through the current asset accounts is analyzed by interpreting the
operating cycle. Generally, the lower the operating cycle, the better it is for the company because
it means that it takes fewer days for the company to sell its inventory and receive cash for the
sale of inventory.

We can see from the data that, in 2016, the Operating Cycle was 208 days. We can say that in
2016 it took 208 days for the company to sell its inventory and receive cash for the sale of
inventory. In 2017 Operating Cycle increased. In 2017 the Operating Cycle was 311 days. 2017
took a bit higher time than 2016 to sell its inventory. In 2018 and 2019 the Operating Cycle
decreased. In 2018 and 2019 the Operating Cycle was 304 days and 213 days.
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Corona had an impact on Mir Akhter Hossain Ltd. The Operating Cycle had a big impact in
2020. After Corona in 2020 the Operating Cycle increased at a higher rate. In 2020 the Operating
Cycle was 417 days. In 2020 it had the longest operating cycle as of 2020 with 217.8 days and in
2016 it had the shortest operating cycle with 208 days. It affects its Inventory and receives cash.
It took a huge time to sell its inventory and received cash for the sale of its inventory then the
other years.
After analyzing, we can say that in 2016 it has the most impressive numbers when it comes to
the operating cycle.

Payable period
Days in payable is an efficiency ratio that measures the average number of days a company takes
to pay its suppliers/creditors. The formula used is Days in payable = 365/ payable turnover.
Calculated payable turnover by, Cost of goods sold/average payable. Companies with a high
days-in-payable ratio can postpone payments and use the extra cash for short-term investments,
as well as to boost their working capital and free cash flow. However, a higher payable period is
preferable,and may not always be a suitable thing for the company since it could also indicate a
cash shortage and inability to pay its debt.
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Year Payable Turnover Days In Payable

2016 1.00020308359 365

2017 0.93015798224 392

2018 1.08148451003 337

2019 1.15129049341 317

2020 0.76182389693 479

 
The data shows us, in 2016 accounts payable turnover was 1.00020308359 times. and days
payable was 365 days. Means they take 365 days on average to pay to their suppliers. In 2017 the
accounts payable turnover plummeted to 0.93015798224 times. And because of this decrease the
days payable has increased to 392 days. Indicates, in 2017 the company took more time= to pay
to their suppliers then previous year. In 2018 they have decided to pay their suppliers in a shorter
period of time.

Because if every year the company delays in paying their debt, it could result in a bad way. So in
2018 the accounts payable turnover was 1.08148451003 times which resulted in the days payable
to 337 days, which is lesser than 2017. In 2019 the accounts payable turnover again goes up to
1.15129049341 times than last year. And this increase made the days payable declined to 317
days. Which is 20 days less than 2018. In 2020, because of the Corona, the accounts payable
turnover had an extensive fall, which is 0.761 times.
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And because of this huge fall the days in payable grow up to 479 days. Means they took 479
days to pay their creditors. Which is a risky thing for a company. The company did not face this
kind of pandemic situation earlier. And because of the pandemic the business has faced many
difficulties These days the payable have increased so much. In 2020 they had their money in
liquid form for a long time. So they may have used this chance to invest the money somewhere
else.

Cash cycle
The difference between the operating cycle and the account payable period is the cash cycle. In
other words, it is the amount of time, measured in days, it takes a company to convert its paid-for
inventory and other resource inputs into cash. The cash cycle helps assess how efficient a
company is at managing its working capital. A shorter value for the cash cycle means the
company is better at selling its inventories and collecting cash from those sales while paying off
their suppliers. Therefore, shorter cash cycles mean more cash on hand for the company and less
need for them to borrow money.

Year Operating cycle Days in payable Cash cycle

2016 208 365 -157
2017 311 392 -81
2018 304 337 -33
2019 213 317 -104
2020 417 479 -62

The cash cycle can also be negative. Negative cash cycle means the company is not paying for its
inventory. The company is buying everything on credit and the creditors are letting the company
run without demanding money for a long period of time and the firm receives money from its
customer it just pays the creditors back. So a negative cash cycle simply means that the firm
takes longer to pay its supplier or its bills.
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This chart shows the cash cycle of Mir Akhter Hossain Ltd from 2016 to 2020. In 2016 the Cash
Cycle was -157 days. So the negative figure denotes that the company is not paying for its
Inventory and this a very desirable situation to end. That means the company is buying
everything on credit. In 2017 Cash Cycle was -81 days. Cash Cycle decreased in 2017.   In 2018
there was a huge impact in Cash. It has decreased to -33 days. Cash Cycle was Negative. In 2019
Cash cycle increased. In 2019 Cash Cycle was -104 days. Then comes 2020 during which the
Corona Cash Cycle decreased to -62 days. From 2016 to 2020 the cash Cycle was negative.
Negative Cash Cycle means that it takes longer for the company to pay companies suppliers than
it does for Company to sell its products and collect its money, implying that its suppliers
subsidize its operations. Mir Akhter LTD.  recorded negative cash cycles from 2016 to 2020,
because of their long payable period and short operating cycle. In 2016 Cash Cycle was shorter
than the other years. That indicates more cash in hand in 2016. 

Current ratio
The current ratio is used to measure the ability of a company to pay its short-term obligations
due within one year. Investors and analysts use this ratio to evaluate how financially stable a
company is concerning its outstanding debts within a year. Generally, a higher current ratio is
more promising and it is preferable to have a current ratio greater than one as it means the
company is more solvent and can pay off its current debt payments.

Year Current asset Current liabilities Current ratio

2016 3,398,597,367 2,213,370,010 1.54
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2017 4084680001 2743524172 1.49

2018 4819559832 3189945036 1.51
2019 5659383688 3515518048 1.61
2020 5340186444 4328853459 1.23

From the graph, we can see that in 2016, the current ratio was 1.54 Times. It was the second
highest then the other years. In 2017 the current ratio was 1.49 Times. In 2017 the Current ratio
decreased which is not good for the company.  Falling Current Ratio, it indicates insolvency of a
company. In 2018 current Ratio increased to 1.61 Times. Then comes another year. In 2019
Current Ratio was 1.61. After Corona in 2020 Current Ratio was 1.23 Times. In 2020 Current
Ratio was the lowest compared to other years. Mir Akhter Hossain Ltd. had the highest Current
Ratio in 2019. we can say that they are capable enough of paying its obligations because it has a
larger proportion of short-term asset value relative to the value of its short-term liabilities in
2019. But due to Corona in 2020 Mir Akhter Hossain Ltd. lost their capability to meet its short-
term liabilities.

Conclusion
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After doing all the necessary financial measurements such as  inventory period, days in
receivable, Operating cycle, days in payable, cash cycle & current ratio we can conclude that
covid 19 pandemic really hits the company of Mir Akhter Hossia LTD. Particularly they are
struggling to manage their inventory period as lower days in inventory is more preferable, they
also need to take a look into their operating cycle as longer days in operating cycle is not
desirable, shorter operating cycle indicates efficiency and success of a business. Other than these
two indicators we can say in terms of current ratio they are efficiently managing their short term
obligations over the past 4 years.
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Reference
 MIR AKHTER HOSSAIN LTD. (n.d.). MIR AKHTER HOSSAIN LTD.

https://www.mirakhter.net/

 IPO INFORMATION. (n.d.). MIR AKHTER HOSSAIN LTD.

https://www.mirakhter.net/ipo-information/?

fbclid=IwAR0HJL4J4TRXo1akSX9gVXjgNtq7MOdpfWzmb81pQw2VY-

JPpsRMAXruNck

 MIR AKHTER HOSSAIN LTD. (2020, November). Prospectus-of-Mir-Akhter-Hossain-

Limited.pdf. http://www.mirakhter.net/wp-content/uploads/2020/11/Prospectus-of-Mir-

Akhter-Hossain-Limited.pdf?fbclid=IwAR1NVkjmjvsIc_cqBgE-

aIpovZTb4WzjuhdcXtU4r2JYDhff61IKSqMPsdw

 Tuovila, A. (2021, August 3). Working Capital Management. Investopedia.

https://www.investopedia.com/

 Working Capital Management. (n.d.-b). Corporate Finance Institute.

https://corporatefinanceinstitute.com/resources/knowledge/finance/working-capital-

management/

 Fernando, J. (2021, August 5). Inventory Turnover. Investopedia.

https://www.investopedia.com/terms/i/inventoryturnover.asp

 Hayes, A. (2021, April 29). Days Payable Outstanding. Investopedia.

https://www.investopedia.com/terms/d/dpo.asp