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Malek Spinning Mills Ltd.

WORKING CAPITAL MANAGEMENT

Malek Spinning Mills Ltd.


Incorporation 02 November 1989
Operation January 01, 1991
Public14 September 2008

Product Premium quality yarn


Capacity 14,621,000 kgs
Location Shafipur, Gazipur
Kazi Mohammad Selim 14-005

Current Assets
Figures are in million tk.
June 09
(Actual)

Current Assets 1,892.2

Cash and Cash Equivalents


Advances, Deposits, Pre-payments
Accounts Receivable
Inventories

June 10
(Actual)

June 11
(Forecasted)

18,782.5

2,112.1

Percentage of Current Assets


Current Assets
Inventory,
2009, 51%Inventory
Account
Receivable,
2009, 39%

Cash,
7%

2009,

June 09
(Actual)
1,892.2

June 10
(Actual)
18,782.5

Account Receivable

June 11
(Forecasted)
2,112.1

Cash

Inventory,
2011, 45%
Account
Receivable,
2011, 35%

Account
Inventory,
Cash,
2010,
Receivable,
2010,2010,
4%3.60%
3%

Cash,
4.70%

2011,

Current Liabilities
Figures are in million tk.

Current Liabilities

June 09
(Actual)

June 10
(Actual)

June 11
(Forecasted)

1,921.8

756.4

1,257.9

Short Term Loan


Current Portion of Long Term Loan
Security Deposit against Sales
Acceptance Liabilities for Raw Cotton
Acceptance Liabilities for Machinery
Creditors and Accrues
Provision for Income Tax

Net Working Capital

Net Working Capital

June 09
(Actual)
-29.4

June 10
June 11
(Actual) (Forecasted)
18,025.90
854.7

Working Capital Policy

Tasfik Awal 14-067

Cost of Goods sold Statement


Jun09 (Actual)

Jun10 (Actual)

Jun11(Forecasted)

Opening Inventory Raw Materials

211,250,433

474,050,838

650,102,860

+Purchase during the period

221,798,459

610,297,115

820,200,110

303,557

245,859,579

271,800,926

432,745,335

838,488,374

1,198,502,044

+Direct Expenses

18,934,082

40,008,096

71,500,100

+Factory Overhead

98,952,804

123,163,615

129,162,600

550,632,221

1,001,660,085

1,399,164,744

90,180,248

232,724,343

410,450,850

640,812,469

1,234,384,428

1,809,615,594

42,348,472

73,074,857

70,599,856

598,463,997

1,161,309,571

1,739,015,738

170,673,973

472,238,309

490,100,690

769,137,970

1,633,547,880

2,229,116,428

97,477,381

180,011,817

211,929,428

671,660,589

1,453,536,063

2,017,187,000

200,129,231

230,158,125

240,540,156

871,789,820

1,683,694,188

2,257,727,156

-Closing Inventory of Raw Materials


Raw Material Consumed

Total Manufacturing Cost

+Work-in-Process - Opening
Cost of Goods available for Use
-Work-in-Process - Closing
Cost of Production
+Finished Goods - Opening
Cost of Goods Available for Sales
-Finished Goods - Closing
Cost of Goods Sold
+Selling, ad.& general expenses
Cost of sales

June 09 (Actual)

June 10 (Actual)

June 11 (Forecasted)

1. Raw Material Conversion Period


(a) Raw material consumption

432,745,335

838,488,374

1,198,502,044

(a) Raw material consumption per day

1,202,070.38

2,329,134.37

3,329,172.34

303,557

245,859,579

271,800,926

(a) Raw material inventory holding days

0.25

106

82

2. Work in Process Conversion Period


(a) Cost of production

598,463,997

1,161,309,571

1,739,015,738

(a) Cost of production per day

1,662,399.99

3,225,859.92

4,830,599.27

(a) Work in process inventory

42,348,472

73,074,857

70,599,856

25

23

15

3. Finished Goods Conversion Period


(a) Cost of goods sold

671,660,589

1,453,536,063

2,017,187,000

(a) Cost of goods sold per day

1,865,723.86

4,037,600.18

5,603,297.22

(a) Finished goods inventory

97,477,381

180,011,817

211,929,428

52

45

38

4. Collection Period
(a) Credit sales at cost

871,789,820

1,683,694,188

2,257,727,156

(a) Sales per day

2,421,638.39

4,676,928.30

6,271,464.32

(a) Debtors

733,896,080

629,187,317

743,008,000

(a) Debtors outstanding days

303

135

118

5. Creditors Deferral Period


(a) Credit purchase

221,798,459

610,297,115

820,200,110

616106.83

1695269.76

2278333.64

104,744,071

24,039,638

81,502,000

170

14

36

(a) Raw material inventory

(a) Work in process inventory holding days

(a) Finished goods inventory holding days

(a) Purchase per day


(a) Creditors
(a) Creditors outstanding days

Inventory Conversion Period


June 09
(Actual)

June 10
(Actual)

June 11
(Forecasted)

0.25

106

82

Work in Process

25

23

15

Finished goods

52

45

38

Inventory Conversion Period

77

174

135

Debtors Conversion Period

303

135

118

Gross Operating Cycle

380

309

253

Payment Deferral Period

170

14

36

210

295

217

Raw material

Net Operating Cycle

Working capital turnover


June 09
(Actual)

June 10
(Actual)

June 11
(Forecasted)

1.71

1.22

1.66

Tafiz Mahmud 14-141

Ratio Analysis
June 09
(Actual)

June 10
(Actual)

June 11
(Forecasted)

Liquid Ratio

0.49

23.71

0.92

Current Ratio

0.98

24.83

1.68

Working Capital Ratio

-0.02

23.83

0.68

Investment in Working Capital


June 09 (Actual)

June 10 (Actual)

June 11(Forecasted)

300,518

246,888,243

272,992,132

Investment in Work-in process

41,560,000

74,194,778

72,458,989

Investment in Finished Goods

97,017,641

181,692,008

84,049,458

Investment in inventory

138,878,159

502,775,029

429,500,579

Investment in Book debts

733,756,432

631,385,321

740,032,790

Investment in advance

58,255,174

10,315,871

242,995,000

Cash Balance

140,489,874

677,831,055

99,087,000

1,071,379,639

1,822,307,276

1,511,615,369

104,738,161

23,733,777

82,020,011

Deferrel payment

1,477,220

1,800,200

2,000,000

Wages

18,934,082

40,008,096

71,500,100

Overhead

98,952,804

123,163,615

129,162,600

Short term loan

862,369,894

212,805,180

200,800,100

1,086,472,161

401,510,868

485,482,811

-15,092,522

1,420,796,408

1,026,132,558

Investment in Raw Materials

Total
Deduct
Creditors

Total
Net working Capial

Inventory Management

Raw material: Raw cotton


Procured from USA only
Malek Spinning Mills Ltd. and Salek Textile Ltd. are licensees
of COTTON USA

Main supplier
Staple Cotton Co-operative Association
214, West Market St, PO Box547, Greenwood, M S 389350547, USA.

Khandaker Shohag 14-127

Percentage of inventory
Current Assets

51%

4%

45%

Sales 117%
Total Assets 19%

50%

43%

4%

16%

MSMLs inventory
Raw Materials
Stock-in-Transit
Work-in-Process
Finished Goods
Stores and Accessories

EOQ in 2009
Annual requirement = 959,726,554 tk.
Ordering cost = 10,000
Carrying cost =31,200 tk.
2 AO
2 * 959,726,554 *10,000

So Economic Order Quantity =


c
31,200
=24,803 unit.

OPQ in 2009
Annual production =2,834,523 kgs (1st July 2009 to 30th September 2009)
Set up cost =15,000
Carrying cost = 31,200 tk
2 * 2,834,523*15,000
So optimum production run = 2 AS
=
c
31,200
= 1,651kgs.

Account Receivable Management


Accounts Receivable
Bills Receivable is carried at original invoice amount
No provision for doubtful debts
Trade debtors occurred in the ordinary course of business are unsecured
but considered good

Accounts Receivable

June 09 (Actual)

June 10 (Actual)

June 11 (Forecasted)

733,896,080

629,187,317

743,008,000

Md Anisur Rahman 14-007

Cash Management
Cash Management
According to BAS-7 cash comprises of cash-in-hand and demand deposits.
Cash in hand and Bank balances have been considered as cash and cash
equivalents.
They have 15 accounts with 7 banks.
The banks areI) Trust Bank Ltd
II) Dhaka Bank Ltd
III) HSBC
IV) Eastern Bank Ltd.
V) One Bank Ltd.
VI) Shahjalal Islami Bank Ltd A/C
VII) CITI Bank N.A

Cash in Hand at Head Office


Cash at Banks:

June 09
(Actual)
140,489,874
58,255,174

June 10
(Actual)
677,831,055
10,315,871

June 11
(Forecasted)
99,087,000
242,995,000

Recommendation

A fluctuating trend in net working capital


Import raw material from USA
Export is made on 100% confirmation LC with
fixed maturity dates
Cash in hand and Bank balances have been
considered as cash and cash equivalents & they
get overdraft facility

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