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Presentation
 Now Presenting…

Shyamal Biswas
TOPIC: WORKING CAPITAL
MANAGEMENT OF RENATA
LTD.
 Contents……………
• Literature Review
• Company Chronology
• Cash Management
• Receivable Management
• Inventory Management
• Working Capital Determination and Finances
 Literature Review
Working Capital: part of the firm’s capital which is
required for financing short- term or current
assets
Gross working capital: capital invested in the total
current assets
Net working capital :excess of current assets over
current liability
Temporary or variable working capital
Permanent or fixed working capital
Current Assets
•Cash in hand and cash at bank
•Bills receivables
•Sundry debtors
•Short term loans and advances.
•Inventories of stock as:
 Raw material
 Work in process
 Stores and spares
 Finished goods
Current liabilities
•Accrued or outstanding expenses
•Short term loans, advances and deposits.
•Dividends payable
•Bank overdraft
•Provision for taxation, if it does not amt. to app. of profit.
•Bills payable
•Sundry creditors
 Now Presenting…

Sanjoy Kumar Halder

 Company Chronology
 

• Manufacturing Pharmaceutical, Animal Health

Medicine, Nutritional and Vaccines
• Its year of Incorporation is1972: as Pfizer laboratories
(Bangladesh) Limited,
• In 1993 it renamed as “Renata Limited”
• Upgrading their manufacturing plant to WHO GMP
standards
• Management is committed to ensure that quality
 Cash Management

• Cash is the benchmark of liquidity.

• Renata has determined optimum level of liquidity
• Renata Limited manages liquidity to provide a smooth
production process and to reduce the cost of inefficient
management.
• Renata sells goods on credit and collect cash through
marketing agent.
• Billing & Mail float for these firms are zero.
• The Bank Processing Float for these firms is on an
average less than 2 days.
 Cash Management

Concentration banking : For reducing collection

float of check Renata uses the Banks with
accelerated clearing capabilities.
Cash Forecasts: Prepares cash forecasting
Statement 30% on monthly Basis.
Models of Cash Management : As Renata
experiences a continuous cash flow, miller-orr or
stone model can be best applicable here.
 Now Presenting…

Imranur Rashid Khan

  
Receivable Management:

• Receivables occupy the second place

Credit Granting Decision:
• Renata uses the traditional method that is 5 C’s .
• Judgmental Scoring approach.
Factoring: does not use factoring
Default in Accounts Receivable:
• Ranata has bad debt less than 5%.
• Recovery rate more than 75% of the default amount.
• Separate controlling and monitoring mechanism
• Not more prone to financial crisis.
  
Receivable Management:

Controlling & Monitoring Accounts Receivables:

Renata follows the DSO (Days Sales
Outstanding Statistics).
L\C Management:
• Back to back L/C.
• 85% of total amount of export bills
• Cash out the later 15% if he wishes
 Accounts Payable:

• Follows a consistent policy in case of payment

of invoices.
• Uses Inventory as security collateral incase of
borrowing from banks.
• Accruals payment on due date.
• Lower percentage (ranging from 7.5% to 9%)
of accruals to the total current liability.
 Now Presenting…

Raju Majumder
 Inventory Management
Finished goods -Pharmaceutical (Unit-1) 351,714,028 324,757,865 351,714,028
-Premix (Unit-2) 166,438,190 47,263,025 166,438,190
-Contract Manufacturing (Unit-3) - 63,748,087
-Potent Product Facility (Unit-4) 14,616,205 20,216,213 14,616,205
-Cepha Plant 61,479,449
517,464,639 532,768,423
Work-in-progress 79,865,978 70,578,009
Raw materials 78,300,537 65,690,623
Bulk materials 93,447,964 103,773,861
Packing materials 74,676,790 62,898,497
Raw and packaging materials-Premix (Unit-2) 76,369,039 56,102,900
Raw and packaging materials-Contract manufacturing (Unit-3) 16,898,990 7,533,464

Raw and packaging materials-Potent Product Facility (Unit-4) 29,559,690 16,566,688

Raw and packaging materials-Cepha plant - 67,559,430

Consumable stores and spares 9,049,888 5,325,749
Less: provision for slow moving and obsolete items (7,781,871) (15,558,619)
Stock in transit 260,444,090 169,630,986
1,295,855,164 1,075,310,581
 Inventory Management

Composition of Inventory:
• Renata holds a huge proportion of Inventory in
Current Assets.
• Investment in Raw Material is highest among
the inventories
• Renata does not want to face any stock out
situation
Procurement of Inventory:
• Local procurement varies within the range of
60% to 40%, 75% to 25%, and 80% to 20%.
 Inventory Management

Costing Policy of Inventory:. Renata incurs some

costs:
• set-up costs on machines to produce inventory,
• costs of generating a purchase order for the
inventory
• managing its inventory.
• Obsolesces costs and Stock out costs
Lead Time for Inventory: 15 days on an average
Safety Stock Determination: maintains the huge
level of safety stock
 Inventory Management

Inventory Controlling Mechanism : Using both

the
• physical control
• stock verification method.
• budgetary control.
• “First in First out” or FIFO method for
valuation inventory
Now Presenting…

Sanjib Shil
Determining Working Capital of Renata Limited

Year wise working capital requirement

Year Net working capital(CA-CL)
2011 5,410,460,740

2012 10,460,382,273
2013 15,584,658,908
2014 21,499,324,443
2015 28,417,484,970
  
Gross and net working capital cycle

Based on financial statement

data of the year 2010
Raw material inventory 436,812,440
Raw material consumption 1,664,716,203
closing stocks of finished
goods 517,464,639
Cost of goods sold 2,405,361,976
closing stocks of work in
process 79,865,978
Cost of goods produced 1,655,428,234
Credit sales 5,090,318,113
Debtors 478,364,475
Creditor 31,752,362
Working capital cycle
Raw material consumption 94.4620339 94
period
Work in process conversion 17.36816583 17
period
Finished goods conversion 77.44666786 78
period
Inventory conversion period 189.2768676 189
Recivable conversion period 33.83112945 34
Deferred payment period 6.389653007 -6
Net working capital cycle 217
Gross working capital cycle 223
all sales credit sale assuming
assuming all purcsase in credit
 Working Capital Finance of Renata

Finance its working capital by bank loans

Name of the Bank Limit Taka Taka(2010)
Eastern Bank Limited, 375,000,000 98,369,080
Dhaka
The Hongkong Shanghai 750,000,000 284,724,860
Banking
Corporation Ltd., Dhaka

City Bank Limited 500,000,000 53,839,973

Standard Chartered 1,065,000,000 367,782,782
Bank, Dhaka
Citibank N. A., Dhaka 500,000,000 323,757,486

Agrani Bank 940,703

Total 3,190,000,000 1,129,414,884
Q &A
Thanks