A company cannot be fully evaluated only by over viewing the cash, accounts receivables, inventory, short-term security and short-term liabilities management procedures. Other types of financial performance indicators such as profitability ratios, debt ratios, activity ratios and market ratios etc should also be considered when assessing and appraising the performance of a company – and this is also true for ACI Ltd. Comparisons should also be made: between companies between industries between different time periods for one company between a single company and its industry average

1. Submitted to:
Ms. Afia Akter
Assistant Professor of
Finance
Department of
Business
Administration
Submitted by:
Romana Akter
(BBA110104002)
Sayed Jubayer Ponir
(BBA 110104036)
Maherunnessa Nupur
(BBA 110104071)
Marjiya Khatun Mou
(BBA 110104072)

2. WORKING CAPITAL
MANAGEMENT
PROCEDURE
A Study on ACI Ltd.

3.  Background of the study
 Objectives of the study
 Methodology of the study
 Sources of data collection
 Sample size of the study
 Data Analysis
 Limitations of the study

4. Background
ACI Limited is one of the leading conglomerates in
Bangladesh, established as the subsidiary of Imperial
Chemical Industries (ICI) in 1968. It has been
incorporated as ICI Bangladesh Manufacturers Limited
on January 24, 1973. The company was renamed as
Advanced Chemical Industries Limited (ACI Limited)
on 5 May 1992.
Overview
In 2013, ACI Group witnessed a much improved
performance over the previous year. This was mainly
due to a change in focus from growth to profitability,
and improved macroeconomic environment.

5. Strategic Business Units and Subsidiaries:
1. Health Care Division
2. Consumer Brand Division
3. Agribusiness Division
4. Logistic
Subsidiaries and Associated Companies:
 ACI Formulations Ltd.
 Premiaflex Plastics Limited
 ACI Godrej Agrovet Private Limited
 Tetley ACI (Bangladesh) Ltd.
 Asian Consumer Care Pvt. Ltd.

6. Mission
ACI's Mission is to enrich the quality of life of the people through
responsible application of knowledge, skills and technology.
Vision
To realize the Mission, ACI will:
 Endeavour to attain a position of leadership in each category of our
business.
 Provide products and services of high and consistent quality, ensuring
value for money to our customers.
Our Values
 Quality
 Customer Focus
 Fairness
 Transparency
 Innovation
 Continuous Improvement

7. Working capital management
It is a managerial accounting strategy focusing on
maintaining efficient levels of both components
of working capital, current assets and current
liabilities, in respect to each other.
Working capital management ensures a company
has sufficient cash flow in order to meet its short-
term debt obligations and operating expenses.

8. Working capital investment and financing policy
A) Conservative Working Capital Policy
 high level of investment in current assets
 support any level of sales and production
 high liquidity level
B) Aggressive Working Capital Policy
 Low level of investment
 More short-term financing is used to finance current assets.
 Support low level of production & sales
C) Moderate Working Capital Policy
 This approach tries to balance risk and return concerns.
 Management of ACI Ltd. plans to follow a Moderate
Approach. However, the company does not still have a
formal working capital investment and financing
procedure.

9. Cash management procedure
 To establish that all bank balances and over-drafts have
been included at the correct amount.
 To ensure that bank balances and overdrafts are
correctly disclosed.
The accounting consideration of cash of ACI is as follows:
Cash and Cash
Equivalents
30 June 2013 30 June 2012
Cash on hand 2,745,764 2,857,430
Cash at banks 5,815,246 7,825,755
Total 8,561,010 10,683,185

10. Accounts receivable procedure
 To ensure that trade debtors are due at the value recorded.
 To ensure that adequate provision has been made for all
bad and doubtful trade debts.
 To ensure that proper cut-offs have been made.
The accounting consideration of accounts
receivables of ACI is as follows:
Trade & Other
Receivable
30 June 2013 30 June 2012
Trade receivables 127,926,138 80,889,527
Other receivable 788,121 -
Total 128,714,259 80,889,527

11. Inventory management procedure
 To ensure that the company has good title to
stock and work in progress.
 To ensure that all stock and work in progress
exists.
 To ensure that stock and work in progress have
been valued correctly, consistently and in
accordance with applicable accounting
standards.
The accounting consideration of inventory of ACI
is as follows:

12. Inventories 30 June 2013 30 June 2012
Raw materials - factory godown 72,951,470 55,441,874
Raw materials - bank godown-
AIBL
71,724,580 84,961,578
Raw materials - bank godown-
SJIBL
882,960 13,807,737
Raw materials - toll godown 17,747,060 9,523,109
Packing materials-factory godown 41,215,082 39,770,348
Packing materials-toll godown 5,815,120 8,928,907
Finished goods* 58,987,615 68,630,274
Work in process 7,729,550 12,435,820
Pad & literature (Printing
materials)
1,278,578 4,736,952
Promotional goods(gift) 4,623,298 3,957,686
Printing and stationery ( HO and
factory)
214,871 -
Sample (physician) factory 2,918,538 2,777,758
Lab chemical & QC 557,338 561,195
Spare parts 874,530 827,451
Total 287,520,590 306,360,689

13. Short-term security management procedure
 To ensure that the company has good title to all short-
term securities.
 To ensure that short-term securities are valued
correctly, with provision being made for any
permanent diminution in value.
The accounting consideration of short-term security of
ACI is as follows:
 A financial asset is considered to be impaired if
objective evidence indicates that one or more events
have had a negative effects on these assets. However,
no such conditions that might be suggestive of a
heightened risk of impairment of assets existed at the
reporting date

14. Payables and accrual Management:
 Accounts Payable Management and its Impact on
Profitability Good accounts payable and
 accruals management can have a major impact on
the profitability of a business firm.
 Business firms should build trust with suppliers in
order to obtain the best discounts, service, and
information possible.

15. Ratio Analysis Method
Liquidity Ratios: Ratios that show the relationship
of a firm’s cash and other current assets to its
current liabilities.
1. Current Ratio: Current ratio = Current assets ÷
Current liabilities
Particulars June 2013 June 2012
Current assets 739,194,191 620,891,430
Current liabilities 740,019,405 553,360,050
Current ratio
(times)
1.00 1.12

16. 2) Quick (acid test) Ratio: Quick (acid test) ratio =
(Current assets – Inventory) ÷ Current liabilities
Particulars June 2013 June 2012
Current assets 739,194,191 620,891,430
Inventory 287,520,590 306,360,689
Current assets-
Inventory
451,673,601 314,530,741
Current
liabilities
740,019,405 553,360,050
Quick (acid
test) ratio
(times)
0.61 0.57

17. Cash Conversion Cycle (CCC):The longer the
cash conversion cycle, the greater the amount of
investment required in working capital. The length
of the cash conversion cycle depends on the length
of:
 Inventory conversion period
 Trade receivables collection period
 Trade payables deferral period

18. 1. Inventory conversion period: Inventory
conversion period = (Inventory ÷ Cost of goods
sold) * 360
Particulars June 2013 June 2012
Inventory 287,520,590 306,360,689
Cost of goods sold 464,568,211 500,189,018
Inventory
conversion period
(days)
222.80 220.50

19. 2. Day sales outstanding (DSO) / Trade
receivables collection period:
Day sales outstanding (DSO) = Accounts
receivables ÷ Average sales per day = Accounts
receivables ÷ (Annual sales ÷ 360)
Particulars June 2013 June 2012
Accounts
receivables
128,714,259 80,889,527
Annual sales 1,377,928,617 1,362,813,168
Average sales per
day
3,827,579 3,785,592
Day sales
outstanding (days)
33.63 21.37

20. 3. Trade payables deferral period:
Trade payables deferral period = (Accounts payables ÷
Purchase) * 360
Particulars June 2013 June 2012
Accounts
payables
121,592,779 2,002,893
Purchase 365,611,827 336,770,217
Trade payables
deferral period
(days)
119.73 2.14

21. Cash conversion Cycle = Trade receivables collection
period + Inventory conversion period - Trade
payables deferral period.
Particulars June 2013 June 2012
Cash
Conversion
Cycle
136.71 239.72

22. Statement Analysis Method:
 Sales have increased over two years, showing that the
trading activity of the company was quite rapid
 Cost of goods sold has decreased – an indication that
small outflow of money occurred during this period
 Investment is increasing gradually
 Short term bank loan is decreasing
 Administrative is decreased gradually

23. Ratio Analysis:
0.94
0.96
0.98
1
1.02
1.04
1.06
1.08
1.1
1.12
1 2
Current ratio (times)
Current ratio
(times)

24. Quick (acid test) Ratio:
0.55
0.56
0.57
0.58
0.59
0.6
0.61
0.62
1 2
Quick (acid test) ratio (times)
Quick (acid test) ratio
(times)

25. Cash Conversion Cycle (CCC):
0
50
100
150
200
250
1 2
Cash Conversion Cycle
Cash Conversion Cycle

26. Their results have been better than expected all the
financial indicators show improve performance. The
good news is that this year has started very well. The
recovery has been dramatic & robust. Company
performance improved due to a focus on internal
efficiency and productivity.
Their credit sales are 10% of total sales. They invest
best on seasonal, non seasonal & lifestyle like: Eid,
pahela Baishak etc. Sometimes they invest
spontaneous finance.

27. There were some interesting highlights in 2013-
 Pharmaceutical business achieved a significant
improvement in exports and brought in some new
technology into our portfolio.
 Consumer Brands business continued to their brand
building activities and strengthens their distribution
network.
 Agribusinesses performed much better than the previous
year, and faced a better agricultural environment. First
time in Bangladesh bird flu vaccine from ACI
 Logistics improved the quality of the business, and
develop a lifestyle clothing brand called "Shwapno Life".
 We have a new distribution partnership with the world's
number one paint company Akzo Nobel with the Dulux
brand.

28. A company cannot be fully evaluated only by over viewing
the cash, accounts receivables, inventory, short-term
security and short-term liabilities management procedures.
Other types of financial performance indicators such as
profitability ratios, debt ratios, activity ratios and market
ratios etc should also be considered when assessing and
appraising the performance of a company – and this is
also true for ACI Ltd.
Comparisons should also be made:
 between companies
 between industries
 between different time periods for one company
 between a single company and its industry average

29.  A detailed working capital management policy for each and
every item of current assets and current liabilities should be
made by the management of ACI.
 ACI should benchmark its operations with industry best
practices and attempt to implement procedures towards
achieving them
 Development of motivational program for the employees to
achieve higher productivity
 As the way of promotion, the company may carry out more
social welfare activities and attract socially aware customers
 Fresh and young generation employees should be appointed in
the department who are familiar with the latest technology and
literacy
 Regular review should be made as to whether the working
capital management policy adopted by management is actually
being implemented as planned.

30. Hope its was not that bad
and thanks to every one.