Analysis of Working capital management

Added on - Jan 2020

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Working capital management1
Table of ContentsINTRODUCTION................................................................................................................................3TASK 1.................................................................................................................................................3Working capital management...........................................................................................................3TASK 2.................................................................................................................................................5Risk and return..................................................................................................................................5CONCLUSION....................................................................................................................................7REFERENCES.....................................................................................................................................82
INTRODUCTIONEvery commercial establishment whether small or large size needs to assure sufficient amountof funds to meet their daily operational need, called as working capital. It is important becausewithout having proper money, they cannot run their routine functioning such as buying material andpayment of salary, bills, accounts payable, rent, rates and taxes etc. The present report layemphasize on the different ways of managing working capital in Kathmandu Holding Ltd. (KMD).Moreover, it will be analysed with its competitor, Oroton Group Ltd (ORL). Effective and efficientmanagement of WC is a sign of strengthen short-term ability of the company to pay timely to theircurrent liabilities.TASK 1Working capital managementCash conversion cycle:CCC indicates the time period which KMD takes to convert itsresources into cash flows. In other words, it express the net time period between the total receipts ofcash funds from their debtors and inventory over the length of time, in which, company will makeits deferral payments to their payables (Sivashanmugam and Krishnakumar, 2016). It is mainly usedto analyse and examine the effectiveness of management to generate quickly the cash flows andthereby ensure sufficient availability of WC.CCC= Days inventory outstanding + days sales outstanding – days payable outstandingDIO indicates the time period to sale the entire inventory into the market whereas DSOexpress the length of time in which company receive its cash from the debtors (Deepa and et.al.,2016). However, the time lag to pay the deferral payments to the suppliers for their supplies iscalled as DPO.Figure1Calculation of Cash conversion CycleParticularsKMDORLDIO100.99 days224.12 daysDSO0.09 days10.55 daysTotal101.08 days234.67 daysDIO39.27 days72.23 daysCCC61.81 days162.44 days3
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