Different techniques for managing working capital

This article discusses different techniques for managing working capital and how Vodafone implements them. It highlights the steps Vodafone takes to maintain its capital, such as maintaining agreements for cash flow, avoiding excess stock, and offering discounts to customers.

03.01 Different techniques for managing working capital
There are many more techniques through which a company can manage the working
capital. Vodafone is renowned telecommunication sector which puts a microscopic
observation on its working capital. There are few steps through which Vodafone maintain the
capital which is explained below:
l There would be specific restriction among the funds’ differentiation in outflow and
inflow both way.
l The outlays of cash should be significant according to cash flow amount.
l Maintaining agreements of bigger cash flow should be essential.
l There should be a specific reach of a line of the gross amount of cash flow in
business.
l The company should be honest towards the banker and should maintain a good
relationship with the banker too.
l The excess stock should be avoided as it may tie with the flow of cash; the company
has to observe distinctively on inventory levels.
l Customers should be offered different offers especially at the first payment time; the
customer has to be given discount offers. The due amounts have to get from the
consumers as fast as possible.
l The company should not get hesitate to ask about the deposits to the customers.
l Better conditions have to be taken from the suppliers for regarding longer payment
cases.
l Long-term assets should have to be financed which get the equal economy through
the life of the assets.
l Financing of cash flow should be hidden from the public as well as para-public
agencies and other organizations tool.
Overall the performance of Vodafone is not good as it gross profit ratio, current ratio,
solvency ratio and efficiency ratio is declining. This reflects that Vodafone should take
corrective measures for managing the working capital effectively by making timely payment
to the vendors, improving the receivable process and managing the debtors effectively for
making informed financing decisions. Hence, there are several techniques available which
can be undertaken by Vodafone for managing working capital effectually includes following:

 By taking more credit limit from creditor’s business unit can meet its day to day monetary
requirements effectually.
 Further, by allowing credit to the debtors for less duration Vodafone can manage its financial
capability prominently.
 In addition this, with regards to working capital management, Vodafone should focus on
employing effectual inventory management tools or techniques. Accordingly, by applying
economic order quantity, just in time etc methods company can ensure proper management of
stock and thereby funds. In this way, through applying effectual stock management tools
company use excessive fund in other activities.
 Along with this, by applying budgeting or budgetary control tools company can evaluate and
monitor expenses. Thus, by identifying deviations and taking corrective measures on time
business unit can fulfil financial requirement to the significant level.
03.02 How to analyse accounting records
Analysis of accounting records are too much important as the records for accounting
are based on the financial stability of the organization. There are much more variations how
the data of accounting would be recorded for the longer period. Vodafone secures its
accounting records so minutely that contains a long term relation with earnings which is full
of variant studies. Valuation of the assets of the company is much confidential, and it would
vary by the enlargement of the company, as Vodafone is a company which is running
telecommunication services since 1991 and has accounted for 26 long years. The structure of
the capital of the company must be differentiated as well as the consequences have to be
maintained followed by it. Vodafone is an experienced telecommunication company that
maintains every financial procedure precisely and in a much organized way. The company
must have to work on its capital and resources besides the banking options as well as assets
of its. The detailed records of cash inflow as well as outflow too, assets of the company,
liabilities of the organization, due amounts which are there in the market, other liquid cash
flow should have to be structured in order. The operations and financial ratios vary company
too company like Vodafone are a renowned telecommunication company running for twenty-
six years, and it has a large circle of accounts which are maintained precisely with
documented records of cash inflow and outflow. Under this report, accounting records of
Vodafone are been analysed by using the ratio analysis tool in order to make the comparisons
between the two years effectively and efficiently. Ratio analysis is been counted as the most

useful tool in order to assess the financial performance of the company. This is one of the
most effectual tool which provides assistance in evaluating company’s performance from
several perspectives such as profitability, liquidity, solvency and efficiency. Hence, by
analysing performance on the basis of such aspects company and its stakeholders evaluate
financial performance. In this, to analyse and evaluate Vodafone’s performance ratio analysis
tool has been applied.
Ratio analysis of Vodafone for the period of 2018 and 2019 is enumerated below:
Profitability ratio analysis
Profitability ratio analysis
2018 2019
Gross Profit 121040 118723
Net profit 41682 146039
Sales revenue 282471 370056
GP ratio Gross profit / sales * 100 43% 32%
NP ratio Net profit / sales * 100 15% 39%
From the above, it has been interpreted that the company's profitability ratio increased
from 15% to 39% at the end of 2019. However, on the other side, deteriorated trend found in
the GP ratio of Vodafone from 43% to 32% respectively. Considering this, it can be stated
that Vodafone failed to control direct expenses which in turn negatively impacted company’s
profitability. Hence, Vodafone is advised to employ budgetary control tools and techniques
which in turn helps in improving profitability aspect.
Liquidity ratio analysis

Liquidity ratio analysis
2018 2019
Current assets 102346 183812
Current liabilities 108309 542384
Inventory 367 42
Prepaid expenses 17442 2777
Current ratio
Current assets / current
liabilities 0.94 0.34
From the above, it has been interpreted that the ideal ratio is 2:1 but as per the table,
the current ratio for 2018 is 0.94 and for 2019, the current ratio is 0.33. In other words,
referring graphical presentation it can be entailed that Vodafone’s ability in relation to
meeting financial obligation is not sound. Moreover, business unit failed to maintain 2 assets
in against to 1 current liability. Thus, for enhancing liquidity position company should
undertaker working capital management strategies. By this, company would become able to
meet current obligations timely.
Solvency ratio analysis
Solvency ratio analysis 2018 2019
Long-term debt
57.7
6 45.45
Shareholder's equity
27.6
6 25.96
Debt-equity ratio
Long-term debt / shareholders’
equity 2.1 1.8

From the above it has been interpreted that solvency ratio determine or measure the
company's ability in order to meet the long term obligation and as per the table the company
have above 20% solvency ratio then it is consider that the company is healthy. But in 2019,
the company's solvency ratio is below 20% then it reflect that the company' is not working
properly, there is a need to develop strategies for improvement. From financial statement
analysis, it has found that Vodafone failed to manage capital structure in line with ideal ratio
which is .5:1. According to ideal framework, company should issues 2 equities in against to 1
debt instrument. However, in the context of Vodafone, capital structure is not optimal due to
inclusion of high debt. Moreover, debt imposes high cost in front of the firm pertaining to
interest expenses etc. Hence, for developing effectual structure Vodfone should focus on
issuing equity which in turn helps in reducing expenses and thereby maximizes profitability.
Efficiency ratio
Efficiency ratio analysis
2018 2019
Cost of goods sold 161431 251333
Average Inventory (opening inventory+ closing inventory)/2 477.5 204.5
Turnover or sales revenue 282471 370056
Average total assets (opening total assets+ closing total assets)/2
976409.
5 1641383.5
Average fixed assets (opening fixed assets+ closing fixed assets)/2 887074 1498304.5
Receivables or debtors 5512 24736
Creditors or payables 35479 126486
Cost of ggod sold 161431 251333
Stock turnover ratio (In
times) 338.08 1229.01

Total assets turnover ratio 0.29 0.23
Fixed assets turnover ratio 0.32 0.25
Receivables or debtors
turnover ratio (in days) (Debtors * 365) / Credit sales 7.12 24.40
Efficiency ratio determine the ability of a business to use the asset and for Vodafone,
the current assets for 2018 is 0.289 which means that in that year the company uses the asset
and the fixed asset ratio is 0.318 for 2018 while for 2019, it is 0.246. It has assessed from
the evaluation that fixed and total assets turnover ratio of Vodafone decreased significantly
over the period. It shows that business unit failed to make effectual use of assets in relation to
generating sales. Thus, for attaining success business unit should make modification in the
existing strategic framework. By this, firm would become able to make optimum utilization
of assets.
3.3 The component and process for commercial transaction
For sales, of the company have more than one product line and department, then it
must kept the separate set of books for each. Even most of the entrepreneur also find separate
accounting with more meaningful information for their product and for sales, this practice
also reveal that which product will provide more profitability for the business and which one
is not. For example, for a company, some and all expenses may not apply to only one
department but it should be allocated among department so that it will help for correct
accounting.
On the other hand, in order to manage the sales. The company should be simplify the
bookkeeping and also combine the sales and cash receipt journals. Therefore, to manage the
sales, the company must have daily cash register, daily cash sheet and daily sales register.

For purchase, also the manager of the company should maintain the inventory
register in which in and out of the items should be recorded so that it will help to identify
which product is used maximum times.
Therefore, it is to be recommended to Vodafone to use Precoro plan for purchasing
the item which includes every detail and maintain daily cash register, daily cash sheet and
daily sales register for sales purpose.
03.04 The legal requirements for financial reporting in an organization
In an organization, there are always requirements of financial reporting which are
legal there. Every renowned company maintains this specific line of procedure at a certain
period. Vodafone also follows this method in a much-secured way. Each and every company
has maintained this methodology by the help of an accountant who knows every aspect of
every legal term and condition of financial reporting. Whether the accountant faces any
difficulties or critical issues regarding legal terms and regulations, as fast as possible the
accountant has to inform the higher authority as the authority can deal with that at the time. It
is very important to maintain a nice and smooth relationship with the bankers of the
company, as well as Vodafone has to maintain this procedure too. Thus the company would
able to know every legislation regarding financial reports and issues on a daily basis.
Vodafone is a multinational company which has many brunches around the world. In
different countries, the company has to face different issues contained with financial
reporting as in different places have different legislations for financial issues so that the
company has to maintain them minutely and with much observations. At the end of the year,
Vodafone has to report its audited final reports to users in compliance with the legal rules
that involves fulfilling IFRS standards and GAAP. This framework allows an organization in
making the comparison of its financial performance with that of its competitors and in
finding out that the other company is functioning in compliance with the accounting
standards or not. It creates transparency, consistency and reliability of the final reports and
ensures in providing true and fair view of the company's financial position to the
stakeholders or the users so that they could be able to make better or suitable financial
decisions.
4.1 The role of legislation and regulation, in relation to businesses and other
organisations
Business law joins a baffling web of state, government and city statutes. These laws
collaborate to ensure consistency and tolerability. They also enable contention by

guaranteeing property rights. Regardless whether a business trade incorporates the offer of a
stallion, or ensnared multi-million-dollar movie deal, the law gives a way to deal with
everyone to grasp their commitments and duties. It is hereby with a specific consent of the
chosen organization named Vodafone PLC in which the statutory norms are known to play a
crucial role by together affecting its overall functional considerations. It is therefore on
considering 2 vital acts that are applicable in the undertaken operations of Vodafone PLC
namely contract law and intellectual property.
A Contract law is a wide field that regulates the lead of business in various extents
including contract drafting, errand of rights, trades, arrangement of commitments, what
assertions must be in creating, conditions to an understanding, break and cures. The
regulatory norms of intellectual property states an authorized development law that infuses
licenses and trademarks. Thus as bona fide property law is stressed with rights relating to a
touch of property, secured advancement is concerned with rights relating to consequences of
the mind.
Increasing patent rights is a crucial technique for some tech associations in light of the way
that if they have the patent to a creation, they may restrict others from making and using that
advancement.
There together exist some other legislative laws that are dependent upon the kind of
business in context to Vodafone with various diversified laws applicable on its business. For
example, metropolitan prosperity codes may apply to the offer of food. Government
Department of Transportation codes may administer the transportation of perilous chemicals
used as a part of a combination of associations. Government Occupation and Safety Laws
secure the pros in your business. Evaluate codes regulate whether you charge force for your
thing, and in this manner, paying little mind to whether you can be saddled.
There are different legislation that are required to be followed by the organization and
plays a vital role in smooth functioning of the business operations of an entity. Legislation
and the laws act as the guideline for an organization in respect of their business affairs and
has a great impact on the working of the company (Ulceluse and Kahanec, 2018). The legal
rules represents a huge challenges for different organizations as complying and implementing
the regulation within the business requires re-evaluation of its resources, skill sets and overall
functioning.
Changes resulted in the business laws reflects the changes in the operations of the
business. Taxation policy is considered as an important government policies which directly

affects the business as taxation depends on the money earned by all the businesses. For
instance- increase in the corporation tax that focuses on business profits has a greater effect
in the same sense that is resulted to rise in the costs.
Legislation and the laws affects the relationship of employer and employee. For
example- it is compulsory for the employers to follow the government rules in relation to the
ways in which they should treat their employees and in hiring the mechanism. In case of
international trade, laws of business are been imposed with regards to the international trade
tariffs. Such regulations enforces the guidelines on parties which should be taken into
consideration. Government imposes the business rules and the regulations for ensuring that
all the organizations run its business with due diligence and in compliance with the
appropriate code of conduct, safety of consumers and good health.
When there occurs a major changes in the regulations, organization needs to adjust
their structures, strategies and the processes accordingly. Regulatory pressures could affect
the institutional environments by altering the standards for the accountability.
Employment law deals with the establishment of the minimum conditions in relation
to employing the person like minimum age for working, minimum amount of hourly wage
etc. It referred as the collection of the rules and the laws which regulates the relationship in
between the employees and the employers (Bratianu, Iordache-Platis and Prelipcean, 2016).
It has a significant impact on each and every aspect of workplace as it determines the rights
of business organization relating to hiring, providing wage and the benefits, medical leave,
discrimination, termination etc.
Employment law plays a crucial role in finding the jobs, it provides an employee
with specific protections at the time of layoffs, other issues and the termination regarding the
unemployment. This legislation covers all the federal and the state laws in relation to wages,
fair pay and the benefits to an employee. It helps in determining which workers are been
eligible for receiving the overtime pay in order to work for extended hours. In case the
employers fails in complying with the laws, they had to pay for fines and penalties.
Employment law mandated for prohibiting the discrimination and the harassment
within the workplace. This law is provisioned for protecting the employees against any
illegal activities or the violations in which their employers are involved. It prevents the
employees from retaliation and the other hostile working environment which might develop
because of the whistle-blowing. It is very important for the employees and the employers in

becoming familiar with the employment legislation and its impact, influence and
improvement on the workplace.
Health and safety laws is the other major legislation which states that employers are
mainly responsible for ensuring the safety of all the workers from the possible dangers that
could be resulted to them. This involves making assure to the employees that job and work
environment in which they will be working are safe and do not contain any health risks.
It acts as an important legislation as it protects well being of the employers, customers and
the visitors (Fankhauser, Gennaioli and Collins, 2015). Looking towards the health and
safety laws helps an organization in making a good sense of business. The workplace which
does not work in compliance with these regulations might lose its staff and leads to increased
cost which in turn reduces the profitability.
Executing health and the safety measures within a workplace helps in assessing the
potential risks and also enables in determining the significant hazards. It assist the employee
to put the measures in the place for protecting people and the environment within an
enterprise. These steps are crucial for reducing cost associated with the safety failures. By
implementation of the health and the safety measures, working with the regulation
representatives saves the time and cost of the business organization in the long run.
4.2 Explain the legislative implications of global trade
It is not must to meet all the legal and regulatory requirements in overseas with home
country. While a business deals with other countries and willing to conduct their business in
that country, they face some major issues which are:
The different laws and regulations which they are not aware off. Thus, the business
might get some serious legal issues there.
While it is about business, every country has their foreign direct investment contracts
and rules. In this way, the companies will not get full access of their business in that
certain countries.
Legislations have huge impact on global trade. It can be observed that time to time
every nation face different situations and in order to handle it nations prepare new rules
and regulations. These new rules and regulations aimed at protecting interest of the nation
in terms of export and import of goods. With passage of time few nations like China
follow strategy to promote trade under which they make available product at cheaper
rates to the customers which is knows as dumping. Such kind of things destroy domestic

industry in the nation and due to this reason, many nations of the world make changes in
their rules and regulations so that self interest can be protected (Petersmann, 2015).
In year 2017 changes were made in EU trade legislation in order to protect European
Union against unfair trade practices. Under this dumping rules are prepared and used in
situations where it is observed that price of product is artificially low due to state
intervention. In the legislation new methodology is prepared under which cases where price
of imported goods is lowered due to state intervention are investigated. There is specific
commission which will need to prove that is imported at the product much lower then actual
price. Thus, it can be said that such kind of legislations will certainly affect trade. This is
because if commission will identify that product is available at relatively very low price then
in that case its import may be banned or request can be made to country to make available
product at right price. If foreign country does not change value of item export to EU then in
that case trade between that specific nation and European Union may decline (Dhingra and
et.al., 2017). Thus, it can be said that legislation heavily affect trade between nations.
In European Union trade legislation safeguard measures are given which need to be
adopted in free trade agreement. EU FTA with Japan, Singapore and Vietnam are updated by
these safeguard measures. Under these safeguard measures it is ensured that interest of local
industries will be fully protected and import of goods will not negatively affect them to great
extent. It is possible that these updated free trade agreements affect import of European
Union. This means that legislation surely affect trade between two nations. On analysis of
entire section, it can be said that European union is committed to provide barrier free trade
environment but it is also aware about harms that trade can cause to its domestic industry.
Thus, on time European Union is taking appropriate steps to handle condition. It successfully
controls such kind of harms (Dal Bianco and et.al., 2015). However, it can be said that with
passage of time many new modifications will need to be made to trade regulations so that
challenges can be handle significantly.
Tension that European Union have can be estimated from the fact that trade deficit
between China and EU is 62 billion which is very huge amount. At fast rate Chinese products
gain popularity in EU nations and because of cheap price they become very popular in the
relevant countries, Thus, Chinese products are gaining wide popularity in EU nations which
highly affect domestic firms market. Moreover, in China also these products are not able to
give any tough competition and because of this trade deficit increase between EU and China.

This is the one of main reason because of which EU is considering evaluation of current
situation so that on time control of market by Chinese firms can be confined to specific limit.
Other main reason behind bringing such kind of legislation is that if there will be
absence of regulations then in that case tariff elevation is the only option that remain with
any nation to save its domestic market (Bach and et.al., 2016). It can be observed between
USA and China that because of unfair trade practices of China USA now charged higher
amount of tariff on imported products. In return China also impose high tariff on US
products which ultimately lead to trade war between China and USA and because of this
China growth rate decline at its low rate over decade. EU understand such kind of situation
and due to this reason, more focus is on preparing rules and regulations in such a way that
prevent harm of domestic industry. Hence, rule for evaluation of FDI (foreign direct
investment) is prepared in EU so that situation can be controlled before it become worse.

REFERENCES
Books and journals
Bach, T. and et.al., 2016. Transnational bureaucratic politics: An institutional rivalry
perspective on EU network governance. Public Administration. 94(1). pp.9-24.
Bratianu, C., Iordache-Platis, M. and Prelipcean, G., 2016, November. The role of
legislation and organizational culture in shaping academic leadership. In Proceedings of
the 12th European Conference on Management, Leadership and Governance (pp. 17-
23).
Dal Bianco, A. and et.al., 2015. Tariffs and non-tariff frictions in the world wine
trade. European Review of Agricultural Economics. 43(1). pp.31-57.
Dhingra, S and et.al., 2017. The costs and benefits of leaving the EU: trade
effects. Economic Policy. 32(92). pp.651-705.
Fankhauser, S., Gennaioli, C. and Collins, M., 2015. The political economy of passing
climate change legislation: Evidence from a survey. Global Environmental Change. 35.
pp.52-61.
Petersmann, E.U., 2015. Transformative transatlantic free trade agreements without rights
and remedies of citizens?. Journal of International Economic Law. 18(3). pp.579-607.
Ulceluse, M. and Kahanec, M., 2018. Self-employment as a vehicle for labour market
integration of immigrants and natives: The role of employment protection
legislation. International Journal of Manpower. 39(8). pp.1064-1079.
ONLINE :
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