Working Capital Management and Barclays PLC Performance Analysis

This report investigates the impact of working capital management on the overall performance and profitability of Barclays PLC, a British multinational investment bank. It begins with an introduction to working capital management, highlighting its importance in maintaining financial health and operational success, and then outlines the research objectives, which include identifying the elements of working capital, assessing its impact on profitability, and analyzing its significance for Barclays PLC. A comprehensive literature review explores the components of working capital, its impact on organizational performance, and the importance of effective working capital management. The research methodology employs an exploratory research design with a quantitative approach to gather reliable data. The analysis section then delves into the findings, drawing conclusions based on the research objectives and questions, and finally provides a list of references to support the findings. The study aims to provide insights into how working capital management can enhance financial performance and profitability within the context of a major financial institution.

Business Project

Table of Contents
TITLE .............................................................................................................................................1
INTRODUCTION ..........................................................................................................................1
RESEARCH OBJECTIVES, QUESTIONS OR HYPOTHESES FOR PROJECT........................3
LITERATURE REVIEW ...............................................................................................................1
The components of working capital management and its impact on profitability of an
organisation ................................................................................................................................1
The impact of working capital on determining the performance and profitability of an
organisation.................................................................................................................................2
The importance and impact of working capital management on performance and profitability
of Barclays Plc............................................................................................................................3
RESEARCH METHODOLOGY ....................................................................................................6
ANALYSIS .....................................................................................................................................8
CONCLUSION .............................................................................................................................22
REFERENCES .............................................................................................................................23

TITLE
To identify the impact of working capital management on overall performance and
profitability of an organisation. A study on Barclays plc.
INTRODUCTION
Working capital management is an important aspect that help in maintaining an optimal
balance between every component of working capital like inventory,cash, payables, receivables
and many more. All these are crucial that create value within the company in order to attaining
competitive advantage (Bagh and et. al., 2016). Thus, proper management of working capital is
one of the crucial activity for company as it help in maintaining financial health and operational
success. For attaining the same, good management of company is consider as an ability to
effectively utilize working capital management in order to maintain a solid balance between
organisational growth, liquidity and its profitability level as well. In context of this, company
uses working capital within their day to day operational activities that determine the difference
between current assets and current liabilities or debts as well. Management of working capital
includes the goal that support in maximizing the operational efficiency which directly support in
improving profitability level of the company.
Background of company
Current research is based in Barclays plc, is British multinational investment bank and
financial service company that operate their business in London with the aim of improving their
profitability level. In this company also manage working capital to effectively analysing the
performance at market place. Company was established in 1690 in City of London by Nigel
Higgins with the aim of attaining the success. In this regards, Barclays deployed the world's first
cash dispenser.
Rationale of research
In this regards, one of the main reason of selecting this research is to analysis the impact
of working capital management over the profitability of company. With the help of this,
investigator easily improve their skills and knowledge about the research topic. Mainly, this
specific theme provide vast information and scope through which researcher easily develop a
critic analysis towards the selected research topic that directly support in attaining positive and
reliable results (Ahmad and et. al., 2017). The main focus of this research is to analysis how
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working capital is managed and influence organisational profitability. By analysing the same,
investigator is able in undertaking the same research in future and also attain chances to
accomplishing valid results.
Research Gap
It is one of the important section of research as it define the research problem that needs
to be addressed. Mainly, it is systematic review that can direct research agendas in order to
influence future activities and scope of the project. Current research is based on working capital
management and its impact on the overall profitability level of the company. This will support
business organisation in managing their operational efficiency by evaluating or controlling
overall profit and expenses. With the help of this, company may develop the positive
performance at market place (Afrifa and Padachi, 2016). By undertaking this study business
organisation easily analysis their day to day activities that help them in reducing the chances of
increasing expenses and at the same time also maximizing the profitability level.
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RESEARCH OBJECTIVES, QUESTIONS OR HYPOTHESES FOR
PROJECT
Research aim
“To identify the impact of working capital management on overall performance and
profitability of an organisation”. A study on Barclays plc.
Research objectives
 To Identify the elements of working capital management and its impact on profitability of
an organisation.
 To identify the impact of working capital on determining the performance and
profitability of an organisation. To understand the importance and impact of working capital management on
performance and profitability of Barclays Plc.
Research questions
 What are the components of working capital management and its impact on profitability
of an organisation?
 What are the impact of working capital on determining the performance and profitability
of an organisation? What are the importance and impact of working capital management on performance and
profitability of Barclays Plc?
Research design and approach
Exploratory research design will be used for doing this research as it supports researcher
in determination of best data collection method. Along with this, quantitative approach of
research will also use by investigator for collecting information from the questionnaire (Flick,
2015). Therefore, exploratory research design and quantitative research approach are more useful
in gathering of reliable and valid information about the impact of working capital management
and its effect on profitability and productivity of business.
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LITERATURE REVIEW
The components of working capital management and its impact on profitability of an
organisation
According to the Wasiuzzaman, 2015, working capital is recognised as a basic requirement
of an organisation in order to circulate the function of organisation on regular basis without any
breakdown. Since last decades the essentialness of working or operating capital administration
increased in terms of completing the working capital requirement of business. C. A. and C. L. are
the key components of working capital. The difference of current assets and current liabilities is
recognised as a working capital of an entity. the current assets present as a resources of
organisations utilised within one financial year. whereas the current liabilities also remain same
in nature to current assets as the settlement of current liabilities also made less than a duration of
one year.
On the other hand, Tahir and Anuar, 2016, current assets are the combination of further
elements as cash and cash equivalents, stock, debtor, trade receivables, expenses paid in advance
and investments made for short term period. Current liabilities are the combination of trade
payables, outstanding payments, short-term borrowings, tax payables, dividend payables and
short-term debts. The overall structure helps in ascertaining the day to day running business
requirement. the process of converting the raw form of stock in to cash and cash equivalent is
considered as a WCC (Working Capital Cycle). It is one of the key element of working capital
management in organisation context as the cycle present the capacity to generate cash and
completing its overall operational cycle in a year.
As per the view presented by Singh, Kumar and Colombage, 2017, Planning for working
capital is part of a company's financial planning, some aspects are, for example, capital
budgeting or capital optimizing. First two are mainly capable of long-term investment and risk
management. Thus WCM focuses mainly on corporate short-term funding and brief-term
investment choices. Because it accounts for more than half of their total capital for these
companies. Working capital management is essential for a business, particularly for production,
trade and logistics firms, as WCM affects productivity and profitability specifically in such
firms. Inefficient WCM can lead to default, even though a company's productivity is consistently
positive. One explanation might be that high rates of current assets change. effective WCM must
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handle operating capital in a way in which organisation be able to correlate the current and
operative objectives of business. the risk of default on the repayment of short-term commitments
on the one hand and minimizes the increase in excess working capital rates at the other efficient
management of working capital not only assist performance of organisation but also assist in
leading the organisational objectives towards sustainable development (Shan and et. al., 2015). A
sustainable image of business also reflects a clear image of business operation and advise the
management to correlate the administrative requirement with its day to day running operations.
appropriate WCM keep business process in an optimum level and prevent uncertainties form
daily operations. In terms of ascertaining the raw material requirement the organisers analyse the
potential impact upon business performance and profitability of organisation. if entity is enough
sufficient subject to necessity of operating capital in more effective manner.
The impact of working capital on determining the performance and profitability of an
organisation
According to the Nobanee and Haddad, 2014, efficiency and profitability mainly based on
the corrective operating capital and administrative procedure for business operations. the
working capital cycle extracts the efficient WCM. It is calculating considering the cash
conversion cycle of organisation. the scale of cash outflows and inflows helps in ascertaining the
firm’s key goals and objectives in key direction. Efficient use of raw material usage helps in
maintaining the requirement of production process and also assist in meeting the regular
production requirement. Positive impact falls upon entire profitability and performance of
organisation. with the frequent use of required standards and streams the it become feasible to
complete the daily requirement of suppliers and customers. Circulating regular process of
business in business operations make the process of getting payment in more feasible and
systematic manner.
As per the view presented by Muhammad and et. al., 2015, proactive approach of working
capital management and allocation of resources in optimistic way leads organisation to attain
competitive advantage. It ascertains the credibility among creditors and build a clear image and
perspective in the eye of stakeholders. Thus, it is clearly understanding that sustainable and
prefect image of business basically based on proactive management of working capital. There is
a key contribution found in order to construct a stable structure of working capital of
organisation. the trade policies, credit policies, dividend and taxation policies are the key
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elements to construct the base of efficient working capital base. It is anticipated that the lag in
period of inventories reduces delay the production process and it increase the entire cash
conversion cycle. The scale of cash conversion cycle also gets impacted due to lag in process of
managing the daily supply requirement. Not only lag in period of production process but also the
lag in period of getting payment form debtors affect the performance and efficiency of
organisation.
According to the Mehtap, 2016, the working capital requirement varies from entity to
entity. Working capital management in financial industries remain different because the cash and
cash equivalent remains high in amount. In the context of daily working requirement
organisation put significant efforts towards making the operation smoother manner. In
consideration to developing an effective base of WCM and organisational culture it is essential to
keep monitoring the working capital structure of business for smooth functioning. Use of current
assets is the key parameters subject to boost the working capital structure of business. The role of
business performance also states a clear vision and control towards managing the daily capital
requirement. Cash is one of the key element that maintains an optimum level of liquidity and
functionality of business in systematic manner.
In financial industries cash conversion cycle runs around receivables and days payable. the
gap between the payable must be less and receivable days must be remained high in order to
circulate the cash cycle of business. in order to determine the consecutive working capital
management and efficient flow of cash overall perspective remain centralized towards enhancing
the performance and profitability of business entity (Mathuva, 2015).
The importance and impact of working capital management on performance and profitability of
Barclays Plc
According to the Lamptey, Frimpong and Morrison, 2017, working capital management
is very critical due to its impact on the company's productivity risk, thus the business's value. A
firm's decision on financial management has four facets, including economic decision, funding
decision, dividend decision, and liquidity decision. The allocation of working capital is
considered a critical concern with the organisation’s profitability and short-term investment
decision. It also has an impact on the company's liquidity to competitiveness. The company's
wealth is created by the optimal use of operating capital.
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As per the view presented by Kumaraswamy, 2016, the term working capital indicates to
the figures of financial needed to maintain day-to-day spending on a company company's
operating activities. It is literally necessary to run the company's wheels. Financing company's
effectiveness depends on the tension between fluency of cash and profit. The goal of working
capital planning is to maximize profits, which leads to a decrease in the likelihood that the
ripening short-term debt cannot be met. The problem here is operating capital management, a
business must take into account all things in both budgets and seek to manage risk tolerance. The
high volatility risk of a company leads to high profitability.
According to the Jamil and et. al., 2015, in Banking industry, the liquidity level remains
at peak of point and it reduces the complexities whenever the liquid requirement remains high in
organisational context. Nonetheless, brief-term decisions in designing a financial strategy in
businesses are not less critical because working capital planning plays a vital role among short-
term policies in that a business's shareholder value and balancing a business's two objectives of
productivity and flexibility. Many work on corporate finance typically relates to decisions on
lengthy-term funding and pay-out policy. The willingness of the government to continue its
operations without endangering liquidity was accepted by operating capital.
According to annual report of Barclays the Leader in investment banking is focused on
improving our service. its introduced a new dual-country virtual finance network over the course
of the year, mainly serving customers of the Corporate and Accounting firm, which was recently
launched in Europe or Europe. In 2018, Corporate Bank and the British government unveiled a £
1 billion residential development fund to support housing production in England. As the working
capital framework of organisation is centralised upon leaving less commodities taxation so that
the durability of payment gets decreased for the year 2020. The management is monitoring the
liquidity of bank and keep compare the feasibility and transparency between large cash
payments. In order to construct a valid reason for sustainable working capital structure the
operations are quite confirm and elaborative in annual meeting. The financial position of Group’s
presents a favourable and profitable results. The management and financial professional of
Barclays prepared a three years’ sustainable working capital management plan. The management
is quite confident subject to future working capital policy.it stated a clear vision and valid
formation of presenting the data in predefined manner. The forecasts not only present a viable
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image and existence of banking group but also it reflects towards the strong capital structure and
bond of organisation in near three-four years (Strategic Report of Barclays, 2018).
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RESEARCH METHODOLOGY
Research methodology is considered as the particular process or techniques which is
utilised for identifying, selecting, processing as well as analysing information about topic. So,
with the assistance of this researcher may able to evaluate the validity as well as reliability of all
research (Gioia, Corley and Hamilton, 2013).
Research design: It is regarded as the framework of techniques as well as methods
opted through researcher for combining several elements of investigation in analytical manner in
order to managed the research problems effectively. It have certain kinds which are which are
exploratory, experimental and descriptive. Among all mentioned design, exploratory research
design will be used as it help in identification of research impact (Green, Camilli and Elmore,
2012).
Time frame: In research time frame is defined as the set time period that researcher
required and takes for accomplishment of work. Cross sectional: This is considered as an observational research type which examine
information of variables accumulated at given time period across sample population.
 Longitudinal: This is considered as the research design which includes repeated similar
variables observation over long or short duration (Kumar, 2019).
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Qualitative approach: This is executed in case where relation among accumulated
information as well as observation developed as per the numerical calculation. It is associated to
naturally existent phenomenon, may be proved or disproved with the help of statistical
computation. Researcher rely upon this approach in which they are anticipated to conclude
“why” a specific techniques exists along with what is the viewpoint of respondents (Mackenzie,
Tan, Hoverman and Baldwin, 2012).
Quantitative approach: This is regarded as the approach which is executed where it is
vital for researcher to has statistical conclusion to accumulate actionable visual image. As
number facilitates a effective perspective for formulating essential decision. It is crucial for the
effective accomplishment of research as conclusion comes as per the numbers as well as analysis
will only prove to be efficacious for investigation (Mackey and Gass, 2015).
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