Working Capital Management By Ring Shine Textiles Limited (part-1)

Acknowledgment

While the writing of this report had been difficult, the preparation for writing had been even harder. It certainly would not have been possible without the help of many people and I would like to acknowledge my appreciation to all those who had helped during the process.

First, I must express my gratitude to Prof. M. Abdullah my faculty advisor, who helped me choose a topic that was of interest and could be of use to my organization. His guidance in helping me to separate the important and necessary details from the unnecessary certainly helped me to stay on the correct track (and reduced my work somewhat).

My heartfelt gratitude and respect goes to my supervisor at the organization, Mr. Sadrul Haque, Chief Executive (Finance & Accounts) of Ring Shine Textiles Ltd. His guidance during my first few weeks of exposure to the work force had been invaluable and helped me to learn a great deal more than I could have otherwise learnt. Mr. Haque assigned responsibilities to me and allowed me enough latitude to do it my own way and learn for my own self.

I would also like to thank all the employees of Ring Shine Textiles Ltd. who helped learn the ropes during this period. They have been extremely cooperative and willing to help at all times, especially my Finance & Accounts section team members. Without them, I do not think the experience would have been as great as it had been.

My gratitude goes out to all my friends who helped during the difficult times when I felt like work was hard and ready to give up. They gave me back life, just by being there.

Lastly; I would like to thank my family specially my two brothers ATM Faruk-ul Islam and ATM Tariqul Islam who has been with me not only these few weeks, but during all my life. They have been extremely patient and always willing to sacrifice when it came to my studies and now work. Without such a wonderful family, I do not think I could have withstood all these four years at university, let alone complete this report.

1.1 Introduction

Bangladesh is one of the developing countries in the world. To bring about desired change in the socio economic field, the role of various manufacturing industries can not be overemphasized. Although most of the people in our country are farmers, commerce and industry provide bulk of country’s wealth. Without adequate manufacturing firm it is not possible to meet up all the basic needs of the vast population of the country.

Ours is a free market economy, where private sector plays a key role in establishing an industrial base. We are striving to expand our industrial portfolio to meet the needs of a growing population. Starting from a stake in an Knit based Garments product unit making Sweater, the group’s industry now cover Spinning, Dyeing, Auto Knitting, Printing & Embroidery and making tea-shirt and Fleece product. It has also stepped into the IT sector and eagerly anticipates further expansion of its product and service portfolio to make a sizable contribution to the national economy.

1.2.1 General Objective

The primary objective of this report is to observe the working capital management done by Ring Shine Textiles Ltd.

1.2.2 Specific Objectives

The other objectives include:

• To acquire practical knowledge about the absolute financial performance managed by Ring Shine Textiles Ltd.
• To understand the different working capital modes of RSTL
• To evaluate working capital situation of RSTL
• To be familiarized with various financial works
• To get practical exposure of a manufacturing company
• To adapt with the corporate environment
• To understand the assets and liabilities situations
• To understand accounts receivable practices by RSTL

1.3 Scope of the Study

The internship is a part of the Masters of Business Administration (MBA) degree that provides an on the job experience to the students. I was placed in Ring Shine Textiles Ltd. at the corporate head office located in Plot 224-260, DEPZ Exten Area, Ganakbari, Savar, Dhaka as an internee for three months duration include one month practical work at Factory Office. This internship program was my very first on the job exposure and provides me with learning experience and knowledge in several areas.

During the first week of my internship period I was able to get accustomed to the working environment of Ring Shine Textiles Ltd. As the internship continued, I not only learn about the activities and operation of the correspondent office, but also gathered some knowledge about the basic business activities of a manufacturing firm in the very first one month of my internship period.The scope of the study includes the basic financial operations of Ring Shine Textiles Ltd. In this report I have focused on all the qualitative factors which includes profiles of Ring Shine Textiles Ltd., RSTL and all sister concerns, all basic terms of Finance and Financial Management, Financial Markets: money and capital market, different credit policy etc. I have also included the ways how a company can manage the assets, liabilities and working capital. I have also analyzed the financial position of RSTL that includes current ratio, profit margin, working capital turnover and operating profit as well.

1.4 Methodology

Mathodology is an important part of a report. Methodology refers to the way by which data are collected for preparing any report or study. This is an explanatory type of report that has undertaken insights and understanding about overall finance practices by Ring Shine Textiles Ltd. I especially focused on working capital management done by the organization. This report has been prepared on the basis of primary and secondary data. The relevant data information was collected through direct interview of the personnel engaged in finance division of Ring Shine Textiles Ltd.

The secondary data source is annual report of RSTL. Besides to collect the secondary data I have accessed the official website of Ring Shine Textiles Ltd.

1.4.1.1 Primary Sources of Data

• Direct Interviews and conversation
• Official records
• Observation of various organizational procedures
• Expert opinion

1.4.1.2 Secondary Sources of Data

Most of the information used in this report has been collected from

• Annual Report 2007
• Publications of RSTL
• Various websites

• Magazines / Journals / Periodicals

1.4.2 Methods of Collecting Data

Methods of collecting data mean the methods by which way the data have been collected. Primary data are collected through face to face conversation basis and secondary data are collected from different articles and annual report of Ring Shine Textiles Ltd.

1.4.2.1 Primary Sources of Data are collected by:

• Interviewing the Finance and Accounts Manager of Ring Shine Textiles Ltd.
• Interviewing all executives under Finance Department
• Informal conversation with other colleagues

1.4.2.2 Secondary Sources of Data are collected by:

• Annual Report of Ring Shine Textiles Ltd.
• Manuals and Articles collected from Finance Department of RSTL
• Relevant articles and journals available in the web site of Ring Shine Textiles Ltd.

1.5 Limitations of the Study

The main limitations of the study are as follows:

• Lac of adequate knowledge about financial position of any organization.
• Sufficient records, publications, facts and figures are not available. These constraints narrowed the scope of the real analysis.
• For the reason of confidentiality, some useful information can not be expressed in this report.
• Lac of available information about financial analysis of RSTL.
• Unavailability of sufficient written documents as required making a comprehensive study.
• In many cases up to date information are not published.
• Because of the unwillingness of the busy key persons, necessary data collection became hard.
• Lac of experiences has acted as constraints in the way of meticulous exploration on the topic.
• Lac of available time to prepare such a large report.

2.1 About Ring Shine Textiles Ltd

2.1.1 Location:

Ring Shine Textiles Ltd. is located at Plot 224-260, Dhaka Export Processing Zone Exten Area, Ganakbari, Savar, Dhaka. The site enjoys excellent infrastructure like good road communication, gas, power, water, telecommunication and manpower.

2.1.2 Background & Objectives:

Ring Shine Textiles Ltd. is a foreign owned 100% export oriented textiles company. It is committed to produce the best Color Fabric and Dyed Yarn with the best of machineries. All around the world there has been a noticeable growth and success of the Textiles industry. Being inspired by this excellent growth, financial performance and future prospects of the Textiles market, sponsors are confident that it would be beneficial and worthy to invest into the Textiles industry. With this end in view the company has decided to set-up a whole new business. The excellence of the technology, the genius of company’s personnel, clear vision and commitment of management “Simply the best” in the Textiles arena is the mainstay of this bold initiative.

2.1.3 Marketing Advantage:

The promoters of the company are successfully operates more than 5 manufacturing and trading concerns and offers the best (value of money) to customers of Bangladesh. All the directors of Ring Shine Textiles have contributed a lot as promoter-directors in the growth of Ring Shine Textiles Ltd. Sponsors of the project properly utilize this cumulative strength of knowledge to solve the manifold problems of fast-changing economy. Thus this management set-up is a marketing advantage.

2.2 Products

Ring Shine Textiles has the following products:

2.2.1 Yarn

Ring Shine Textiles can produce yarn from Acrylic tow or Acrylic Fiber by its Spinning machine.

2.2.2 Dyed Yarn

Ring Shine Textiles can dye any color of yarn & fabric, depending on the order size.

2.2.3 Fleece Fabric

Ring Shine Textiles can produce Fabrics by its circular knitting machine.

2.3 Management Chart:

Figure: 1    Top Management Chart

2.4 Vission

We are the leading Textiles solution provider in Bangladesh achieving our business vision through growth in market reach, increasing operation size, international distribution, total service and consistent branding activities by the being most customers focused & Innovative, cost effective & efficient, environmentally responsible & quality concerned company in the business.

2.4.1 Mission

2.4.1.1 The Aim

The Sky is not the limit for us, but our expectation is within limits. Therefore, our imagination soars beyond conventional barriers. We share or destiny with our beloved motherland. We want to serve her in the greater quest for national uplift.

2.4.1.2 The Way

To sincere traveler, the way is never too long. We believe in “progress in diversity and service through entrepreneur”. We are merchants and missionaries, doers and dreamers, entrepreneurs and professionals. We are futuristic with emphasis on creating thinking and dynamic action.

2.4.1.3 The Spirit

Enterprise is our spirit. We manufacture superior import-substitute consumer and industrial products. Our cutting edge precision leads to greater public utility and hygiene, with a great care for the environment and human inhabitation. It is the very ingredient that gives our organization the integrity upon which our reputation is built and we zealously guard it everyday.Many a thousand minds contributed their gathered knowledge to keep the wheels rolling that in turn leads us to our goal. This cumulative strength of knowledge is required, today, to find new solutions for the manifold problems of fast- changing economic cultural and ecological milieu.

2.4.2 Career

They offer challenging professional opportunities to young persons who can give sustained and focused hands on performance in the field of marketing, accounts, finance, production, MIS / IT and engineering. Vacancies arise from time to time to fulfill requirements of the Group.We offer attractive salaries and benefits in line with top industrial employers in Bangladesh. Scope of advancement is strictly performance based.

2.4.3 Contact Address
Ring Shine Textiles Ltd.
House # 5, Road # 6
Baridhara Model Town, Dhaka 1000
Ph. 9885580, Fax: 9885557
E-mail: saiful@ringshine.com

3.1 Introduction

Working capital is the single best method of determining the position of a company, or how well that company may be doing. When all is said and done, the company’s working capital is what makes it profitable or not profitable. The more working capital a company has the better that company is doing, financially. Many potential investors and others in the public sphere will scrutinize a balance sheet to find the working capital calculation of a company.

Knowing the amount of working capital a company has is vital to many aspects. The working capital calculation will tell the company, as well as the investors, exactly how well the company is doing. In addition, the company’s working capital constitutes the monies used for purchasing new equipment, new stock lines and much more. Working capital is the single most important aspect of a company, whether you are judging performance or speculating on expanding the company. Without the required working capital and knowledge of how to perform a working capital calculation, it may be impossible for a business to grow and prosper. Having the right amount of working capital is the only way in which a company can advance.

Working capital refers to the cash a business requires for day-to-day operations, or, more specifically, for financing the conversion of raw materials into finished goods, which the company sells for payment. Among the most important items of working capital are levels of inventory, accounts receivable, and accounts payable. Analysts look at these items for signs of a company’s efficiency and financial strength.

3.2 What is Working Capital?

Working capital (also known as net working capital) is a financial metric which represents the amount of day-by-day operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities. A company can be endowed with assets and profitability, but short of liquidity, if these assets cannot readily be converted into cash.

Firms need cash to pay for all their day-to-day activities. They have to pay wages, pay for raw materials, pay bills and so on. The money available to them to do this is known as the firm’s working capital. The main sources of working capital are the current assets as these are the short-term assets that the firm can use to generate cash. However, the firm also has current liabilities and so these have to be taken account of when working out how much working capital a firm has at its disposal.

Working capital is therefore:-

Thus working capital is the same as net current assets, and is an important part of the top half of the firm’s balance sheet. It is vital to a business to have sufficient working capital to meet all its requirements. Many businesses have gone under, not because they were unprofitable, but because they suffered from shortages of working capital.

3.3 Factors determining working capital requirements

• Size of business
• Stage of development
• Time of production
• Rate of stock turnover ratio
• Buying and selling terms
• Seasonal consumption
• Seasonal production

3.4 The desirability of budgeting

3.4.1 Capital budget

This concerns fixed asset requirements for the next five years and how these will be financed.

3.4.2 Cash budget

Working capital requirements of a business should be monitored at all times to ensure that there are sufficient funds available to meet short-term expenses.

Some More Parts-

Working Capital Management By Ring Shine Textiles Limited (Part-1)

Working Capital Management By Ring Shine Textiles Limited (Part-2)