analysis on the working capital management behavior of the food industry of bangladesh
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Analysis on the Working Capital Management Behavior Of The Food Industry Of BangladeshTRANSCRIPT
Mahamuda Jahan Chowdhury BBA 03912538
Kazi Fahmida BBA 03912534 Shamima Rahman Shanta BBA 03912729
On the WORKING CAPITAL MANAGEMENT BEHAVIOR OF THE
FOOD INDUSTRY OF BANGLADESH
Selection of Industry FDI Received AmountSummery of Ratio Why there are Differences Among RatiosFinding from Perspective of Working
Capital Management
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Food Industry Total 15 listed food companies operating in
Bangladesh
FU-WANG FOODS LTD
Financed by domestic investors
RAHIMA FOOD CORPORATION LTD
FDI received
Year of incorporation: 1997
Listed in Dhaka Stock Exchange Ltd.: July 2000
Listed in Chittagong Stock Exchange Ltd.: July 2000
Commercial Production: August
1997
ISO Certification: ISO-9002 Certified on 04 November 1998
Business Line: Food Processing Industry
Authorized Capital Paid-UP Capital No. Of Shares
TK. 1000 Million TK. 445.28 Million 44528000 shares of TK 10/- each
Business line : producing and packing best quality refined edible oil and vegetable ghee.
Year of incorporation:1990
Conversion into Public: 1996 Initial Public Offering of shares: 1997 Enlistment with DSE & CSE:
1997
Authorized capital Paid up Capital: No. of shares
Taka 250.00 Million Taka 200.002 Million
2,000,020 shares, Taka 100/- each
FDI Received Amount(in TK) 102810102
FDI in % 5.14%
Aggressive Investment Policy (AIP) results in minimal level of
investment in current assets versus fixed assets. In contrast, a
conservative investment policy places a greater proportion of
capital in liquid assets with the opportunity cost of less
profitability. If the level of current assets increases in
proportion to the total assets of the firm, the management is said
to be more conservative in managing the current assets of the
firm.
AIP=Total Currant Liabilities/Total Asset
Fu-Wang is using a more fluctuating AIP policy because it increasing one year than decreasing other year because of their fluctuation in fixed asset and current asset holding
Compare to Fu-Wang Rahima Food is having a symmetrical AIP policy due to their a balanced current & fixed asset holding
Both the companies differ in terms of AIP
Return on Asset calculate how much profitability is receiving from investing fixed asset
ROA=Net Earning After Tax/Book Value of Asset
Fu-Wang is having a symmetrical ROA than that of Rahima Food due to fluctuations in profitability of Rahima Food
Fu-Wang is having more cost efficiency than Rahima Food
Tobin’s q compares the value of a company given by financial
markets with the value of a company’s assets. A low q (between
0 and 1) means that the cost to replace a firm’s assets is greater
than the value of its stock. This implies that the stock is
undervalued. Conversely. A high q (greater than 1) implies that
a firm’s stock is more expensive than the replacement cost of its
assets. Which implies that the stock is overvalued.
TOBIN’S Q=MARKET VALUE OF FIRM/BOOKVLUE
OF ASSET
Both Fu-Wang and Rahima Food are having a asymmetrical Tobin’s Q because of their share price fluctuations and stock is more expensive than the replacement cost of its assets which implies stock is overvalued as it is more than1in most of the years
Rahima food is having a 565.7% in 2011 due to the increase in FDI
Fu-Wang ‘s Sale is symmetrical as it is increasing from 2007 to 2011 & Rahima Food’s Sale is asymmetrical because of asymmetrical Price fluctuations of their RM
Both the companies have asymmetrical growth on sale because of sudden change in price hike of their RM and fuel and international price fluctuations
From 2007 to 2010 both Fu-Wang ‘s financial leverage was higher but they try to reduce it in 2011
Rahima Food ‘s financial leverage is increasing means using more debt financing than equity financing
Rahima Food is receiving FDI every year but Fu-Wang Food does not
Rahima Food operating with a more fluctuating Raw Materials industry
FU-WANG Food RAHIMA Food
Both the companies’ stock is more expensive than the replacement cost of its assets which implies stock is overvalued as it is more than1in most of the years
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