Underlying relationship between working capital management and profitability- a case study on GlaxoSmithKline Bangladesh Ltd.

Abstract

This study aims to investigate the underlying relationship between working capital management and profitability in GlaxoSmithKline Bangladesh Ltd. Working Capital can be found by subtracting current liabilities from current assets The purpose of this report is to determine the management of working capital by the company in terms of cash, inventory period, receivable period and payable period management and its overall influence on the profitability of the organization. This study begins with the objective of the study and the methodology. The report entails the analysis of 5 years data of GSK commencing from the year 2012 to 2016. Previously researchers have found that the failure or success of any business heavily depend on the efficient management of working capital performed by the administration. The objective of the study is to investigate the previous studies and find the correlation with this paper. Following to the objective the general company overview with its operational structure has been given. Reportedly In the fiscal year 2013-14 GSK made more than 24 crores taka as Net Profit. They believe in higher utilization of short term financing hence follow aggressive WCM policy. Inventory conversion period has been used to determine the inventory management performance. The time gap between collecting money from the creditors is very reasonable. The organization tries to delay the accounts payable as much as possible. GSK makes the payment to debtors within 256 days of time. Analysis of the collected secondary data has been given at the end. Descriptive, ratio analysis of the variables with proper interpretation has been included in the study for a clearer understanding on the issue. The relationship between profitability and working capital components has been deducted from the analysis. The analysis reflects that there is a negative relationship between profitability and receivable period whereas other variables are positively related. Last but not the least, findings and conclusion chapter bring the end of the report with a summary of the results found through quantitative analysis