Working capital management and its impact on profitability- a study on British American Tobacco Bangladesh Ltd.

Abstract

This study tries to explore the impact of working capital management on profitability of British American Tobacco Bangladesh Ltd. one of the leading multinational corporations in Bangladesh. Working Capital can be defined as the amount when current asset is surpassing current liabilities. The focus of this paper is to analyze how the company manages its working capital on the basis of cash, inventory period, receivable period and payable period management and how it influence the profitability of an organization. This project paper starts with the objective of the study and the methodology. The project paper contains the analysis of ten years data of BATB commencing from the year 2006 to 2015. Most of the researchers found that degree of efficiency of administration of working capital largely determines the success or failures of overall operations of an organization. The objective of this report is to analyze the previous studies and relate them with this paper. Afterwards description of the company including its history, products, mission, vision, organization structure etc. is discussed in chapter three. Corporate social responsibility is a remarkable part of BATB. In the fiscal year 2013-14 BATB contributed more than 8436 crore taka as taxes to the national Exchequer. WCM policy for BATB is discussed elaborately in this chapter as well. They follow aggressive WCM policy because of their higher utilization of short term financing. Inventory management performance is evaluated using inventory conversion period. In the year 2014 it was approximately 171 days which is quite high in compare to other years. BATB.s time gap between collecting money from the creditors is very satisfactory with an average period of 4 days. The organization tries to delay the accounts payable as much as possible. The time taken by BATB to make payments to creditors is around 107 days. Analysis of the collected data is presented in chapter five. It contains descriptive, correlation and multiple regression analysis of the variables with proper interpretation and it was found that there is relationship between profitability and working capital components. Correlation analysis shows that receivable period is negatively related with profitability and other variables are positively related. Finally findings and conclusion chapter includes a summary of the results found in the analysis portion.