Working capital management and its impact on profitability- a study on Glaxo SmithKline Bangladesh ltd.

Abstract

This study tries to explore the impact of working capital management on profitability of Glaxo SmithKline 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 4 years data of GSK commencing from the year 2003 to 2016. 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. In the fiscal year 2013-14 GSK made more than 24 crore taka as Net Profit. They follow aggressive WCM policy because of their higher utilization of short term financing. Inventory management performance is evaluated using inventory conversion period. GSK’s time gap between collecting money from the creditors is very satisfactory. The organization tries to delay the accounts payable as much as possible. The time taken by GSK to make payments to creditors is around 256 days. Analysis of the collected data is presented at the last. It contains descriptive, ratio analysis of the variables with proper interpretation and it was found that there is relationship between profitability and working capital components. The 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.