Internee Report

Department of Finance and Banking
University of Chittagong
1.1 ORIGIN OF THE REPORT
This paper is originated from the curriculum requirement of MBA program of University of
Chittagong .The topic of my report is Working capital Management practiced in Usmania Glass
Sheet Factory Ltd.. The report has been Prepared under direct supervision of Md. Fazlul Haque
Deputy Manager, Accounts and Finance, UGSFL.
1.2 AIM & OBJECTIVES OF THE STUDY

The aim of the report is to evaluate the working capital management of Usmania Glass Sheet
Factory Ltd. comparing with the standards of working capital management.
The objectives of the study are:
To have an idea about the working capital management of Usmania Glass Sheet Factory
Ltd.
To be familiar with internal control of working capital procedure.
To understand the application of every component of working capital in UGSFL.
To relate the theoretical learning with the real life situation.
To identify problems and provide recommendations on the basis of my findings.
1.3 SCOPE OF THE STUDY

The scope of my study is only about working capital management. The Term Paper describes
about the existing procedure of working capital management in Usmania Glass Sheet Factory
Ltd. the rules and regulations followed by it and the existing Accounts Payable and Account
Receivable system relating to this account. The report is prepared on the basis of conversations
with personnel of accounts and finance department of UGSFL. As I have prepared this term
paper on the basis secondary sources, my scope of work was limited to provide information.
1.4 METHODOLOGY OF THE STUDY

The following methodology was followed throughout the study .The study is based basically on
both primary and secondary data. Data regarding the organization profile collected in the
following ways:
1.4.1 Primary Sources
Face- to-face conversation with the respective offices.
Informal conversation with the clients and friends.
Appointment with the top officials of UGSFL
1.4.2 Secondary Source
Organizational Brochures/ Annual Reports.

Online information.
Different UGSFL publications.
Other relevant written materials.
Text Books.
1.5 ORGANIZATION OF THE REPORT
The Term Paper is divided into five parts. The first part is the introductory chapter. The second
part is the organizational part (a brief overview of UGSFL). The Third part deals with report part
of UGSFL. The fourth part includes overall findings and analyzing performance concluding
remarks. The last part provides Bibliography and annexure
1.6 LIMITATIONS OF THE STUDY
Time is an important issue in Term Paper Report writing. As I have been given a specific
deadline for submission, observation and learning all the working capital management within
few days really tough. Besides, all the comments made, conclusions reached and suggestions for
possible improvement provided are purely based on my level of understanding, knowledge and
my way of interpreting a particular statement. Because of the lack of information, I have to make
some assumptions that may cause few errors or personal mistakes in the Term Paper. In spite of
all these limitations, I have tried to put the best effort as far as was possible.

2.1 BACKGROUND OF GLASS SHEET INDUSTRIES IN BANGLADESH
There was no glass sheet manufacturing company before 1959. Now some glass sheet factories
have been established in Bangladesh to meet our current demand. The oldest sheet glass plant in
Bangladesh is situated in the southern side of the country at the district of Chittagong. It is fully,
integrated plant and established on 30th June 1959 with the name of Usmania glass sheet factory
Ltd. under the companies Act 1913 and started its commercial production in 1961. After
liberation of Bangladesh, it was taken over by the Government of Bangladesh and was
subsequently placed under Bangladesh Chemical Industries Corporation (BCIC). This was the
first glass sheet-producing unit in this industry. But glass sheet companies are not developed in
our country as for need. Usmania was monopoly in this line up to 1996. And in 1997 another
glass sheet factory MEB was established in the capital city. It is a part of ISLAMIC
BROTHERS. But these are the only two running glass sheet factories in Bangladesh till now. But
within last two years the following organization came into the market with more advanced
technology and capacity.
PHP Float Glass Industries Ltd. (having 150 m.ton production capacity each day)
Nasir Gold Glass Industries Ltd.
These factories have created a new arena in glass industries of Bangladesh. PHP is the first
organization that has exported flat glass. On the other hand the imported sheet glasses are
available in our country and this glass captured most of the market at present. Generally glass
sheet are imported from
China
Thailand
Taiwan
Indonesia
Vietnam
India
Large amount of glass are imported from China and Thailand and a small portion from India and
mostly high quality glass are imported from Vietnam. (Annual report of UGSFL, 2012)
3

2.2 HISTORICAL BACKGROUND OF USMANIA GLASS SHEET FACTORY
There were a few glass-ware manufacturing industries in the then east Pakistan, now forming the
territory of Bangladesh, but not a single factory to manufacture sheet glass to serve the country.
The country was fully dependent on import from outsides. In the circumstances, a thought
prevailed in the minds of some private entrepreneurs as to whether a sheet glass manufacturing
unit could be set-up in the country in order to achieve economic advantages for the country. His
thought gradually took a definite shape and in 1959 a group of entrepreneurs of the then West
Pakistan, now Pakistan, proposed to set up a sheet glass factory at the sea town of Chittagong.
The factory was started at Kalurghat Industrial Area initially with one furnace with an annual
installed capacity of 72-ac sft. Per year, in terms of 2mm. It went on production from April, 1961
The company was subsequently converted into a Public Limited Company in 1962 with an
authorized capital of Taka one crore divided into 10 lacs ordinary shares of Tk. 10.00 each. The
issued and paid up capital of the company was Taka fifty lacs which was later on increased to
Tk.55 lacs and the management of the company was vested in the Managing Agents of M S.
US,1AN SONS LTD.
Thus in short The Company was incorporated on 30th of June 1959 as a private Limited
Company with object set out in the memorandum of Association, which inter alia, provided for
establishment and operation of a glass sheet factory. With a view to associate a larger section of
the public with a growing industry, the company was converted into a public limited company on
27th October, 1962.
2.3 COMPANY OVERVIEW
Usmania Glass Sheet Factory ltd. (UGSFL) is situated in Kalurghat Heavy Industrial area, Post
office Chandgaon, Chittagong-4212.
This company is production oriented. The initiative to establish this industry was taken firstly
late usman shat. He was a citizen of the then Pakistan. This organization established on 30th
June 1959. It is going to commercial production in 1961 and production started from 27th
October 1962.Meanwhile in 1962 it converted in public limited company and it becomes

nationalized under president order-27 in 1972. This factory is now under the sector corporation
named Bangladesh Chemical Industries Corporation (BCIC).
Usmania Glass Sheet Factory is a state owned enterprise (SOE), i.e.49% share in private and
51% share in public/Govt. ownership.
1. Address
Usmania glass sheet factory ltd is situated in Kalurghat Heavy

Industrial area, Post office Chandgaon, Chittagong-4212.
2. Year of commissioning
1961
3. Nature of production
Forecourt Drawing
4. Number of Furnaces
2 (two)
5. Drawing capacity
25000 sift per machine per day Or 11.25 MT/Day/m/c
6. Molten glass capacity
15 M/Tons per day per Furnace
7. Main Products
Sheet glass of 2MM, 3MM, 5MM & 6MM Mussalin &

Design Glass of 2MM to 6MM
8. Main Raw-materials
a. Silica Sand b. Soda-Ash c. Dolomite-Ash d. Lime Stone

e. Culets
9. Man-power
Officers 46
Staff 97
Workers147
Total 290
10. Utility consumption
Furnace oil
3500 Gallons per day
Water
75000 Gallons per day
Electricity
2500 KWH per day

2.4 ORGANIZATIONAL STRUCTURE

In UGSF Ltd has a composition of supreme board. Total 9 persons in this board. Out of which 5 persons
are selected/assigned by the BCIC and remaining 4 persons are selected or assigned by private owners of
49% shareholders.

Managing Director
Adjustment
Branch-2+1=3
Administratio
Purchase/Com
Production &
Accounts
Engineering
mercial
Quality
Division
Division
Division
Control
16+1=17
28+5=33
13+3=16
135+114=249
Division
37+11=48
General
General
Manager
General
General
Manager
Administratio
(Admins.)
n
Staff
Administratio
Purchase
Marketing
MPIC
treatment
Batch plant
Furnace
Cutting
Medical
Packing
Center
General
Secretariat of
Manager
Board, Share,
(Account and
Cost, Budget,
Finance)
MIS,
(Operation)
Sand
(Engineering)
Mechanical,
Electrical
Engineering
Accounts,
Finance,
Audit,
Bill,
Store
accounts.
Quality
Security
Control
&
Branch
Research
&
Development
Department
Manager

3.1 WORKING CAPITAL MANAGEMENT

Working capital, also known as net working capital or NWC, is a financial metric which
represents 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. If current assets are less than current liabilities, an entity has a
working capital deficiency, also called a working capital deficit. .
In Accounting: Net liquid assets computed by deducting current liabilities from current assets.
Sources of working capital are (1) net income, (2) long-term loans (non-current liabilities), (3)
sale of capital (non-current) assets, and (4) injection of funds by the owners (stockholders).
Amount of available working capital is a measure of a firm's ability to meet its short-term
obligations. Ample working capital allows management to avail of unexpected opportunities, and
to qualify for bank loans and favorable trade credit terms. In the normal trade cycle of a firm,
working capital equals working assets.
A high working capital balance is needed if the business is unable to borrow on short notice.
Banks look at working capital over time to determine a company's ability to support financial
crises.
Net Working Capital (which is also known as Working Capital or the initials NWC) is a
measurement of the operating liquidity available for a company to use in developing and
growing its business. The working capital can be calculated very simply by subtracting a
companys total current liabilities from its total current assets.
Through this formula, a working capital amount can be determined to be either positive or
negative. Naturally, this will rely largely on the amount of debt owed by the company. It should
not come as a surprise that having plenty of working capital tends to help companies achieve
more success. This follows because working capital allows companies to grow smoothly and
make necessary improvements to their corporate operations.

On the other hand, companies that are operating with negative working capital may not have the
financial support or flexibility to grow and/or improve, even when such developments would be
indicated. Hence, working capital can be an indicator of the overall strength of a company.
There are three main indicators used in calculating working capital. Elements of the current
assets side of the equation will include accounts receivable, as well as any inventory of goods
on-hand. Current liabilities will include accounts payable.
A positive change in a companys working capital will generally indicate one of two
developments. Either the company has increased its current assets by receiving cash (or some
other form of assets), or it has minimized its liabilities often by paying off a short-term creditor.
Working Capital = Current Assets Current Liabilities

A company can be endowed with assets and profitability but short of liquidity if its assets cannot
readily be converted into cash. Positive working capital is required to ensure that a firm is able to
continue its operations and that it has sufficient funds to satisfy both maturing short-term debt
and upcoming operational expenses. The management of working capital involves managing
inventories, accounts receivable and payable and cash.
3.2 COMPONENT OF WORKING CAPITAL
3.2.1 Cash
Cash is probably the least productive asset you can have. Not only does it not earn anything, it
actually loses purchasing power as a consequence of inflation. While cash is necessary to cover
the transactions motive, the precautionary and speculative motives can be covered with the near
money (or near cash) of marketable securities. In order to maximize your cash balances, you can
do one of two things; either accelerate the inflow of funds (ask for an advance on your salary) or
delay the outflow of funds (postpone paying the phone bill until next month).
3.2.2 Marketable Securities

9

Marketable securities are a way of holding cash but with the attribute of earning interest. Market
securities have three characteristics:
1. Short-term maturity (less than one year, or money market instruments
2. High marketability
3. Virtually no risk of default
Several types of marketable securities exist, the major ones being
Treasury bills: Treasury bills are auctioned every predetermined day by the government. Most
have maturities of 91 or 181 days, although some 9-month (270 days) and 12-month (360 days)
bills are sold. The t-bills, generally with a face value of $10,000 each, are sold at a discount to
the highest bidders. The difference between the amount paid and the face value at maturity
represents the interest that is earned.
Anticipation notes: Anticipation notes are issued by municipalities and school districts. Since
their revenues come from tax sources, the notes are in anticipation of future tax receipts.
3.2.3 Commercial paper
Commercial paper is the promissory notes of major national firms. Most of the firms that issue
commercial paper sell it directly to investors (insurance companies, money market funds,
pension funds) although sometimes it will be sold through investment bankers. Commercial
paper is a substitute for bank debt, but at a rate of interest that is one-fourth to on-half of a
percent higher than t-bills (currently about 4.3%) but significantly less than what banks would
charge (prime is currently about 8.5%).
3.2.4 Bankers Acceptances
A bankers acceptance is a time draft that evolves from international export/import financing. An
exporter is paid by a time draft issued by a foreign bank. Since the draft is not payable until
some future date (1-3 months, typically) the company that receives it will often sell it to its local
bank at a discount. The local bank bundles the discounted drafts (bankers acceptances) and then
resells them in the money markets.
3.2.5 Accounts Receivable
10

Accounts receivable are generated when a firm offers credit to its customers. The first thing that
needs to be addressed when establishing a credit policy is to set the standards by which a firm is
judged in determining whether or not credit will be extended. There is whats known as the 5 Cs
of credit:
1. Character, 2.Capacity, 3.Capital, 4.Collateral, 5. Conditions
Once the credit standards have been set, the terms of credit need to be established. When must
the customer pay? If they pay early, will they receive a discount? If they pay late, do they get
charged a penalty? While the whole purpose of extending credit is to increase sales and, thus,
gross profits, the expected increase in gross profits must be compared with the costs associated
with extending credit to customers. Competitors will respond very quickly to a change in price.
How many times have we seen the claims that We will meet or beat any advertised price? A
change in credit policy, on the other hand, is a more subtle means of competing for customers
and one that the competition will not necessarily respond to. In fact, many firms base their
business on easy credit. How many times have we seen the advertisements where they tell us
Good credit? Bad credit? No credit? We dont care! Of course, these firms will have larger
bad debt expenses and larger financing costs, etc. Obviously, they will also need to have higher
prices (higher gross profit margins) in order to cover these costs.
3.2.6 Inventories
Inventories (raw materials, work-in-process, finished goods) make up a large portion of most
firms current assets, and for many, total assets. As such, the extent to which a firm efficiently
manages its inventories can have a large influence on its profitability. Thus, keeping abreast of
inventory policy is critical to the profitability (and value) of the firm.
Several factors influence the amount of inventory that a firm maintains. The most important of
these include
Level of sales typically, the more sales a firm has, the more inventory it holds
Length of time and technical nature of the production process The longer it takes to
produce finished goods inventories from raw materials, the larger the amount of finished
goods that a firm will typically hold (a safety stock). Also, if the production process is highly
11

technical, requiring that retooling be performed prior to each production run in order to
assure that production is meeting specifications, larger amounts of inventory will be
produced with each production run in order to minimize the set-up costs associated with
retooling.
Durability vs. Perish ability If an inventory item is highly perishable, such as fresh
vegetables, a small amount will be held. Similarly, fashions of clothes and car styles are
perishable and will result in smaller inventories than durable goods such as tools and
hardware.
Costs Cost of holding inventories as well as costs of obtaining inventories will influence
inventory sizes.
3.3 WORKING CAPITAL CYCLE
Cash flows in a cycle into, around and out of a business. It is the business's life blood and every
manager's primary task is to help keep it flowing and to use the cash flow to generate profits. If a
business is operating profitably, then it should, in theory, generate cash surpluses. If it doesn't
generate surpluses, the business will eventually run out of cash and expire
The faster a business expands the more cash it will need for working capital and investment. The
cheapest and best sources of cash exist as working capital right within business. Good
management of working capital will generate cash will help improve profits and reduce risks.
Bear in mind that the cost of providing credit to customers and holding stocks can represent a
substantial proportion of a firm's total profits.
There are two elements in the business cycle that absorb cash - Inventory (stocks and work-inprogress) and Receivables (debtors owing you money). The main sources of cash are Payables
(your creditors) and Equity and Loans.
12

Each component of working capital (namely inventory, receivables and payables) has two
dimensions time and money. When it comes to managing working capital - TIME IS MONEY.
If you can get money to move faster around the cycle (e.g. collect monies due from debtors more
quickly) or reduce the amount of money tied up (e.g. reduce inventory levels relative to sales),
the business will generate more cash or it will need to borrow less money to fund working
capital. As a consequence, you could reduce the cost of bank interest or you'll have additional
free money available to support additional sales growth or investment. Similarly, if you can
negotiate improved terms with suppliers e.g. get longer credit or an increased credit limit; you
effectively create free finance to help fund future sales.
13

4.1 LEVEL OF WORKING CAPITAL OF UGSFL

The consideration of the level investment in current assets should avoid two danger poi of
excessive and inadequate investment in current assets. Investment in current assets should be just
adequate, not more or less, to the need of the business firms. Excessive investment in current
assets should be avoided because it impairs the companys profitability, as idle investment earns
nothing. On the other hand inadequate amount of working capital can be threatened solvency of
the firms because of its inability to meet its current obligation. It should be realized that the
working capital need of the firms may be fluctuating with changing business activity. This may
cause excess or shortage of working capital frequently. The management should be prompt to
initiate an action and correct imbalance.
Table - Size of working capital in UGSFL
Particulars
A)Current assets
2,008(TAKA)
2,009(TAKA)
2011(TAKA)
2012(TAKA)
Inventories
Other Assets
Total of A
78725677
349224436
427950113
77698025
370560788
448258813
115118340
320840975
435959315
79610713
305471318
385082031
69416102
49132211
53189502
378842711
386827104
331892529
( Gross WIC)
B)
Current 77855992
Liabilities
Net WC(A-B)
350094121
Source: Annual report (2011-2012)
14

Source: Self Arrangement in financial area from annual report book.

4.1.1 Current Assets of UGSFL
Current asset is very much important component of working capital of the company. Here in
UGSFL the status of the current assets are shown below:
Table-1: Current assets of UGSFL
Particulars
Inventories
BCIC Current Accounts
Current Accounts With
2008 (Tk)
78,725,677
1,310,301
88,265
2009 (Tk)
7,7698,025
1,964,007
158,164
2011 (Tk)
115,118,340
251,740
2012 (Tk)
79,610,713
1,754,244
296,054
BCIC Enterprises
Trade Debtors
90,551
Other Debtors
181,423
Advances, Deposits & 14,694,752
89,501
181,423
22,184,962
64,120
17,975,893
64,120
16,080,493
pre-payments
Advances
15,533,579
6,177,328
11,295,690
295,994,817
258,101,252
252,505,447
34,454,335
448,258,813
38,270,642
435,959,315
23,475,270
385,082,031
Against 14,015,484
Income Tax
Bank Deposits Accounts 298,472,585
(FDR)
Cash & Bank Balance
Total Current Assets
20,371,075
427,950,113
15

Figure: Current Assets of UGSFL.

Here as the company is getting bigger day by day the size of the current assets is also increasing
at proportionately. But in 2011 & 2012 the amount of current assets are quite less than the
previous years. In 2012 the amount of inventories, account receivables & loans & advances are
quite less than the previous year. But I have observed that the volume of production, sales
volume & profit margin these all the indicators are sound enough than the previous years
performance. It indicates me that the management of current assets in 2012 is very nice. As
larger amount of current assets require a larger amount of costs, I think in that year management
did well. Same case occurred in 2011 also. In 2009 the management achieved larger Profit after
tax by using very less current assets. I think it is an indicator of well performance of
management.
4.1.2 Current Liabilities of UGSFL

In order to run the company, the company should maintain a sound amount of current liabilities.
Otherwise the company will face a crisis of cash flow. Even the company may face the problem
of running the day to day operations. The recent conditions of the current liabilities are being
shown below:
16

Particulars
2008(Taka)
Creditors For Goods
2,020,151
Creditors
For 20,716,786
2009(Taka)
1,513,077
19,153,427
2011(Taka)
1,025,609
19,574,487
2012(Taka)
2,777,167
22,333,019
Expenses
Creditors For Other 21,143,104
13,383,430
14,836,793
16,192,693
Finance
Unclaimed Dividend
12,273,905
Current
Account 198,775
12,749,239
248,440
13,006,567
323,820
9,776,073
-
Enterprises
Provision For W.P.P.F 3,223,580
3,299,762
236,687
280,068
Fund
Provision For Income 17,729,691
18,518,727
261,882
Tax
MEB
Total
550,000
69,416,102
128,248
49,132,211
1,568,600
53,189,502
With
BCIC
550,000
Current 77,855,992
Liabilities
Table 2: Current liabilities of UGSFL
Figure: Total Current Liabilities.
17

Here though it is a liability, if a company can use maximum amount of current liabilities, it can
run its business with little operating costs. By taking this view under consideration, I think that in
2008&2009 the company used comparatively bigger amount of current liabilities that forced its
net profit higher. In 2011 another noticeable thing is that the company used very lower amount of
current liabilities, which forced the company to the lower amount of profit:
4.2 RECEIVABLE MANAGEMENT
Receivables or debtors are the one of the most important parts of the current Assets which is
created if the Industry sells the finished goods to the customer but not receive the cash for the
same immediately. Trade credit arises when firm sells its products and services on credit and
does not receive cash immediately. It is essential marketing tool, acting as bridge for the
movement of goods through production and distribution stages to customers. Trade credit creates
receivables or book debts which the firm is expected to collect in the near future.
Table: Size of receivables of UGSFL
Particulars
Trade Debtors
Other Debtors
Total Debtors
Indices
2008
90,551
181,423
271,974
100
2009
89,501
181,423
270,924
99.61393368
2011
2012
64,120
64,120
64,120
64,120
23.66715389 23.57578298
18

Chart- Size of receivables
4.2.1 Average collection period

The average collection period measures the quality of debtors since it indicate the speed of their
collection. The shorter the average collection period, the better the quality of the debtors since a
short collection period implies the prompt payment by debtors.
The average collection period should be compared against the firms credit terms and policy
judges its credit and collection efficiency. The collection period ratio thus helps an analyst in two
respects.
In determining the collectability of debtors and thus, the efficiency of collection efforts.
In ascertaining the firms comparative strength and advantages related to its credit policy
and performance.
The debtors turnover ratio can be transformed in to the number of days of holding of debtors.
Observations
The size of receivables is very insignificant. It indicates that the Industry was allowing no credit
year to year. Actually the company is strictly avoiding credit sales. All the above factors directly
or indirectly affects in the debtors turnover ratio, current ratio and working capital ratio. For
effective management of credit, the Firms should lay down clear cut guidelines and procedure for
granting credit to individual customers and collecting individual accounts should involve
following steps:
(1) Credit information
(2) Credit investigation
(3) Credit limits
(4) Collection procedure.
19

4.3 INVENTORY MANAGEMENT
The term inventory is used to designate the aggregate of those items of tangible assets which
are Finished goods (saleable)
Work-in-progress (convertible)
Material and supplies (consumable)
In financial view, inventory defined as the sum of the value of raw material and supplies,
including spares, semi-processed material or work in progress and finished goods. The nature of
inventory is largely depending upon the type of operation carried on. For instance, in the case of
a manufacturing concern, the inventory will generally comprise all three groups mentioned
above while in the case of a trading concern, it will simply be by stock- in- trade or finished
goods.
Table -Size of inventory
Particulars
2008
2009
2011
2012
inventory
78725677
77698025
115118340
79610713
100
98.6946419
146.2271833 101.1242025
Indices
20

Chart Size of Inventory
4.3.1 Composition of inventory

In most of the case, a firm maintains raw material, Working-in-process and Finished goods as
inventory. Depending on the nature of Business, the proportion of inventory held by the firm
various.
Table- 3: Total inventories of UGSFL
Items
Finished Goods
2008 (TK)
299,100
2009 (TK)
1,471,296
2011 (TK)
8,726,389
2012 (TK)
15,562,038
Raw materials
24,983,576
36,958,064
7,261587
24,783,310
Work in Process
4,564,477
Store spares & 48,680,491
4,139,379
35,101,972
4,958,666
89,796,729
5,128971
33,980,222
accessories
Store in Transit
198,033
27,314
4,374969
156,172
Total Inventory
78,725,677
77,698,025
115,118,340
79,610,713
21

Figure- 3: Total Inventories of UGSFL
Here, try to show the total inventories of UGSFL in 2007 to 2010.In this I see in 2006 the
percentages of inventories is higher than other four years. And the inventories position is
gradually increase of UGSFL in 2003 to 2006.
Here though the amount of inventory is increasing year after year, but the proportionate amount
of inventories is not increasing at same rate. If we observe the following calculation it will be
clear to us:
Year
2008
2009
2011
2012
Sales
322,606,548
327,492,038
260,370,205
228.355,818
Cost of goods sold

210,931,863
208,905,100
216,338,393
188,077,340
Inventories
78,725,677
77,698,025
115,118,340
79,610,713
Inventory turnover
2.59 Times
2.69 Times
2 Times
1.93 Times
Here we have seen that the in 2012 the company hold smaller amount of inventory than that of
2011. It is good. The company is now conscious about its inventory management.
4.4 MANAGEMENT OF CASH
Cash is common purchasing power or medium of exchange. As such, it forms the most important
component of working capital. The term cash with reference to cash management is used in two
senses, in narrow sense it is used broadly to cover cash and generally accepted equivalent of cash
such as cheques, draft and demand deposits in banks. The broader view of cash also induce hearcash assets, such as marketable sense as marketable securities and time deposits in banks. The
main characteristics of this deposits that they can be really sold and convert in to cash in short
term. They also provide short term investment outlet for excess and are also useful for meeting
planned outflow of funds. We employ the term cash management in the broader sense.
22

Irrespective of the form in which it is held, a distinguishing feature of cash as assets is that it was
no earning power. Industry have to always maintain the cash balance to fulfill the dally
requirement of expenses. There are four primary motive for maintain the cash as follow
Table-Size and indices of cash of UGSFL
Particulars
Cash & bank balance
Indices
2008
318,844,000
100
2009
2011
2012
330,449,000 296,372,000 275,981,000
103.639711 92.95203924 86.55674875
Chart - indices of cash
4.4.1 Summary of Cash Flow Statement of UGSFL:

23

Net Cash Flow
2008
2009
2011
2012
Tk.
Tk.
Tk.
Tk.
Cash & Cash Equivalents at End of 330,449,152 318,843,660 296,371,894 275,980,717
Year
From the above information we can say that the position of the cash flow is in the upward
situation. So we can say that the UGSFL is conscious enough about the cash in hand. Its a
positive sign, as it helps to continue the production and all other it also indicates that the
companys ability to pay the current obligations is in a handsome position. On the other hand it
should not be excess proportionate to the production volume. Otherwise it will cost much and the
per unit product cost will also increase.
4.5 RATIO ANALYSIS

4.5.1 Current ratio
This ratio between the current assets and the current liabilities is known as the current ratio. If
the current assets are larger than the current liabilities, the borrower ability to meet his current
24

liabilities without default may easily be established. The current ratio shows the short-term
financial strength of a business concern. This ratio of 2:1 is generally considered quit satisfactory
as the current liabilities are sufficiently covered by the current assets and the surplus is a short of
buffer for the creditors. This is true from the viewpoint of a creditor but not from that of product
management, because excess of cash balance or stock-in-trade over what is needed, may not be
considered desirable by the management. The current ratio may also fluctuate because seasonal
characteristic of business. This ratio is to be calculated
Total Current Assets
The current ratio = Total Current Liabilities
Now I analysis of two years current ratio of the UGSFL Ltd, follow their financial statements.
These analyses are below:
Current Assets
Current Ratio 2012 = Current Liability
385082031
= 53189502
= 7.24:1
Similarly calculated for other years:

Year
2008
2009
2011
2012
Current Asset
427950113
448258813
435959315
385082031
69416102
49132211
53189502
6.45756244
8.873187388
7.23981268
Total
current 77855992
liabilities
Current Ratios
5.496688206
25

Here we have seen that the current ratio of the company is less in 2012 than 2011, it represents
that though in both year the ratio is above the standard its current assets/working capital is
controlled in 2012. We have mention earlier that the company expanded its business in 2011 &
2012 but they reduced their working capital.
Its an important issue that it is not necessary to go above the standard level, as it costs a big
amount to maintain a larger amount of working capital. The basic reason is that its a short term
financing.
Observations
Industry has an increasing trend of current ratio. The current ratio indicates the availability of
funds to payment of current liabilities in the form of current assets. A higher ratio indicates that
there were sufficient assets available with the organization which can be converted in cash,
without any reduction in the value. As ideal current ratio is 2:1, where current ratio of the firm is
26

more than 2:1, it indicates the unnecessarily investment in the current assets in the form of debtor
and cash balance. Ratio is lower in the year 2012 where cash balance is more than requirement.
4.5.2 Quick Ratio

This ratio is the similar to the current ratio except that the inventories are excluded from the
current assets because they may not be so easily marketable assets as the other liquidity assets
are. This ratio measures the short-term liquidity of a business concern. The quick ratio
establishes a relationship between readily marketable assets and the current liabilities. It provides
a better indication of the liquidity position and repaying capacity of borrowing concern than the
current ratio. This ratio of 1:1 is generally considered excellent, as the liquid assets will be
considered sufficient to meet the current liabilities. This ratio is to be calculated:
Total Current Assets - Inventories
Total Current Liabilities
The quick ratio =
Now I analysis of two years quick ratio of the UGSFL Ltd, follow their financial statements.
These analyses are below:
Current Assets - Inventory

Current Liability
Quick Ratio 2012 =
= (385082031-79,610,713)/ 53189502
= 5.44:1
27

Year
2008
2009
2011
2012
Current Asset
427950113
448258813
435959315
385082031
69416102
49132211
53189502
Total
current 77855992
liabilities
Total Inventory
78,725,677
7,7698,025
115,118,340
79,610,713
Quick Ratios
4.52
5.02
6.16
5.44
Observations
Note: The quick ratio is the important of the analysis of the financial statements. This ratio is
indicating how much quick asset to repay their current liabilities. This ratio of 1:1 is standard of
28

the analysis of the financial statements. It is not standard for the quick ratio. This ratio is the less
for their standard to repay their current liabilities.
Unlike the current ratio the status of quick ratio is also very nice, more than double to the
standard level. It represents that the inventory of the firm is not too much comparing to the other
ingredients. Though it costs a very large amount but the stakeholder of the company will feel
comport to be involved with the company.
The company can easily manage bank loan and no disruption will occur in the production
process. Here the company is trying to control its quick ratio to the standard level.
Quick ratio indicates that the Industry has sufficient liquid balance for the payment of current
liabilities. The liquid ratio of 1:1 is suppose to be standard or ideal but here ratio is more than 1:1
over the period of time, it indicates that the firm maintains the over liquid assets than actual
requirement of such assets.
4.5.3 Receivable Turnover Ratio
This ratio is worked out by dividing the total credit sales during the year by the amount of the
debtors outstanding at the end of the year. The ratio shows the extent to which credit is granted
by the business concern to its buyers and also indicates the promptness with which the debts are
realized. A low turnover of receivables means higher collection period and large amount of
overdue.
Receivable Turnover ratio = Sales/Account Receivable
Now I analyze of two years receivable turnover ratio of the UGSFL, follow their financial
statements. These analyses are below:
29

Receivable Turnover 2012 = Sales/Account Receivable
= 228,355,818/ 64,120
= 3561.3821times
Year
2008
2009
2011
2012
Sales
322,606,548
327,492,038
260,370,205
228,355,818
Accounts Receivables
271,974
4270,924
64,120
64,120
Receivable Turnover
1186.166869
76.67943471
4060.670696
3561.3821
30

Note: Actually there is no mentionable amount of account receivable. Because UGSFL does not
allow any credit sell. So here this ratio is not important.
4.5.4 Inventory Turnover Ratio

This is usually computed as cost of sales divided by the inventory. Like the account receivable
turnover ratio, the more liquidity the asset. The basic difficult with the accounts receivable
turnover ratio and inventory turnover ratio as liquidity measure is that only focus on only one
assets nearness to cash, and thus by themselves do not tell about the firms overall liquidity
position. That really what we want to measure.
Cost of Goods sold
Inventory
Inventory Turnover Ratio =
Now I analysis of two years inventory turnover ratio of the UGSFL, follow their financial
statements. These analyses are below:
Cost of Goods sold

Inventory
Inventory Turnover 2012 =
= 188,077,340/79,610,713
= 2.3624627times
31

Year
2008
2009
2011
2012
Cost of goods sold
210,931,863
208,905,101
216,338,393
188,077,340
Inventory
78,725,677
7,7698,025
115,118,340
79,610,713
Inventory turnover
2.679327394
2.68867968
1.879269567
2.3624627
Note: I am analysis this ratio and find out their return, but I see that this turnover is increasing
last year. So in this case, the companys position is good. The ratio represents that the company is
keeping optimal level of inventory for its production purpose. As a result its cost behind
inventory management will be controlled at large amount.
4.5.5 Working capital Turnover Ratio
Working capital turnover ratio represents the efficiency of the management in using the working
capital. So that the costs related to financing if working capital can be controlled. It signifies that
for an amount of sales, a relative amount of working capital is needed. If any increase in sales
contemplated working capital should be adequate and thus this ratio helps management to
32

maintain the adequate level of working capital. The ratio measures the efficiency with which the
working capital is being used by a firm. It may thus compute net working capital turnover by
dividing sales by working capital. Working capital turnover ratio
Working capital turnover ratio = Net sales/Net working capital
Working capital turnover 2012 = 228,355,818/331892529

=0.688041453
Year
2008
2009
2011
2012
Net sales
322,606,548
327,492,038
260,370,205
228,355,818
Net working capital
350094121
378842711
386827104
331892529
0.921485191
0.864453845
0.673091938
0.688041453
working
turnover
capital
33

Note: As here the rate of turnover is increasing, compare to the previous year, it can be said that
the management is being efficient in utilizing its working capital. The more the working capital
will turn, represents that it costs less in financing working capital.
Observations
It was observed that current assets turnover ratio does not indicate any trend over the period of
time. Turnover ratio was below 1 in the following year and remains same to all respectively, but
it decreased in the year 2011, because of high cash balance. Cash did not help to increase in sales
volume, as cash is non-earning asset. In the year 2012 Industry Current Assets Turnover Ratio
also decrease from previous year as increase its sales with decrease investment in current assets,
thus current assets turnover ratio increased to 0.673 from 0.688 in the year 2012.
34

5.1 CONCLUSION
We know that ratio analysis is one of the common used tolls to evaluate the financial
performance. By examining the Usmania Glass Sheet Factory Limited through ratio analysis we
have found that the financial performance of the company is quite satisfactory. But it can be said
that the company could use its opportunities more effectively. As the company is the largest
government owned Glass manufacturing firm, the company should use its opportunity more
efficiently though it has some problems such as idle money, production inefficiency, obsolete
technology highly dependence on foreign raw materials lack proper planning and promotional
activities . But I think that these problems can be overcome. The management as well as the
government can do this. I saw that all the personnel working in the executive level are skillful,
efficient and qualified. Therefore the company will be able to overcome these problems in future.
Despite a profitable concern of BCIC, owing to lack of supervision, financial inefficiency
,lengthy process of procurement raw materials and accounts receivables gross profit , net profit
margin ROA,ROE, are constantly decreasing over the passage of time.
In time it can be said that Usmania Glass Sheet Factory Limited has created a good position in
glass sheet field through its high quality product, services, and research and development
programs. However, it should maintain its existing goodwill as well as improve its market share
to survive. Finally I wish all success of Usmania Glass Sheet Factory Limited.
5.2 RECOMMENDATIONS
So far we have analyzed various financial statements such as income statement
Balance sheet and cash flow statement of UGSFL that guides us to recommend the following:
Consumer census and data base.
Detection of pilferage and unauthorized connections.
Introduction of universal metering and time based metering for bulk consumers of
power and replacement of faculty meters.
35

The company should consider its field level manager's decisions in creative decision
making process.
The company should contribute in the governments new decisions regarding
environment more effectively.
The company should follow product differentiation policy to face the competitors.
The company should purchase through tenders under the decision of General
Manager (Purchase)
The company should replace their officials and it should search young and energetic
workers.
To increase sales company should offer attractive gifts to its customers.
To survive the market company should take immediate steps in order to face
competitors.
Usmania Glass Sheet Factory Limited has to implement an action program to deal
with the system loss in power & gas distribution , urban water supply and telephone
services through appropriate measures, including:
Usmania Glass Sheet Factory Ltd. should have effective advertisement through mass
media like television newspapers etc.
36

BIBLIOGRAPHY AND REFERENCES

1. Dr. Solaiman Md.1991, Impact of Poor Asset management on Productivity-A
Management Approach Chittagong University Studies (Commerce) Vol. 7,
2. Glickman & Richard. B.A, "Financial Statement & Reporting" 5th Edition, The Dryden
Press, Newyork
3. Gupta, R.L. "Financial Statement Analysis" 11th Edition, New Delhi Publication, India.
4. Kevin S.K Portfolio Management, Second Edition, New Delhi Publication, India.
5. Saleh Jahur Mohammad & Jannat Ara Parveen 1996 Analysis of Financial Performance
of Public Enterprises-A case study of Chittagong Steels Mills Ltd. Chittagong
University Studies (Commerce) Vol. 12,
6. Shamim uddin khan Dr. Mohammad & Hossain Shahadat, 2003 cash flow rations for
evaluating financial performance: A study chittagong port The Chittagong university
journal of business administration, Vlo. 18, pp- 41-60.
7. Usmania Glass Sheet Factory Ltd. Annual Report for 2005-06, 2006-07, 2007-08,20082009,2009-2010.
8. Usmania Glass Sheet Factory Ltd. Special Publication for june-2010.
37

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1.2 AIM & OBJECTIVES OF THE STUDY

1.3 SCOPE OF THE STUDY

Department of Finance and Banking

1.4.2 Secondary Source

Organizational Brochures/ Annual Reports.

Department of Finance and Banking

2.1 BACKGROUND OF GLASS SHEET INDUSTRIES IN BANGLADESH

Department of Finance and Banking

Department of Finance and Banking

Usmania glass sheet factory ltd is situated in Kalurghat Heavy

25000 sift per machine per day Or 11.25 MT/Day/m/c

6. Molten glass capacity

15 M/Tons per day per Furnace

Sheet glass of 2MM, 3MM, 5MM & 6MM Mussalin &

a. Silica Sand b. Soda-Ash c. Dolomite-Ash d. Lime Stone

10. Utility consumption

3500 Gallons per day

75000 Gallons per day

2500 KWH per day

Department of Finance and Banking

2.4 ORGANIZATIONAL STRUCTURE

Department of Finance and Banking

Department of Finance and Banking

3.1 WORKING CAPITAL MANAGEMENT

Department of Finance and Banking

Working Capital = Current Assets Current Liabilities

3.2.2 Marketable Securities

Department of Finance and Banking

Department of Finance and Banking

Department of Finance and Banking

Department of Finance and Banking

Department of Finance and Banking

4.1 LEVEL OF WORKING CAPITAL OF UGSFL

Department of Finance and Banking

Source: Self Arrangement in financial area from annual report book.

Department of Finance and Banking

Figure: Current Assets of UGSFL.

4.1.2 Current Liabilities of UGSFL

Department of Finance and Banking

Figure: Total Current Liabilities.

Department of Finance and Banking

Department of Finance and Banking

4.2.1 Average collection period

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Department of Finance and Banking

4.3.1 Composition of inventory

Department of Finance and Banking

Cost of goods sold

Department of Finance and Banking

Chart - indices of cash

4.4.1 Summary of Cash Flow Statement of UGSFL:

Department of Finance and Banking

Net Cash Flow

4.5 RATIO ANALYSIS

Department of Finance and Banking

Similarly calculated for other years:

Department of Finance and Banking

Department of Finance and Banking

4.5.2 Quick Ratio

Current Assets - Inventory

Similarly calculated for other years:

Department of Finance and Banking