36711831 virgin-soft-drinks-working-capital-management

Virgin Soft Drinks Working Capital Management

Maruf
Note
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UNIVERSITY OF DHAKA DEPARTMENT OF ACCOUNTING AND INFORMATION SYSTEMS


Submitted to

Mr Md Amirus Salat

Assistant Professor

Department of Accounting and Information Systems

University of Dhaka

Submitted by

Shah KamalDepartment of Accounting amp Information SystemsUniversity of Dhaka

Maruf
Note
Contactable1313Shah Kamal13Email shahkamallivecom

Table of Contents

Executive Summary

1 Introduction 01

2 Objectives of the Study 02

3 Methodology 02

4 Limitations of the Study 03

5 Working Capital Management 04

51 Defining Working Capital 04

52 Working Capital Policies 05

53 Working Capital Cycle 07

531 Cash Management 08

532 Inventory Management 19

533 Managing Accounts Receivable (Debtors) 22

534 Managing Accounts Payable (Creditors) 26

6 Overview of Virgin Group 29

7 Overview of Virgin Soft Drinks 31

8 Finding of Working Capital Management Maintained by Virgin Soft Drinks in Bangladesh

32





9 Recommendation

43

10 Conclusion 44

Bibliography

Annexure

EXECUTIVE SUMMARY

Working capital is basically an expression of how many in liquid assets the company

currently has to build its business fund its growth and produce value for the owner

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 the business Good management of working capital will generate cash and

help improve profits and reduce risks My study is based on the comparison between

theoretical and practical aspects of working capital management For this purpose

Ive collected some information regarding working capital its cycle and its

management from Virgin Soft Drinks It has been found that their major transactions

are handled in cash But one of its major weaknesses is that it keeps its surplus funds

in banks rather than investing in marketable securities Therefore they can earn

optimum profit by implementing effective mechanism which will help to gain

optimum working capital


1 INTRODUCTION

Working capital is the life blood of any business big or small However smaller

businesses might find it more trying to maintain a comfortable level of capital

Managing working capital is an important factor for them Working capital

management is important because maintaining a balance of income to debt can be

difficult and owners must be diligent to assure that it is kept Sometimes it takes a

little assistance to maintain levels of fluidity or make major purchases If working

capital dips too low a business risks running out of cash Even very profitable

businesses can run into trouble if they lose the ability to meet their short-term

obligations Working capital financing can be used as a fast cash option to cushion

the periods when the flow is not ideal or readily available Even when owners are

meticulous in managing working capital finding the right levels to remain

comfortable and competitive can be difficult

The analogy has often been made that cash is the lifeblood of any business A

transfusion will miraculously bring the patient back from the brink of death but only

if

The blood is of the right kind

The problem causing the leakage is attended to

In other words the financial requirements of any business must be tailored to suit

that businesss own particular needs For example fixed assets should be financed by

long term loans and capital Working capital requirements should be attended to by

short term finance eg overdrafts

of 46

It goes without saying that before capital is injected into the business it should first be

ascertained whether all unnecessary leakages have been plugged Otherwise in time

the transfusion will follow the same route To control and exploit the cash cycle

through any business so that it can continue to function on a day-to-day basis is

therefore the hub of working capital management The fundamental principle of


working capital management is having just the right amount of money available

when needed Every rand in the business should be earning its maximum return

wherever employed

2 OBJECTIVES OF THE STUDY

The study has been undertaken with the following objectives

To know the fundamentals of working capital management

To gather practical knowledge about the implementation of working capital

management by Virgin Soft Drinks

To understand the efficiency of Virgin Soft Drinks in managing working

capital

3 METHODOLOGY

In this paper the following methods are used

a) Sources and Data Collection

The major part of this paper is collected from the primary and secondary data

collection method

Conducted formal interview and focus observation and intensive practical

work to collect information

Page 2 of 46

Collected information from companys profiles


Collected current information from website

b) Segregation of Data

Necessary data were segregated from the source material for the purpose of preparing

the report

c) Processing of Data

Collected data were compiled and processed for the purpose of preparing the report

d) Presentation of Data

Collected data were presented in charts and tables

4 LIMITATIONS OF THE STUDY

On the way of my study I have faced a number of problems which may be turned

as the limitation of report

Many personnel of the organization due to their pressure of the work were

reluctant to provide much useful information

Sufficient records publications facts and figures are not available These

constraints narrowed the scope of real analysis

Due to time constraint I could not spend sufficient time which was

necessary to make this report more representative of the fact

Page 3 of 46

Lack of experience has also acted as constraint for the exploration of the

topic


5 WORKING CAPITAL MANAGEMENT

51 DEFINING WORKING CAPITAL

The term working capital refers to the amount of capital which is readily available to

an organization That is working capital is the difference between resources in cash

or readily convertible into cash (Current Assets) and organizational commitments for

which cash will soon be required (Current Liabilities)

Current Assets are resources which are in cash or will soon be converted into cash in

the ordinary course of business

Current Liabilities are commitments which will soon require cash settlement in the

ordinary course of business

Thus ndash

WORKING CAPITAL = CURRENT ASSETS - CURRENT LIABILITIES

In a firms Statement of Financial position these components of working capital are

reported under the following headings

Current Assets

Liquid Assets (cash and bank deposits)

Inventory

Debtors and Receivables

Current Liabilities

Bank Overdraft

Creditors and Payables

Other Short Term Liabilities

Page 4 of 46


Working capital management involves the relationship between a firms short-term

assets and its short-term liabilities The goal of working capital management is to

ensure that a firm is able to continue its operations and that it has sufficient ability 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

52 WORKING CAPITAL POLICIES

The aim of working capital policy is to balance having too little working capital

which can lead to an inability to pay debts as they fall due or the need for expensive

short term borrowings and too much which is wasteful in terms of lost opportunities

for the funds tied up The crucial role of working capital is that it finances the goods

inwards production and sales activities

A firmrsquos working capital policy has two components

1 Policies regarding the appropriate level of current assets (Current Asset Investment Policy)

2 Policies regarding the use of short-term financing (Current Asset Financing Policy)

Alternative Current Asset Investment Policies

These policies are general strategies that firms may follow with regard to their overall

level of current assets investment or holdings There are three types

1 Relaxed Current Asset Investment Policy ndash

Relatively large amounts of cash marketable securities and inventories are carried

and sales are stimulated by a liberal (generous) trade credit policy resulting in high

levels of receivables This is a low risk strategy because the firm always has plenty of

cash and inventory on hand The return is low because more money is invested in

low yielding assets

Page 5 of 46


2 Restricted Current Asset Investment Policy ndash

Holdings of cash securities inventories and receivables are minimized This is a

high risk strategy because the firm tries to keep the bare minimum of cash and

inventory The potential return is high because less money is invested in low

yielding assets

3 Moderate Current Asset Policy ndash

Balance between relaxed and restricted current asset investment policies (moderate

risk - moderate potential return)

Alternative Current Asset Financing Policies

These policies are general strategies that firms may follow with regard to how current

assets are to be financed Current assets can be classified as permanent or temporary

Permanent current assets are the current assets that the company needs to maintain

throughout the entire year Temporary current assets are those that are due to

seasonal fluctuations With respect to the current asset financing policy the question

is how the permanent current assets will and temporary current assets are financed

(long-term or short-term financing)

Page 6 of 46

Aggressive Moderate Conservative

Cash Minimum holding Prepared to hold

some precautionary

balances

Prepared to hold idle

cash balances

Debtors and

stock

Minimum

consistent with

business needs

Moderate levels High stock and

debtor levels to

maximize sales

Creditors Maximum

available without

compromising

business needs

Moderate level Low level seeking

discounts and

reputation for good

payment


Future cash

flows

Predictable Reasonably

predictable

Unpredictable

Attitude to

Risk

Accepting Neutral Rejecting

Total assets = Fixed Assets + Permanent Current Assets + Fluctuating Current Assets

53 WORKING CAPITAL CYCLE

Cash flows in a cycle into around and out of a business It is the businesss life blood

and every managers 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 doesnt generate surpluses the business will eventually

run out of cash and expire



within business Good management of working capital will generate cash will help

improve profits and reduce risks

Working capital can be broken down into the following major components cash (or

bank overdraft) stock debtors creditors Each of these items can have a major

influence on the working capital (or simply cash) that any business requires on an

ongoing basis For example when a business starts up the owner may inject a

certain amount of cash into the business which will enable him to purchase his initial

stock pay his workers their first months wages and cover other overheads such as

rent He then sells his product and this income may be utilized to purchase more

stock pay more wages and overheads and perhaps even have a surplus over for his

own use The quicker he can turn his stock over to receive payment the sooner the

working capital cycle will be completed

Page 7 of 46


Figure Working Capital Cycle

These major components of working capital are discussed below

531 CASH MANAGEMENT

The term cash management refers to the management of cash from the time it starts

its transit to the firm until it leaves the firm in payments Cash management

encompasses the design of collection and disbursement systems for cash and the

temporary investment of cash while it resides with the firm Widely used money

market instruments are-

Treasury bill

Commercial paper

Certificate of deposits

Bankerrsquos acceptance

Page 8 of 46

Repurchase agreement


5311 Motives for Holding Cash

Despite the seemingly low returns there are several good reasons why firms hold

cash and marketable securities These reasons are ndash

Cash for transactions

Cash and near cash assets as hedges

Temporary investment and

Compensating balances

5312 Components of Cash Management

A Cash Flow Statement shows the sources and uses of cash and is typically divided

into three components

Operating Cash Flow

Operating cash flow often referred to as working capital is the cash flow generated

from internal operations It comes from sales of the product or service of your

business and because it is generated internally it is under your control

Investing Cash Flow

Investing cash flow is generated internally from non-operating activities This

includes investments in plant and equipment or other fixed assets nonrecurring gains

or losses or other sources and uses of cash outside of normal operations

Financing Cash Flow

Financing cash flow is the cash to and from external sources such as lenders

investors and shareholders

Page 9 of 46


5313 Tools for Cash Management

Flotation and Check Clearing

Management of cash when it is not in the firmrsquos hands that is in transit to and from

the firm is on important function in the area of finance Transit times for the check

takes in three stages These are mail float at firm float and clearing float Normally

mail float takes 1 to 5 days at firm float takes 025 to 1 day and clearing float takes 0

to 2 days The firm should care about this process because every delay in the receipt

of money by the firm lowers the firmrsquos returns and therefore its shareholdersrsquo wealth

There are several strategies that firm can use to reduce the delay in receiving funds

Each of these strategies addresses one or more of the three float times (mail float

time at time float time and clearing float time) that make up the total transit time of

fund from one firm to another

Other Cash Management Tools

When the economy is strong companies can lapse into sloppy cash-management

practices Firm should try exploring these options

1 Sweep accounts

These bank accounts are the easiest way to generate some income from companys

spare funds however they make sense only if the money youll earn will be greater

than the fees your bank will charge Business owners have two types of sweep

accounts to choose between

Page 10 of 46

Controlled-investment accounts These are the most profitable form of

sweep account but they wont work for company if the firm has any

electronic payments or wire transfers since those may be submitted for

payment later in the day and the account wont have enough cash in it to

cover them


Page 11 of 46

End-of-day sweep accounts A safer bet for most small-business owners

these accounts wait until a late-hour cutoff to determine how much to

sweep into the firms overnight investments Typically their investment

yields are 10 to 20 basis points (1 to 2 of the investment) lower than

those offered with controlled investments

2 Lock-box accounts

A lock box is a cash-management system that helps the firm collect funds quickly

Generally set up with the assistance of a big money center or regional bank lock

boxes provide the firm with a special zip code and usually quicker deliveries from

regional post offices They are especially important if the firm has clusters of

customers in out-of-state locations and dont want to lose days waiting for their

checks to arrive by long-distance mail

5314 Cash Concentration and Cash Disbursement

Once the remittances from the firmrsquos customers have been received and cleared the

resulting cash balances is available in the firmrsquos lockbox (depository) banks It is

useful for the firm to gather these balances from the lockbox banks into the central

bank account The process of collecting funds is called cash concentration

Several concentration mechanism are available for the firm to use in transferring

funds from its collection banks to regional concentration banks and from there to the

central concentration bank These mechanisms differ in cost and in the availability of

funds that they provide These are ndash

a) Depository Transfer Check

It is the cheapest transfer mechanism This document instructs one bank to

send funds to another and is treated the same as any other check


b) Automated Clearing House (ACH) Electronic Transfer

This vehicle is essentially an electronic version of the depository transfer

check and can be used between banks that participate in the automated

clearing house system

c) Wire Transfer

These are electronic message between banks

Decisions regarding concentration mechanism usually hinge on the size and

spread of the firmrsquos deposits Firms with small deposits spread over a

substantial number of banks will tend to have more extensive concentration

systems and will transfer among accounts using low-cost transfer vehicles that

offer only delayed availability (such as depository transfer checks) Firms with

larger deposits will have fewer accounts (since a local deposit for transfer to

an upstream bank is not needed) and will use more expensive and more rapid

transfer mechanisms (such as wire transfers) The concentration systems of

major chemical companies for example tend to be structured in this way ndash

DepositoryLockbox Banks

Regional Concentration Banks

Central Concentrated Bank

Figure A typical Cash Concentration System

(Arrows indicate transfers of collected funds)

Page 12 of 46


Disbursement management addresses the efficient payout out of this cash once it is

concentrated The firmrsquos objective in disbursement management is to retain the cash

for as long as possible In this way the firm will have the maximum amount of funds

available for investment and transactional purposes Certainly this management

means making disbursement only when they are due and not before The firm has

several available set of techniques for disbursement management Included among

these are ndash

a) Management of Disbursement Float

In this set of techniques the disbursing firm attempts to increase the length of

time between the mailing of its checks and the eventual withdrawal of funds

from the banks This involves strategies for increasing mail float at firm float

and clearing float on its outgoing checks For example the disbursing firm

may intentionally address checks to the firmrsquos office address rather than its

lockbox creating at firm float

b) Zero-Balance Accounts

Here the firm holds the cash until the check arrive (or expected to arrive) at

the disbursement bank In this strategy an account for disbursement is first

established at a bank For the zero-balance system to be effective the

participating bank must be one on which most disbursement are made via the

Bangladesh Bankrsquos clearance system (which presents disbursements to banks

early in the morning) and not a bank where disbursements occur throughout

the day (as with a major money-center bank) Consequently the banks used

in zero-balance strategies are usually branches of major banks and not their

main locations

Page 13 of 46

c) Controlled Disbursing

In this system the firm projects the amount of checks to arrive each day at the

disbursement bank (based on the checks written in previous days and historic


statistics on disbursement float) and transfers the amount of the expected

checks to the account on that day or just before

5315 Cash Forecasting

Defining Cash Forecasting

The cash forecast is an estimation of the flows in and out of the firmrsquos cash account

over a particular period of time usually a quarter month week or day The cash

forecast is primarily intended to produce a very useful piece of information an

estimation of the firmrsquos borrowing and lending needs and uncertainties regarding

these needs during various future periods Cash forecasting is very crucial to most

firms It enables them to anticipate periods of surplus cash and periods where

financing will be necessary This anticipation is the reason that cash forecasts are

generated Anticipation enables the firm to plan much more effectively for

investment and financing and via this planning produce superior return

Types of Cash Forecasts

The types of cash forecasts generated by firms can be differentiated along two

dimensions the length of the periods included within the cash forecast and the approach

to cash flows used in the cash forecast The length of the period refers to the units of

time into which the cash forecast is divided Firms may make cash flow forecasts

over periods of various lengths yearly flows quarterly flows monthly flows weekly

flows or even daily flows The most popular forecast involves monthly flows but

most firms do not confine themselves to a single forecast Instead they use several

forecasts with periods of various lengths When the firm makes forecasts involving

multiple and overlapping period lengths one forecast relates to another Starting

with data on relatively long periods and breaking it down into smaller periods is

called distribution starting with data on relatively short periods and aggregating into

longer periods is called scheduling

Page 14 of 46


Firms use two common approaches to cash flows in generating the cash forecast the

receipts and disbursements approach and the adjusted net income approach The receipts

and disbursements approach use the amounts of cash expected to be received and

disbursed by the firm over the periods chosen for forecast The adjusted income

statement approach is sometimes called the sources and use approach Here the

forecaster starts with projected net income on an accrual basis and adjusts to a cash

basis This method provides a representation of changes in asset and liability

accounts since the level of these accounts are of interest to the firm this aspect of the

adjusted income statement is an advantage over the receipts and disbursements

method

Items to Be Forecast

In the receipt and disbursements cash forecasting method estimates need to be made

of the numerous major and minor items that the firm collects (receipts) and that it

pays (disbursements) The more individual categories of items the firm includes in its

forecast procedure the more accurate the forecast may be but the more costly in

terms of time and effort it will be to generate

Some Possible Types of Cash Receipts and Cash Disbursements

Cash Disbursements Cash Receipts

Cash Purchases of Materials Payroll

Taxes

Maturing Accounts Payable

Maturing Notes Payable

Miscellaneous Disbursements

Accounts Receivable

Notes Receivable

Rental Income

Interest Income

Miscellaneous Receipts

Methods of Financial Forecasting

Page 15 of 46

Financial forecasting is the estimation of the future level of a financial variable often

a cash flow asset level or liability level It is usually assumed that the relationship

between the financial variable and other variable is linear The general linear model

can then be used


nnt xaxaxaaY 22110 ++=

Here

= Financial variable (Y) to be forecast in period t tY

x = Explanatory variable it is assumed to cause the level of Y in period t

0a = Represents a constant unaffected by the x

The other terms are the estimated coefficients of the explanatory x variables

There are n terms with xrsquos in them

There are four common approaches to forecasting financial variables but they

are all special cases of the general linear model These are ndash spot method proportion

to another account compounded growth and multiple dependencies

Using Cash Forecast

The estimate of available funds for investment and needed financing enables the firm

to plan so as to obtain the most advantages borrowing terms for deficits and achieve

the greatest interest income on surplus A useful chart for this planning purpose is a

bar chart eg

Figure Bar Chart of Cash Surpluses and Deficits from hypothetical data

Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us

January February March April May June


Sources of Uncertainty in Cash Forecasting and Hedging Uncertainties

There are numerous sources of risk in cash forecasting Among the sources are sales

uncertainty collection rate uncertainty production cost uncertainty and capital

outflow uncertainty

5316 Models for the Management of Cash and Temporary Investments

There are different models for the management of cash and temporary investments

Among these the most popular methods are ndash Baumol model Beranek model

Miller-Orr model and Stone model

Baumol and Beranek use the same model The formula is cited below ndash

Interest Income = iYn

n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21

Optimum number of transactions = ⎟⎠⎞

⎜⎝⎛

aiY2

Where n = Optimum number of transactions

i = Interest rate per period

a = Transaction cost

Y = Total inflow for the period

Page 17 of 46

Miller-Orr and Stone use the same model ie R-Statistic The model is ndash

31

43

iav

R ⎟⎠⎞

⎜⎝⎛=

Optimum Control Limit = R + L

Upper Control Limit = 3R + L

Where a = Transaction Cost


v = Variance of daily cash flows

i = Daily interest rate

5317 Administration

Cash receipts should be processed and banked as quickly as possible because

They cannot earn interest or reduce overdraft until they are banked

information about the existence and amounts of cash receipts is usually not

available until they are processed

Where possible cash floats (mainly petty cash and advances) should be avoided If

on review the only reason that can be put forward for their existence is that weve

always had them they should be discontinued There may be situations where they

are useful however For example it may be desirable for peripheral parts of

departments to meet urgent local needs from cash floats rather than local bank

accounts

5318 Internal Control

Cash and cash management is part of a firms overall internal control system The

main internal cash control is invariably the bank reconciliation This provides

assurance that the cash balances recorded in the accounting systems are consistent

with the actual bank balances It requires regular clearing of reconciling items

5319 Practicing Good Cash Flow Management

Good cash management is simple It involves

Knowing when where and how firms cash needs will occur

Page 18 of 46

Knowing the best sources for meeting additional cash needs


Page 19 of 46

Being prepared to meet these needs when they occur by keeping good

relationships with bankers and other creditors

532 INVENTORY MANAGEMENT

Inventory management is necessary for owners who want to maintain a stocking

service for quick turnaround to help ensure total customer satisfaction The fill rate

of an item on a managed inventory list must be maintained to avoid shortages of

frequently used items Even when utilizing an inventory management system

occasional shortages will still occur Inventories are lists of stocks-raw materials

work in progress or finished goods-waiting to be consumed in production or to be

sold The total balance of inventory is the sum of the value of each individual stock

line

Basically firms hold stocks for the following reasons

To act as a buffer in times of unusually high demand

To ensure continuity of production

Avoid high costs of emergency orders

To take advantage of quantity discounts by ordering more at a time

To reduce ordering costs by ordering more items on fewer

As part of the production process eg maturing whisky or keeping oil in

pipelines

Seasonality of demand (eg firework) or supplies

Suppliers insist on minimum order quantities

The key issue for a business is to identify the fast and slow stock movers with the

objectives of establishing optimum stock levels for each category and thereby

minimize the cash tied up in stocks Factors to be considered when determining

optimum stock levels include


Page 20 of 46

What are the projected sales of each product

How widely available are raw materials components etc

How long does it take for delivery by suppliers

Can the firm remove slow movers from its product range without

compromising best sellers

Inventory management is an important aspect of working capital management

because inventories themselves do not earn any revenue Holding either too little or

too much inventory incurs costs

Costs of carrying too much inventory are

Opportunity cost of foregone interest

Warehousing costs

Damage and pilferage

Obsolescence

Insurance

Costs of carrying too little inventory are

Stock out costs

Lost sales

Delayed service

Ordering costs

Freight

on Order administrati

nts

Loss of quantity discou


Carrying costs can be minimized by making frequent small orders but this increase

ordering costs and the risk of stock outs Risk of stock-outs can be reduced by

carrying safety stocks (at a cost) and re-ordering ahead of time

The best ordering strategy requires balancing the various cost factors to ensure the

firm incurs minimum inventory costs The optimum inventory position is known as

the Economic Reorder Quantity (ERQ)

Nowadays many large manufacturers operate on a just-in-time (JIT) basis whereby

all the components to be assembled on a particular today arrive at the factory early

that morning no earlier - no later This helps to minimize manufacturing costs as JIT

stocks take up little space minimize stock-holding and virtually eliminate the risks of

obsolete or damaged stock Because JIT manufacturers hold stock for a very short

time they are able to conserve substantial cash JIT is a good model to strive for as it

embraces all the principles of prudent stock management For better stock control

firm may try the following

Review the effectiveness of existing purchasing and inventory systems

Know the stock turn for all major items of inventory

Apply tight controls to the significant few items and simplify controls for the

trivial many

Sell off outdated or slow moving merchandise - it gets more difficult to sell the

longer the firm keeps it

Consider having part of its product outsourced to another manufacturer rather

than make it itself

Review its security procedures to ensure that no stock is going out the back

door

Higher than necessary stock levels tie up cash and cost more in insurance

accommodation costs and interest charges

Page 21 of 46


However it is important to keep an overall perspective It is not cost-effective to

closely manage a large number of low value inventory lines nor is it necessary A

usual feature of inventories is that a small number of high value lines account for a

large proportion of inventory value The 8020 rule (PARETO) predicts that 80

of the total value of inventory is represented by only 20 of the number of inventory

items Those high value lines need reasonably close management The remaining

80 of inventory lines can be managed using broad-brush strategies

533 MANAGING ACCOUNTS RECEIVABLE (DEBTORS)

Cash flow can be significantly enhanced if the amounts owing to a business are

collected faster Every business needs to know who owes them money how much is

owed how long it is owing for what it is owed

Debtors (Accounts Receivable) are customers who have not yet made payment for

goods or services which the department has provided The objective of debtor

management is to minimize the time-lapse between completion of sales and receipt

of payment The costs of having debtors are

Opportunity costs (cash is not available for other purposes)

Bad debts

If firm doesnt manage debtors they will begin to manage business as the firm will gradually

lose control due to reduced cash flow and of course it could experience an increased

incidence of bad debt The following measures will help manage debtors

Having the right mental attitude to the control of credit and make sure that it

gets the priority it deserves

Establishing clear credit practices as a matter of company policy

Page 22 of 46

Making sure that these practices are clearly understood by staff suppliers and

customers


Page 23 of 46

Being professional when accepting new accounts and especially larger ones

Checking out each customer thoroughly before the firm offers credit Use

credit agencies bank references industry sources etc

Establishing credit limits for each customer and sticking to them

Continuously reviewing these limits when it suspects tough times are coming

or if operating in a volatile sector

Keeping very close to the firms larger customers

Invoicing promptly and clearly

Considering charging penalties on overdue accounts

Considering accepting credit debit cards as a payment option

Monitoring its debtor balances and ageing schedules and dont let any debts

get too large or too old

Debtor management includes both pre-sale and debt collection strategies

Pre-sale strategies include

Offering cash discounts for early payment andor imposing penalties for late

payment

Agreeing payment terms in advance

Requiring cash before delivery

Setting credit limits

ning credit Setting criteria for obtai

Billing as early as possible

rogress payments

ost-sale strategies include

for collecting the debt upon the center that made the sale

Requiring deposits andor p

P

Placing the responsibility

Identifying long overdue balances and doubtful debts by regular analytical reviews

Having an established procedure for late collections such as

A reminder

A letter


Page 24 of 46

ion of further credit Cancellat

Telephone calls

n agency Use of a collectio

he firm should recognize that the longer someone owes firm the greater the chance

Legal action

T

it will never get paid If the average age of debtors is getting longer or is already very

long it may need to look for the following possible defects

Weak credit judgment

res Poor collection procedu

ms Lax enforcement of credit ter

Slow issue of invoices or statements

Errors in invoices or statements

Customer dissatisfaction

Debtors due over 90 days (unless within agreed credit terms) should generally

demand immediate attention For example warning signs of a future bad debt ndash

Longer credit terms taken with approval particularly for smaller orders

Use of post-dated checks by debtors who normally settle within agreed terms

Evidence of customers switching to additional suppliers for the same goods

New customers who are reluctant to give credit references

Cre G

Receiving part payments from debtors

dit ranting to Marginal Accounts

Traditional Approach

In the traditional approach to the credit granting decision it is the credit analysts job

rmation that has been collected and reach a judgment

regarding the applicants creditworthiness One traditional way of organizing this

to synthesize all the info


information is by characterizing the applicant along five dimensions These

dimensions are called the Five Cs of credit ndash

Capital

Character

Collateral

and Capacity

Conditions

Net Present Value (NPV) Approach

Once a firm has assessed the creditworthiness of a customer it has to decide whether

r not credit should be granted The firm should use the NPV rule to make the

ld be granted

Figure

o

decision If NPV is positive credit shou

Credit Granting Decision


he act of collecting money is one which most people dislike for many reasons and

therefore put on the long f selves there is something

ore urgent or important that demands their attention now There is nothing more

T

inger because they convince them

m

important than getting paid for firms product or service A customer who does not

Page 25 of 46

Grand Credit

Payment received Payment not received

Benefit of present value of future net cash flow

Cost of present value ment of lost invest

Net Payoff PV of benefit-cost

No Credit

No Payoff


pay is not a customer Here are a few ideas that may help the firm in collecting

money from debtors

Firm should develop appropriate procedures for handling late payments

It should track and pursue late payers

It might get external help if its own efforts fail

or money its firms and it is entitled Company shouldnt feel guilty asking f

to it

ction

Firm must make that call now And it should keep asking until it gets some

satisfa

lessens the problem

In difficult circumstances take what the firm can now and agree terms for the

remainder It

paying

When asking for money be hard on the issue - but soft on the person It shouldnt

give the debtor any excuses for not

534 BLE (CREDITORS)

ices for goods or services have

een paid Organizations often regard the

not

to delay all payments until the latest possible date Regular weekly or

The firm make it its objective is to get the money - not to score points or get

even

MANAGING ACCOUNTS PAYA

Creditors (Accounts Payable) are suppliers whose invo

been processed but who have not yet b

amount owing to creditors as a source of free credit However creditor

administration systems are expensive and time-consuming to run The over-riding

concern in this area should be to minimize costs with simple procedures

While it is unnecessary to pay accounts before they fall due it is usually

worthwhile

Page 26 of 46

fortnightly payment of all due accounts is the simplest technique for creditor

management


Electronic payments (direct credits) are cheaper than check payments considering

that transaction fees and overheads more than balance the advantage of delayed

presentation Some suppliers are reluctant to receive payments by this method but in

view of the substantial cost advantage (and the advantages to the suppliers

themselves) departments may wish to encourage suppliers to accept this option

However electronic payments are likely to be used in conjunction with rather than

as a replacement for check payments

Applying Best Practices in Managing Accounts Payable

f course simply deferring payments to suppliers could have adverse consequences

O

that more than offset the benefits of this additional cash flow Therefore it is

important to develop a holistic approach The firm should consider the following

best practices for payables management

Managing payment dates and terms to maximize cash flow ndash

y reporting on

receivable and

id penalty charges and taking advantage of

wer vendors and negotiate for more

to buying consortia with others even

voices for

payment based on receipt of goods or receipt of invoice whichever

comes later

Calculating and setting performance targets Regularl

AP performance measures such as days in payables

Coordinating the AP processes with accounts

inventory management to ensure that the company is collecting more

cash than it is paying out

Paying bills on time to avo

prompt-payment discounts where the discounts exceed the companyrsquos

cost of working capital

Consolidating purchases with fe

favorable payment terms

Considering entering in

Page 27 of 46

competitors to obtain favorable supplier pricing and terms

Unless contract terms specify otherwise setting up in


Page 28 of 46

Em

process

-time payments with Electronic Funds Transfer (EFT)

uraging vendors to utilize electronic invoice presentment

a

ndancies and more

ploying technology to automate the accounts payable transaction

es ndash

Making just-in

Using an electronic invoice-matching application

Enco

For companies with multiple locations or business units employing

shared service approach for AP to eliminate redu

quickly implement process improvements

Mainta

vendor

Communicating accounts payable requirements to suppliers at the

m key suppliers

for suggestions on how to improve the

Efficient a

and making th rsquos cash is just good business

ining open communications and building strong relationships with

s to access valuable trade credit ndash

beginning of transactions

Requesting summary invoicing fro

Requiring suppliers to send invoices directly to accounts payable

Asking tier-one suppliers

payment process

nd effective management of accounts payable helps improve cash flow ndash

e most of company


6 OVERVIEW OF VIRGIN GROUP

Virgin - one of the most respected brands in Britain - is now becoming the first global

brand name of the 21st century Virgin is involved in planes trains finance soft

drinks music mobile phones holidays cars wines publishing bridal wear - the lot

What tie all these businesses together are the values of its brand and the attitude of its

people Virgin has created over 200 companies worldwide employing over 25000

people Its total revenues around the world in 2002 exceeded pound4 billion (US $72

billion)

In 1970 Richard Branson founded Virgin as a mail order record retailer and not

long after he opened a record shop in Oxford Street London During 1972 a

recording studio was built in Oxfordshire and the first Virgin artist Mike Oldfield

recorded Tubular Bells which was released in 1973

This album went on to sell over 5 million copies Since then many household names

including Belinda Carlisle Genesis Phil Collins Janet Jackson and The Rolling

Stones have helped to make Virgin Music one of the top six record companies in the

world The equity of Virgin Music Group - record labels music publishing and

recording studios was sold to THORN EMI in 1992 in a US$1billion deal

Page 29 of 46

The Virgin Group has now expanded into international music Mega stores air

travel mobile financial retail music internet drinks rail hotels and leisure with

around 200 companies in over 30 countries


In Virgins customers eyes Virgin stands for value for money quality innovation

fun and a sense of competitive challenge It delivers a quality service by empowering

its employees and facilitates and monitors customer feedback to continually improve

the customers experience through innovation

When they start a new venture Virgin bases it on hard research and analysis

Typically they review the industry and put themselves in the customers shoes to see

what could make it better Virgin asks fundamental questions

Is this an opportunity for restructuring a market and creating competitive

advantage What are the competitors doing

Is the customer confused or badly served

Is this an opportunity for building the Virgin brand

Can we add value

Will it interact with its other businesses

Is there an appropriate trade-off between risk and reward

Page 30 of 46

Virgin is also able to draw on talented people from throughout the group New

ventures are often steered by people seconded from other parts of Virgin who bring


with them the trademark management style skills and experience Virgin frequently

creates partnerships with others to combine skills knowledge and market presence

and so on Contrary to what some people may think their constantly expanding and

eclectic empire is neither random nor reckless Each successive venture demonstrates

its skill in picking the right market and the right opportunity

7 OVERVIEW OF VIRGIN SOFT DRINKS

The Virgin Drinks Group first launched as the Virgin Cola Company in 1994 with

Virgin Cola in the UK Since then the company has ventured across the carbonated

soft drinks arena and beyond into energy drinks tea and flavored Colas This

expansion has lead to the evolution of the Virgin Drinks Company a company

whose aim is to put the excitement back into the world of soft drinks It launched in

Bangladesh in 1999 Virgin Soft Drinks is monitored by Global Beverage Co Ltd in

Bangladesh

Brief history of Virgin Drinks is given below

Page 31 of 46

1994 November Virgin Cola launched in the UK

1996 March Virgin Cola launched in France

1998 June Virgin Cola launched in Belgium

April Virgin Cola launched in the French West Indies


August Virgin Cola launched in Switzerland

1999 March Virgin Colours launched in Italy

March Virgin Cola launched in Japan

July Virgin Colours launched in South Africa

December Virgin Colours launched in Bangladesh

2001 January Sweden launched Virgin Colours

November Singapore launched Virgin Colours

2002 February Croatia launched Virgin Colours

June Russia launched Virgin Colours

June Tunisia launched Virgin Colours

2003 May Israel launched Virgin Colours

8 FINDINGS OF WORKING CAPITAL MANAGEMENT MAINTAINED BY

VIRGIN SOFT DRINKS IN BANGLADESH

81 CASH MANAGEMENT

811 Holding Cash and Marketable Securities

Although there are many good reasons why firm hold cash and marketable

securities Virgin Drinks holds cash and marketable securities for two reasons ndash

i) Cash for transactions

ii) Cash as hedges

This indicates that the firm does not hold cash and marketable securities for some

important reasons such as ndash

i) Near cash assets as hedges

Page 32 of 46


ii) Temporary investment and compensating balances

Virgin Soft Drinks does not invest in money market securities such as Treasury bill

commercial paper certificate of deposits bankerrsquos acceptance and repurchase

agreement This firm deposits its money in bank as currant AC or fixed AC They

say that they do not have enough money to invest in money market instrument

They also say that if they have enough money they will invest it in money market

short term securities We know that near cash interest earning assets can be

substituted for cash when motivation for holding these assets is the hedging of cash

flow uncertainties or is the temporary investment of surplus funds In this point

Virgins position is not good as there is no significant hedging against uncertainty of

cash

812 Floatation and Check Clearing

Virgin is very smart in handling the problem of transit time for checks Here mail

float takes 2 to 3 days at firm takes 025 day and clearing float takes 1-3 days Virgin

uses most of the strategies available for reducing the delay in receiving funds It

(Virgin) has linked Islami Bank which posses an accelerated clearing facility It uses

electronic collection process which ensures faster collection and its at the firm check

processing is satisfactory But Virgin does not use lockbox The reason behind this is

that it is not cost-effective for Virgin to set lockboxes At this point we can say that

Virgins check clearing mechanism is much good

813 Cash Concentration and Disbursement Management

Page 33 of 46

Virgin Soft Drinks takes the matter of cash concentration very seriously They use all

the available cash concentration mechanism Virgin is a firm with small deposits

spread over a substantial number of banks and this is why the firm tends to use


depository transfer checks extensively If is less costly Virgin also uses automated

clearing house and wire transfer To Virgin wire transfer seems too costly

Like other firm Virgin tries to retain the cash for as long as possible But Virgin

always performs it in an ethical manner Virgin does not try to defeat the receiving

firmrsquos attempts to reduce the float on incoming checks It does not take any strategy

for increasing mail float at firm float and clearing float on its outgoing checks To

Virgin it is deemed to be unethical It thinks that maximization of disbursement float

will not go unnoticed by sophisticated creditors for very long When it is noticed it

will negatively affect relations with these creditors reducing the firmrsquos bargaining

power with them This may ultimately cost Virgin dearly when future prices and

delivery schedules for goods and services purchased from trade creditors are

negotiated Virgin follows ldquoZero-Balance Accountsrdquo methods for managing

disbursement It thinks that in this method the coordination of funds inflows to

disbursement banks with the presentation of checks does not work to the detriment

of creditors since the firmrsquos checks to them are honored as presented and this strategy

does not affect float significantly Controlled disbursing method is less attractive to

Virgin because zero-balance system is already feasible


Cash Forecasting and Its Types

Page 34 of 46

Virgin forecasts the future cash inflows and outflows To Virgin cash forecast is an

important part of the firmrsquos cash control system and is one of the forecasts that are

part of the Virginrsquos financial plan Virgin forecasts cash on monthly basis and on

yearly basis Virgin does not forecast on daily basis assuming that the temporary

shortage of funds within these periods can be covered without value cost eg

advance receipts from customers Virginrsquos cash forecasting system involves a

combination of distribution and scheduling The receipts and disbursements

approach of cash forecasting is used in virgin This method is used because it

minutely traces the movement of cash and very close control of cash is possible


Virgin does not use adjusted net income approach on two grounds First it does not

permit the tracing of the individual types of cash inflows and outflows for any given

period which is often useful information for virgin Second it is not simple to use

Items to be Forecast

Virgin does not forecast all the items It forecasts only major items eg accounts

receivable notes receivable payroll cash purchases of raw materials In this regard

virgin trade off between cost and benefit


Virgin forecasts the future level of financial variable such as cash level asset level or

liability level We know in short term forecasts many things will result from plans

and events that are already in place (contracts capital budgets long-range financing

plans and so forth) But in the long run most things can vary and are dependent on

outside influences such as the firmrsquos long-term growth rate Since Virginrsquos cash

forecasting deals mostly with near future many of the items on the cash forecasts are

estimated by some variation of the spot method and remaining estimates are mostly

on a ldquoproportion of another accountrdquo basis with this ldquoother accountrdquo often being a

particular periodrsquos sales Virgin uses the other two methods less frequently

Using Cash Forecast

Virgin forecasts cash for meeting general objectives (ie to know the available funds

for investment and need financing) and for meeting some special objectives (eg to

know whether the firm will fulfill its out of debt requirement) But it is matter to note

that Virgin does not make any short term investment of its surplus cash but only keep

this surplus in Bank Account

Page 35 of 46



Virgin faces uncertainty in cash forecasting mainly from two sources These are ndash

sales and production cost In peak season (hot season like autumn summer) sales

increases but in dull season (eg in winter) sales decreases drastically Production

cost may be increased because of increase of price of sugar chemicals aluminum

can Virgin follows two methods for hedging cash balance uncertainties These are ndash

i) Holding a stock of extra cash and

ii) Extra borrowing capacity

815 Modes for the Management of Cash and Temporary Investments

Virgin does not follow any of these methods wholly Virgin receives cash

continuously and pays salary at steady rate and pays continuously for other

expenses So it neither follows Baumol model nor Beranek model It has no upper

control limit lower control limit return point in case cash management So it neither

follows Miller-Orr model nor Stone model

In Summary

Page 36 of 46

Standard Compliance by Virgin Soft Drinks

Generally all firms hold cash and

marketable securities

Virgin holds only cash

Firms hold cash and marketable

securities for some reasons like

bull Cash for transactions

bull Cash and near-cash assets as

hedges

bull Temporary investments

bull Compensating balances

Virgin holds cash only for

two reasons ndash


bull Cash as hedges

Available money market instruments Virgin does not invest in any such


(short term securities) are ndash

Treasury Bills

Commercial Paper

Certificates of Deposit

Bankerrsquos Acceptance

Repurch menase Agree ts

instruments They only keep cash in

Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)

Figure Transit time for a typical check Figure Transit time for a check for

Virgin

Strategies that firms can use to reduce

the delay in receiving funds are ndash

Selecting of Banks with

accelerated clearing capabilities

of check processing Acceleration

at the firm

ectronic collection Use of el

procedures

Use of lockboxes

Virgin follows the first three strategies

but does not use lockboxes

Available cash concentration

mechanisms are ndash

Depository transfer check

ouse Automated Clearing H

(ACH) electronic transfer)

Wire transfer

Virgin uses all these mechanisms of

cash concentration

Available sets of techniques for cash

disbursement management are ndash

ement of disbursement

Page 37 of 46

Manag

float

Virgin uses zero-balance accounts

technique


Zero-Balance Accounts

Controlled disbursing

Firms may make cash flow forecasts

over periods of various lengths yearly

flows quarterly flows monthly flows

weekly flows or even daily flows

Virgin forecasts cash on yearly basis and

monthly basis

Cash forecasting system may involve ndash

Distribution

Scheduling

Virginrsquos cash forecasting system

involves a combination of distribution

and scheduling

Two common approaches to cash flow

in generating the cash forecast

and disbursement Receipts

approach

Adjusted net income approach

Virgin uses the receipts and

disbursement approach

There are many items to forecast Virgin forecasts only major items like

AR payroll etc

Four common approach to forecasting

fina i ndash nc al variables are

Spot method

Proportion to another account

Compounded growth

Multiple dependencies

Virgin uses spot method for forecasting

cash It uses proportion to another

account method for other variables and

remaining two methods are frequently

used

Sources of uncertainty in cash

forecasting are ndash

Sales uncertainty

Collection rate uncertainty

Production cost uncertainty

Capital outflow uncertainty

Virgin faces uncertainty mainly from

sales and production cost

Methods for hedging cash balance

unc a

Page 38 of 46

ert inties are ndash

i) Holding a stock of extra cash

Virgin two available methods for

hedging cash balance uncertainties

Th ese are ndash


ii) stock of near-cash Holding a

assets

iii) Extra borrowing capacity

iv) ary surpluses in Investing tempor

near-cash assets



(advance receipt from

customers)

Models for the management of cash and

temporary investments are ndash Baumol

model Beranek model Miller-Orr

model and Stone model

Virgin does not follow any method

wholly but a combination of Baumol

model and Beranek model is occurred


21 Certainty Approach

isnt used in

irgin because it thinks it is not possible to implement in Bangladesh

d time is one to three days It

oes not use ABC system of inventory management

8

Main item of inventory of Virgin is Can pet chip sugar label chemical artificial

sweet etc Virgin maintains a minimum level of inventory but it does not have to face

problems because inventory is managed efficiently just-in-time (JIT)

V

Virgin maintains buffer stock because of the shortage of work-in-process (WIP)

inventory Its production process may also be hampered Thats why it maintains

safety stock to avoid stock out cost In case of imported goods normal lead time is

about one month and within the country normal lea

d

Page 39 of 46

Inventory Model

In reality Virgin does not use any of models of EOQ ordering and holding strategy

and safety stock strategy They maintain inventory based on their prior experience


822 Uncertainty Approach

Virgin does not use any model for handling inventory uncertainty It says that such

decision depends on business cycle and market situation Long before Eid festival

they bought large amount of sugar because of price increase on the occasion of Eid

In summary


Firms maintain inventory to guard

against several problems

Virgin maintains a minimum level of

inventory which is managed efficiently

Some firms use JIT to avoid inventory

cost

JIT is not used by Virgin as it thinks it is

impossible to implement in Bangladesh

Firms maintain buffer stock Virgin maintains buffer stock too

Firms maintain safety stock to avoid

shortage cost

Virgin also maintains safety stock

Firms use ABC system to monitor

inventory

Virgin doesnt use ABC system

EOQ model is an appropriate method

for measuring quantity that has to be

ordered per order

Virgin does not use EOQ model rather

makes order based on experience and

market demand


831 Terms of Sale Decision

Page 40 of 46

Virgin offers the term 210 net 30 enables the customers to deduct 2 percent from the

face value of the bill when paying within the first 10 days but if the discount is not

taken the customer must remit the full amount within 30 days But Virgin does not


offer the same terms of sale to all customers For prime customers it offers special

terms of sale In setting an appropriate term of sale it costs and benefits regarding

this are compared It uses the standard approach of terms of sale decision as it is

simple to use

832 Credit Granting Decisions

In case of Virgin the Capital and Character of Five Cs get more importance

Although there are many problems with the traditional approach Virgin uses it

because of its simplicity Virgin does not use Net Present Value (NPV) method in

credit granting decision It thinks that NPV is an appropriate method and should be

used next time It does not face any severe problem because of bad debts The reason

is that notes receivable is used when credit is granted

833 Monitoring Accounts Receivable

Virgin monitors its accounts receivable Virgin believes that in any case both positive

and negative durations in accounts signal differences from the results that

management believe to be the most advantageous for the firm

Tools for Monitoring Accounts Receivable

Page 41 of 46

For monitoring accounts receivable there are several tools such as aging schedule

the ratios of receivable outstanding to original sales customers payment proportion

and sales weighted DSO (Days Sales Outstanding) For monitoring accounts

receivable Virgin uses aging schedule fractions and traditional DSO statistics

because of their simplicity in use Although payment proportions ratios of

receivables outstanding and sales weighted DSO methods are free from inherent bias

None of these is used because all these are complex to maintain


In summary

Page 42 of 46


Generals terms of sale is 210 net 30 Normally Virgin also use general terms

of sale ie 210 net 30

Firms do not offer the same terms of

sale to all customers

Yes For prime customers Virgin offers

special terms of sale

Approaches of terms of sale decisions

are ndash

bull Standard approach

bull Multi period approach

Virgin uses standard approach of terms

of sale decision as it is simple to use and

understand

Source of credit information are ndash

Sellers prior experience with the

customer

Credit agency ratings and

reports

Personal contact with the

applicants bank and other

creditors

Analysis of applicants financial

statements

Customer visit

Main source of credit information to

Virgin is its prior experience with the

customer All other sources are not cost-

effective for Virgin

Approaches of credit granting to

marginal accounts are ndash

Traditional approach

Net Present Value (NPV)

approach

It uses traditional approach still now but

thinks that NPV should be used for the

next periods

Firms monitor accounts receivable

because deviations from the expected

levels of turnover and of bad debt can

Virgin also monitors its accounts

receivable


signal several different problems

Different tools for monitoring accounts

receivable are ndash

Aging schedule

Ratios of receivables

outstanding to original sales

Customers payment

proportions

Sales-weighted DSO

For monitoring accounts receivable

Virgin uses aging schedule and

traditional sales outstanding statistics

84 MANAGING ACCOUNTS PAYABLE (CREDITORS)

Virgin has almost accounts payable of Tk 8000000 But most of its liabilities are to

the banks rather than suppliers But we dont have any clear information about

Virgins accounts payable

9 RECOMMENDATION

Virgin should invest its surplus cash in short term marketable securities

because it is suitable hedging against cash uncertainties and will also give

some returns (interest income)

Virgin should publish its own annual report which will satisfy information

needs of stakeholders and also increase the credibility of information provided

by Virgin

Page 43 of 46

Virgin should use multi period approach in terms of sale decision because

standard approach which is already exists in Virgin has some inherent

problems


It should stop using traditional approach from now It should use NPV

method in credit granting to marginal accounts

In monitoring accounts receivable Virgin should use sales-weighted DSO

method because it has least limitation compared to the others

It should be more flexible in granting credit which will ultimately increase its

sales

To get the appropriate number of quantity to be ordered per order it should

use DSO model

It should be ABC system for proper monitoring of inventory

10 CONCLUSION

The use of other peoples money in business is usually an expensive resource Before

looking outside for finance a firm should examine its own working capital cycle to

make sure that every rand of its own internal funds is being fully utilized Good

management of working capital is part of good financial management Effective use

of working capital will contribute to the operational efficiency of the whole

organization optimum use will help to generate maximum returns Furthermore

working capital management is not an end in itself It is an integral part of the firms

overall management The needs of efficient working capital management must be

considered in relation to other aspects of the Virgins financial and non-financial

performance Thats why when planning the development of a business it is critical

that the impact of working capital be fully assessed

Page 44 of 46


BIBLIOGRAPHY

Scherr FC (1989) International Edition Prentice-Hall International Inc Modern

Working Capital Management Text and Cases

Hussain Riaz (2002) Working Capital Management

Robertson Lonnie (July 1998) Inventory Management

httpwwwasashoporg visited on March 13 2006

The Art of Cash Management

httpwwwinccom visited on March 13 2006

Working Capital Management

httpwwwstudyfinancecom visited on March 13 2006

White Paper ndash Managing Working Capital

httpwwwplanwareorg visited on March 13 2006

Management of Working Capital

httpwwwbusinesscentralcoza visited on March 13 2006

Cash Management

httpwwwsbagov visited on March 13 2006

Working Capital Management Objectives

httpwpsprenhallcom visited on March 13 2006


Page 45 of 46

httpwwwadvancemecom visited on March 13 2006


Business Receivables Financing

httpwwwbbtcom visited on March 13 2006

Working Capital Finance

http wwwfnbcoza visited on March 13 2006

Tips to manage your working capital

httpsmallbusinessninemsncomau visited on March 13 2006

Inventory Financing

httpwwwfranklincapitalnetworkcom visited on March 13 2006

Accounts Receivable Management



httpwwwtreasurygovtnz visited on March 13 2006


httpwwwtreasurystrategiescom visited on March 13 2006

Working Capital Works

httpwwwinvestopediacom visited on March 13 2006

Treasury Services

httpwwwjpmorganchasecom visited on March 13 2006

what were about

Page 46 of 46

httpwwwvirgincom visited on March 13 2006

Annexure

Annexure

Interview with YASEER RIZVI

Mr Yaseer Rizvi the DMD of Global Beverage Co Ltd obtained his MBA degree

from a reputed university He had been the Director of Ocean Container Ltd before

joining in Global Beverage Co Ltd He possesses a nice personality

I interviewed Yaseer Rizvi Excerpts from his interview are as follows ndash

Shah Kamal Sir would you please tell me do you invest in short term marketable securities

Yaseer Rizvi Basically we do not invest our surplus cash in short term marketable

securities like T-Bill commercial paper certificate of deposit etc But we keep our

surplus cash in Bank

Shah Kamal Would you tell me something about transit time for a typical check

Yaseer Rizvi Well in Virgin the transit time for a typical check is ndash

For mail float 2 to 3 days

At firm float 6 hours

Clearing float 1 to 3 days

Shah Kamal Do you maintain any cash concentration mechanism like depository transfer check automated clearing house and wire transfer

i

Annexure

Yaseer Rizvi Our position in this case is very strong as we use all the mechanisms

you mentioned As Virgin is a firm with small deposits spread over a substantial

number of banks so we tend to use depository transfer checks extensively It is less

costly We also use automated clearing house and wire transfer but later is used in a

less extent

Shah Kamal Sir what techniques of disbursement management is used by your firm

Yaseer Rizvi Like other firms Virgin tries to retain the cash for as long as possible

But we always perform it in an ethical manner We do not use management of

disbursement float as it seems unethical We follow Zero-Balance Accounts method

for managing disbursement We do not prefer Controlled Disbursing method since

Zero-Balance system is already practiced in Virgin

Shah Kamal How do you hedge cash balance uncertainties

Yaseer Rizvi Well you may say that we do not invest in short term securities but for

facing cash difficulties we keep our surplus cash in bank

Shah Kamal Sir would you please tell me the general terms of sale of Virgin

Yaseer Rizvi Though it is difficult to maintain a fixed terms of sale our general terms

of sale is 210 n30 But for prime customers we offer special terms of sale

Shah Kamal What are the sources of credit information in case of your firm

Yaseer Rizvi We grant credit on the basis of prior experience with the customers In

case of a new customer personal contact is weighted

Shah Kamal Does your firm consider 5 Cs in granting credit

ii

Annexure

Yaseer Rizvi In case of Virgin Capital and Character get more importance than the

others Mind one thing personal relationship is the main measure in granting credit

Shah Kamal Do you use NPV method in credit granting decisions

Yaseer Rizvi We do not use NPV method But we think that NPV is a suitable

method and we have to use it from the next period

Shah Kamal Sir how do you handle the problem of bad debt

Yaseer Rizvi Well in this case our position is very strong Yet we do not face any

problem because of bad debt Just note that we make more than 80 of sales in cash

and we monitor accounts receivable very carefully

Shah Kamal What level of inventory is maintained by Virgin

Yaseer Rizvi We maintain a minimum level of inventory but do not have to face

stock out problems because inventory is managed efficiently

Shah Kamal What is the normal lead time

Yaseer Rizvi In case of imported goods normal lead time is about 1 month and when

we purchase raw materials from inside the country lead time is 1 to 3 days

Shah Kamal What method do you use for managing inventory

Yaseer Rizvi We do not use any method particularly rather inventory decision

depends on business cycle and market situation Long before the Eid festival we

bought large amount of sugar because price of sugar was increased on the occasion

of Eid

iii

Annexure

Shah Kamal What are the main items of inventory of your firm

Yaseer Rizvi Well these are ndash aluminum can pet chip sugar label chemical and

artificial sweet

Shah Kamal What are the uncertainties in maintaining appropriate level of stock

Yaseer Rizvi These are ndash

bull Increase in price of raw materials

bull Sales uncertainty

bull Market trends etc

Shah Kamal Thank you for your kind cooperation

Yaseer Rizvi Most Welcome

iv

Global Beverage Company Limited

>

ahlbdcom


UNIVERSITY OF DHAKA DEPARTMENT OF ACCOUNTING AND INFORMATION SYSTEMS


Submitted to

Mr Md Amirus Salat

Assistant Professor

Department of Accounting and Information Systems

University of Dhaka

Submitted by

Shah KamalDepartment of Accounting amp Information SystemsUniversity of Dhaka

Maruf
Note
Contactable1313Shah Kamal13Email shahkamallivecom

Table of Contents

Executive Summary

1 Introduction 01


3 Methodology 02













32





9 Recommendation

43

10 Conclusion 44

Bibliography

Annexure

EXECUTIVE SUMMARY















1 INTRODUCTION















if







Page 1 of 46









wherever employed







capital

3 METHODOLOGY




collection method



of 46






the report














Page 3 of 46


topic












Thus ndash




Current Assets


Inventory


Current Liabilities

Bank Overdraft



Page 4 of 46

























low yielding assets

Page 5 of 46






yielding assets












Page 6 of 46



some precautionary

balances


cash balances

Debtors and

stock

Minimum

consistent with

business needs


debtor levels to

maximize sales

Creditors Maximum

available without

compromising

business needs


discounts and

reputation for good

payment


Future cash

flows


predictable

Unpredictable

Attitude to

Risk























Page 7 of 46




531 CASH MANAGEMENT






Treasury bill

Commercial paper



Page 8 of 46













Operating Cash Flow




Investing Cash Flow




Financing Cash Flow



Page 9 of 46

















1 Sweep accounts





Page 10 of 46





cover them


Page 11 of 46






2 Lock-box accounts
























c) Wire Transfer
















Page 12 of 46








these are ndash

















main locations

Page 13 of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom


Table of Contents

Executive Summary

1 Introduction 01


3 Methodology 02













32





9 Recommendation

43

10 Conclusion 44

Bibliography

Annexure

EXECUTIVE SUMMARY















1 INTRODUCTION















if







Page 1 of 46









wherever employed







capital

3 METHODOLOGY




collection method



Page 2 of 46






the report














of 46


topic












Thus ndash




Current Assets


Inventory


Current Liabilities

Bank Overdraft



Page 4 of 46

























low yielding assets

Page 5 of 46






yielding assets












Page 6 of 46



some precautionary

balances


cash balances

Debtors and

stock

Minimum

consistent with

business needs


debtor levels to

maximize sales

Creditors Maximum

available without

compromising

business needs


discounts and

reputation for good

payment


Future cash

flows


predictable

Unpredictable

Attitude to

Risk























Page 7 of 46




531 CASH MANAGEMENT






Treasury bill

Commercial paper



Page 8 of 46













Operating Cash Flow




Investing Cash Flow




Financing Cash Flow



Page 9 of 46

















1 Sweep accounts





Page 10 of 46





cover them


Page 11 of 46






2 Lock-box accounts
























c) Wire Transfer
















Page 12 of 46








these are ndash

















main locations

Page 13 of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom


EXECUTIVE SUMMARY















1 INTRODUCTION















if







Page 1 of 46









wherever employed







capital

3 METHODOLOGY




collection method



Page 2 of 46






the report














Page 3 of 46


topic












Thus ndash




Current Assets


Inventory


Current Liabilities

Bank Overdraft



of 46

























low yielding assets

Page 5 of 46






yielding assets












Page 6 of 46



some precautionary

balances


cash balances

Debtors and

stock

Minimum

consistent with

business needs


debtor levels to

maximize sales

Creditors Maximum

available without

compromising

business needs


discounts and

reputation for good

payment


Future cash

flows


predictable

Unpredictable

Attitude to

Risk























Page 7 of 46




531 CASH MANAGEMENT






Treasury bill

Commercial paper



Page 8 of 46













Operating Cash Flow




Investing Cash Flow




Financing Cash Flow



Page 9 of 46

















1 Sweep accounts





Page 10 of 46





cover them


Page 11 of 46






2 Lock-box accounts
























c) Wire Transfer
















Page 12 of 46








these are ndash

















main locations

Page 13 of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom



1 INTRODUCTION















if







Page 1 of 46









wherever employed







capital

3 METHODOLOGY




collection method



Page 2 of 46






the report














Page 3 of 46


topic












Thus ndash




Current Assets


Inventory


Current Liabilities

Bank Overdraft



Page 4 of 46

























low yielding assets

of 46






yielding assets












Page 6 of 46



some precautionary

balances


cash balances

Debtors and

stock

Minimum

consistent with

business needs


debtor levels to

maximize sales

Creditors Maximum

available without

compromising

business needs


discounts and

reputation for good

payment


Future cash

flows


predictable

Unpredictable

Attitude to

Risk























Page 7 of 46




531 CASH MANAGEMENT






Treasury bill

Commercial paper



Page 8 of 46













Operating Cash Flow




Investing Cash Flow




Financing Cash Flow



Page 9 of 46

















1 Sweep accounts





Page 10 of 46





cover them


Page 11 of 46






2 Lock-box accounts
























c) Wire Transfer
















Page 12 of 46








these are ndash

















main locations

Page 13 of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom





wherever employed







capital

3 METHODOLOGY




collection method



Page 2 of 46






the report














Page 3 of 46


topic












Thus ndash




Current Assets


Inventory


Current Liabilities

Bank Overdraft



Page 4 of 46

























low yielding assets

Page 5 of 46






yielding assets












of 46



some precautionary

balances


cash balances

Debtors and

stock

Minimum

consistent with

business needs


debtor levels to

maximize sales

Creditors Maximum

available without

compromising

business needs


discounts and

reputation for good

payment


Future cash

flows


predictable

Unpredictable

Attitude to

Risk























Page 7 of 46




531 CASH MANAGEMENT






Treasury bill

Commercial paper



Page 8 of 46













Operating Cash Flow




Investing Cash Flow




Financing Cash Flow



Page 9 of 46

















1 Sweep accounts





Page 10 of 46





cover them


Page 11 of 46






2 Lock-box accounts
























c) Wire Transfer
















Page 12 of 46








these are ndash

















main locations

Page 13 of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom






the report














Page 3 of 46


topic












Thus ndash




Current Assets


Inventory


Current Liabilities

Bank Overdraft



Page 4 of 46

























low yielding assets

Page 5 of 46






yielding assets












Page 6 of 46



some precautionary

balances


cash balances

Debtors and

stock

Minimum

consistent with

business needs


debtor levels to

maximize sales

Creditors Maximum

available without

compromising

business needs


discounts and

reputation for good

payment


Future cash

flows


predictable

Unpredictable

Attitude to

Risk























of 46




531 CASH MANAGEMENT






Treasury bill

Commercial paper



Page 8 of 46













Operating Cash Flow




Investing Cash Flow




Financing Cash Flow



Page 9 of 46

















1 Sweep accounts





Page 10 of 46





cover them


Page 11 of 46






2 Lock-box accounts
























c) Wire Transfer
















Page 12 of 46








these are ndash

















main locations

Page 13 of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom













Thus ndash




Current Assets


Inventory


Current Liabilities

Bank Overdraft



Page 4 of 46

























low yielding assets

Page 5 of 46






yielding assets












Page 6 of 46



some precautionary

balances


cash balances

Debtors and

stock

Minimum

consistent with

business needs


debtor levels to

maximize sales

Creditors Maximum

available without

compromising

business needs


discounts and

reputation for good

payment


Future cash

flows


predictable

Unpredictable

Attitude to

Risk























Page 7 of 46




531 CASH MANAGEMENT






Treasury bill

Commercial paper



of 46













Operating Cash Flow




Investing Cash Flow




Financing Cash Flow



Page 9 of 46

















1 Sweep accounts





Page 10 of 46





cover them


Page 11 of 46






2 Lock-box accounts
























c) Wire Transfer
















Page 12 of 46








these are ndash

















main locations

Page 13 of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom


























low yielding assets

Page 5 of 46






yielding assets












Page 6 of 46



some precautionary

balances


cash balances

Debtors and

stock

Minimum

consistent with

business needs


debtor levels to

maximize sales

Creditors Maximum

available without

compromising

business needs


discounts and

reputation for good

payment


Future cash

flows


predictable

Unpredictable

Attitude to

Risk























Page 7 of 46




531 CASH MANAGEMENT






Treasury bill

Commercial paper



Page 8 of 46













Operating Cash Flow




Investing Cash Flow




Financing Cash Flow



of 46

















1 Sweep accounts





Page 10 of 46





cover them


Page 11 of 46






2 Lock-box accounts
























c) Wire Transfer
















Page 12 of 46








these are ndash

















main locations

Page 13 of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom







yielding assets












Page 6 of 46



some precautionary

balances


cash balances

Debtors and

stock

Minimum

consistent with

business needs


debtor levels to

maximize sales

Creditors Maximum

available without

compromising

business needs


discounts and

reputation for good

payment


Future cash

flows


predictable

Unpredictable

Attitude to

Risk























Page 7 of 46




531 CASH MANAGEMENT






Treasury bill

Commercial paper



Page 8 of 46













Operating Cash Flow




Investing Cash Flow




Financing Cash Flow



Page 9 of 46

















1 Sweep accounts





of 46





cover them


Page 11 of 46






2 Lock-box accounts
























c) Wire Transfer
















Page 12 of 46








these are ndash

















main locations

Page 13 of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom



Future cash

flows


predictable

Unpredictable

Attitude to

Risk























Page 7 of 46




531 CASH MANAGEMENT






Treasury bill

Commercial paper



Page 8 of 46













Operating Cash Flow




Investing Cash Flow




Financing Cash Flow



Page 9 of 46

















1 Sweep accounts





Page 10 of 46





cover them


of 46






2 Lock-box accounts
























c) Wire Transfer
















Page 12 of 46








these are ndash

















main locations

Page 13 of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom





531 CASH MANAGEMENT






Treasury bill

Commercial paper



Page 8 of 46













Operating Cash Flow




Investing Cash Flow




Financing Cash Flow



Page 9 of 46

















1 Sweep accounts





Page 10 of 46





cover them


Page 11 of 46






2 Lock-box accounts
























c) Wire Transfer
















of 46








these are ndash

















main locations

Page 13 of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom













Operating Cash Flow




Investing Cash Flow




Financing Cash Flow



Page 9 of 46

















1 Sweep accounts





Page 10 of 46





cover them


Page 11 of 46






2 Lock-box accounts
























c) Wire Transfer
















Page 12 of 46








these are ndash

















main locations

of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom


















1 Sweep accounts





Page 10 of 46





cover them


Page 11 of 46






2 Lock-box accounts
























c) Wire Transfer
















Page 12 of 46








these are ndash

















main locations

Page 13 of 46































of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom



Page 11 of 46






2 Lock-box accounts
























c) Wire Transfer
















Page 12 of 46








these are ndash

















main locations

Page 13 of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom







c) Wire Transfer
















Page 12 of 46








these are ndash

















main locations

Page 13 of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom









these are ndash

















main locations

Page 13 of 46































Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









monthly basis


Distribution

Scheduling



and scheduling




approach





AR payroll etc



Spot method


Compounded growth






used



Sales uncertainty







unc a

Page 38 of 46





Th ese are ndash



assets



near-cash assets




customers)










isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



inventory




ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









In summary

Page 42 of 46









are ndash





understand



customer


reports



creditors


statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

ahlbdcom





























Page 14 of 46











method










Taxes




Accounts Receivable

Notes Receivable

Rental Income

Interest Income



Page 15 of 46




can then be used



Here









Using Cash Forecast




bar chart eg


Page 16 of 46

75

50

-60

30

100

-20

-80-60-40-20

020406080

100120

Defic

it

S

urpl

us






outflow uncertainty







n⎥⎦⎤

⎢⎣⎡ minus

21

Profit = naiYn

nminus⎥⎦

⎤⎢⎣⎡ minus

21


⎜⎝⎛

aiY2





Page 17 of 46


31

43

iav

R ⎟⎠⎞

⎜⎝⎛=







5317 Administration










accounts









of 46



Page 19 of 46











line








pipelines








Page 20 of 46











Warehousing costs


Obsolescence

Insurance


Stock out costs

Lost sales

Delayed service

Ordering costs

Freight


nts




















trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

A letter


Page 24 of 46


Telephone calls



Legal action

T















Cre G











Capital

Character

Collateral

and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











O





y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

Em

process



a

ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















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Page 36 of 46









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9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

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Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























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Page 35 of 46
















In Summary

Page 36 of 46









hedges




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9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

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less extent

















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of Eid

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Page 30 of 46
















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Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




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day)

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day)

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9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

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Page 30 of 46
















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Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




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Page 41 of 46









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9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

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less extent

















ii

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of Eid

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artificial sweet








iv


>

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accounts









Page 18 of 46



Page 19 of 46











line








pipelines








Page 20 of 46











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lessens the problem


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Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




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Commercial Paper





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Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

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2 days)

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(2 to 3 days)

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day)

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(1 to 3

days)


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Page 37 of 46

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float


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Page 39 of 46

Inventory Model








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Page 40 of 46








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Page 41 of 46









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proportions

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9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

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less extent

















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of Eid

iii

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artificial sweet








iv


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Page 19 of 46











line








pipelines








Page 20 of 46











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Page 21 of 46


















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payment






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o







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m


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ction


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lessens the problem


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paying



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even








worthwhile

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y reporting on

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Page 27 of 46




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process



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ndancies and more


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Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






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Use of lockboxes








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cash concentration




Page 37 of 46

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float


technique









monthly basis


Distribution

Scheduling



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Page 38 of 46





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isnt used in




8




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d

Page 39 of 46

Inventory Model








In summary







cost





shortage cost



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ordered per order



market demand



Page 40 of 46








simple to use













Page 41 of 46









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Page 42 of 46









are ndash





understand



customer


reports



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statements

Customer visit









approach



next periods





receivable





Aging schedule



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proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

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Page 20 of 46











Warehousing costs


Obsolescence

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Stock out costs

Lost sales

Delayed service

Ordering costs

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nts




















trivial many




than make it itself


door



Page 21 of 46


















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Page 22 of 46


customers


Page 23 of 46
















payment






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A reminder

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Legal action

T















Cre G











Capital

Character

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and Capacity

Conditions




ld be granted

Figure

o







T


m


Page 25 of 46

Grand Credit





No Credit

No Payoff



money from debtors





to it

ction


satisfa

lessens the problem


remainder It

paying



534 BLE (CREDITORS)



not



even








worthwhile

Page 26 of 46


management











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y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

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process



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ndancies and more


es ndash

Making just-in


Enco




Mainta

vendor


m key suppliers


Efficient a








payment process


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billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

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Float

(1 to 3

days)


Virgin






at the firm


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Use of lockboxes








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cash concentration




Page 37 of 46

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float


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Scheduling



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unc a

Page 38 of 46





Th ese are ndash



assets



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isnt used in




8




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d

Page 39 of 46

Inventory Model








In summary







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Page 40 of 46








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Page 41 of 46









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Page 42 of 46









are ndash





understand



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reports



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statements

Customer visit









approach



next periods





receivable





Aging schedule



Customers payment

proportions

Sales-weighted DSO








9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















i

Annexure





less extent

















ii

Annexure




















of Eid

iii

Annexure



artificial sweet








iv


>

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trivial many




than make it itself


door



Page 21 of 46


















Bad debts







Page 22 of 46


customers


Page 23 of 46
















payment






rogress payments




P




A reminder

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Page 24 of 46


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Legal action

T















Cre G











Capital

Character

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and Capacity

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ld be granted

Figure

o







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m


of 46

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ction


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lessens the problem


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paying



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not



even








worthwhile

Page 26 of 46


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y reporting on

receivable and




voices for


comes later












Page 27 of 46




Page 28 of 46

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process



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ndancies and more


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Making just-in


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Mainta

vendor


m key suppliers


Efficient a








payment process


e most of company









billion)










Page 29 of 46
















Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















In Summary

Page 36 of 46









hedges




two reasons ndash


bull Cash as hedges




Treasury Bills

Commercial Paper





Bank Account

Mail Float

(1 to 5 days)

At Firm

Float

(025 to 1

day)

Clearing

Float

(0 to

2 days)

Mail Float

(2 to 3 days)

At firm

Float

(025

day)

Clearing

Float

(1 to 3

days)


Virgin






at the firm


procedures

Use of lockboxes








Wire transfer


cash concentration




Page 37 of 46

Manag

float


technique









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Distribution

Scheduling



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approach





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Page 38 of 46





Th ese are ndash



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isnt used in




8




V





d

Page 39 of 46

Inventory Model








In summary







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Page 40 of 46








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Page 41 of 46









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Page 42 of 46









are ndash





understand



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Customer visit









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9 RECOMMENDATION






by Virgin

Page 43 of 46



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10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









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Page 32 of 46












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by Virgin

Page 43 of 46



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10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










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Page 46 of 46


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Page 31 of 46



















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Page 32 of 46












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Page 34 of 46




























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Page 36 of 46









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by Virgin

Page 43 of 46



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use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










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what were about

Page 46 of 46


Annexure

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Page 30 of 46
















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Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























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Page 35 of 46
















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Page 36 of 46









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9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










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what were about

Page 46 of 46


Annexure

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Page 30 of 46
















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Page 31 of 46



















81 CASH MANAGEMENT





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Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























Using Cash Forecast






Page 35 of 46
















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Page 36 of 46









hedges




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by Virgin

Page 43 of 46



problems







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use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










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Page 46 of 46


Annexure

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Page 29 of 46
















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Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























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Page 35 of 46
















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Page 36 of 46









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9 RECOMMENDATION






by Virgin

Page 43 of 46



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use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










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Page 46 of 46


Annexure

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Page 29 of 46
















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Page 30 of 46
















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of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























Page 34 of 46




























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Page 35 of 46
















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Page 36 of 46









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9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










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what were about

Page 46 of 46


Annexure

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Page 29 of 46
















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Page 30 of 46
















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Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




of 46












cash











Page 33 of 46
























Page 34 of 46




























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Page 35 of 46
















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Page 36 of 46









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Page 41 of 46









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9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

Annexure
















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less extent

















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billion)










Page 29 of 46
















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Page 30 of 46
















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Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











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Page 34 of 46




























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Page 35 of 46
















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Page 36 of 46









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Page 39 of 46

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Page 40 of 46








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Page 41 of 46









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are ndash





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9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

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less extent

















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of Eid

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artificial sweet








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Can we add value



Page 30 of 46
















Bangladesh


Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











Page 33 of 46
























of 46




























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Page 35 of 46
















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Page 36 of 46









hedges




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(1 to 5 days)

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2 days)

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Page 41 of 46









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9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










Treasury Services


what were about

Page 46 of 46


Annexure

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less extent

















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Page 31 of 46



















81 CASH MANAGEMENT





ii) Cash as hedges




Page 32 of 46












cash











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Page 34 of 46




























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Page 36 of 46









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Page 40 of 46








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9 RECOMMENDATION






by Virgin

Page 43 of 46



problems







sales


use DSO model


10 CONCLUSION












Page 44 of 46


BIBLIOGRAPHY














Cash Management





Page 45 of 46









Inventory Financing










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what were about

Page 46 of 46


Annexure

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less extent

















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artificial sweet








iv


>

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81 CASH MANAGEMENT





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Page 32 of 46












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Page 44 of 46


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36711831 virgin-soft-drinks-working-capital-management

Economy & Finance

automated

extra borrowing

managing working

capital outflow

managing accounts

virgin soft

monitoring

increasing