Mahamuda Jahan Chowdhury BBA 03912538

Kazi Fahmida BBA 03912534 Shamima Rahman Shanta BBA 03912729

On the WORKING CAPITAL MANAGEMENT BEHAVIOR OF THE

FOOD INDUSTRY OF BANGLADESH

Selection of Industry FDI Received AmountSummery of Ratio Why there are Differences Among RatiosFinding from Perspective of Working

Capital Management

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Food Industry Total 15 listed food companies operating in

Bangladesh

FU-WANG FOODS LTD

Financed by domestic investors

RAHIMA FOOD CORPORATION LTD

FDI received

Year of incorporation: 1997

Listed in Dhaka Stock Exchange Ltd.: July 2000

Listed in Chittagong Stock Exchange Ltd.: July 2000

Commercial Production: August

1997

ISO Certification: ISO-9002 Certified on 04 November 1998

Business Line: Food Processing Industry

Authorized Capital Paid-UP Capital No. Of Shares

TK. 1000 Million TK. 445.28 Million 44528000 shares of TK 10/- each

Business line : producing and packing best quality refined edible oil and vegetable ghee.

Year of incorporation:1990 

Conversion into Public: 1996 Initial Public Offering of shares: 1997  Enlistment with DSE & CSE:

1997

Authorized capital Paid up Capital: No. of shares

Taka 250.00 Million Taka 200.002 Million

2,000,020 shares, Taka 100/- each

FDI Received Amount(in TK) 102810102

FDI in % 5.14%

Aggressive Investment Policy (AIP) results in minimal level of

investment in current assets versus fixed assets. In contrast, a

conservative investment policy places a greater proportion of

capital in liquid assets with the opportunity cost of less

profitability. If the level of current assets increases in

proportion to the total assets of the firm, the management is said

to be more conservative in managing the current assets of the

firm.

AIP=Total Currant Liabilities/Total Asset

Fu-Wang is using a more fluctuating AIP policy because it increasing one year than decreasing other year because of their fluctuation in fixed asset and current asset holding

Compare to Fu-Wang Rahima Food is having a symmetrical AIP policy due to their a balanced current & fixed asset holding

Both the companies differ in terms of AIP

Return on Asset calculate how much profitability is receiving from investing fixed asset

ROA=Net Earning After Tax/Book Value of Asset

Fu-Wang is having a symmetrical ROA than that of Rahima Food due to fluctuations in profitability of Rahima Food

Fu-Wang is having more cost efficiency than Rahima Food

Tobin’s q compares the value of a company given by financial

markets with the value of a company’s assets. A low q (between

0 and 1) means that the cost to replace a firm’s assets is greater

than the value of its stock. This implies that the stock is

undervalued. Conversely. A high q (greater than 1) implies that

a firm’s stock is more expensive than the replacement cost of its

assets. Which implies that the stock is overvalued.

TOBIN’S Q=MARKET VALUE OF FIRM/BOOKVLUE

OF ASSET

Both Fu-Wang and Rahima Food are having a asymmetrical Tobin’s Q because of their share price fluctuations and stock is more expensive than the replacement cost of its assets which implies stock is overvalued as it is more than1in most of the years

Rahima food is having a 565.7% in 2011 due to the increase in FDI

Fu-Wang ‘s Sale is symmetrical as it is increasing from 2007 to 2011 & Rahima Food’s Sale is asymmetrical because of asymmetrical Price fluctuations of their RM

Both the companies have asymmetrical growth on sale because of sudden change in price hike of their RM and fuel and international price fluctuations

From 2007 to 2010 both Fu-Wang ‘s financial leverage was higher but they try to reduce it in 2011

Rahima Food ‘s financial leverage is increasing means using more debt financing than equity financing

Rahima Food is receiving FDI every year but Fu-Wang Food does not

Rahima Food operating with a more fluctuating Raw Materials industry

FU-WANG Food RAHIMA Food

Both the companies’ stock is more expensive than the replacement cost of its assets which implies stock is overvalued as it is more than1in most of the years

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