TOPIC- GUEST LECTURE

Done by Mohammed Azharuddin

A.U.D 0814

Bachelors of Business Administration General

Batch 2016
DEPARTMENT OF BUSINESS ADMINISTRATION

Faculty Guide Mrs. Debpriya Sengupta

May 2016

Acknowledgements

I would like to express my gratitude towards my guide Mrs. Debpriya Sengupta for all the
guidance that I received from her.

I would like to thank Amity University for giving me an opportunity to expand my knowledge.

Mohammed Azharuddin

1. Introduction to Working Capital Management

Working capital is the money a business has available to sustain its operations. Its the capital
available to purchase inventory, pay employees, keep the lights on, and finance other short term
expenditures. This makes managing working capital a critical business skill. If there is no
working capital, there is no business.
All business needs cash to survive.
Cash is needed to:

Invest in fixed assets

Pay suppliers and employees
Fund overheads and other fixed costs
Pay tax due to the Government

Nearly all businesses use much of their cash resources to finance investment in Working
Capital.
Managing working capital effectively is, therefore a vital part of making sure the business has
enough cash to continue

Working Capital is calculated by the following:

Working Capital = Current Assets

Current Liabilities

2. Thoughts of the Expert

The Middle East market is one of the happening places wherein business can be conducted. In
terms of International business, United Arab Emirates ranked 31 st. United Arab Emirates has the
Largest Re-Export Hub and does not levy any tax charges. The famous Jabel Ali port, charges
minimum tax charges on the import of products.
The Demand and Supply of Setting Business in the United Arab Emirates is from the Horizon of
Short to Medium Scale Enterprise.
If a business manages to survive for 3 years, then we can say that the actual business has started.
However, the critical thinking of either expanding the business or quitting the industry must take
place in the 2nd year of operations.

Types of SME
There are 3 Types of SME (Small and Medium Enterprise) Organizations
1. I am the Boss Here the Proprietor makes all the decision
2. I am the Boss, But Intend to Formulize

Percentage of Tyep fo SME's

17%

I am the Boss
I am the Boss,But Intend to
Formulize
20%

Formal Organization

63%

3.

Formal
Organization Works with the concept of team work and pays attention to employees responses.

Types of Accounting

1. 23% of the firms prepare Informal Accounting

2. 27% of SME companies prepares Internal Accounting
3. 50% of the companies have External Audit Companies
It is important that companies maintain Formal Accounting Books in order to get finance. If they
fail to do so the banks will reject their loans.

SME Stats
United Arab Emirates consists of a total 230,000 SMEs. 175,000 among them are suited in Abu
Dhabi, Dubai and Sharjah.
Among the 175,000: 110,000 are Traders
61,000 are Service Oriented i.e. large in terms of transportation
4000 are Small Manufacturers
90,000 to 100,000 among the 230,000 SMEs, are Micro SMEs and do not follow the Formal
Accounting concept.
SME offer employment to 65-80% population with opportunities for finance careers.

Capital for SME

1. 38% of SME businesses are self financed i.e. the proprietor arranges the capital for the
business himself.
2. 8% of SME businesses arrange for capital by borrowing money from family and friends.
3. 11% of SME businesses arrange for capital through additional partners or by engaging into a
partnership form of business.
4. 14% of SME businesses arrange for capital through loans from banks and financial institutions.
5.

29% of SME businesses enter into the market without any capital.
The Revenue Potential for SME is $2 billion with the growth rate of 9-10% per annum

The GDP of The United Arab Emirates is 400 Billion (26,000 per Capital. 63% of UAE GDP is
from non-oil businesses, 37% is from Oil businesses. 65-70% of UAE GDP contribution is from
Traders, Service & Manufacturer.

Risk Management of SME

SME faces, 4-5 key risks. There are: 1.

Competition Risk: Issues regarding where to set up the business.

2.

Legal Risk: Issues regarding legal formalities and study regulations.

3.

Credit Risk: Issues regarding deciding when to buy products on credit, when to supply product
on credit, risk on loss and so on.

4.

Market Risk: Issues regarding fluctuation of currencies, economy downfall, increase or decrease
in demand and supply of the product.

5.

Concentration Risk: Issues regarding extend to when you have one of similar kind of supplier.
Example of Frozen Food and Meat Company was given; who had 1000+ Debtors in their
company and they faced a credit risk as they were not able to get there pay on time.

My Learning Experience
From this lecture I gained information regarding how businesses work in the United Arab
Emirates. I gained knowledge upon how working capital management is important part in the
firms financial management decision. Improper management of Working capital, that is, too
much or too low working capital may make firms suffer, so an optimum level of working capital
is the key to a smooth inflow of profit. To reach optimal working capital management firm
manager should control the trade-off between profitability and liquidity accurately.