Working Capital

Management
Fund is required to manage day to day operations. It measures company
efficiency and operating liquidity. There is no hard and fast rule as to what
Quantum of Working Capital has to be.
Relaxed Policy the greater the bank balance, inventory and Receivable
will be resulting of greater working capital need.
Tight policy means the company is put to inconvenience occasionally, but
the Benefit of Lower quantum of Working capital.

The Position is

ummarised as

Impact on Sales

Tight policy
Likely to be Lower

Impact on
Production

Production Process
being affected

Inventory Level
Collection period
Receivable
quantum
Working Capital
Investment
Working Capital
Cost

Will be Lower
Will be Lower
Will be Lower

Relaxed Policy
Likely to remain
intact
Production Process
being not be
affected
Will be Higher
Will be Higher
Will be Higher

Will be Lower

Will be Higher

Will be Lower

Will be Higher

Sun Parma Working Capital Assessment

Comparisons with Competitor:

Cipla

The key Working Capital Ratio

Sun Parma

Cipla

Glen mark

71 (days)

105 (Days)

57 (Days)

Analysis- Financial measures of Company Performance that gives

investors an idea of how long it takes a company to turn its inventory
into Sales, So sun Parma take 62 days to convert their inventory into
sales.
Impact on company profitability- less is better because it
increase the goodwill in front of the competitors and it is required for
a company to keep monitoring this regularly.

Sun Parma

Cipla

Glen mark

50 (days)

60 (Days)

103 (Days)

Analysis- Every company would seek to have its dues collected

fast because of market condition and Competitors or because of
lack of Fellow up by the sales team.
Impact on company profitability- Company keep monitoring
this regularly. Long delay in receipts of dues result in loss of
interest on working Capital and risks of Bad debt is more.

Sun Parma

Cipla

Glen mark

97 (days)

50 (Days)

112(Days)

Analysis- measures how long business holds onto cash. It helps in

compare one company payment policies to another.
So Sun Parma have fewer days of payable as compared to glen mark but
greater than but greater than Cipla.
Fewer- Company ability to make Payment.
Greater - Company ability to delay Payment and conserve cash.

Impact on company profitability- longer they take to pay to the

creditor, the more money the company has on hand, which is good for
working capital and free Cash flow, but if company takes too long to pay to
creditors then creditor is unhappy and refuse to give credit on future.

Sun Parma

Cipla

Glen mark

24 (days)

115 (Days)

76 (Days)

Analysis- It express the length of time, in days that it takes for a

company to convert resources input into cash flow. It measures how
quickly a company can convert its products into cash through Sales.

Impact on company profitability- Sun Parma shorter life as

compared to their Competitors that means less time the capital is tied
up in the business process, and thus better for the company bottom
line.