Contents

1.

Introduction.........................................................................................................................................3

2.

About the Company.............................................................................................................................3

3.

2.1.

Company profile..........................................................................................................................3

2.2.

Mission........................................................................................................................................4

2.3.

Vision...........................................................................................................................................4

2.4.

Products.......................................................................................................................................4

Working Capital Management.............................................................................................................5

3.1.

Definition.....................................................................................................................................5

3.2 Importance of good working Capital Management............................................................................5

3.3 Problems with inadequate working capital........................................................................................5
4. Policies in working capital management..................................................................................................6
5. Cash Management...................................................................................................................................6
6.1 Credit granting decision.....................................................................................................................6
6.2 Terms of sales ( Amount in thousands)..............................................................................................7
6.3 Default rate in Account Receivables..................................................................................................7
6.4 Controlling and monitoring Accounts Receivables............................................................................8
6.5 Turnover Method...................................................................................................................................8
7. Inventory Management............................................................................................................................8
7.1 Overall inventory management condition..........................................................................................8
7.2 Composition of inventory..................................................................................................................9
7.3 Economic Order Quantity..................................................................................................................9
8. Analyzing Performance.........................................................................................................................10
8.1 Explanation of the ratios with Graphs..............................................................................................10
8.1.1 Working Capital Turnover.........................................................................................................10
8.1.2 Current Assets Turnover............................................................................................................11
8.1.3 Inventory Turnover Ratio..........................................................................................................11
8.1.4 Average Holding Period............................................................................................................12
8.1.5 Raw Material Inventory Turnover.............................................................................................12
8.1.6 Work in Process Inv. Turnover..................................................................................................13
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8.1.7 Conversion Period....................................................................................................................13

8.1.8 Finished Goods Inventory Turnover.........................................................................................14
8.1.9 Finished Goods Storage Period.................................................................................................14
8.1.10 Receivables Turnover..............................................................................................................15
8.1.12 Cash Turnover Ratio...............................................................................................................16
8.1.13 Payable Turnover Ratio...........................................................................................................17
8.1.14 Payable Deferral Period..........................................................................................................17
8.1.15 Current Ratio..........................................................................................................................18
8.1.17 Cash Ratio...............................................................................................................................20
9. Conclusion.............................................................................................................................................21
10. References...........................................................................................................................................22

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1. Introduction
The report will help management to take correct decision. The respondents are the future
decision makers so this report will light on their need. It will help to identify the current market
position & reasons for decreasing the sales. It will help as a secondary data for further research.

2. About the Company

2.1. Company profile
AMBEE PHARMACEUTICALS LTD., a fast growing company was established in 1976 in Bangladesh.
This public limited company was registered under the companies Act, 1913 and was incorporated in
Bangladesh on 4th February 1976. Ambee has a joint venture with a famous multinational company
Medimpex of Hungary. Ambee started its operation with modest 17 joint ventured products and is now
running in full swing with 76 products. They have Tablets, Capsules, Liquids, Gel in tubes and
Injectables. Its operational area covers all over Bangladesh with a large number of field forces who strive
hard to establish the demand of products of the company in every corner of the country. The company
maintains four outside Depots located at Khulna, Bogra, Chittagong and Sylhet besides its National
Distribution Cell in Dhaka.
When Ambee Pharmaceutical Ltd.(APL) was launched back in Feb 1976 Ambee had only 30 field forces
who had launched 17 products only. In the first year company had registered a sales little over than 1
Crore. Since then the company engaged itself in marketing most needed new formulations and today in
2001, APL has got 68 products in the form of capsule, liquid, gel and injectables. Now the company has
got its own distribution network throughout the country. Ambee has 5 depots with more than 150 people
working in Distribution Department. The Sales Team has now become reasonably big with 200 people in
the field. Besides local market Ambee has been successful to explore Export market. The company has
already completed one export deal with Myanmar in 2000, while closely working for the same business
possibility with the African & SAARC countries.
Their aim is to achieve business excellence through quality by satisfying customer expectations. They
follow Quality Management System to ensure consistent quality of products. They also meet all National
Regulatory Requirements in their business affair and follow Good Manufacturing Practices (GMP) as
recommended by World Health Organization (WHO) for its pharmaceutical operations.
The management of Ambee Pharmaceuticals Limited is dedicated to its commitment of quality and all
employees of the organization follow documented procedures to ensure quality standards. Their strength
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lies in our fully dedicated and quality team of professionals. The Human Resources of the company are
their asset and they are regularly trained for the continuous improvement of work methods.
In 2001 Ambee Pharmaceuticals Ltd. became ISO 9001 certified company. ISO 9001 certificate is the
international recognition of the quality management system of this organization that complies with the
standard of ISO 9001 system. This certificate was awarded by United Registrar of Systems Ltd. (URS) of
UK. In Bangladesh among 250 pharmaceutical companies only few have become ISO 9001 certified and
Ambee is one of them.

2.2. Mission
To be the leader in the Pharmacitical sector of the country by rendering quality products and
services through maintaining high standards in business operations and to bring fullest
satisfaction to our valued shareholders, customers and employees.

2.3. Vision
To significantly contribute to the sustainable development and growth of our country towards its
journey for a better and prosperous future.

2.4. Products

Tablets
Capsules

Liquid Products
Cream, Ointments & Gel
Injections
Sugar Coated Products

3. Working Capital Management

3.1. Definition
Working Capital management is the set of activities that are required to run day to day operations
of the business to ensure that cash is adequate to meet short term debt and upcoming operational
expenses. Working capital is also known as the circulating capital or revolving capital. Working
capital is calculated as current assets minus current liabilities. If current assets are less than current
liabilities, an entity has a working capital deficiency, also called a working capital deficit.

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3.2 Importance of good working Capital Management

Well-managed working capital is crucial to the running of a healthy and successful business. In
simple terms, working capital is the cash available for the day-to-day running of the business,
used to settle regular bills such as wages and supplies, and also covering unplanned costs and
unexpected expenses. An important part of working capital management is a company's cost
structure.
The main importance of working capital are as follows:

Strengthen the Solvency

Enhance Goodwill

Easy Obtaining Loan

Regular Supply of Raw Material

Smooth Business Operation

Ability to Face Crisis

3.3 Problems with inadequate working capital

Unable to pay the liability or loan repayment

Loan provider will be reluctant to give the loan
Good will may hamper
Shareholders will be dissatisfied regarding firms performance
Face some problems to meet day to day expenditures
Share price may drop down
Liquidity crisis may arise

4. Policies in working capital management

Among three policies, Ambee Pharmaceuticals Limited follows Aggressive approach because
their current assets are greater than current liability.

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5. Cash Management
Cash & Cash Equivalents
In hand
At banks:
In current accounts
In in-operative account
Total Amount

Amount in TK.
10,338,656
5,337,813
5,256,298
81,515
15,676,469

Cash Generated from operating activities

61,212,188

Net cash (used in) / generated from investing activities

5,112,062

Net cash used in financing activities

28,927,627

6. Receivables Management
6.1 Credit granting decision
Here,
EBIT = 29,355,740
Sales = 344,038,325
Market value of equity = 600,000,000
Book value of debt = (8,319,966 + 350,644,649) = 358,964,615
Retained earnings = 28,968,472
Total assets = 417,067,240
Working capital = 367,342,889

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Z =3.3

EBIT
Sales
MarketValueofEquity
R.E.
W .C .
+1.0
+ 0.6
+1.4
+1.2
TA
TA
B . V . ofDebt
TA
TA

Z =3.3

29,355,740
344,038,325
600,000,000
28,968,472
367,342,889
+1.0
+ 0.6
+1.4
+1.2
417,067,240
417,067,240
358,964,615
417,067,240
417,067,240

Z = 4.09 > 2.7

So the company is credit worthy and has a good condition.

6.2 Terms of sales (Amount in thousands)

6.3 Default rate in Account Receivables

When companies extend credit to customers, there's always the chance that one or more of those
customers won't pay. The cost of non-collectable accounts receivable can eat away at profits.
Businesses have developed methods for dealing with unpaid invoices, and they can benefit from
understanding these best business practices. Plan ahead for uncollected accounts receivable.

6.4 Controlling and monitoring Accounts Receivables

Establishing a definitive company-wide credit policy provides uniformity and structure for a
small business. Credit limits for individual sales and total credit outstanding must be established,
and credit terms should be instated. If the company credit policy is not in writing, is not
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communicated and is not supported by top management, confusion results. Employees interpret
policy drawing different lines of distinction and setting varying boundaries. Customers don't
understand the inconsistency in policy application; they feel discriminated against and may
complain, not pay, sue or take their business elsewhere. These negative repercussions only
hamper productivity. Instituting a written policy that is upheld by upper management is
instrumental for optimal collection. Employees need proper training and support to effectively
carry out company policy.

6.5 Turnover Method

This company is applicable for turnover method.
Accounts Receivable Turnover = Credit sales/ Accounts receivables
= 1,542,135/ 81,641,418
= 0.02 times
Average collection period =360/ Accounts Receivable Turnover
=360/0.02
= 18000 days

7. Inventory Management
7.1 Overall inventory management condition
The overall inventory management of the company is so good and the firm is in the good
position in the pharmaceutical industry.

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7.2 Composition of inventory

Particulars
Inventory
Raw materials

Amount in TK.
67,456,488

36.76%

Packing materials

38,051,682

20.74%

Promotional materials

1,580,300

Percentage of

0.86%

Work-in-process

3,966,467

2.16%

Finished goods

72,355,870

39.43%

Materials-in-transit

92,310

0.05%

Total Inventory

183,503,117

100%

7.3 Economic Order Quantity

S = 131,292,216 units
C =20% (Assumption)
PP =1.5 Tk. (Assumption)
O = 260 (Assumption)
EOQ= ((2*O*S)/(C*PP))
= ((2*260*131,292,216)/(0.20*1.5))
=477,050 units
Total Inventory cost = [(C*PP)*(Q/2)] + [O*(S/Q)]
= [(.20*1.5)* (477,050 /2)] + [260*(131,292,216/477,050)
= 143,113.89 TK.
Order per year = Total Demand/Total Quantity
= 131,292,216/477,050
= 275.22 orders
For a 360 day year, orders will be placed about every (360/275.22) = 1.31 days.

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Assume, Lead time = 5 days

Order point = Lead time*Annual Demand/360
= (5*131,292,216)/360
= 1,823,503 units

8. Analyzing Performance
8.1 Explanation of the ratios with Graphs
8.1.1 Working Capital Turnover

Working Capital Turnover

15.00
10.00
5.00
0.00
2014

2013

This ratio indicates the rate of working capital Utilization in the firm. A higher turnover ratio in
2013 compared with next year 2014 indicates that the amount of working capital in this firm is
less than that required by its operation. If this ratio is lower than previous year 2013 it indicates
the investment in net working capital is more then what is required. Working capital turnover
ratio for 2014 is 10.91 which is less than 13.53 for 2013.

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8.1.2 Current Assets Turnover

Current Asset Turnover Ratio

0.60
0.50
0.40
0.30
0.20
0.10
0.00
2014

2013

It also indicates the rate at which WC has been used. Generally a higher ratio is considering an
indicator of better efficiency which was 0.56 in 2013 and lowers one the opposite of 0.44 in
2014.
8.1.3 Inventory Turnover Ratio

Inventory Turnover
1.50
1.00
0.50
0.00
2014

2013

.
The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period. This measures
how many times average inventory is "turned" or sold during a period. In other words, it
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measures how many times a company sold its total average inventory dollar amount during the
year. A higher turnover is considered good that was 1.22 in 2013 and a lower turnover is bad that
is 0.88 in 2014.
8.1.4 Average Holding Period

Avg Holding Period

500.00
400.00
300.00
200.00
100.00
0.00
2014

2013

Inventory turnover ratio indicates the way management has used inventory to conduct the
operation of the business. Generally a higher turnover is considered good and a low turnover
bad. The more days it will take to convert inventory into sales that is not good for a firm. So the
minimum rate or the lower the day it counted to converted inventory that shows the efficiency of
the firm. In 2014 it takes more days almost 414 days to convert inventory into sales than in 2013
it took 298 days.
8.1.5 Raw Material Inventory Turnover

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Raw Material Inventory Turnover

0.55
0.50
0.45
0.40
2014

2013

The ratio indicates the rate of utilization of raw materials. A higher turnover ratio in 2013 was
0.52 indicated its increasing utilization. But too high a ratio may indicate that proportionately
fewer raw materials were held in order to carry out the production. But in 2014 it is 0.44.
8.1.6 Work in Process Inv. Turnover

Work In Process Inv. Turnover

7.80
7.60
7.40
7.20
7.00
2014

2013

In 2013 a higher turnover ratio 7.65 indicated lower inventory accumulation and lesser tied up
working capital. In 2014 a falling turnover 7.30 means either management has become relax in
controlling in production process or some external factors have change the production
movement.
8.1.7 Conversion Period

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Conversion Period
0.14
0.14
0.13
0.13
2014

2013

It indicates how quickly the WIP inventory converts into finished good. Lower conversion period
is good than higher. In 2014 it takes 0.14 day to covert WIP inventory to finished goods and in
2013 it took 0.13 day.
8.1.8 Finished Goods Inventory Turnover

Finished Goods Inventory Turnover

3.00
2.50
2.00
1.50
1.00
0.50
0.00
2014

2013

It indicates how quickly finished goods reaches in the market for sales. Higher turnover is better
for the firm that was 2.76 in 2013 and in 2014 it is 2.24.
8.1.9 Finished Goods Storage Period

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Finished Goods Storage Period

200.00
150.00
100.00
50.00
0.00
2014

2013

A higher turnover ratio indicates lower inventory accumulation and lesser tied up working
capital. A falling turnover means either management has become relax in controlling in
production process or some entreat factors have retired the production movement. Generally
lower storage period is considered good but too low a storage period is risky. In 2013 there was
lower storage period 132 days than 163 days in 2014.
8.1.10 Receivables Turnover

Receivables Turnover
0.03
0.03
0.02
0.02
0.01
0.01
0.00
2014

2013

In 2014 the account receivable turnover of 0.02 times which is computed by credit sales divided
by account receivable , which representing that the amount of credit sales will recover by 0.02
times and also it was 0.03 times in 2013. Higher turnover is better and it was in 2013.
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8.1.11 Receivables Collection Period

Receivable Collection Period

20000.00
15000.00
10000.00
5000.00
0.00
2014

2013

Receivables collection period in 2013 was 19323.29 days and in 2014 it is 14374.99 which
represent that the outstanding will recover by these times. The Receivables collection period
represent the average length of time that the firm must wait after making credit sales before
receiving the cash that means its an average collection period. Lower days are preferable.
8.1.12 Cash Turnover Ratio

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Cash Turnover Ratio

12.00
11.00
10.00
9.00
8.00
2014

2013

A companys cash turnover ratio measures how many times per year it replenishes its cash
balance with its sales revenue. A higher cash turnover ratio is generally better than a lower one.
In 2013 it was 11.38 that are higher than 9.75 in 2014. So in analyzing, the cash turnover ratio
can help to determine how efficiently keep cash flowing through small business, but there are
some drawbacks to the ratio that could present an inaccurate picture.
8.1.13 Payable Turnover Ratio

Payable Turnover Ratio

0.50
0.40
0.30
0.20
0.10
0.00
2014

2013

The payable turnover was 0.36 times in 2013 and 0.48 times in 2014 computed by credit
purchase divided by accounts payable. The payable turnover ratio measure the speed with the
companys pays its suppliers. As lower turnover is better so 2013s turnover is better than 2014.

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8.1.14 Payable Deferral Period

Payable Deferral Period

1200.00
1000.00
800.00
600.00
400.00
200.00
0.00
2014

2013

Payable deferral period means the activity ratio that measures how well a business is managing
its accounts payable. Average payable period in 2103 was 1024.69 days and in 2014 it is 758.74
days calculated by 365 divided by payable turnover. The lower the ratio, the quicker the business
pays its liabilities but higher numbers of days are better.
8.1.15 Current Ratio

Current Ratio
100%
80%
60%
40%
20%
0%

1.05

1.05

2014

2013

The current ratio is a widely used measure for evaluating a companys liquidity and short-term
debt-paying ability. The higher value of current ratio the more liquid the firm is and more ability

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to pay its liability. A ratio 2:1 is considered satisfactory. In both years its current ratio is 1.05 that
indicates this company does not have quite enough ability to meet up its current liabilities.
8.1.16 Quick Ratio

Quick Ratio

0.58
0.56
0.54
0.52
0.50
2014

2013

The quick (acid-test) ratio is a measure of a companys immediate short-term liquidity. A ratio
1:1 is considered satisfactory. A higher ratio does not mean it is good nor lower ratio is bad. The
quick ratio is 0.52 in 2014 and 0.57 in 2013. These ratios indicate the company does not have the
enough ability to recover the current liabilities. It can be also said that the liquidity position of the
company is bad.

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8.1.17 Cash Ratio

The cash ratio 0.08 in both years is representing that the cash and marketable ratio is 0.08 greater
than current liabilities and it is not good enough to meet up the companys current liabilities

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9. Conclusion
The Board of Directors has recruited key, high quality staff, with a proven successful track
record in the industry and has been innovative in business management. Additionally, the Board
of Directors will ensure effective interaction with government bodies at all levels with a view to
increasing profitability and efficiency.
Bangladesh is a market of 130 million people and the local market as well as the export market is
highly increasing. Ambee Pharmaceuticals Ltd.(APL), as an established quality manufacturer
and marketer will search out new customers in local and foreign market.
APL as a well-managed local company in Bangladesh has succeeded for the following reasons:

Capable Senior Management team.

Financial Strength.
Excellent Marketing and Sales Organization.

Thus the company has been successful in manufacturing, marketing & selling and most
importantly, in promoting itself as a manufacturer of quality products.

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10. References

http://www.ambeepharma.com/ambee/comments.html#top
http://www.ambeepharma.com/ambee/aboutus.html
http://www.ambeepharma.com/ambee/factory.html
http://www.ambeepharma.com/ambee/comp_hist.html
http://123.49.46.158/reports/Annual%20Reports/New/Pharma%2001/Ambee
%20Pharmaceuticals/Ambee%20Pharmaceuticals%20%202014.pdf

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