Financial Management

Assignment On
Time Value of Money and Management of Working Capital
Submitted to
Mr. Fakir Tajul Islam
Head in-charge, South Asia School of Business
University of South Asia

Prepared By
Group Name: Tulip
Name of the Members of the Group:
1) Hasna Sultana Zhupa-193-0144-009
2) Robel Hasan Adi-193-0143-009
3) Abu Yousuf Talukdar – 193-0333-029
4) Oishik Rahaman Siddiqi – 192-0225-029
5) Sanjib Chandra Saha – 192-0131-009
6) Md. Shafayat Hossen – 193-0025-029
7) Jakir Hossen – 192-0199-029

Date of submission- 14th August, 2020

PAGE I
18 May 2020
To
Fakir Tajul Islam
Head in-charge, South Asia School of Business
University of South Asia
Banani, Dhaka-1213
Subject: Submission of our assignment on Time Value Of Money And Working Capital
Management

Dear Sir,
We are the student of M.B.A of University of South Asia & also from the group named “Tulip”.
We are enthusiastic to have such an assignment & also thanks to you for making us worthy for
corporate. Our topic is “Time Value Of Money And Working Capital Management”. We have
learned many things from this topic which will help us in future. Each member of our group has
tried our best to give an overview of our topic.

We the group “Tulip” tried our best to make this assigment, informative and enjoyable by the
help of electronic and print media in association with our honorable faculty “Fakir Tajul Islam”.
We hope you will find our assignment informative.

Yours Sincerely  
Hasna Sultana Zhupa-193-0144-009
Robel Hasan Adi-193-0143-009
Abu Yousuf Talukdar – 193-0333-029
Oishik Rahaman Siddiqi – 192-0225-029
Sanjib Chandra Saha – 192-0131-009
Md. Shafayat Hossen – 193-0025-029
Jakir Hossen – 192-0199-029
Group-Tulip
MBA
University of South Asia
PAGE II
 3.Abstract

The value of money changes over time. The value of a dollar in hand today is more than the
value of a dollar to be received a year from now because if you have a dollar in hand today you
can invest it elsewhere and earn some interest on it. An investment made today will grow at
some fixed or flexible rate in future if left undisturbed.

“Working capital is relatively liquid (which can be converted into cash) portion of the total
capital of the business. It is required for investment in current assets like cash, stock of materials
and finished goods, debtors, etc.

PAGE III
 4.Acknowledgement

Firstly, I am grateful to express my sincere gratitude to our honorable faculty Mr. Fakir Tajul
Islam, Head in-charge, South Asia School of Business, University of South Asia for allowing us
to benefit from his vast field of experience, knowledge and for training, supervising &
encouraging for such small entrepreneurial type work. Also much honor and credit are due to our
team mate who visited lots of google site and pages and greatly contributed to the standards of
this work. All the information has been collected from the secondary sources. During the
preparation of the review paper, we went through various e-books, journals, proceedings, reports,
publications, internet etc. relevant to this topic.

PAGE IV
 5.TABLE OF CONTENTS
S NO. TOPIC PAGE NO.
1 Cover letter I
2 Letter of transmittal II
3 Abstract III
4 Acknowledgment IV
5 Table Of Content V
6 Introduction 1
7 Financial Management 2
8 Importance of Financial Management 2-5
9 Profit vs Value maximization Principle 6
10 Function of chief financial officer 6-7
11 Exercise 1 8
12 Management of working Capital 9
13 Cash & Marketable Securities Management 9
14 Treasure management 10
15 Receivable Management 10
16 Inventory Management 11
17 Financing of working capital 12-13
18 Exercise 2 14-17
19 Conclusion 18
20 Reference 18

PAGE V

Introduction
The time value of money is the idea that there is greater benefit to receiving a sum of money now
rather than an identical sum later. It is founded on time preference. The time value of money is
the reason why interest is paid or earned: interest, whether it is on a bank deposit or debt,
compensates the depositor or lender for the time value of money

Working capital management is a business strategy designed to ensure that a company operates
efficiently by monitoring and using its current assets and liabilities to the best effect. A
company's working capital is made up of its current assets minus its current liabilities.

PAGE 1

Chapter 1

Q.1. What is financial management?

Financial Management:
Financial Management is a vital activity in any organization. It is the process of planning,
organizing, controlling and monitoring financial resources with a view to achieve organizational
goals and objectives. It is an ideal practice for controlling the financial activities of an
organization such as procurement of funds, utilization of funds, accounting, payments, risk
assessment and every other thing related to money.
Financial Management means planning, organizing, directing and controlling the financial
activities such as procurement and utilization of funds of the enterprise. It means applying
general management principles to financial resources of the enterprise.

Q.2. What are the Importance and Objectives of financial management?

Importance of financial management:
The importance of financial management can be explained from the following angles:
Importance to all types of organization:
Business Organisation:
Financial management is very important in the field of increasing the wealth of the investors and
the business concern. Ultimate aim of any business concern will achieve the maximum profit and
higher profitability leads to maximize the wealth of the investors as well as the nation
Charitable Organisation:
Financial management of not-for-profits is similar to financial management in the commercial
sector in many respects; however, certain key differences shift the focus of a not-for-profit
financial manager. A forprofit enterprise focuses on profitability and maximizing shareholder
value.
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A not-for-profit organization’s primary goal is not to increase shareholder value; rather it is to
provide some socially desirable need on an ongoing basis. A not-for-profit generally lacks the
financial flexibility of a commercial enterprise because it depends on resource providers that are
not engaging in an exchange transaction.
Public sector undertaking:
Everything you need to know about the types of public sector undertaking. Public sector
organizations are those organizations that are owned, controlled and financed by the Government
of the country.

Other organizations:
Helps in improving the profitability of organisations; Increases the overall value of the firms
or organisations; Provides economic stability; Encourages employees to save money, which
helps them in personal financial planning
Importance to all stake holders:
Stakeholders have been defined by R. E. Freeman in his book Strategic Management: A
Stakeholder Approach as “any group or individual who can affect or is affected by the
achievement of the firm’s objectives”. These stakeholders can affect or be affected by a
corporation’s financial success, can be classified as Primary and Secondary stakeholders.
i. Primary stakeholders have interests that are directly linked to the fortunes of a company.
They typically include shareholders and investors, employees, customers, suppliers, and
residents of the communities where the company operates. Natural environment, nonhuman
species, and future generations can also be added to this list.
ii. Secondary stakeholders have an indirect influence on an organization. They include the
media and pressure groups, regulators, competitors, and others that form the social ecology of
an organization.
Can also be differentiated as,
1. Inside stakeholders Shareholders – the owner of the organization
2. Managers – the employees responsible for coordinating organizational resources to realize
the organization’s goals
3. The workforce – all non-managerial employees
4. Outside stakeholders  Customers – an organization’s largest outside stakeholder group
5. Suppliers – provide reliable raw materials and component parts
6. The government  Trade unions  Local communities
7. Media etc
8. The general public Stakeholders contribute to the wealth-creating capacity of a corporation
and are, therefore, its potential beneficiaries and/or risk bearers. They act as gatekeepers to
resources that firms need.

PAGE 3
Objectives of financial management
The objectives of financial management are given below:
1. Profit maximization
Main aim of any kind of economic activity is earning profit. A business concern is also
functioning mainly for the purpose of earning profit. Profit is the measuring techniques to
understand the business efficiency of the concern.

The finance manager tries to earn maximum profits for the company in the short-term and the
long-term. He cannot guarantee profits in the long term because of business uncertainties.
However, a company can earn maximum profits even in the long-term, if:

 The Finance manager takes proper financial decisions

 He uses the finance of the company properly

2. Wealth maximization

Wealth maximization (shareholders’ value maximization) is also a main objective of financial

management. Wealth maximization means to earn maximum wealth for the shareholders.

3. Proper estimation of total financial requirements

Proper estimation of total financial requirements is a very important objective of financial

management. The finance manager must estimate the total financial requirements of the
company. He must find out how much finance is required to start and run the company.

4. Proper mobilization

Mobilization (collection) of finance is an important objective of financial management. After

estimating the financial requirements, the finance manager must decide about the sources of
finance.

5. Proper utilization of finance

Proper utilization of finance is an important objective of financial management. The finance

manager must make optimum utilization of finance. He must use the finance profitable. He must
not waste the finance of the company.

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6. Maintaining proper cash flow
Maintaining proper cash flow is a short-term objective of financial management. The company
must have a proper cash flow to pay the day-to-day expenses such as purchase of raw materials,
payment of wages and salaries, rent, electricity bills, etc.
7. Survival of company

Survival is the most important objective of financial management. The company must survive in
this competitive business world. The finance manager must be very careful while making
financial decisions. One wrong decision can make the company sick, and it will close down.

8. Creating reserves

One of the objectives of financial management is to create reserves. The company must not
distribute the full profit as a dividend to the shareholders. It must keep a part of it profit as
reserves.

9. Proper coordination

Financial management must try to have proper coordination between the finance department and
other departments of the company.

10. Create goodwill

Financial management must try to create goodwill for the company. It must improve the image
and reputation of the company. Goodwill helps the company to survive in the short-term and
succeed in the long-term. It also helps the company during bad times.

11. Increase efficiency

Financial management also tries to increase the efficiency of all the departments of the company.
Proper distribution of finance to all the departments will increase the efficiency of the entire
company.

12. Financial discipline

Financial management also tries to create a financial discipline. Financial discipline means:

 To invest finance only in productive areas. This will bring high returns (profits) to the
company.
 To avoid wastage and misuse of finance.

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13. Reduce cost of capital
Financial management tries to reduce the cost of capital. That is, it tries to borrow money at a
low rate of interest. The finance manager must plan the capital structure in such a way that the
cost of capital it minimized.
Q.4. Explain conflicts in profit versus value maximization principle.
Conflicts in profit versus value maximization principle:
1) Conflict between Departmental Goal and Firm Goal: There are several departments in affirm
such as sales department, purchase department, production department .and marketing
department etc. There may be conflicts among the goals of these department.
2) Diverse Interests of Stakeholders: Company is a complex organization. There are various
stakeholders in a company, other than the shareholders. They are creditors, debenture holders,
employees, customers and society who have their own interest in the organization. The interests
of stakeholders are different. Every group wants to evaluate the performance of management
from its own objective viewpoint.
3) Concentration on Easily Attainable Goals: In case of corporate firms, the ownership is held by
the shareholders while the management is in the hands of Board of Directors and senior
management who work as functional directors or heads.
4) Differing Viewpoints: Usually, the shareholders are scattered and ill organized to control the
Board of Directors. Board of Directors may tend to develop their own goals on account of their
functional autonomy.
5) Survival of Management: The survival of management will be threatened if any objective of
the stakeholders remains unfulfilled.
The objective of wealth maximization may be in general harmony with the interests of the
various groups such as owners, employees, creditors and society.
Q.5. What are the functions of chief financial officer?
functions of chief financial officer

PAGE 6
For decades, the leading role of a company’s Chief Financial Officer (CFO) was to provide operational
and budgetary support as head accountant and bookkeeper. With the rise of globalization, increasing
economic uncertainty, and the evolution of technology, the CFO position has evolved to include
advanced roles in company strategy and innovation.
CFOs are now expected to serve as chief financial stewards, operators, and strategists, as well as
catalysts to cut costs, drive revenue growth and ensure success, the accounting firm Deloitte said.
As a C-suite executive reporting directly to the company’s Chief Executive Officer (CEO) or
president, the CFO helps shape company policy and financial goals. To land a CFO role,
applicants must meet numerous academic and professional prerequisites.

In addition to this advanced skill set, today’s aspiring CFOs should have a graduate level
education such as an Executive MBA from Washington State University to help ensure they have
the broad leadership knowledge required by the C-suite.

Duties And Responsibilities

In most companies, the CFO assists the Chief Operating Officer (COO) by providing budget
management, cost benefit analysis, and financial forecasting. A CFO’s core duties can be divided
into three main parts:

1. Controllership duties:
Controllership involves presenting and reporting accurate and timely historical financial
information. Shareholders, analysts, creditors, employees, and other stakeholders rely on the
quality of this information to make future financial decisions.

2. Treasury duties:
CFOs oversee the capital structure by determining an optimal mix of debt, equity, and internal
financing. They are responsible for the financial conditions within a company and need to be
aware of financial influences such as risk and liquidity when determining how best to invest the
company’s money.

3. Economic strategy and forecasting:

CFOs are also responsible for mapping out the company’s financial future. They must identify
and report areas of financial strengths and weaknesses to board members and key stakeholders.
Thus, economic forecasting – the process of predicting financial success – is another key facet of
a CFO’s duties.
The roles of the modern CFO also have expanded beyond traditional accounting management
into human resources and information technology.

As previously mentioned, executive responsibilities vary between industries, which affects the
spectrum of compensation for CFOs. Another significant variable is company size, executives at
large corporations generally earn more than those at smaller companies.

PAGE 7

Exercise:
Assume that you have 1000 take to invest. Two options available (1) invest at 10% compounding
rate for 1 year, 2 years, 5 years and (2) invest at 10% simple rate for 1 year, 2 years, 5 years.
Calculate future value of the two options.
Solution:
Given That,
Investment Amount = BDT 1000
Interest Rate = 10 %

Requirements,
(1). Future value at the end of the 1 year, 2 year, 5 year using compounding rate.
(2). Future value at the end of the 1 year, 2 year, 5 year using simple rate.

For compounding rate,

FV = Investment amount × (1 + Interest rate )year

∴FV₁ = 1000 × (1 + 0.10)¹= 1000 × 1.10 = BDT 1100

∴FV₂ = 1000 × (1 + 0.10)²= 1000 × (1.10)² = 1000 + 1.21 = BDT 1210
∴FV₅ = 1000 × (1 + 0.10)⁵= 1000 × (1.10)⁵ = 1000 + 1.61051 = BDT 1610.51

For Simple rate,

FV = Investment amount + (Investment amount × Investment rate × year)

∴FV₁ = 1000 + (1000 × 0.10 ×1) = 1000 + 100 = BDT 1100

∴FV2 = 1000 + (1000 × 0.10 ×2) = 1000 + 200 = BDT 1200
∴FV5 = 1000 + (1000 × 0.10 ×5) = 1000 + 500 = BDT 1500

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Chapter 3
Q.1. What is management of working capital?
Management of working capital:
The focus of this reading is on the short-term aspects of corporate finance activities collectively
referred to as working capital management. The goal of effective working capital management is
to ensure that a company has adequate ready access to the funds necessary for day-to-day
operating expenses, while at the same time making sure that the company’s assets are invested in
the most productive way. Achieving this goal requires a balancing of concerns. Insufficient
access to cash could ultimately lead to severe restructuring of a company by selling off assets,
reorganization via bankruptcy proceedings, or final liquidation of the company. On the other
hand, excessive investment in cash and liquid assets may not be the best use of company
resources.
Working capital management is a business strategy designed to ensure that a company operates
efficiently by monitoring and using its current assets and liabilities to the best effect. ... A
company's working capital is made up of its current assets minus its current liabilities.

Q.2. What is Cash and Marketable securities management?

Cash and Marketable securities management
Cash forms the method of collecting revenues and paying various costs and expenses of the
business. At any one time there is almost certainly going to be a stock of cash in hand or some
Iiability of cash owing. This is shown in the balance sheet under the headings cash in hand and
bank balances or, if there is a negative bank balance, as a bank overdraft. (Note that from now on
cash and current-account bank accounts will be used synonymously and deposit accounts will be
treated separately with marketable securities as 'liquid assets'; the reason for the differentiation is
that payments are made out of the current accounts arid that it takes some time to convert deposit
accounts and marketable securities into current-account cash.) The reasons for holding cash have
traditionally been divided into three categories as postulated by Keynes!, the transaction's
motive, the precautionary motive and the speculative motive. Each of these will be considered in
turn.

PAGE 9
The precautionary motive for holding cash relates to the need for creating readily available funds
to meet unexpected circumstances. the more uncertain the cash flows are, the greater the
precautionary balances that have to be kept. If the company has very good access to short-term
borrowing, then this acts to reduce the precautionary balances that need to be held.

Q.3. What is Treasury management?

Treasury management:
Treasury Management can be understood as the planning, organizing and controlling holding,
funds and working capital of the enterprise in order to make the best possible use of the funds,
maintain firm’s liquidity, reduce the overall cost of funds, and mitigate operational and financial
risk.
Simply put, treasury management is the management of all financial affairs of the business such
as raising funds for the business from various sources, currency management, cash flows and
various strategies and procedures of corporate finance.

Functions of Treasury Management

Q.4. Explain what is Receivables management?

Receivables management
Account Receivables Management refers to the set of policies, procedures, and practices
employed by a company with respect to managing sales offered on credit. It encompasses the
evaluation of client credit worthiness and risk, establishing sales terms and credit policies, and
designing an appropriate receivables collection process.
PAGE 10
Accounts receivables are found on the balance sheet of a company, and are considered a short-
term asset. They are the one of the backbones of sales-generation, and thus must be managed to
ensure they are eventually translated into cash-flows. A company that fails to efficiently convert
its receivables into cash can find itself in a poor liquidity position, crippling its working capital
and facing unpleasant operational difficulties.
Benefits of Accounts Receivable Management

1. Better Cash Flow.

1. All our Budgets and projections depends on how much we can spend. Predictable
cash flow enables us to manage our operations and expansion plans.
2. Lower Working Capital Requirements.
1. Effective receivables management ensures that our Working Capital requirements
are kept at minimum.
3. Lowered Interest costs.
1. Working capital is also fixed capital, which attracts interest. Lower Debtors will
reduce our Interest burden.
4. Better Bargaining with Sellers.
1. When we are buying any goods or services, we can bargain mainly  on quantity or
Payment terms. Having a good receivable management provides us with enough
cash flow to bargain effectively with our Suppliers.
5. Stop profit leakages
1. In case of thin margins, just imagine how much more sales we have to do to
recover and adjust just one small bad-debt. 

Q.5. What is Inventory management?

Inventory management:
Inventory is the goods that your company handles with the intention of selling. It might be raw
materials that you buy and turn into something entirely new, or it might be a bulk product that
you break down into its constituent parts and sell separately. It could even be something
completely intangible: software, for instance.
Types of inventory

There are lots of different types of inventory, and which ones you’ll deal with depends on the
goods you sell. Here’s an overview of some of the types you’re more likely to encounter:

 Finished goods/for-sale goods: The products you sell to your customers

 Raw materials: The inventory you use to make your finished goods
 Work-in-progress: Essentially, unfinished goods — inventory that is part-way through
the manufacturing process
 MRO goods: MRO stands for maintenance, repair and operating. This is the inventory
you use to support the manufacturing process
PAGE 11

 Safety stock: The additional inventory you keep in store to deal with supplier shortages or
surges in demand

Every venture that handles inventory will need some way of handling stock. Let’s take a look at
how that works in principle.

How does inventory management work?

At a basic level, inventory management works by tracking products, components and ingredients
across suppliers, stock on hand, production and sales to ensure that stock is used as efficiently
and effectively as possible. It can go as deep as you need it to: for example, by examining the
difference between dependent and independent demand, or forecasting sales to plan ahead. But at
the end of the day, it all goes back to your stock.

Q.6. Explain financing of working capital.

Financing of working capital:
A working capital loan is a loan that is taken to finance a company's everyday operations. These
loans are not used to buy long-term assets or investments and are, instead, used to provide
the working capital that covers a company's short-term operational needs
Types of Working Capital Financing / Loans
Trade Credit
This is simply the credit period which is extended by the creditor of the business. Trade credit is
extended based on the creditworthiness of the firm which is reflected by its earning records,
liquidity position, and records of capital financing, trade credit also comes with a cost after the

free credit period.

PAGE 12
Cash Credit / Bank Overdraft
Cash credit or bank overdraft is the most useful and appropriate type of working capital
financing extensively used by all small and big businesses. It is a facility offered by commercial
banks whereby the borrower is sanctioned a particular amount which can be utilized for making
his business payments.

Working Capital Loans

Working capital loans are as good as term loan for a short period. These loans may be repaid in
installments or a lump sum at the end. The borrower should take such loans for financing
permanent working capital needs. The cost of interest would not allow using such loans for
temporary working capital.

For more details, we recommend reading

Working Capital Loan and Finance

Purchase / Discount of Bills
For a business, it is another good service provided by commercial banks for working capital
financing. Every firm generates bills in the normal course of business while selling goods to
debtors.

Bank Guarantee
It is primarily known as non-fund based working capital financing. Bank guarantee is acquired
by a buyer or seller to reduce the risk of loss to the opposite party due to non-performance of the
agreed task which may be repaying the money or providing of some services etc.

Letter of Credit
It is also known as non-fund based working capital financing. Letter of credit and bank guarantee
has a very thin line of difference. Bank guarantee is revoked and the bank makes payment to the
holder in case of non-performance of the opposite party whereas, in the case of a letter of credit,
the bank will pay the opposite party as soon as the party performs as per agreed terms. So, a
buyer would buy a letter of credit and send it to the seller.

Factoring
Factoring is an arrangement whereby a business sells all or selected accounts payables to a third
party at a price lower than the realizable value of those accounts. The third party here is known
as the ‘factor’ who provides factoring services to business.
PAGE 13

Exercise:
Calculate the Gross operating cycle and net operating cycle from the data given below:

No. Particular Amount (in Lakh)

1. Opening Balance Of
Raw Materials , stores & spares 3454.84
Work in process 56.15
Finished goods 637.92
Accounts receivable 756.45
Accounts payable 2504.18
2. Closing Balance Of
Raw Materials , stores & spares 4095.41
Work in process 72.5
Finished goods 1032.74
Accounts receivable 1166.32
Accounts payable 3087.47
3. Purchases of Raw Materials , stores & spares 10676.1
4. Manufacturing Expenses 1146.76
5. Depreciation 247.72
6. Customs excise duties 35025.56
7. Selling Administration and finance (SAF) cost 4557.48
8. Sales 54210.65

PAGE 14
Solution:

Gross operating cycle = Raw material storage period (N1) + Conversion period(N2) + Finish
goods storage period (N3) + Average collection period (N4)
Net Operating cycle = Raw material storage period (N1) + Conversion period(N2) + Finish
goods storage period (N3) + Average collection period (N4) – Average Payment Period (N5)
Raw material storage period (N1)
 Average stock of raw material
¿ Days
Average Daily consumptionof raw materials
3775.13
¿ Days¿ 135.41 Days
27.88
∴ Average Daily consumption of raw materials
Annual consumptionof raw material
¿
360
10035.53
¿
360
¿ 27.88

Working,
Annual Daily consumption of raw materials = Opening stock + Purchase – Closing stock

= 3454.84 + 10676.1 – 4095.41

= 10035.53
∴ Average stock of raw material,
Opening balanceof materials +Closing balance of materials
¿
2
3454.84+4095.41
¿
2
7550.25
¿ = 3775.13
2
Conversion period(N2)

PAGE 15
Average stock of work ∈progress
¿ Days
Average Daily cost of production
64.33
¿ Days = 2.02 Days
31.70
∴ Average stock of work ∈ progress
 Opening work ∈ progress+Closing work ∈ progress
¿
2
56.15+ 72.50
¿ = 64.33
2
∴ Average Daily cost of productio n
Annual cost of production
¿
360
OpeningWIP+Consumption of material+ Manufacturing expensen+ Depreciation−Closing WIP
¿
360
56.15+ 10035.53+ 1146.76+247.72−72.5
¿
360
11413.66
¿ = 31.70
360
Finish goods storage period (N3)
Average inventory of finished goods
¿ Days
Average Daily cost of sale
835.33
¿ Days = 5.94 Days
140.560
∴ Average inventory of finished good s
Opening stock of finished goods+Closing stock of finished goods
¿
2
637.92+1032.74
¿ = 835.33
2
∴ Average Daily cost of sal e
Annual cost of sale
¿
360
Opening stock FG +Cost of production+ SAF expense +CED−Closing stock FG
¿
360
PAGE 16
637.92+11413.36 + 4557.84+35025.56−1032.74
¿
360
50601.94
¿ = 140.560
360
Average collection period (N4)
Average book debt
¿ Days
Average Daily sale
961.385
¿ Days = 6.384 Days
150.59
∴ Average Daily sal e
Annual sale 54210.65
¿ ¿ = 150.59
360 360

∴ Average book deb t

Opening account receivable+Closing account receivable
¿
2
765.45+ 1166.32 1922.77
¿ ¿ = 961.385
2 2

Average Payment Period (N5)

Average balance of trade creditors
¿ Days
Average Daily purchase
2795.82
¿ Days = 94.26Days
29.66
∴ Average balance of trade creditor s
Opening account payable+ Closing account payable
¿
2
2504.18+ 3087.47
¿
2
5591.65
¿ =2795.82
2
∴ Average Daily purchas e
Purchases of Raw Materials , stores∧spares 10676.10
¿ ¿ = 29.66
360 360

PAGE 17
∴Gross operating cycle = Raw material storage period (N1) + Conversion period(N2) + Finish
goods storage period (N3) + Average collection period (N4)
= 135.41 + 2.02 + 5.942 + 6.384
= 149.756 Days
∴Net Operating cycle = Raw material storage period (N1) + Conversion period(N2) + Finish
goods storage period (N3) + Average collection period (N4) – Average Payment Period (N5)
= 135.41 + 2.02 + 5.942 + 6.384 – 94.26
= 55.28 days

Conclusion
Financial management helps to improve the profitability position of the concern with the help of
strong financial control devices such as budgetary control, ratio analysis and cost volume profit
analysis.

Reference
1. Slides shared by our honourable faculty Fakir Tajul Islam
2. https://onlinemba.wsu.edu/blog/the-roles-of-chief-financial-officers/
3.https://www.toppr.com/guides/accountancy/financial-statements/stakeholders-and-their-
information-requirement/
4.http://www.expertsmind.com/questions/conflicts-in-profit-versus-value-maximization-
principle-30181018.aspx
5.https://www.unleashedsoftware.com/inventory-management-guide
6.https://efinancemanagement.com/working-capital-financing

The End

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