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Working Capital And Some Solutions To Improve Its Management Efficiency At Agricare Vietnam Co.ltd

Working capital and some solutions to improve its management efficiency at Agricare Vietnam Co.Ltd

CHAPTER 1 1 LITERATURE REVIEW OF WORKING CAPITAL MANAGEMENT 1 1.1. Introduction of working capital in enterprises 1 1.1.1. Definition of working capital 1 1.1.2. Classification of working capital 1 1.1.3  Role of working capital 4 1.1.4 Structure of working capital 4 1.1.5 Factors affecting working capital 6 1.2. Working capital management 9 1.2.1. Working capital management and its objectives 9 1.2.2. Managing working capital 10 1.2.3. Working capital management efficiency ratios 16 CHAPTER 2  MANAGEMENT AT AGRICARE VIET NAM CO.LTD 26 2.1 General overview of Agricare Viet Nam Co., Ltd 26 2.1.1 History of the company’s establishment and development 26 2.1.2 Business fields and products 26 2.1.3 Organizational structure of Agricare Viet Nam Co.Ltd 28 2.1.4 Financial situation of Agricare Vietnam Co.Ltd 29 2.2 Working capital management situation in Agricare  Viet Nam Co., Ltd 31 2.2.1 Working capital structure 31 2.2.2 Cash management situation in Agricare Viet Nam Co., Ltd. 36 2.2.3. Account receivable management situation in Agricare Viet Nam Co., Ltd 39 2.2.4 Inventory management situation in Agricare Viet Nam Co., Ltd 42 2.2.5 Other management situation in Agricare Viet Nam Co., Ltd 44 CHAPTER III SOLUTIONS FOR IMPROVING WORKING CAPITAL MANAGEMENT IN AGRICARE VIET NAM CO.LTD 45 3.2.1 Cash management 47 3.2.2 Receivables management 48 3.2.3 Inventory management 49 3.2.4 Other recommendations 49 CONCLUSION 51 REFERENCE 58

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Introduction

  1. Rationale of the study

In the market economy, capital is one of the most important factors for enterprises to survive and develop beside others factors such as human resources, the inventions, patents, technical management….Generally, in the commercial activity and particularly in the commercial enterprises, capital is also an effective tool to enhance the competitiveness of enterprises. Therefore, every business which wants to exist and develop has to concern about the capital creation and management.   Working capital is one of the two components of capital. For commercial businesses, working capital accounts for a large proportion of the total capital approximately 75% – 95%. Working capital management is an important area of financial management in every business function. Working capital management deals with the administration of the liquidity components of firms’ short-term current assets and current liabilities (Baker and Powell, 2005; Brigham and Ehrhardt, 2005; Gitman, 2009). The most important current assets are cash, debtors or account receivables, stock or inventory and current liabilities consisting of creditors or account payables, accrued expenses, taxation liabilities, short-term debt such as commercial bills, and provisions for current liabilities such as dividends declared but not yet paid . This is the reason why working capital management has become a hot topic for all enterprises, and improving working capital efficiency is the target for all business.   Recognizing the important of working capital management in the firm’s survival , growth and after my internship time in Agricare Viet Nam Co.Ltd, I had a chance to work in Finance- accounting department where had overall responsibility for using, managing capital, and contributing to company growth and profitability. I choose the topic “Working capital and some solutions to improve its management efficiency at Agricare Vietnam Co.Ltd” as topic of the thesis.

  1. Aims of the study

The main objective of the study is to analyze the working capital management and suggest some methods to improve the efficiency of the process. The specific aims of the thesis include:

  • To provide a source of information on capital concepts encompassing definition capital, the importance of working capital .
  • To get a better understanding of working capital management at Agricare Viet Nam  Co.Ltd.
  • To evaluate the current situation of organization and management of working capital at Agricare Viet Nam  Co.Ltd .
    • To offer business management recommendations on managing working capital.
  1. Method of the study

For this study the following approach was adopted. Firstly, relevant literature, publications and studies are reviewed in order to get in-depth information on fixed capital management in general and this concept at Agricare Viet Nam in particular. The company’s background is also studied and reviewed. Secondly, data related to working capital management at the firm including financial statements and other required documents will be collected and examined. Finally, the information obtained is analyzed, processed to evaluate the working capital management efficiency.

  1. Scope of the study

Due to the limited time and the scale, this dissertation emphasizes on working capital management at Agricare Viet Nam Co.Ltd in the period from 2012-2014 and propose some solutions for improvement.

  1. Organization of the study

Apart from the Introduction, Conclusion, Reference and Appendix, the thesis is divided into three main parts as follows:

  • Chapter 1: LITERATURE REVIEW. This chapter provides general background on capital and working capital management.
  • Chapter 2: THE STUDY. This chapter gives the data and analysis of the enterprise’s working capital management.
  • Chapter 3: SOLUTIONS AND RECOMMENDATIONS. This chapter suggests some recommendations to improving working capital management efficiency at Agricare Vietnam Limited Liability Company.

CHAPTER 1 LITERATURE REVIEW OF WORKING CAPITAL MANAGEMENT 1.1. Introduction of working capital in enterprises 1.1.1. Definition of working capital In   accounting   and   financial   statement   analysis,   working   capital involves a firm’s current assets and current liabilities that have maturities of less  than  one year  and  are needed  for a  normal  business  cycle.  The  net working  capital  is  the  difference  between  current  assets  and  current liabilities.   The   current   assets   primarily   include   cash   and   short-term investments in marketable securities, inventories of raw materials, work-in- progress  and  finish goods  as  well  as  accounts  receivables. If the current assets excess the current liabilities, this indicates that the firm has ability  to  meet  its  short-term  financing  obligations.  The  greater  the  net working capital is the more liquid or solvent the firm is.

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