Bbc Pvt. Ltd. and Working Capital Challenge
Table of Contents
* Case Background 3 * Key Findings 4 * Recommendations 6 * References 11 * Exhibits 11
Case Background BBC Pvt. Ltd, is a chemical manufacturing company that was established in 2004. It's registered offices are in Bangalore, and its manufacturing is in Lucknow. At the time of the case BBC is in need of working capital to secure a major contract with Indian Railways. The contract would open doors for long term business. BBC's product manufacturing required minimal fixed assets investment and high quality production. Their product was low cost high quality which …show more content…
One is their surplus of inventory. To fix this we must evaluate their just-in time ratio. This will avoid overstock and understocking. This will free up space that is needed in the warehouse and will also reduce damaged stock. Next, is the loans and advances, if we can avoid payments from customers by managing the debtors we can increase working capital. Additionally, we can consider early payments discounts. This will entice customer to pay off their debt quickly and will put cash in hands for our working capital needs.
How much working capital is required?
According to the proposals of Indian Railways they would need a 1.2 Million dollar investment to gain the Indian Railways contract. This would be considering reconstructing the warehouse, adding offices, creating a new warehouse, and administrative fees to process the Indian Railways contract. We will further evaluate if this figure is truly needed.
Is BBC a growing company?
Yes they are. If we would evaluate their 1.2 million dollar loan in 2009 to the 2011 figures that is $180,000 their retained earnings would be in the millions, but their inventory and quick payment methods make the company look horrific in the balance sheet. With good management and a good strategic plan they should be able to growth more with the new acquisition.
BBC must first ramp up their credit department and ensure they offer customers early payment interest