Managerial Financial Management: Ratio Analysis Of Working Capital Management

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Working capital management is a managerial accounting strategy focusing on maintaining efficient levels of both components of working capital, current assets and current liabilities. Working capital management can ensures London Biscuits Berhad has sufficient and enough cash flow in order to meet its short-term debt obligation and operating expenses. Implementing an effective working capital management system is an excellent way for many companies to improve their earnings. The two main aspects of working capital management are ratio analysis and management of individual components of working capital.
A few key performance ratios of a working capital management system are the working capital ratio, inventory turnover ratio and the collection ratio. Ratio analysis will lead management to identify areas of focus such as inventory management, cash management, accounts receivable and payable management.
The working capital of London Biscuits Berhad for 2015 is -RM51,816,510 which is calculated by the following formula:
Working Capital= Current Assets- Current Liabilities
Working Capital= RM237,920,815- RM289,737,325
Working Capital= -RM51,816,510

A few key performance ratios of a working capital management system are the working capital ratio, inventory turnover and the collection ratio. Ratio analysis will lead …show more content…

There are some important key for the company to manage the cash flow, London Biscuit Berhad needs to measure their cash flow by preparing cash flow projections for next year, next quarter and next week. An accurate cash flow projection can alert you to trouble well before anything untoward happen. Next, it is also important to improve the cash flow of the company by managing the receivables. It will be done by improve the speed of turning materials and suppliers into the product, then receivables and

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