Corporate profitability is becoming more and more dependent on operating efficiency and businesses are becoming increasingly competitive. This situation is desirable from a social point of view, as consumers are getting higher quality goods at lower prices, but intense competition has certainly made life harder for corporate managers. Businesses can no longer afford to sit back and simply assume that the strategies that got them to where they are will continue to work in the future.
Knowledge of the future can be classified into three types: certainty, uncertainty, and ignorance; and each of them requires a different type of planning: commitment, contingency and sensitivity.
strategy-financial-analysis-short-term-company-sector-construction-cuba-1After 1989, the Cuban economy lost the dose of certainty that characterized it after the breakdown of economic relations with the socialist camp and the countries of Eastern Europe. And for this reason, since it does not have a secure market, it is affected by changes in international financial markets, making it essential to direct efforts towards seeking business efficiency as the only alternative.
The development of the company itself has resulted in its forecasting of its economic and financial situation requiring greater efficiency, which must be given by the relationship between collections and payments and with achieving the entity's objectives of having adequate cash availability.
Given the need to develop strategies and make decisions that allow a better management of the company's funds, this research is carried out at the Construction Materials Company, which could contribute to improving its financial credibility among other companies of its type.
1.1 Characteristics of the Construction Materials Company of Las Tunas.
The Construction Materials Company of Las Tunas is located on Avenida Camilo Cienfuegos No. 223 in the city of Las Tunas, it is subordinate to the Industrial Construction Business Group of the Ministry of Construction. It has a group of production centers mainly in the Tunas municipality, in addition to the municipalities of Puerto Padre, Majibacoa and Colombia.
The company was founded in June 1966, and created by Resolution No. 58/81 of the Ministry of Construction as Construction Materials Company No. 2 of Las Tunas and by Resolution No. 123/2002 issued by the Ministry of Construction In its sixth section, the name of the entity was changed to Las Tunas Construction Materials Company. The construction materials company in Las Tunas is dedicated to:
- Produce, transport and wholesale aggregates including silica sand and other materials from the quarry, paints, gypsum, lime and its derivatives, clay and mud products and systems, concrete elements, terrazzo, additives, textured repels, monolayers, glue cement, dehydrated mix, hydraulic tiles, cast iron and bronze elements, products for the glass and ceramic industry, refractory products, hydraulic concretes, coatings and waterproofing agents, including their application; wood carpentry, including its assembly and offer after-sales services, all in national currency and currency. Provide maintenance and assembly services to industrial technological facilities and equipment for the production of construction materials;laboratory for testing construction materials, rental of construction equipment, complementary and specialized transport, transportation of general cargo; of diagnosis, repair and maintenance of automotive, construction and complementary transport equipment, as well as its aggregates; warehouse rental, parking; rental of premises, scientific-technical services and execution of R&D projects and technological innovations, as well as technical assistance, consulting and advice on activities in the production of construction materials; specialized blasting services, including your project; produce and commercialize in retail form surplus agricultural products from self-consumption to their workers and from storage and sale of fuel and lubricants,the latter only to entities of the Ministry of Construction system, all of them in national currency.
The corporate purpose of the Construction Materials Company of Las Tunas was approved by resolution No. 503 of 2004 issued by the Ministry of Economy and Planning, which includes the following:
The Productions of this company are destined to the priority programs of the revolution.
- Works of the Battle of Ideas. Construction of houses. Self-financed investments (cost + 10%)
To respond to the corporate purpose, it has the following MISSION:
"To provide constructive development with quality materials, based on excellence, innovation and experience."
The organization is projected into the future with the following Vision.
- The Business Improvement System is implemented The production of materials has been developed in correspondence with the increasing demands of the constructive programs. Strategic planning and management by objectives and values are effective management tools. Processes and systems are automated as effective sources of the information. The most accepted principles of Internal Control and Accounting are fulfilled, consolidating the quality and opportunity of the Accounting Register. The organization has a certified quality management system. We have motivated workers, with high performance and a sense of belonging. Technological innovation has been consolidated as an integrated process of competitiveness, and organizational development, maintenance of facilities and equipment is consolidated.In-depth economic and financial analyzes are carried out as a regulatory element of the organization's efficiency. The behavior of product costs is systematically analyzed as an effective tool for decision-making. The use of techniques to promote products and services has allowed insertion into new market segments, with high levels of competitiveness and customer satisfaction. Workers in general fight systematically to prevent manifestations of corruption, indiscipline and illegalities. We have highly capable managers who are prepared to continually respond to changes and challenges that are projected.The behavior of product costs is systematically analyzed as an effective tool for decision-making. The use of product and service promotion techniques has allowed insertion into new market segments, with high levels of competitiveness and customer satisfaction.. Workers in general fight systematically to prevent manifestations of corruption, indiscipline and illegalities. We have highly capable managers and prepared to continuously respond to the changes and challenges that are projected.The behavior of product costs is systematically analyzed as an effective tool for decision-making. The use of product and service promotion techniques has allowed insertion into new market segments, with high levels of competitiveness and customer satisfaction.. Workers in general fight systematically to prevent manifestations of corruption, indiscipline and illegalities. We have highly capable managers and prepared to continuously respond to the changes and challenges that are projected.Workers in general fight systematically to prevent manifestations of corruption, indiscipline and illegalities. We have highly capable managers who are prepared to continually respond to the changes and challenges that are projected.Workers in general fight systematically to prevent manifestations of corruption, indiscipline and illegalities. We have highly capable managers who are prepared to continually respond to the changes and challenges that are projected.
The company works in three fundamental branches: quarry, concrete and red ceramic, producing materials such as: aggregates, wall, floor, ceiling and woodwork elements.
These productions allow us to respond to the needs of the province in terms of construction and repair of works for the programs carried out by the country.
The structure of the company is flat, there are three levels between the Director and the Chief closest to production, two functional levels and one executive. It has flexibility and unity of command allowing compliance with the objectives and mission of the organization. (See Annex 2)
The Company has a Central Office with four Vice-Directorates, to which 5 Base Business Units are subordinate, which are:
- “La Veguita” Sand Deposit Must Produce 30.0 m3 of beneficiated sand and 40.0 m3 of natural sand per year. Aggregate of “José Rodríguez” Aggregates Start-up of a hydrocyclone and clarifier to produce high quality artificial sand, 40.0 m3 per year.A block laying plant with a production capacity of 2400.0 Mu per year. Combined Concrete and Carpentry "Guillermo Tejas": Expansion of the Rigam tile plant with 2 presses, 2 mixers, 2 hoists and a water recovery system and waste treatment, increased production by 29.0 m2 per year. Ceramic and Sand Combined “Cristino Barreda”: Construction for the month of September 2006 of a chamber furnace to increase ceramic production capacity: 400.0 Mu rails, tiles 300.0 Mu and bricks at 3000.0 Mu.
| Occupational Category | Current |
| Leaders | 32 |
| Technicians | 81 |
| Administrative | 17 |
| Services | 100 |
| Workers | 382 |
| Total | 612 |
Providers.
-CUPET: Provides the company with fuel (diesel, gasoline, fuel oil), lubricants and liquefied gas. It is assigned nationally according to the productions to be made. -Cement Union: It provides cement, Nuevitas gray cement and Siboney white cement, it is assigned nationally according to the productions to be carried out and because of its proximity.
-EXPLOMAT: They supply explosives, equipment, and quarry pieces. They are assigned to the company according to the need and the number of explosions to be carried out.
-CIMEX Corporation: Provides office supplies, food and cleaning; Also as a supplier of office supplies is COPEXTEL and food ENSUNA. When negotiating, a market exploration is carried out to find out which is the best alternative, the one with the lowest prices and the best quality.
-MINCIN: Provides food and is assigned to the entity by Provincial Planning.
-Industrial Gases: It supplies oxygen and acetylene and is the only supplier of this type, given the proximity it offers.
-OBE: Guarantees electricity.
-ACINOX: Provides electrodes and electrical materials as well as DIVEP and ENSUNA.
-CUBALUB: Supplies lubricants.
Among the most important clients are:
-The MICONS that complies with the Battle of Ideas program (program drawn up by the Revolutionary Government aimed at the construction and repair of public works).
-The Escambray Marketing Company that markets the productions in currency.
-The House that is the one that is given the resources of the housing program and the battle of ideas.
These customers are the ones that depend most on the Construction Materials company and are sold the largest volumes.
MICONS and Comercializadora Escambray make payments in foreign currency. At the end of the year 2000, a process of changes and transformations began in the methods and styles of management, structures, decentralization of resources and functions, training and preparation of workers, achieving a participatory management where the linking of individual results is prioritized and organizational, based on mutual trust, open communication and cooperation. We begin to apply the OVAR method of management, which allows us to follow up on the objectives proposed by the organization.
The culture of the organization is aimed at flexibility, innovation, group orientation, with a predominance of visionary leadership and motivation, aimed at assimilating change as a key element of competitiveness. Consequently, with these analyzes, the following values that managers have identified to positively influence people's minds were defined for the organization, thus achieving better performance.
FUTURE VISION
INNOVATION
TEAMWORK
AUTONOMY
LEADERSHIP
MOTIVATION
ADAPTABILITY TO CHANGE
COMPETITIVENESS
In June 2003, a system audit was carried out at the request of the company, which was carried out by the Territorial Unit of State Construction Inspection with the aim of certifying the accounting so that the company could be inserted into the Business Improvement. The results of this audit were evaluated as acceptable. The company plans to insert itself in the Business Improvement Process. On January 12, 2004, the initial diagnosis was approved by the MICONS Improvement Group, and work is being done in the Study Development stage (File), with the subsystems being reviewed by the Company's Central Commission.
1.2 Strategic diagnosis of the Construction Materials Company.
A multidisciplinary team, of which the author was part as facilitator of the work process, carried out a diagnostic study of the company's operational management. The team was made up of six specialists from the different functional areas of the company: commercial, productive, economy, finance, costs and supplies.
The diagnostic study covered the following stages:
- Formulation of the Mission and Vision. List of internal factors: Strengths and Weaknesses.
III. Priority matrix of internal factors.
- Strategic evaluation matrix of internal factors List of external factors: Opportunities and Threats Priority matrix of external factors
VII. Strategic evaluation matrix of external factors.
VIII. SWOT IMPACT matrix.
- Approach to the strategic problem. Approach to the strategic solution.
STAGE I: Formulation of the Mission and Vision.
It is necessary to clarify that the vision and the mission were already elaborated by what was taken by the group.
Mission:
Produce quality building materials based on excellence, innovation and experience
View:
We are leaders in the production of construction materials in the territory, we distinguish ourselves by progressively applying and developing a quality management system that meets customer expectations and allows us to maintain a competitive position in order to achieve excellence.
STAGE II: List of Internal Factors
Strengths
F1. Market dominance of fundamental construction materials in the province.
F2. Existence of mineral reserves of sand, stone and clay with mining concepts to work long-term.
F3. Economic Preparation of Tables and Leaders.
F.4 Motivation of workers in general is high.
F5. Implementation of a Quality Management System based on standards
ISO 9001.
Weaknesses
D1. Insufficient financial resources in both currencies.
D2. Obsolete and deteriorated technology.
D3. Low average earnings for workers.
D4. Insufficient training of technicians and workers.
D5. Insufficient communication between heads of establishments, middle managers and workers.
The group determined that the strength that can give the company the most advantages is the domain of fundamental building materials market in the province. And its main weakness is obsolete and deteriorated technology.
STAGE III: Priority Matrix of Internal Factors.
To reduce the list of strengths and weaknesses, a matrix is used that relates the probability of Occurrence and the Probable Impact of each of the factors. Those that classify in the cells that are above the main diagonal are selected.
STAGE IV: Strategic Evaluation of Internal Factors.
The strategic evaluation matrix of the Internal Factors is built from the strengths and weaknesses selected in the previous stage, the specific weight that the experts confer on each of them according to their level of importance and the level of response of the organization using a Likert-type evaluation scale 1,2,3,4,5. The value 1 represents the worst assessment and 5 the best. The average or regular assessment is in the range 2.5-3.5. The results shown below were obtained as a result of the analysis of the team of specialists.
STRATEGIC EVALUATION MATRIX OF INTERNAL FACTORS
Taking this result into account, the level of management response of the VITALMAC company to its strengths and weaknesses is evaluated on a regular basis, indicating that there are reserves in the use of strengths to overcome weaknesses.
STAGE V: List of External Factors.
Opportunities
O1. Possibilities of insertion in the business improvement process.
O2. Existence of training centers in the territory.
O3. Opening of the Escambray Marketing Company.
O4. Development of social programs of the Revolution in the province.
O5. GEICON support in the introduction of new technologies
Threats
A1. Offers of quality imported construction materials that replace concrete and ceramic productions.
A2. Low level of investments in the province.
A3. Deterioration of the economic-financial situation in the country.
A4 Technological improvement in neighboring Construction Materials Companies.
A5 Financial scheme in MLC imposed, not allowing to cover the needs of the company.
STAGE VI: Priority Matrix of External Factors.
STAGE VII: Strategic Evaluation of External Factors.
The procedure for constructing the strategic evaluation matrix of external factors was similar to that proposed in stage IV.
Considering this result, the level of management response The COMPANY to opportunities and threats is evaluated regularly, indicating that there are reservations in the use of opportunities in the environment to counteract threats from it.
STAGE VIII. SWOT Matrix Impact.
SWOT MATRIX IMPACT
STAGE IX: Approach to the Strategic Problem.
If the improvement of neighboring construction materials companies continues and the supply of quality imported construction materials continues to replace concrete and ceramic productions, in addition to not meeting the needs of the company due to the financial scheme imposed in MLC Then the company will not be able to control the market for construction materials in the province. Mineral reserves such as sand, stone and clay will not be used, which means that the opening of the trading company ESCAMBRAY, the development of the social programs of the revolution in the province and the support provided by the GEICON in the introduction of new technologies.
STAGE X: Approach to the Strategic Solution.
STRATEGIC SOLUTION
If the dominance in the construction materials market is increased, the reserves of sand, stone and clay and the capacities and constructive and technological conditions can be used. In addition to the implementation of a quality management system, then the effects of the entry of imported construction materials and from neighboring provinces can be counteracted, which will allow the company to take advantage of the opening of the ESCAMBRAY trading company and benefit from the development of the social programs of the revolution in the territory, as well as the support provided by the GEICON group in the introduction of new technologies, which would considerably improve the management and efficiency of the company.
1.3 SHORT-TERM FINANCIAL ANALYSIS IN THE COMPANY.
1.3.1 FINANCIAL ANALYSIS OF THE CONSTRUCTION MATERIALS COMPANY LAS TUNAS.
It should be noted that as a positive element it was found during the investigation that the Ministry of Construction has established financial reasons, which allows a greater evaluation of the company's financial management. To calculate the ratios, the 2004 and 2005 financial statements were used, see Annexes (3, 4, 5, 6, 7, 8, 9,10).
Liquidity Ratios.
Table # 1 General Liquidity.
| CONCEPT | Um | REAL
2005 |
REAL
2004 |
|
| Current Assets | one | MP | 2909.8 | 3086.9 |
| Current Liabilities | two | MP | 1062.9 | 823.7 |
| Circulating Ratio (½) | 2.74 | 3.75 | ||
Source: Author's elaboration
In 2004, for each peso of short-term debt, the company had $ 3.75 of current assets, however in 2005, its ability to pay was less, with $ 2.74, due to a decrease in current assets and an increase in current liabilities., behaving favorably during the two years, showing that the company has acceptable liquidity, which exceeds the norm established according to non-commercial criteria and the norm established by the company, which is between 1 and 2.
Table # 2 Immediate Liquidity or Acid Test
| CONCEPT | Um | REAL
2005 |
REAL
2004 |
|
| Current Assets-Inventories. | one | MP | 1088.9 | 1096.7 |
| Current Liabilities | two | MP | 1062.9 | 823.7 |
| Circulating Ratio (½) | 1.02 | 1.33 | ||
Source: Author's elaboration
When analyzing the immediate liquidity, $ 1.33 was obtained in 2004, that is, for each peso of short-term debt, the entity had $ 1.33 of available and realizable assets, after discounting inventories, which represent 64.4% and 62, 5% respectively for the years analyzed. And what implies that the company had liquid assets to meet its short-term liabilities, already in 2005 the ratio decreased by 0.31 cents ($ 1.33 - $ 1.02), that is, it reached a value of $ 1.33 remaining above the criterion author, and that of the company which is approximately 0.7 cents
Table # 3 Solvency.
| CONCEPT | Um | REAL
2005 |
REAL
2004 |
|
| Total Assets | one | MP | 10077.0 | 9797.7 |
| Total Liabilities | two | MP | 1428.9 | 1274.6 |
| Solvency Ratio (½) | 7.05 | 7.69 | ||
Source: Author's elaboration
At the end of 2004, real assets covered 7.69 times all debts, that is, for each peso of external financing, the company had $ 7.69 of real assets to cover all obligations. In 2005 the ratio decreased by 0.64 cents ($ 7.69 - $ 7.05), which means that it has $ 7.05 to face each peso of debt. The foregoing shows that the entity's fundamental source of financing is capital for both periods, which represents 87% and 86% respectively for the periods analyzed, exceeding the norm established according to auroral criteria and that of the company that must be up to 2.
Table # 4 Working Capital.
| CONCEPT | Um | REAL
2005 |
REAL
2004 |
|
| Current Assets | one | MP | 2909.8 | 3086.9 |
| Current Liabilities | two | MP | 1062.9 | 823.7 |
| Working Capital (1-2) | $ | 1846.8 | 2263.2 | |
Source: Author's elaboration
This indicator is considered positive when current assets are higher than current liabilities. In this case, when analyzing both periods, it is observed that in 2005 there is a decrease with respect to the previous year of $ 416.4 MP ($ 2,263.2- $ 1,846.8). The fundamental cause is precisely the decrease in current assets by $ 177.2 MP, specifically in cash on hand by $ 114.5 MP, and current liabilities increased due to the fact that short-term accounts payable increased by $ 78.06 MP, the accounts accounts payable- $ 8.0 MP and accounts payable- investments $ 131.017 MP.
1.2 Reasons for Activity
Table # 5 Collection Cycle.
| CONCEPT | Um | REAL
2005 |
REAL
2004 |
|
| Sales | one | MP | 4255.9 | 4284.8 |
| Average Accounts Receivable | two | MP | 379.8 | 471.1 |
| Accounts Receivable Rotation (½) | 3 | Times | eleven | 9 |
| Days of the Period | 4 | Days | 360 | 360 |
| Collection Cycle (4/3) | 5 | Days | 32 | 40 |
Source: Author's elaboration
In 2004, accounts receivable rotated 9 times a year every 40 days, however in 2005 they did so 11 times every 32 days. As can be seen, the collection cycle decreased over the previous year by 8 days, influencing the decrease in the average of the accounts that are still pending collection. If this result is compared with the average collection cycle in the country that is 30 days, then it must be considered that it is within the parameters.
In the case of our companies, it is necessary to determine the purchases for the period. As the company does not have a specific account to collect this data, it is necessary to find out what the purchases of materials and merchandise were, since these constitute the fundamental amount of the purchases made by the company.
Materials Purchases = Material Expenditure + Final Inventory - Initial Inventory.
Table # 6 Payment Cycle.
| CONCEPT | Um | REAL
2005 |
REAL
2004 |
|
| Purchases | one | MP | 1532.6 | 1293.1 |
| Average Accounts Payable | two | MP | 82.15 | 47 |
| Accounts Payable Rotation (½) | 3 | Times | 18.6 | 27. |
| Days of the Period | 4 | Days | 360 | 360 |
| Payment Cycle (4/3) | 5 | Days | 19 | 13 |
Source: Author's elaboration
The payment cycle increases, behaving in 13 days for the year 2004 and 19 days for the year 2005, this situation is not favorable for the company, since lengthening the payment cycle without breaching the commitments made is a good measure for the administration of cash and therefore contributes to improving the financial situation of the company. However, it is taken into account that a 30-day payment cycle is within the established parameters, so it can be stated that the company has financing reserves that it is not exploiting and which is not expensive.
Inventory Cycle.
Table # 7 Inventory of Raw Materials and Materials.
| CONCEPT | Um | REAL
2005 |
REAL
2004 |
|
| Premium Materials Expenses | one | MP | 716.5 | 657.5 |
| Average of Raw Materials and Mat. | two | MP | 150.15 | 160.65 |
| Rotation of Raw Materials and Mat. (½) | 3 | Times | 4.7 | 4 |
| Days of the Period | 4 | Days | 360 | 360 |
| Inventory Cycle M. Primas y Mat. (4/3) | 5 | Days | 76 | 90 |
Source: Author's elaboration
This inventory is made up of the Raw Materials and materials that are received from the suppliers and are dedicated to productive consumption, among them is cement, calcium carbonate for the production of mosaics, lubricants, office materials, hardware items among others.
In 2004 and 2005 this inventory represented 8.5% and 7.1% respectively of the total inventory for these periods. In 2005 the material expense was higher than in 2004 by $ 58.0 MP ($ 716.5 - $ 657.5). The average inventory of raw materials and materials was 150.15 MP in 2005 and in 2004 it was 160.65 MP, that is to say 9.50 MP less. The inventory cycle of raw materials and materials decreased in relation to 2004 in 14 days, that is, it rotated 4.7 times every 76 days in 2005, however in 2004 it rotated 4.0 times every 90 days. Even when the company has not determined the behavior of this inventory, it is considered positive as its turnover is faster, so it can be argued that in 2005 there was better efficiency in the administration of this inventory.
Table # 8 Main Production in Process.
| CONCEPT | Um | REAL
2005 |
REAL
2004 |
| Gross Production 1 | MP | 4393.0 | 4644.8 |
| Average Inventory Production Proc. two | MP | 120.2 | 36.05 |
| Production Rotation Princ. Proc. (½) 3 | Times | 36.5 | 128.8 |
| Days of Period 4 | Days | 360 | 360 |
| Production Cycle. Princ. Proc. (4/3) 5 | Days | 9 | two |
This inventory focuses on the ceramic and concrete branches, in the first are the productions of red ceramics, brick, Creole tile and racilla. In the second are concrete blocks, hydraulic slabs (mosaics, tiles) In 2004 and 2005 this inventory represented 2.1% and 10.9% of the total inventory respectively for both periods. In 2005 the production gross decreased by $ 251.8 MP ($ 4644.8 MP - $ 4393.0 MP), the average inventory of production in progress increased by $ 84.15 MP ($ 120.2 MP - $ 36.05 MP). The main production in process in the year 2005 rotates 36.5 times every 9 days and in the 2004 rotated 128.8 times every 2 days.
Table # 9 Finished Production.
| CONCEPT | Um | REAL
2005 |
REAL
2004 |
|
| Mercantile Production | one | MP | 4236.2 | 4633.2 |
| Inventory Inventory Produc. Term. | two | MP | 1028.75 | 1228.7 |
| Production Rotation Term. (½) | 3 | Times | 4.1 | 3.7 |
| Days of the Period | 4 | Days | 360 | 360 |
| Production Cycle. Term. (4/3) | 5 | Days | 87 | 97 |
Source: Author's elaboration
The Finished Production inventory is the inventories that are ready to sell, within them we have aggregates (sand and stone) productions, ceramic and concrete productions.
In 2004 and 2005 this inventory represented 59.1% and 48.3% respectively of total inventory. Mercantile production decreased by 397.0 MP in 2005 in relation to the previous year, due to the fact that the planned production plan was not complied with, even when the consumption of inputs was higher than planned, negatively affecting the quality of the products, so it was necessary to sell them at cost price. As can be seen, the finished production cycle is 5.1 times every 70 days for 2005 and in 2004 4.5 times, that is, every 80 days. Taking into account the criteria of the entity's specialists, this cycle should not exceed 30 days, however, as explained above, it is 70 days, so it is evident that there is an accumulation of this inventory.
In the 80s the company acquired a Kaolin mine, where Kaolin and Clay are extracted, they were commercialized without benefiting both in foreign currency or in national currency with the Holguín White Ceramic Factory, at the moment the Mine is not in operation, because on the Isle of Youth a beneficiary plant was set up that markets the mineral and supplies it with higher quality. The foregoing means that there is Finished Production for $ 401.51 referring to the Mineral that does not have a market, in this case the entity is carrying out an adjustment process in order to deregister this inventory.
There are large amounts of aggregates in inventories mainly of 11/2 stones, this is because the company has little technology when grinding these stones, so when grinding three types of stones are compulsorily obtained, but 1 1/2 stones they have little demand in the market and removing them causes a double expense to be incurred, resulting in a large number of them without being able to market them.
1.3.3 Analysis of the Cash Cycle and Proposal of an Ideal Cash Cycle.
Table # 10 Analysis of the Cash Cycle and Proposal of an Ideal Cash Cycle.
| CONCEPT | Um | REAL
2005 |
REAL
2004 |
|
| Collection Cycle | one | Days | 32 | 40 |
| Inventory Cycle | two | Days | 155 | 172 |
| Operating Cycle (1 + 2) | 3 | Days | 187 | 212 |
| Payment Cycle | 4 | Days | 19 | 13 |
| Cash Cycle (3-4) | 5 | Days | 166 | 199 |
| Days of the Period | 6 | Days | 360 | 360 |
| Cash Cycle Rotation (6/5) | 7 | Times | 2.1 | 1.8 |
Source: Author's elaboration
It is observed that there is a decrease of 25 days in the cycle of operations in 2005 with respect to 2004. In 2005 the cycle of operations was 155 days and in 2004 172 days, the same is given by a decrease of 17 days in the rotation of raw material inventories, finished and in-process production, and an 8-day decrease in the collection cycle. In 2004 the entity paid its accounts on average every 13 days and the cash cycle was 199 days, that is, there were 199 days between the cash disbursement and the income from the collection of accounts receivable, in 2005 the accounts were paid every 19 days, that is to say 6 days more than the previous year and the cash cycle was 166 days, that is to say 33 days less than in 2004.Taking into account the criteria of various specialists for their experience and knowledge in the activity, the Cash Cycle should behave as follows: The Operations Cycle should be 76 days taking into account that the Raw Materials Inventory Cycle it would be 20 days, the Production in Process 10 days, the Finished Production 20 days and the Collection Cycle of 26 days. If the Payments are extended up to 28 days, then a Cash Cycle of 48 days is obtained, which differs from the current one in 186 days. According to the above, the company must take measures to achieve greater efficiency in its operational financial management that allows it to reach the levels proposed for each of the cycles.The Operations Cycle should be 76 days taking into account that the Raw Materials Inventory Cycle would be 20 days, the Production in Process 10 days, the Finished Production 20 days and the Collection Cycle 26 days. If the Payments are extended up to 28 days, then a Cash Cycle of 48 days is obtained, which differs from the current one in 186 days. According to the above, the company must take measures to achieve greater efficiency in its operational financial management that allows it to reach the levels proposed for each of the cycles.The Operations Cycle should be 76 days taking into account that the Raw Materials Inventory Cycle would be 20 days, the Production in Process 10 days, the Finished Production 20 days and the Collection Cycle 26 days. If the Payments are extended up to 28 days, then a Cash Cycle of 48 days is obtained, which differs from the current one in 186 days. According to the above, the company must take measures to achieve greater efficiency in its operational financial management that allows it to reach the levels proposed for each of the cycles.then a 48-day Cash Cycle is obtained, which differs from the current one by 186 days. According to the above, the company must take measures to achieve greater efficiency in its operational financial management that allows it to reach the levels proposed for each of the cycles.then a 48-day Cash Cycle is obtained, which differs from the current one by 186 days. According to the above, the company must take measures to achieve greater efficiency in its operational financial management that allows it to reach the levels proposed for each of the cycles.
Conclusions
- The entity's fundamental source of financing is capital, which is why they do not take advantage of free commercial credit to its full potential. The company does not maintain efficient inventory management. In the planning process, factors that influence are not taken into account. in the objectivity of the plans.
Bibliography
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