Analysis of Effectiveness Working Capital Footwear Industry in Small Businesses

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Analysis of Effectiveness Working Capital Footwear Industry in Small Businesses

(Case Study on MSMEs Alfian Jaya in Sidoarjo, East Java, Indonesia)

Nadilla Octavia, Reswanda T. Ade

Universitas Narotama, Departement of Economics and Business [email protected], [email protected]

Abstract

Effective working capital management and cash turnover are important components for any business, because they function to finance operational activities that can be used to increase company value. The purpose of this research is to analyze working capital management and cash turnover in the short term on the size of the MSME business in order to sustain their business. The research method used is descriptive qualitative and data analysis based on financial statement data for the period 2017, 2018, and 2019 as supporting data. Data collection techniques by observation, interviews, documentation, and triangulation. The results showed that the working capital turnover of UD. Alfian Jaya in 2017 was 3.50 times, in 2018 it was 3.60 times, and in 2019 it was 2.93 times if <6 times it was not effective based on the standard of Kasmir, (2018). These results showed that it was not effective because it was waste occurs, so the business owner can adjust the production capacity according to the order and the collection of receivables so that they are collectible, the business owner can take persuasive approaches to customers by providing relief in installments for bad credit. The Cash Conversion Cycle in 2017 was 7,3 days, 2018 was 12,67 days, and 2019 was 4,88 days because converting inventory to be produced and converting receivables into cash, the turnover was slow, so business owners must as well as provide discounts for cash payments and speed up the production process so that they can be immediately cashed.

Keywords:

Cash Convertion Cycle, UKM, Working Capital

1. Introduction

Seeing that the small business sector that had previously developed has now experienced a decline due to the Covid-19 virus disaster in Indonesia and even throughout the world, so that the turnover in the economic sector has decreased, especially in small businesses, there has been a decrease in buying and selling activities, raw materials are difficult to find , and hinder distribution. Sufficient working capital in the company can carry out activities properly so that the company is spared from the financial crisis. If the company decides to set a large amount of working capital, it is likely that the level of liquidity will be maintained but the opportunity to make a profit will decrease in the end, having an impact on profitability. Conversely, if the company wants to maximize profitability, it is likely to have an impact on liquidity Marantika, (2012). In planning the allocation of capital, financial management is required to be able to perform efficiency, this can be realized by making a decision in the policy to determine the capital required Rizal Faturrohman Sukoco MGWiEndang Zahroh ZA, (2015). Considering that working capital and cash cycle turnover are essential for effective working capital turnover, it is hoped that every business actor can determine the proper management of capital.

Working capital management is an activity related to the management of the company's current account, namely current assets and current liabilities Syamsuddin, (2011). Proper working capital management based on the effective use of current assets and current liabilities can generate targeted profits. In measuring the effectiveness of working capital based on how working capital (cash, accounts receivable, and inventory) works best for the production process so as to increase sales revenue. Working capital turnover related to sales with working capital provides an indication of the turnover of working capital per year Gibson, (2009). Working capital management is very important to be used by large companies to analyze working capital. In this case, Small Business UD. Alfian Jaya also urgently needs to apply working capital effectiveness analysis methods with working capital turnover analysis, net working capital (NWC) and cycle conversion cash (CCC) to help optimize the extent to which MSMEs can use the composition of working capital optimally.

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UMKM UD. Alfian Jaya needs working capital management that is effective in the use of working capital due to limited internal and external working capital so that business actors find it difficult to carry out working capital management. The purpose of analyzing the effectiveness of working capital using the analysis of working capital rotation, net working capital (NWC) and cycle conversion cash (CCC) for UMKM UD.

Alfian Jaya is in order to know whether the working capital used is optimal or not, considering that UD. Alfian Jaya is oriented towards developing his business at the national to international level which has its own local brand. Therefore, working capital management that meets the planned targets and standards will have strong implications for the development of its business in the future.

Based on the background of the problems described above, the problems that will be examined in this study can be determined, namely:

How is the turnover of working capital in small businesses UD. Alfian Jaya in Sidoarjo?

1.

How is the cash turnover of small businesses UD. Alfian Jaya in Sidoarjo?

2.

2. Literature Review

2.1. Capital

Every business that is run requires capital to finance day-to-day operations in running its business.

Capital is also important to be managed properly so that it can be used as a long-term investment and used in running a business. Capital is the excess value of assets owned by a company against all its debts (Munawir, 2007)

2.2. Working Capital

All organizations, especially businesses, must consider working capital management because it is very important for their operations and business success. Working capital is the cash needed to pay for day-to-day business operations. It is the difference between current assets and current liabilities of a business (Paul M.

Muchinsky, 2012).

Working capital is an analysis that is interconnected between current assets and current liabilities (Weston, 1997).

Working capital really must be considered by companies in the sense that working capital must be sufficient, must be able to finance expenses or daily operational activities, because with sufficient working capital it will be profitable for the company (Jumingan, 2011).

Every company in a state of operating within a company must make a working capital turnover as long as the company is in a business situation. Working Capital Turnover is the ability of working capital to rotate within a period of the company's cash cycle (Riyanto, 2011).

2.3. Cash Conversion Cycle

In general, working capital management uses a cash conversion cycle where it is used to analyze the effectiveness of a company's working capital management. The length of time between company payments for raw materials and receivables from customers is known as the company's cash conversion cycle (Brealey, RichardA., StewartC.Myers, 2001, p169). The cash conversion cycle is the length of time between spending cash for production (materials and workers) and receiving cash from the sale of products, in other words the length of time it takes to manage payments for employee wages and the purchase of materials by billing accounts receivable (Brigham F. Eugene, 2001).

The formula for finding Cash Conversion Cycle is as follows:

2.4. Effectiveness of Working Capital

The effectiveness of working capital is how the company's ability to manage its working capital properly and precisely so that the goals to be set can be achieved through the available working capital. The working capital of a company can be considered effective through working capital turnover, when the turnover of working capital is low, indicating that excess working capital may be caused by low inventory turnover and accounts receivable turnover, as well as the large cash balance in the company (Munawir, 2007).

The effectiveness of working capital is the level of success of a company in working capital that is in accordance with the standards set, giving rise to advantages or disadvantages and can provide a satisfactory ratio (Riyanto, 1991).

CCC = DSO + DSI - DPO

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2.4. MSMEs

MSMEs have a very important role in creating individuals who are able to be independent and competitive in developing local products and MSMEs can also help the economy in Indonesia (www.ojk.go.id, 2008). MSMEs have an important role to play in national development and labor development in Indonesia.

2.5. Research Flow Framework

Figure 1. Research Flow Framework

3. Methods

3.1. Research Approach

The research approach used in this research is qualitative research using descriptive research. Qualitative research is research that is used to analyze or describe a phenomenon, event, social activity, attitudes, beliefs, perceptions, and people individually or in group (Sukmadinata, 2009).

Determining Research Subjects

Literary studies, Theoretical basis,

Source Triangulation Activity Data

Working Capital Turnover

Current asset Current liabilities

Optimum Working Capital Analysis

1. Turnover of Working Capital Components Cash

Accounts Receivable Supply

Current liabilities

2. Net Working Capital (NWC) 3. Cash Conversion Cycle (CCC)

Description and Conclusions of the Research Results on the Effectiveness of MSME Working Capital

UD. ALFIAN JAYA

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3.2. Data Types

The type of data is quantitative data in the form of numbers or quantifiable numbers. Based on the type of data collected in this study, it is quantitative data. Quantitative data is data obtained in the form of numbers consisting of:

Financial Report of UD. Alfian Jaya in 2017, 2018 and 2019 Sales Report UD. Alfian Jaya in 2017, 2018 and 2019

Report of Raw Material Cost of UD. Alfian Jaya in 2017, 2018 and 2019 3.3. Data Source

Sources of data used in this study are primary data and secondary data. The primary data used by this study is by interacting directly with MSMEs by means of researchers conducting observations, interviews, and documentation studies with owners regarding the description of the composition of working capital currently used. Secondary data used by this study is in the form of financial statements from the owner of UD. Alfian Jaya in the form of balance sheet financial statements, profit and loss reports, sales reports, and reports of raw material costs for the periods of 2017, 2018 and 2019 respectively.

3.4. Data Collection Technique

Data collection techniques used in this study are interviews, observation, documentation and triangulation.

3.5. Data Analysis Technique

1) Data collection, that is by collecting data from objects examined by observation, interviews, documentation, and triangulation.

2) Determine current assets for the period 2017, 2018 and 2019 at UMKM UD. Alfian Jaya 3) Determine current debt for the period 2017, 2018, and 2019 owned by UMKM UD. Alfian Jaya 4) Calculate weight debt UD. Alfian Jaya, Formula :

Weight Debt (wD) (%) = Total Debt (1) Total Debt + Equity

5) Calculate weight equity UD. Alfian Jaya, Formula :

Weight Equity (wE) (%) = Total Capital (4 (2)

Total Equity + Debt

6) Calculate component working capital turnover UD. Alfian Jaya, Formula :

Working Capital Turnover = Sales (3)

Current Assets – Current Liabilities

Average Accounts Receivable = Initial Accounts Receivable + Final Accounts Receivable (4) 2

Receivable Turnover = Net Account Receivable (5)

Average Accounts Receivable

Average Inventory = Initial Inventory – Final Inventory (6) 2

Inventory Turnover = Cost of Goods Sold (7)

Average Inventory

Payable Turnover = Cost of Goods Sold (8)

Payable

Total Assets Turnover = Net Sales

Total Assets (9)

7) Calculate net working capital UD. Alfian Jaya, Formula :

Net Working Capital = Total Current Assets – Total Current Liabilities (10)

8) Calculate cash conversion cycle UD. Alfian Jaya, Formula :

Cash Conversion Cycle = DIO + DSO – DPO (11)

DIO : Inventory

Cost of Goods Sold DSO : Account Receivable Sales

DPO : Account Payable Cost of Goods Sold

9) Describe and conclude the results of the study.

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X 360 X 360 X 360

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4. Result And Discussion

To find out the composition of the optimal working capital at UD. Alfian Jaya, what needs to be done is to collect data that contains MSMEs financial statement data consisting of income statement and preparation in a period of 3 year. From the data obtained will be used to analyze efectiveness working capital by UD. Alfian Jaya.

Table 1. Income Statement UD. Alfian Jaya period 31 December 2017 UD. ALFIAN JAYA

INCOME STATEMENT As of 1 January - 31 December 2017

Sales Rp. 2,136,000,000

Cost of Goods Sold Rp. (640,800,000)

GROSS PROFIT Rp. 1,495,200,000

Operating Costs

Employee Salary Costs Rp. 316,200,000

Electricity Costs Rp. 55,200,000

Raw Material Costs

Rp. 451,500,000

Maintenance Costs Rp. 12,000,000

Total Operating costs Rp. (834,900,000) Earning Before Interest and Tax (EBIT) Rp. 660,300,000

Interest Expense Rp. (8,532,000) Earning Before Tax (EBT) Rp. 651,768,000

0.5% UMKM Tax Rp. (3,258,840)

NET INCOME / EAT Rp. 648,509,160

Source : Financial Report UD. Alfian Jaya, data is processed by authors.

From table 1 above, it can be seen that the total sales per year is Rp. 2.136.000.000. For operational costs of Rp.834.900.000. After knowing the total sales and operating costs, then calculating EBIT (earnings before interest and taxes) that is by way of gross profit minus the total operating costs. From the reduction, EBIT was obtained at Rp.660,300,000.- and reduced by interest costs will be obtained EBT results of Rp.651,768,000. The tax that must be paid by MSMEs in accordance with PMK Number 99 is equal to 0.5% and a net profit of Rp.648,509,160 can be obtained.

Sales Rp. 1,824,000,000

Operating Costs

Raw Material Costs

Rp. 352,700,000

Total Operating costs Rp. (688,100,000) Earning Before Interest and Tax (EBIT) Rp. 588,700,000

0.5% UMKM Tax Rp. (2,894,055)

From table 2 above, it can be seen that the total sales per year is Rp. 1.824.000.000. For operational costs of Rp.688.100.000. After knowing the total sales and operating costs, then calculating EBIT (earnings before

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interest and taxes) that is by way of gross profit minus the total operating costs. From the reduction, EBIT was obtained at Rp.588,700,000.- and reduced by interest costs will be obtained EBT results of Rp.578,811,000. The tax that must be paid by MSMEs in accordance with PMK Number 99 is equal to 0.5% and a net profit of Rp.575,916,945 can be obtained.

Sales Rp. 2,400,000,000

Operating Costs

Raw Material Costs

Rp. 640,300,000

Total Operating costs Rp. (1,090,300,000) Earning Before Interest and Tax (EBIT) Rp. 589,700,000

0.5% UMKM Tax Rp. (2,896,580)

From table 3 above, it can be seen that the total sales per year is Rp. 2.400.000.000. For operational costs of Rp.1.090.300.000. After knowing the total sales and operating costs, then calculating EBIT (earnings before interest and taxes) that is by way of gross profit minus the total operating costs. From the reduction, EBIT was obtained at Rp.589,700,000.- and reduced by interest costs will be obtained EBT results of Rp.579,316,000. The tax that must be paid by MSMEs in accordance with PMK Number 99 is equal to 0.5% and a net profit of Rp.576,419,420 can be obtained.

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Table 4. Balance Sheet Report UD. Alfian Jaya period 31 December 2017 Balance Sheet Report UD. ALFIAN JAYA

As of December 31, 2017

ASSETS / ASSETS

Cash Rp. 30,670,000

Bank Rp. 55,750,000

Raw Materials Rp. 451,500,000

Inventory Rp. 87,590,000

Accounts Receivable Rp. 85,000,000

Current Assets Rp. 710,510,000

Building Rp. 215,500,000

Vehicles Rp. 75,000,000

Equipment Rp. 243,500,000

Fixed Assets Rp. 534,000,000

TOTAL ASSETS Rp. 1,244,510,000

PASIVA / LIABILITY

Short term Debt -

Long Term Debt Rp. 100,085,000

Current Pasiva Rp. 100,085,000

Capital / Equity

Paid up capital Rp. 600,000,000

Retained Earnings Rp. 270,125,000

Current Profit Rp. 274,300,000

Fixed Pasiva Rp. 1,144,425,000

TOTAL PASIVA Rp. 1,244,510,000

Source: Financial Report UD. Alfian Jaya, data is processed by authors

From the table above, it can be seen the total assets of Rp.1.244.510.000. - taken from the sum of current assets with fixed assets. Total Pasiva obtained from total debt plus total capital which is equal to Rp.1.244.510.000. From these results, it can be said that the total assets and total pasiva balance.

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ASSETS / ASSETS

Cash Rp. 24,600,000

Bank Rp. 48,750,000

PASIVA / LIABILITY

Short term Debt -

Capital / Equity

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ASSETS / ASSETS

Cash Rp. 34,500,000

Bank Rp. 65,000,000

PASIVA / LIABILITY

Short term Debt -

Capital / Equity

Before calculating and determining the efectiveness working capital, it must first calculate the parts, namely:

Current assets in 2017 were Rp. 710,510,000, -, in 2018 there was Rp. 610,250,000, -, and in 2019 there is 1.

Rp. 931,000,000, Because it is the sum of cash, bank, accounts receivable, raw materials, and inventories in the balance sheet is the total assets of UD MSMEs. Alfian Jaya which can be cashed if needed in the near future.

Current debt owned by UMKM UD. Alfian Jaya in 2017 there were Rp. 100,085,000, - in 2018 there was 2.

Rp. 103,800,000, - and in 2019 there are Rp. 112,350,000, -. Because it is the sum of the short-term and long-term debt accounts that are on the balance sheet, where repayment will be made in the short term or less than one year.

Weight Debt (wD) (%) = Total Debt 3.

Total Debt + Equity Year 2017

= Rp. 100.085.000,- Rp. 1.244.510.000,- = 0,08 or 8%

Year 2018

= Rp. 103.800.000,- Rp. 1.190.750.000,- = 0,09 or 9%

Year 2019

X 100%

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= Rp. 112.350.000,- Rp. 1.559.500.000,- = 0,07 or 7%

Capital structure in the composition of debt (wD) held in 2017 was 0.08 or 8%, 2018 amounted to 0.09 or 9%, and in 2019 amounted to 0.07 or 7%. Because it is the result of the percentage of total debt and total capital in the balance sheet then divided by the total debt contained in the balance report.

Weight Equity (wE) (%) = Total Capital 4.

Total Equity + Debt Year 2017

= Rp. 1.144.425.000,- Rp. 1.244.510.000,-

= 0,92 or 92%

Year 2018

= Rp. 1.086.950.000,- Rp. 1.190.750.000,-

= 0,91 or 91%

Year 2019

= Rp. 1.447.150.000,- Rp. 1.559.500.000,-

= 0,93 or 93%

Capital structure in the composition of capital (wE) owned in 2017 amounted to 0.92 or 92%, 2018 amounted to 0.91 or 91%, and in 2019 amounted to 0.93 or 93%. Because it is the result of the percentage of total capital and total debt in the balance sheet then divided by the total capital contained in the balance report.

Working Capital Turnover = Sales 5.

Current Assets – Current Liabilities Year 2017

= Rp. 2.136.000.000,-

Rp. 710.510.000 – Rp. 100.085.000

= Rp. 2.136.000.000 Rp. 610.425.000

= 3,50 kali Year 2018

= Rp. 1.824.000.000

Rp. 610.250.000 – Rp. 103.800.000

= Rp. 1.824.000.000 Rp. 506.450.000

= 3,60 kali Year 2019

= Rp. 2.400.000.000

Rp. 931.000.000 – Rp. 112.350.000 X 100%

X 100%

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= Rp. 2.400.000.000 Rp. 818.650.000

= 2,93 kali

Working capital turnover at UMKM UD. Alfian Jaya in 2017 for 3,50 times, in 2018 for 3,60 times, and in 2019 for 2,93 times. Every Rp. 1.00 fixed assets can contribute to sales. This result is said to be ineffective because it is less than 6 rounds (Kasmir, 2018). This is because current assets minus current payables on the balance sheet when divided by sales in the income statement cannot exceed 6 turns. From these results indicate that the management of working capital is not effective because UD. Alfian Jaya in utilizing its resources or assets is ineffective so that each component of the working capital calculation can give ineffective results.

Receivable Turnover 6.

Average - Average Receivables = Beginning Receivables + Final Receivables 2

2017 year

= Rp. 60,500,000 + Rp. 85,000,000 2

= Rp. 72,750,000 2018 year

= Rp. 85,000,000 + Rp. 87,350,000 2

= Rp. 86,175,000 2019 year

= Rp. 87,350,000 + Rp. 98,700,000 2

= Rp. 93,025,000

Accounts Receivable Turnover = Net Credit Sales 7.

Average - Average Accounts Receivable 2017 year

= Rp. 85,000,000 Rp. 72,750,000 = 1.17 times 2018 year = Rp. 87,350,000

Rp. 86,175,000 = 1.01 times 2019 year = Rp. 98,700,000

Rp. 93,025,000 = 1.06 times

So, it means that the accounts receivable turnover owned by UMKM UD. Alfian Jaya in 2017 was 1.17 times, in 2018 it was 1.01 times, and in 2019 it was 1.06 times a year from credit sales. It can be said to be effective if the turnover exceeds 15 times, because the higher the turnover of a business accounts, the better (Kasmir, 2018) .This is because the average accounts receivable is high so that when divided by net credit sales, it is very less than 15 times, in this case the collection of receivables is slow due to bad credit, so it can be done with a persuasive approach by paying in installments and giving a discount in price. payment in cash.

Inventory Turnover

8.

Average Inventory = Beginning Inventory + Ending Inventory 2

2017 year

= Rp. 90,350,000 + Rp. 87,590,000 2

= Rp. 88,970,000 2018 year

= Rp. 87,590,000 + Rp. 96,850,000 2

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= Rp. 92,220,000 2019 year

= Rp. 96,850,000 + Rp. 92,500,000 2

= Rp. 94,675,000

Inventory Turnover = Cost of Goods Sold 9.

Average Inventory 2017 year

= Rp. 640,800,000 Rp. 88,970,000 = 7.20 times 2018 year

= Rp. 547,200,000 Rp. 92,220,000 = 5.93 times

2019 year = Rp. 720,000,000

Rp. 94,675,000 = 7.60 times

So, it means that the inventory turnover owned by UMKM UD. Alfian Jaya in 2017 it was 7.20 times, in 2018 it was 5.93 times, and in 2019 it was 7.60 times. It can be said that it is effective if the turnover exceeds 20 times, because the higher the inventory turnover of a business, the better and more effective it is in managing existingin ventory (Kasmir, 2018). This is because the average inventory is high so that when divided by the cost of goods sold is less than 20 times, in this case the production process is not in accordance with the capacity of production needs, so the production needs must be adjusted to the orders received.

Accounts Payable Turnover = Cost of Income 10.

Account payable

2017 year = Rp. 640,800,000 Rp. 100,085,000 = 6.40 times 2018 year = Rp. 547,200,000

Rp. 103,800,000 = 5.27 times 2019 year = Rp. 720,000,000

Rp. 112,350,000 = 6.41 times

So, it means that in turnover the accounts payable owned by UMKM UD. Alfian Jaya in 2017 was 6.40 times, in 2018 it was 5.27 times, and in 2019 it was 6.41 times. This is because the cost of income in the income statement is higher than the accounts payable in the balance sheet, in this case UD. Alfian Jaya is able to pay his obligations.

Total Assets Turnover

11.

Asset Turnover = Net Sales Total assets

2017 year = Rp. 2,136,000,000

Rp. 1,244,510,000 = 1.72 times

2018 year = Rp. 1,824,000,000

Rp. 1,190,750,000 = 1.53 times

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2019 year = Rp. 2,400,000,000

Rp. 1,559,500,000 = 1.54 times

So, it means that the assets turnover (total asset turnover) owned by UMKM UD. Alfian Jaya in 2017 was 1.72 times, in 2018 it was 1.53 times, and in 2019 it was 1.54 times. It can be said to be effective if the rotation exceeds 5 times, because it is the level of effectiveness in turning the assets (Kasmir, 2018).This is because the total assets in the balance sheet show a high number so that after dividing by the net sales in the income statement it is less than 5 times so that in this case the turning of the assets is not effective.

Net Working Capital (NWC) = Total Current Assets - Total Current Liabilities 12.

2017 year

= Rp. 710,510,000 - Rp. 100,085,000 = Rp. 610,425,000

2018 year

= Rp. 610,250,000 - Rp. 103,800,000 = Rp. 506,450,000

2019 year

= Rp. 931,000,000 - Rp. 112,350,000 = Rp. 818,650,000

So, it means the net working capital owned by UD. Alfian Jaya in 2017 amounting to Rp. 610,425,000, in 2018 amounting to Rp. 506,450,000, and in 2019 amounting to Rp. 818,650,000 taken from the amount of current assets or the amount of current assets contained in the balance sheet minus the amount of current debt contained in the balance sheet. That UD. Alfian Jaya can cover current debts effectively.

Cash Conversion Cycle = Inventory Conversion Period + PeriodAccounts Receivable Collection - Deferred 13.

Period Debt

2017 year

= 49.21 days + 14.32 days - 56.23 days = 7.3 days

2018 year

= 63.72 days + 17.24 days - 68.29 days = 12.67 days

2019 year

= 46.25 days + 14.80 days - 56.17 days

= 4.88 days

So, it means that the cash conversion cycle owned by UD. Alfian Jaya in 2017 amounted to 7.3 days, in 2018 amounted to 12.67 days, and in 2019 amounted to 4.88 days because it was the result of the inventory conversion period plus the accounts receivable conversion period then reduced by the debt deferral period. UD cash conversion cycle. Alfian Jaya can be shortened by speeding up the production process and shortening inventories, shortening the conversion of accounts receivable by speeding up the debt collection process, and extending the debt deferral period to slow down payments without increasing costs or reducing sales (Brealey, Richard A.,Stewart C. Myers, 2001). From the calculation of the cash conversion cycle owned by UD. Alfian Jaya so that cash circulation can be more effective, UD. Alfian Jaya must pay attention to the collection of accounts receivable and the management of his business inventories so that they can be immediately cashed.

Inventory Conversion Period = Inventory

Cost of goods sold

2017 year

= Rp. 87,590,000

Rp. 640,800,000 = 49.21 days 2018 year = Rp. 96,850,000

Rp. 547,200,000 = 63.72 days 2019 year

= Rp. 92,500,000 Rp. 720,000,000 = 46.25 days

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So, it means that in the conversion period the inventory owned by UD. Alfian Jaya in 2017 it was 49.21 days, in 2018 it was 63.72 days, and in 2019 it was 46.25 days of UD. Alfian Jaya converts raw materials into finished goods for sale, the faster the production process for ready-to-sell, the more effective it is in shortening the inventory (Brealey, Richard A.,Stewart C. Myers, 2001) .

Accounts Receivable Collection Period = Receivables

Sales

2017 year = Rp. 85,000,000 Rp. 2,136,000,000 = 14.32 days 2018 year

= Rp. 87,350,000 Rp. 1,824,000,000 = 17.24 days 2019 year = Rp. 98,700,000

Rp. 2,400,000,000 = 14.80 days

So, it means that in the receivables collection period owned by UD. Alfian Jaya in 2017 for 14.32 days, in 2018 for 17.24 days, and in 2019 for 14.80 days for UD. Alfian Jaya invoices to become cash, the faster the process of collecting accounts receivable, the more effective it is in converting it into cash (Brealey, Richard A.,Stewart C. Myers, 2001)

Debt Deferral Period = Payable

Cost of goods sold 2017 year

= Rp. 100,085,000 RP. 640,800,000 = 56.23 days 2018 year

= Rp. 103,800,000 Rp. 547,200,000 = 68.29 days 2019 year

= Rp. 112,350,000 Rp. 720,000,000 = 56.17 days

So, it means that in the period of suspension of debt owned by UD. Alfian Jaya in 2017 for 56.23 days, in 2018 for 68.29 days, and in 2019 for 56.17 days for UD. Alfian Jaya extends debt payments for other payments, the longer it slows down payments, the more effective it is in using other payments (Brealey, Richard A.,Stewart C. Myers, 2001)

5. Conclusion

Based on the results of the research and discussion presented in the previous chapters, the following conclusionscanbedrawn:

1. Turnover of working capital used by UD. Alfian Jaya in 2017, 2018, and 2019 from the results showed that there was an ineffective management of working capital for accounts receivable, inventory and asset turnover, this was because the turnover was less than that stated by (Kasmir, 2018). Because in inventory there was waste, the capacity to produce adjusted to the order and the occurrence of uncollectible accounts resulting in bad credit, it can be done with a persuasive approach to provide relief in installments. But UD. Alfian Jaya is able to perform debt deferral. In retrospect, the composition of the capital structure owned by UD. Alfian Jaya in 2017, 2018 and 2019 the percentage composition of the capital structure was very effective because the composition of capital was greater than debt.

2. Judging from the calculation of the cash conversion cycle, cash turnover owned by UD. Alfian Jaya in the results showed that in 2017 it was 7.3 days, 2018 was 12.67 days, and 2019 was 4.88 days. Since the inventory conversion period and accounts receivable collection in 2017 were 49.21 days and 14.32 days, the inventory conversion period and accounts receivable collection in 2018 were 63.72 days and

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17.24 days, the inventory conversion period and accounts receivable collection in 2019 46.25 days and 14.80 days, so that when it is reduced by the deferred period of debt repayment in 2017 of 56.23 days, 2018 of 68.29 days, and in 2019 of 56.17 days, this is good in UD . Alfian Jaya carried out a long debt deferral due to other operational uses to support the business to get profitable results.

References

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