DETERMINING THE OPTIMAL WORKING CAPITAL MANAGEMENT (CASE STUDY: PT ULTRAJAYA MILK INDUSTRY & TRADING COMPANY TBK)

Abstract

PT Ultrajaya Milk Industry & Trading Company Tbk (ULTJ) is one of the leading producers of food and beverage products in Indonesia. The Company introduced the technology of Ultra High Temperature (UHT) processing combined with aseptic packaging in carton packs. The business issue in this research is working capital management in ULTJ is not optimal. ULTJ has the problem that their Cash Conversion Cycle (CCC) is getting longer from year after year. This situation makes the company needs to manage their working capital. The research framework of this research is to optimize CCC of ULTJ. The results in this study from sensitivity analysis show that inventory is the most sensitive variable compared to account receivable and account payable. From the calculation, the optimal inventory affects the Average Age of Inventory (AAI). The AAI is smaller than the current AAI value in the company. The analysis results also show that the decrease in the AAI causes the reduction of CCC value. Therefore, based on the analysis the author recommends ULTJ should consider to modifying inventory management in running its business in order to create good working capital management.