WORKING CAPITAL MANAGEMENT AND PROFITABILITY OF MANUFACTURING FIRMS

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WORKING CAPITAL MANAGEMENT AND PROFITABILITY OF MANUFACTURING FIRMS

ABSTRACT

Working capital, as the name implied comprises capital that are not used for long-term investment. Thus, the instrument used for collecting the data are questionnaire and official document of the coca cola plc, the researcher used mean statistic, method to analyze the data and extract the findings. However, emphasis should be directed towards systematic introduction of appropriate technology for control and management information system purpose. Indeed a financial data is relevant in banking industries. The introduction of the method in the banks to take care of the determination of cash balances for different periods in as much as experience is a good teacher, a scientific forecasting method should be introduced. The study would be of benefits to students, banking and institution i.e. it would enable students carryout research and persuade learning on issues that has to do with working capital management. The majority of the documents shows how working capital management had made it possible on the operational exercise and providing services of the banks in Nigeria.

TABLE OF CONTENTS

Title Page i

Declaration ii

Approval page iii

Dedication iv

Acknowledgement v

Abstract vi

Table of contents vii

CHAPTER ONE

1.0 Introduction 1

Background of the Study 1
1. Statement of the Problem 3
1. Objectives of the Study 4
1. Significance of the Study 5
1. Research Questions 6
1. Scope of the Study 7
1. Limitation of the Study 7

CHAPTER TWO – Literature Review

2.0 Introduction 11

Concept of Working Capital Management 11
- Characteristics of Working Capital Management 15
- Working Capital Component in Banking Sector
- The Meaning and Importance of Cash Management

in the Bank

Approaches to Working Capital Management 18
- Determinant of Working Capital 21
- Financial Working Capital 22
- Management for Cash and Marketable Securities 23
- Summary of the Review

CHAPTER THREE

Research Methodology

Introduction 26
- Research Design 26
- Area of Study 27
- Population of Study 27
- Sampling Size and Sampling Techniques 28
- Instrument of Data Collection 28
- Validation of Instrument 28
- Reliability of Instrument 29
- Method of Data Collection 30
- Method of Data Analysis 31

CHAPTER FOUR – Data Presentation and Analysis

Introduction 33

4.1 Characteristics of Respondents 34

4.2 Presentation of Data and Analysis 36

4.3 Summary of Findings

4.4 Discussion of Findings

CHAPTER FIVE

Summary, Conclusion and Recommendation

Introduction 49

5.1 Summary 49

Conclusion 50

5.3 Recommendations 51

Reference 54

Appendix I 55

CHAPTER ONE

INTRODUCTION

Background of the study

Working Capital is the investment at the firm in short-term or current assets, which include cash, account receivable, marketable securities, short-term note receivables, inventories and some expense prepayments. A portion of the investment in current assets is financed by current liabilities such as short-term note payable to banks. Income tax liabilities advances by customers and account payable. Therefore, networking is that portion of current assets financed by long term debt and equity sources.

The liquidity position of many firms is of fundamental importance. Hence, the importance of working capital management and its operations thus become relevant in the growth and success of any organization management policies and decisions are made due consideration of its working capital position. Organization faces a lot of shortcomings in it operation, if working capital is not given full consideration.

Inadequate working capital hinders the success of any organization. This is because it affects the daily operational activities, which directly affect the efficiency rate.

Inadequate cash for marketable securities brought about deficiency in investment and revenue generation for the organization. Inventories are often being short in supply if there is insufficient cash for the daily operation of the organization which will affect the productivity.

If there is inadequate working equipment in the organization, it discourage employee from being performing their official assignment.

The concept of working capital as a tool in financial analysis has long been recognized for instance, the American Institute of Certified Public Accountant (AICPA) in 1936 officially recognized the importance of working capital to the creditor. As a rule, a creditor is more particularly interested in the liquidity of enterprises the nature and adequacy of its working capital, hence the details of this current asset and current liabilities.

Lastly by definitions, in reality and fact working capital is not statistic of fixed figure, it changes continuously as its constitutes are turned over and over again. Often several times within a particular financial year. The crucial importance of working capital has fact, that it is used to finance production inventories and also provide credit to customers. Therefore, the availabilities of sufficient working capital is very vital to successful running of any business.

A firm usually evaluates its working capital management whether small or medium. The sole motive of every business is to make profit.

Many organization can be seen to have been forced out of business simply because of inadequate or excessive management of working capital.

This could be as a result of overtrading, under trading, lack of a careful appraisal of the procedure of organization of business and probably due to future to review the effectiveness or other wise of existing system of control.

statement of the problem

It appears that some company (s) have the problem of managing their working capital. This has resulted to the poor capital. This has resulted to the poor working capital in many organization. Hence, it is because of this phenomenon that this study tries to examine the evaluation of working capital for the successful management of Nigeria bottling company plc

Objectives of the study

The objective of the study are as follows:

To examine the problems of working capital management of the orgnaizatiopn.
To examine how working capital would be managed.
To ascertain it working capital management capable of solving the problem of the organization.
To highlight how the problem could be evaluated and managed within a well structured framework.

Significance of the study

Managers, working capital administrators, government and students would benefit as it provides and impetus for future study on effective working capital management

For greater productivity in organization the researcher also highlight the attendant consequences of poor capital management on productivity and the way forward ion achieving optimum result.

Research question
What is the problem of working capital for the successful management of an organization.
How working capital would be managed.
Does effective working capital solve the problem of a company.
How the problem of working capital would be solved.
What is the prospect of working capital of enterprises in Nigeria.

Scope of the study

The researcher study will primarily focus on the problems of working capital management of Nigeria bottling company plc. The researcher is constrained by certain factors which prevent the exhaustive discussion of the research topic, such factors includes;

Inability to lay hands on proper document because such or some of the documents were tagged confidential that is, going through them might be an intuition in their privacy.
Unavailability of funds hinders the ability to go deep into the research work.
Inability to have physical interaction with the manager of the company.
Most impartiality, most publication may not present the actual state of affair thereby, giving misleading information to any researcher that come across such publication.

Limitation of the study

There are some basic problems and hardship that were encountered in the process of collecting the data. Lack of disclosure of some vital information to the researcher hampered the study in no small measure. Strict adherence was served on some of the study and all information supplied in the conduct of the study were kept confidential.

Time factors, semester work load and financial constraints also proof great problem to the researcher.

Definition of terms

This segment will be use to define various terminologies used in this research.

Working capital: Is a financial metric which recusants the amount of days by day operating liquidity available to the business.

Evaluation: Is the systematic acquisition and assessment of inflammation to provide useful feedback about some object.

Working capital Management: Involves the relationship between firms short term assets and its short term liabilities.

Management: Management can be defined as the coordination of all the resources of the organization through the process of planning, organizing, directing and controlling towards achieving the organizational goals and objective.

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