ABSTRACT
This study was
carried out to find the ectolency of banking activities with the problems of
working capital management in private sector. The aim of this research work is
to find out the relationship between the working capital and management and
banking activities and the contribution of working capital to word banking
activities in economy.
The location and limitation of the study was able to
come up with the faces banking location improves trendously with the
management. It is of great import once to both the ministries and the research.
Since it helps to find out whether the economy that
is the working capital can go far with the help of computers. Like wise if
helped to broache, the mind of the researcher on the problems that management
specialist in banking can face in the course of working activities.
The literature review was compiled from the existing
test books on computer and lecture notes, all from the school library and
journal and newspapers.
CERTIFICATION
This is to
certify that Miss Anekeoku Uzoamaka L. carried this research work in the
department of banking and finance ND II in the Institute
of Management and Technology (I.M.T) Enugu.
TABLE OF CONTENTS
Title page
Approval
page
Dedication
Acknowledgement
Abstract
Table of content
CHAPTER ONE
Introduction
Background
of the study
Statement
of the problem
Objective
of the study
Significant
of the study
Limitation
of the study
CHAPTER TWO
Review of the related literature
CHAPTER THREE
Research design and methodology
CHAPTER FOUR
Findings
CHAPTER FIVE
Recommendation
and conclusion
References
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
The sole objectives of any business in the private
sector are to make profit but the uncertainty inherent in today’s economic
environment threatens the survival of every business and makes sound liquidity
and cash management. The local point for financial management rather than
achievement of maximum profit, for sometime past the convention revenue
accounts and balance sheet have been considered sufficient for the effective
control of a business. The deeper study and increased analytical approach to
business finance has red to an ever growing realization of the importance of
working capital and its influence on the success or other wise of business
operation.
Working capital management is concerned with the
management of the various elements of working capital, which includes stocks,
debtors, cash and creditors other components of working capital include short
term securities, bills payable, prepayments and other current assets. However,
working capital management has been variously defined but in a nutshell. It
refers directly to planning organizing, financing and controlling of resource
available to the business in order to achieve set of objectives or a definite
goal.
L.R Howard put it this way; working capital may be
regarded as the lifeblood of a business.
Its effective
provision can do much to ensure the success of a business, while its
inefficient management can lead not only to the loss of profit but also to the
ultimate down fall of what other wise might be considered as a promissory
concern.
It is certain that if skilled working capital
management is not available in amount of finance provided will transform a
financially weak company with mediocre performance into a strong and dynamic
organization enjoying a scintillating regulation.
This research work is a crucial one in the sense
that current asset by their very nature are changing daily if not hourly and
management decision must be made.
1.1 STATEMENT
OF THE PROBLEM
The management of inter-relationship existing
between current assets and liabilities has been the primary problem of working
capital management. Effective working capital management involves sourcing of
fund for the management daily operations of the companies. Every company needs
to maintain a satisfactory level of working capital or it would go into
bankruptcy and finally wound up. However, profitability, liquidity and other
related risks have been a major problem facing companies in private sector.
This is an important characteristic of working
capital management. Maintaining a large size of positive side of the economy,
but profitability would be adversely affected, as fund remains ideal.
Conversely, if company’s holding asset are
relatively small, the overall profitability will not doubt increase, but this
will have an adverse effect on the company’s overall performance, including its
liquidity position and thus, making the company more risky.
Working capital management should therefore aim at
striking a balance between the liquidity and profitability positions of the
company by ensuring that right combinations of current assets and liabilities
are held at cash point in time for a better company performance.
1.2 OBJECTIVE OF THE
STUDY
As mentioned earlier, effective working capital
management plays effective role on the financial decision making of any
company, which is however the basis for success in any viable company. As
earlier observed, the objective of financial decision making, is to maximize
shareholders wealth.
This wealth or profit usually depends on the rate of turnover.
Primarily, the objective of this study is to examine
how (EBY CO NIG. LTD)
(i) Identify
and discuss the basic determination of working capital because the individual
need of companies as influenced by many factors and fluctuate over time.
(ii) Identify
and highlight areas of short-term investment of the company, with a view to
making recommendation on how funds could be better utilized to generate higher
earrings and to offer suggestions for improving insufficient cash balances to
meet current obligations.
(iii) Discuss
the place of receivables in the liquidity of a company with a view to providing
solutions through lightening or reduction of solutions collection policies
where receivable appears excessive.
(iv) Highlight
the importance of net working capital as measure of liquidity as this serves as
important consideration for any contemplating granting of credit to the
company.
1.3 SIGNIFICANCE OF THE
STUDY
Virtually, continuous growth and development of every
business or company depends on its source and roper application of fund
generated, which act as its measure of profitability. This topic is therefore
significance as it provides a panacea to the profitability problem of companies
through product cash management.
Inadequacy of cash receivable, which is vital form
of working capital, impairs the growth of any business. However, the present
degree of uncertainty prevailing in the economy makes it important to maintain
better cash or it’s equivalent for contingency expenditure. This is the crux of
the need for effective working capital management.
Nevertheless, determination of the current ratio of
companies has been a determinant of credit grant to companies. The working
capital ration is particularly significant in this regard as it is indicative
of the degree of shrinkage in current asset that will not discourage the
interest of the current creditors. Therefore, working capital is significant
and crucial in this context.
1.4 LIMITATIONS OF THE
STUDY
This work is exclusively limited to EBY Co Nig. Ltd.
For precision and objectivity. Although, EEBY CO Nig Ltd classify some
information as highly confidential to maintain certain secrecy like other
viable companies do.
This is viewed as a limitation because it is assumed
that the disclosure of such information would further contributed to academic
excellence of the study.
Another limitation of this study is to cost involved
in data collected and in writing and processing of the research work.
This was a further constraint, if more funds were
made available at the disposal of the researcher. Virtually all the branches of
EBY Co Nig Ltd would have been sampled and this would have contributed to
improve the quality of this work. Samples of other companies might have been
collected for comparison. Bureaucracy was another set back to the project work.
This is a result of delay in getting one to source information.
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