TABLE OF CONTENTS
CHAPTER ONE:
INTRODUCTION
References
CHAPTER TWO:
LITERATURE REVIEW
References
CHAPTER THREE:
RESEARCH DESIGN AND METHODOLOGY
CHAPTER FOUR:
DATA PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA
CHAPTER FIVE:
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION
References
Appendix
Questionnaires
RESEARCH PROPOSALS
This research work is designed to find out the magnitude to which cash and collectibles bear to the firms total working capital and to discuss as far as possible the extent to which improper management of cash resources and accounts receivable can create illiquidity and a state of insolvency in a business outfit.
In conducting the research for this topic, the primary sources of information will be interviews and questionnaire and also secondary sources like text book, Annual reports, journals and periodicals.
The appropriate statistical tools will be applied in analyzing the project data.
The major problems which I am likely to encounter while doing this research work are: time factor, inadequate funding, anti-research attitude. Apart from all these problems and which must be looked at the time of initiating this research, the research work will be a practicable one if adopt all the techniques above.
I hope that when this project has been completed, the problem of untimely liquidation and illiquidity in financial and other sectors of the economy will be a thing of the pasty.
In conclusion therefore, the researcher will suggest how adequate cash and credit management by the financial managers can lead to expansion of business.
CHAPTER ONE
INTRODUCTION
The management of an organization’s capital relates to the finance and investment of non-human resources, that is, physical and monetary assets, for the purpose of maximum benefit in terms of profitability. According to Frear (1980) profitability is determined in part by the way in which a company manages its working capital elements, especially the company’s management policies in respect of cash and account receivable/payable. Basically, there would be a drop in profit if the basic element of working capital were raised without a corresponding rise introduction or margins. So one of the principal functions of a financial manager is to provide the erect amount of each elements of working capital at the right time and in the appropriate place to realize the greatest return on investment. A business which is basically profitable in a capital intensive industry with high level of inventory turnover but does not have an effective/efficient policies for it's’ working capital constituents, especially cash, can easily be stopped by a temporary set-back into liquidation because it has no room to maneuver. Traditionally, the users of accounting information, especially the external users are interested in notions of solvency and liquidity as criteria for assessing credit worthiness. In recent years, cash and trade credit management has become the most important sector of financial management in many trading and manufacturing organizations. At one time, it was possible for a business to survive without proper cash management policies as well as lay down policies for accounts receivable (trade debtors) as long as it was reasonably profitable. Accounting to Bennel (1989) prior to 1970’s; trade credit was not a dominant feature of conducting business and procurement of fund were largely easily were not exploited to its fullest use. Today however, this has not generally been the case and many highly profitable companies have had liquidity. Problems and some have gone into liquidations, largely because of lack of appropriate cash and credit management policies/techniques. In these circumstances, business executives now attach a high decree of importance to the cash and accounts receivable management function. In large organizations, the financial director or treasurer is usually in charge of the management of cash resources and in introducing appropriate systems that will ensure adequate working flow that enable the economy to remain liquid at all times. Illiquidity problems could be found in all types of companies and not restricted to small inefficient firms. In some cases, large well known companies have experiences illiquidity problems and in some few instances, liquidation proceedings and eventual demise of such organizations. The current wave to distress in our financial sectors (Banks and insurance companies) provides a good background to illiquidity problems arising from ineffective in cash and credit management policies in spite of their profitability. Today, several of these institutions have been liquidated.
These developments have naturally had an effect on credit and cash management policies and it is therefore considered to be particularly important that the reasons behind these liquidity problems should be appreciated; using Anambra motor company ltd – a manufacturing organization as a case study. The choice of this organization is the relevant, which cash and credit management policies bear to its operation.
Many profitable organizations are forced into untimely liquidation, bankruptcy and experience work stoppages as a result of strike action and consequently operate at losses not because the business is not profitable but due to inefficient utilization of cash and other material resources at its disposal. Moreover, majority of business transactions are conducted credit basis and this has always increased the volume of account receivable (debtor) and a substantial amount of these receivable are lost daily through bad and doubtful debts. The resultant effect is that companies have huge amount of its fund tied to un-collectables, hence a state of illiquidity can arise. Therefore, the continued existence of a firm/company, its survival and growth depends, among other factors on how best the firm utilizes its available cash resources and the efficient management of its collectable as the neglect of these highly important core of management are could soon lead to a state of insolvency due to illiquidity problems. The study is therefore designed to evaluate the essence of efficient cash and credit management policies existing in Anambra motor company limited
Realizing the high rate of failed / distressed organization in the financial sector and the manufacturing sectors of the economy due to illiquidity and problems and the fact that factors responsible for such distressed conditions had not been properly addressed, the specific objectives of the study are to find out:
The following research questions have been designed to address the detailed area of the study and will serve as a guide to the researcher on the issue of the study.
These and others are the area in which this study intends to explore.
According to Spiege (1972) “a research hypothesis is an assumption, statement or suggestion about the population under consideration”.
Omololaijie (1986) defined hypothesis as a suggested investigation”
Consequently, the following hypothesis will be used in this study:
This research project will be of great importance to the company management and other corporate bodies as well as the general public as investors. This way which this study has been planned and carried out will offer enough information and explanation to all those engaged in the management of an organization either as financial managers or financial controllers.
Furthermore, this study is expected to offer a secondary source of data to many students/ researchers in the are of working capital management.
Osuala (1989) defined scope of study as those parts of topic or problem that normally might be considered to be part of such but which because of limitations of time, physical capacity or other reasons, the researcher cannot or does not wish to include.” Thus the researcher had to restrict himself to a particular area of concentration and specific period of time.
The scope of this study is limited to cash and credit management policies for improved liquidity in an organization with particular reference to Anambra motor manufacturing company ltd. The researcher will only decree on the design of effective cash and credit policies through cash budgeting techniques and efficient collection procedures for bailing out companies in the web of Illiquidity/liquidation.
It is also necessary to state the scope of the study was limited to Enugu environment due to time, financial and other constraints which inhibit the researcher’s scope of activities in this field. Unwillingness/unco-operative posture of some respondents also affected the scope of this study.
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