DEPARTMENT OF BUSINESS ADMINSRATION, PROJECT TOPIC, Working capital and management Profitability
PROPOSAL
The
importance of working capital in an organization can never he over emphasizes,
owing to the fact that it assisting in carrying out the clay to day activates
and smooth running of the organization. This study examines the working capital
and management Profitability with special reference ton Nigeria Bottling
Company Plc’.
The
work is divided mo live chapter for easy understanding of the entire work
Chapter
one is the general introduction which contains the background to the study,
aims and objectives of the study scope and limitation etc
Chapter
two of the study review the work of various authors which serves as the
theoretical framework of the study
Chapter
three serves as the Research methodology which will reveal the methods used in
gathering data
Chapter
four, presents and analysis data while the last chapter
Chapter
five, put the whole work in concise form with summary, conclusion and
recommendation.
TABLE OF CONTENTS
Title
Page i
Certification ii
Dedication iii
Acknowledgements iv
Proposal v
- vi
Table
of Contents
CHAPTER ONE: GENERAL INTRODUCTION
1.
1 Background of the Study 1
1.2
Statement of the problem of the study 2
1.3
The Aims and Objectives of the Study 2 - 3
1.4
Significance of the Study 3
- 5
1.5
Scope and of the Study 5 - 7
1.6 Historical background of the study 7 - 8
1.7 Definition of terms. 8 - 13
CHAPTER TWO: LITERATURE REVIEW
2.0
Introduction 14
2.1
Definition working capital 14 - 24
2.2
The need for working Capital 24 - 26
2.3
Determination of working Capital 26 - 28
2.4
Working capital policy, combining
current
asset and Current Liabilities 28 - 29
CHAPTER THREE: RESEARCH METHODOLOGY
3.1
Research Design 30
3.2
Population of study 30
- 31
3.3
Sampling method 31
3.4
Research Instrument 31
- 32
3.5
Pilot Validity and reliability 32 - 33
35
Methods of data collection 33
3.7
Limitation of Data Collection 33 - 35
CHAPTER FOUR
4.
1 Analysis, Interpretation and Analysis of Data 36 - 43
CHAPTER FIVE
SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.2 Summary of Findings 44- 46
5.3 Conclusion 46
- 47
5.4
Recommendations 47 - 49
References
CHAPTER ONE
GENERAL
INTRODUCTION
1.1
BACKGROUND TO THE STUDY
The
effective administration and control of the liquid resources of a company, with
the aims of minimizing short term risk of not being able to meet the production
level required paved ways to this study
This
research work is basically on the application of working capital management and
profitability in Nigeria
bottling company
Interestingly,
for an organization to work effective and efficiently adequate working capital
must be well guaranteed smooth running of the organization. Working capital
management profitability have major concerns of Nigerian business organizations
as the growth and development of the organizatioan solidity the money poured
into the business
1.2
STATEMENT OF PROBLEMS OF THE STUDY
Carefully examination
of the study of working capital and organization profitability will reveal
areas where business can have problems if not properly managed if they is any
short coming in the raising of working capital and how it is used, are as
follows:
1.
It will acid to poor standard of
living of the Concerned employee
2. It will lead to liabilities of employee.
3.
Those employees and the management concerned
will not be able to meet up with their caliber in the society
4.
This situation ‘an also lead to
liquidation of the organization
5.
It will lead to increase in the rate
of depending in the society
1.3 THE AIMS AND OBJECTIVES OF THE STUDY
The
purpose of this research work is to find out the objectives and important of
working capital in business organization. An organization must ensure that adequate
working capital position which may definitely affect the growth of the company
in question
The
two important aims of the working capital are profitability and solvency.
Solvency refers to the firms continuous ability to meet maturity obligations .to ensure solvency, the firms
should liquidate which means longer.
1.4 SIGNIFICANCE OF THE STUDY
This
study is relevant in multifarious reasons which include the following:
1.
To explain the importance of working
capital and management profitability.
2.
The research also brings together
contributions of other researchers who have proffered solutions to the problems
of working capital in an organization.
3.
The contents of the research could serve
as a useful guide since the level of productivity or organizational output can
be said to be a function of working capital and management profitability.
4.
The study will expose to the researcher many key – elements
in the Nigerian Bottling company
5.
The research will sever as a useful
guide to government and he management of Nigerian bottling company to
understand relevance of working capital and management profitability
We
know that the working capital is the life blood of the life of any business necessary
for the organization to manage their targeted profit also to enable a business
organization complete favourably with their competitor in the markets, this can
be done by managing the organization current asset very well and by investing
in research and development
In
dealing with question “why the need to invest in current asset”, Attempt will
be made to find asset very well and by investing in research and development.
In
dealing with question why the need to invest in current asset. Al tempt will be
made to find but why firms invest in current asset also what determines the
ai1iount by various which may include
a. Manufacturing
circle
b. Business fluctuations
c. Production policy
d. Availability of f
credit
e. Growth and
expansion activates
1.5
THE SCOPE AND LIMITATION OF THE STUDY
Capital
in organization profitability covers the various aspect of working capital such
as credit inventories arid receivables. Capital it’s effectiveness enhance
working capital in organization.
LIMITATION
OF THE STUDY.
In carrying out tins
research work various problem were encountered these includes: -
i.
Time factor- the time within which
the project was short especially when this has to turn concurrently other academic
activity.
ii.
Financial resources: - the limitation
of the cash available for the research due to concurrent economic situation
has considerable affected the scope of
the research work.
iii.
Uncooperative attitude of the
respondent to some questions raised which could have still be an additional
data for the research work.
1.6
HISTORICAL BACKGROUND OF THE CASE STUDY
There
is no university accepted definition of working capital means those found used
in acquiring assets it again be define as the excess current liabilities.
The second definition
is the one recommended by the accounting profession and of often called
networking capital.
The two definitions
are common found in use. The main difference between the two lies in the
problem of management of each type the fact that each different appeal to
different people.
Working
capital can he said to be the life blood of any business organization there is
importance any functions is financially management of business that can be
influential in it’s immediate outcome the control exercise over working
capital. The result insuring for depending upon it profitability, but also may
even be decisive factors in it’s continue existence.
The
need for working capital to run the day to day operation of business can not be
over emphasized indeed. Firm differs in their requirement of working capital
one most cherished aims of business
organization is the maximized share – holders wealth. In it’s endeavour to maximize wealth,
the firm should earn sufficient return from its operation earning steady amount
of profit desire successful sales activities. It has to invest enough found in
current asset since sales do not convert into cash immediae1y.
The
investment term of asset such as short term securities. The trade debtors and
stock is referred to as working capital.
1.7
DEFINITION OF TERMS
These
are registered meaning of the term used in introduction aspect o the research
work. This include: -
SOLVENCY:-
solvency in a finance or business is the degree to which the current assets of
an individual or entity exceeds the current liabilities of that individuals or
entity. Solvency can also be describe as the ability of a co-operation to meet
its long term fixed expenses and to accomplished long term expansion and
growth. This is best measured using the next liquid balance (NLB) formular. In
this formular, solvency is calculated by adding cash and cash equivalents o
short term investment. In the other word, it refers to the firm’s ability to
meet measuring obligation.
CURRENT
LIABILITIES:- Liabilities that are to Settled less
than a year are called current liabilities. Those include trade creditors and
debt due within a year (including debt repayable on demand such as overdraft) current
liabilities are one of the major groups of items on the balance sheet. Current
liabilities are very important in growing a company’s financial heath as the
company needs to have the money to meet those commitment in the short – term.
PROFIT;
A financial benefit that is realized when the account of revenue gained from a
business activity exceed the expenses, cost and taxes needed to sustain the
activity. Any profit that is gained goes to the business’s owner who may or not
decide to spend it on the business.
Profit
is calculated as:
Profit
= total
revenue – Total Expenses.
MEDIUM
TERM FINANCE: Medium term finance is defined as
money raised for a period from one to five years. The medium term funds are
required by a business mostly for the repair and modernizing of the machinery.
Medium term sources of securing finance, heavy advertising. The medium sources
of securing medium term funds are as under;
a) Commercial banks
b) Debentures
c)
Loan
from specialized credit institution
COMMERCIAL BANKS: Commercial banks are now
the most important sources of providing medium term loans. Loan are generally
giving against some security of assets. Generally. The loan is credited to the
account of the borrower. Traditionally, the banks were mainly concentrating on
providing short - term loans. Now – a – days, the term loan exceeding one year are
being provided by the banks.
DEBENTURES: A company may raised a part of medium term
capital by issuing debentures. A debentures is an instrument used by a company
acknowledge defit under its common seal.
LOANS
FROM SPECIALIZED CREDIT INSTITUTION: Medium term loans
are also provided to the business concerned by specialized credit institutions.
SHORT
TERM CAPITAL: Those are residual categories in the
balance of payments that include financial assets of less than one year such as
currency, deposit, and bills.
MARGINAL
COST OF CAPITAL:
Marginal or incremental cost of capital is cost of the additional
capital raised in a given period. The average cost to a company to issue one
more unit of debit or equity. The incremental or marginal cost of capital
varies according to how many more or power units a company wish to issue.
LONG
TERM CAPITAL: The sale of a security or mutual
funds share that has been held for more than one year. Government encourage
long term investment and as such, long term capital are usually entitled to
preferential treatment for tax purposes.
That is, they are taxed at a lower rate than most other income.
CHAPTER TWO
LITERATURE
REVIEW
2.0
INTRODUCTION
This
chapter will dwell extensively on the theoretical framework of the study. It
review the work of various author in the Field of study.
2.1
DEFINITION OF WORKING CAPITAL
In
business organization working capital is very important for the success of
business just as blood is essential in human being. Working capital comprises
of current asset and current liability.
Profitability
may be considered as very important factor of business, however if the wrong
capital is managed, the business will run into liquidation therefore according
to how and (1982) working capita! is defined a :“ the asset for current use within a business less the amount due to
these await settlement in the short term in whatever form.
From
the definition above, it can be seen or deduced that during the period between
delivery and settlement, there would be reduction in the working capital. It is
awaiting settlement in managing the working capital in current assets to know
the amount to invest in current asset and the appropriate sources of finance
Pandy
(1986) views working capital from two perspectives. These are gross working
capital which means firms investment capital assets. Net working capital is
current liability, asset that are called current asset. Some of these assets
are inventories debtor account receivables, marketable securities that must be
settle within one year (Creditors account payable) bill over draft and
outstanding expense are example of liability.
Important
of gross working capital is indicated by optimum investment in current asset.
Here
investment must neither be in excess or inadequate. Excess investment result in
trying clown the capital o business, the tied clown capital will not earn
anything reducing the level. Conversely the business be insolvency arrangement
for funds to finance current assets. In another area where gross working
capital also facilitates, this indicates that the finance director of the
company must arrange for funds when business is a financial means, He must also
invest surplus funds in short term securities.
The
ideas of networking implies that the current asset must be in excess of current
liabilities. This is necessary in order to protect the interest of creditor of
this to be effective ratio 2: 1 may be considered necessary. However, this depend
on the nature of the industry. Current asset can be finance by owner equity.
Debenture long term debt preference capital and retained earning.
Further
more, current asset can be financed by account payable. There is no criteria to
determine the exact amount of working capital regarded for every firm.
Therefore ii is advisable that problem of each firm should be analyzed to
determined the desirable level of working capital.
Orientation:
In this chapter we introduce working capital management in terms of managing
the firms liquidity.
Specifically,
working capital is defined as the different in current assets and current
liabilities. The hedging principle is offered as one approach to addressing the
firms
1.
MANAGING CURRENT ASSETS
A. The firm’s investment in current assets
(like fixed assets) is determined by the margin benefit derived from investing
in them compared with their acquisition cost.
B.
However, the current fixed assets mix
of the firms investment of firm’s liquidity. That is, the greater the firm’s
investment in current assets, other things remaining the same. The greater the
firm’s liquidity. This is generally true since current assets are usually more
easily converted into cash.
C.
The firm can invest in marketable
securities to increase its liquidity. However, such a policy involves
committing the firms funds to a relatively low yielding (in comparism to fixed
assets) investment.
2.
MANAGING THE FIRMS USE OF CURRENT LIABILITIES
A.
The greater the firms’ use of current
liabilities, other things being the same, and the less will be the firm’s
liquidity.
B.
There are a number of advantages
associated with the use of current liabilities for financing the firms assets
investments.
(1)
Flexibility current liabilities can be
used to match the tuning of a firms short-term financing need exactly.
(2)
Interest cost, Historically, the
interest cost on short-term debt has been lower than that on long-term debt.
C.
Following are the disadvantages
commonly associated with the use of short-term debt;
(1),
Short-term debt exposes the firm to an
increased risk of liquidity because short-term debt matures sooner and in
greater frequency, definitions, than does long-term debt.
(2)
Since short -term debt agreements must
he re-negotiated from year to year, the interest cost of each years financing
is uncertain.
(3)
DETERMINING
THE APPROPRIATE LEVEL OF WORKING CAPITAL.
(A)
Theoretically, it is impossible to
derive the “optimal level of working capital for the firm such a derivation
would required estimation of the potential costs of illiquidity which, to date,
have eluded prease measurement”
(B)
Prograrnmatically. the “hedging principle”
provides the basis fur the firm’s working capital decisions.
(i)
The hedging principles or rule of self
liquidating debt involves the following: those assets needs of the firms not
financed by spontaneous sources (i.e payables and accruals) should be 1nanced
in accordance with the following wile: permanent asst investments are financed
with permanent sources and temporary investments are financed with temporary
sources of financing.
(ii)
A permanent investment in an asst is
one which the firm expect to hold for a period longer than one year, such an
investment may involve current or fixed assts.
C.
Following are the disadvantages commonly associated with the use of short-term
debt;
(1),
Short-term debt exposes the firm to an
increased risk of illiquidity because short-term debt matures sooner and in
greater frequency, definitions, than does long-term debt.
(2)
Since short -term debt agreements must
he re-negotiated from year to year, the interest cost of each years financing
is uncertain.
(3)
Determining the appropriate level of
working Capital
(A)
Theoretically, it is impossible to
derive the “optimal level of working capital for the firm such a derivation
would required estimation of the potential costs of illiquidity which, to date,
have eluded prease measurement”
(B)
Prograrnmatically. the “hedging principle”
provides the basis fur the firm’s working capital decisions.
(i)
The hedging principles or rule of self
liquidating debt involves the following: those assets needs of the firms not
financed by spontaneous sources (i.e payables and accruals) should be 1nanced
in accordance with the following wile: permanent asst investments are financed
with permanent sources and temporary investments are financed with temporary
sources of financing.
(ii)
A permanent investment in an asst is
one which the firm expects to hold for a period longer than one year, such an
investment may involve current or fixed assts.
(iii)
Temporary asset investment comprise the
firms investment in current assets what will be liquidated and not replace
during the year.
(iv)
Spontaneous sources of financing include
all those source which are available upon demand (e.g trade credit-accounts
payable or which arise naturally as a part of doing business (e.g. wages
payable interest payable, taxes payable etc.).
(v)
Temporary sources of financing include
all forms of current or short-term financing not categorized as spontaneous.
Examples include hank loans, commercial paper and finance Company loans.
(vi)
Permanent source of financing include
all long-term sources which as debt having a maturity longer than 1 year,
preferred stock, and common stock.
C.
Although the hedging principle
provides a useful guide to
the
firms working capital decisions. No firms will follow its tenets strictly. At
times a firm may find itself overly reliant on temporary financing but at other
times it may have excess cash as a result of excessive use of permanent
financing.
2.2 THE NEED FOR WORKING CAPITAL
The
need for working capital cannot he overemphasized. A firm needs working capital
because the production sale and cash flow payment and transact ion arc not
instantaneous. The other hand, the need for current asset arises because of operating cycle, the operating cycle is a
continuous process and therefore the need for current asset is felt constantly,
operating cycle differs according to the nature of the business Pandy (1979)
define operating cycle as the time required to complete the sequence of event
in the case of manufacturing firm.
•
Conversion of cash to raw materials
•
Conversion of raw materials into work in progress
•
Conversion of work in progress into finish goods.
•
Conversion of finished goods into distant and bill receivable
•
Conversion of debtor and bill receivable into cash.
The sequence above is
shown diagrammatically
THE SEQUENCE ABOVE IS
SHOWN DIAGRAMMATICALLY
The
non manufacturing firms such as wholesaler and retailer will only have direct
conversation of each cost of stock of finished goods into debtors and then into
cash shown in figure 22
2.3
DETERMINING OF WORKING CAPITAL
There are some
factors of different importance which affects the working capital requirement
of firm in one way or the other. Among these factors are the following:
NATURE
AND SIZE OF BUSINESS: The working requirements of firm arc
basically influenced by nature of business. Trading and financial concerns have
a very low investment in fixed asset, but a large investment in working
capital. Some manufacturing firms also invest a substantial amount in working
capital. Retail stores for example must carry large stock of variety of goods
to satisfy the varied and continuous demand of their customer. In constraints public utilities
have limited and supply for working capital because they cash sales only and
supply to invest sum in working capital. Another working capital of a firm is
the size of the business. All things being equal a firm with large scale of
operating will need more working capital than small Firm.
PRODUCTION OF MANUFACTURING CYCLE:
A Firms production commences with payment arid uses raw materials and completes
with the production of finished good the longer production cycle production
cycle the larger follow activities but produced it,
OPERATING EFFICIENCY:
the operating efficiency of a company will be effectively contributing to its
working capital if it is efficient in controlling the operating cost. The uses
of working capital it’s improved and pace of the cash cycle is accelerated with
profitability arid thus, help in releasing the pressure of working capital.
2.4
WORKING CAPITAL POLICY: COMBINING
CURRENT ASSET AND CURRENT
LIABILITIES
The
stand of most modern texts on relationship between the two sides of the balance
sheet is based on Modigliani and miller proposition that investment and
financial decision are independent on the working capital, that is short term
financial and current liabilities or instance, the use of receivable to secure
short term loans still suggest optimist short term investment decision
independently the related 1nancing resources that should be invested in the different items of
current asset.
CHAPTER
THREE
RESEARCH
METHODOLOGY
3.1
RESEARCH DESIGN
This
chapter is developed to discuss the methodology followed in the collection of
data for the study the choice of Nigeria bottling company Plc. We
motivated by the fact it is a big company in the business line: therefore,
toward this end, this chapter will discuss the methodology used in obtaining
claw for this survey with particular reference on population and samples
research approach, data gathering instrument, administration of instrument used
reliability and statistical method in analyzing the obtained data.
3.2
POPULATION OF STUDY
The
study site was Nigeria Bottling Plc. 40 staff
were randomly selected among the workers most of these staff can be
found in different marketing and sales department because they share similar
3.3
SAMPLING METHOD
The
sampling method adopted for this research work is randomly sampling. Five
companies were selected and there was a personal interview with each one. The
question ask from these people include the source of fund for the company of
the company finance, attitude of staff towards the management of the company.
The
questionnaire were distributed irrespective of their sex. position, in order to
know their view about working capital.
3.4
RESEARCH INSTRUMENT
The
researcher in the process of collecting relevant information will rely on the
use of secondary source of data. This consists of the selected companies’
annual report for the past five years. However personal interview will also be
used if the need arises for t lie purpose of comparison and necessary
recommendation, the data collected from the companies would be analyze by
computing various liquidity ratios.
The ratios to be
computed include:
a. Current ratio
b. Quick ratio
C. Inventory turnover
d. Average connection period taken
e. Average credit taken ratio
f. Net worth to fixed asset ratio.
The
trend and comparative analysis of the ratio will be computed so as to bring out
the purpose of this research work.
3.5
PILOT TEST VALIDITY AND RELIABILITY
In
order to test reliability of data we are going to use chi- square and sample
percentage method reliability is the characteristics of research methodology
which allows ii w be repeated by same different research but always with the
same result.
3.6
METHOD OF PROCESSING DATA
The
analysis and incorporation of raw data this investigation are means by which
the research is answered and stated hypothesis are tested, that is breaking
down of the data constitutes parts
It consists of
statistically calculation performed which the raw data to provide answer to the
question intuiting the research work. The project will be literacy Form.
3.7
LIMITATION OF DATA COLLECTION
Although,
it is hoped not the data collected would give a fairly representative data for
the company it is however not without some limitations.
Thu
researcher found it difficult to obtain the raw data used in the research work
because of the uncooperative altitude of the officers of the company under the
study.
Also,
the researcher is subjected to time constraint the time available does not
allow extensive research on the topic
Furthermore,
the data collected interviewed maybe due to the following reasons:
1.
The officers been interviewed may
target to disclose relevant information.
2.
A deliberate intent to mislead.
The
research found it difficult to obtain the raw data used in the research work
because of the uncooperative attitude of the officer of the company under the
study.
Also
the researcher is subjected to time constraint the time available does not allow
extensive research on the topic.
Furthermore,
the data collected interviewed may be due to the ol1owing reasons.
1.
The officers been interviewed may
target to disclose relevant information
2. A deliberate intent to mislead
CHAPTER FOUR
DATA
PRESENTATION, ANALYSIS AND
INTERPRETATION
4.1
INTRODUCTION
This
chapter deals extensively with the presentation analysis and interpretation of
data these are the data that have indeed obtained from filed or the case study
in which this research work has been carried out.
However, this data
shall be analyzed and presented in tabular form or pattern, explanation and
interpretation therefore shall be extensively considered, since this is the
principle aims of this chapter.
These
analysis and interpretation are as follow:
|
ALTERNATIVES
|
RESPONDENTS
|
PERCENTAGES%
|
|
MALE
|
07
|
70
|
|
FEMALE
|
03
|
30
|
|
TOTAL
|
10
|
100%
|
‘SOURCE;
FILED SURVEY 2011.
From
the above table 7 respondents representing 70%, are male while 3 respondents
representing 30% are females
|
ALTERNATIVES
|
RESPONDENT
|
PERCENTAGES%
|
|
BELOW 25 years
|
2
|
20
|
|
26 – 40 years
|
6
|
60
|
|
41 – 45 years
|
1
|
10
|
|
56 years and above
|
1
|
10
|
|
TOTAL
|
10
|
100%
|
SOURCE:
FILED SURVEY 2011
2 respondents
representing 20% are below 25 yrs and 6 respondents representing 10% are 26 yrs
of ages while 1 respondents representing 10% around 41 years of age and 1 respondents representing 10% are 56 years and above
TABLE
4, 3’ MARITAL STATUS
|
ALTERNATIVES
|
RESPONDENT
|
PERCENTAGES%
|
|
SINGLE
|
4
|
40
|
|
MARRIED
|
5
|
50
|
|
DIVORCED
|
1
|
10
|
|
TOTAL
|
10
|
100%
|
SOURCE:
FILED SURVEY 2011
From the table above
4 respondents representing 40% are
single. 5 responding 50 are married 1 respondents representing 10 is Divorced.
Table
4.5 Post Head In An Organization
|
ALTERNATIVE
|
RESPONDENTS
|
PERCENTAGES
|
|
Lower management
|
3
|
30
|
|
Middle management
|
5
|
50
|
|
To management
|
2
|
20
|
|
TOTAL
|
10
|
100%
|
SOURCE; FIELD SURVEY 2011
3 respondents
representing 30% are working at the administration department 4 respondents
representing 40% are entire department which contains highest worker .while 2
respondent representing 20% are marketing department SECTION B
Table 4.6 ,Does
working capital influence the level of your production in the organization?
|
ALTERNATIVES
|
RESPONDENT
|
PERCENTAGES%
|
|
YES
|
8
|
80
|
|
NO
|
2
|
20
|
|
TOTAL
|
10
|
100%
|
SOURCE: FILED SURVEY 2011.
8 respondents
representing 80% are yes while 2 respondent. representing 20% are no.
Table
4.9 Does Working Capital Organization
Profitability Cover The Various Aspects Of Working Capital Such A Credit
Inventories And Receivable
|
ALTERNATIVES
|
RESPONDENT
|
PERCENTAGES%
|
|
YES
|
7
|
70
|
|
NO
|
3
|
30
|
|
TOTAL
|
10
|
100%
|
SOURCE;
FILED SURVEY 2011
7 respondents
representing 70% are yes mean that the highest respondents means that working
capital covers a credit inventories and receivable while 3 respondents
representing 30% are no.
Table 4.10 Does
case of machine problems improve the level of your production
|
ALTERNATIVES
|
RESPONDENT
|
PERCENTAGES%
|
|
YES
|
2
|
20
|
|
NO
|
8
|
80
|
|
TOTAL
|
10
|
100%
|
SOURCES : FILED
SURVEY 2O11.
2 respondents
representing 2O% are yes while 8 respondent representing 80% are no which means
that machine problem does not increase
the level of production in the organization
Table
4. 11 Does marketing environment such as climate government policies,
technology etc. affect your production?
|
ALTERNATIVES
|
RESPONDENT
|
PERCENTAGES%
|
|
YES
|
4
|
40
|
|
NO
|
6
|
60
|
|
TOTAL
|
10
|
100%
|
SOURCE:
FIELD SURVEY 2011,
4 respondents
representing 40% said yes while
6 respondents representing
70% said no.
Table
4.12 it is true that working capital can be said to life blood of any
organization?
|
ALTERNATIVES
|
RESPONDENT
|
PERCENTAGES%
|
|
YES
|
9
|
90
|
|
NO
|
1
|
10
|
|
TOTAL
|
10
|
100%
|
SOURCE
FIELD SURVEY 2O11
9 respondents
representing 90% are true mean while 1 respondents representing I0% are false.
Table
4.13 does your sale get boosted during the dry season?
|
ALTERNATIVES
|
RESPONDENT
|
PERCENTAGES%
|
|
YES
|
6
|
60
|
|
NO
|
4
|
40
|
|
TOTAL
|
10
|
100%
|
SOURCE:
FILED SURVEY 2011
6 respondents
representing 60% are yes while
4 respondents
representing 40% are no the highest
respondents is yes mean while sales get boosted during Season.
Table
4.14 Does working capital influence to meet maturity obligation of a company
|
ALTERNATIVES
|
RESPONDENT
|
PERCENTAGES%
|
|
YES
|
7
|
70
|
|
NO
|
3
|
30
|
|
TOTAL
|
10
|
100%
|
SOURCE:
FILED SURVEY 2011.
7 respondents
representing 70% are yes while
3 respondents
representing 30% the highest respondents
mean that the working capital promote and influence the maturity obligation of
a company.
CHAPTER FIVE
5.1
SUMMARY, CONCLUSION AND RECOMMENDATIONS
This
Chapter will put the whole work in concise form with summary conclusion and
recommendation
5.2
SUMMARY
Chapter
one introduce the research topic generally than the purpose of research
methodology and scope of all the study were highlighted
In the second chapter
attempt were made to highlights the various concept and theories of working
capital. Two concept and theories of working capital two were identified.
the gross and the Net
work capital concept,
gross concept refers to total current
asset while networking concept working capital is current asset less current
liabilities, A theory (Baumo) relating to cash management was also discussed.
The
third chapter contains the research methodology to be used. The limitation of
the research was also cleanly stated.
Chapter
four was devoted to the analysis and representation of data collect
The
following ratios were used in analysis the twenty of working capital and
organization profitability.
a. Current ratio
b. Quick ratio
c. Inventory turnover
d. Average collection period
e. Average credit taken
f. Net worth asset
The
analysis of ratio shows that the current and quick ratio for Nigeria bottling
company (Cocacola) is not high as we have in some companies the average
collection period a well as the worth to fixed asset ratio for Nigeria bottling
company are also lower. However the average credit taken is longer
The
analysis further revealed that fixed asset carried the largest proportion of
the total asset of Nigeria
bottling company plc while in some companies the current asset has the largest
percentage. The nature o business could be a responsible explanation for this.
5.3
CONCLUSION
Based
on the result o1 the analysis in chapter four, it can be conclude that:
Ø Current
ratio differ among companies while ii is higher for a conglomerate it is
however lower for single companies in manufacturing business.
Ø The
quick ratio is lower with companies in only manufacturing and non - manufacturing
business.
Ø The
inventory turnover ratio is high for companies that replenish their inventories
in small size.
Ø Manufacturing
firms invest more is fixed asset than non-manufacturing purchase plain and
equipment and also houses to keep them.
Ø finally,
companies adopting conservative financing policy normally make less profit, but
they are less prone to liquidity problem.
5.4
RECOMMENDATIONS
In
view of the observation and findings in chapter four and the conclusion arrived
at in the earlier part of this chapter, the following can be suggested for
proper working capital for organizational profitability.
1. Management must study their working capital
in relation to operation cycle so that excess of working capital does not
occur.
2.
Management should always prepare ratio
analysis at all balance sheet data and other times to enable them compare and
evaluate in other assess the performance the company in question.
3.
Management should evolve a proper
planning and control strategy for all its current assets items for efficient
working capital management
4.
for proper cash management, the
financial manager should ensure that he does not allow a significant deviation
between projected cash flow and actual flows to achieve this cash management
efficiency will have to improve through a proper control of cash collection and
disbursement
In
choosing among alternative securities, the firm should all always examine the
three basic features of a security that that is
1. Safety
2. Maturity
3. Marketability
4. Management should always strike a balance
between excessive and inadequate investment inventories
5.
For effective management of credit,
the firm should lay down clear guidelines and procedure for granting credit to
individual accountant or customers
REFERENCES
Banumol,
W.J (1979). “ The transaction demand for cash and inventory Approach’
Quarterly Economic Journal 2nd Edition Gaslonk Publications.
Khan
N.J and JAM (1981). Financial Management 3( Edition, New Delhi : Mc Areno Italy Publication company
Limited.
Pandy,
l.M (1997). Financial management business Finance London Pitman
Publications Limited
Ramamidophy,
V E (1976). Working Capital Management 4th Edition, London Madras
Publishers
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