Working Capital Management As A Tool For Sustainable Growth Of Manufacturing Companies In Nigeria: (A Study Of Manufacturing Companies In Nigeria)

Reference code: c015

ABSTRACT

This research was conducted on Working Capital Management as a tool for sustainable growth of manufacturing companies in Nigeria using Flour Mills Nigeria Plc. as case study. The effective management of an organization’s working capital occupies a relevant position in the quest for the corporate goal and survival in many years to come. This research study attempts to examine the problem and profound a comprehensive solution to this problem. Working capital management is an important research topic which tends to provide a workable solution to the problems of bad and doubtful debt. Survey design was adopted for the study. Data were collected using structured questionnaire. The analyses were carried out using descriptive statistics. The data gathered were analyzed using the Statistical Packages for Social Sciences (SPSS) and chi- square for hypothesis testing. From the literature review and data analysis, the study found that the success of a firm depends ultimately, on its ability to generate cash receipts in excess of disbursements. Growth is necessary for corporate survival. The study recommends that periodical ratio on weekly, monthly or quarterly basis should also be encouraged in the organization to reveal the strength, the weakness within the organization. This will enable actions to be taken by management on the areas of weakness revealed.

INTRODUCTION

............... Working Capital is well thought-out to be the life giving force for any economic unit and therefore, its management is categorized among the most important functions of corporate management. Every organization, whether profit oriented or non profit, and irrespective of size and nature of business, requires sufficient amount of working capital for the operations of business (Mukhopadhyay, 2004). The management of such resources is considered as the most critical factor for maintaining liquidity, solvency, continued existence and profitability of business (Siddiquee & Khan, 2009).
Working capital management efficiency is imperative for firms specifically in manufacturing sector, where a major part of assets is composed of current assets (Home and Wachowitz, 2000). This may therefore, directly affect the profitability and liquidity of firms (Raheman and Nasr, 2007). Excessive levels of current assets may result in low levels of returns such as return on investment (ROI) for firms. In contrast, firms with lesser amount of current assets might be facing difficulties in maintaining smooth operations (Home and Wachowicz, 2000).
One of the major functions of manufacturing firms is the production of goods (Kavita, 2009). This function in most firms depends largely on the Working Capital Management. Management of fixed assets falls within the realm of capital budgeting while the management of Working Capital is a continuing function which involves control and flow of financial resources circulating in the firm in one form or the other.  Padachi (2006) emphasized that the management of working capital is important to the financial health of businesses of all sizes.
Working capital management is the management of all aspect of both current asset and current liabilities to minimize risk of insolvency while maximizing the return and growth on investment in current asset. Trade Credit arises when a firm sells its products or services on credit and does not receive cash immediately. It is an essential marketing tools acting as a bridge for the movement of goods through production and distribution stages to customers. A firm grants trade credit to protect its sales from the competitors and to attract the potential customers to buy its product at favourable terms. Trade credit account for receivable or trade debtor that the firm is expected to collect in the near future.
Working capital refers to the firm’s investment in short-term assets. In the past, most of the researches were concentrated in the aspects of long term investment and capital structure in order to examine the performance of the companies and to give an indicator what influences their sustainability. However, through series of studies, it was proven that the management of working capital (receivables, inventory, payables) has significant influence in firm’s sustainability.
Nazir & Afza (2008) stated that decisions concerning working capital are vital, because they are proving the financial stability of a business and market growing perception about the firm accordingly. Management of working capital is important for every company. All over the world researches study the issue in the framework of many countries. In developing countries, researchers came to the conclusion that working capital is probably the most important factor for a company to succeed. ...............

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TABLE OF CONTENT

CHAPTER ONE: INTRODUCTION
1.0 Introduction
1.1 Background to the Study
1.2 Statement of the Problem
1.3 Objective of the Study
1.4 Research Question
1.5 Significance of the Study
1.6 Research Hypothesis
1.7 Scope/ Delimitation and Limitation of the Study
1.8 Organization of the Study
1.9 Brief Historical Background of the Selected Company
1.10 Definition of Terms

CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.0 Introduction
2.1 Nature of Working Capital
2.2 Definitions of Working Capital
2.3 Concept of Working Capital
2.4 Management of Working Capital
2.5 Classification of Working capital
2.6 Factors Influencing Working Capital Requirement
2.7.0 Financing of Working Capital
2.7.1 Policies of Financing Working Capital
2.7.2 Types of Financing Working Capital
2.7.3 Approach of Mix of Financing
2.8.0 Importance of Good Working Capital Management
2.8.1 What Affects Working Capital Management
2.8.2 Measures to Improve Working Capital Management
2.9.0 Working Capital Cycle
2. 9.1 Need for Working Capital Cycle
2.9.2 Sources of Additional Working Capital
2.10.0 Handling Receivables (Debtors)
2.10.1 Managing Payable (Creditors)
2.10.2 Managing Investment in Current Assets
2.11.0 Inventories
2.11.1 Components of Inventories
2.11.2 Inventory Related Benefits and Costs
2.11.3 Managing Inventory
2.11.4 Motive for Holding Inventories
2.11.5 Objective of Inventory Management
2.12.0 Economic Order Quantity (EOQ)
2.12.1 Implementing EOQ
2.12.2 Inventory and the Financial Manager
2.13.0 Cash and Bank
2.13.1 Cash Management
2.13.2 Motives for Holding Cash
2.13.3 Inefficient Cash Management
2.13.4 Cash Management Process
2.13.5 Cash Budgeting
2.14.0 Management of Accounts Receivable
2.14.1 Credit Policies
2.14.2 Monitoring Receivables

CHAPTER THREE:  RESEARCH METHODOLOGY
3.0 Introduction
3.1 Research Design
3.2.0 Population of the Study
3.2.1 Sample and Sampling Procedure
3.3 Research Instrument
3.4 Data Collection Method
3.5 Method of Data Analysis
3.6 Research Assumptions

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.0 Introduction
4.1 Personal – Data Analysis Section
4.2 Main Question Analysis
4.3 Hypothesis Testing

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION
5.0 Introduction
5.1 Summary of Findings
5.2 Conclusion
5.3 Recommendations
5.4 Suggestion for Further Study
BIBLIOGRAPHY
APPENDICES 
Appendix I: Introductory Letter
Appendix II: Questionnaire
Appendix III: Chi – Square Probabilities

Reference code: c015

Reference code: c015

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71 Pages

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