THE IMPORTANT OF WORKING CAPITAL MANAGEMENT IN AN ORGANIZATION A CASE STUDY OF ETERNIT LTD, SAPELE

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THE IMPORTANT OF WORKING CAPITAL MANAGEMENT IN AN ORGANIZATION A CASE STUDY OF ETERNIT LTD, SAPELE

ABSTRACT

The major purpose of the study was to know the importance of working capital management in an organisation. The design of the study was a field survey research, the population consisted of 27 male and female respondents in head up of G,C.E., O’ Level and ND holders 23 B.Sc and H.N.D holder 14 M.Sc holder and PhD holder scale value (Sa, A. UD. D, SD) were used to analyse the seventy one question while the square was used to test the hypothesis at 0.05 level of significance. The major finding of the study that the level of working capital employed in a firm maximize the profit of that organisation, it was concluded that if a level below the optimum is used will affect the profitability negatively because there will be no adequate product for sale which will yield profit.

TABLE OF CONTENT

Title i

Approval ii

Dedication iii

Acknowledgement iv

Abstract v

Table of contents vi

Chapter One – Introduction

1.1 Background of the study 1

1.2 Statement of problem 3

1.3 Objective of the study 3

1.4 Research Question 4

1.5 Significance of the study 4

1.6 Scope of the Study 5

1.7 Limitation of the Study 5

1.8 Structure of the Study 6

1.9 Definition of Terms 6

Chapter Two – Literature review

Working Capital 8

Component of Working Capital 10

Management of the Component of Working Capital 11

Cash Management 11

Inventory in Management 15

Chapter Three – Research methodology

3.1 Research design 19

3.2 Population of the Study 19

3.3 Sample Size and Sample Techniques 19

3.4 Types and Sources of Data 19

3.5 Instrument of Data Collection 19

3.6 Validation of Instrument 20

3.7 Method of Data Collection 20

3.8 Method of Data Analysis 21

Chapter Four – Data Analysis and Presentation

4.1 Data Presentation 22

4.2 Data Analysis 22

Chapter Five – Summary conclusion and recommendation

5.1 Summary 38

5.2 Findings 38

5.3 Conclusion 38

References 39

Appendix 41

Questionnaire 42

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The major policy indulged in by management to see to amusement of this am is working capital management the day to day operation of a firm activates sustained fund available for such operations, such funds are referred to as working capital.

Working capital has a very wide range of definition it has been viewed by different writers in different perspectives Weston (1988) sees working capita as current assets less current liabilities which represent the firm’s investment in each makeable securable, inventory account receivable.

According to Akpala (2006) working capital or circulating capital can been sees as the capital of the firm which has not permanent native but constantly changing form one form to another having a short life span of one year o less.

Hampton (1975) posits working capital as well short term assets used in daily operation. Brigham (1990) trace the origin of working capital to the old Yankee peddlers who would lead up his wagon with goods then peddle his wares. The merchandise was his turnover used in production of profit. Hence they were called working capital which had to be repaid. From the view o the above definition, it states that working capital shows the investment of a company medium and short-term funds which re-expected to be raise within a trading year (Cosazerbaru, 2003).

Therefore, working capital management refers to the administration within policy guidelines to current assets and current liabilities, an adequate surplus of which is considered as a reliable indication that a company is solvent t most times, it is believed that the profits to be earned from investing I long term assets are greater than the profits to be earned investing in current assets. As such times, a business would want to minimize it investment in working capital and to concentrate its resources on investment with a life than current assets as much as it as safe of the current assets is financed by current liabilities.

However, in some economic conditions the wisdom of the day suggest that it is better for a business to keep it resources liquid by investing I current asset including placing any surplus cash in short term financial investments, being liquid also enables a firm to take immediate advantages of any opportunity that may rise.

In Nigeria most firm do not have a standardized policy for the management of working capital management. The majority do so by role of thumb, hat is, making it a common practice to increase or reduce their holding f working capital arbitrarily.

A proper approach to working capital management in our firm is necessary to do this proper cash management principles are to be applied to determine the target cash balances as suggested by Ross et al (2002) in the Bayomi, Miller air and Barenek models standardized.

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