Adequacy Or Inadequacy Of Working Capital: Its Importance And Implication

Project and Seminar Material for Accountancy / Accounting

Abstract

The objective of this study is to evaluate and examine the adequacy or inadequacy of working capital: its importance and implication The study observed that A lot of financial institutions have failed and more may still fall due to inadequacy of working capital Because many financial institutions has quested or fallen some firms has will draw the confidence they have in putting more effort to progress while the liquidated ones find it different to off set its indebtedness. In conclusion, the following recommendation more made Firms that has excess working capital should invest their excess capital in short term investment so that they will not be forced with the adverse effect of excess working capital Corrective measures should be adopted to the consequences of inadequate or excess working capital in the economy.

Chapter One

Introduction

1.1 Background Of The Study

The primary aim of establishing or going into business is to optimize profit and as well as ensure continuity of that business concern. When one person (sole trader) or group of person (partnership or companies limited by shares or guarantee) intends forming a business entity or will need a smooth take off, these fixed and current assets in facing and current assts will be funded from both long term liabilities and current liabilities (or capital) as the case may be. On formation, the business as an entity will be provided with fixed assets, such as building and premises, plant and machinery, equipments, motor van etc. but from all medication we know and we see that these fixed assets itemized and we see that achieve the a fore said aims of establishing the business. This is so be cause the fixed assets were not bought for then purpose of resale as a result any project cannot be directly accruable from its continuous stay. From the foraging, it is easily describable from it that the business as a going concern need some indispensable terms or factors that will determine its profitability and its ability to with stand the rest of time in a prevalent competitive environment. These indispensable items are operational and resoling in contrast with fixed capital and this is what we termed as the “WORKING CAPITAL” BACKGROUND OF STUDY The need for working capital would not have been necessary or relevant if not it’s inherent problems. In the light or this I wish to state a maiden approach in discussing this course or profession could easily flow and appreciate this simplicity of this presentation. The need for cash detention or holing cannot be overemphasized because it goes a long way in tacking problems resulting from inflation and its like. Therefore, attempts would be made discuss the problems, prospectus of this topic for the benefits of those who care to read or go through the content of this piece of work.

1.2 Statement Of Problem

For many years they are some historical cause of adequacy or inadequacy of working capitals. What other likely causes are and knowing the causes and also finding remedies to them, knowing all these problem does the government, financial institutions and private individual any role to play in the cause and remedies. As a result of this problem firms easily find themselves go or walk the of liquidation because they failed to make Provisions for the rainy day. This piece of work is an attempt in providing last solutions to these problems and ways of abating these problems forever.

1.3 Objective Of Study

The project is hopefully aimed at identifying the cause of adequacy or inadequacy of working capitals.
Corrective measure\remedies that could be adopted to the consequences of adequacy or inadequacy of working capital in the economy.