Effects Of Working Capital Management On Cooperative Efficiency

Project and Seminar Material for Economics

Effects Of Working Capital Management On Cooperative Efficiency


Abstract


This study examines the effects of working capital management on cooperative efficiency. From a total population of 1200 members of the cooperative society under study, 120 members were involved in the study. Five-point Likert measurement Scale questionnaire was used as research instrument and Simple percentage were used to analyze the data based on the research questions. The research results showed that there is a significant effect of Capital Management on Cooperative activities. Different modalities are adopted by cooperative to ensure effective capital management of cooperative activities in the light of the array of problems that tend to affect capital management in cooperative activities. The following recommendations will assist greatly in enhancing liquidity management of Cooperative Societies.


Chapter One


Introduction

1.1 Background of the Study

Working capital management in cooperative business is concerned with the management of the enterprise current account which encompasses current asset and current liabilities. The management of Working Capital in Cooperatives is one of the most special aspects of industrial overall financial management. If the cooperative enterprise cannot maintain a satisfactory level of working capital, it is likely to become bankrupt. The current asset of the cooperative enterprise should be large enough to cover its current liabilities in order to maintain a reasonable margin of financial safety. Working capital management in Cooperative deals with actual management of current asset and current liabilities in the enterprise.

Working Capital can be defined as the excess of current asset over current liabilities. Onuoha(2009). Basically, there are four conventional class of current asset which are cash, inventories, marketable securities and account recurable while current liability entail account payable, accruals and taxes working capital is used to finance production to invert in stock and to provide credit to customers. A deeper understanding of the importance of working capital by a cooperative society and it’s satisfactory management can lead not only to efficiency of capital management but also assist in fulfilling the ultimate aim of the cooperative business such as increasing surpluses, maximizing cost and return on cooperative investment.

Consequently, the extent to which working capital management affect cooperative efficiency is the thrust of this study.


1.2 Statement of the Problem

Working capital is the live wire of any enterprise which means that its management is quite crucial to the business. Cooperative societies of whatever type survive with efficient working capital management. The capital of the cooperative enterprise has to be effectively managed for the benefit of the cooperative business so that stated objectives can be achieved. Given every stage and level of cooperative activities, finance tends to play a significant role in the efficiency of the enterprise.

Many cooperative businesses may have adequate finance but could lack proper efficient working capital management. It is disheartening to discover that several cooperative societies seem not be performing up to expectation even in the light of apparent effective and efficient working capital management on cooperative efficiency so that informed measures could be taken to facilitate efficient working capital management in cooperatives in such a way that the cooperative business can effectively achieve stated objectives for the benefit of the members. Consequently, how working capital management affects cooperative efficiency and the modalities that could ensure effective working capital management to promote cooperative business is the thrust of the study.


1.3 Objectives of the Study

The objectives of this study are to:

  1. Find out how working capital management affects cooperative efficiency.
  2. Determine the extent of member’s participation in working capital management in cooperatives.
  3. Find out the modalities in ensuring effective working capital management by cooperative organizations.
  4. To identify the problems affecting efficient working capital management in cooperatives.

1.4 Research Questions

The research questions of this study are:

  1. What are the effects of working capital management on cooperative efficiency?
  2. What is the extent of member’s participation in working capital management in cooperatives?
  3. What are the modalities in ensuring effective working capital management by cooperative organizations?
  4. What are the problems affecting working capital management in cooperative?

1.5 Significance of the Study

This study examines the effects of working capital management on cooperative efficiency. No doubt, this study is significant to government cooperative departments, cooperative societies and of course incoming students.

It is hoped that at the end of this research work, the findings will reveal which pattern of working capital management will be ideal for any cooperative society. The society will be able to appreciate what is capital composition will be for effective and efficient running of the society towards attaining her aims and objectives. Hence, the significance of this study can be said to be enormous.

To the government cooperative department, the result of this study will be a pointer for evaluating problems hindering the development of cooperative societies in the country with reference to working capital management. Besides, the government cooperative department can also use the research findings to protect cooperative from exploitative by some individual, groups, private business and other cooperative organization and other researchers may use this study as a reference material for their own study by referring to the research methodology, data presentation modalities and the pattern of statistical analysis.


1.6 Scope and Delimitations of the study

This study finds out the effects of working capital management on the efficiency of cooperatives, an examination of the extent of member’s participation in working capital management by cooperative organizations fall within the ambit of the study. Included in the scope is a critical assessment of the problems affecting working capital management by cooperatives so that possible solutions could be proffered.


1.7 Definition of Terms

The following terms are contextually defined:

Account Payment:

This is the receipt of inventories and payment for it.

Account Receivable:

These are all payments made to an organization for the sale of its inventories and collection or receivable.

Accruals:

These are liabilities not paid for but postponed to the following financial years.

Bankruptcy:

The inability to pay debt in full and the asst of the business confiscated and distributed to the business creditors.

Business:

Any legal activities which individual, group cooperative bodies etc. engage themselves in doing to provide satisfying goods and services with the ultimate aim of making profit.

Current Liabilities:

These are liabilities that can be payable within the next accounting year and operational circle and which can be incurred in the ordinary course of business. These will consist of money owned to suppliers, tax and all other current expenses that will be incurred by the cooperative enterprises.

Inventories:

Inventories are stocked goods which include raw materials, spare part, tools, component, assembles, semi finished goods, finished goods.

Management:

The effective and efficient utilization of human and material to achieve organizational goal and objective i.e ability to get things done through other people.

Working capital:

This is simply current asset minus current liability. Current assets are the assets that will be turned over in the normal course of the business. They include stock of goods, debtors and cash at hand etc.


Chapter Five


Summary, Conclusion and Recommendations

5.1 Introduction

This chapter presents the Summary of the research, Conclusion drawn from the findings of the study and Recommendations that would head to the effectiveness of Capital Management on Cooperative activities. This chapter equally contains suggestions for further researchers.


5.2 Summary of the Study

This study investigates the effects of capital management on cooperative efficiency. A survey method was used for this study. The population consisted of all the entire Male and Female members of KRPC Multi-purpose Cooperative society limited. The research questions that guided the study were; what are the effects of Capital Management on Cooperative efficiency? What is the extent of member’s participation in capital management in Cooperative? What are the modalities involved in ensuring effective capital management by Cooperative Organizations? What are the problems affecting Capital Management in Cooperatives?

Five-point Likert measurement Scale questionnaire was used as research instrument and Simple percentage were used to analyze the data based on the research questions. Research results showed that there is a significant effect of Capital Management on Cooperative activities. Those members actively participate in Capital Management of their Cooperative activities, that different modalities are adopted by Cooperatives to ensure effective Capital Management of Cooperative activities in the light of array of problems that tend to affect Capital Management in Cooperative activities. It was recommended among others that Cooperative Societies should ensure an effective monitory and evaluation of financial data through regular auditing of Cooperative business. There should be regular review of business transactions to keep them abreast with the modern trends of the economy.


5.3 Conclusion

Based on the research findings “what are the effects of working capital management on cooperative efficiency it is concluded that Capital Management has significant effects on the Cooperative efficiency, Administrative official and other Management Carefully manage the financial resources in a prudent and cost effective manner in order to make the society very effective and well developed. There are significant effects of capital management on cooperative efficiency. Among others, it enhances prudence on the part of the management committee. It safeguards the investments of the cooperative members etc.

Members actively participate in the capital management of their cooperative activities. This they do through investment in decision making, investment policies, approval of loans etc.

Different modalities are adopted by cooperative to ensure effective capital management of cooperative activities in the light of the array of problems that tend to affect capital management in cooperative activities.


5.4 Recommendations

The following recommendations will assist greatly in enhancing liquidity management of Cooperative Societies.

  1. Cooperative Societies should ensure an effective monitoring and evaluation of financial data in Cooperatives through regular audits there should be monthly or annual financial reports on the business activities of the Cooperative of the Cooperative Society. This should be handled by an expert hired from outside the Cooperative enterprise.
  2. There should be a clear specification of all sources of funds for the Cooperative business and the expenditure should be clearly defined and implemented accordingly.
  3. The Cooperative auditor should ensure a clear distinction between the budget of the Cooperative business for a given period and the actual fiscal activity.
  4. There should be a regular review of modalities of business transactions of the Cooperative Society so that the business could be conducted in line with the modern trends of the economy.
  5. Cooperative Societies should ensure a process of making innovations such as revising plans of budget to reflect changed circumstances raising an additional way of funding the Cooperative business modifying goals or objective of the Cooperative when necessary.

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