The Need For Good Working Capital Management In Manufacturing Company
Project and Seminar material for Accountancy
Abstract
The need for good working capital management one of the most important aspects of the firms over all financial management is necessary in order to ensure the firms long term success and to achieve its overall goal, which is the maximization of owner’s wealth.
From the chapter two, we would be looking at the concept of working capital. The need for good working capital managements, to run day to day activities business enterprise cannot be over emphasized.
In view of this problem and short coming the objective of his research was.
- To find out manufacturing industries have adequate working capital.
- To assess the need for financial auditing.
- To also look into the management of cash for day- to-day running expenses.
Table Of Contents
Preliminary Page(s)
- Title page
- Approval page
- Certification
- Dedication
- Acknowledgement
- Abstract
- Table of contents
Chapter One
1.0 Introduction
- 1.1 Background of study
- 1.2 Need for the study
- 1.3 Statement of the study
- 1.4 Purpose of the study
- 1.5 Scope of the study
- 1.6 Significance of the study
- 1.7 Definition of terms
Chapter Two
2.0 Literature Review
- 2.1 Concept of working capital
- 2.2 Overview of working capital Audit management
- 2.3 Financing of fixed current Assets
- 2.4 Management of selected component of working capital cash management
- 2.5 Working capital and the fund flow statement
- 2.6 Inventory management.
- 2.7 Dangers of Inadequate work capital
- 2.8 Working capital as measure of liquidity
- 2.9 Management of Account Receivable
Chapter Three
3.0 Research Design and Methodology
- 3.1 Introduction
- 3.2 Research design
- 3.3 Sources and method of data collection
- 3.4 Population and sample size
- 3.5 Sample Techniques for data analysis
- 3.6 Validity and Reliability of Measurement Instrument
- 3.7 Method of data Analysis
Chapter Four
4.0 Presentation and Analysis of Data
- 4.1 Introduction
- 4.2 Presentation of Data
- 4.3 Data analysis
Chapter Five
5.0 Summary, Conclusion and Recommendation
- 5.1 Summary
- 5.2 Conclusion
- 5.3 Recommendations
- 5.4 Areas of further study
- Bibliography
Chapter One
1.0 Introduction
In this capital such areas like background of the study would be looked into, it is divided into these sub-headings such as statement of problem, purpose of the study, scope of the study of the study research hypothesis, significance of the study limitation of study and definition of terms.
1.1 Background Of The Study
The viability of an organization can be enhanced through effective and efficient management of the firms working capital, working capital management has variously been defined by authors and professional as the capital which can readily turned into each for payment of the day to day expenses of the firms.
The need for financial resources are limited and costly and even where it is available, the scope into which we could be applied and diverse.
A business that is just about to start production needs a fixed assets and adequate working capital to pay staff salaries, wages and other administrative expenses.
The need for good management of capital should be the most important aspect of a firms over all financial management. This is because efficiency in this area of financial management as necessary to ensure the firms long term success and to achieve its overall goals which is maximization of owner’s wealth.
Working capital has also defined by western brigham’s as a firms investment in short term asset each short term securities, account recruable and inventories” from the foregoing working capital management refers to all aspects of the administration of both current assets and current liabilities.
1.2 The Need For The Study
The need for the study is to run day- to –day business activities cannot be over emphasized. We will hardly find a business firm which does not require any amount of working capital, indeed, firm differs in their requirement of working capital. We know that firms aim at maximizing the result of shareholders. In its endeavor to maximize shareholders wealth, the firm should corn sufficient return requirement successful sales activity.
The firm has to invest enough founds in current assets for the sales do not convert into cash instantly. In as much as a firm need adequate working capital to run its business operation it should keep watch over situation that could lead to both excessive and in adequate working capital position sincere that could be dangerous from the firm’s point of view.
1.3 Statement Of The Problem
The study entitled “Need for good working capital management in manufacturing industry (A case study of sunrise Flour Mill Limited times). Has the major problem of studying how working capital management could be managed so as lead to reduction in cost and improvement in profit potential of the firm.
Another problem that would be looked into the study is the adequacy of working capital management in manufacturing industries further the problem that affect the effective implementation of working capital policy will also be dealt with. As a follow up these other problems would be looked into
- Flow much cash, does the business need to operate its day- to-day activities adequately.
- Whether the business has as inventory policy.
- Also to be looked into as how the firm manages its cash.
- Finally, the researcher would look into the problem of the understanding and acceptability of members of staff of such organization to the capital management policy.
1.4 Purpose Of The Study
The main purpose of the study is to highlight the importance of the need for good working capital management in manufacturing industries generally, with particular reference to sunrises flour Mill Emene. The work intends to determine the existence and evaluate the adequacy and quality ;of the firms’ working capital policy.
Further, the working capital is also aimed at filling the gap existing in the study of need for good working capital management which has been created by financial managers.
1.5 Scope Of The Study
This study intent to cover the need for good working capital management in manufacturing industries around Enugu Localities with particular reference to sunrise’s flour Mill limited Emene Enugu.
- Is capital properly managed in sunrise flour Mill?.
- What are the problems that engulf sunrise’s flour Mill?
- What are the measures that can be taken to improve the performance of sunrises?
- What government regulation affects the performance of the company?
- Have auditors ever audited the current.
- To what extent can the efficiency of sunrise be measured?
1.6 Significance Of The Study
The work as intended generally for the benefit of stores and owner of manufacturing industrial who have adopted, and policy on working capital management . The work will contribute immensely to the management of working capital management in Sunrise flour Mill limited.
They would study the work and make recommendation where necessary also the work will be useful to investors and creditors who might have been dealing with company.
This work would be made available after successful completion in the institution library probably for other students who may embark on the study on need for good working capital management in their future programmes.
Finally, the general public may find this work valuable in cases where they wish to broaden their knowledge of working capital management policy in business enterprise.
1.7 Definitions Of Terms
Some technical terms used in the project are defined as follows:
Current Assets:
Assets which are really convertible into cash acquired for short term using such as stock.
Capital:
Wealth owned by an individual or business organization in form of money or goods as to be used for the creation of additional wealth.
Credit Policy:
This is how a firm plans to give out its credit and collection of debt owned to it by its customers.
Working Capital:
This is the capital that can be readily converted to cash for used in day- to- day expenses of the firm.
Idle Funds:
Funds which are not used in production and does not earn interest or divided.
Market Securities:
These are short term securities which can be richly converted into cash.
Management:
These are the act of getting things done, more especially management of business which involves setting company’s goals and directing human and physical resources to achieve these goals.
Gross Capital:
Refers to the firm’s investment in current Assets.
Current Liabilities:
These are short credit owned by the company to other individual or companies.
Chapter Five
5.0 Summary, Conclusion And Recommendations
5.1 Summary.
Considering the information on the various label sunrises at the set that have a general obstacle arising from the prevailing economic situation in the country. Apart from improving the knowledge and efficiency of its staff via training program. The company of sunrise lacks the maintenance of equipment and manpower.
The government policy on tax impose on the company does not enable the company to embark on planned expansion programme.
5.2 Conclusion
Having critically analysis the working capital management of Sunrise Flour Mill Limited. We rightly concluded that:
- The management team of sunrise should exploit every available avenue to improve the working capital ratio of the company.
- The method of collecting debts out standing from customers is to improve to reduce the deficiency in current assets as will improve company’s policy on credit extension.
- There should be periodic or quarterly auditing of company’s account.
It can be seen that there is a strong relationship among all the mention variable. If any of it is weak on the other.
5.3 Recommendations
Having gone through this research work with keen interest, which was aroused by the indiscriminate cloure of some manufacturing industries in Nigeria.
The researcher has these recommendations to make. In order to see that good capital management has adequately maintained, the management of sunrise should as a matter of fact make provision for account auditing by a qualified auditor either yearly or quarterly depending on the financial capability of the company.
The average current ratio should be improved on to meet the industry average management and improve on profitability maximization is the ultimate objective of any profit making organization. This is the reason why effective management of operating cost should be enhanced. A reduce operating cost should increase profit capacity.
Finally, the management of working capital should be the ultimate aim of management team in sunrise flour mill limited.
5.4 Areas For Further Study
It is a known fact that research on this topic will not end in this study other researchers will still research on this topic and related facts therefore the following areas are recommended for further study.
- How the effects of inflation and other economic factor can be controlled by the use of quantitative techniques while computing ratios so that figures will not give a false picture of the firm.
- Other types of specified Assets and their effect on profit, this may help firms to control their profits as a result of the Assets composition.
- Accounts of more than one bank should be compared so as to arrive at objective/deductive result of the effects of ration analysis.
- Researchers may also investigate beyond the banking Industry even through the nature of Assets is some what different. In that regard, the research may restructure the methodology to suit the situation of business.
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