Table of contents
Title page
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Certification
Dedication
Acknowledgement
Chapter one
The backgound of the study
The statement of the study
Justifification of the study
Objective of the study
Research methodology
Hypothesis of the study
The scope of the study
Plan of the study
Definition of major terms
Chapter two
The concept of working capital
Working capital cycle
Significant of working capital
Cash management
Account receivable/debtor management
Stock management
Management of trade creditors
Chapter three
Research methodology
Method of data collection
Types of data
Sampling method
Method of data analysis
Historical background of the case study
Chapter four
Data presentation and analysis
Hypothesis testing
Chapter five
Summary of findings
Conclusion
Limitation of the study
Bibliography
CHAPTER ONE
1.1 THE BACKGROUND OF THE STUDY
It is surprising that most companies go bankrupt and collapse, not because they are not profitable but their inability to meet their mature obligations. This is usually due to the inefficient management of their working capital, particularly in manufacturing companies.
Therefore, the survival of a company depend largely on the availability of adequate working capital as well as the proper management of each of the component to enhance optimality.
Working capital management involve the relationship between a firms short term asset and its short term liabilities. The basic goal of working capital management is to ensure that a firm is able to continue its operation and it has sufficient ability to satisfy both maturing short term debts and upcoming operation expenses. This is done as to avoid two ugly situation of over capitalization and under capitalization.
Overcapitalization according to Olowe (1997) is an inefficient working capital management that result in excessive stock, debtors, and cash and every few creditors. The implication of this is that it impairs the firms profitability as idle investment earn nothing. The idle investment could have been invested in other profitable investment like marketable securities.
Debt Recovery Management And Its Effect On Profitability Index Of Banks
Cost Accounting Models As Tools For Managerial Decision Making
Undercapitalization on the other hand occur if a firm is trying to support large volume of production with little long- term capital at its disposal. The implication is that it can threaten the solvency of a firm because of its inability to meet it current and maturing obligation.
Thus, the ultimate aim of management of working capital is to maintain an optimum level of working capital, in maintaining an optimum level the company must avoid overcapilization and undercapitalization.
STATEMENT OF THE PROBLEM
The survival of a business firm or company depend largely one its ability to properly manage its working capital component. The prevailing issue of mismanagement of resources in the country particularly the manufacturing companies has made to be of paramount importance to look in the management of working capital will leads to over- trading or under trading.
The result of this two unfavorable condition will lead to insolvency or lower return of capital employed it will adversely affects the profitability and liquidity of a company.
This study intends to solve the problem of inefficient in the management of working capital in manufacturing companies. By solving this problem, the companies particularly the manufacturing companies should be able to manage the component of its working capital in order to maintain an optimum level of working capital
JUSTIFICATION FOR THE STUDY
It has been observed that many companies fold or ceased operation at preliminary study, this is due to the fact that most of the companies do not pay much attention the management of each component of their working capital such as cash, debtors, stock, creditors and marketable securities.
Therefore it is important to manage these component properly. To serve this purpose in the best possible way, there is the need to understand the various component of working capital and the various techniques of managing them.
This study would throw more light on the issue of working capital that has caused much conflict and dissatisfaction among operation in the manufacturing company.
This study would also be of great benefit to the company as it would help to enhance their profitability and liquidity. Finally, this study would however contribute to the existing work on working capital management and also provide avenue for further study.
OBJECTIVE OF THE STUDY
The management of company will fail if it pay little or no attention to its level of working capital especially on the excuse that working capital is only one year affair, unlike long term investment such a company may be ending up negotiating an urgent loan or overdraft under unfavorable condition like selling an asset that can still be very useful to the business, therefore becoming a victim of creditors forced to liquidation.
The main objective of this stud is to examine the significant of efficient management of working capital on the liquidity profitability and the overall management of the manufacturing companies. Adding to this the following are the specific objectives of the study.
- To evaluate the various statistical method or techniques to be used for the proper management of individual components of working capital.
- To examine the optional level of working capital which the company should maintain in order to avoid over trading and under trading.
- To assess the impact of working capital on the liquidity and profitability as well as the overall management of the
- To proffer suggestion which will be based on the finding of the study to Lubcon limited Ilorin.
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