Effect of Cash Management On the Profitability of Financial Institutions: A Case of Equity Bank Kabalagala Branch

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Table of Contents

Declaration .............................................................................................................................. i

Approval ................................................................................................................................ ii

Dedication ............................................................................................................................. iii

Acknowledgement ................................................................................................................ iv

List of Tables .......................................................................................................................... x

List of Abbreviations ........................................................................................................... xii

Abstract ............................................................................................................................... xiii

CHAPTER ONE:INTRODUCTION ............................................................................................. 1

1.0 Introduction ....................................................................................................................... I

1.1 Background of the Study .................................................................................................. l

1.1 Problem Statement ............................................................................................................ 5

1.2 Purpose of the Study ......................................................................................................... 5

1.3 Objectives of the Study ..................................................................................................... 5

1.4 Research Questions ........................................................................................................... 5

1.5 Scope of the Study ............................................................................................................ 6

1.5.1 Geographical scope ........................................................................................................ 6

1.5 .2 Content Scope ................................................................................................................ 6

1.5.3 Time Scope .................................................................................................................... 6

1.6.0 Conceptual Frame Work ................................................................................................ 6

1.7 Significance of the Study .................................................................................................. 7

V

CHAPTER TWO:LITERA TURE REVIEW .......................................................................... 8

2.0 Introduction ....................................................................................................................... 8

2.1 Cash Management ............................................................................................................. 8

2.1.2 Importance of Holding Cash .......................................................................................... 8

2.2 Cash Management Techniques ....................................................................................... 12

2.3.0 Profitability .................................................................................................................. 18

2.3.1 Measurement of Profitability ....................................................................................... 20

2.3.2 Determinants of Profitability in a Company ................................................................ 22

2.4 Relationship between Cash Management and Profitability ............................................ 24

CHAPTER THREE:_METHODOLOGY ............................................................................. 30

3.0 Introduction .................................................................................................................... .30

3.1 Research Design ............................................................................................................ .30

3.2 Study Population ............................................................................................................. 30

3.3 Sample Size ..................................................................................................................... 31

3.4 Sampling Procedures ...................................................................................................... 31

3.5 Source of Data ............................................................................................................... .32

3.5.1 Primary Data ................................................................................................................ 32

3.5.2 Secondary Source ........................................................................................................ 32

3.6 Data Collection Instruments and Methods ..................................................................... .32

3.6.1 Questionnaire ............................................................................................................... 32

3.6.2 Interview Guide .......................................................................................................... .33

vi

3.6.3 Documentary Analysis ................................................................................................. 33

3.6.4 Interviewing ................................................................................................................. 33

3.7 Reliability and Validity ................................................................................................... 34

3.8 Procedure of Data Collection ......................................................................................... .34

3.9 Data Presentation, Interpretation and Analysis ............................................................... 35

3.9.1 Data Analysis ............................................................................................................... 35

3.9.2 Data Editing ................................................................................................................. 35

3.9.3 Data Presentation ......................................................................................................... 35

3.10 Ethical Consideration .................................................................................................... 36

3.11 Limitations of the Study ............................................................................................... 36

CHAPTER FOUR:PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS ........... 38

4.1 Introduction ..................................................................................................................... 38

4.2 Demographic Characteristics of Respondents ................................................................ 38

4.3 Cash Management Techniques Used By Equity Bank .................................................. .40

4.3.1 Cash Management Techniques Being Used in Equity Bank ...................................... .40

4.3.2 Rating the Effectiveness of Cash Management in Equity Bank ................................. .40

4.3.3 Equity Bank Invest Its Excess Cash Balances in Marketable Securities .................... .41

4.3.4 The Bank Puts Aside Money for Precaution and Speculation Motives ...................... .41

4.3.5 Optimum Cash Balance .............................................................................................. .42

4.3.6 Equity Bank Carries Out Cash Planning ...................................................................... 43

4.3.7 Equity Bank Takes Long To Pay Off Debts Due To It .............................................. .43

Vil

4.3.8 Preparation of Cash Budgets ....................................................................................... .44

4.3.9 Various Cash Management Techniques in Equity Bank ............................................ .45

4.4 Level of Profitability in Equity Bank ............................................................................ .47

4.4.1 Rating the Level of Profitability in the Equity Bank .................................................. .4 7

4.4.2 The Bank Has a Policy of Controlling Expenditure ................................................... .47

4.4.3 Fraud Has Affected the Profitability of Equity Bank Limited .................................... .48

4.4.4 Staff That Has Left the Bank Due to Fraud Related Cases ........................................ .48

4.4.5 The Current Profitability of Post Bank Limited Is Low ............................................. .49

4.4.6 Equity Bank Has Lost a Lot Due to Fraud Related Cases .......................................... .49

4.4.7 Determinants of Profitability in Equity Bank ....................................................................... 50

4.5 The Relationship between Cash Management and Profitability of Commercial Banks.51

4.5.1 Effect of Cash Management on Profitability of Equity Bank-Uganda ........................ 51

4.5.2 Cash Management Affects Profitability ...................................................................... 5 I

4.5.3 Good Cash Management Practices Results in High Profitability Levels .................... 52

4.5.4 Cash Management Affected the Profitability of Equity Bank ..................................... 52

4.5.5 Delaying Payables Improves Profitability ................................................................... 53

4.5.6: Accelerating Receipts Collections Increases Profitability .......................................... 54

4.5.6 Summary of the Findings on the Relationship between Cash Management and

Profitability of Equity Bank Limited .................................................................................... 55

CHAPTER FIVE:DISCUSSION, CONCLUSION AND RECOMMENDATIONS ...................... 59

5.0 Introduction ..................................................................................................................... 59

5.1 Summary ......................................................................................................................... 59

viii

5.1.1 Cash Management Techniques Used By Equity Bank ................................................ 59

5.1.2 Level of Profitability in Equity Bank .......................................................................... 60

5.1.3 Cash Management and Profitability of Equity Bank ................................................... 60

5.2 Conclusion ...................................................................................................................... 61

5.3 Recommendations ........................................................................................................... 62

5.4 Areas for Further Research ............................................................................................. 63

REFERENCES ..................................................................................................................... 64

APPENDICES ...................................................................................................................... 67

APPENDIX A: SELF-ADMINISTERED QUESTIONNAIRE ............................................ 67

APPENDIX B: WORK PLAN .............................................................................................. 71

APPENDIX C: ACTUAL BUDGET .................................................................................... 72

Abstract The purpose of the study was to establish the effect of cash management on the profitability of financial institutions with specific emphasis on establishing the various cash management techniques, the level of profitability and the relationship between cash management and profitability of Equity Bank. The research design adopted in this study was a case study design. The study population included the staff of Equity Bank on Kabalagala Branch a total of 30 respondents was selected for the study. Simple random sampling was used to select respondents in the field. The questionnaires were used and administered to the employees working with the bank. Data from the questionnaires was coded, entered, edited for consistency and easiness in and later analyzed using Statistical Package for Social Scientists (SPSS) where correlation was used to establish the relationship between cash management and profitability of Equity Bank. Regarding the study findings, it was revealed that cash management in Equity Bank affects profitability levels. The findings also showed that the bank employs several cash management techniques in order to reduce fraud of cash in the bank. The study also showed that profitability levels were high in the bank. Findings on cash management in Equity Bank, it was revealed that the cash management techniques are in place but they are not so effective. The bank carries out cash planning , it prepares cash budgets, tries to maintain some cash balance but its not optimum, all of these are done by the bank but are not effective. The researcher recommended that there is need for deploying a cash management system which involves support and coordination among multiple departments. Banks need to pick the right cash management provider who can coordinate the physical and technological installation of the system can significantly expedite and smooth the process of ensuring profit maximization. Each department should carefully consider features and functionality that will be required for a successful deployment and utilization of cash management which also increases profitability.

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APA

VIOLA, K (2022). Effect of Cash Management On the Profitability of Financial Institutions: A Case of Equity Bank Kabalagala Branch. Afribary. Retrieved from https://afribary.com/works/effect-of-cash-management-on-the-profitability-of-financial-institutions-a-case-of-equity-bank-kabalagala-branch

MLA 8th

VIOLA, KUKUNDAKWE "Effect of Cash Management On the Profitability of Financial Institutions: A Case of Equity Bank Kabalagala Branch" Afribary. Afribary, 19 Jul. 2022, https://afribary.com/works/effect-of-cash-management-on-the-profitability-of-financial-institutions-a-case-of-equity-bank-kabalagala-branch. Accessed 09 Aug. 2022.

MLA7

VIOLA, KUKUNDAKWE . "Effect of Cash Management On the Profitability of Financial Institutions: A Case of Equity Bank Kabalagala Branch". Afribary, Afribary, 19 Jul. 2022. Web. 09 Aug. 2022. < https://afribary.com/works/effect-of-cash-management-on-the-profitability-of-financial-institutions-a-case-of-equity-bank-kabalagala-branch >.

Chicago

VIOLA, KUKUNDAKWE . "Effect of Cash Management On the Profitability of Financial Institutions: A Case of Equity Bank Kabalagala Branch" Afribary (2022). Accessed August 09, 2022. https://afribary.com/works/effect-of-cash-management-on-the-profitability-of-financial-institutions-a-case-of-equity-bank-kabalagala-branch