One of the major objectives of most business organisation is profitability. However, in financial management, it is generally believed that liquidity is more important than profitability. One of the reasons for this is that most organisations make profits, but do not possess enough or adequate liquid asset to off-set current obligations. Inability to make payment as t when due may definitely have serious consequences on the organisation. This situation may give rise to a loss of goodwill and furthermore any result to technical insolvency which may lead the organisation to unintended liquidation.
A second reason is that uncertain inherent in this present days economic/business environment threatens the survival of every business, thus making sound liquidity and cash management a necessity points in corporate planning. This claim is substantiated in the recent times by the fact that the importance of management of liquid asset has been gradually and systematically gaining prominence and growth in most manufacturing companies or firms. This incidental prominence and growth of liquidity management makes it very apparent that no firm can survive without an effective and efficient management of its liquid resources which is the working capital.
The working capital by all standards is been and regarded as the life –wire of any business organisation it is particularly important in the daily maintenance and running expenses involving cash. For the purpose of this project, the working capital of a firm comprises of the cash balance, marketable short-term securities, inventories and accounts receivables. On the other hand, net working capital is the excess of current assets over current liabilities. Therefore, working capital management refers to the efficient administration of both the current assets and current liabilities.
The rationale of working capital management is on the realization that current asset holding should be increased to the point where marginal returns on increases in such assets are equal to cost of capital required to finance such additions while current liabilities should as much as possible be used instead of long term debt whenever this reduces the average cost of capital. Current assets characteristically constitute more than half the assets of most businesses and the size and relative volatility of these assets make it necessary for such assets to be closely monitored. Thus disproportionate amount of time of the financial controller is devoted to the management of working capital.
Finally, efficient management of working capital is important to both large and small firms, especially during this austere period because if the efficiency of managing working capital is not available, no amount of finance provided will transform a financially weak organisation performance into a strong and dynamic organisation with a remarkable reputation.
TABLE OF CONTENT
Title Page II
Approval page III
Table of content VIII
1.2Statement of problem 3
1.3Objective of the study 5
1.4Research hypothesis 7
1.5Assumption of the study 8
1.6Scope of the study 9
1.7Significance of the study 9
1.8Limitations of the study 11
1.9Historical background of Marshal paints & Chemical company13
1.10Organisation of the study 15
1.11Definition of operational terms 16
2.0Review of related literature 21
2.1Meaning of working capital 21
2.2Composition of working capital 23
2.3Factors of affecting the composition of working capital 24
2.4Current assets 26
2.5Current liabilities 28
2.6Management of working capital 29
2.7Types of working capital 30
2.8Characteristics of working capital 30
2.9Sources of working capital 31
2.10Uses of working capital 33
3.0Research methodology and procedures 37
3.1Selection of data 38
3.2Collection of data 38
3.3Nature of data analysis 41
4.1Data presentation and analysis 45
4.2Presentation of data 46
5.0Summary and recommendation 69
5.1Summary and findings 69
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