THE PROBLEMS OF WORKING CAPITAL MANAGEMENT IN THE PRIVATE SECTOR
TABLE OF CONTENTS
TITLE PAGE
APPROVAL PAGE
DEDICATION
ACKNOWLEDGEMENT
TABLE OF CONTENT
CHAPTER ONE
INTRODUCTION
1.1 BUSINESS GUIDING OBJECTIVES
CHAPTER TWO
2.1 MEANING OF WORKING CAPITAL
2.2 MANAGEMETN
CHAPTER THREE
3.1 SUMMARY
3.2 RECOMMENDATION
3.3 CONCLUSION
REFERENCES
CHAPTER ONE
1.0 INTRODUCTION
The sole objective of any business in the private sector is to
make profit, but the uncertainly inherent in today’s economic environment threatens the survival of every business and makes sound liquidity and cash management the local point fro financial management rather than achievement of maximum profit.
The deeper study and in creased analytical approach to business finance has red to an ever growing and importance of working capital and it’s influence on the success or otherwise of business operation. It is concerned with the management of the various elements of working capital which include stock, debtor, cash and creditors. Other components of working capital include short term securities, bills payable, prepayment and other current assets. However, working capital management has been variously defined but in a nutshell; it refers directly to planning – organizing, financing and controlling of resources available to the business in order to achieve set of objective or a definite goal.
L.R. Howard puts it this way; working capital may be regarded as the life hood of a business. Its effective provision can do much to ensure the success of a business while it’s in efficient management can lead not only to loss of profit but also to the ultimate downfall of want. Otherwise might be considered as a promissory concern.
It is certain that if skilled working capital management is not available in amount of finance provided will transform a financially weak company with mediocre performance into a strong and dynamic organization enjoying a scintillating regulation.
This research work is a crucial one in the sense that current asses by their very nature are changing daily, if not hourly and management decision must be made.
As B. Chizen puts it this way, that is the imperative of sound management of working capital has assured critical significance in the face of the deteriorating market situation consequently on the unavailability of foreign exchange, essential raw material and other inputs badly required for the optional functioning of the management sector.
It is therefore necessary that available resources of which capital is the most important in any business be optionally utilized, since an established test for the ability of management of an enterprise is the way and management mangers the scare resources entrusted to it.
Excluding over draft, accounting to him overdraft should be excluded because it is revolving liability of non-current nature. Lucy defined management as the direction of enterprise, through the planning, organizing, co-operating and controlling of its human and material resources towards the achievement of a predetermined objective.
Relating to the issue at hand working capital management can then be said to involve the directing, planning, organization, co-coordinating, financing and controlling of resources available to the private and public sector in order to achieve a set out objective or definite goal.
INEFFICIENT MANAGEMENT OF WORKING CAPITAL
The following is the description of the inefficient which generally influence the working capital requirements of the organizations
1. NATURE AND SIZE OF BUSIENSS: The working capital requirement of a firm are basically influenced by the nature of its business.
Trading and financial firms have a very less investment in working capital. Take for instance, retail stores which carry large stock of goods to satisfy the varied and continuous will be a the minimum and debtors almost non existent on the other hand large firms carry heavy inventories of raw material and working-in-progress and their debtors are likewise usually quite substantial.
This size of business also has an important impact on its working capital needs. A firm with large of operation will bread more working capital than small firm.
2. INTERNAL POLICY: These can be grouped into two:
a. production Policy: Due to seasonal changes in the demand for the firms product constant production may be maintained by the firms in order to resource working capital problems.
As steady production policy will cause inventories to accumulate during the of-season period and the firm will be exposed to greater inventory costs and risks. Thus, the organization may adopts the policy of varying it’s production schedules in accordance.
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