THE PROBLEM OF WORKING CAPITAL MANAGEMENT IN THE MANUFACTURING INDUSTRIES IN NIGERIA: A CASE STUDY OF EMENITE LIMITED
TABLE OF CONTENTS
Table of Content
1.1 Background of the study
1.2 statement of problem
1.3 objective of the study
1.4 significant of the study
1.5 scope and limitations of the study
1.6 Definition of terms
2.0 Literature review
2.1 Working capital management (introduction)
2.2 components of working capital management
2.3 Classification of working capital
2.4 working capital cycle
2.5 Effects of inadequate working capital
2.6 Effects of excess working capital
2.7 Determination of adequate amount of working capital
2.8 Factors affecting the amount of investment
2.9 Sources of business finance
3.0 Summary of findings, recommendation and conclusion
Bibliography CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
The term working capital originated with the old iankee peddlers, who would load up his wagon with goods and then go off on his route t o peddle his wares. The merchandise was called working capital because it was what he actually sold, or turn over” to produce his projects. He generally owned the rvagon around horse, so that they were financed with ‘equity’ capital, but he borrowed the funds to buy the merchandise these borrowings were working capital loans, and they had to be repaid after each trip to demonstrate to the bank that the credit was sound. If the peddler was able to repay the loan, then the bank would make another loan.
From this, working capital is conceptualized as the provision of sufficient current assets that will be able to sustain the normal process of acquisition of raw materials and supplies, turning out the finished product and collection of payments.
Working capital management deals with the determination of the ratios at which to hold the current assets and current liabilities in the overall valuation of the firun. Working capital broadly refers to current assets and current liabilities. Net working capital is the deduction of current liabilities from the current assets.
Therefore, working capital is one of the most strategic asset holdings of firms. It is a circulating capital which flows and changes form as the firm pursues its goals and performs, its operation it is a financial lubricant or life stream for the firm and maintains constant process of circulation throughout firm.
Current assets as the gross working capital, therefore, represent those assets that can be converted into cash within an accounting period. Current assets are constantly varying in the life of a firm i.e it changes from cash to inventions, to receivable and then back to cash. If a lot of funds are field down in the form of current assets, it will constitute a problem to the management as there may be little or no fund for the other operational sectors.
The purpose of the research is to assess the problem of working capital management in the development of manufacturing industries in Nigeria. In order to accomplish this study, Emenite Nigeria limited has been selected as a case organization.
1.2 STATEMENT OF PROBLEM
In Nigeria today, some manufacturing industries are facing obsolescence, deterioration, pilferage, mishandling, high insurance and carring cost, idle funds and accounts receivable due to unnecessary accumulation of inventories. This study is arming at finding whether there is excessive working capital.
Also, some manufacturing industries in Nigeria, are facing the problem of independence due to liquidity problem. This study is aiming at finding also whether there is in sufficient working capital available to manufacturing industries in Nigeria.
Moreover, some are facing the problem of stagnation and sluggish rate of return on investment. This study is also aiming at finding whether there is more availability of working capital to undertake profitable investments.