THE NEED FOR GOOD WORKING CAPITAL MANAGEMENT IN MANUFACTURING COMPANY

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THE NEED FOR GOOD WORKING CAPITAL MANAGEMENT IN MANUFACTURING COMPANY

ABSTRACT

The need for good working capital management one of the most important aspects of the firms over all financial management is necessary in order to ensure the firms long term success and to achieve its overall goal, which is the maximization of owner’s wealth. From the chapter two, we would be looking at the concept of working capital. The need for good working capital managements, to run day to day activities business enterprise cannot be over emphasized. In view of this problem and short coming the objective of his research was.

To find out manufacturing industries have adequate working capital.

To assess the need for financial auditing.

To also look into the management of cash for day- to-day running expenses.

CHAPTER ONE: INTRODUCTION

1.0 INTRODUCTION

In this capital such areas like background of the study would be looked into, it is divided into these sub-headings such as statement of problem, purpose of the study, scope of the study of the study research hypothesis, significance of the study limitation of study and definition of terms.

1.1 BACKGROUND OF THE STUDY

The viability of an organization can be enhanced through effective and efficient management of the firms working capital, working capital management has variously been defined by authors and professional as the capital which can readily turned into each for payment of the day to day expenses of the firms.

The need for financial resources are limited and costly and even where it is available, the scope into which we could be applied and diverse.

A business that is just about to start production needs a fixed assets and adequate working capital to pay staff salaries, wages and other administrative expenses.

The need for good management of capital should be the most important aspect of a firms over all financial management. This is because efficiency in this area of financial management as necessary to ensure the firms long term success and to achieve its overall goals which is maximization of owner’s wealth. Working capital has also defined by western brigham’s as a firms investment in short term asset each short term securities, account recruable and inventories” from the foregoing working capital management refers to all aspects of the administration of both current assets and current liabilities.

1.2 STATEMENT OF THE PROBLEM

The study entitled “Need for good working capital management in manufacturing industry (A case study of sunrise Flour Mill Limited times). Has the major problem of studying how working capital management could be managed so as lead to reduction in cost and improvement in profit potential of the firm, Another problem that would be looked into the study is the adequacy of working capital management in manufacturing industries further the problem that affect the effective implementation of working capital policy will also be dealt with. As a follow up these other problems would be looked into

(a) Flow much cash does the business need to operate its day- to-day activities adequately.

(b) Whether the business has as inventory policy.

(c) Also to be looked into as how the firm manages its cash. Finally, the researcher would look into the problem of the understanding and acceptability of members of staff of such organization to the capital management policy.

1.3 NEED FOR THE STUDY

The need for the study is to run day-to-day business activities cannot be over emphasized. We will hardly find a business firm which does not require any amount of working capital, indeed, firm differs in their requirement of working capital. We know that firms aim at maximizing the result of shareholders. In its endeavour to maximize shareholders wealth, the firm should corn sufficient return requirement successful sales activity. The firm has to invest enough founds in current assets for the sales do not convert into cash instantly. In as much as a firm need adequate working capital to run its business operation it should keep watch over situation that could lead to both excessive and in adequate working capital position sincere that could be dangerous from the firm’s point of view.

1.4 PURPOSE OF THE STUDY

The main purpose of the study is to highlight the importance of the need for good working capital management in manufacturing industries generally, with particular reference to sunrises flour Mill Emene. The work intends to determine the existence and evaluate the adequacy and quality ;of the firms’ working capital policy.

Further, the working capital is also aimed at filling the gap existing in the study of need for good working capital management which has been created by financial managers.

1.5 SCOPE OF THE STUDY

This study intent to cover the need for good working capital management in manufacturing industries around Enugu Localities with particular reference to sunrise’s flour Mill limited Emene Enugu.

Is capital properly managed in sunrise flour Mill?

What are the problems that engulf sunrise’s flour Mill?

What are the measures that can be taken to improve the performance of sunrises?

What government regulation affects the performance of the company?

Have auditors ever audited the current.

To what extent can the efficiency of sunrise be measured?

1.6 SIGNIFICANCE OF THE STUDY

The work as intended generally for the benefit of stores and owner of manufacturing industrial who have adopted, and policy on working capital management . The work will contribute immensely to the management of working capital management in Sunrise flour Mill limited.

They would study the work and make recommendation where necessary also the work will be useful to investors and creditors who might have been dealing with company.

This work would be made available after successful completion in the institution library probably for other students who may embark on the study on need for good working capital management in their future programmes.

Finally, the general public may find this work valuable in cases where they wish to broaden their knowledge of working capital management policy in business enterprise.

1.7 DEFINITIONS OF TERMS

Some technical terms used in the project are defined as follows:

CURRENT ASSETS: Assets which are really convertible into cash acquired for short term using such as stock.

CAPITAL: Wealth owned by an individual or business organization in form of money or goods as to be used for the creation of additional wealth.

CREDIT POLICY: This is how a firm plans to give out its credit and collection of debt owned to it by its customers.

WORKING CAPITAL: This is the capital that can be readily converted to cash for used in day- to- day expenses of the firm.

IDLE FUNDS: Funds which are not used in production and does not earn interest or divided.

MARKET SECURITIES: These are short term securities which can be richly converted into cash.

MANAGEMENT: These are the act of getting things done, more especially management of business which involves setting company’s goals and directing human and physical resources to achieve these goals.

GROSS CAPITAL: Refers to the firm’s investment in current Assets.

CURRENT LIABILITIES: These are short credit owned by the company to other individual or companies.

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