THE EFFECT OF WORKING CAPITAL ON THE OPERATIONAL EFFICIENCY OF AN ORGANIZATION
TABLE OF CONTENTS
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
1.2 Statement of the Problem
1.3 Objectives of the Study
1.4 Research Questions
1.5 Research Hypotheses
1.6 Significance of the Study
1.7 Scope of the Study
CHAPTER TWO
LITERATURE REVIEW AND THEORETICAL FRAMEWORK
2.1 Concept of Working Capital
2.2 Working Capital Management
2.3 Components of Working Capital
2.4 Working Capital Ratios
2.5 Dangers of Excess Working Capital
2.6 Determinants of Working Capital
2.7 Relationship between Working Capital and Profitability
2.8 The Nigerian Economy and Working Capital Management of Quoted Firms in Nigeria.
2.9 Historical Background of Cadbury Nigeria Plc
2.10 Theoretical Framework
2.11 CONCLUSION
CHAPTER THREE
METHODOLOGY
3.1 Description of the Study Area
3.2 Method of Investigation
3.3 Methods of Data Collection
3.4 Research Instrument
3.5 Validation of Research Instrument and Testing
3.6 Method of Data Analysis
CHAPTER FOUR
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA
4.1 Components Of Working Capital In Cadbury Nigeria Plc
4.2 Data Analysis (Secondary Data)
4.3 Data Analysis (Primary Data)
4.4 Hypotheses Testing
4.5 Discussion of Findings
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary
5.2 Conclusion
5.3 Recommendations
REFERENCE
APPENDIX
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The current scarcity of cash and credit is threatening the survival of many businesses in all over the world primarily in
Nigeria as its considered the sources of company’s working assets and liabilities referred to as working capital. it is a
fact that corporations could not exist without working capital and this is undeniable. Eventually, the management of
working capital (WCM) necessitates short term decisions in working capital (WC) and financing of all aspects of both
firms short term assets and liabilities.
This explains the fact that firms with inadequate working capital are in financial strait jacket. As the name implies,
working capital refers to the funds that are required for the day to day running of the activities of a firm. it is the
excess of current assets over current liabilities. Working capital management involves the relationship between a
firms short term assets and its short term liabilities. The goal of working capital management is to ensure that a firm is
able to continue its operations and that it has sufficient ability to satisfy both maturing short term debt and upcoming
operational expenses. In view of that, working capital management has become one of the most important issues in
the organizations where many financial executives strive to identify the basic working capital drivers and the
appropriate level of working capital (Lamberson 1995).
The management of working capital involves managing inventories, account payables, account receivables and cash.
Large numbers of business failure has been attributed to the inability of financial managers to plan and control the
current assets and current liabilities of their respective organizations. This explains why working capital management
is vital to firms with limited access to the long term capital market. The working capital measures both a company’s
efficiencies and its short term financial health. It also gives investors an idea of the companies underlying operational
efficiency. The working capital shows a company’s efficiency, financial strength and cash flow health which also helps
in determining the profitability and risk as well as its value (Smith 1980).
The significant of working capital had been highlighted in most of the literature of WCM i.e. Eljelly (2004) described
that the efficient WCM are engaged with planning and controlling current assets and liabilities in such a way that
eliminates the risk of inability to meet short term obligations in hands with the avoidance of excessive investments in
these assets. Siddiquee and khan (2009) indicate that the inefficient management of WC not only reduces profitability
but ultimately may also lead a concern to financial crisis thus every organization irrespective of its profit orientation,
size and nature of business needs requisite amount of WC. Consequently, the efficient WCM is the most crucial factor
in maintaining survival, liquidity, solvency and profitability of the concerned business organization. Thus, we could say
that approach in managing working capital has enormous influence to the firm’s performance.
The importance of working capital in the day to day running of the business activities of a firm are stated in the books.
Having said that working capital is the live wire of a business, it is expected that effective provision of it will ensure
greater success of a company while in — effective management of it will lead to ultimate downfall of what otherwise
might be considered as a prosperous concern. Working capital is important to the operations of a firm but the
maintenance of a working capital is more crucial. This is because excessive working capital means holding costs and
idle funds which earns no profits for the firms is dangerous while inadequate working capital which means not having sufficient funds only limits the firm’s profitability but also results in production interruptions and inefficiencies and sales disruptions.
THE EFFECT OF WORKING CAPITAL ON THE OPERATIONAL EFFICIENCY OF AN ORGANIZATION