CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
Cash management is a concept that is receiving serious attention all over the world especially with the current financial situations and the state of the world economy. The concern of business owners and managers all over the world is to devise a strategy of managing their day to day operations in order to meet their obligations as they fall due and increase profitability and shareholder’s wealth. Cash management, in most cases, are considered from the perspective of working capital management as most of the indices used for measuring corporate cash are a function of the components of working capital (Eljelly, 2013). Cash Management is essential to every business that designs to meet up with its financial obligations. No business operation is isolative of cash management. Olowe (1998) said that cash is regarded as the most important current asset for the operations of businesses. Cash is the basic input required to keep the business running on continuous basis and it is also ultimate output expected to be realized by selling the services or products manufactured by firm (Pandey, 2013).
Cash Management in imperative in every business organization as cash is said to be the life blood of any business. The essence of cash management is to ensure positive cash flow for smooth business operation. According to Ross et.al (2011) said and as stated by Atrill (2012) that efficient cash management involved the determination of the optimal cash to hold by considering the trade- o between the opportunity cost of holding too much cash and trading cost of holding too little. Therefore there is the need for careful planning and monitoring of cash flows overtime as to determine the optimal cash to hold. According to Gitman (2009) it is objectively used to manage and determine the optimal level of cash required for business operation and the investment in marketable securities, which is suitable for the nature of the business operation cycle. The pattern of the cash and operating cycle varies per industry., but in general term, the pattern involves the provision of cash as capital for firm’s initial outlay., the procurement of raw material in manufacturing companies and finished goods in marketing companies, distribution of the finished goods obtain immediate cash or create debtors when goods are sold on credit term (Akinbuli, 2009). Furthermore, the process of managing cash has become a major challenge for most of the companies, because of its significant impact on the results of a company (Ekwere, 2012). The success of any business venture is predicted on how the management has planned and controlled it cash flows (Akinsulire, 2012).