AN APPRAISAL OF THE SOURCES OF FUNDS TO MEDIUM AND SMALL BUSINESS CONCERNS IN ENUGU STATE. (A CASE STUDY OF EASTERN PLASTICS NIGERIA LIMITED 1995 – 1999).
1.1 Background of the Study
Conceptually business is the exchange of goods, money or
services for mutual benefit. In other words, a business enterprise
succinctly put is the sum total of those activities that have as their
main purpose, the creation, maintenance and expansion of a concern which
continues to exist, because it earns profit or other benefits, as a
result of this exchange of goods and services or money.
Historically, business activities came into existence when
our forefather began to trade by barter, that is exchange of goods for
goods) having realized the different capabilities and talents possessed
by individuals and the enormous times energy wasted in trying to become
self sufficient. No wonder why, the age long aphorism that “No man is an
Island” is an accepted contention of most critics.
As a rule of thumb, this exchange of goods existed in many
parts of the world including Egypt, Europe, Germany and some parts of
Africa Albelt, the advert of industrial revolution made man to
conceptualize and then concretize that serious need to develop his
genetic and phenotypic qualities in trying to specialize in one trade or
another, thereby making life more satisfying to the generating of the
people. Conceptually different types of business enterprises have
evolved over the years ranging from sole proprietorship to partnership,
co-operative companies to even corporation or public liability companies
(PLC). All those were primary established for the production
distribution and provision of services to the entire human race (Homo
On the whole, modern business enterprises are characterizes
by rapid technological changes; speculation/forecasting with a high
degree of inter-dependence and precision, and increased number of
mergers. As of today, the complexities of business and modern
technological advancement encourage the formation of companies that
engage only in production; while selling and many types of small
business enterprises such as Supermarket Retailshops, Parent medicine
stores, provision stoves, motorcycle spare parts shops, plastic
producers etc. have all sprang up.
Enugu as an ancient city is consistently being converted
from a pure traditional setting into a fast growing cosmopolitan city.
Enugu was the capital of the Eastern Region, which was later sub-divided
into East Central State; and presently, Enugu is the capital state;
after the Nigerian Civil War. There has been steady but gradual influx
of people from other state particularly the nearly states like Imo,
Anambra, Ebonyi, etc, either as traders or workers. And with a lot of
Federal and State establishments, there was a tremendous increase in the
number of people coming from other states into Enugu. This situation
has indeed made the population of Enugu to be a mixed one.
As a rule lunch, the major economic activities in Enugu are
civil service working with either at the Federal of State
establishments, a lot more are still engaged in large scale medium scale
enterprise scattered almost everywhere in the city including of course,
Easter Plastics at along Enugu-Abakaliki Express Road, Emene, Enugu.
This research work would thus highlight the major issues
surrounding he sourcing of funds for small/medium scale business
concerns with particular reference Eastern Plastics Enugu-Abakaliki
express road Emene, Enugu. It would also evaluate the relevance of
having a balanced working capital as this will serve as important basis
for the inculcating of the need to have a proper internal control of
funds when finally obtained by this enterprise.
1.2 STATEMENT OF THE RESEARCH PROBLEM
In general one major panacea proffered by well meaning
Nigerians on effective way of reducing unemployment in this country,
thereby increasing productivity is through the establishment and
sustenance of small scale/medium scale business enterprise all over the
country. Little wonder then, why most government; both past and present
and the three ties hand in one way or another, enunciated well
articulated but perhaps, poorly implemented programmes, all of which
were aimed at increasing the awareness required for this kind of
Incidentally, virtually all small/medium scale concern is
almost part of the world including Enugu, started in a very low way, but
they gradually and steadily expanded. In other words most of these
small/medium scale business concerns passed through a period of
metamorphosis, generally beginning virtually with little, but
subsequently, graduating into full-pledge business concerns. Some of
these business enterprises/concerns even got matured into large-scale
business enterprises/public liability companies after some period of
transformation and sustained development.
However, the issue that arises is why should such a period
of gestation or transformation take place in the establishment and
expansion of small/medium business enterprises?
One school of thought holds it that the above trend
suggests and even indicated that small/medium business enterprises have
problems in obtaining the initial capital to start off their operations
and subsequent expansion. Worst still is the generally accepted motion
that such capital when finally obtained some times is poorly managed,
and even in some extremely cases, embezzled by the top management. On
the whole, any of these circumstances, can greatly affect the
establishment of these business enterprises. therefore, ascertaining the
authenticity of these schools of thought by first identifying the
various sources of capital to small/medium scale business enterprises
with particular reference to Eastern Plastic Nig. Ltd at along
Enugu-Abakaliki Express Road Emene, Enugu is the major thrust of this
work. The study will equally investigate thoroughly the difficulties
encountered by their company in sourcing capital as well as finding out,
how such capital if obtained, is managed for the successful operation
of this company, in it’s bid to meet their specific and corporate
1.3 PURPOSE OF THE STUDY
The overall purpose of the study is to find out the sources
of capital available to small/medium business organization operational
activities. It was also aimed at ascertaining how these funds should be
effectively managed throughout the life span of the business so as to
enable them meet their corporate goals and targets.
Besides this study was also geared towards ascertaining how
efficient are the financial management including their skills and
strategies used by small/medium business as regards to the preparation
of necessary book of accounts; the use of professional accountants and
whether banking facilities are used and at which cost.
Specifically, the study seeks
i) To ascertain the various sources of loan/capital available to Eastern Plastics Nig. Ltd in Enugu.
ii) To appraise which sources are more frequently used and why;
iii) To examine whether Eastern Plastics Nig. Ltd experience any difficulty in getting loan/capital.
iv) To find out if Eastern Plastics Nig. Ltd actually
employ qualified accountants, so as to curb cases of loans of stock and
cash in their operations.
1.4 RESEARCH QUESTIONS
(1) Are the various sources of loans/capital available to Eastern Plastics Nig. Ltd adequate?
(2) What are the difficulties encountered with these sources; as well as the cost implications of each sources?
(3) Does this business outfit employ the services of qualified
accountants in their day to day financial operation and transaction?;
(4) What measures can be taken to significantly increase the
availability of funds to this business concern so as to enable them meet
their corporate goals.
1.5 SIGNIFICANCE OF THE STUDY
This study is significantly for a good number of reasons, including the following:
Firstly, this study will to a reasonable extent, highlight
the perceived deplorable conditions under which Eastern Plastic concern
in the face of a glassing dearth of funds needed for both the working
capital as well as for the attainment of their corporate goals and
target. By so doing, all the indentified issues will later be examined
with a to redressing and resolving them, so as to sustain and improve
upon the efficacy of this business concern in the production of plastic
and other associated products for the people of Enugu State in
particular and Nigeria in general.
Again, this study will reveal the associated cost of each
source of fund in terms of their implications towards the availability
of capital needed by the enterprise. This will naturally guide future
government at the various tiers towards formulation polices and
programmes that will make it mandatory for financial institutions and
intermediaries to set aside substantial amount of funds as loan
advancement to small scale and medium scale business concerns such
Eastern Plastic Nig. Ltd. When such an enabling environment is thus
established, it will go a long way forwards the production of plastic
and other allied products by the business concern.
Additionally, the findings of this study will serve as a
blue-print that will ultimately guide future policy formulation towards
the increase and sustenance of the production of plastic product in the
state in particular and Nigeria in general.
Besides, other future researchers will find this research
work very invaluable at least, as a readily available reference
material, while carrying out any study of this nature in future.
1.6 SCOPE OF THE STUDY
This study will be delimited only to Eastern Plastics Nig.
Ltd. along Enugu Abakaliki express road Emene, Enugu, in terms of their
various sources of funds, their cost implications and then the measures
that could be taken to significantly increase the number of
organizations or institutions – financial or otherwise, that will be
also and willing to make funds available to them at a relatively
Additionally, the study will be concentrated only on the
various plastic products produced and marketed by Eastern Plastics Nig.
Besides, the study will investigate the various roles
played by commercial banks, insurance companies etc towards increasing
the available of capital to small scale and medium scale business
outfits that are scattered all over the state.
Finally, this study will be delineated to only the
proximate and immediate measures that could be taken by this business
concern, and then the governments, towards redressing any anomaly, such
that more funds can be made available to them so that they can be meet
up with their corporate objectives and targets.
1.7 DEFINITION OF TERMS
a) WORKING CAPITAL: The difference between current assets
and current liabilities it is an index of the firm’s ability to pay its
short term liabilities.
b) INSOLVENCY: The inability of the firm to discharge its liabilities immediately they are due.
c) SHORT TERM LOAN/CAPITAL: It is a borrowed capital that must be paid back within an relatively short term usually less than a year.
d) LONG TERM LOAN/CAPITAL: It is the
capital usually obtained by using bonds long terms notes or mortgages
used for the purchase of fixed assets of the business repayable after
5-10 years or longer.
e) INTERMEDATE OR MEDIUM TERM LOAN: It is the borrowed capital that is repayable within one to five years.
f) CURRENT ASSETS: They are those assets
that can be converted into cash with a period of time such as marketable
securities, stocks debtor, and prepared expenses.
g) CURRENT LIABILITIES: These are credit bills payable acured expenses, bank drafts, income tax and long-term debts maturing in the current.