This study examines the Management of Working Capital with special reference to Nigeria Bag Manufacturing Company.
This study employs survey research design. Analytically, the research
adopted descriptive statistics to examine the impact of working capital
in manufacturing organisations in Nigeria.
Data were basically sourced from primary method through means of a
well structured questionnaire. Twenty Five (25) respondents were sampled
from the population based on simple random sampling technique.
Four hypotheses were formulated and tested with the used of
Chi-Square Statistical Technique. The analysis resulted into rejecting
the four null hypotheses and concluding that; The working capital
requirement of a business venture is dependent on the level of the
business that has been established; Excessive working can increase
production cost; The longer the working capitals cycle of an
organization, the greater the investment in working capital; and there
is no industry norm or minimum agreed level of investment in working
The study proffered valuable recommendations as business organization
should manager its working capital efficiently, in such a way as to
avoid the ills of over capitalization and under capitalization.
1.0 GENERAL BACKGROUND OF THE STUDY
The enactment of the Nigeria Enterprise, promotion Decree of 1972,
otherwise known as Indigenization Decree, made many businesses which
were higher in the hands of foreign business men to pass into the hands
of Nigerians. Perhaps by more co-incidences the economy became over
liquid. The result at the excess liquidity was inflation.
To succeed in this new challenge passed by the said Indigenization
Decree, Nigerian entrepreneurs and business concerns need at least a
fair comprehension of essential aspects of financial management and more
specifically, working capital management.
Generally, it is believed that the presumed objective at financial
management especially in private organizations is the maximization of
the value of the firm. Thus, wealth maximization of the present value of
the future streams of cash inflows of the shareholders which are a
derivative at the profitability of a firm. (Brokington, 1983).
Although profitability may be considered the objectives at a
business, nevertheless, the mismanagement of work capital can
effectively bring to a half, or to its ultimate downfall, what might
otherwise be a successful and profitable organization.
Therefore, according to Howard (1982) working capital is defined as
'the asset held for current use within a business less the amount due
to those who await settlement in the short-term in whatever form". In
the same vein,
Olowe (1997) views working capital as "the capital available for
running the day to day operation of and organization. It is defmed as
current Assets less Current liabilities".
Current Assets are the circulating assets of the business; these are
the assets that are not permanent in nature. They include: Cash at hand
and bank; Short-term investments such as treasury bills; Stock of raw
materials, work-in-progress and finished goods; Debtors, Accrued income
etc. Current liabilities on the other hand are debts of the business
that have to be settled within the following twelve months. They
include; Creditors; Current taxation, Bank overdraft etc. A current
liability for a sizeable part of the business sources at finance and it
is the cheapest form at business finance (Olowe, 1997).