CHAPTER ONE
1.1Background To The
Study
Cash management is the collection,
concentration, and disbursement of cash. With the aim of managing the cash
balances of a firm so as to maximize
the availability of cash not invested in fixed assets or inventories in such a
manner as to avoid the risk of insolvency. Cash management involves the
monitoring of the firm’s level of liquidity, its management of cash balances,
and its short-term investment strategies. Cash management constitute a
fundamental function of the firms management so as to ensure all financial
obligations are met as at when due. If a firm fails to pay its obligation when it is due as a
result of lack of cash, the firm is insolvent. Insolvency then leads the firm
to bankruptcy. Consequently it is important the firm manage their cash well.
The need for efficient cash management is to prevent bankruptcy, improves the
profitability and mitigate the firms risk.
Cash management is particularly important as cash flow problems could arise
even in the midst of the firm having many clients, and offering superior
products with superior image. Firms with cash flow problems do not have a
margin of safety to meet unplanned emergencies, fund innovations and expansion
and hire and retain staffs. Cash is therefore the lifeblood of the business.
Many firms make the mistake of spending all of their funds as soon as it is received
for the obligations of the firm without any leverage for the future Successful
cash management, therefore requires making realistic projections, monitoring ,collections
and disbursements of cash , adopt effective billing and collection measures, and
adhere to budgetary restrictions.
1.2Statement of the
Problem
The fundamental problem
confronting many organizations is the issue of cash to meet its obligations and
stay afloat in business profitably. This is the desire of all organization but
the real situation shows that majority of firms are only managing to meet its
obligations within tight available cash flow.
Cash management is the
collection, concentration, and disbursement of cash. With the aim of managing
the cash balances of a firm so as to
maximize the availability of cash not invested in fixed assets or inventories
in such a manner as to avoid the risk of insolvency. Cash management involves
the monitoring of the firm’s level of liquidity, its management of cash
balances, and its short-term investment strategies. Cash management constitute
a fundamental function of the firms management so as to ensure all financial
obligations are met as at when due. If a firm fails to pay its obligation when
it is due as a result of lack of cash, the firm is insolvent. Insolvency then
leads the firm to bankruptcy. Consequently it is important the firm manage
their cash well. The need for efficient cash management is to prevent
bankruptcy, improves the profitability and mitigate the firms risk.
Therefore, the problem confronting the
research is to determine the the role
of cash management in the success of a business (A Study of ECO Bank).
1.3 Objectives of
the Study
1.
To determine the roles of cash management in the
success of a business.
2.
To
examine how effective cash management system is in Eco Bank Nigeria PLC.
3.
To examine the challenges of effective
cash management in Eco Bank Nigeria PLC.
1.3Research
Questions
1. what are the roles of cash
management in the success of a business?
2.
How
effective is the cash management system in Eco Bank Nigeria PLC?
3.
What are the challenges to effective
cash management in Eco Bank Nigeria PLC?
1.6 Research
Hypothesis (If
Necessary)
|
Ho: The role of cash management
for the attainment of business success in ecobank is not effective
Hi: The role of cash
management for the attainment of business success in ecobank is effective
|
1.7 Scope of the
Study
The
study focuses on the appraisal of the role of cash management in the success of
a business a case study of Ecobank.
1.8 Limitations
of the Study
The
study was confronted by some constraint including logistic and geographical
factor.
1.9 Definition of
Terms
CASH
MANAGEMENT DEFINED
Cash management is a broad term that
refers to the collection, concentration, and disbursement of cash. The goal is
to manage the cash balances of an enterprise in such a way as to maximize the
availability of cash not invested in fixed assets or inventories and to do so
in such a way as to avoid the risk of insolvency. Factors monitored as a part
of cash management include a company's level of liquidity, its management of
cash balances, and its short-term investment strategies.
LIQUIDITY
DEFINED
A measure
of the extent to which a person
or organization
has cash
to meet immediate and short-term obligations, or assets that can be quickly
converted to do this.
2. Accounting: The ability
of current assets to meet current liabilities.
3. Investing: The ability
to quickly convert an investment portfolio
to cash
with little or no loss in value