EFFECT OF FINANCIAL MANAGEMENT TECHNIQUES ON THE FINANCIAL PERFORMANCE ON MANUFACTURING COMPANIES: (A STUDY OF SELECTED COMPANY IN NIGERIA)

ABSTRACT

The study investigated the effect of financial management techniques on the financial performance of manufacturing companies. The major objectives of study are:to determine the effect of financial management on operational performance of firms in Nigeria and to ascertain the effect of financial management techniques profitability of firms in Nigeria. To achieve the objectives of the study, survey research design was adopted. The researcher adopted primary data in getting the required information. A total of 50 respondents constitute the population size of the study. In testing the hypothesis, regression analysis was used. The findings further revealed that financial management techniques has a significant effect on the operational performance of the firms, financial management techniques has a significant effect on the organizational profitability.The researcher also recommends that manufacturing companies should adopt financial management techniques for enhancement of organizational performance. The study further recommends that policy and practice for project performance should be carefully evaluated and the results of evaluation fed back into improved approaches. It is important that the evaluation considers the full range of costs and benefits. 

CHAPTER ONE

INTRODUCTION

1.1    Background to the study

In today’s world, there is rapid change in the business environment such that the product-market competition is ever increasing among industries, information technology improving in various industries as the day goes by in a way that firms use internet facilities and social network to advertise and market their products and services. To compete successfully in this present competitive business environment, firms continually need to make some strategies and take some actions by improving product quality and productivity, reducing product cost, promoting product and process innovations, and improving product speed to the market and customers’ goodwill. Firms therefore need to strive to be at par with the global change, achieving competitive advantage position and enhancing performance relative to their competitors (Muogbo, 2013). Strategy is a detailed plan for a business in achieving success. Since business is a high-stakes game, a poorly planned and executed strategic move could result in loss of millions of dollars, thousands of jobs, or even bankruptcy of business (Dauda, 2010). This calls for strategic management in order to develop an effective strategy. Thus, strategic management comprises the set of decisions and actions that result in the formulation and implementation of plans designed to achieve a firm’s objectives.

Strategic management is the process of making decision, planning, coordinating and taking some actions by the top managers of a company in order to achieve set goals and objectives. Decisions are of little use unless they are acted upon. Firms must take the necessary actions to implement their strategies. This requires top managers to allocate the necessary resources and to design the organization to bring the intended strategies to reality (Dess, 2005). Because it involves long-term, future-oriented, complex decision making and requires considerable resources, top-management participation is crucial.

(Wheelen and Hunger, 2007) articulated that initially strategic management was of most use to large firms operating in multiple industries. Increasing risks of error, costly mistakes, and even economic ruin now forced today’s professional managers in all organisations to take strategic management seriously in order to keep their firms competitive in an increasingly volatile environment.

How well an organization implements its policies and programs and accomplishes its strategic intent in terms of its mission and vision is of paramount concern. Managers in both private and public organizations are becoming increasingly aware that a critical source of competitive advantage often come from indigenous product and services, best public relations strategy state-of-the-art technology and having an appropriate system of attracting and managing the organizations human resources. From the foregoing, and looking at today’s trend, it is evident that the space of change in our business environment presents fresh challenges daily. Therefore, a panacea must be found for the manufacturing subsector, if it must adequately meet its challenges. Various firms, therefore, need to come up with the applications of innovative ideas to create unique brands, customers-friendly products/services that will bring about competitive advantages in terms of brand preference and customer confidence.Although manufacturing is usually a small sector in African economies, in terms of share of total output or employment, growth of this sector has long been considered crucial for economic development. This special interest in manufacturing stems from the belief that the sector is a potential engine of modernisation, a creator of skilled jobs, and a generator of positive spill over effects (Tybout, 2000).

Despite these, no research work has targeted to investigate the impact of the broad subject of strategic management on organizational growth and development in Nigeria. Of these studies in Nigeria, none accessed the impact of strategic management of planning on manufacturing sub-sector of the economy. Nigeria in particular this study attempts to empirically analyse how strategic management can be used by manufacturing firms in effective derive plans for growth and development.

1.2 Statement of problem

A financial management system has the following characteristics: Physical Control, Authorisation and Approval control, Personnel Control, Segregation of Duties, Supervision Control, Arithmetical or Accounting Control, Management Control, Organisational Control. The study of financial management techniques has drawn so much attention among business practitioners and academic researchers into limelight. As more industries become global, strategic management now becomes an increasingly important tool to keep track of international development and position of the firm for long term competitive advantage. In develop countries as well as developing ones, much has been written on strategic management in forms of books. However, Nigeria in particular, there are few empirical studies conducted to investigate the relationship between strategic management and firm performance.

1.3 Objectives of the study

The main objective of the study is to examine the effect of financial management techniques on the performance of manufacturing firms.

The specific objectives include;

1.    To determine the effect of financial management on operational performance of firms in Nigeria.

2.    To ascertain the effect of financial management techniques on profitability of firms in Nigeria.

1.4 Research questions

i. What is the effect of financial management on operational performance of firms in Nigeria.?

ii. What is the effect of financial management techniques on profitability of firms in Nigeria?

1.5     Research Hypotheses

In order to achieve the objectives designed for this study, the following research hypotheses were tested in their null form based on the revelations in the review of literature concerning financial management techniques and financial performance in of manufacturing companies.

Ho1: Financial management techniques have no significant effect on operational performance of firms in Nigeria.

Ho2: Financial management techniques have no significant effect on  profitability of firms in Nigeria.

1.6     Significance of study

It is therefore hoped that the evidence from this study would serve as important quantitative information into the calculation of business policy and also add to the existing body of empirical literature from a developing nation like Nigeria.

1.7     Scope of the study

 The scope of the study the ‘effect of financial management techniques on the financial performance of manufacturing companies’, reviews strategic planning, budgeting banking and expenditure checks and also organizational challenges regarding budgeting in project management. Pressure to follow through with only the project that are going to be successful and carry less risk in mounting. In investigating the ‘effect of financial management techniques on the financial performance of manufacturing companies, study would be carried out in Abia state, Aba using Nigeria Breweries for the data generation.

1.8 Limitations of the Study

The limitations of this study include some of unavoidable constraints and problems encountered in the process. They are as follows:

Finance: The problem of finance is not left out in the course of research to this study. This type of study required adequate money and time to enable the researcher visit the necessary places for collection of data. Insufficient fund will hinder an in-depth study of this research since it is finance from pocket money of the researcher. Although the researcher, as a student, is not financially dependent, he is poised to making the best use of the available monetary resources to get the job properly done.

Non-availability of records: This is one of the most important limiting factors in the course of the study. This includes the problems of easily getting the appropriate data due to bureaucracy which hinders the information flow in the country.

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