ABSTRACT
The study was designed to determine
the effectiveness of cash management on growth and survival of a manufacturing
company using Nigeria Bottling Company Plc as a case study.
A descriptive survey sample design
was adopted. Data was collected for funding a self developed questionnaire
which was validated and tested for reliability. A total of seventeen people
took part in the survey.
The random sampling technique was
used to select the subjects - to answer the research questions and hypothesis
raised in the investigation, percentage and chi-square were used.
The result showed that effective cash
management is necessary to ensure the smooth running and survival of the
company. The data collected indicated that all variable investigated do not
significantly influence effective cash management on growth and survival of a
manufacturing company in Nigeria Bottling Company Plc.
Recommendations were therefore made
based on the findings for improvement in the communication net work. And more
so it is important to consider other valuable like stock management, debtors
management among others affecting management company’s growth and survival.
TABLE OF CONTENTS
Title Page
Certification i
Dedication ii
Acknowledgement iii
Abstract iv
Table of Contents v
Chapter One
1.1 Introduction
1
1.2 Historical
Background of Cadbury Nigeria Plc 2
1.3 Statement
of the Problem 5
1.4 Statement
of Research Question 6
1.5 Statement
of Research Hypothesis 7
1.6 Aim
and Objectives 7
1.7 Significance
of the Study 8
1.8 Scope
and Limitation of Study 9
1.9 Definitions
of Terms 10
Chapter Two
Literature Review
2.1
Introduction
11
2.2
Cash
Management CYC 12
2.3
Objective
of Cash Management 13
2.4
Importance
of Cash Management 13
2.5
Definition
of Cash 14
2.6
Motive
for Holding Cash 14
2.7
Factors
Determining the Company’s Level of Cass Requirement 15
2.8
Cash
Management Strategies 17
2.9
Cash
Flow Problems 18
2.10 Possible Effect Of Cash Flow
Management Problem 20
2.11 Techniques Of Easing Cash Flows
Problem 20
2.12 Effective Cash Management 22
2.13 Element Of Cash Management 24
2.14 Specialized Methods Of Cash
Management 36
2.15 Working Capital And The Control Of
Cash 38
2.16 Cash
Operating Circle of a Manufacturing Company 39
2.17 Sources
of Finance for Companies 40
Chapter Three
Research Methodology
3.1
Introduction
43
3.2
Research
Design 43
3.3
Research
Question 44
3.4
Research
Hypothesis 44
3.5
Characteristics
of Study 45
3.6
Sampling
Design and Procedure 45
3.7
Method
of Data Collection 45
3.8
Method
of Data Analysis 46
3.9
Limitation
of the Study 47
Chapter Four
Data Analysis and Presentation
4.1 Introduction
48
4.2 Data
Presentation 48
4.3 Analysis
of Data 48
4.4 Test
of Hypothesis. 57
Chapter Five
Summary, Recommendation and Conclusion
5.1
Introduction 60
5.2
Summary of Findings 61
5.3
Conclusion
62
5.4
Recommendation
62
5.5
Recommendation
for Further Studies 63
Bibliography 65
Appendix 68
CHAPTER ONE
1.1 INTRODUCTION
Cash is the
most important asset for business operation. It is the basic input required to
start the business and essential tool needed to keep the business running on a
continuous basis. Cash is also the ultimate output expected to be realized by
selling the products or service on an organization. Infact, it is the lifeblood
of business. Effectual management of cash is essential in maintaining the cash
control of business cash flow.
While
management is the process of organizing controlling, coordinating the resources
of an organization in an efficient and effective manner iii order to achieve
direct result.
Cash
management can be defined as the art of managing (i.e. planning, controlling,
organizing and co-ordinating) cash and cash equivalent in an organization to
ensure the objective of the organization which might include profitability,
growth and survival (Pandey I. (2004).
Every
organization estimate its future cash need with some relevant technique or
tools for making financial decision for the organization as a whole, but face a
fundamental problem of managing cash with a liquidity buffer to meet unexpected
contingency. Liquidity itself is a measure of financial viability. It refers to
a firms ability to pay its obligation when they become due. Management of cash
involves trade off between:
i.
Liquidity: Having enough
cash available to meet everyday demand;
ii.
Profitability/Cost: Holding high
balance of cash is costly in terms of cost investment interest. while
unexpected deficit can be expensive if emergency funding is required.
Cash
management in any organization involve the operating cash cycle which is component
of the working capital. Therefore cash cannot be studied in isolation. In a
manufacturing company, cash management covers the following:
i.
The provision of cash as Capital for the Company
initial out lay which generated from friends family or loan at bank.
ii.
The procurement of raw materials
iii.
The distribution of finished goods to obtain immediate
cash or create debtor when goods are sold on credit term.
In
practice, a carefully monitored budget will generally provide the basis for
cash management.
1.2 HISTORICAL BACKGROUND OF NIGERIA
BOTTLING COMPANY PLC
The
Nigerian Bottling Company Plc was incorporated on 22nd November, 1951 as private limited
liability company with authorised share capital of N200.000 divided into 400,000
ordinary shares of 50 kobo each and issued per capital of N130,900 divided into
261,800 ordinary shares of 50 kobo each. The entire shareholding was then owned
by foreign shareholders notably late Anacliasions George Leveiltis.
It got
converted to public company in 1972, and it is the most profitable and
promising member of Leventies Group of Companies but the manufacturing units
within the Leventies group known as Beta Industries Limited which was to
operate as a wholly owned subsidiary of Nigeria Bottling Company Plc.
In the
light of emerging developments, however, it became necessary for the new
company to run independently as a commercially viable unit.
The main
business of the company is the bottling of soft drink. It is sole bottler in Nigeria of the
coca-cola and scheweppes range of soft drinks.
As at the
date of this study, NBC’s authorized share capital is N275,000,000 divided into
550,000,000 ordinary shares of 50 kobo each. Out of which 483,740,4400 share
are issued and fully paid.
The paid up
capital of Nigeria Bottling Company Plc is beneficially held as follows:
|
Shareholders
|
No. of Shareholders
|
% Holding
|
|
Nigeria citizen
|
234,037,880
|
48.59%
|
|
Foreign shareholders
|
199,347,341
|
41.21%
|
|
Molino Soft Drinks S.A.
|
49,355,210
|
10.20%
|
|
Total
|
483,740,440
|
100.00%
|
Its subsidiaries
associated companies and investment are as follows-,
a. SUBSIDIARIES: 100%
Sum it Agro Industrial Company Ltd 100%
Nigeria Bottling
Company Plc Benin)
Ltd. 100%
Apapa Chemical Industrial Limited 100%
Grown Products Limited 60%
Delta Glass Plc 57%
b. ASSOCIATED COMPANIES:
Valley Foods Limited 48.13%
Blaize Industrial Company Limited 40.00%
Kupa Firms Limited 40%
Continental Can (Nigeria) Ltd. 22.05%
c. INVESTMENT
Beta Industries Limited 3.67%
The
manufacturing process of Nigeria Bottling Products is based on carefully
measured combination of sugar, water, carbon dioxide and concentration which
are 400, usually imported from the United States to ensure that some
standard is maintained 261,8( throughout the world.
NBC Ikeja
plant, has a very broad organizational structure with the plant managers at its
apex, directly under him are those occupying the functional management
position. These are the assistant plant
manager, plant accountant, sales manager and bottling manager.
1.3 STATEMENT
OF THE PROBLEM
During the
proceed of achieving efficient cash management, financial manager encounters
source problems, which have not made the management of cash resources an easy
task.
The type of
problem associated with cash management which the management which the study
will be trying to provide answer to in relation to manufacturing company
includes the following:
a. Problem
of generating fund either to be used as start-up capital or daily operations.
b. Determination
of right investment opportunities to invest idle cash.
c. Determination
liquidity policy to embark upon to maintain a balance between liquidity and
profitability.
d. Identification of methods of ensuring
cash adequacy.
e. Problem
of funding mis-match in project or investment financing in which short term
fund is used to finance long term project.
f. Problem
of deciding on the amount of cash to be hold by the organization in order to
meet up with their demand.
g. Determination
of uses to which surplus funds can be put to generate income.
h. Adequate
management of receivable or debtors to ensure debt recovery.
i. Problem
of planning for the adequate supply of stock that will provide constant inflow
of cash to be the organization.
1.4 STATEMENT
OF RESEARCH QUESTION
This study
will seek to answer the following question:
1. Does any
significance relationship between cash management and profitability and growth
of manufacturing companies?
2. What impact
does effective cash management has on the profitability and growth management
has on the profitability and growth of manufacturing company?
3. How does
an effective cash management ensure the growth and survival of a manufacturing
company?
4. Will the
manufacturing company grow and be more effective in its business operation if
cash is properly managed?
1.5 AIM AND
OBJECTIVES
The aim of
the research is to examine the impact of cash management on the growth and
survival of Nigeria Bottling Company Plc. They are:
(a) To examine the sources of Nigeria Bottling
Company Plc
(b) To identify
the constraints and likely problem that Nigeria Bottling Company Plc. face in
raising funds.
(c) To
review the existing cash management of Nigeria Bottling Company Plc for efficiency
and effectiveness.
(d) To
examine the effect of inadequate on the profitability and growth of Nigeria
Bottling Company Plc
(e) To make
policy recommendations on efficient and effective cash management in the
manufacturing industry.
1.6 STATEMENT
OF RESEARCH HYPOTHESIS
The
following hypotheses will be tested in the project:
Hypothesis One
H0: Effective
cash management has no significance impact on profitability an growth of
manufacturing company.
Hi: Effective
cash management has a significant impact on the growth and survival of
manufacturing company.
Hypothesis Two
H0: There
is no significant relationship between cash management and growth and survival
of a company.
Hi. There is
a significant relationship between cash management and growth and survival of a
company.
1.7 SIGNIFICANCE
OF THE STUDY
The
significance of this study is established on the assumption that for any
manufacturing company to survive and maximize profit, there is need for such
company to manage it can effectively.
The
research will also enable the management to compare and contrast the various
methods of raising fund to finance the productive activities of the company and
it will allow them to choose the best alternative. More so, it will be of great
value to the management of the company because it will afford the management of
to examine the current system of cash management in the organization.
It will
afford the company the opportunity to maintain an optimum cash position and
take corrective measure in situation of shortage or surplus liquidity. The
findings of this study is expected to educate the general and potential manufacturer
who might be opportune to lay hand on this project in their respective line of
business.
Above all,
the study will enable the company to amend some system of operation which the
research world reveal as inappropriate for effective cash management.
1.8 SCOPE AND
LIMITATION OF STUDY
This study,
will concentrate on the cash management problem of Nigeria Bottling Company Plc
and its cash management policies as regards control to monitor the inflow and
outflow cash.
It shall
only cover the finance department of the company where cash is raised, managed
and accounted for. This will enable the researcher to gain in the company.
The
concentration of the study would be to find out in Nigeria Bottling Company Plc.
operate and effective. Cash management determine the ways by which cash
management affect the growth and survival of Nigeria Bottling Company Plc. The
chief among many, limitation of the study is the difficult in obtaining relevant
information Nigeria Bottling Company Plc.
Another
major problem militating against the smooth conduct of this research is the
lack of adequate finance.
Notwithstanding
the highest limitation is hope that this research will be useful to many
organization that may want to embark on an effective and efficient cash
management.
1.9 DEFINITIONS
OF TERMS
CASH: Money or any negotiable money under
a cheque, including the collected balances or deposit with a bank that is
assumed to be available for use by the enterprise.
CASH BALANCE: a cash budget is a summary
statement of the firms expected cash inflow and outflow over a projected time
current asset.. CASH SURPLUS: This
is the excess of cash generated over a cash applied resulting in an inverse in
working capital.
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