This project examines the issues of working capital management in banks
specifically, it focuses attention on an efficient and effective. Working
Capital Management using the case study of Wema Bank Plc. The study examines
and expatiates on the merit of maintaining an efficient working capital
portfolio in an organization. It focuses on the efficiently managed. In the
project, a critical assessment of the relationship between the various
components of working capital as an important tools to enhancing profitability
and liquidity as well as the rudiment for the effective working capital
management within any organization was done. It was discovered that fro a bank
to maximize the wealth of its share holders the bank should earn a steady
amount of profit from its operation. Hence the bank needs an adequate working
capital level to generate sufficient returns. Working capital in bank refers to
items required by the bank to ensure efficient delivery of its operation on
day-to-day basis. If can be defined as the excess of current asset over current
asset over current liabilities. Liquidity ratio measure the ability of the bank
to meet its current obligation as they become due, failure of bank to meet its
obligation due to lack of sufficient liquidity would result in loss o customers
goodwill. Depositors will lose confidence in the bank and this may eventually
result to a legal tangle and hence closure of the bank. Liquidity is however
measure with following ratios. Current Ratio = Current Asset Current Liabilities
In banks liquidity is usually assessed by using cash ratio which is.
Cash + Marketability Security
In order to achieve the aims and objectives of this study, the banks
working capital was carefully examined and required information on the subject
matter was gathered information on the subject matter was gathered from
personal interviews, collected fact from text banks, journals. Other crucial
information were obtained from respondents and from a number of questionnaires
administered within the banks. Finding from the study shows that efficient
working capital management will improve profitability to help to stabilize or
improve liquidity of bank. The study concluded that banks should maintain adequate
level of working capital in order to improve on profitability of
TABLE OF CONTENT
Title page i
Table of content vi
1.1 Introduction 1
of study 2
of problem 2
of the study 3
for hypothesis 3
of the study 3
of the study 3-
of terms 4
2.0 Introduction 7
of working capital in banks 8
banking concepts in Nigeria
of working capital 9
of credit facility 10
the cash flows 16
determining the level of profitability of banks 17
of adequate working capital 17
3.0 Data collection method 19
3.1 Population and sample sizes 20
3.2 Sampling techniques 20
3.3 Data analysis 20
4.0 Data presentation and analysis 21
4.1 Testing hypothesis 21
5.1 Finding 25
5.2 Recommendation 25
5.3 Conclusion 26
5.4 Bibliography 27
Many corporate bodies into problems because of mismanagement of working
capital and inability to determine the effectiveness of working capital
component on the organization performance.
Working capital is the backbone of any organization be it finance / bank,
manufacturing or trading. It is so because, if working capital of a company is
not properly managed, it could lead to the total breakdown and closure of the
organization. Hence, management of working capital is being critically analyzed
in this research work.
Working capital in bank refers to items requires by the banks to ensure
efficient delivery of its operation on day-to-day basis. It can be defined as
the excess of current asset over current liabilities. Generally, working
capital management is concerned with the managing of:
Asset: Which majorly consist of stock, trade debtor’s payment or
creditors balance at bank, and cash in hand? Although the component of
each variables of current asset depends on the type of industry in
question e.g while stock may be subdivided into raw materials, work in
progress and finished good. In banking industry their stock is mainly
money or cash.
Liabilities: Trade creditors, accrued, expenses, taxation.
Furthermore, cash is an important component of working capital, a pointer
to this fact is the even though cash constituted the smallest portion of
the total current asset yet management of any organization devotes
considerable time to its management. The following are the consequence of
efficient management of working capital.
Regular operation will not be possible, as inadequacy
of funds will course unplanned closure.
The incessant slowing down of banking activities
leading to inability to needs customers. This may lead to bank customers
closing their account and going for other banks that are effective in bank
Low level of availability of find may hamper the
extension of credit and bring about inability to meet customer with drawals.
Deposit that has matured may be impossible to repay
which may resort into litigation and consequent upon which bank may be waind
OF THE STUDY
This research works reveal how important working capitals improve
tremendously profitability of bank. The research conducted in this research
show how availability of adequate working capital on increase profitability of
Wema Bank tremendous. The impact of working capital helps bank to achieve its
aims and objectives of profit making.
It also helps in the efficiency of operation and this improve customer
confidence on banker due to the fact that banker always able to meet customer demand
at any time he/she demand for his / her money.
In addition, the research conducted shows that availability of working
capital helps bank to employ its excess or surplus working capital an viable
project and investment that improve its profitability tremendously.
Finally, the availability of adequate working capital is a great tools to
help banks to improve its profitability tremendously. It is very important that
every bank should try to increase their working capital which will have
positive impact on their profitability and improve their efficiency of
OF THE PROBLEMS
These are the problems that are envisaged in this research work. The
first part relates to problems directly attributable to the research topic, and
the other relates to the problems encountered in the course of carrying out the
The following problems relate to working capital as a research topic:
In ability to determine the adequate level of working
capital may affect availability of funds in banks which may in turn affect loan
portfolio since there was not enough fund to give out as loan.
Where a bank experience increase in its number of
customers, there is likelihood that demand for credit will increase. If it
does, and funds are not available, level of operation will be hampered.
The following problems are assumed to be encountered in the course of
carrying out the research work.
The response to the questionnaires by the respondents
cannot be taken to the totally correct .
There is also the problem of implementation of working
capital policies even when it was correctly formulated.
It is also assumed that to some extend. The respondents
to the questionnaire might not want to supply important information considered confidential
to the bank.
OF THE STUDY
The objectives of this research work is to study bank’s level of working capital
to determine its adequacy as well determine its impact on the level of
For the purpose of this study, the following hypothesis were tested.
effective working capital management in bank will improve level of
Hi: That effective working capital
management in bank will not improve level of profitability.
The study will seek to answer the following questions. But in answering
the question, the use of personal interviews, textbooks and journals will be
employed. The answers are considered to the final output of this research
study. The questions include:
What is the need for an effective working capital?
What is the importance of cash as a working capital
How can working capital be effectively managed?
OF THE STUDY
This study will cover several areas to shows the impacts of adequate working
capital on profitability of banks with special reference to Wema Bank Plc,
This study will also include the literature review of different sholars
on the subject matter i.e. the benefits to the derived on adequate working
capital in relating to profitability of banks.
OF THE STUDY
The research is designed to cover wide are but due to some limitation
which deferent researchers to cover much area like
Problem of finance, which really limit our research to
Another problem that stands as a limiting factor. There
was no sufficient time for us to carryout much research.
Inadequacy of materials, the absence of necessary
materials in the school library has narrowed the way of getting materials.
However, despite all these short-coming, the project was written with
adequate information gathered to produce meaningful and comprehensive work.
Cash Budget: This is the summary
statement of a firm’s expected cash inflows and outflows over a projected
period of time.
Cross Working Capital: This refers to
the firm’s investment incurrent asset which can be easily converted into cash
within an accounting year.
Working Capital: This is the excess of
current assets over current liabilities. The surplus which would be available
Liabilities: This is a debt owe by the
company and will be settled at stipulated time.
Prepayment: This is the payment made
now and y the benefit in advance or nearest future.
Cash: This is the money which the bank
can disburse easily and immediately without restriction.
Collateral Security: This is the real
or tangible asset which can be used as surely for the loan secure.
Overdraft: It is a relationship exist
between banker and customer whereby bank allows its customer to withdraw funds
in excess up to a certain specified limit during a stipulated period.
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