ABSTRACT

   The most important resource needed to established and effectively run a business certain cash. A company’s cash requirement are planted out in the form of cash flow statement cash flow statement provides information about cash receipt and cash payments of an enterprise over a given period of time. It indicates the pattern of cash generation and utilization. It reveals  how cash is generated from operation and how payment are made such as taxes, dividends and debts. The knowledge go a way in determine the financial strength of that enterprise.

            The work of others had done research textbooks, journals, hand-outs, seminar, workshops and conference were reviewed in course of this project.

            The research instrument used in respect of this study is questionnaire and interview question are design on close ended format to enable the respondent provides answers to questionnaire easily and to make it very easy for the researcher to control and analyze responses.

            It was also observed that with cash management strategies such as cash planning managing cash flow, investing surplus cash of idle cash and keeping optimal cash balance etc contributes effectively in cash flow management. 

CHAPTER ONE

1.0 INTRODUCTION

          Cash is the most liquid asset of any super market store. All supper market store whether large or small receive and pay out certain amount of cash in the process of business transactions.

Consequently for a company to have enough liquidity to meet its current obligation it requires good and efficient management for the fact the cash inflows and out flows are differently timed.

          Cash is the basic input and the ultimate output and is made up of currency and demand deposit, the latter being more important for many super market stores.

          Cash requirement tend to rise in proportion to the volume of transactions to ensure that the current liabilities are settled at the appropriate time, sufficient liquid assets should be maintained. Furthermore, there are other demands upon which the stores demand for cash such as cash payment of interest, dividend, and creditors for good supplied, repayment of the bank loans etc.

          The importance of cash management cannot be over emphasized as the determination and maintenance of adequate cash or near – cash items (marketable securities) cannot be treated with indifference of those demand upon the industry for cash are to be met as when due. How much of the cash or marketable securities is to be held at any point in time involve fundamental decisions to be considered in relation to the firm’s liquidity and its cash payment. Such decision can be influenced by the availability of profitable investment opportunity. The opportunity cost of keeping a high level of cash balance is the interest that could have accrued to the firm if the cash has been invested. Conversely, to maintain a low level of cash can force a firm to accept quite consideration constraints upon its freedom of action.

What amount of cash balance should a firm keep? How can this amount of cash balance be arrived at? These are more similar questions, which can only be resolved by carefully examining the following issues.

1. Why do companies or industries hold cash and marketable securities?
2. What are the objectives of industries, which require cash management policy?
3. What are the factors that can influence industry’s level of cash balance? The study shall provide answers to the above questions and identify the benefits of operating a good cash management.

1.1            BACKGROUND OF THE STUDY

This study helps the reader to understand the pertinence of the of the study and to appreciate its importance to education. The researcher having observed that cash flow as its name suggest it is movement of money into and out of a business as goods are bought and sold. Therefore cash flow management was developed in early part of the century, it was considered primarily as part of economics.

Cash flow management system involves the system of cash flow statements, which on January 1^st 1998; the Nigeria Accounting Standard Board (NASB) issued Statement of Accounting Standard (SAS NO 18). A statement of cash flow presents cash flows according to the activities, which gave use to them. This statement of cash flow includes all cash inflows and outflows of the firm. It should however exclude cash flows arising from the purchase and liquidation of cash equivalents. However the following are the need for cash flow information. Financial statements usually provide information to help present and potential investors, creditors and other assets to access the profitability, liquidity, financial flexibility and risk of an industry.

1. A statement of cash flows on its own will not provide all the information required by investors to access the profitability, liquidity, financial flexibility and risk of a particular firm. Much of this information will be provided by a combination of the balance sheet, profit and loss account and the statement of cash flows when taken together with related disclosure.
2. The profit and loss account will provide information on profitability. Cash flow information adjusted to eliminate the leads and lags created by the allocations associated with accrual accounting, gives an indication of the relationships between earnings and cash flows and therefore of the quality of earnings.
3. The balance sheet provides information on the structure of the assets, liabilities and equity of a firm at a point in time.
4. Investors and creditors are interested in the ability of a firm to generate sufficient cash flow to pay dividends and interest on its equity and dept respectively on a sustainable basis.

The management is responsible for the inadequate cash flow in an industry. The most important resources needed to establish and effectively run a business concern is cash but there are some obstacles towards it. Therefore the problem of cash flow management lies on the following points:

1. Inadequate  cash needed in a firm to meet its obligations or payment
2. Idle cash not invested to yield interest or income, which will increase profit of the firms.
3. Delay in the provision of cash would disrupt other activities that follow it.
4. Improper marketing of funds and activities would lead to a high cost of a loan is retired and a new one is raised for the same project.
5. Improper evaluation of projects would lead to losses that should be registered.

However, the following are the source of cash inflow in an industry.

 i.            Profit before tax

1. Profit on sake of fixed assets
2. An adjustment not involving the movement of funds or cash
3. Other sources of cash like proceed from fixed assets, issue of new shares etc.
4. Profit on sake of fixed assets
5. An adjustment not involving the movement of funds or cash
6. Other sources of cash like proceed from fixed assets, issue of new shares.

1.2            STATEMENT OF PROBLEM

The problem associated with the cash management in an industry, which motivate the researcher to embark on is that without cash or where it is short supply the normal flow of operation of the cooperation erasure of being disrupted. However, cash is not directly productive, it is sterile. It neither produces goods  for sales nor induces customers to buy as it is in the case of other assets like fixed assets, inventories and account receivable. As a result of this, the good cash flow management should maintain the right amount of cash. Without paying directly or indirectly for holing it and to invest excess cash in profitable ventures. Does the determination of these goods required accurate timing of cash flow and the amount of cash balance to be closely monitored.

The problem that is also facing the finance manager is the difficult in.

Does the determination of these goods requires accurate timing of cash flow and the amount of cash balance to be closely monitored. The problem that is also facing the finance manager is the difficulty in timing of payment and receipts. The required cash flows do not coincide with cash outflows at other times more cash flows than in it receipts and payment period could ne matched perfectly and forecast with certainty, then a firm would need no cash balance. Does shortage of cash contract prevent operations of the company, which usually manifest in the inability of the industry or time to pay bill when due, and the dissipation of assets? Persistence of cash shortage can lead to financial insolvency, which may subsequently lead to liquidation of industry. Does too much cash that are not invested lead the industry in paying directly or indirectly for the money that is not used? And does the industry lose the opportunity of earning interest and runs and runs the risk of keeping the liquid asset (cash) due to mismanagement of cash flow. Does the determination of these goods requires accurate timing of cash flow and the amount of cash balance to be closely monitored.

The problem that is also facing the finance manager is the difficulty in. Does improper evaluation of project lead to looses that would be registered in the industry, which will be difficult to settle? Does the management face problem on how to maintain and control optimum cash balance sufficient to meet all payment despite the difficulties in cash flows throughout the financial period.

1.3            OBJECTIVE OF THE STUDY

Cash flow management is principally concerned like any other management process of planning and control. Although cash is the most vulnerable assets to theft in a firm, it is a surprising that there is completed lack of formalized cash management in many industries today, while some industries prepares cash budget at the beginning of their financial year without any following control mechanism and more over actual performance are not corresponding with the budget  at the close of the period. Others rely on monthly bank reconciliation statement, which are often prepared late for management and management hardly see the weakness or breakdown in cash management system until cash problem arise.

1. Therefore the purpose or the intention of the researcher is to a To find out how short supply of cash is disrupted the normal flow of operation of the industry.
2. To ascertain the extend to which cash manager  find it very difficult in timing of receipts and payment.
3. To find out whether if the idle cash not invested will have any effect in the industry.
4. To determine how loss on the opportunity of earning interest and the risk of keeping the liquid assets affect the effectiveness of the industry.

Answer or suggest rise by the problem of the study.

1. To find out how short supply of cash is disrupted the normal. The find out how short supply of cash is disrupted the normal flow of operation of the industry.
2. To ascertain the extend to which cash manager find it very difficult in timing of receipts and payment.
3. To find out whether if the idle cash not invested will have any effect in the industry.
4. To determine how loss on the opportunity of earning interest and the risk of keeping the liquid assets affect the effectiveness of the industry.
5. Flow of operation of the industry.
6. To ascertain the extend to which cash managers find it very difficult in timing of receipts and payment.
7. To find out whether if the idle cash not invested will have any effect in the industry.
8. To determine how loss on the opportunity of earning interest and the risk of keeping the liquid assets affect the effectiveness of the industry.
9. To find out how short supply of cash is disrupted the normal flow of operation of the industry.
10. To ascertain the extend to which cash manager find it very difficult in timing of receipts and payment.
11. To determine how loss on the opportunity of earning interest and the risk of keeping the liquid assets affect the effectiveness of the industry.
12. To determine how loss on the opportunity of earning interest and the risk of keeping the liquid assets affect the effectiveness of the industry.
13. To find out how improper marching of fund and activities lead to high cost as loan is retired and new one is raised for the same project.
14. To ascertain the extent of the improper evaluation of projects lead to losses that registered in the industry.
15. To determine the extent how management facing problems of how to maintain and control an optimum cash balance enough to meet all payment.

1.4            RESEARCH QUESTIONS

Research questions are those questions researcher asked in order to locate answers to the research problems. This study seeks to answer the following research questions.

a)     Do adequate cash needed to meet the firm’s payment or bill provided by the industry?

b)    How do amount of idle cash held by the firm should be minimized and should be invested in order to yield interest?

c)     What are the strategies that management map out concern the managing of cash inflow and cash outflow of industries?

d)    How do management monitor over cash outflows such as purchases, salaries and wages etc. so that the cash posture of the company will not adversely affected?

e)     In what ways does a firm utilized its cash?

f)      How do management guard over it most liquid and importance resources (cash)?

1.5            RESEARC HYPOTHESIS

A hypothesis is a tentative statement, which could be proved right or wrong through statistical testing.

A hypothesis therefore is that which is formed so as to guide one in the finding out whether a situation is really exist and to find a possible solution to such problem for the purpose of this research work, the following hypothesis were put forward.

1. Hi:                   Adequate cash flow management is needed to put and to    continue a company on a sound business path.

Ho:         Adequate cash flow management is not needed to put and continue a company on a sound path.

1. 3.     HI:                   A positive cash flow avails a business of investment opportunities. 

1.6            SIGNIFICANT OF THE STUDY

Cash inflows and outflows do not always smoothly over a period of time in a seasonal business cash inflows be high over period of the year than others while some cash outflow are fairly constant (monthly salaries) while other (dividend taxation etc.) are usually paid in the year.

This presents problem as the thing of the inflows and outflows do normally coincide this problem of how a firm can ensure that inflows are available in right amount and at the right time to meet obligatory cash outflows brings us to the significant management.

The study is there aimed at improving the efficiency and effectiveness of cash management strategies in industries with a reference to the Pal Breweries Ltd Oko as case study.

Cash is the life hold of any business. Without it, the firm dies as a result of this many businesses both small and large are not doing well.

Therefore, it is risks to be ignorant of the immense benefit of such a study if a firm must survive grows, and attain its objects. Also the need for adequate cash for the firm is to enable the firm to maintain credit rating, take trade discount, and meet emergencies and take advantage of business opportunities. It is hoped that the findings and recommendations will assist industries and the business sector to appreciate the implementation and importance of efficient and effective cash management. Moreover, this study would help to indicate problems in cash management and suggest solutions so that such problem can be easily assessed and checked.

Pal Breweries Ltd in particular would be in position to review its cash flow management strategy and improve its machinery for a more effective cash flow management.

1.7 SCOPE/DELIIMITATION OF THE STUDY

The study covers or concentrate on the information concerning the movement of cash or cash flows in an industry’s reference to Pal Breweries Ltd Oko Orumba North Local Government Area Anambra state. The main focus of he study is proper management of cash inflow and outflow over a particular period of time. The study can be generalized to other related companies for investment in their cash flow management.

1.8LIMITATION OF THE STUDY.

In human endeavor, there must be some elements of which would deter him from accomplishing his or her set goals the accomplishment of the research is what GOD has ordained in spite of opposing  problems from various angles. Effort was made in this study to carry out through research on the management of cash flows of industries especially pal breweries industries limited Oko in Orumba North Anambra State. But the company official were reluctant to respond to interviews and questionnaire, therefore it is regarded as one of the constraint.

          Another constraint is time the research work was carried out alongside with the normal academic work, hence there was no enough time to make the research.

1.9 DEFINITION OF TERMS

For the purpose of clarity and understanding it is demanded to improve and to define some technical terms used in this project work.

1. CASH: This comprises of cash in hand and demand deposits dominated in Naira and foreign currencies.
2. CASH FLOW: this includes inflows and outflows of cash and cash equivalent.
3. CASH EQUIVALENT: are short term, highly liquid investments that are readily convertible to know amount of cash and, which are subject to an insignificant risk of changes on value. Generally, they are within three months for maturity (SAS 18).
4. MANAGEMENT: according to afford dictionary is the control and making of decisions in a business or similar organization.
5. CASH FLOWS STATEMENT: a statement that summarized the effect on cash of the operating, investing and financing activities of a company for a period” (Hermanson, Edward, and Rayburn, 1991 page 723).
6. BUDGETING: this is the process of using budget for planning and control A budget for planning and control. A budget, according to Hornigem et al (1987 page 39). Is a quantitative expression of plan of action and an aid to coordination and implementation
7. CASH BUDGET: according to (Abohi, 2001, page 29), is the quantization of a plan of expected receipts and payments of cash a period of time.
8. CONTROL: this is management action to ensure conformity wit plan or budget.
9. LIQUIDITY: this is the state of owing things of value that can easily be converted in to cash.
10. MARKETABLE SECURITIES: these are short – term debts instruments such as treasure bills, commercial certificate of deposit etc. which are easily convertible to cash.
11. MONEY MARKET: this is the completive market for securities with maturity of one yes or less.
12.  OPPORTUNITY COST: rate of returns that would have been obtained from an alternative investment if it been accepted.
13. WORKING CAPITAL: this is different  between current assets and current liability of a firm sometime it’s called net working capital.
14. INSOLVENCY: technically, insolvency occurs when a firm is unable to pay its bills as they fall due, legally insolvency occur when.
15. The liabilities of a firm are greater than the market value of its asset.
16. The liabilities of a firm are greater than the market value of its asset.