Problems of Working Capital Management in Manufacturing Industries (a Case Study of Pz Cussons Nigeria Plc, Aba)

Problems of Working Capital Management in Manufacturing Industries (a Case Study of Pz Cussons Nigeria Plc, Aba)

Abstract

This study focuses on the problems of working capital management with special reference PZ cussons Nigeria Plc Aba. This export is carried out in order to seek solution to the problems encountered by PZ cussons Nigeria Plc data were collected per the study y using questionnaire the data collected were analyzed tabulated and presented using average and simple percentages the hypothesis (research question) tested using chi square (x²) as the inferential statistic at ∝=0.05 significant level and for sample size n, which is same as in N in this study the chi-square(x²)was calculated and compared with critical value. The hypotheses were accepted since statistic test calculated was higher than the critical values. The major findings made in the course of this study include that there is problem in working capital management in manufacturing indusial and finally there is accepted valuation of efficient and effective working capital management on recommendations. The manager of manufacturing industries should be the priority of the financial manager with a view of increasing profitability.

CHAPTER ONE

1. INTRODUCTION
2. GENERAL DESCRIPTION OF THE STUDY

The viability of an organization can be enhanced through effective and efficient management of the firm’s working capital. In order to run the day to day business activities of a firm, the need for working capital cannot be over emphasized. We will hardly find a business firm, which does not, require any of working capital.

There are two concepts of working capital, gross working capital, which refers to the firm’s investment in Current Assets and net working capital which refers to the difference between Current Assets and current liabilities. Two concepts of working capital (Gross and Net) are not exclusive, rather they have equal significance from the management viewpoint. The gross working capital concept focuses attention on two aspects of Current Assets management.

How to Optimize investment in current asset?
How should Current Assets be financed? The consideration of the level inadequate in Current Assets.

Investment in Current Assets impairs the company profitability, an idle investment earns nothing. On the other hand, inadequate amount of working capital can threaten solvency of the company because of its inability to meet its currents obligation.

Not working capital is a qualitative concept. It indicates the liquidity position of the company and suggests the extent to which working capital needs may be financed by permanent sources of funds.

Here, the management decided the extent to which Current Assets should be financed with equity capital and or borrowed capital. However, it may be emphasized that both gross and net concepts of working capital management refers to the administration of all components of working capital such as; cash, marketable securities, debtors (receivables) and inventories creditors (payables) pandey (2010:585).

The needs for financial resources are limited and costly and even where it is available the scope into which they could be applied is diverse. A company that is about to start operation needs a fixed assets and adequate working capital to pay staff salaries, wages and other administrative expenses.

The working capital management should be the most important aspect of a company’s overall financial management; this is because efficiency in this area is to ensure the company’s success and to achieve its overall goal, which is maximizing the wealth of its shareholders. This study therefore addresses the critical factors of working capital management in manufacturing industries.

1. HISTORY OF CASE STUDY/ ORGANIZATION

This company was incorporated in Nigeria on 4^th December 1948 under the name PB Nicholas and company limited. It name was changed to Ailagbon Industries limited in 1960. The company became a public company in 1972 and was granted a listing on the Nigeria Stock Exchange then the name was changed to Peterson Zochonis Industries Limited on 24 November 1976 and compliances with the companies and allied matters Act, it changed its name to Peterson Zochonis Industrial 21 September 2006, the company adopted it present name of PZ Cussons Nigeria Plc. Its product include to manufacture soap based on local palm oil, cosmetic, freezers, air conditions, plastic container and components.

1. STATEMENT OF THE PROBLEM

The study title “Problems of working Capital Management in manufacturing Industry” (A Case study of PZ Cussons Nigeria Plc ,Aba) has the major problems of studying how working capital could be managed so as to lead to reduction in cost and improvement in profit potential of the firm, another problem that would be looked into in this study is the adequacy of working capital management.

The problem that affects the effective implementation of working capital policy will also be dealt with.