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  • Chapter 1 to 5
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Recently, with the present economic predicaments in the country, many business organizations and individuals have found it difficult to cope with the high cost of living.  This is due to the paucity of the raw cash available in the economy with which they can buy the necessary goods and services they require on the spot with cash.

Fortunately, with the advancement in the business world, sales and purchases can be made on credit basis thus alleviating the sufferings and the deprivation that would have been experienced by individuals, business enterprises and various governments while making business transactions.

The research topic delve into trying to ascertain the impact of accounts receivable in business organizations but with particular attention to the PZ Industries Plc Enugu Branch.

In chapter one, a general background statement about the topic was given.  Also, the statement of the problem of the study, purpose of the study, importance of study likewise the scope of the study was mentioned.  It also gives some definition on likely terms.

In chapter two, related texts as regards accounts receivable impact on the performances of business organization were reviewed.  Under this chapter, the definition of accounts receivable as were given by related literature and the formulation of accounts receivable policy, the determinants of accounts receivable policy and the measures of promotion accounts receivable were all examined from related literature.

In chapter three, attempt was made to show the various methods used I gathering the necessary data for the study likewise stating the statistical tool used.

Chapter four is where the analysis of the findings based on the data collected was made.  It presents and discussed the summary of the report.

Finally chapter five takes care of the discussion of the findings and conclusion likewise making the necessary recommendations.


1.1              Background to the Study

1.2              Statement of Problem

1.3              The purpose/Objective of the Study

1.4              Scope of the Study

1.5              Research Questions

1.6              Significance of the Study

1.7              Definition of Terms


2.1              Formulation of Accounts Receivable Policy

2.2              Determinant of Accounts Receivable Policy

2.3              Measures to Promote Accounts Receivables

2.4              Administration of Accounts Receivable

2.5              Summary of Related Literature


3.1              Research Design

3.2              Area for the Study

3.3              Population for the Study

3.4              Sample and Sampling Procedure

3.5              Instrument for Data Collection

3.6              Validity of the Instrument

3.7              Reliability of the Instrument

3.8              Method of Administration of the Instrument

3.9              Method of Data Analysis


4.1              Summary of Results



5.1              Discussion of Results

5.2              Conclusions

5.3              Implication of the Results

5.4              Recommendations

5.5              Suggestions for Further Study

5.6              Limitation of the Study



LIST OF TABLE Table 4.1:        Adequacy of liquidity position of the firm

Table 4.2:        Impact of account receivable in predetermined profitability of the industry

Table 4.3:        Possibility of maximizing or optimizing sales through the use of trade debtors.

Table 4.4:        Company’s efficiency in debt collection during the past three years




Prior to the advent of time, civilization, economic condition, and the business world, the world had known only a cash or barter economy.  However, with development in business world, business are being transacted on credit basis.

In recent years, many business organizations in Nigeria have experienced liquidity problems largely because of the effects of high rate of inflation.  This has been necessitated by the various economic measures introduced in the country ranging from austerity measures introduced in 1982 to the present Poverty Alleviation Programme (PAP). Because of this, it then becomes more important than ever to get money promptly from trade debtors for the day-to-day operation because of uncertainty in the fluctuation of prices.

However, if all trade transactions were to be made on cash basis, the companies in Nigeria would hardly do well in terms of its sales turnover.  Consumers and middlemen would equally be affected if all purchases made form companies are always on cash basis.  Money (cash) is a scarce commodity which has wide application in the area of both human and material needs.  Thus bringing about the problem of effective management of available cash resource through efficient receivable collection management.

At the time of purchase, the consumer and wholesalers may find it difficult to have ready cash for the payment of their products.  The liquidity position of consumers, particularly wholesalers may make it difficult to purchase all their needs on cash basis.  The seller with sound knowledge of his customer may be ready to offer his good and services to him, even if he has no cash for his purchase.  Thus, lies the situation facing the seller and the buyer (debtor and creditor relationship).

Receivables represents claims, usually stated in terms of a fixed amount, arising from the sale of goods, from the performance of services, from the lending of funds, or from some other type of transaction which establishes a relationship whereby one party is indebted to another.  This, claims which result from the sale of goods or services and which are neither supported by a written note nor secured by specific collateral (ie the creditor has not right to specific asset in case the debtor fails to pay) are categorized as account receivable.

Accounts receivables are sometimes of short-term nature.  Short term receivable can be defined as “claims held against others for money, goods or services collectible within a year or operating cycle, which ever is longer”.

For financial statement purposes, receivables could be classified into two broad sections: viz.

1.         Trade receivables

2.         Non trade receivables

Trade receivables are amounts owed by customers for goods sold as part of the normal operation of the business.  They are usually the most significant receivables any organization has.  It is usually a written commitment by others and are normally collectible within one year and sometimes as long as five years.

Non trade or special receivables which arise from a variety of transactions are written promises to pay at a later date.  Examples of non-trade receivable are:

a.                   Advances to officers and employees

b.                  Advances to subsidiaries

c.                   Deposits to cover potential damages or losses etc.

A firm grants credit in order to protect its sales from competitors and to attract the potential customers to its good and services could deteriorate in quantity if not sold within a specific time period, for example, perishable goods.  Trade credit thus creates accounts receivable or book debts, which the firm is expected to retrieve in the near future.

This book debt or accounts receivable arising out of granting credit has three major elements.

The first is the riskiness of the agreement which might result in debt to the seller.  Cash sales are without risk, but not credit sales as cash is yet to be received.

An equally associated element is that accounts receivable is based on economic value.  To the buyer of goods and services, the economic value passes immediately at the time of sale, while the seller expects an equivalent value to be received at a later date.

Another element is the futurity of the negotiation.  This means that payment will be made in the future time.  The customers from whom receivables or book debts have to be collected in future are called trade debtors or receivables which represents the firm’s claim or asset.

In view of the above characteristics, the adoption of an efficient accounts receivable policy becomes necessary towards the achievement of the overall organizational goals.


No business concern wants to sell her goods and services on credit to a customer who will prove unable to pay his or her accounts when due.  The sales department will always want to increase the sale turnover, hence the need to increase credit sales to customers.  The credit department being the conservative partner worry about the collectibility of the debts.  What occupies the department most is whether such credits extended will definitely materialize by debtors paying their debts.  If debts resulting from credit are not collected when due, which department should bear the brunt? Is it the accounts department or sales department who requested for its approval?

Among the problems are as follows:

1          Liquidity position by adequate credit policies, practices and procedure regarding credit granting, credit limits and collection of receivable.

2.         Effect of accounts receivable to attain its predetermined profitability.

3.         The possibility of maximizing sales through the use of trade debtors.

4.         The company’s level of efficiency in debt collection.

5.         Inefficient accounts receivable that led to the winding up of business


In every business organization, accounts receivable plays an important part in assisting the business attain its profitability objective, particularly in those areas that relate to net profits and return on assets investment.

Among the basic purpose of this study are to:

1.         To know the liquidity position by adequate credit policies practices procedures, regarding credit granting, credit limits and collection of receivable.

2.         To know the effect of accounts receivable to attain its predetermined profitability.

3.         To know the possibility of maximizing or optimizing sales through the use of trade debtors.

4.         To know how the company’s level of efficiency in debt collection during the past three years.

5.         To know how inefficient accounts receivables had led to the winding up of business.


This study is to analyze the impact of accounts receivable in business organizations but with particular reference to PZ Industries Plc at their branch at Emene in Enugu.  This is with the view to determine how the company has been able to manage her accounts receivable towards achieving her objectives.

In the analysis, attention will be focused on the investment in trade (or in trade receivables) from the stand of granting company.  The study covers ascertain from the company’s accounts or credit department all necessary information and requirements that help the company in achieving its objective by granting trade credit or where there are short falls, what factors that attributes to that are all among the areas to be covered under the study.

Although information as regards accounts receivable or trade debtors were gathered from company’s accounts or credit department, this study did not go into making comparisons with those other companies but uses the necessary information gathered din developing and broadening the view and ideas gathered from Pz Industries Plc thereby coming up with a substantial idea on the impact of accounts receivable in business organizations with particular reference to Pz Industries Plc, Enugu Branch.


The following research questions have been formulated to guide the investigation:

1.         To what extent are liquidity position by adequate credit policies, practices and procedures regarding credit granting, credit limits and collection of receivable?

2.         To what extent does account receivable affects its predetermined profitability?

3.         To what extent are the possibility of maximizing or optimizing sales through the use of trade debtors?

4.         To what extent are the company’s efficiency in debt collection during the past three years?

5.         To what extent does inefficient accounts receivable led in the winding up of business?


In recent times, due to changes in business generally, greater emphasizes have been placed on credit management.  While industrial output are growing, we should also expect receivable to increase which to some extent has been fostered by highly competitive conditions.  This therefore suggest that perhaps credit is being used as an instrument by the sales department to generate additional sales volume.  If a firm embarks on a too tight credit policy, there will be some possible loss of sales while on the other land, there will be a possibly high bad debt losses if an easy credit policy is maintained.

Therefore since non of the two extremes will be favourable to a company, the importance of this study is that it will help to strike a balance between too tight and too open credit policy in order for the firm to achieve their profitability objective.  The study will also highlight the consequences of not having or operating an efficient account receivable in business organizations.

The research work will also expose the management of business organizations to the effective way to manage the accounts receivable towards the achievement of the organizational goals.

The study will show how business organizations will tackle various risks inherent in credit sales but the most essential aspect is the control function which aims at checking and bringing any delinquent debtors to order in order to achieve the objective of efficient accounts receivable in business organization.


1.         Accounts receivable:               This has been identified as claims held against others for money, goods or services collectible within a period or operating cycle, which ever is longer.

2.         Receivable represents claims, usually stated in terms of a fixed amounts, arising from the sale of goods or services rendered.  It could be classified into: trade receivables and non trade receivables.

3.         Trade debtors are those people (customers) owing any organization as a result of goods/service received from them or credit.


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