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CASH PLANNING AND PROFITABILITY: A STUDY OP SELECTED NIGERIAN FIRMS
ABSTRACT
A study of the relationship of cash planning to profitability in selected Nigerian firms in Zaria and Funtua towns of Kaduna State was made. Information was obtained by administering questionnaires and conducting personal interviews. The study showed that most of the companies examined had no cash planning section although they practised some form of cash planning in the sense that they prepare cash budgets during the annual budgeting period. Cash for them consists of petty cash and money in the bank and not marketable securities, inventories and account receivables. Sales are carried out on cash basis to the generality of the public and on credit basis only to big firms. Because of this, there is no actively functioning credit department in these firms. As sales are mostly on cash basis, there is no need for such practices as factorising account receivables, lock-box systems, remote point disbursement system or playing the float as obtains in the developed countries such as United States of America. The companies indicated that they do not normally have surplus cash and that their money is mostly kept in current accounts with their banks. This earns them no return. However, they indicated that if they have surplus cash they would normally invest it in term deposits of 3 to 6 months maturity period as repurchase agreements (RPs) and certificates of deposits (CDs) are rarely used in Nigeria. Majority of these selected companies are dependent on foreign raw materials for their production. The procurement of these raw materials depends on the Federal Government having enough foreign exchange for the manufacturing sector. Because of the state of the economy, the Federal Government has been formulating different and sometimes conflicting policies to aid the manufacturing sector to procure raw materials. As a result of this, most of these companies maintained a large cash balance to take advantage of any of the government’s policies. This uncertainty in the economic activities of the country was given as a reason why cash planning is not practised, as it should be, in the majority of the firms in the country. The majority of the firms hold cash mostly for transaction purposes. Despite what obtains in these companies, many of them agreed that cash planning is important to any business organisation and that it affects profitability.
TABLE OF CONTENT
Title page- – – – – – – – – i
Approval page – – – – – – – -ii
Dedication – – – – – – – – -iii
Acknowledgement – – – – – – – -iv
Abstract – – – – – – – – – -v
Table of content – – – – – – – -vi
CHAPTER ONE
INTRODUCTION – – – – – – – -1
1.0 Background of the study – – – – -1
1.1 Statement of the problem – – – – -5
1.2 Purpose of the study – – – – – -6
1.3 Significance of the study – – – – -8
1.4 Research questions – – – – – -9
1.5 Scope of the study – – – – – – -10
CHAPTER TWO
LITERATURE REVIEW – – – – – – -11
CHAPTER THREE
Research methodology – – – – – – -39
Design of study – – – – – – – -40
CHAPTER FOUR
Presentation, analysis and interpretation of data – -48
CHAPTER FIVE
Summary of findings – – – – – – -60
Conclusion – – – – – – – – -61
Recommendations – – – – – – – -62
Suggestions for further research – – – – -64
References – – – – – – – – -65
Appendix I – – – – — – – – -68
Questionnaire. – – – – – – – -69
