CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Cash management is the collection, concentration, and disbursement of cash. With the aim of managing the cash balances of a firm so as to maximize the availability of cash not invested in fixed assets or inventories in such a manner as to avoid the risk of insolvency. Cash management involves the monitoring of the firm’s level of liquidity, its management of cash balances, and its short-term investment strategies.
Cash management constitute a fundamental function of the firms management so as to ensure all financial obligations are met as at when due. If a firm fails to pay its obligation when it is due as a result of lack of cash, the firm is insolvent. Insolvency then leads the firm to bankruptcy. Consequently it is important the firm manage their cash well. The need for efficient cash management is to prevent bankruptcy, improves the profitability and mitigate the firms risk.
Cash management is particularly important as cash flow problems could arise even in the midst of the firm having many clients, and offering superior products with superior image. Firms with cash flow problems do not have a margin of safety to meet unplanned emergencies, fund innovations and expansion and hire and retain staffs.
Cash is therefore the lifeblood of the business. Many firms make the mistake of spending all of their funds as soon as it is received for the obligations of the firm without any leverage for the future Successful cash management, therefore requires making realistic projections, monitoring ,collections and disbursements of cash , adopt effective billing and collection measures, and adhere to budgetary restrictions.
1.2 Statement of the Problem
The fundamental problem confronting many organizations is the issue of cash to meet its obligations and stay afloat in business profitably. This is the desire of all organization but the real situation shows that majority of firms are only managing to meet its obligations within tight available cash flow.
Cash management is the collection, concentration, and disbursement of cash. With the aim of managing the cash balances of a firm so as to maximize the availability of cash not invested in fixed assets or inventories in such a manner as to avoid the risk of insolvency. Cash management involves the monitoring of the firm’s level of liquidity, its management of cash balances, and its short-term investment strategies. Cash management constitute a fundamental function of the firms management so as to ensure all financial obligations are met as at when due. If a firm fails to pay its obligation when it is due as a result of lack of cash, the firm is insolvent. Insolvency then leads the firm to bankruptcy. Consequently it is important the firm manage their cash well. The need for efficient cash management is to prevent bankruptcy, improves the profitability and mitigate the firms risk. Therefore, the problem confronting the research is to determine the the role of cash management in the success of a business (A Study of ECO Bank).
1.3 Objectives of the Study
1. To determine the roles of cash management in the success of a business.
2. To examine how effective cash management system is in Eco Bank Nigeria PLC.
3. To examine the challenges of effective cash management in Eco Bank Nigeria PLC.
1.4 Research Questions
1. what are the roles of cash management in the success of a business?
2. How effective is the cash management system in Eco Bank Nigeria PLC?
3. What are the challenges to effective cash management in Eco Bank Nigeria PLC?
1.5 Research Hypothesis
Ho: The role of cash management for the attainment of business success in ecobank is not effective.
Hi: The role of cash management for the attainment of business success in ecobank is effective.
1.6 Scope of the Study
The study focuses on the appraisal of the role of cash management in the success of a business a case study of Ecobank.
1.7 Limitations of the Study
The study was confronted by some constraint including logistic and geographical factor.
1.8 Definition of Terms
CASH MANAGEMENT DEFINED
Cash management is a broad term that refers to the collection, concentration, and disbursement of cash. The goal is to manage the cash balances of an enterprise in such a way as to maximize the availability of cash not invested in fixed assets or inventories and to do so in such a way as to avoid the risk of insolvency. Factors monitored as a part of cash management include a company's level of liquidity, its management of cash balances, and its shortterm investment strategies.
LIQUIDITY DEFINED
A measure of the extent to which a person or organization has cash to meet immediate and short-term obligations, or assets that can be quickly converted to do this. 2. Accounting: The ability of current assets to meet current liabilities. 3. Investing: The ability to quickly convert an investment portfolio to cash with little or no loss in value.
SOLVENCY DEFINED
Solvency is the ability of a company to meet its long-term financial obligations. Solvency is essential to staying in business as it asserts a company’s ability to continue operations into the foreseeable future. While a company also needs liquidity to thrive, liquidity should not be confused with solvency. A company that is insolvent must often enter bankruptcy.
