ROLE OF WORKING CAPITAL MANAGEMENT IN PRIVATE SECTOR ESTABLISHMENTS
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ROLE OF WORKING CAPITAL MANAGEMENT IN PRIVATE SECTOR ESTABLISHMENTS
ABSTRACT OF WORKING CAPITAL MANAGEMENT’S ROLE IN PRIVATE SECTOR ESTABLISHMENTS
The purpose of this study was to determine the ectolency of banking activities with difficulties of working capital management in the private sector.
The purpose of this research is to determine the relationship between working capital and management and banking activities, as well as the contribution of working capital to economic banking activities.
The study’s location and limitations were able to provide the facial banking location improves trendily with the management. It is extremely important to both ministries and research.
Because it helps to determine whether the economy, which is the working capital, can go far with the assistance of computers. Similarly, if assisted to broach, the researcher’s mind on the challenges that management specialists in banking may experience in the course of working activities.
The literature review was created using existing computer test books and lecture notes from the school library, as well as journals and newspapers.
INTRODUCTION TO CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
The main goal of any private sector organisation is to make a profit, yet the unpredictability inherent in today’s economic environment threatens the sustainability of every business and necessitates prudent liquidity and cash management.
For some years, the convention revenue accounts and balance sheet have been considered sufficient for the effective control of a corporation rather than the achievement of maximum profit.
Deeper research and a more analytical approach to corporate finance have resulted in a rising understanding of the importance of working capital and its impact on the success or failure of an organisation.
Working capital management is concerned with the management of working capital’s many components, which include stocks, debtors, cash, and creditors. Other components of working capital include short-term securities, bills payable, prepayments, and other current assets.
However, working capital management has been defined in a variety of ways, but in a nutshell. It directly relates to the planning, organising, financing, and regulating of the business’s resources in order to reach a set of objectives or a specific purpose.
Working capital, according to L.R Howard, is the “lifeblood” of a corporation.
Its proper provision can do much to ensure a business’s success, but inefficient management can lead not just to a loss of profit, but also to the ultimate demise of what would otherwise be regarded a promissory concern.
If expert working capital management is not available, the quantity of finance provided will change a financially weak company with mediocre performance into a robust and dynamic organisation with a dazzling regulatory environment.
This research is critical since current assets, by definition, change daily, if not hourly, and management decisions must be made.
1.1 STATEMENT OF THE PROBLEM
The major difficulty of working capital management has been the management of the interrelationships that exist between current assets and liabilities. Effective working capital management entails the acquisition of funds for the administration of a company’s day-to-day activities.
Every business must maintain an acceptable level of operating capital or risk insolvency and closure. However, profitability, liquidity, and other related concerns have been a serious issue for private-sector enterprises.
This is a crucial aspect of working capital management. Maintaining a big size of the positive side of the economy, but profitability would suffer if the fund remained ideal.
In contrast, if a firm’s holding assets are relatively small, overall profitability will undoubtedly grow, but this will have a negative impact on the company’s entire performance, including its liquidity position, making the company riskier.
Working capital management should thus attempt to strike a balance between the firm’s liquidity and profitability situations by ensuring that the appropriate combinations of current assets and obligations are kept at cash point in time for improved company performance.
OBJECTIVES OF THE STUDY
As previously said, good working capital management has a significant impact on any company’s financial decision making, which is the foundation for success in every viable business. As previously stated, the goal of financial decision making is to maximise shareholder wealth.
This wealth or profit is often determined by the rate of turnover.
The primary goal of this research is to investigate how (EBY CO NIG. LTD)
(i) Identify and discuss the fundamental determination of working capital because unique company needs are influenced by a variety of circumstances and fluctuate over time.
(ii) Identify and highlight areas of the company’s short-term investment in order to make recommendations on how funds could be better utilised to create higher profits and to offer options for improving insufficient cash balances to meet current obligations.
(iii) Discuss the role of receivables in a company’s liquidity in order to provide solutions by lightening or reducing solution collection policies if receivable appears excessive.
(iv) Emphasise the significance of net working capital as a measure of liquidity, as this is a crucial criterion for any credit extension to the company.
1.3 SIGNIFICANCE OF THE STUDY
Almost every organisation or company’s continued growth and development is dependent on the source and proper application of funds generated, which serves as its measure of profitability. This topic is significant because it gives a solution to organisations’ profitability problems through product cash management.
Any business’s growth is hampered by a lack of cash receivable, which is a critical source of working capital. However, given the current level of uncertainty in the economy,
it is critical to keep more cash or its equivalent on hand for contingency spending. This is where good working capital management comes into play.
Nonetheless, determining a company’s current ratio has been a factor of credit grant to a company. The working capital ration is particularly important in this regard since it indicates the degree of contraction in current assets that will not discourage current creditors’ interest. As a result, working capital is important and critical in this setting.
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