CASH PLANNING AND PROFITABILITY: A STUDY OP SELECTED NIGERIAN FIRMS
CASH PLANNING AND PROFITABILITY: A STUDY OP SELECTED NIGERIAN FIRMS
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Date
1987-08
Authors
IEEDIOBI, VERONICA NNEBUGWU
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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.
Description
A Dissertation submitted to Post-Graduate School,
Ahmadu Bello University, Zaria in partial fulfilment
of the requirements for the award of the Degree of
Master of Science in Accounting and Finance.
Department of Accounting
Faculty of Administration
Ahmadu Bello University, Zaria.
August 1987
Keywords
CASH,, PLANNING,, PROFITABILITY,, STUDY,, SELECTED,, NIGERIAN,, FIRMS,