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EFFECTIVENESS OF WORKING CAPITAL MANAGEMENT IN BREWERY INDUSTRIES

CHAPTER ONE

INTRODUCTION

The concept capital management in brewery industries is concerned with what working capital initiate, which are; cash, marketable security, debtor and inventories In recent times, many industries especially in brewery industries are operating on inadequate working capital while others are operating on excessive working capital. These result to consequences of inadequate working capital. This study is embarked on generalizing on the importance of management of working capital to all person on an industry or business who are responsible directly or indirectly for any of the component of working capital.  From the work, it is observed that working capital is very significant proportion of a firm total capital. Efficient management of working capital ensure continued existence growth and stability achievement of an enterprises objective both at short and long run projection.

1.1   BACKGROUND TO THE STUDY 

Working capital is referred to a firm aggregate investment in short term asset such as cash, short term securities, account receivable and inventories by accounting definition; this refer to those assets of a business which in normal course of business are convertible into cash within an accounting year. Working capital is also defined as current assets less current assets less current liabilities. It could even be said to be that portion of the capital of a business enterprises, which is not invested in fixed assets but is kept liquid to care for the day working need. Management could be defined as the effective utilization of both human and material resources to achieve the forms objective and efficient administration of all items of current assets in relation to short term credit that is liability to achieve management short term objective.

Management is also the process of co-coordinating resource through people to meet and objective. Management harness both human and non-human resource into production and supply it with the necessity of life.  Consequently, working capital is important because a weak liquidity position will posses threat the slovenly of an industry, firm or business organization. When an industry solvent, it is in a condition to pay his debtors as they mature white liquidity implies the solvency of a business which has special reference to the degree of readiness in which asset can be converted into cash without any form of loss. It is the duty of the management to take prompt and timely action to correct and improve the in balance in the first liquidating position.

 1.2   PROBLEMS OF THE STUDY

Various problem are encountered by the brewery industries but the greatest problem of the industries today is lack of effective and efficient management of the resource at their disposal which is aggrieved considering the present monetary and fiscal policies which tend to discourage borrowing and also the management inability to determine cash surplus and deficit of an industry for a period and the country case movement.

The following are the problems, which the study will be concerned with:

1. Can the control of cash through cash management be effective to working capital.

2. To what extent will the existence of marketable securities be to the industry.

3.  How well will investment in debtors assist business in the economy.

4. Will adequate benefit of current assets meets the maturing obligation of the economy.

 1.3   OBJECTIVES OF THE STUDY

This research is based on the concept of what working capital initiate, they are as follows:

1. CASH: To emphasis the important of cash management as regard the control of cash.

2. MARKETABLE SECURITY: To inform the person concerned why marketable securities are held and should be invested in business.

3. DEBTOR: To expose the importance of investment on debtors since it represents the extension of credits by one industry to other industry and individual.

4. INVENTORIES: To explain the benefit of adequate current asset to meet its maturity obligation.

1.4   AREA OF THE STUDY

The reason of the study is to generalized the importance of management of working capital to all in an industry or business enterprise who are responsible directly or indirectly for any of the component of working capital e.g sales manager, managing directors, production manager, management accountant, share-holders and other beneficiaries such as debtors, creditors, students, employees and the public at large.

1.5   DEFINITIONS OF IMPORTANT TERMS

ASSETS: Anything owned by a business or by an individual, which has commercial or exchange value it may consists of specific property or of claims against others.

MANAGEMENT: This is an act of achieving objectives through people, which involve the application of resources such as finance and human beings.

LIQUIDITY: The ability to pay the liabilities of a business selling the assets and distributing the remaining cash to the owner who owned the business.

MARKETABLE SECURITY: This is referred to the relative cash and quickness with which a good properly commodity or service of, could be sold quickly without loss of price.

FISCAL POLICY: This is a conscious attempt to direct the economic activities of the government towards achieving economic growth and economic stability.

INVENTORY: A detailed list showing quantity descriptions and value of property and goods.

CURRENT LIABILITY: This is an industry debt which are payable within an accounting period they are normally used to finance working capital and fixed assets of an industry.

 REFERENCES

JONES G. L. (2016).  Financial Measurement for Managers; London Macmillan Publishing Ltd.

SIMON J. M. (2014).  The Basic Arts of Financial Management 2nd Edition; England, Redwood Burn Ltd.

WEBSTER DICTIONARY:    International Edition; New York, Publishers Guild Group.

WINFTON J. C. (2011).  Financial Management Theory and Strategies; Englewood; Prentice Hall Inc. 

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