ABSTRACT
The study investigated the Effects of Working Capital Management on the profitability of manufacturing Company, A Case study of Cadbury Nigeria Plc. The specific objectives of the study are to identify the various components of working capital in Cadbury Nigeria PLC; identify the level of working capital management in Cadbury Nigeria PLC; and to evaluate the impact of working capital management on the profitability of Cadbury Nigeria PLC. Total of questionnaires was distributed to staff in Cadbury Nigeria Plc drawn from the study population was used for the analysis. Three hypotheses were formulated for the study, simple percentage and ratio analysis. Under the simple percentage and ratio analysis was analyzed by the use of tables which involved the use of simple percentages. Contrarily, the reason for using this method is to enable the researcher compare and group information and data accordingly. The computation of ratios was limited to those that have to do with working capital of the company. At the end of the study, the researcher found out that, Working Capital Management of Cadbury Nigeria PLC does not enhance its profitability and Cadbury Nigeria PLC does not have an optimum level of Working Capital Management. Based on the findings the following recommendations were made that the company should reduce the period between the time cash is paid out for raw material and the time cash is recorded from sales of the company’s product. This will provide funds for regeneration and increasing working capital of the firm there after, the company should pay more attention to its liquidity position and improve on it. This is because a company that has no favorable liquidity position may likely face insolvency problems, the poor working capital can also be remedied through provision of additional fund by the shareholders and loans from banks and cadbury as international company should carry out more research to develop new product with the view of diversifying into new areas or lines of business.
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The working capital of a company has a major role in making it profitable or non-profitable. Most of the potential investors and other sanalyze position statement to evaluate the management of working capital. Net Working capital consists of current assets less Short term obligations. Positive working capital explain that the corporation is in a fine condition to reimburse it’s short-term debt whereas negative working capital explain that the most liquid assets of the corporation are not sufficient to fulfill its current monetary commitments. Any finance manager must sustain a most favorable point of investment in the most liquid assets of the company. Working capital for any business is the amount of capital to carry out its daily basis operations. In manufacturing concerns, it is the investment required for the conversion of raw material into ready to sell products for the company. The most important items inside determination of working capital are inventories of the corporation, its accounts receivables and payables. The management of working capital frequently considered a tool to maintaining competence of the business inside their operations. Working capital is often assessed by lenders to judge the financial short term paying back ability in difficult financial periods.
One of the key determinants of survival and sustainable business growth of modern organisations is the effectiveness of accounting and finance department or function (Eljielly, 2004). One area of accounting and finance that affects the efficient operations of business organisations in general is working capital management (WCM), among other things (Eljielly, 2004; Shin & Soenen, 1998; Tauringana & Afrifa, 2013). WCM has been described as the management of current assets and current liabilities (Agyei & Yeboah, 2011; Tauringana & Afrifa, 2013).