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).