The efficient and effective utilization of the resources of an organization is important if such an organization is to achieve its set goals and objectives. As it is the case that resources are known to be scarce relative to demand, organizations and indeed all consumers strive to maximize the benefits that can be derived from the usage of the resources. Thus, organizations manage key resources required in their day-to-day operations to ensure ready availability, proper utilization and avoidance of waste. Cash is one of such resources that has to be handled adequately if organizational activities are to be carried out without disruptions.
Cash is the money which a firm holds to operate its business and also to meet its obligations as they fall due. Cash includes coins, money in an organization’s bank account as well as cheque. Non availability of cash and its components simply implies that there is no cash. It is the most liquid, significant current asset and also the basic liquid, significant current asset and also the basic input that an organization needs to keep the business running on a continuous basis. It determines the survival of an organization. Practically, companies do go bankrupt and sometimes even go out of business not because they are not making profit but rather as a result of non availability of cash and/or its components. Cash is however subject to more frequent changes than any other assets and therefore poses more problems of control. Hence, the need for effective and efficient cash management especially in this period of inflation to ensure survival.
Cash management has to do with “managing the monies of the firm in order to attain maximum cash availability and invest idle funds” – Van Horn (1983:356). Cash management activity is usually carried out by the treasures office. It involves the management of cash flows into and out of the firm, cash flows within the firm and cash balances held by the firm at any point in time by financing deficit on investing surplus fund. Hence cash planning and control as well its effect on the organization’s survival is an important issue to almost any type of organization.
The ideal cash management system will depend on the firm’s products, competition, organizational structure and options available.
It is pertinent to state at this juncture that cash could be held for precautionary motive, speculative motive and transactionary motive. The main objective of cash management is to maintain adequate control over cash position, to keep the business sufficiently liquid and to use excess cash in some profitable venture. Alternatively, the aim of cash management is to ensure that just the right amount of cash is held at any particular time to meet its various usages.
Thus a firm should emphasize efficiency in the management of cash so as to overcome the difficulty in the economy which now prevail in Nigeria in particular and the developing countries in general.
The Nigerian Bottling Company (NBC) Plc was registered in 1953 and had its first plant in Nigeria in Lagos precisely at Oyingbo, Ebute-Metta, which is where we now have Mainland Hotel. The need for more markets for their products which would invariably lead to more profit, raw materials and exchange of technical know-how by Leventis Group in London which lead to the creation of a Bottling Company in Nigeria which was to be called Nigerian Bottling Company (NBC). The Nigerian Bottling Company is the largest group in the private sector in terms of size and geographical spread of operations. Its main objective is to make profit which can only be achieved by making the products available in large quantities.
Nigerian Bottling Company is Nigeria’s number one bottler and manufacturer of soft drinks. Its brands include Fanta, Sprite, Bitter Lemon, Fanta Lemon, Coca-Cola, Fanta Apple, Eva Table Water, Linger Ale, Fanta Tonic, Fanta Soda, five Alive etc. Although NBC Plc has stopped the production of some of these brands.
The major raw materials used by NBC Plc are carbonated water, sugar, phosphoric acid, sodium benzoate, caramel colour, flavouring, ascorbic acid, sunset yellow etc some of these materials are imported.
The company has production stages ranging from sorting, washing, inspecting bottles to the production of syrup, warehousing and dispatching of the products to the consumers. NBC Plc is the only bottler of Coca-Cola products in Nigeria and one of the largest in the world. It is also the largest manufacturer of carbon-dioxide (Co2
) used to carbonate the favourite soft drinks.The taste and quality of these products are the same all over the world. Nigerian Bottling Company (NBC) Plc is a market leader in the soft drink industry.
It is almost impossible to have a manufacturing concern that does not encounter cash problem. This problems are aggravated today in Nigeria by the economic crisis and various government policies which directly or indirectly affect the cash that a firm holds at any point in time. This makes it mandatory for firms to manage their cash efficiently to ensure an optimal level of cash.
Firms are always faced with the problem of how much cash to hold in a particular period and when to hold small or large amount of cash. This however, is as a result of the fact that holding too much cash makes the organization loose the profit that would have accrued if such excess cash was invested. Similarly, insufficient cash can disrupt the activities of the firm. It is in light of this that the study is being carried out to strike a balance between holding too little cash and holding too large amount of cash, in other words we are trying to determine the optimum cash balance or level which is the point where cash management is efficient.
Following from the above the study seeks to answer the following questions.
As it was mentioned earlier, the business environment is quite dynamic. The success or failure of any firm depends to a large extent on the cash position of the organization. Since it is true that the importance of cash cannot be over-emphasized as cash is used to meet obligations as they fall due and also transact business on a day-to-day basis.
The objectives of this study therefore are
As a result of the limited time available for this research work and the insufficient fund at the disposal of the researcher, this study will cover relevant literature on cash management with the aim of determining its relevance to the survival of the organization.
The evaluation of cash management using Nigeria Bottling Company Plc as a case study in order to validate the theory that the level of survival of a company depends largely on the effectiveness and efficiency of the management of cash.
The study utilizes questionnaire designed to collect necessary information with respect to cash system in the company, the questionnaire is also designed to obtain information that cannot be disclosed in the financial reports.
Oral interview will be conducted with top management staff of the organization.
Secondary data will be used to obtain information from the company’s books in relevant areas, records, library and journals.
A good number of organizations in Nigeria are currently passing through a period of economic recession as a result of the inflationary trend and particularly too, as a result of cash mismanagement or misappropriation of funds within such organization. In an attempt to restore their survival, this study is conducted to examine benefits of
In the course of this study the following hypothesis have been formulated.
That there is no positive relationship between profitability/liquidity and survival of a company.
That there is a positive relationship between profitability/liquidity and survival of a company.
In the course of carrying out this research work we may encounter some universal factors that may militate against achieving the aim of the project such as financial constraints, time constraint and of course the inability, to have access to some key officials of the company and data termed “classified data”, etc.
In addition, we may encounter limitations such as inaccurate statistical data, sample size, standard error etc.
Cash – This is the standard medium of exchange and it provides the basis for measuring all other items. Cash consist of currency (bank notes and coins) and bank account balances, etc.
Cash Management: This is the critical task of deciding the volume of funds and the speed with which they travel through the system.
Survival – This relates to the ability of an organization to earn returns on resources or assets invested and ability to honour its debt obligations as they fall due.