WORKING CAPITAL MANAGEMENT IN AUTOMOBILE INDUSTRY

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

In the early 70’s there was an economic from in Nigeria and manufacturing industries inspite of widespread misapplica and diversion of resources still returned handsome profits. Companies expanded and prospered as a result and effective management became insignificant. However, in the early 80’s, Nigeria started witnessing an austere economic condition due to global oil fall in price. Business environment became so complex that most manufacturing industries and other sectors of the economy started findings things difficult. Hence the need for effective management of resources became imperative.

The financial resources of the manufacturing industries were one of the major casualties. The companies liquid asset were inadequate to meet its day to day requirement of fund and a newly established company require adequate working capital to be able to start off operation effectively. Good working capital management is vital to effective financial obligation of an industry. It is therefore imperative at this point to illustrate the definition of working capital. It represent asset used in the day-to-day mining of an enterprise. In other words, working capital in the net investment in current assets.

Working capital also indicates in a general sense, the ability of a business to meet it short-term liabilities as they fall due out of its short-term asset. However the importance of working capital cannot be over emphasized. Explicate survey has revealed that there is growing awareness of importance of capital and its influence on the success of a business organization. Based on the above general premises of our discussion, working capital management refers to all aspect of administration of both currents asset and liabilities working capital requires a careful and mutinous management as its effectiveness make a gloomy business likely and prosperous. As a result of the impact of working capital on a business, this study is to assess the working capital management in manufacturing industries within Anammco.

1.2   STATEMENT OF THE PROBLEM:

A critical overview at the trend of business activities over some years in Nigeria will reveal a consistent increase in cost and lowering profit. It puzzles one why manufacturing industries in Nigeria have not been operating efficiently, is it because of unavailability of raw materials? Or is it lack of managerial expertise. We noted the practise of working capital management in manufacturing industries yet the problem lingers on. In the light of all these problem and the fact that there is the awareness of the need for working capital management and that there is inadequate working capital in our manufacturing industries.

1.3   PURPOSE OF THE STUDY

The purpose of the study include:

1.To determine the immense importance of working capital management in manufacturing industries.

2.To critically examine the existence and evaluate the quality of working capital of automobile industry.

3.To assess the general contribution of working capital management in cost reduction.

4.To determine the factors hindering the working capital management in manufacturing industries.

1.4    SIGNIFICANCE OF THE STUDY:

This study will determine certain problems associated with the management of working capital in manufacturing industries.

It will highlight useful information on the possible means of improvement.

It will be of immense benefit to investors in the industry.

Finally, it will serve as a useful guide for further researcher, who may wish to go into the subject.

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