Working capital is known to be the background and life wire of any
business organizations in every part of the world. This makes it
imperative that there should be efficient working capital management, to help
in reducing constant incidents/cases of banks distresses (i) Banking industry
since this has been a source worry to the users of financial statements.
Consequently this project has attempted to give an expository discussion on the
management of working to enhance the continuity industry to enhance the
continuity of banking industry, with a particular interest in united bank for
Africa plc Surulere, lagos.
It thus gave hits on how bank managers should manage financial
distress banks where such signs of distress situations tries to occur.
Conclusions arising form this research are both outstanding and
TABLE OF CONTENT
1.1 Background of the
1.2 Statement of
1.3 The purpose of objective of the
1.5 Hypothesis where
1.6 Significance or rationale of the
1.7 Scope of the
1.8 Definition of
2.0 Review Of Literature
3.0 Research design and Methodology
3.1 Research design
3.2 Area of the
3.3 Population of the
3.4 Sample and sampling
3.5 Instrument for data
3.6 Validity of the instrument
3.7 Reliability of the instrument
3.8 Method of Administration of the instrument
3.9 Method of data
Data presentation and results summary of
4.1 Summary of
4.2 Test of
5.0 Discussion Implication and
5.1 Discussion of results
5.3 Implication of the
5.5 Suggestion for Further
5.6 Limitation of the
BACK GROUND OF THE STUDY
capital management is vital in the management of the bank’s current account
which include current assets and current assets and current liabilities.
This explains the various forms of current assets and current liabilities
adjustments which a bank can make in order to meet its required working
capital. Working capital is of two types, gross type and net type.
The gross type refers to the bank’s investments in current assets, this
means those assets which can be means those assets which can be converted into
cash within accounting year, like short term securities, debtors bills
receivable, stock and cash.
The net type is the difference between current assets and current
liabilities. Current liabilities means those claims of outsiders which
are expected to mature for payment within an accounting year, such as creditor,
bank overdraft and bills payable. Net working capital occurs when current
assets exceeds current liabilities.
Working capital management is one of the important aspects of the
bank’s overall financial management. This is because efficiency in this
area is necessary in order to ensure the bank long-term success and achieve its
overall goal which is the maximization of owners wealth.
A certain level of working capital is required for operation in
the banking industry. This level of working capital of a bank constitutes
the cash holding or near cash holding or near cash assets required of a bank by
a statue of the government or it should be noted however, that the level
of working capital do not directly earn the bank any income when it is all
allowed to be held in cash form, that is idle cash.
The main purpose of establishing commercial banks to operate is to
make profit for the shareholders. In that regards, banks as well as other
profit seeking enterprises strive to increase their net income and presence
value of their assets. While recognizing this, the immediate concern of
the bank manger is to provide satisfactory returns for the shareholders, and this
requires holding a sufficient volume of safe and productive assets as well as
sourcing for funds through the fast volatile and expensive available sources.
It should be noted however, that a bank does not possess full
control over its assets and also a greater part of its liabilities, the reality
it that it possesses partial control on some current assets and current
liabilities absolute control on some and still lack total control over
others. It is within this business environmental constraints and prospect
that banks have to carry out their various adjustments to suit their long run
In the earlier paragraph, it was mentioned that there are two
concepts of working capital (the gross and net working capital ) They
have equal significance from the management view point, the gross working
capital concept focuses attention on the two aspects of current asset
(a) optimum investment in current assets
(b) Financing current assets.
The consideration of the level of investment in current assets
should avoid two danger points, the excessive and inadequate investment on
assets. The investment in current assets should be in adequate form to
enhance better performance. While the excessive investment in current
asset should be avoided because it impairs a bank’s profitability since idle
investment earns nothing to the investor.
On the other hand, inadequate availability of working capital can
threaten the solvency of the bank when it fails to meet its current
obligations. Thus the financial managers should have knowledge of the
source of working capital funds as well as the investment avenues, where the
idle funds may be temporally invested. The net working capital on the
other hand has indicated liquidity position and suggests that current assets
should be sufficiently in excess of current liabilities in order to constitute
a margin for maturing obligations within the ordinary operation cycle of a
The need for working capital to run the day to day activities of a
bank business cannot be over-emphasized. We will hardly find banks or
other firms which does not require any amount of working capital. Banks
should earn enough return from their operations in order to be able to achieve
their set goals, which of course includes the maximization of shareholders
wealth and as such to avoid the recent distress problems in today’s banks which
has its root basically from inadequate working capital caused by inefficient
working capital management . The banks have to invest enough in current
assets for success of their business.
The need for working capital to run the day to day activities of a bank
business cannot be over-emphasized. We will hardly finds bank or other firm
which does not require any amount of working capital. Banks should earn enough
return from their operations in order to be able to achieve their set goals,
which of course includes the maximization of shareholders wealth and as such to
avoid the recent distress problems in today’s banks which has its root
basically from inadequate working capital. The banks have to invest
enough in current assets for success of their business.
The inability of the bank to honour
claims from individuals/customers demand start a spiral of technical insolvent,
it was for the avoidance of such embarrassing situation as liquidity, technical
insolvency, high risk and low profit that such theory, the profit ability
theory, the liability management theory have been formulated in banking to
guide bankers in their decision making process.
STATEMENT OF THE PROBLEM
are many banks that are not able to meet the demands of their customers owing
to their inability to manage their working capital effectively and efficiently.
Their bank managers are consistently confronted with formidable problems in
striving to meet their level of working owners investment in their banks.
The problem is really related to the following
(1) Inadequate cash reserves
(2) Poor management of the available funds.
(3) Non compliance to rules and regulations in
giving loans to their customers
(4) Non payment of loans extended to customers on
time and sometimes not paying at all.
(5) Constant withdrawals of money deposited in bank
by their depositors owning to lack of confidence by customers.
(6) Abstaining from depositing money in banks due to
constant cases of banks distress by some would have been banks customers.
PURPOSE OF THE STUDY
(a) To know whether working capital management has
any affect on the liquidity of banks
(b) To find out the causes of bank distress or
reasons why there are distress in banking industries today.
(c) To know whether the working capital management
has any effect on the profitability of the bank.
(d) To how the bank manager manage the current
account of the bank.
find out whether the long term longs affect the management of the bank.
(f) To find out how adequacy is the working capital
of the bank.
(a) How is working capital being managed in UBA Plc
(b) Is there enough working capital for the
operational activities in the bank?
(c) Do the management (officers) of UBA Plc
Surulere, lagos make proper use of the available working capital
(d) If there is proper working capital management in
UBA Plc Surulere, lagos, has it contributed to the profitability of the
(e) How do the loan beneficiaries respond to such
offer given to them by the Bank?
(f) How do the customers react to the operational
mode of the bank?
this research hypotheses, the null hypotheses is represented by HO while the
alterative hypothesis is represented by Hi
HO: Working capital management in united bank for
Africa Plc affects the liquidity of the bank.
Hi: Working capital management in united
Bank for Africa does not affect the liquidity of the bank
HO: The efficient management of the working capital in
the bank is enough.
HO: Long term loans and short term loans methods of
issuing loans are not favourable to the bank.
Ho: The united bank for Africa Plc should not
employ more well trained personnel’s.
Hi: The united Bank for Africa should
employ more well trained personners to enhance productivity.
SIGNIFICANCE OR RATIONALE OF THE STUDY
are many significances about the working capital management of united
Bank for Africa plc Surulere, lagos. Those are as follows
(i) The study of this project topic will give the
researcher the opportunity to know and hence empty the most dynamic and
competitive techniques of working capital management.
(ii) It serves as data base of information on
contemporary practices in evaluation.
(iii) The study will help/lead to increase know how in
areas of risk reduction, liquidity management.
(iv) It will help the management of united management
and make good use of its working capital decision making process.
SCOPE OF THE STUDY
scope of this study will be based on working capital management, its inadequacy
and excess implications in banking industry. Another things that
contributed to this limitation are time and financial constraints, which did
not allow for more exhaustive research.
DEFINITION OF TERMS
are some technical terms which are used in this research they are defined as
(i) CAPITAL: This
is defined as wealth owned by an individual or business organization (bank) in
form of money or goods, which can be used for creation of additional wealth.
(ii) CURRENT ASSESTS: These are
assets which can be readily converted into cash acquired for use within an
(iii) CURRENT LIABILITIES: These are those
accounts payable, notes payable and all the accruals.
CAPITAL: This is the difference between the current assets and
current liabilities of a firm (Bank).
(v) WORKING CAPITAL MANAGEMENT: This is
the determination of the ratios at which to hold the current assets and current
liabilities in the overall valuation of a bank (firm).
SECURITIES: These are short term securities which can readily be
converted into cash, such as Treasury, bills, Treasury certificates development
stocks and bonds
WORKING CAPITAL: This is total current assets less total current
(viii) MANAGEMENT: The act of getting things done more
specifically which involves setting bank’s goals and directing human and
physical resources to achieve these set goals
WORKING CAPITAL: This is
the investment in current assets by banks (firms)
TERMS AND CONDITIONS APPLY
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