The objective of this study is to evaluate and examine the adequacy or inadequacy of working capital: its importance and implication
The study observed that
A lot of financial institutions have failed and more may still fall due to inadequacy of working capital
Because many financial institutions has quested or fallen some firms has will draw the confidence they have in putting more effort to progress while the liquidated ones find it different to off set its indebtedness.
In conclusion, the following recommendation more made
Firms that has excess working capital should invest their excess capital in short term investment so that they will not be forced with the adverse effect of excess working capital
Corrective measures should be adopted to the consequences of inadequate or excess working capital in the economy.
TABLE OF CONTENTS
Background of study
Statement of problems
Objective of study
Significance of the study
Scope and limitation
Definition of terms
Need for working capital
A balance approach
Component items of working capital
Classification of working capital
Importance of adequate working capital
Excess working capital and its effect
Adequacy of working capital
Implications of inadequacy working capital
Summary of funding, recommendation and conclusion
Discussion of finding
The primary aim of establishing or going into business is to optimize profit and as well as to ensure continuity of that business concern. When one person (sole trader ) of group of person (partnership of companies limited by shares or guarantee) intends forming a business entity he will need both fixed and current assets to facilitate a smooth take off, these fixed and current assets will by funded from both long term liabilities and current liabilities (or capital) as the case may be.
On formation, the business as an entity will be provided with fixed assets, such as building and premises, plant and machinery. Equipments, motor van etc. But form all indication we know and we see that these fixed assets itemized above cannot achieve the aforesaid aims of establishing the business. This is so because the fixed assets where not bought for the purpose of resale as a result any project cannot be directly accruable from its continuous stay.
From the foregoing, it is easily deduceable from it that the business as a going concern need some indispensable items or factors that will determine its profitability and its ability to withstand the test of time in a prevalent competitive environment
These indispensable items are operational and resolving in contrast with fixed capital and this is what we termed as the
BACKGROUND OF THE STUDY
The need for working capital would not have been necessary or relevant if not its inherent problems.
In the light or this I wish to state a modern approach in discussing this topic in bits so as a voice in this course or profession of this presentation.
The need for cash tentention or holding cannot be over emphasized because it goes a long way in tackling problems
resulting from inflation and it�s like.
Therefore, attempts wanted be made to discuss the problems, prospectus of this topic for the benefits of those who care to read of go through the content of this piece of work.
STATEMENT OF PROBLEM
For many years, they are some historical cause of adequacy or inadequacy of working capital.
What other likely causes are and knowing the cause and also findings remedies to them. Knowing all these problems does the government, financial institutions and private individual and role in the cause and remedies.
As a result of this problems firms easily find themselves go or walk the path of liquidation because they failed to make provisions
for the rainy day�.
This piece of work is an attempt in providing last solution to these problems and ways of curbing these problems forever.
OBJECTIVE OF STUDY
1. The project is hopefully aimed at identifying the causes of adequacy of working capital.
2. Corrective measure/remedies that could be adopted to the consequences of adequacy or inadequacies of working capital in the economy.
SIGNIFICANCE OF THE STUDY
This study is significant in that:
1. A lot of financial institutions have failed and more may still fall due to inadequacy of working capital.
2. because many financial institutions and banks of forms have fallen or liquidated, deposits confidence have been withdrawn leading to how banking habit which is not favourable, while the liquidated firms find it difficult to off set its in debtedness.
3. To show is blamed for firms failures.
SCOPE AND LIMITAION
At the onset, numerous problem nearly made the completion of this work impossible. Amongst other factor was time. The time at which the department made open the issue of project preparation was late coupled with other academic obligation. The most prominent factors was finance which is usual, but it was divinely surmounted.
We also had the problem of research materials periodical, magazines, textbooks, newspaper, and journal from where we could make references. Not withstanding, data and other
information we collected by God�s special grace.
DEFINITIONS OF TERMS
Meaning of working capital
The working capital of a business concern is the firms
investment in short � term assets stock, les current liabilities used to finance the current assets.
PERMANENT WORKING CAPITAL
This represents the volume of fund have by an organisation to meet it financial obligation for sourcing raw materials work in progress, stock of finished goods spare parts etc.
COMPONENT OF WORKING CAPITAL
These are those components or items that makes rep the working of the firm.
Whenever an organisation is under obligation to pay a debt to another party within one year, such payment may be classified as current liabilities.
EXCESS WORKING CAPITAL
Excess working capital is a lot of fund which would have been used for profit able investment but are held to the current assets as working capital.