ANALYZING DEBT MANAGEMENT TECHNIQUES IN BUSINESS ORGANIZATIONS IN NIGERIA
(A CASE STUDY OF NIGERIA BOTTLING COMPANY PLC ENUGU)
Previously debt can be talked of when individual, group of solicits suffer efficiency. At the down of the modern economic life, it has been observed that one can be debtors and get stands to meet his current liabilities provided it as well as manager.
This research work delves into the business managing of debt, analyzing its management in business organization, the fruit of its efficient management in an organization.
A close look at the Nigeria Bottling Company Plc Enugu, the research has employed both primary and secondary source of data. Primary sources involves oral interview the use of personal observation from the source document, secondary are the data sources from published textbooks.
A good financial manager can sources fund by debt invest and make a profit before the maturity of the debt. To do this, some speculative factor can be considered and handled so that balance or breakdown of the risk and return can been sought for and a fairly equilibrium is met.
TABLE OF CONTENTS
1.1 Background of the study
1.2 Statement of the problem
1.3 Purpose of the study
1.4 Research questions
1.5 Scope of the study
1.6 Significant of the study
1.7 Limitation of the study
1.8 Definition of terms
2.0 Review of related literature
2.1 Meaning of debt management
2.2 Classification of debt – management
2.3 Analyzing debt management in relation to
organization’s working capital
2.4 Cost of capital in relation to
debt – management techniques
2.5 Different school of though in debt management
2.6 Different types of debt-management
2.7 Debt-management financing in
organization capital structure
2.8 Cost of debt capital in business organization
3.0 Research design and methodology
3.1 Research design
3.2 Area of the study
3.3 Population of the study
3.4 Sample and sampling procedure / technique
3.5 Instrument for data collection
3.6 Validation of the instruction
3.7 Reliability of the instruction
3.8 Method of data collection
3.9 Method of data analysis
4.0 Data presentation and analysis
4.1 Presentation and analysis of data
4.2 Summary of result
5.0 Discussion, recommendation and conclusion
5.1 Discussion of results finding
5.3 Implication of the research finding
5.5 Suggestions for further research
1.1 BACKGROUND OF THE STUDY
In contemporary business setting, debt is seemingly unavoidable. Sometimes it emanates from short fund suitable with the existing trade terms. Debt does not occur only when money is borrowed. It equally occur when there is exchange of goods or service with a derived payment. Each time goods or services are exchanged with a different of its financial obligation there is incidence of debt.
C. A. Ezigbo (2001) defines debt management as the ability of financial manager or management to make good use of the money borrowed by the company in order to achieve the set objective. It can also be defined as the process where the debt obligation is being managed in all ramifications whether from the domestic or external sources.
A good business may not always write to finance the beginning of his business from his personnel savings.
At the commencement of a conscience organization the owners try to maintain a favoaruble capital structure it is normal for the business owners to finance to finance business. The choice of the capital structure and the finding technique is left at the merely of the financial managers.
Business organization usually structure achieve a number of objectives. These corporate objective provides a set of criteria upon which financial decisions can be based. In general terms of business organization seek to achieve by obtaining funds from various sources and investing some reasonably. It is important to recognize that the various steps of fund raised has its own cost and certain risks. For example debentures, preferences and ordinary shares. Loans. Raised on the security organizations assets tends to have fairly low rates of interest although they imply certain risks. Failure to meet the terms of th loan on due date would the tender to confiscate the said assets with potentially catastrophe consequence for the borrower.
Ordinary share however has no fixed charge as such. Its dividend depends on the periodic business profits yet excessive use of equity shares is determine to the organizational control, if it is not technically handled. When the equity shared is used in marginal funding of the firms, it is only advisable when the issue is such that share prices would increase.
One would not expect an issue of share to be made with an expectation that share prices would fall since that would reduce shareholder’s wealth. So it can be said that the minimum return required from a new issue is that which would leave the share price at its present level.
ii. Trade debt: are usually made on credit. This means that cash settlement legs sometimes behind the delivery of the goods or the consumption of the service to which the payment relates. It encourages for the following reasons.
a) The recipient will need to assure himself that the goods are satisfactory prior to payment.
b) Additional safeguard will be introduced with regards to the cash collected.
The practice of allowing credit has thus come to be widely accepted as normal. To achieve the, the financial manager and the management consider the cost under two categories
a. Cost of allowing credit
b. Cost of refusing credit
1.2 STATEMENT OF THE PROBLEM
Debt has implication in the life of every business organization. Poor analysis of debt affect a prime adversely.
It is pertinent to note that many business have gone into compulsory liquidation due to poor debt management.
In the business tending policy a firm tries as much as possible to minimize credit following reasons.
a) It brings about bad debts which is a deadly disease to a businesses.
b) Protracted debt denies the business organization the chance of using their business opportunities as they fall due.
This project is not pessimistic to debt at all neither it intend to criticize debt and anything about it, rather it delves into the problems and consequences of debt and analyzing its management situation.
1.3 PURPOSE OF THE STUDY
Every organization is set up to achieve certain goals using its resources but the resources alone can achieve nothing without the conscious effort of debt.
Subscribing to this fact, C. A. Ezigbo stated that debt is the process where the obligation is being managed in all ramifications whether from he domestic or external sources.
The general objective of the study therefore is to determine how the concepts can be successfully applied in a services organization.
The specific objective are:
i. To ascertain what debt management means.
ii. To ascertain the process involved in the application of the concept.
iii. To find out if this concept is used in coca cola company
iv. To identify the difficulties involved in the application of the concept.
v. To determine how to overcome these difficulties.
vi. To identify the benefits derived from the successful application of the concept.
1.4 SCOPE OF THE STUDY
The scope of the study covered was an analyzing debt management technique in Nigeria business organization with much concerned to Nigeria bottling company Plc.
However, for further reference and clarity, emphasis are made form other reasons and these are consider vital, thus such emphasis are profitability solvency, control and conversation.
1.5 RESEARCH QUESTION
a. How does debt management bring about an optimal capital structure in a business organization?
b. Will good analysis of trade debt management, help measures an effective working capital management in every business organization.
c. What effort will be made to reach latent problem, inherent in analyzing debt management in area of organizational capital structure.
d. How does the important element in decision about resource help to finance the almighty surrounding concept of the cost capital.
1.6 SIGNIFICANCE OF THE STUDY
In a continued effort to reach an applicable equilibrium in the problems and consequences of debt and its effective management, we employed a selected statistical to enable us reach fair conclusion.
In the light of the above, therefore the following major hypothesis have been formulated. Hypothesis mean a tentative statement made by a researcher, subject to tests with a view to forming basic to study a phenomenon.
1. Ho: effective debt financing does not bring about an optional capital structure in a business organization (NULL).
Hi: effective debt financing bring about an optional capital structure in a business organization (NULL).
2. Ho: Good analysis of debt management is not good measure of an effective working capital management in business organization (NULL).
Hi: Good analysis of debt management is good measure of an effective working capital management in business organization (NULL).
1.7 DEFINITION OF TERMS
i. DEBT: Money or something owned by or some one a liability or an obligation.
ii. DEBTOR: One who owes the liability or obligation
iii. CREDIT: trust or confidence in a buyer’s ability Intention to pay at the same time exhibited b out rushing him with goods.
iv. MANAGEMENT: The process of planning, organizing, leading and controlling the work of organization members and of using all available organization resources to reach stated organizational goods.
v. CAPITAL STRUCTURE: Debt or equity relationship, it is configuration of equity capital loan capital in the long term financing of an organization.
vi. EQUITY: The rush bearing portion of the long term capital of a business organization.
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