THE ROLE OF FINANCIAL MANAGEMENT IN A COOPERATE ORGANIZATION (A CASE STUDY OF NICON INSURANCE COMPANY LTD, ENUGU)
This project is poised at X – raying the degree of “the role of financial management in a corporate organization”. Making reference of Union Bank (Nig) plc Enugu, Financial management is the management activities conceived with raising of capital, planning cash and credit requirements including the effective control of financial resources. This work was divided into five chapters . The first chapter was the introduction and background of the study, objective of the study which is the maximization of owners wealth. Significance of the study was also discussed. Related textbooks was also used as literature review of the study, questionnaire were distributed to respondents. Information getting from responses were presented in tabular form. Finally conclusion were drawn and recommendation were also given based on research
- Background of the Study 1
- Statement of the Problem 3
- Objective of the Study 5
- Research Questions 6
- Significance of the Study 6
- Scope of the Study 7
- Limitation of the Study 7
- Definition of Term 8
REVIEW OF RELATED LITERATURE 9
2.1 Review of Related Literature General Overview 9
2.2 Financial Rations and Profit Planning 11
23 Current Asset Management 20
2.4 Break Even Analysis of a Firm 24
2.5 Forecasting Future Need for Funds 28
2.6 Budgeting and Investment Analysis
Financial Planning 31
2.7 Managing the Financial Structure 40
3.1 Research Design 47
3.2 Area of the Study 48
3.3 Population of the study 48
3.4 Sampling Method 48
3.5 Research Instrumentation 48
3.6 Validity and Reliability of Research Instruments 49
3.7 Sources of Data 49
3.8 Method of Investigation 49
DATA PRESENTATION AND ANALYSIS 52
4.1 Data Presentation 52
4.2 Test of Hypothesis 57
FINDINGS RECOMMENDATIONS AND CONCLUSION 62
- Findings 62
- Conclusion 63
- Recommendation 66
LIST OF TABLES
Table 4.1: Question 7 52
Table 4.2: Question 15 53
Table 4.3 Question 20 53
Table 4.4 Question 21 54
Table 4.5 Question 24 55
Table 4.6 Question 25 55
Table 4.7 Question 27 56
Table 4.8 Question 28 57
1.1 BACKGROUND OF THE STUDY
Financial management involves all activities of a financial manager concerned with raising of capital, planning cash and requirement melding the effective control of financial resources
The activities could be segregated as follows:
- Converting force caste in to plans and budgets
- Planning the appropriate capital structures
- Raising cash from outside the business
- Forecasting the future availably of and requirement of cash
- Investing surplus funds
- Controlling cash balances and flows in accordance with plans and with changing circumstances.
With the emergence of finance as a separate field of study the emphasis was more or less on legal matters seen as mergers formation of new company’s disposal and consolidations. With most vital problem of the firm was identification of means of raising capital for possible expansion due to increasing wave in industrialization, the mobility of funds from area of surplus to area of scarcity pose a lot of problems.
In the 1930’s the stock of depression ushered in an era of conservation and attention slighter to such tropics as preservation of capita, maintenance of liquidity, reorganization of financial troubled corporations, and the bankruptcy process the federal government assured a much larger role in regulating business.
In 1940’s and early 1950’s offered little new in the study or produce of corporate finance. Crower, in the mid 50’s a major shift in emphasis took place, up to that time, the study of finance had been disruptive of definitional in nature.
The first area of study to generate the new found enthusiasm for decision related analysis was capital budgeting, in which the financial manager was presented with analytical techniques for allocating resources among the various assets of the firm the enthusiasms spread to other decision making areas of firm such as cash and inventory management, capital structure formulation and dividend policy. The emphasis shifted from that of the outside looking in the financial manager force to make though day to decision affecting the performance of firm.
From the late 1960’s through today’s financial management has focus on risk-return relationship and the maximization of return for a given level of risk.
Another area of financial resources that also receive more attention in early 1990’s AGENCY THEORY. This theory examines the relationship of the firm. In privately owned firms, management and the owner are usually the same people, management operates the firm to satisfy its own goals, needs, financial requirements and the like.
As a company moves from private to public ownership, management now represents all the owners, this places management in the agency position of making decision in the best interest of all shareholders.
Because of the diversified ownership interest, conflicts between managers and shareholder can arise that impact the financial decision of the firm. Also because of the increased level of corporate stock took place in the 1960’s agency theory has became more important in assessing whether shareholders goals are being achieved by management in the long run.
1.2 STATEMENT OF PROBLEM
There has been unappreciated increase in the quest for the answer of the following questions posed in order to clarify the duties of financial manager which is the prospective rank of a student studying fiancé.
What is managerial finance Functions to the perfuming designed to accomplish pontific goals. How and when do the finance achieves the firms objective? What is the financial managers, definition of a fare-price and how is it related to his firms return and investment capital, one may logically ask, why are we interested in these cash flows, if they do not affect profit, why can their profit effect not be taken directly into account in the analysis? What tools and techniques are available to him and how does one go about measuring his performance? On a general scale do they have any operational meaning? That is how can managerial finance be used to further rational goals?
Having identified these questions, the provision of the possible answers to the aforementioned question constitutes the area of consideration of this project.
As stated, the financial manager must find a rational based for answering the following three questions.
- How large should an enterprise be and how fast it grow?
- What should be the composition of this liability?
- In what form should it hold its assets.
The questions stated above related to three board decisions areas of financial management, investment financial manager becomes important that the primary researchers caudated on a named company serves dual purpose. This not only serves as paint of the tool in answering the questions but it mainly asked to unfold the extent the financial manager of the company is executing his duty according to the project.
1.3 OBJECTIVE OF THE STUDY
Since this project is concerned with the role of financial managers in a corporate organization, therefore, it is informant to note the objective of any corporate organization.
(a) Maximization of Wealth: The main objective of financial management is the maximization of owners wealth. Owners wealth maximization of accomplished by maximizing the sum of the present value of the stream of dividend received and the present value of the increased in the market value of the share of stock held by the shareholder. Thus the apparent wealth maximization is the best economic objective for shareholders as the owners and for the company whose primary interest is to shareholder owners.
(b) Profit Maximization: This is the second of frequently encountered objectives of any business, infact, all business firms believed that as long as they are earning as much as possible while holding down lost they are achieving this goals of profit maximization. It is regarded as a rational for business as stated “although profit maximization appear to be intensively appealing, it represents only one aspect of corporate performance.
1.4 RESEARCH OF THE QUESTIONS
- The sources of fund which the company use in financing their company, ie. whether short or medium term sources of fund. Also, the method of financing working capital which the company adopt.
- Methods used by the company forecast additional fund needed to support the higher volume sacks and also plan for profit.
- What are the financial ration used on evaluation and understanding of the result of their business operation.
- The objectives of the company’s budget and the policies usually established in furtherance of the budgeting system.
1.5 SIGNIFICANCE OF THE STUDY
this research work on the role of financial management in a cooperate organization will be of benefit to the financial institution in the following ways.
(a) Internal Environment: The principle factors in this case, sit is unavailability or the lack of human resources and the organizational self imposed standard.
- The External Environmental Factor: The external factor include political, economic (monetary and fiscal policies) technological or even social. It is this factor that mostly accounts of the unpleasantness that facts the financial manager in his bid to achieve organizational goals.
- SCOPE OF THE STUDY
This study on the role of financial management in a cooperate organization. Is study is concentrated on Nicon insurance company L.T.D ENUGU.
- LIMITATIONS OF THE STUDY
The problems encountered in the study include lack of sufficient fund, inadequate contact with some of the respondents, illiteracy level and prejudice, distress arising form ignorance of the basis for the study.
One of the limitations of the study is time. In the collection of questionnaires, several repeat calls were made and sometimes the respondents never actually answered the question. This state of affairs could be frustrating and in some cases, the respondents become hostile and aggressive.
1.8 DEFINITION OF TERMS.
HUMAN RELATIONS: The interaction that exists amongst people in an organization.
MORALE: State of mind and emotion
INEFFICIENCY: Not capable
MOTIVATIONAL DEVICES: Those devices used t stage up the morale f workers towards achieving organizational goals eg. regular promotion of staff, high pay packages etc
MORALE BOOSTER: Something that increase the workers’ state of mind.
NEED’S HIERARCHY: The order, stage or pyramid f human wants or desire. The higher the hierarchy, the more satisfied the person is.
DECENTRALIZATION: Making the offices and authority of an organization to be scattered at different places. This is the reverse of centralization.
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