The managements of an organization capital relate to the finance and investment of non- human resources, that is physical and monetary assets for the purpose of maximum benefit in terms of profitability.

According to fear (1980) profitability is determine in part by the way in which a company manages its working capital elements especially the company’s management policies in respect of cash and account receivable or payable.

Basically, there would be a drop in profit if the basic elements of working capital were raised without a corresponding rise in production or margins. So one of the principle functions of a financial manager is to provide a correct (optimum) amount of each element of working capital at the right time and in the appropriate place to realize the greatest return on investment. A business which is basically profitable in a capital intensive industry with high level of inventory turnover but does have an effective or efficient policy for its working capital constituents, especially cash can easily be stopped by a temporary set-back into liquidation because it has no room to maneuver.

Traditionally, the users of accounting information, especially the external users are interested in notions of solvency and liquidity as criteria for assessing credit worthiness.

In recent years, cash and trade credit management has become the most important sector of financial management in many trading and manufacturing organization. At one time, it was possible for a business to survive without proper cash management policies as well as lay down policies for accounts receivables (trade debtors) as long as it was reasonably profitable.

According to Bennel (1989),prior to 1970’s, trade credit was not a dominant feature of conducting business and procurement of fund, were largely easily obtained and cash flow projections or forecasting were not exploited to its fullest use.

Today, however, this has not generally been the case and many highly profitable companies have had liquidity problems and some have gone into liquidations largely because of lack of appropriate cash and credit management policies or technique. In these circumstances business executives now attach a high degree of importance to the cash and accounts receivables management function. In large organizations, the financial director or treasurer is usually in charge of the management of cash resources and in introducing appropriate systems that will ensure adequate working capital flow that enable the company to remain liquid at all times.


Illiquidity problems could be found in all types of companies and not restricted to small inefficient firms. In some case, large well known companies have experienced illiquidity problems and in some few constant, liquidation proceedings and eventual demise of such organizations. The current wave of distress in our financial sector (Bank and insurance companies) provides a good back up to illiquidity problems arising from in efficiencies in cash and credit management policies in spite of their profitability. Today, several of these institutions have been liquidated.

These developments have naturally had an effect on credit and cash management policies and it is therefore considered to be particularly important that the reasons liquidity problems should be appreciated, using united Bank for Africa plc Enugu and Nigerian Breweries plc Enugu as study of some selected companies. The choice of these organizations is the relevant which cash and credit management policies bear to its operations.


Many profitable organization are forced into untimely liquidation ,bankrupt and experience work stoppages as a result of strike action and consequently operate at looses not because the business is not profitable but due to inefficient utilization of cash and other material resources at its disposal.

Moreover majority of business transaction are conducted on credit basis and this has always increased the volume of account receivable (debtors) and a substantial amount of these receivable are lost daily through bad and doubtful debts.

The resultant effect is that companies have huge amount of its fund tied to uncollectable, hence a state of illiquidity can arise. Therefore, the continued existence of a firm or company, its survival and growth depends among other factors on how best the firm utilizes it’s available cash resources and the efficient management of its collectables, as the neglect of these high important core of management area could soon lead to a sale of insolvency due to illiquidity problems.

This study is therefore designed to evaluate the essence of efficient cash and credit management policies existing in united Bank for Africa plc Enugu and Nigerian Breweries plc Enugu.



Realizing the high rate of failed or distressed organization in the financial sector and the manufacturing sectors of the economy due to illiquidity problems and the factors responsible for such  distressed conditions had not been properly addressed, the specific objective of the study are to find out:

(i) The percentage of cash and collectibles to the firm’s total working capital.

(ii)The extent to which improper management of cash resources and accounts receivables can create illiquidity or insolvency in a business outfit.

(iii) To evaluate the extent to which an organization require regularity in its liquidity management   through the techniques of cash flow budgeting.

(iv) To assess the adequacy of cash and credit management policies of companies.



The following research questions have been designed to address the detailed areas of the study and will serve as a guide to the research on the issue of the study.

(i)  What is the percentage of cash and collectibles to the firm’s total working capital?

(ii)  To what extent will improper management of cash resources and accounts receivable   create illiquidity or insolvency in a business outfit?

(iii) What techniques of cash flow budgeting does an organization require regularly in its liquidity management.

(iv) How can the adequacy of cash and credit management policies of companies or organizations be assessed.



According to Spiegel (1972)”A research hypothesis is an assumption statement or suggestion about the population under consideration.”

Omoloaije (1986) defined hypothesis as a suggested answer to the problem of the research under investigation.

Consequently, the following hypothesis will be used in this study:

HO:  A high percentage of cash and collectibles does not increase firm’s total working capital.

H1:  A high percentage of cash and collectibles increases the firm’s total working capital.

HO:  Improper management of cash resources and accounts receivables does not create illiquidity or insolvency in a business outfit.

H1: Improper management of cash resources and accounts receivable create    illiquidity or insolvency In a business outfit.

HO: A well instituted techniques of cash flow budgeting regularly does not yield liquidity turnover.

H1: A well instituted techniques of cash flow budgeting regularly in organization yields liquidity turnover.



The research project will be of great importance to the company’s management and other co-operate bodies as well as the general public such as investors.

The way which this study have been planned and carried out, will offer enough information and explanation to all those engage in the management of an organization either as a financial manager or financial controllers.Furthermore,this study is expected to offer a secondary source of  data to many student or researchers in the area of working capital management.



Osuata (1987) defined scope of study as these part of topic or problem that normally might be considerable part of such but which because of limitation of time, physical capacity or other reasons, the researcher cannot or does not wish to include it, thus the researcher had to restrict himself to a particular area of concentration and specific period of time.

The scope of this study is limited to cash and credit management policies for improved liquidity to the united Bank for Africa plc Enugu and Nigerian Breweries plc Enugu.

The research will only rely on the design of effective cash and credit policies through cash budgeting techniques and efficient collection procedures for bailing out companies in the web of illiquidity liquidation.

It is also necessary to state that the scope of the study is limited to Enugu environment due to time, financial and other constraints. The time coverage for the study is from 2009 to 2010 year.



(1)     CASH: Money in coins or notes. Give or obtain notes or coins for a cheque.

(ii)     CREDIT: a system of allowing payment for purchases to be deferred.

(iii)    MANAGEMENT: The act of managing.

(iv)    POLICIES: A course of action adopted or proposed.

(v)     INSTRUMENTS: A tool or implement for precise work.

(vi)    LIQUIDITY: The availability of liquid assets to a market or company.

(vii)   SOLVENCY: State of being able to pay current debts obligation as when due.

(viii) EVALUATION: To assess the amount or value of

(ix)    ACCOUNT RECEIVABLE: This refers to debtors.

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