APPRAISAL OF FINANCIAL MANAGEMENT PRACTICES IN A MANUFACTURING INDUSTRY. (A CASE STUDY OF EAGLE CEMENT COMPANY PLC. NKALAGU)
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APPRAISAL OF FINANCIAL
MANAGEMENT PRACTICES IN A MANUFACTURING INDUSTRY. (A CASE STUDY OF EAGLE CEMENT
COMPANY PLC. NKALAGU)
Abstract
Finance is the life-wire of any organization and proper
management means a sustained increase in the life of an organization. Owing to
the broad view of this project when settled for an elaborate detail about it,
this report or write up has been divided into five different chapters as
follows:
Chapter One: which is the introduction, deliberates or the
introduction of the topics as regards the background, objectives scope and
significance of the study, the statement of problems, research questions and
hypothesis of the project.
Chapter Two: elaborates on the literature review as in the
evaluating financial performance, accounting system, accounting procedure and
internal control etc.
Chapter Three: deals with the research methodology as in
research design, area of study, population of study, sample and sampling
procedures, instrument for data collection, validation of the instrument,
reliability of the instrument, method of data collection or administration of
instrument and method of data analysis.
Chapter Four: deals with the data presentation and analysis
test of hypothesis and summary of result.
Chapter Five: presents and gives discussion, implication and
recommendation as in discussion of result, conclusion, implication of the
results, recommendations, suggestions for the further research and limitation
of the study.
Table of Content
Title
Table of contents
Proposal
CHAPTER ONE
1.0. Introduction
1.1. Background of study
1.2. Objectives of study
1.3. Statement of problems
1.4. Scope of study
1.5. Research questions
1.6. Hypothesis
1.7. Significance of study
CHAPTER TWO
2.0 Review of literature
2.1. Evaluating financial performance of a company
2.2. Accounting systems
2.3. Accounting procedures
2.4. Internal control systems in accounting procedures
2.5. Summary
CHAPTER THREE
3.0 Research methodology
3.1 Research design
1.2 Area of study
1.3 Population of study
1.4 Sample and sampling procedures
1.5 Instrument for data collection
1.6 Validation of the instrument
1.7 Reliability of the instrument
1.8 Method of data collection or administration of instrument
1.9 Method of data analysis
CHAPTER FOUR
4.0 Date presentation and analysis
4.1 Test of hypothesis
4.2 Summary of results
CHAPTER FIVE
5.0 Discussion, implication, recommendation
5.1 Discussion of result
5.2 Conclusion
5.3 Implication of the result
5.4 Recommendations
5.5 suggestions for further research
5.6 limitation of the study
Bibliography
Introduction
Almost all kinds of business activities directly or
indirectly involve the acquisition and use of funds. There exists an
inseparable relationship between finance on the hard and production and other
functions on the other. In a business set up, the functions of recruitment and
promotion of employees are clearly the work of the personnel department.
Sales promotion policies come within the functions of the
marketing department. These activities performed by these departments
(personnel and marketing departments) require outlay of funds and therefore
affect resources. The finance function of raising and using money although has
a significant effect on other functions but it need not necessary limited the
general running of the business. Generally firms formulate their policies
(marketing productions, personnel and other policies) most of the time, to
tally with the financial resources of the company available to them.
The word “Finance” is viewed from different perspective by
different group thus: -
a. A layman sees finance as the volume of money in h-is
prose, vault and at the bank.
b. Investors sees finance as the provision of funds as at the
time it is need for investment. It goes beyond coursing and applying the fund
for profit maximization as well as the state of sharing the profits.
c. Academic sees finance as the science of fund management.
The investor view about finance shall be upheld in this write
up. This because it emphasizes on profit making for the maximization of
shareholders wealth. Wealth maximization is one of the corporate financial
objectives of a firms. This can only be achieved by efficient and effective
management of the company’s resources.
Financial management involves all the activities that are
concerned with planning cash and credit requirement, including the effective
control of the financial resources
The activities could be segregated as follows
i. Forecasting the future availability of and requirements of
cash
ii. Converting forecasts into plans and budgets
iii. Planning the appropriate capita structure
iv. Raising of cash from outside the business
v. Controlling cash balances and flows in accordance with
plans and changing circumstances
vi. Investing surplus fund
In financial planning, this involves estimating and
planning of the future flow of cash receipt and
disbursements. Also this is useful in raising of funds organizing and ensuring
that funds necessary for carrying on the operation of planning is available.
The wise use of funds by allocating such funds ensuring efficient use of funds.
In financial controlling, monitoring financial operations to
ensure that cash flows are proceeding according to plan.
As a company is part of financial community, its financial
management can be fully interpreted only within the context created by the
workings of financial institutions and markers.
The variables considered in the framework of financial
management are:
a. The financial goals of the company
b. The valuation of the company and the extent to which this
valuations uninfluenced by company decision.
c. The means of measuring the performance of the company.
When it goals have been identified and the method of valuation chosen, the
company’s performance must be monitored and measured accordingly.
The researcher here wants to access the financial health of
a manufacturing industry, its strengths, weaknesses, recent
performances, future prospects and the implementation of its financial
policies. This involves a review of the financial policies.
This involves a review of financial statements followed by
careful consideration of their use in evaluating financial performance.
ASSESSING THE FINANCIAL HEALTH OF A
MANUFACTURING COMPANY
The most important source of information for evaluating the
financial health of a company is its financial statement consisting of a
balance sheet and a income statements. EAGLE CEMENT is a public liability
company and as required by law, it is expected to submit her annual account to
the registrar, corporate affairs commission, Abuja. The account so prepared is
for the consumption of many interest group like: the shareholders, tax
authorities, investors, creditors etc.
For the purpose of evaluating the financial health of the
company (EAGLE CEMENT), the use of financial statement for 1999 year shall be
reviewed and analyzed. See chapter four on data presentation and analysis.
1.1 BACKGROUND OF STUDY
The research work is based on the NIGERIAN CEMENT Company Plc.
Nkalagu in Ebonyi State. As miller puts it, “we cannot understand the attitude
of either management of workers unless they are seen in their historical
context”. Here the history of NIGERCEM Nkalagu is briefly narrated and derived
from the management audit enquiry of NIGERCEM, 1976.
The history of NIGERCEM dates back to colonial days in
Nigeria. I the early thirties of this century, several district officers,
geologists had report tot he existence of large deposits of limestone in
Nkalagu area – various over sees had as a result of this shown interest in
working of deposit.
On 23rd August, 1954, the Nigerian government signed an
agreement with F. L Smith and company for the erection of a cement works at
Nkalagu. By the same agreement, F. L. Smith and company limited as managing
agents. The Nigerian Cement Company Limited, Nkalagu was incorporated on 13th
Novemenber 1954 to operate this cement project. Mr. E. E. Sabben – Clare became
the first chairman of the board of directors.
On December 20, 1957, the governor general of Nigeria, Sir,
James Robertson, opened the factory officially. Commercial production commenced
on 1st January, 1958.
Once of such investors is flour mills of Nigeria which Chief
Emmanuel Ukpabi said arrears of staff salaries alone in Nigrecem in
conservatively put at N1.4billion according to him. Liabilities to individuals
and corporate bodies are estimated at several billions of naira. He recalls
that there had been desperate move by cement importing companies to either buy
wholly or acquire majority shares of ailing cement manufacturing firms. But
they all shunned Nigercem because of the said liabilities.
Nigercem owned by the five south-eastern states ran into
hitches from the late 80’s due mainly to gross mismanagement. The development
led to break down of three of firms vital machines which remained unserviceable
with the only functional one operating at low capacity for some time until it
finally got grounded. The south-east governors who are the major investors in
the company had also contemplated many options aimed at reviving the company.
At recent meeting of the five south-eastern governors in
Owerri the Imo State capital, various options for the revival of Nigercem
topped the agenda of their parley. The host governors Achike Udenwa who spoke
with news men said Nigercem will be privatized if the governor’s ratify is
being considered for privatization. The government of the five eastern states
are already considering this in order to improve efficiency and productively.
The chairman of Nigercem “Nze Clement Maduako noted that
eastern Rukeem company limited producers of Eagle Cement, was the major
shareholder in the privated Nigercem with a controlling share of 60 percent.
Expressing confidence on the ability of new management to kick-start Nigercem
now called Eagle Cement again, he said the new board has the first general
manager of the cement company as member, while another employee of the company
is expected to join the six-member board. Member of board, who emerged from the
election conducted by the 165 shareholder in attendance were Nze Maduako,
chairman; captain I.A Hastrup, Mr. H.N Onugbogu, Mr. Coran Wejdmark, Mr. S.A
Oludemi and Dr. J.O Ojukwu.
The plant stopped production in 1999, but had a text run in
2001 for only three months in preparation for the privatization. Some of
shareholders who spoke said they had not been paid for the past 40 months and
pleaded with the new board to consider clearing the arrears then works
commences in the factory.
1.2 OBJECTIVE OF THE STUDY
The overall purpose of the study is to understand the
financial management practices that equips them with the conceptual and
analytical knowledge requires to make skillful, informed, sound, objective and
reliable decision of the company. Specifically the objective of the study on
this project is stated as follows:
a. To evaluate the financial performance of EAGLE CEMENT
Company.
b. To evaluate the management levels of control of financial
performance of the company.
c. To identify the accounting systems and procedures and
check whether the financial polices of the company are implemented accordingly.
d. To prefer solution to ineffectiveness in financial
management of the company.
1.3 STATEMENT OF THE PROBLE
a. It is believed from the evaluation of financial status of
the company that the company is not financially healthy.
b. It is also established that there is inefficient and
ineffective management of the company’s resources
c. It equally discovered that the financial policies are not
properly implemented.
d. Exposing financial fraud noticed. It include as follows:
i. Cash advance
Staff and management do apply for cash advance but over spend
the amount approved for them only to come back to claim a very huge amount as
their balance
ii. Car repairs:
Outside, manager do not allow their official cars to be
repaired by the company’s employed mechanics. They prefer repairing it outside
only to present an inflated biill to the company payment
iii. The provision that all purchases should be routed
through the purchasing department is just in principle not in practice.
iv. Price invoicing:
The company allows suppliers to inflect the prices of their
suppliers because of the interest some of them have.
v. price variation:
Some supplier do after some months of supply sent a price
increase to the company for items already supplied and the company will honour
such claim.
vi. Supply of item, which do not agree with the specification
of item actually required by the company.
vii. Contract prices are unjustifiable inflated
viii. Cheque exchange granted to some staff or managers take
more than one year before it is redeemed.
1.4 SCOPE OF STUDY
The study covers the area relating to financial manger of
EAGEL CEMENT. It also touched on the effective implementation of financial
policies of the company.
1.5 RESEARCH QUESTIONS
i. What are the levels of the financial management control of
the company?
ii. What are your accounting system and procedures relating
tot he receipt and disbursements of the company money?
1.6 HYPOTHESIS
i. Financial management practices EAGLE CEMENT COMPANY are
not in line with the approved policy
ii. The accounting procedures are not in line with the
approved policy
iii. The internal control system of the company are not in
line with the establishment system.
1.7 THE SIGNIFICANCE OF THE STUDY
1. The study will reveal the ineffectiveness of financial
management practices in the company
2. The study will equally reveal the weaknesses in the internal
control system of the company
3. The study will also over haul the accounting procedures of
the company as to see how adequate they are.
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