THE ROLE OF FINANCIAL MANAGEMENT IN A CORPORATE ORGNAISATION (A CASE STUDY OF NICON INSURANCE COMPANY LIMITED ENUGU, ENUGU STATE)
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THE ROLE OF FINANCIAL MANAGEMENT IN A
CORPORATE ORGNAISATION (A CASE STUDY OF NICON INSURANCE COMPANY LIMITED ENUGU,
ENUGU STATE)
ABSTRACT
This project
is poised to x raying the degree of “the role of financial management in a
corporate organization”. The main aim of
every business is profit maximization.
Care must therefore be taken to ensure that available finance for a
business is well managed. This role is left in the hands of financial manager.
In conducting the research on this topic, the researcher wishes to visit the
Enugu office of the NICON insurance corporation NICON PLC and administer
questionnaire to the Zonal Director and other top ranked workers in the
corporation in a bid to collect proper information. It is purely on oral interview, after which
critical analysis of data follows.
Regrettably certain factors will tend to limit research for this
information. Resources are scarce to
meet up with transportation expenses to various part of the country for
information. Lectures will be going on
in the class, making it impossible for the researcher to go out every time. In
conclusion, the researcher will suggest that corporate organizations in Nigeria
will be compared to those in advanced countries if the finance available to
them are managed well.
TABLE OF
CONTENTS
Title
Page
ii
Approval
page
iii
Dedication
iv
Acknowledgement v
Abstract
vi
Table of
contents
vii
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background of the study
1
1.2 Statement of problem
4
1.3 Objective of the study
6
1.4 Research Hypothesis 7
1.5 Scope and limitation of the
study
8
1.6 Definition of terms
8
CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 General review
9
2.2 Financial ratio and profit
planning 13
2.3 Current Assets Management
23
2.4 Break even analysis of a firm
27
2.5 Forecasting future needs for
funds 33
2.6 Budgeting and investment
analysis
39
2.7 Managing the financial
structure 51
CHAPTER
THREE
3.0 RESEARCH DESIGN AND METHODOLOGY
3.1 Research design
59
3.2 Sources of Data collection,
60
3.3 Population and sample size
62
3.4 Methods of investigation
63
CHAPTER FOUR
4.0 PRESENTATIONS, ANALYSIS AND INTERPRETATION
OF DATA
4.1 Analysis of Data
66
4.2 Hypothesis Testing
72
CHAPTER FIVE
5.0 SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATION
5.1 Summary of findings
77
5.2 Conclusions
79
5.3 Recommendations
81
Bibliography
Appendix
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Financial
management involves all activities of a financial manager concerned with
arising of capital, planning cash and credit requirement including the
effective control of financial resource.
The activities could be segregated as
follows:
i. Converting forecasts into
plans and budgets
ii. Planning the appropriate
capital structure
iii. Raising cash from outside the
business
iv. Forecasting the future
availability of and requirement of cash
v. Investing surplus finds
vi. 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 emphases was more or less
on legal matter such as mergers formation of new company’s disposal and
consolidation.
With most
vital problem of the firm was identification of means of raising capital for
possible expansion due to increasing ware in industrialization, the mobility of
funds from area of surplus to are of scarcity pose a lot of problems.
In the 1930s
the stock of depression ushered in an era of conservation, and attention
shifter to such topics as preservation of capital, maintenance of liquidity,
reorganization of financially troubled corporations, and the bankruptcy process
the federal government assumed a much larger role in regulating business.
In 1940s and
early 1950s offered little new in the study or produce of corporate
finance. However, in the mid- 50s a
major shift in emphasis took place. Up
to that time, the study of finance had been descriptive o definitional in
nature.
Furthermore,
the orientation had been from the viewpoint of a third partly, or outside
looking in the all changed in the mid-50s as a more analytical decision
oriented approach began to evolve.
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 the firm such as cash and inventory management,
capital structure formulation, and dividend and policy. The emphasis shifted
from that of the outside looking in to that of the financial manger force to
make tough day to-decision affecting the performance of firm.
Form the
late 1960s through todays; financial management has focus on risk-return
relationship and the maximization of return for a given level of risk.
Another area
of financial research that also receiving more attention in early 1990s is
AGENKY THEORY. This theory examines the
relationship of the firm. In privately
owned firms, management and the owners 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 shareholder.
Because of
the diversitied 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 1980s
agency theory has became more important in assessing whether shareholders goals
are being achieved by management in the long rum
1.2 STATEMENT OF PROBLEM
There have
been unprecedented increase in the request for the answer of
the
following questions posed in order to clarity the duties of financial manager
which is the prospective rank of a student studying finance.
What is managerial finance? How important is finance functions to the
company; it the financial manager is responsible for the performance of certain
tasks, dose this mean that his actions are designed to accomplished specific
goals. How and when do the finance
achieved the firms’ objective? What is the financial manager’s definition of a
far price and how is it related to his firms return and investment capitals if
they do not affect profile, why can their profile affect 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 seals do they
have operational measuring? That is how
can managerial finance be used to further national goals?
Having identified these questions,
the provision of the possible answers to
the aforementioned question constitute the area of consideration of this
profit.
As stated, the financial manager must
find a rational bases for answering the following questions.
a. How large should and
enterprise be and how last it grow?
b. What should be the composition
of its liability
c. In what firm should it held
its assets
The
questions stated above related to three board decision area of financial
management, investment financing and dividend.
Therefore the above roles of
financial managers becomes important that the primary researcher conducted as a
named company serves dual purpose. This
nothing serves as part to unfold the extent the financial manager of the
company is executing his duties 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 important to note the
objective if 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 te
present value of the stream of dividends 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 shareholders/ 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 goal of profile
maximization. It is regarded as a
rational for business as stated “Although profit maximization appears to be
intuitively appealing, it represents only one aspect of corporate performance.
THE
ENVIRONEMNTAL SCOPE OF FINANCIAL MANAGER IN EXECUTIVE THEIR JOB
Financial
managers do not have absolute authority on carrying out their responsibilities,
there actions are constrained by certain factors beyond their control.
These factors can be divided into
two:
a. Internal environment: This principal factor in this case, sit is
unavailability or the lack of human resources and the organizational self
imposed standard.
b. The external environment
factor: the external factors include
political, economic (monetary and fiscal polices) 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.
1.4 RESEARCH HYPOTHESIS
1. The sources of fund which the
company use in financing their company, i.e. whether short or medium term
sources of fund. Also, the method of
financing working capital which the company adopt.
2. Methods used by the company in
forecasting additional funds needed to support the higher volume of sales and
also plan for profits.
3. What financial ratios are
often used in evaluating and understanding of the results of the business
operations?
4. The objective of the company’s
budget and the policies usually established in furtherance of the
budgeting system.
1.5 SCOPE AND 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, distrust arising from 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.
With the high rate of illiteracy in
this part of the world, some respondent never understood what was required of
them and why the research was being carried out. They therefore never answered any of the
questions. Some respondents work
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