A CASH MANAGEMENT IN A SUPPER MARKET STORE
Abstract
Cash is the most crucial resource required to start and successfully operate a business. The financial needs of a corporation are laid forth in the form of a cash flow statement. A cash flow statement gives details about the cash inflows and outflows of an enterprise over a specific time period. It displays the usage and production patterns of money. It demonstrates how operating cash flow is generated and how payments are made for things like taxes, dividends, and loans. The information helps to assess the enterprise’s financial stability.
In the course of this endeavor, the research-related writings of others were examined in textbooks, journals, handouts, seminars, workshops, and conferences.
The questionnaire and interview questions used in this study’s research instrument are designed with a close-ended structure to make it simple for respondents to reply to the questionnaire and for the researcher to monitor and analyze responses.
Additionally, it was shown that using cash management techniques including cash planning, managing cash flow, investing excess cash and ensuring an ideal cash balance, among others, significantly improved cash flow management.
Chapiter 1
1.0 Overview
The most movable asset in any supermarket is cash. Every single supper market, no matter how big or small, receives and expends a specific amount of cash throughout commercial transactions.
Because cash inflows and outflows have various timings, excellent and efficient management is required for a company to have enough liquidity to satisfy its current obligations.
Cash is the primary input and the final output, and it is made up of demand deposits and currency, with the latter being more significant for many supermarkets.
In order to ensure that the current liabilities are fulfilled at the appropriate time, sufficient liquid assets should be kept. Cash requirements tend to increase in proportion to the amount of transactions. There are additional requirements that the stores have, such as cash payment of dividends, interest, and creditors for goods sold, repayment of bank loans, etc.
It is impossible to overstate the significance of cash management since it is crucial to establish and maintain an adequate supply of cash and near-cash products (marketable securities) in order to meet industry demands for cash when they become due. Fundamental considerations regarding the firm’s liquidity and cash payment must be taken into account when deciding how much cash or marketable securities should be maintained at any given time. The existence of lucrative financial opportunities may affect this choice. The interest that the company could have earned if the cash had been invested is the opportunity cost of maintaining a high level of cash balance. On the other hand, maintaining a low level of cash can require a company to accept significant restrictions on its freedom of action.
What level of cash should a company maintain? How is it possible to calculate this cash balance? These and other related queries can only be answered by carefully considering the following problems.
1. Why do businesses or sectors keep cash and marketable securities on hand?
2. What are the goals of the industries that need cash management policies?
3. What variables can affect the amount of cash in an industry? The study will respond to the aforementioned queries and outline the advantages of employing sound cash management.
1.1 The Study’s Background
This study aids the reader in appreciating the study’s relevance and its significance to education. As its name suggests, cash flow is the movement of money into and out of a business as items are bought and sold, the researcher has noted. So when cash flow management was created in the early 20th century, it was primarily thought of as a component of economics.
The Nigeria Accounting Standard Board (NASB) released Statement of Accounting Standard (SAS NO 18) on January 1, 1998. This statement of accounting standard is a component of the cash flow management system. A cash flow statement displays financial flows in accordance with the uses to which they were put. All of the company’s cash inflows and outflows are included in this cash flow statement. However, it should not include cash flows from the acquisition and disposal of cash equivalents. However, the following indicate the requirement for cash flow data. Financial statements typically provide data that may be used to assess the profitability, liquidity, financial flexibility, and risk of an industry for both current and potential investors, creditors, and other assets.
a. Investors will not be able to access the profitability, liquidity, financial flexibility, and risk of a certain firm with just a statement of cash flows on its own. When combined with relevant disclosure, the balance sheet, profit and loss account, and statement of cash flows will offer the majority of this information.
b. Information about profitability will be available from the profit and loss statement. An indicator of the links between earnings and cash flows, and consequently of the quality of earnings, can be obtained from cash flow information that has been adjusted to remove the leads and lags caused by the allocations associated with accrual accounting.
c. The balance sheet offers details on the composition of a company’s assets, liabilities, and equity at a certain point in time.
d. Investors and creditors are concerned with a company’s capacity to produce enough cash flow to sustainably pay dividends and interest on equity and debt, respectively.
The management is to blame for an industry’s insufficient cash flow. Cash is one of the most essential resources for starting and successfully operating a business, but it is not without challenges. Consequently, the following issues are at the heart of the cash flow management problem:
a. Lack of funds a company needs to pay its bills or fulfill its commitments
b. idle money that isn’t invested to generate interest or other forms of income that might boost businesses’ profits.
c. A delay in the payment of money would prevent other operations from happening as planned.
d. A loan is repaid and a new one is raised for the same project at a high cost due to improper marketing of funds and activities.
e. Projects that were improperly evaluated would result in losses that needed to be reported.
However, the sources of cash intake in an industry are as follows.
i. Gain before taxes
ii. Gain for the benefit of fixed assets
iii. a change that doesn’t include the transfer of money or cash
iv. Other cash sources include proceeds from fixed assets, the issuance of new shares, etc.
v. Profit for fixed asset purposes
vi. a change that doesn’t include the transfer of money or cash
vii. Additional funding sources include the sale of additional shares and proceeds from fixed assets.
Statement of the problem: 1.2
The issue with managing cash in an industry that spurs the researcher on is that the usual functioning of the cooperative risk being disturbed in the absence of cash or in situations where it is in short supply. Cash, on the other hand, is sterile and not directly productive. Like other assets like physical assets, inventory, and account receivable, it neither creates things for sales nor encourages customers to buy. Because of this, good cash flow management should keep the appropriate level of cash on hand. Without paying directly or indirectly for using it, and to put extra money into successful endeavors. The determination of these items needed precise timing of cash flow and close attention to the quantity of cash balance.
The problematic in is the issue that the finance manager is also dealing with.
The timing of the cash flow and the amount of the cash balance must be precisely calculated in order to determine these items. Timing issues for payments and receipts are a concern for the finance manager as well. If the necessary cash flows could always be properly matched with the cash outflows and receipts could always be predicted with certainty, then a company would not need a cash balance. Does a cash flow problem hinder the company’s activities, which are typically reflected in the incapacity of the sector to pay bills on time and the depletion of assets? A persistent cash shortfall may result in financial insolvency, which may then cause an industry to be liquidated. Does an industry end up paying directly or indirectly for money that isn’t used if there is too much money that isn’t invested? Additionally, due to poor cash flow management, the industry misses out on the chance to earn interest and runs the danger of holding the liquid asset (cash). The timing of the cash flow and the amount of the cash balance must be precisely calculated in order to determine these items.
The difficulty in is the issue that the financial manager is also dealing with. Does faulty project appraisal result in losses that would be reported to the market and difficult to resolve? Does the management struggle with how to keep an optimal cash position that is large enough to cover all obligations despite tough cash flow conditions throughout the financial period?
1.3 Study’s Objective
The main concerns of cash flow management are planning and control, just like with any other management process. It is surprising that many industries lack formalized cash management today, even though cash is the asset that is most susceptible to theft in a company. Some industries prepare a cash budget at the start of their fiscal year without any additional controls, and moreover, actual performance does not match the budget at the end of the period. Others rely on monthly bank reconciliation statements, which are frequently created after the fact and are rarely reviewed by management before a cash flow issue arises.
i. As a result, the researcher’s goal or intention is to determine how a cash shortage affects the sector’s regular flow of business.
ii. to discover the degree to which the cash manager finds the timing of revenues and payments to be very problematic.
iii. to ascertain whether the industry would be impacted by the idle cash that has not been invested.
iv. to ascertain how the industry’s effectiveness is impacted by the loss of the chance to earn interest and the risk of holding liquid assets.
Respond to or make a suggestion based on the study’s problem.
v. To determine how a cash shortage disrupts the status quo. Learn how a lack of cash is causing the industry’s regular operations to be disrupted.
vi. to discover the degree to which the cash manager finds the timing of revenues and payments to be very problematic.
vii. to ascertain whether the industry would be impacted by the idle cash that has not been invested.
viii. to ascertain how the industry’s effectiveness is impacted by the loss of the chance to earn interest and the risk of holding liquid assets.
ix. Operational flow in the sector.
x. to assess the degree to which cash managers find the timing of revenues and payments to be exceedingly problematic.
xi. to ascertain whether the industry would be impacted by the idle cash that has not been invested.
xii. to ascertain how the industry’s effectiveness is impacted by the loss of the chance to earn interest and the risk of holding liquid assets.
xiii. to see how a lack of cash has disturbed the sector’s regular flow of business.
xiv. to discover the degree to which the cash manager finds the timing of revenues and payments to be very problematic.
xv. to ascertain how the industry’s effectiveness is impacted by the loss of the chance to earn interest and the risk of holding liquid assets.
xvi. to ascertain how the industry’s effectiveness is impacted by the loss of the chance to earn interest and the risk of holding liquid assets.
xvii. to learn how inefficient budgeting and activity planning result in excessive costs when a loan is repaid and a new one is raised for the same project.
xviii. Identifying the degree to which projects were not properly evaluated led to losses that were recorded in the sector.
1. to ascertain the degree to which management is struggling with how to maintain and manage an ideal cash position sufficient to cover all payments.
1.4 Questions For Research
In order to find solutions to the research challenges, a researcher asks questions known as research questions. The subsequent research questions are the focus of this study.
a) Is the industry providing the firm with the necessary funds to pay its bills or make payments?
b) How should the company reduce the amount of idle cash it holds and invest it to generate interest?
b) What strategies does management provide for controlling the flow of funds into and out of different industries?
d) How does management keep an eye on cash outflows such purchases, salaries, and wages to ensure that the company’s financial position is not negatively impacted?
e) How does a company spend its money?
b) How does management protect its most important and liquid resource—cash?
1.5 Research Hypothesis
A hypothesis is a speculative assertion that can be proved correct or incorrect via statistical analysis.
Therefore, a hypothesis is anything that is put out to help one determine whether a condition is actually present and to find a potential solution to such an issue. For the sake of this study endeavor, the following hypothesis was presented.
2. Hello: To start and maintain a company on a healthy business route, adequate cash flow management is required.
Ho: Setting up and maintaining a company on a sound route do not require adequate cash flow management.
3. HI: Investment opportunities are made available to a business by a positive cash flow.
xix.
1.6 THE IMPORTANCE OF THE STUDY
In a seasonal firm, cash inflows and outflows don’t always flow smoothly over time. Some cash inflows are higher than others at different times of the year, while some cash outflows are generally consistent (monthly salaries), while others (dividend taxes, for example) are typically paid all at once.
The fact that inflows and outflows do not typically coincide causes a difficulty. The question of how a company may make sure that inflows are accessible in the proper amount and at the proper time to meet required cash outflows brings us to the important management.
The report uses Pal Breweries Ltd. Oko as a case study and aims to increase the efficiency and effectiveness of cash management systems in various sectors.
Any business’s lifeline is cash. Without it, the company fails because so many companies, both small and large, are struggling.
Therefore, if a business is to survive, grow, and accomplish its goals, it is risky to be uninformed of the enormous benefit of such a study. Additionally, the company needs enough cash to preserve its credit score, accept trade discounts, cover unexpected expenses, and seize commercial possibilities. The results and suggestions are intended to help businesses and industries understand the application and value of efficient and successful cash management. Additionally, by highlighting issues with cash management and offering solutions, this study will make it easier to examine and monitor these issues.
For better cash flow management, Pal Breweries Ltd. in particular would be in a position to reassess its cash flow management plan and upgrade its equipment.
1.7 The Study’s Scope And Deliimitations
The study discusses or focuses on data related to cash flows or cash movement in an industry with reference to Pal Breweries Ltd. in Oko Orumba North Local Government Area, Anambra State. The effective management of cash influx and outflow over a specific time period is the study’s principal focus. The study can be applied generally to other relevant businesses for cash flow management investments.
1.8 The Study’s Limitations.
The fulfillment of the research is what GOD has ordered despite opposing challenges from many angles, yet there must be some components in human endeavor that would prevent him or her from reaching their defined aims. In this study, an effort was made to conduct research on the control of cash flows in various sectors, particularly Pal Breweries sectors Limited Oko in Orumba, North Anambra State. However, company representatives were reticent to participate in questionnaires and interviews, thus this is viewed as a limitation.
Time was also a problem because the study was done in addition to the regular academic work and couldn’t be completed in time.
1.9 Term Definition
It is necessary to clarify and define several technical words utilized in this project’s work for the sake of comprehension.
i. CASH: This consists of cash on hand and demand deposits, the majority of which are in foreign and naira-based currencies.
ii. CASH FLOW: This refers to the incoming and outgoing movements of cash and cash equivalents.
iii. CASH EQUIVALENT: Short-term, highly liquid assets that can be easily converted into a specific quantity of cash and are only slightly at risk of value changes. They typically reach maturity within three months (SAS 18).
iv. According to the Oxford English Dictionary, management is the process of controlling and making decisions in a company or other similar organization.
(Hermanson, Edward, and Rayburn, 1991, p. 723) “v. CASH FLOWS STATEMENT: a statement that described the effect on cash of the operating, investing, and financing operations of a corporation for a period.
vi. The process of using a budget for planning and management is known as BUDGETING. According to Hornigem et al (1987, page 39), a budget. is a way to express a plan of action quantitatively and to help with coordination and execution.
vii. According to (Abohi, 2001, page 29), a cash budget is the quantification of a plan of anticipated cash revenues and payments over a specific time period.
viii. Control is a management strategy to guarantee that a plan or budget is followed.
ix. LIQUIDITY: This is the situation of having assets that are readily convertible into cash.
x. MARKETABLE SECURITIES: These are short-term debt instruments that are easily converted into cash, such as commercial certificates of deposit, treasury bills, etc.
xi. The competitive market for assets having a maturity of one year or less is known as the “Money Market.”
xii. OPPORTUNITY COST: The rate of returns on a different investment, had it been accepted.
xiii. Working capital, often known as net working capital, is the difference between a company’s current assets and current liabilities.
xiv. INSOLVENCY: Legally speaking, insolvency is when a company is unable to pay its debts when they become due.
xv. A company’s liabilities always exceed its assets’ market worth.
xvi. A company’s liabilities always exceed its assets’ market worth.
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