Working Capital Management In The Banking Sector: Banking Finance Projects

Working Capital Management In The Banking Sector: Banking Finance Projects

Abstract

Working capital is known to be the background and life line of any business associations in every part of the world. This makes it imperative that there should be effective working capital operation, to help in reducing constant incidents cases of banks torments( i) Banking assiduity since this has been a source solicitude to the druggies of fiscal statements. Accordingly this design has tried to give an explanatory discussion on the operation of working to enhance the durability assiduity to enhance the durability of banking assiduity, with a particular interest in united bank for Africa plc Surulere, lagos.

It therefore gave successes on how bank directors should manage fiscal torture banks where similar signs of torture situations tries to do.

Conclusions arising form this exploration are both outstanding and helpful too.

Chapter One

Preface

Back Ground Of The Study

Working capital operation is vital in the operation of the bank’s current account which include current means and current means and current arrears. This explains the colorful forms of current means and current arrears adaptations which a bank can make in order to meet its needed working capital. Working capital is of two types, gross type and net type.

The gross type refers to the bank’s investments in current means, this means those means which can be means those means which can be converted into cash within account time, like short term securities, debtors bills delinquent, stock and cash.

The net type is the difference between current means and current arrears. Current arrears means those claims of outlanders which are anticipated to develop for payment within an account time, similar as creditor, bank overdraft and bills outstanding. Net working capital occurs when current means exceeds current arrears.

Working capital operation is one of the important aspects of the bank’s overall fiscal operation. This is because effectiveness in this area is necessary in order to insure the bank long- term success and achieve its overall thing which is the maximization of possessors wealth.

A certain position of working capital is needed for operation in the banking assiduity. This position of working capital of a bank constitutes the cash holding or near cash holding or near cash means needed of a bank by a statue of the government or it should be noted still, that the position of working capital don’t directly earn the bank any income when it’s all allowed to be held in cash form, that’s idle cash.

The main purpose of establishing marketable banks to operate is to make profit for the shareholders. In that respects, banks as well as other profit seeking enterprises strive to increase their net income and presence value of their means. While feting this, the immediate concern of the bank manger is to give satisfactory returns for the shareholders, and this requires holding a sufficient volume of safe and productive means as well as sourcing for finances through the fast unpredictable and precious available sources.

It should be noted still, that a bank doesn’t retain full control over its means and also a lesser part of its arrears, the reality it that it possesses partial control on some current means and current arrears absolute control on some and still warrant total control over others. It’s within this business environmental constraints and prospect that banks have to carry out their colorful adaptations to suit their long run objects objects.

In the earlier paragraph, it was mentioned that there are two generalities of working capital( the gross and net working capital) They’ve equal significance from the operation view point, the gross working capital conception focuses attention on the two aspects of current asset operation.

a) optimum investment in current means

b) Backing current means.

The consideration of the position of investment in current means should avoid two peril points, the inordinate and shy investment on means. The investment in current means should be in acceptable form to enhance better performance. While the inordinate investment in current asset should be avoided because it impairs a bank’s profitability since idle investment earns nothing to the investor.

On the other hand, shy vacuity of working capital can hang the solvency of the bank when it fails to meet its current scores. therefore the fiscal directors should have knowledge of the source of working capital finances as well as the investment avenues, where the idle finances may be temporally invested. The net working capital on the other hand has indicated liquidity position and suggests that current means should be sufficiently in excess of current arrears in order to constitute a periphery for growing scores within the ordinary operation cycle of a bank’s business.

The need for working capital to run the day to day conditioning of a bank business can not beover-emphasized. We’ll hardly find banks or other enterprises which doesn’t bear any quantum of working capital. Banks should earn enough return from their operations in order to be suitable to achieve their set pretensions, which of course includes the maximization of shareholders wealth and as similar to avoid the recent torture problems in moment’s banks which has its root principally from shy working capital caused by hamstrung working capital operation. The banks have to invest enough in current means for success of their business.

The need for working capital to run the day to day conditioning of a bank business can not beover-emphasized. We’ll hardly finds bank or other establishment which doesn’t bear any quantum of working capital. Banks should earn enough return from their operations in order to be suitable to achieve their set pretensions, which of course includes the maximization of shareholders wealth and as similar to avoid the recent torture problems in moment’s banks which has its root principally from shy working capital. The banks have to invest enough in current means for success of their business.

The incapability of the bank to recognize claims from individualities guests demand start a curl of specialized insolvent, it was for the avoidance of similar disturbing situation as liquidity, specialized bankruptcy, high threat and low profit that similar proposition, the profit capability proposition, the liability operation proposition have been formulated in banking to guide bankers in their decision making process.

Statement Of The Problem

There are numerous banks that aren’t suitable to meet the demands of their guests owing to their incapability to manage their working capital effectively and efficiently. Their bank directors are constantly brazened with redoubtable problems in seeking to meet their position of working possessors investment in their banks. The problem is really related to the following

1) shy cash reserves

2) Poor operation of the available finances.

3) Non compliance to rules and regulations in giving loans to their guests

4) Non payment of loans extended to guests on time and occasionally not paying at all.

5) Constant recessions of plutocrat deposited in bank by their depositors retaining to lack of confidence by guests.

6) Abstaining from depositing plutocrat in banks due to constant cases of banks torture by some would have been banks guests.

Purpose Of The Study

a) To know whether working capital operation has any affect on the liquidity of banks

b) To find out the causes of bank torture or reasons why there are torture in banking diligence moment.

c) To know whether the working capital operation has any effect on the profitability of the bank.

d) To how the bank director manage the current account of the bank.

e) To find out whether the long term longs affect the operation of the bank.

f) To find out how acceptability is the working capital of the bank.

Exploration Questions

a) How is working capital being managed in UBA Plc Surulere, lagos?

b) Is there enough working capital for the functional conditioning in the bank?

c) Do the operation( officers) of UBA Plc Surulere, lagos make proper use of the available working capital

d) If there’s proper working capital operation in UBA Plc Surulere, lagos, has it contributed to the profitability of the bank?

e) How do the loan heirs respond to similar offer given to them by the Bank?

f) How do the guests reply to the functional mode of the bank?

Exploration Suppositions

In this exploration suppositions, the null suppositions is represented by HO while the alterative thesis is represented by Hi

1. HO Working capital operation in united bank for Africa Plc affects the liquidity of the bank.

Hi Working capital operation in united Bank for Africa doesn’t affect the liquidity of the bank

2. HO The effective operation of the working capital in the bank is enough.

3. HO Long term loans and short term loans styles of issuing loans aren’t favourable to the bank.

4. Ho The united bank for Africa Plc shouldn’t employ more well trained labor force’s.

5. Hi The united Bank for Africa should employ more well trained personners to enhance productivity.

Significance Or Explanation Of The Study

There are numerous senses about the working capital operation of united Bank for Africa plc Surulere, lagos. Those are as follows

i) The study of this design content will give the experimenter the occasion to know and hence empty the most dynamic and competitive ways of working capital operation.

ii) It serves as data base of information on contemporary practices in evaluation.

iii) The study will help lead to increase know how in areas of threat reduction, liquidity operation.

iv) It’ll help the operation of united operation and make good use of its working capital decision making process.

Compass Of The Study

The compass of this study will be grounded on working capital operation, its inadequacy and redundant counteraccusations in banking assiduity. Another effects that contributed to this limitation are time and fiscal constraints, which didn’t allow for further total exploration.

Description Of Terms

There are some specialized terms which are used in this exploration they’re defined as shown below.

i) CAPITAL This is defined as wealth possessed by an individual or business association( bank) in form of plutocrat or goods, which can be used for creation of fresh wealth.

ii) CURRENT ASSESTS These are means which can be readily converted into cash acquired for use within an account period.

iii) CURRENT ARREARS These are those accounts outstanding, notes outstanding and all the supplements.

iv) WORKING CAPITAL This is the difference between the current means and current arrears of a establishment( Bank).

v) WORKING CAPITAL OPERATION This is the determination of the rates at which to hold the current means and current arrears in the overall valuation of a bank( establishment).

vi) MARKETABLE SECURITIES These are short term securities which can readily be converted into cash, similar as Treasury, bills, Treasury instruments development stocks and bonds

vii) NET WORKING CAPITAL This is total current means less total current arrears

viii) OPERATION The act of getting effects done more specifically which involves setting bank’s pretensions and directing mortal and physical coffers to achieve these set pretensions

ix) GROSS WORKING CAPITAL This is the investment in current means by banks( enterprises)