WORKING CAPITAL MANAGEMENT AS A TOOL FOR COST MINIMIZATION AND PROFIT MAXIMIZATION (A CASE STUDY OF ANAMBRA MOTOR MANUFACTURING COMPANY ENUGU).

WORKING CAPITAL MANAGEMENT AS A TOOL FOR COST MINIMIZATION AND PROFIT MAXIMIZATIONA CASE STUDY OF ANAMBRA MOTOR MANUFACTURING COMPANY ENUGU.amp;lt;pamp;gt;ABSTRACTamp;lt;/pamp;gt;amp;lt;pamp;gt;The objective of this research work contains working capital management as a tool for minimization and profit maximization with particular reference to Anambra motor manufacturing company, Enugu. The research design used was the survey method and the sources of data were both primary and secondary. The primary sources were interviews granted to me while the secondary sources of data were obtained from related literatures viz text books, internet, journals by different authors. Primary sources were from interviews and questionnaires. The data, Hypotheses were tested using chisquare. From the researchers findings, it is seen that profitability of a firm depend on the level of its working capital management. Although working capital management is creating problems in todays business environment due to global developments of science and applied in business but ANAMMCO tries here best and maintained her liquidity position. The researcher would recommend that seminars and workshops be organized for the staff and management of the company on the effect and merits of effective and efficient working capital management.amp;lt;/pamp;gt;amp;lt;pamp;gt;amp;lt;/pamp;gt;amp;lt;pamp;gt;amp;lt;strongamp;gt;CHAPTER ONEamp;lt;/strongamp;gt;amp;lt;/pamp;gt;amp;lt;pamp;gt;amp;lt;strongamp;gt;INTRODUCTIONamp;lt;/strongamp;gt;amp;lt;/pamp;gt;amp;lt;pamp;gt;amp;lt;strongamp;gt;1.1 BACKGROUND OF THE STUDYamp;lt;/strongamp;gt;amp;lt;/pamp;gt;amp;lt;pamp;gt;Capital can be classified into two broad categories based on tenure viz. long term and short term capital.amp;lt;/pamp;gt;amp;lt;pamp;gt;The long term capital of firms is committed to investment in fixed assets. It includes shareholders funds and long term loans. On the other hand, short term capital is applied for investment in current assets such as cash, marketable securities and short term credits. Current assets are usually acquired very often in varying quantities depending on the demand structure for the firms product. Each time a decision to acquire current assets is taken, finance becomes inevitable.amp;lt;/pamp;gt;amp;lt;pamp;gt;However, it does not necessarily mean that cash has to be paid each time an order for recurrent production input is placed, rather it implies that just like in the case of fixed assets, every decision on current assets has financial implications. For instance, a firm hasto decide how much of the material used for production of goods and services are to be on credit or on cash and carry basis. it also has to determine what proportion of its sale has to be on credit. Also both the optimum and minimum stock levels for raw materials and workinprogress WIP have to be determined and maintained at a given point in time.amp;lt;/pamp;gt;amp;lt;pamp;gt;amp;lt;/pamp;gt;amp;lt;pamp;gt;amp;lt;strongamp;gt;A BRIEF HISTORY OF ANAMMCOamp;lt;/strongamp;gt;amp;lt;/pamp;gt;amp;lt;pamp;gt;The Anambra motor manufacturing company ANAMMCO was incorporated in 1977 as a private limited liability company. It was established in line with a joint venture agreement which the government entered with Daimler Benz Ag of Germany, now Daimler chyler AG DCH of Germany as the technical partners. The shareholding structure is presented as follows in table below:amp;lt;/pamp;gt;amp;lt;pamp;gt;Table 1: shareholding structure of Anammcoamp;lt;/pamp;gt;amp;lt;pamp;gt;Shareholders percentageamp;lt;/pamp;gt;amp;lt;pamp;gt;Daimler 40amp;lt;/pamp;gt;amp;lt;pamp;gt;Federal ministry of finance incorporated 35amp;lt;/pamp;gt;amp;lt;pamp;gt;Other investors 25amp;lt;/pamp;gt;amp;lt;pamp;gt;total 100amp;lt;/pamp;gt;amp;lt;pamp;gt;Source: National council on privatization secretariat bureau of public enterprises investment opportunities in Nigeria Auto motive industry.amp;lt;/pamp;gt;amp;lt;pamp;gt;According to the term agreement, the plant is to assemble/ manufacture Mercedes Benz brands of trucks and buses of different models and capacity.amp;lt;/pamp;gt;amp;lt;pamp;gt;The joint venture agreement provided some protection of the company through import restriction.amp;lt;/pamp;gt;amp;lt;pamp;gt;The company was to assemble commercial trucks and buses with payloads of 2.5 tons and above. The company started production of vehicles with pay load of 5 tons and above. The plant was commissioned on July 8, 1980 with actual production starting in 1981.amp;lt;/pamp;gt;amp;lt;pamp;gt;It has an installed capacity of assembling 750 vehicles per annum on all a single shift.amp;lt;/pamp;gt;amp;lt;pamp;gt;The plant is located at Enugu and preliminary inspection inspection revealed that the facilities were in good technical condition, which indicated a high standard maintenance. This actually reflected in the award to the company of 150900l certificate for total quality management.amp;lt;/pamp;gt;amp;lt;pamp;gt;amp;lt;/pamp;gt;amp;lt;pamp;gt;Anammco is the second surviving vehicle plant in the country. It is producing at 10 of its installed capacity as clearly indicated in the companys appendix 1.amp;lt;/pamp;gt;amp;lt;pamp;gt;amp;lt;/pamp;gt;amp;lt;pamp;gt;amp;lt;strongamp;gt;1.2 Statement of The Problemamp;lt;/strongamp;gt;amp;lt;/pamp;gt;amp;lt;pamp;gt;The present world economic hazard coupled with economic policies being operated in the nation has led to a situation where many business organizations have to fold up. Others barely survive by thriving on very lean financial and material resources. This is due to the mere fact that procurement of capital to finance their daily operations is increasingly becoming difficult. However, the efficient management and control of working capital can generate a considerable amount of internal financing.amp;lt;/pamp;gt;amp;lt;pamp;gt;The project topic seeks to analyze the Anambra motor manufacturing companys ANAMMCO working capital and its segment. The study uses ration analysis as a measure of efficiency of working capital management. The topic will equally determine the extent to which the profitability of the company is dependent on the level of its working capital management, using the percentage ratio measurement.amp;lt;/pamp;gt;amp;lt;pamp;gt;amp;lt;/pamp;gt;amp;lt;pamp;gt;amp;lt;strongamp;gt;1.3 Purpose of The Studyamp;lt;/strongamp;gt;amp;lt;/pamp;gt;amp;lt;pamp;gt;The objective of any study undertaken is to contribute to the development and growth of its case study. The purpose of this study includes:amp;lt;/pamp;gt;amp;lt;pamp;gt;a To show how working capital management can affect the profitability of the company.amp;lt;/pamp;gt;amp;lt;pamp;gt;B To examine the contribution made by the working capital management on the activities of a manufacturing company, with particular reference to ANAMMCO.amp;lt;/pamp;gt;amp;lt;pamp;gt;C To illustrate the ways in which working capital management can be used as a tool for cost minimization.amp;lt;/pamp;gt;amp;lt;pamp;gt;D To recommend where necessary and appropriate alternative working capital management technique practical and procedure to ANAMMCOs top officials.amp;lt;/pamp;gt;