ATTENTION:
BEFORE YOU READ THE
PROJECT WORK, PLEASE READ THE INFORMATION BELOW. THANK YOU!
TO GET THE FULL
PROJECT FOR THE TOPIC BELOW PLEASE CALL:
08068231953,
08168759420
TO GET MORE PROJECT
TOPICS IN YOUR DEPARTMENT, PLEASE VISIT:
IMPACT
OF ACCOUNTS RECEIVABLE IN BUSINESS ORGANIZATION
(A CASE STUDY OF PZ
INDUSTRIES PLC ENUGU)
ABSTRACT
Recently,
with the present economic predicaments in the country, many business
organizations and individuals have found it difficult to cope with the high
cost of living. This is due to the paucity of the raw cash available in
the economy with which they can buy the necessary goods and services they
require on the spot with cash.
Fortunately, with the advancement in the business world, sales and purchases
can be made on credit basis thus alleviating the sufferings and the deprivation
that would have been experienced by individuals, business enterprises and
various governments while making business transactions.
The research topic delve into trying to ascertain the impact of accounts
receivable in business organizations but with particular attention to the PZ
Industries Plc Enugu Branch.
In chapter one, a general background statement about the topic was given.
Also, the statement of the problem of the study, purpose of the study,
importance of study likewise the scope of the study was mentioned. It
also gives some definition on likely terms.
In chapter two, related texts as regards accounts receivable impact on the
performances of business organization were reviewed. Under this chapter,
the definition of accounts receivable as were given by related literature and
the formulation of accounts receivable policy, the determinants of accounts
receivable policy and the measures of promotion accounts receivable were all
examined from related literature.
In chapter three, attempt was made to show the various methods used I gathering
the necessary data for the study likewise stating the statistical tool used.
Chapter four is where the analysis of the findings based on the data collected
was made. It presents and discussed the summary of the report.
Finally chapter five takes care of the discussion of the findings and
conclusion likewise making the necessary recommendations.
TABLE OF CONTENTS
CHAPTER ONE
INTRODUCTION
1.1
Background to the Study
1.2
Statement of Problem
1.3
The purpose/Objective of the Study
1.4
Scope of the Study
1.5
Research Questions
1.6
Significance of the Study
1.7
Definition of Terms
CHAPTER TWO
REVIEW OF LITERATURE
2.1
Formulation of Accounts Receivable Policy
2.2
Determinant of Accounts Receivable Policy
2.3
Measures to Promote Accounts Receivables
2.4
Administration of Accounts Receivable
2.5
Summary of Related Literature
CHAPTER THREE
METHODOLOGY
3.1
Research Design
3.2
Area for the Study
3.3
Population for the Study
3.4
Sample and Sampling Procedure
3.5
Instrument for Data Collection
3.6
Validity of the Instrument
3.7
Reliability of the Instrument
3.8
Method of Administration of the Instrument
3.9
Method of Data Analysis
CHAPER FOUR
DATA PRESENTATION AND
RESULTS
4.1
Summary of Results
CHAPTER FIVE
DISCUSSIONS, IMPLICATIONS AND
RECOMMENDATIONS
5.1
Discussion of Results
5.2
Conclusions
5.3
Implication of the Results
5.4
Recommendations
5.5
Suggestions for Further Study
5.6
Limitation of the Study
References
Appendices
LIST OF TABLE
Table
4.1: Adequacy of liquidity position
of the firm
Table
4.2: Impact of account receivable in
predetermined profitability of the industry
Table
4.3: Possibility of maximizing or
optimizing sales through the use of trade debtors.
Table
4.4: Company’s efficiency in debt
collection during the past three years
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND TO THE STUDY
Prior
to the advent of time, civilization, economic condition, and the business
world, the world had known only a cash or barter economy. However, with
development in business world, business are being transacted on credit basis.
In recent years, many business organizations in Nigeria have experienced
liquidity problems largely because of the effects of high rate of
inflation. This has been necessitated by the various economic measures
introduced in the country ranging from austerity measures introduced in 1982 to
the present Poverty Alleviation Programme (PAP). Because of this, it then becomes
more important than ever to get money promptly from trade debtors for the
day-to-day operation because of uncertainty in the fluctuation of prices.
However, if all trade transactions were to be made on cash basis, the companies
in Nigeria would hardly do well in terms of its sales turnover. Consumers
and middlemen would equally be affected if all purchases made form companies
are always on cash basis. Money (cash) is a scarce commodity which has
wide application in the area of both human and material needs. Thus
bringing about the problem of effective management of available cash resource
through efficient receivable collection management.
At the time of purchase, the consumer and wholesalers may find it difficult to
have ready cash for the payment of their products. The liquidity position
of consumers, particularly wholesalers may make it difficult to purchase all
their needs on cash basis. The seller with sound knowledge of his
customer may be ready to offer his good and services to him, even if he has no
cash for his purchase. Thus, lies the situation facing the seller and the
buyer (debtor and creditor relationship).
Receivables represents claims, usually stated in terms of a fixed amount,
arising from the sale of goods, from the performance of services, from the
lending of funds, or from some other type of transaction which establishes a
relationship whereby one party is indebted to another. This, claims which
result from the sale of goods or services and which are neither supported by a
written note nor secured by specific collateral (ie the creditor has not right
to specific asset in case the debtor fails to pay) are categorized as account
receivable.
Accounts receivables are sometimes of short-term nature. Short term
receivable can be defined as “claims held against others for money, goods or
services collectible within a year or operating cycle, which ever is longer”.
For financial statement purposes,
receivables could be classified into two broad sections: viz.
1.
Trade receivables
2.
Non trade receivables
Trade receivables are amounts owed by customers for goods sold as part of the
normal operation of the business. They are usually the most significant
receivables any organization has. It is usually a written commitment by
others and are normally collectible within one year and sometimes as long as
five years.
Non trade or special receivables which arise from a variety of transactions are
written promises to pay at a later date. Examples of non-trade receivable
are:
a.
Advances to officers and employees
b.
Advances to subsidiaries
c.
Deposits to cover potential damages or losses etc.
A firm grants credit
in order to protect its sales from competitors and to attract the potential
customers to its good and services could deteriorate in quantity if not sold
within a specific time period, for example, perishable goods. Trade
credit thus creates accounts receivable or book debts, which the firm is
expected to retrieve in the near future.
This book debt or
accounts receivable arising out of granting credit has three major elements.
The first is the
riskiness of the agreement which might result in debt to the seller. Cash
sales are without risk, but not credit sales as cash is yet to be received.
An equally associated
element is that accounts receivable is based on economic value. To the
buyer of goods and services, the economic value passes immediately at the time
of sale, while the seller expects an equivalent value to be received at a later
date.
Another element is
the futurity of the negotiation. This means that payment will be made in
the future time. The customers from whom receivables or book debts have
to be collected in future are called trade debtors or receivables which
represents the firm’s claim or asset.
In view of the above
characteristics, the adoption of an efficient accounts receivable policy
becomes necessary towards the achievement of the overall organizational goals.
1.2
STATEMENT OF THE PROBLEMS
No
business concern wants to sell her goods and services on credit to a customer
who will prove unable to pay his or her accounts when due. The sales
department will always want to increase the sale turnover, hence the need to
increase credit sales to customers. The credit department being the
conservative partner worry about the collectibility of the debts. What
occupies the department most is whether such credits extended will definitely
materialize by debtors paying their debts. If debts resulting from credit
are not collected when due, which department should bear the brunt? Is it the
accounts department or sales department who requested for its approval?
Among the problems
are as follows:
1
Liquidity position by adequate credit policies, practices and procedure
regarding credit granting, credit limits and collection of receivable.
2.
Effect of accounts receivable to attain its predetermined profitability.
3.
The possibility of maximizing sales through the use of trade debtors.
4.
The company’s level of efficiency in debt collection.
5.
Inefficient accounts receivable that led to the winding up of business
1.3
PURPOSE OF STUDY
In
every business organization, accounts receivable plays an important part in
assisting the business attain its profitability objective, particularly in
those areas that relate to net profits and return on assets investment.
Among the basic purpose of this study are to:
1.
To know the liquidity position by adequate credit policies practices
procedures, regarding credit granting, credit limits and collection of
receivable.
2.
To know the effect of accounts receivable to attain its predetermined
profitability.
3.
To know the possibility of maximizing or optimizing sales through the use of
trade debtors.
4.
To know how the company’s level of efficiency in debt collection during the
past three years.
5.
To know how inefficient accounts receivables had led to the winding up of
business.
1.4
SCOPE OF THE STUDY
This study is to analyze the impact of accounts receivable in business
organizations but with particular reference to PZ Industries Plc at their
branch at Emene in Enugu. This is with the view to determine how the
company has been able to manage her accounts receivable towards achieving her
objectives.
In the analysis, attention will be focused on the investment in trade (or in
trade receivables) from the stand of granting company. The study covers
ascertain from the company’s accounts or credit department all necessary
information and requirements that help the company in achieving its objective
by granting trade credit or where there are short falls, what factors that
attributes to that are all among the areas to be covered under the study.
Although information as regards accounts receivable or trade debtors were
gathered from company’s accounts or credit department, this study did not go
into making comparisons with those other companies but uses the necessary
information gathered din developing and broadening the view and ideas gathered
from Pz Industries Plc thereby coming up with a substantial idea on the impact
of accounts receivable in business organizations with particular reference to
Pz Industries Plc, Enugu Branch.
1.5
RESEARCH QUESTIONS
The
following research questions have been formulated to guide the investigation:
1.
To what extent are liquidity position by adequate credit policies, practices
and procedures regarding credit granting, credit limits and collection of
receivable?
2.
To what extent does account receivable affects its predetermined profitability?
3.
To what extent are the possibility of maximizing or optimizing sales through
the use of trade debtors?
4.
To what extent are the company’s efficiency in debt collection during the past
three years?
5.
To what extent does inefficient accounts receivable led in the winding up of
business?
1.6
SIGNIFICANCE OF THE STUDY
In
recent times, due to changes in business generally, greater emphasizes have
been placed on credit management. While industrial output are growing, we
should also expect receivable to increase which to some extent has been
fostered by highly competitive conditions. This therefore suggest that
perhaps credit is being used as an instrument by the sales department to
generate additional sales volume. If a firm embarks on a too tight credit
policy, there will be some possible loss of sales while on the other land,
there will be a possibly high bad debt losses if an easy credit policy is
maintained.
Therefore since non of the two extremes will be favourable to a company, the
importance of this study is that it will help to strike a balance between too
tight and too open credit policy in order for the firm to achieve their
profitability objective. The study will also highlight the consequences
of not having or operating an efficient account receivable in business
organizations.
The research work will also expose the management of business organizations to
the effective way to manage the accounts receivable towards the achievement of
the organizational goals.
The study will show how business organizations will tackle various risks
inherent in credit sales but the most essential aspect is the control function
which aims at checking and bringing any delinquent debtors to order in order to
achieve the objective of efficient accounts receivable in business
organization.
1.7
DEFINITION OF TERMS
1.
Accounts
receivable:
This has been identified as claims held against others for money, goods or services
collectible within a period or operating cycle, which ever is longer.
2.
Receivable represents claims, usually stated in terms of a fixed amounts,
arising from the sale of goods or services rendered. It could be
classified into: trade receivables and non trade receivables.
3.
Trade debtors are those people (customers) owing any organization as a result
of goods/service received from them or credit.
AFFILIATE LINKS:
Comments
Post a Comment