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THE ROLE OF FINANCIAL
MANAGEMENT IN A COOPERATE ORGANIZATION
A CASE STUDY OF UNION
BANK (NIG) PLC
ABSTRACT
This project is
poised at X – raying the degree of “ the role of financial management in a
corporate organization”. Making reference of Union Bank (nig) plc Enugu,
Financial management is the management activities conceived with raising of
capital, planning cash and credit requirements including the effective control
of financial resources. Some thoughts were given to financial management to
provide skilled planning, control and executive of financial activities. The
because among the most crucial decisions of the firm are those which related to
finance and therefore need to understand financial management which provides
them with conceptual and analytical insights to make these decisions. The
financial manager must take steps to ensure that the funds will actually be
available and committed to the firm.
The financial manager
is usually responsible for gathering and analyzing the relevant information,
making forecast of profit level to estimate profits from future sales, the firm
must be aware of current cost and likely changes in the ability of the firm to
sell its product as planned.
The financial manager
must measure the required return of this capital investment by answering this
question. Does the level of return, offered adequately justify that of risk
there in? He is required to know the rate of return that must be expected from
the proposal before it is accepted.
The finance personnel
meet with other officers of the firm and anticipate in making decision
affecting the current and future utilization of fund resources. The manager
will discuss the total amount of assets needed by the firm to carryout its
operations and determine the composition on needs. They identity ways to use
the existing assets more effectively and there by reducing waste and needed
expenses.
This decision making
role cause liquidity and profitability, this is so because converting equipment
to cash improves liquidity while reduction of cost improve profitability.
The role of financial
manager in the management of funds available for the firm. The funds include
cash held by the firm, money borrowed and money gained from the purchase of
common stock and preferred stocks.
The financial manager
is responsible for having sufficient funds for the firm to conduct its business
and pay its bill s and a lot of money to finance receivables and inventions
making arrangement for the purchase of assets and identity sources of long term
financing. In fact, this project aimed at the aforementioned roles of financial
manager in any organization to foster his performance in the following.
Forecasting and profit
planning and control financial ration analysis, working capital policy, stocks,
cash receivable, marketable severities, financial risk and structure, medium
short and long term sources of funds, valuation of stocks and cost of capital,
internal financial dividend policy and techniques for capital investment
analysis.
The issue of whether
these stated role of financial manager are executed or not in a case to be
investigated by the researcher from the following perspective:
٭
Budgeting and investment analysis
٭
Management of short, medium, and long term financing
٭
Financial ratio and planning
٭
Managing the financial structure.
The researchers will
analysis the financial concepts using analytical tools and techniques obtained
from the organizational answers received from the questionnaires to unfold the
financial mangers decisions on financial matters.
It is hoped that this project will attain the standard required of it by all
the examining bodies and also satisfy the curiosity of the general reading
public who may have the desire to become acquainted
TABLE CONTENTS
CHAPTER ONE
Introduction
1.1
Background of the
study
1.2
Statement of the
problem
1.3
Research questions
1.4
Significance Of The
Study
1.5
Research
hypotheses
1.6
Scope limitation and delimitations
Reference
CHAPTER TWO
Review of Related Literature
Reference
CHAPTER THREE
Research design and methodology
3.1
research
design
3.2 area
of
study
3.3
populations
3.4
sample and sampling techniques
3.5
instruments of data collections
3.6
Sources of Data
3.7
methods of data presentation
3.8
method of data
analysis
CHAPTER FOUR
Data Presentation and
Analysis
4.1
Data
Presentation
CHAPTER FIVE
Findings recommendations and
conclusion
5.1
Findings
5.2
Recommendation
5.3
Conclusion.
Bibliography
CHAPTER ONE
1.0
INTRODUCTION AND HISTORICAL PERSPECTIVE
Financial management involves all activities of a financial manager concerned
with raising of capital, planning cash and requirement melding the effective
control of financial resources
The activities could be segregated as
follows :
i.
Converting force caste in to plans and budgets .
ii.
Planning the appropriate capital structures
iii.
Raising cash from outside the business
iv.
Forecasting the future availably of and requirement of cash
v.
Investing surplus funds
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 emphasis was more or less on legal matters seen as
mergers formation of new company’s disposal and consolidations.
With most vital problem of the firm was identification of means of raising
capital for possible expansion due to increasing wave in industrialization, the
mobility of funds from area of surplus to area of scarcity pose a lot of
problems.
Because of the radical changes such as the one that occurred during the
depression of 1930, which culminated in the failure of many business financed
was re-directed to bankruptcy organizational and firms liquidity. Since most
business firms’ objectives are profit maximization and firms liquidity. The
search for profitability under imperfect / perfect competition continues to be
the motivation to improve the wealth of the owners.
This urge to improve and maximize
wealth has led to the study of financial management of which attribute factors
can be socialized as follows:
a.
Savings
b.
Business growth
c.
Research and development expenses.
d.
Inflation
e.
Competitive etc
Based on the above background, same
thoughts were given a financial management to provide skillful planning,
control, and execution of financial activities. The practicing managers and
interested in this subject because among the most crucial decisions of the firm
are those which related to finance and therefore the need to understand
financial management which provides them with conceptual and analytical
insights of capital funds, and using the suppliers of funds are called the
finance function of any firm.
GOALS AND OBJECTIVES
/ROLES OF FINANCIAL MANAGERS
Financial this is the
life wire of any business organization and is developed in 1900 since it
concerns the cultural flows of money as well as any claim against money, the
financial managers subsequent decisions are made in much more co-ordinate
manner directly responsible for the control process.
The financial
managers is concerned with
a.
Financial planning within the bank
b.
Raising of funds
c.
Allocation controlling
d.
Financial controlling
e.
Interpretation.
FINANCIAL PLANNING
This raising of funds
involves organizing and censuring that funds necessary for carrying on the
operations of the plan is available. The second fact of financial manager is
the acquisition of funds.
Each has certain
characteristics as cost: Maturing availability, the supplier of capital.
On the basis of these
factors, the financial manage of the bank must determine the best mix of finance
for the banking industry.
Therefore, the
financial manager has task of formulation and execution of suitable financial
policies in the interest of the organization.
The major purpose of
such policies is to plan co-ordinate, motivate and responsible for an efficient
management of resource. An efficient financial manager thuds, serve as a
valuable aid to the process of decision making a major contribution t pale of
contribution to the pale of economic progress.
The principal
responsibility of financial manager involves a theory of evaluation of
investment financial and dividend decisions with the objective of maximizing
wealth. The financial manager studies the analytical techniques and the
environment which financial decision are made.
The financial manager
keeps accurate financial records, preparing reports, managing the cost
position providing the means for the payment of bills, processing funds in
assets, and obtaining the best mix of financial in relation to overall
development of the organization.
The task of financial manager is invisibly faced with problems like those of
profitability, Liquidity, and risk factors, which influence both internal and
external environment.
Only sound financial decision based on analysis, the planning, and control
activities therefore can help optimization of value of operations.
Optimization of profits and share holder’s wealth is one of those guiding
objectives of business enterpriser, which govern its allocation of resource and
other financial manager.
The financing manager must finally be aware of the sources available financing
the business and be guided by times, selection and combination of these
variables. That is the financial managers dilemma and the principles dilemma is
that of profitability and liquidity while suitability is the principle of time
balancing between assets and liabilities, that is using short term liabilities
to
1.2
STATEMENT OF PROBLEM
There has been
unappreciated increase in the quest for the answer of the following questions
posed in order to clarify the duties of financial manager which is the
prospective rank of a student studying fiancé.
What is managerial finance Functions to
the perfuming designed to accomplish pontific goals. How and when do the
finance achieves the firms objective? What is the financial managers,
definition of a fare-price and how is it related to his firms return and
investment capital, one may logically ask, why are we interested in these cash
flows, if they do not affect profit, why can their profit effect 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 scale do they have any operational meaning? That is
how can managerial finance be used to further rational goals?
Having identified these questions, the provision of the possible answers to the
aforementioned question constitutes the area of consideration of this project.
As stated a the financial manager must find a rational based for answering the
following three question.
a.
How large should an enterprise be and
how fast it grow?
b. What
should be the composition of this liability?
c.
In what form should it hold its assets.
The questions stated above related to
three board decision areas of financial management, investment financial
manager becomes important that the primary researchers caudated on a named
company serves dual purpose. This not only serves as paint of the tool in
answering the questions but it mainly asked to unfold the extent the financial
manager of the company is executing his duty according to the project.
1.3
RESEARCH QUESTIONS
What are the method
used by the company forecast additional fund needed to support the higher
volume sacks and also plan for profit .
What are the
financial ration used on evaluation and understanding of the result of their
business operation.
1.4
SIGNIFICANCE OF THE STUDY
The purpose of this
project the role financial management in a corporate organization is to equip
the practicing financial managers, treasures, students of finance, and readers with
a basic understanding of financial decision. The financial manger carries
out financial decisions maximized through the following
a.
Current asset management
b.
Capital budgeting decision
c.
Dividend decision
d.
Financial decision
A.
CURRENT ASSET MANAGEMENT
Financial management
has every right to manage the long-term assets, and also the duty to manage
current assets efficiently to safeguard the firm against liquidity insolvency.
Investments in
current asset affect the firm’s profitability, Liquidity, and risk. If the firm
does not invest sufficient funds in current assets, it may becomes illiquid.
But it would less profitability as idle current asset would not earn anything.
In order to ensure
that it would not earn anything. In order to ensure that neither insufficient
nor unnecessary funds are invested in current assets, infect he should develop
sound techniques of managing current assets.
B.
CAPITAL BUDGETING DECISION
Capital
budgeting is investment decision of the firm to have its fund invested in long
term project in anticipation of expected flow of future benefits over a period
of years.
These decisions could be either to
mechanize a process, replace a machine with another modern type, selecting
between two machines, production of new products or business expansion
Its features are;
1.
investing current funds for future benefits
2.
The period of investment which involves long term activities.
3.
The potential benefit, which will accrue to the firm over a period of time.
C.
DIVIDEND DECISION
The financial manager
must determine the optimum dividend payment ratio. He should consider the
questions of dividend stability, stock dividends and cash dividend. Financial
manager must decide whether the firms should distribute all profits or retain
the balance.
D.
FINANCIAL DECISION
The financial manger
must decide when, how, and whom to acquire funds to meet the firms investment
needs. The significant issue before him is to determine the proportion of
equity capital and debt capital.
A proper balance will have to be struck
between return and risk once the financial manager is able to determine the
best combination of debt and equity, he must raise the appropriate amount
through best available sources.
1.5
RESEARCH HYPOTHESIS
Ho;
There are no methods that used by the company in forecasting additional funds
needed to support the higher volume of sales and also plan for profits.
HI:
There are methods used by the company in forecasting additional funds needed to
support the higher volume of sales and also profits.
Ho:
There are no financial ratio used in evaluating and understanding of the
results of their business operations
HI:
There are financial ratios used in evaluating and understanding of the result
of their business operation
SUMMARY OF THE REST
OF THE STUDY
The general ideal of
this work “the role of financial manager in a corporate organization “look into
the following perspectives:
Chapter one gives
general explanation of the subject from the historical perspective,
organizational goals, statement of problem, goals and objectives, significance
of the study, limitation and delimitation, and research hypothesis.
Chapter two,
literature review from the general overview financial ration and profit
planning management of current assets, budgeting and investment analysis,
managing the financial structure and management of short, medium and long term
financing.
Chapter three deals with the research methodology conducted and consulted
from the following.
Personal interview, secondary source of
data, questionnaires, hypothesis test , and empirical analysis of the named
company.
However, chapter four deals with the
discussion of results through financial ratio analysis, hypothesis testing and
implicational of the results.
On the other
hand, chapter five looks into the summary, conclusion and recommendations
respectively finally followed by bibliography, Glossary and appendix.
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