Project Materials

EFFECTS OF WORKING CAPITAL MANAGEMENT ON COOPERATIVE EFFICIENCY.

Chapter one

INTRODUCTION

1.1 Background of the Study.

Working capital management in cooperatives is concerned with the management of the enterprise’s current account, which includes current assets and liabilities. The management of working capital in cooperatives is one of the most unique areas of industrial financial management.

If the cooperative enterprise cannot maintain a sufficient level of working capital, it will likely go bankrupt. The cooperative enterprise’s current assets should be sufficient to pay its current liabilities in order to maintain an acceptable margin of financial safety.

Working capital management in cooperatives is concerned with the real management of current assets and liabilities in the firm.

Working capital is defined as the excess of current assets over current obligations. Onuoha(2009). There are four typical classes of current assets: cash, inventory, marketable securities, and account recurable, while current liabilities include account payable, accruals, and taxes.

Working capital is used to finance manufacturing, reverse inventory, and extend credit to customers. A cooperative society’s better understanding of the importance of working capital and its proper management can lead not only to more efficient capital management but also to the ultimate goal of the cooperative business, which is to increase surpluses while maximising cost and return on investment.

As a result, the goal of this research is to determine how working capital management affects cooperative efficiency.

1.2 Statement of The Problem

Working cash is the lifeblood of any firm, thus managing it is critical to its success. Cooperative societies of all types survive with effective working capital management.

The cooperative enterprise’s capital must be successfully managed for the benefit of the cooperative business in order to achieve its declared objectives. Finance plays an important part in the efficiency of cooperative activities at all stages and levels.

Many cooperative enterprises may have ample financing but lack effective working capital management. It is disheartening to discover that several cooperative societies appear to be underperforming, even in light of apparent effective and efficient working capital management on cooperative efficiency

so that informed measures could be taken to facilitate efficient working capital management in cooperatives, allowing the cooperative business to effectively achieve stated objectives for the benefit of members.

As a result, the study focusses on how working capital management influences cooperative efficiency and the mechanisms that might assure effective working capital management in order to promote cooperative business.

1.3 Objectives of the Study

The study’s objectives are to:

1. Determine how working capital management impacts cooperative efficiency.

2. Determine the level of member participation in working capital management in cooperatives.

3. Learn about the methods used by cooperative organisations to ensure successful working capital management.

4. Identify the issues preventing efficient working capital management in cooperatives.

1.4 Research Questions.

The research questions for this project are:

1. What are the implications of working capital management for cooperative efficiency?

2. To what extent do members participate in cooperative working capital management?

3. What are the procedures for guaranteeing good working capital management by cooperative organisations?

4. What are the issues with working capital management in cooperatives?

1.5 Significance of the Study

This study looks at the impact of working capital management on cooperative efficiency. Without a doubt, this study is significant for government cooperative departments, cooperative groups, and, of course, new students.

It is hoped that by the end of this research, the results will disclose which form of working capital management is best for any cooperative society.

The society will be able to understand what capital composition means for the society’s effective and efficient operation in order to achieve its goals and objectives. As a result, this study is extremely significant.

To the government cooperative department, the findings of this study will serve as a guide for evaluating challenges impeding the development of cooperative societies in the country, namely working capital management.

Furthermore, the government cooperative department can use the research findings to protect cooperatives from being exploited by individuals, groups, private businesses, and other cooperative organisations.

Other researchers can use this study as a reference material for their own studies by referring to the research methodology, data presentation modalities, and statistical analysis pattern.

1.6 Scope and Limitations of the Study

This study investigates the effects of working capital management on cooperative efficiency; it also examines the extent to which cooperative organisations’ members participate in working capital management. The scope includes a critical review of the issues influencing cooperative working capital management, with the goal of proposing potential solutions.

1.7 Definition of Terms

The terms below are contextually defined:

· Account Payment: The process of receiving and paying for inventory.

Account receivable refers to payments paid to an organisation for inventory sales and collections.

· Accruals refer to unpaid liabilities that are carried forward to future fiscal years.

· Bankruptcy refers to the inability to pay debts in full, with the assets of the business taken and allocated to creditors.

· Business refers to any legal activity that individuals, groups, or cooperative bodies participate in to supply goods and services with the goal of profit.

· Current Liabilities: These are liabilities that can be paid within the following accounting year or operational cycle and accrued in the normal course of business. These will include money owed to suppliers, taxes, and any other current expenses incurred by cooperative firms.

· Inventories: Stocked goods include raw materials, spare parts, tools, components, assemblies, semi-finished items, and finished goods.

· Management refers to the effective and efficient use of human and material resources to achieve organisational goals and objectives, including the capacity to accomplish tasks through others.

· Working capital equals current asset minus current obligation. Current assets are assets that will be turned over within the normal course of business. They include inventory, debtors, and available cash, among other things.