Description
TABLE OF CONTENT
Title Page i
Certification ii
Dedication iii
Acknowledgements iv
Proposal vi
Table of contents xiii CHAPTER ONE: INTRODUCTION
1.1 Background to the study 1
1.2 Statement of the research 1
1.3 Research Question 2
1.4 Objectives of the study 2
1.5 Research hypothesis 3
1.6 Significance of the study 4
1.7 Scope and limitation of the study 4
1.8 Definition of key Terms 5
1.9 Organization of the study 6
CHAPTER TWO: LITERATURE REVIEW
2.1 Literature Review 8
2.2 Meaning of Fund Management 9
2.3 Cash planning 10
2.4 Cash budget 11
2.5 Functions of Commercial Bank 12
2.6 Cash Balance Required 13
2.7 Cash Balance to Current assets Ratio 14
2.8 Facts of cash management 15
2.9 Need for Holding cash 17
2.10 The creation of fund by money Deposit Bank 19
2.11 Quantities Associated with credit 20
2.12 Commercial bank and Economic Development 21
2.13 Investment of Excess cash 22
2.14 Internal control of cash 23
2.15 Limitation of credit creation 24
CHAPTER THREE:
3.0 Research Methodology 26
3.1 Research design 26
3.2 Sources of data collection 28
3.3 Population and sample size 28
3.4 Sampling technique 29
3.5 Method of data analysis 29
3.6 Limitation of the study 29
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 Data presentation 30
4.2 Data analysis 31
4.3 Data interpretation 33
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS.
5.1 Summary 36
5.2 Conclusion 37
5.3 Recommendation 38
References
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The central Bank of Nigeria is a federal government bank. It is referred to as the father of all banks in the county as it is responsible for issuing currencies and regulating country’s monetary policies. The Nigeria commercial banks are controlled by the central bank through its clearing houses. A system by which inter-bank, in-datedness is settled. There are twenty five banks in Nigeria with commercial banks in Nigeria carryout other banking functions, they concentrate mostly on deposit banking.
The management of fund in commercial banks with particular reference to union banks of Nigeria plc is the topic review in the project. They make up of the firms, capital structure, the management of fund, motive of holding’ money, the firm financial statement to outsiders and its operations are the subject matter of the review.
1.2 STATEMENT OF THE RESEARCH PROBLEM
In this Era of bank distress, management of funds has been a matter of concern to banks, government and customers alike. The language of business is money and banks are the custodial of money.
Based on these parlances, it will not be out of time to conduct a research on fund management in commercial banks, using union bank plc as a case study.
1.3 RESEARCH QUESTIONS
The project work is intended to review the management of funds of commercial banks with particular reference of union banks of Nigeria plc.
As a result of this, the following question arise
- What is the bank’s sources capital of fund?
- What constitute the bank’s capital structure?
- How does the bank manage its cash?
- What are the functions of the banks regarding cash management?
- What is the economic importance of bank?
- What are the other kinds of service rendered by the bank?
- What are the effects of environmental and structural change?
1.4 THE OBJECTIVES OF THE STUDY
The objectives of the study are as follows,;.
- To define the term “fund management”
- To identify’ the functions of commercial banks
- To critically examine fund management in commercial banks
- To appraise the problems encountered by banks in the management of its fund.
- To ascertain roles of commercial banks in business development.
- To make recommendation as to how commercial banks can manage it funds prudently.
1.5 RESEARCH HYPOTHESIS
In the course of this research work, the following hypotheses will be tested.
Hi: analysis of funds management does not bring about efficient use to limited resource and sound banking system in the environment.
Ho: analysis of fund management in providing a sound banking system in Nigeria will bring about efficient us of a limited resources and sound banking in the environment.
1.6 SIGNIFICANCE OF THE STUDY
It is imperative to mention here that the topic analysis of fund management” is a rare topic.
This write up will help to receive the mind rating managers the importance of management of funds.
The study will provides a frame work of knowledge that will assist the existing and potential commercial banks in Nigeria.
Commercial banks will find it useful in developing a good operations system of their banking activities. The knowledge of the study will not double contribute greatly to the much talked about economy as management of cash is a major factor in a country’s economy.
1.7 SCOPE AND LIMITATION OF THE STUDY TIME CONTRANT INADEAUTE FENL IMUFFICIENT DATA.
The scope of the study is to carry out an in-dept investigation, unto fund management in Nigeria commercial Banks using union bank plc as case management.
1.8 DEFINITION OF KEY TERM
- Management:- this term is used here in relation to fund it includes the process of safe-guarding cash, controlling cash and marketable securities fore-casting cash requirement as well as appraisal of investment opportunities for cash and research items towards generating more profit.
- Cash:- it is defined as money or legal tender that constitute negotiable instrument which could be used to settle any contractual obligation fund and cash can be used interchangeably.
. Cheque:- a cheque is an unconditional order in writing whereby a person instructs his bankers to pay on demand a stated sum of money from his current account to a named person.
- Liquidity: this is the nearness to cash of assets, it is the state of being able to raise fund easily be selling off the assets of company.
. Float time:-this is the length of time necessary for a cheque to make its way from the issue to the payer back, the clearing process until the cheque is charge against the issuing account.
- Solvency:- this is the ability to meet debt payment on due dates by having money available in from of cash.
Bank draft:-these are bills of exchange by one banker to another; they form a convenient means of remitting money.
- Over draft:- this is the amount granted to a customer by the bank. The customer drawn more than what is inside his account.
- Bill of exchange:- it is an unconditional order in writing addressed by one person to another, signed by the person giving it requiring the person whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain of money to or the order of a specified person.
- Dormant account:- this is an account which has not been operated for long (one year and above) no operation will be all owned on it including payment of interest until it is reactivated with an explanation to the bank by the customer.
- Certified cheque:-the cheque issued by the bank to a customer on demand with the work “certified payment f the cheque is contain.
1.9 ORGANIZATION OF THE STUDY
The study is divided into five chapters,;.
chapter one; is the introduction which contains background of the study, statement of the research, research question, objectives of the study, research hypothesis, significance of the study, scope and limitation of the study, definition of key terms and organization of the study.
Chapter two: is the literature review which contains literature review, meaning of fund management, cash planning, cash budget, functions of money deposit bank, cash balance required, cash balance to current ratio, facets of cash management, need for holding cash, the creation of fund by money deposit bank, quantities associated with credit, commercial bank and economic development, investment of excess cash, and internal control of cash and limitation of credit creation.
Chapter three:- is the research methodology which contain research design, sources of data collection, population and sample size, sampling technique, method of data analysis and limitation of the study.
Chapter four:-is the data presentation, analysis and interpretation which contains data presentation, data analysis and data interpretation.
Chapter five:-is the summary, conclusion and recommendations which contains summary, conclusion, recommendation.
CHAPTER TWO
LITERATURE REVIEW
2.1 INTRODUCTION
Cash is the most important asset for the operation of the bank as the basic input needed to keep the business moving. It is also the ultimate output expected to be realized by selling bank service.
Therefore, cash can be defined as money or legal tender that constitutes or negotiates instrument which could be used to settle any contractual obligation found and cash be used inter changeable.
And management can be define as the process or fact of getting things done through people in an effective and efficient manger.
Hence, according to {“Raymond and Robert Schulte’’} they define cash management as the firms disburse immediately with out any restriction. Cash management also serves as a means of minimizing the firm idle cash balance.
The term cash induces coins, currency, note and cheque hold by the bank and the balance. In the bank account of the customers.
However, near cash item such as marketable securities or short time deposit are also considered as such because they can readily be converted into cash.
The bank should then keep sufficient cash will simply remain idle without contribution anything towards the firm profitability. Thus, a major function of cash management is to maintain a sound cash.
2.2 MEANING OF FUND MANAGEMENT
Batty (1988) defined fund management which constitutes a considerable portion of the management concern on the total current assets. Fund management may also refer to all forms of institutional investments as well as investment management for private sector (investor). Investment manager who specialized in advisory of discretionary management on behalf of private investors may often refers to their services as wealth management or portfolio management often within the content of so called ‘private banking’.
Nowadays, Union bank plc; manages the cash affairs in such a way as to keep cash management is obvious is no perfect confidence between inflow and outflows of cash.
2.3 CASH PLANNING
According to Oyebanji (2005), cash flow is an inseparable parts of business operation to all banks, the bank needs cash to invest in loans, overdraft and make payment for operating expense.
A firm cash flow are perfectly matched by its cash outflows, thus, the need for cash forecast weight be less. However, most firm find that such inflows and outflow cannot be confidence.
Union bank plc does not dial in product manufacture but rather provide services to customers who are engaged in various business inflows and outflows of cash in the bank. The flow of fund follows certain trends weekly, monthly and yearly.
In a work, cash withdraw from the bank mostly on Monday and Friday, customer withdraw money to be spent over the weekend on Friday and come to withdraw again to replenish spent. During the month, the bank need more cash to satisfy its customer at month end. However, more money is needed at the end of the year particularly December.
Cash planning is a technique of planning and controlling the use of cash. Cash planning protects the financial position of the bank developing a projected cash statement forma forecast of expected cash inflows and outflows for given period. The forecast are based on the p[resent operations and something on anticipated future operations.
2.4 CASH BUDGET
According to Oyebanji (2005), the cash budget is most significance device, the bank uses to plan and control the cash receives and payment. It is a summary statement of the firm expected cash inflow and outflows over a projected period of time. It helps the manager and the accountant to knowledge that can be applied to future projection of cash flow that will be need to attain the objective that been laid down.
Regarding in intermittent period of recession and continue inflation, increased corporate debt and decision making relating to the business environment, the financial manager has a challenging task ahead. The financial executive will need to review his position in a fundamentally new way. He can no longer avoid to view himself only as a controller of treasure. These are the most popular forms of bank lending in the present day banking services in Nigeria namely; loan and overdraft other forms including discounter trade bill or investing in stock impended in his book was the view that ‘the basic goals of credit management is to maximize the value of the firm by achieving a trade off between liquidity and profitability. He said ‘the firm should manage its credit in such a way that sales are expanded to an extent to which remain without acceptable limits.
However, to achieve these objectives of maximizing the value of the firm, they should manage its advance so as to .
- Obtain optimum (not maximum) cash
- Control the cost of credit to keep it as a minimum
- Maintain investment in receivable (debtors and optimum level).
It is this evident that cash management is highly important in the management of a company and this should be pursue with every to vigor to avoid not just lack of growth but also the embarrassing problem of insolvency.
2.5 FUNCTIONS OF COMMERCIAL BANKS.
The chief function of the commercial bank if the provision of the country’s main payment mechanism and overdraft and providing facilities for the transfer of money for saving keeping.
Current account: this account is opened with the use of cheque withdrawal of money and transfer could be made on demand with a previous notices. Deposit on current account make up approximately to 10% deternine the future cash need of the bank, plan of financing of these need of the bank , and exercise control over the cash and liquidity of the firm.
The cash budget should extend over the cash and same period ass the master budgeting and for control purpose, it should be analyzed to show quarterly or monthly the flow of cash.
The cash budget offers the following advantage.
- It helps to determine for additional cash requirement in good times.
- It helps to anticipate short time financing.
- It helps to manage money market investment.
- It shows whether capital expenditure project can be financial internally.
The bank has been very successful in their forecast as evident from the fact that they hardly run short of cash for its transaction.
There is always available transaction and so expenses over simply paid straight away. Expenses items have an account and returns are made monthly for these account. The accounts are control account for management supervision through the way management keep a close control over the expenses of account.
2.6 CASH BALANCE REQUIRED
One of the primary responsibilities of the bank manager and accountants is to maintain a sound liquidity position of the forms that due maybe settle on time. At anytime, the accountant would not want to keep optimum cash balance which would not be too high to result into an opportunity loss or not low result into a liquidity problem.
Measure that assists in the management of cash in Union Bank are;.
Liquidity assets ratio: this is the ratio of liquid assets to total assets in Union bank plc. The ratio of liquid assets to total assets is kept as 6%. These are not legal regulation affecting the balance, a branch should maintain, it the bank needs to increase cash, it may sell some of its liquid assets and can equally adjust its liquid asset ratio by calling on some of its advance. if a bank wishes to set on objective for its own minimum level of liquidity, such cash holding would be a useful inevitable incurred opportunity cost.
2.7 CASH BALANCE TO CURRENT ASSETS RATIO
The cash balance and current asset are all refers to a particular balance sheets date. The figure of current assets balance and the cash balance figure in Union Bank Plc, if the cash balance of the sheet date is #620,000, the ratio would be l0%.it helps the financial manager to provide a rough guide to the minimum cash balance the firm should holds. This type of ratio is certainly very important in banking.
2.8 FACTS OF CASH MANAGEMENT
In view of the current inflationary trend and the changing economic structure, the need for proper cash (fund) and current assets management become eminent. The objective of cash {fund} and management is that cash flow are available in the right amount and at the right time to meet cash outflows.
Among various pronouncement and innovation in cash management is that of the vice president of an American consulting form. He say that ‘ample’ evidence exist that the chief executive officer chairs is been filled increasingly by individual and general managerial management practice current about a quarter of all chief executive in the country have predominantly financial management backgrounds.
Kelvin Elbury, a member of association of international accountants said that the objective of cash management is to ensure the cash inflows are available in the right amount and at the right time to meet cash outflows.
The development of charge that has taken place in the cash position over specified accounting periods and providing the deposit.
Prior to January, 2006 this account do not yield interest as owner were required to pay bank charges but with the new government guideline, bank now pay little interest of about 15% on current account credit balanced..
- Saving account: this account is open with the use of pass book. Theoretically, it requires notice before withdrawals can be made as interest is paid on it. The interest rates from banks to banks an time to times the current rate at Union Bank Plc, generally is 12.8%.
- Deposit Account; Here, deposits are made for a specific period of time such deposits are usually made by forms, government and corporation as well as individuals. Customers must give notice before withdrawal is made. There is a higher rate of interest and it increase with the length of time it is kept. The time arises between three (3) months, six (6) months or one year.
- Providing Loan and overdraft: since not all deposit are withdraw at the same time, the bank lend out some money to prospective customers who wish to borrow for investment and other purpose. Borrower are expected to provide collateral securities before loans are granted to them and interest is payable on such loans.
- Transfer of Money: bank transfer value (money), from one place to another both outside and inside the country, this is done through standing order, telegraphic transfer, credit cards, draft issuance and direct payments are made on behalf of customers for good purchased abroad and issuance of trader’s cheaque.
- Other services: Union Bank Plc, provides facilities for keeping valuable such as certificate, jewelries and other document, they also provide night safe facilities which enable traders to deposit all their money for the day sales.
Furthermore, with recent development of services, department in almost all the commercial banks, customers are advised on how to manage their customers.
2.9 NEED FOR HOLDING CASH
Very often, people prefer to hold part of their money rather than invest or give out as loans to other this involves a less of the interest which could have earned, this type of thing is know as the demand for money to hold or liquidity preference.
The banks need to hold cash are attributed to the following;
- The transaction motive: transaction motive requires the bank to hold cash to conduct its business in the ordinary course. The bank needs cash primary to make payment for wages and salaries, purchase and operation expenses the higher the level of income of the bank, the more money they will like to hold for transaction purpose. This motive mainly is not perfectly matched with cash receipts.
- The precautionary Motive: this is always impossible to forecast accuracy the cash inflow and outflow; therefore cash balance needs to be kept as a precaution. This motive provide buffer to withstand some unexpected emergency. It is the need to hold cash to meet any contingencies in the future. Normally, the banks transfer its excess cash to Muritala Mohammed road Branch, Ilorin and withdraw when its balance fall below the minimum.
- The speculation Motive; the bank does not engage much in holding cash speculative motive. This is a situation where the bank hold cash for invest in a profit making venture: the bank will hold cash when its expected that they will later benefit by the subsequent fall in interest rate and increase the securities.
At Union bank of Nigeria Plc, the transaction and speculation motive of holding cash came into play than precautionary motive as forecasts are made for daily need of cash. Therefore banks these banks are slightly different from other companies because they do not engage in satisfying daily need for expenses but rather to meet the cash demand of their customers.
2.10 THE CREATION OF FUND BY MONEY DEPOSIT BANK
Money deposit bank creates money by granting loans and overdraft to their customer, such loan/overdrafts are known as bank money. Thus, when a bank gives out loans/ overdrafts they are in effect, increasing the total money supply in a country.
Banks ability to create credits (i.e. grant loans/overdraft0 is subject to certain limitations, in the first place a bank must receive cash deposit from customer before it can grant advance. The greater the cash holding, it has the more it will be able to create loans and overdrafts.
Secondly, the amount of money it can create depends on the cash ratio with the cash ratio of 10% of bank that has #100, 000 cash holding can continue to create money(grant loans/overdraft) up to maximum of #1,000,000, #100,000 X 100= #125,000.
Thirdly, the cash ratio depends on the extent to which people make use of cheque, in a country where most people make payment through cash instead of cheque, the cash ratio will be high. The higher the cash ratio the less the ability of bank to create credit as you can see from the above example.
2.11 QUALITIES ASSOCIATED WITH CREDIT
Before the bank can create a loan to an individual or organization, it becomes necessary to consider the quality associated with such credit.
Thus, the qualities to be no6ted are as follows;
- Confidents: this is the most important quality associated with credit. No credit is willing to extend credit to any one whom they do not have confidence.
Therefore, the qualities, with credit should mainly be considered from the point of view of the creditor. If the qualities do not exist then no credit will be granted.
2 Suitable: the given of credit is often established in suitability of the assets on the purpose to which credit is been extended. A banker would consider gambling and speculation as not suitable.
Hire purchase may not be given if the life of the assets is less than the period of time covered by the hire purchase. Agreement the lesser the suitability of the assets (or the purpose of which credit is used) thee lesser the confidence the creditor will have.
3 Safety: A loan must be safe. The lender must make sure that the borrower is reliable (trust and that can honour his obligation with the period given because of the unforeseen event can made a loan to be safe having the borrower to deposit some security as an assurance to the repayment of the loan.
2.12 COMMERCIAL BANK AND ECONOMIC DEVELOPMENT
It should be realized that money deposit bank plays a big role in the economic development of our country.
There are many ways in which they perform this role, some of roles include;
- Provision of capital: banks assist in the provision of money in form of loan and overdraft to the entrepreneurs. It is not possible for businessmen and women to provide the money they needed on their own. This encourages the establishment of industries which helps in the development of the country.
- Financial advice: Money deposit bank not only give loan also provide financial advice to their customer. They advice their customers on the type of loan whether is necessary for investment or not.
- Encourage investment: Both individuals and government are encouraged to invest i.e. government security to carry out its operation. Money deposit banks buy and sell stock and shares on the benefit of individual customers and in addition provide loans to the government.
- Encourage saving money deposit banks encourage people to save money and the supply of capital fund in economy.
- Helps in international trade: money deposit banks open a letter of credit and provide credit toe exporter, providing travelers cheques and other facilities and international trade.
2.13 INVESTMENT OF EXCESS CASH
Excess cash in union bank plc, is treated in two ways: –
- The transfer of excess cash to the central bank and maintaining only a cash float.
- The investment in marketable securities which is conveniently and promptly converted into cash.
Excess cash may be hold as a buffer to meet unpredictable financial need that bank hold extra cash because cash flows cannot be predicated with certainly and it is usually invested in marketable securities until it is needed. Requirement and future contingencies should be temporarily invested in marketable securities which can be regarded as near once. Once the bank has determine an optimum cash balance, the residual of it liquid assets are either transfer to central bank or investment in marketable securities.
The purpose of invest in excess cash in marketable securities is restricted to government treasury bills and commercial banks deposit,
2.14 INTERNAL CONTROL OF CASH
Cash management includes the control to be exercised over highly useful asset, cash internal control over cash management is task taken to prevent the commission of error of fraud, prevent mis-appropriation of cash by the staff.
Union bank plc has quite effective internal control system regarding to cash. Physical cash at the bank is kept in the strong room together with other valuable documents. The strong room has two keys lied by difference officials who must be present before it is open.
Cash is collected or sent to the central bank using the bank’s special vans with police escort accompanying it every morning paying cashier to go to the strong to collect cash that will be use for the day they have limited amount in the strong room before further receipt from customers are made.
Any customer wishing to withdraw money will either fills a debt from a saving account. The signatures of the (cheque or debt form) are verified by an appropriate officer before payment is effected by the cashiers.
The internal control system regarding cash is thus involves many people and is quite efficient. This is evident from the fact that physical cash is embezzled.
2.15 LIMTTATION OF CREDIT CREATION
Like any other money deposit banks the ability of Union bank plc, to create credit depends on some of the following factors:
- The !liquidity ratio: banks, are expected to keep a percentage of their assets in cash to meet public demand. If the ratio at which assets are to be kept in high cash dictated Ly experience or legal consideration, the money creating of power of the hank will be limited.
- 2. the possibility of cash brain of other bank: an individual bank ‘ability to grant credit to customer depends largely o:i the willingness of their bank to do the same. If other banks are not prepared to grant loans than an individual bank, lending ability will be limited since the money lent will find its way into banks
There by drawing such as individual banks reserve.
- The collateral security available: before loan can be granted banks usually ask for some assets to serve as collateral security so that in case defaults, such assets could be sold and the amount realized is used to cover the loans.
Anytime the amount of security available may limit banks lending since lending is not possible in the absence of collateral security.
- The monetary authorities action: the central Bank has as number of measure that include, adjusting the bank ratio capital market, open market operation, direct control, special deposit etc.
- Government legislation: the withdraw of government account restricts commercial banks ability to create credit. This is so because government keeps deposit with commercial banks and the deposit to their customer with the government directive, to withdraw its account from commercial banks in the central banks, most banks are not able to give sufficient credit to customer nor can they meet their operating cost.
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 RESEARCH DESIGN.
Union bank of Nigerian plc was established chap 2 in 1917 as a colonial bank with it. its first branch in Lagos.
In 1925, Barclay bank acquires the colonial bank which resulted in the change of the bank name Barclays bank dominion, colonial and overseas. Following the enactment for all foreign subsidiaries to be incorporate as Barclays bank {DCO}in 1969 was incorporate as Barclays bank of Nigeria limited. The ownership structure of year, the bank was listed on the Nigeria stock exchange.
As a result of the Nigerian enterprises promotion act of 1972, the federal government acquired 51.67% of the bank’s share which left Barclays bank plc London with 40%. By the enactment of the 1972 and 1977 Nigeria enterprises promotion acts, Barclays bank international disposed it share holding on Nigeria in 1979. To reflect the new ownership structure in compliance with the companies and allied matter act of 1990. It assumed the name union bank of Nigeria plc.
In consonance with government programme of privatization and commercialization. Of public enterprises, the federal government in 1993 and its shares in union bank to private individual. The union bank becomes fully owned by Nigeria citizens and organization.
In line with the central bank of Nigeria’s banking sector consolidation policy, union bank of Nigeria plc acquired the former universal trust bank plc and broad bank limited and absorbed its while subsidiary union merchant bank limited. The bank also increased it shareholders fund through a public offer {RIGHT ISSUE IN THE LAST QUARTER OF 2005,} with this development union bank remains one of the most capitalized bank in Nigeria. It has a shareholders fund was #119.160 billion and operates through 405 network branches that are well spread across the country, all of which are online real time.
Today, the bank is a leaching regional bank in sub-sa-haram Africa in terms of its diverse investment Across the globe. Glance at the banks financial summary reveals its its solidity.
As at 31st march,2010, the bank grass earning was #112.983 billions profit before tax was #33.012,000 billion, total assets was #1.128,890 billion, and shareholders fund was #119.160 billion.
The bank management is headed by MRS.FUNKE OSIBODU as the group managing director /chief executive.
3.2 SOURCES OF DATA COLLECTION.
The two sources of information for the study were the primary and secondary sources.
- Primary data.
- Secondary data.
The major source of data for this research is the secondary data.
There are data that are already assembled, and stuck away some where. Only waiting to be typed for use as secondary sources information.
- Some banking textbook, journals and population on the fraud.
- Central bank of Nigeria’s publication like billions record updated form the banks.
- Newspaper and magazine.
- Some professional textbooks.
- Lecture notes and seminal in banking
3.3 POPULATION AND SAMPLE SIZE.
The target population, this study are based on the number of people working in the bank which is thirty (30) and sample size of twenty (20).
3.4 SAMPLING TECHNICQUE
Random sampling was used in selecting respondents for the study which affords-one. equal chance to choose respondents for the study without any bias or favour.
3.5 METHOD OF DATA ANALYSIS
The basic statistic method employed in analyzing data in this study is presented of tables in a sample percentage and also cash flow statement in analyzing the management of fund of the bank.
3.6 LIMITATION OF THE STUDY.
In the process of conducting this project work, the following problems were encountered.
- Look warm attribute from respondents as they treat all information.
- Embarrassment during the consulting or collecting information from the workers of Union Bank.
- Pressure of work for the workers of Union Bank.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 DATA PRESENTATION
The present trend of economic hardship in the name of structural adjustment programme (SAP), foreign exchange market (FEM),dept rescheduling and conversion have brought with them some liquidity problems which need careful attention. It is therefore more important now that ever before to manage cash flow statement.
Once the cash budget has been prepared and an appropriate cash flow is established, the branch manager and chief accountant always ensure that these do no exist a significant deviation between projected cash flow and actual cash flows. Cash flow statement are useful to management because they draw a picture of the cash transaction of the period considered. The cash register keep a record of the flow of the fund in which all cash receipts and expenditure are recorded in it. The balance in this register is always reconciled daily with the “waste sheet”. This waste sheet is summarized and recorded per day.
The vouchers pertaining to cash paid or received cashier and take their balance, the waste sheet figure for cash has to balance with the balance with the balance maintained by the treasury custochain lathe register.
4.2 DATA ANALYSIS
The branch prepared detailed cash statement since it supplies cash to its neighburing branches.
Source; Cash flow statement for ended 31st 2011 to 2012.
The cash flow statement is prepared to analyze change in capital or cash in the firm’s operation. Funds from operation are calculated by adjusting the figure of net profit on non-cash item such as depreciation.
Depreciation is added to net profit to arrive at funds from operation, to determine cash from operations change in current assets, liabilities are also adjusted in the profit. Increase in current assets and increase cash and decease in current liabilities reduces cash, other working capital or cash include sales of fixed assets, issue of share capital and borrowings, the typical example of funds are acquisition of fixed asset, repayment of debt and payment of cash dividend.
Fund flow cash flow statement are important managerial tools for financial analysis. They help the firm to know its liquidity position, capital expenditure incurred, dividend paid and extend of external financing.
A funds or cash flow statement guide the firm to plan the matching of inflow and outflow of fund or cash.
- DATA PRESENTATION
FIVE YEARS FINANCIAL SUMMARY FOR THE YEAR ENDED 31ST FEBRUARY, 2013
| 2013 | 2012 | 2011 | 2010 | 2009 | |
| #M | #M | #M | #M | #M | |
| ASSETS | |||||
| Cash and short terms funds | 70,185 | 42,868 | 29,414 | 56,995 | 27,476 |
| Bills discounted | 42,982 | 94,495 | 91,831 | 49,399 | 47,320 |
| Trading securities | 94,931 | 46,704 | 40,500 | – | – |
| Long term investment | 19,797 | 16,291 | 10,226 | 26,950 | 9,926 |
| Loans and advance | 401,546 | 244,845 | 149,376 | 116,060 | 78,984 |
| Advance under finance lease | 565 | 3852 | 1131 | 897 | 347 |
| Other assets | 240,766 | 125,282 | 23,953 | 109,235 | 22,632 |
| Fixed assets | 532,268 | 26,120 | 25,029 | 206,612 | 14,482 |
| Liabilities | |||||
| Deposit on current and saving account | 758,390 | 649,334 | 417,406 | 252,418 | 200,511 |
| Due to other bank | 93,213 | 62,740 | 16,735 | 23,039 | – |
| Tax payable | 4633 | 4372 | 2978 | 3822 | 3415 |
| Differed tax | 5005 | 4355 | 3626 | 2876 | 2685 |
| Dividend | 309 | 309 | 309 | 6270 | 6364 |
| Other liabilities | 192,084 | 74,693 | 82,116 | 133,452 | 146,267 |
| 1,053,634 | 795,803 | 523,170 | 421,879 | 359,142 | |
| Core capital | 27,146 | 109,778 | 95,170 | 94,192 | 37,636 |
| Fixed assets revaluation surplus | 25,146 | 1493 | 1493 | 1493 | 1493 |
| Shareholders funds | 53,145 | 11,271 | 96,630 | 95,683 | 39,129 |
| Contingent liabilities | 91,123 | 86,855 | 24,459 | 16,794 | 28,697 |
| Gross earning | 130,187 | 92,935 | 71,090 | 50,736 | 44,791 |
| Less profit before taxation expenditure item | 84,493 | 29,746 | 15,320 | 12,350 | 11,953 |
| Less profit before taxation dividend | 71,052 | 24,7370 | 12,126 | 10,036 | 9,375 |
| – | – | 9652 | 6270 | 6264 | |
| Per (50kobo) share data loss earning (basic) | #5.20 | #2.14 | #1.26 | #1.60 | #2.10 |
| Loss earning (selected) | – | – | #1.26 | #1.04 | #0.97 |
| Nets assets | #3.93 | #8.24 | #7.15 | #7.08 | #2.69 |
| Total assets | #31.92 | #61.14 | #45.88 | #38.31 | #29.48 |
| Stock exchange question | #10.00 | #48.50 | #30.00 | #25.98 | #21.20 |
| Market capitalization (M) | 135,00 | 503,730 | 189,558 | 155,049 | 91,283 |
Source: financial statement of union bank of Nigeria plc from 2009-2013
Note: base earning and dividend per share are base on number of issued ordinary shares at 31st February end of year qualifying for dividend and bonus issues while diluted earnings, net assets and total assets per share are based on the number of issued ordinary share at 3lst February 2012.
CHAPTER FIVE
5.1 SUMMARY
It has been seen that the firm employs numerous resources of winch one of it cash. When the enterprise started, operating cash is generated form the sales of shares to intending investors.
The business of any bank is purely on cash and customer, the bank refers to these as assets. This project work is concerned with the management of cash which is the function of financial managers. The general problems affecting cash management have been left in the bank account of companies which been leading to liquidity and solvency problems.
In order to attains this objectives, a lot of problem are envisaged as contained in chapter two which determine the area of problem, hypothesis is arrived as to as to find various ways of solving them. To achieve the aim of the study, the researcher collected relevant data using:
- Interview with the management of the bank
- Documentation method
Cash management techniques have been considered using union bank of Nigeria pie as a case study. It has been that the banks hold cash reserves, short term and liquid marketable securities for three (3) reasons:-
- Conducting transaction.
- Satisfying precautionary speculation.
- Financing possible speculation.
The effect of cash planning has been considered, it has been seen that firms cash flow are match with its cash out flows as a result of cash forecast and budgeting. Cash management involves improving the financial managers with a gauge for determine cash receipt and expenditure. Another area covered was cash balance required to be kept by the bank. The ratio which include the relationship of the cash balance of other assets and liquidity ratio.
5.2 CONCLUSION
plc was not found to deviate too far from the hypothesis holding an optimum cash balance, be it commercial, government or private cannot survive without efficient management and control of it cash resources.
Failure of banks that came into being earlier was because there was no cash management control. It is therefore a paramount important that there should be a system of cash management and control in any banking setup. Union bank plc, is said to maintain a good system of cash control and management which they carry out promptly with the main branch,
Profit maximizing has been the watch world of the bank and resources, utilization is good as the bank is generally said to have an efficient cash management.
5.3 RECOMMENDATION
The economy and the commercial banks are both fairly liquids at present due to lack of investment opportunities resulting from the economic difficulties currently facing maximization, adequate control effective and efficient cash management recommend the following procedures;
- Counter service;- the counter service is in need of urgent improvement. The bank need to be set up its training programme, classroom training should be supplemented with on-the-job training, the senior branch personnel should move round the branches to satisfy himself on the quality of custom or service that will be on important factors it increase deposit ratio. To be efficient, the bank should result move workers to help serve the customer at the shortest possible time.
- Technology:- the need for the bank to adopt technology in accounting system cannot be over emphasized, in doing this, attention has to be given to computer usage, this will reduce the high rate of expenses incurred by the bank i.e. overtime hours will be reduced to minimum as the use of computer will save a lot of time.
- Liquidity or safety ratio:- the bank with a high loan to deposit ratio is often described as being less liquid and riskiest than a bank with low loan to deposit ratio. The bank should Endeavour to maintain a low loan to deposit ratio through increasing interest ratio on saving account and time deposit.
- Return on equity:- it the bank maintains a good return on equity, the shareholders xviii benefit more inform of individual and as much, they will able to invest more in the bank.
- Staff relationship:- senior and junior staff relationship should be geared tip vigorously so as to bring about a conclusive atmosphere where one will rendered services that concerned him1her in order or in increase profit.
- Technical accounting language: – activities of the bank should be explained to the customers and general public in a simple language instead of using technical accounting language.
- Forecast of cash need: – formal daily forecast of cash needs should be made monthly, statistics should be kept regarding the inflow and outflow of fund to help more precise forecasts of cash needs.
REFERENCES
ANAO, A.R . (1993); An introduction to financial accounting, Lagos; Longman Nigeria limited.
BATTY, J. (1986); management account first edition, Lagos state; university press.
OLOWONIYI, A.O (2013); Strategy Financial Management, Business Finance Lecture, Kwara State polytechnic, Ilorin Publisher:
OWUALAH (1989); banking and financial environment note, Lagos state; university of Lagos.
RAYMND AND ROBERT, S. (1992); basic financial Management, Lagos; inner ways publications.
Union bank of Nigeria plc, (2012). Annual report
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