CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

The financial performance of companies has attracted a lot of attention in recent times, comments and interests from both financial experts, researchers, the general public and the management of corporate establishments/entities. The Financial performance of an organization can be analyzed in terms of profitability, dividend growth, sales turnover, return on investments, and return on assets amongst others. However, there is still debate among several school of thoughts regarding the yardstick for measuring the performance of firms and the factors that influence corporate liquidity and the performance of companies/organizations (Liargovas & Skandalis, 2008). According to Iswatia & Anshoria (2007) performance is the ability of an organization/firm to gain and manage the available resources in several different ways to develop competitive advantage among other things.

Liquidity can be said to be an investment in current assets and current liabilities which are liquidated within one year or less and is therefore important for firm’s day to day operations (Kesimli & Gunay, 2011). Liquidity is closely related to working capital which is the money needed to finance the daily revenue generating activities of the firm. According to Vahid, Mohsen and Mohammadreza (2012) Liquidity management plays a crucial role in determining the success or failure of firm in business performance due to its effect on firm’s profitability. Business success depends heavily on the ability of financial managers to effectively manage the components of liquidity (Filbeck & Krueger, 2005). A firm may adopt an aggressive or a conservative working capital management policy to achieve this objective.

Liquidity management is a concept that is receiving serious attention the world over in recent years especially with the current financial situations and the state of the world economy. The concern of business owners and managers all over the world is to devise a strategy of managing their day to day business operations in order to meet their obligations as they fall due and increase profitability and shareholder’s wealth. The importance of liquidity management as it affects corporate profitability in today’s business cannot be over emphasized. The crucial part in managing working capital is required maintaining its liquidity in day-to-day operation to ensure its smooth running and meets its obligation (Eljelly, 2004). Liquidity plays a significant role in the successful managing of a business firm. A firm should ensure that it does not suffer from lack-of or excess liquidity so as to meet its short-term goals. A study of liquidity is of major importance to both the internal and the external analysts because of its close relationship with day-to-day operations of an organisation (Bhunia, 2010). Dilemma in liquidity management is to achieve desired tradeoff between liquidity and profitability (Raheman et all, 2007). Liquidity requirement of an organization depends on the peculiar nature of the firm and there is no specific rule on determining the optimal level of liquidity that a firm can maintain in order to ensure positive impact on its profitability.

STATEMENT OF THE GENERAL PROBLEM

The poor performance of manufacturing companies in Nigeria has been a cause for serious concern in recent years. the poor performance of manufacturing companies have contributed to the present economic recession as many people have been thrown out of their jobs thus leading to high unemployment or under employment rate in Nigeria.

AIMS AND OBJECTIVES OF THE STUDY

The major aim of the study is to examine the effect of corporate liquidity on the performance of cement manufacturing companies in Nigeria. Other specific objectives of the study include;

1. To examine the role of corporate liquidity in the performance of an organization.
2. To examine ther challenges to corporate liquidity and performance of an organization.
3. To highlight the impact of corporate liquidity on the performance of manufacturing companies.
4. To recommend ways of ensuring corporate liquidity in manufacturing companies in Nigeria.

RESEARCH QUESTIONS

1. What is the role of corporate liquidity in the performance of an organization?
2. What are the challenges to corporate liquidity and performance of an organization?
3. What is the impact of corporate liquidity on the performance of cement manufacturing companies?
4. What are the ways of ensuring corporate liquidity in cement manufacturing companies in Nigeria?

RESEARCH HYPOTHESIS

H0: There is no significant impact of corporate liquidity on the performance of cement manufacturing companies in Nigeria.

H1: There is a significant impact of corporate liquidity on the performance of cement manufacturing companies in Nigeria.

SIGNIFICANCE OF THE STUDY

The study would be of immense importance to cement manufacturing companies and indeed other corporate organization as it would reveal the impact of corporate liquidity on the performance of organizations. the study wpould also benefit students, researchers and scholars who are interested in developing further study on the subject matter.

SCOPE AND LIMITATION OF THE STUDY

The study is restricted to corporate liquidity and performance of cement manufacturing companies in Nigeria.

Limitations of the study

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.