CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

No matter the amount of money spent on equipment, plant and machinery, building etc. if the ingredient for production are not efficiently managed the entire amount committed will become a waste. As essential as these are without working capital there is going to be a set back.

Aminu (2003) defines working capital as a firms investment in short term assets that is cash account receivable, short term or marketable securities and inventories similar Philip (2001) sees working capital as items that are required for day to day production of goods (services) to be sold by a firm. 

Philip (2001) stated that working capital management refers to a process of all aspect of the administrations of both current assets and current liabilities. He also explains that it is a process of planning, directing, controlling and decision making over working capital to achieve the aims and objectives of the company. Philip (2001) defines management as a process of planning, directing, controlling and decision making in order to achieve the aims.  

Finance is a broad term that describes two related activities, the study of how money is managed and the actual process acquiring needed funds, while Don (2012) defined finance as a field that deals with the study of investment that includes the dynamics of assets and liabilities over time under conditions of different degree of uncertainty and risk.

The availability of working capital is an important factor to be consider as it is a pivot upon which the life of the firm revolves. But more importantly it is the ability of the manager to harness the components of working capital to bring about consistency in the success and growth of the firm. The efficiency and effectiveness of the management of this vital ingredient is a determining factor of the company’s community in business.