a critical study of financial administration and its managerial efficiency in business enterprise

SAND DATASCOM

Academic Research Materials

A CRITICAL ANALYSIS OF FINANCIAL ADMINISTRATION

AND ITS MANAGERIAL EFFICIENCY IN

BUSINESS ENTERPRISE

A THESIS FORMAT

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ABSTRACT

BLANK

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

The history of industrial revolution in developed and developing

countries have shown that small and medium scale enterprises are

the driving force of industrial development. The attentions of national

governments all over the world have, therefore, focused on funding and

supporting SME activities.

A major characteristic of small and medium scale enterprises

(SMES) worldwide is that they are generally managed by their owners

either as sole proprietorship or partnership. SMES are also largely

local in their areas of operation. They depend on internal sources of

capital and are relatively small size within the industry. Small and

medium scale enterprises are predominant in the private sector of the

Nigeria economy, but most of them are starved of funds. The relative

importance of the small and medium scale enterprise, however, differs

considerably form one type of business to another. The major areas of

business enterprise activities are in manufacturing, distribution of

products and rendering of services, some of which may involve the use of

products.

The experience of many countries indicates that small and medium

scale industries can meaningfully contribute to the attainment of many

economic development objectives. These include output expansion,

employment generation, even location of industries among regions in a

country, income redistribution, promotion of indigenous entrepreneurship

and technology, as well as production of intermediate goods to strengthen

inter and intra – industrial linkage.

DEFINITION OF SMALL AND MEDIUM SCALE INDUSTRY

There is no common definition of what constituted small and medium

scale industries in Nigeria. However, in 1996, the National Council on

Industry (NCI) classified industrial enterprise in Nigeria into four groups as

reviewed in their meeting need at Lokoja in 2003.

1. Cottage Industry: Enterprise with total cost (including working capital

but excluding cost of land) not more than N1.5 million with a labour size of

not more than 10 workers.

2. Small – scale Industry: Enterprise with total cost (including work but

excluding cost of land) above N1 million but not exceeding N4 million and with

labour size of between 11 and 35 workers

3. Medium – scale Industry: Enterprise with total cost (including working

capital but excluding cost of land) above N40 million but not exceeding

N150 million with labour size of between 36 and 100 workers.

4. Large – scale Industry: Enterprise with total cost (including working

capital but excluding cost of land) above N150 million and a labour size of

over 100 workers.

1.2 STATEMENT OF THE PROBLEM

1. The background of any business organization be it small or large is

finance, without money nothing could be done, no business can survive or

function without finance.

Finance plays very important / vital role in any business organization.

The meaning of finance in this study is very vital because many

business enterprises have collapsed because of poor financial administration.

Despite the important role played by finance, many organization i.e their

operator have no financial policy due to ignorant of various opportunities

open to them.

A lot of owners to withdrawn cash from their business account for their

own leisure purpose which automatically affect the running of the business.

In view of this, the research work is carried out to examine the financial

management of small and medium scale business with the view of finding

lasting solution to these problems.

1.3 AIMS AND OBJECTIVE OF THE STUDY

Obviously many people (business men) have heard about small and

medium scale business but still do not know what it actually means; the

nature, and staff strength and composition in relation to staff strength and

establishment with its role to industrial and social development of the society

(country). Hence, this project work is purposely aimed of examining and

analyzing the various issues concerning business operations with absolute

research to Tuyil pharmaceutical Nigeria Limited in order to reflect the actual

meaning of small and medium scale business

It will be very important to state here that no business enterprise can

start as a large business but must first start as a small later develop to

medium and large scale business has we can see in the case of Tuyil

pharmaceutical Nigeria Limited. Before a business can be classified has been

staff strength, composition, equity share capital of the company. It is also

important for the owner / shareholders of the company to monitor the

activities of the company to progress and viable. It also helps reader who may

want to establish a business enterprise of their own.

1.4 SCOPE OF THE STUDY

Many enterprises have been declared bankrupt as a result of poor

financial administration, however for the purpose of this research work Tuyil

pharmaceutical Limited is used a case study which focus on the finance

department. It cover the period of 2001 to 2006 only.

1.5 SIGNIFICANCE OF THE STUDY

The critical analysis of financial administration and its managerial

efficiency in business enterprise will go along way in helping the organization

to achieve it stated financial objectives and to survive in dynamic and

continuous changing environment

Moreover, the following are important for company to grow and viable:

1. It will assist enterprise to source for fund at a cheaper rate or

percentage increase.

2. It will help the organization to concentrate their fund on a profitable and

variable investment.

3. It will assist the management to solve the problem of liquidity in the

organization i.e meeting their short – term obligation.

4. It will facilitate the organization to put necessary machinery in place for

proper recording and book keeping in the organization so as to give room

for accountability.

1.6 LIMITATION OF THE STUDY

A lot of constrains are encountered in this study among which are in

adequate finance, time is relatively small to allow for a comprehensive study.

Also the staffs of the organization to which the research instrument are given

reluctantly refuse to answer the question. This may be due to official reasons

and security purpose of the job.

Therefore, because of the problems mentioned above, the available date

and information should be interpreted with caution. It is also important to

mention that the work study does not cover the whole business enterprise in

Nigeria. It is limited to Tuyil Pharmaceutical Nigeria Limited only.

1.7 DEFINITION OF RELEVANT TERMS

i. Finance: Can be defined as all resource which are acquired and used by

management to plan, control and effectively coordinate the activities of

an organization in order to achieve the set objects. According to (AKINNUSI

AYODELE 1999 corporate business finance Ilorin SMS printing and

publishing company).

ii. Enterprises: A venture especially on calling for determination, energy

and initiative (KAITH LYMAN A AND GUBELLIN CARLOW 1975

introduction to business enterprise. New York: inc Graw Hill Book Coy).

iii. Business: Is defined as the sum of all activities involved in the

production and distribution of goods and services for private personal profit.

According to (Shumbon John A 1957 Business management an

introduction to business and industry New York Barrie and Noble Books).

iv. Management: Is the process of designing and maintaining an

environment in which individual work together in groups accomplishes

efficiently selected aim. According to (koontz H and C. O.O Donnel 1964

principle of management: McGraw Hill intimation student edition, Tokyo).

v. Efficient: Efficient in management means being able to achieve what one

wants to achieve, at minimum or least cost (to minimize cost inform of

time, energy, money, material etc maximize benefit). According to (A.S

Mohammed November 1997 in his book principle of management

volume).

vi. Administration: Administration can be defined as cooperative action by

people aimed of achieving a common purpose. According to (Olowu Dele

1991Nigeria public administration “past, present and future”

Shammeson C. I limited Ibadan).

vii. Small Business: According to company and Allied matter decree 376CD

of 1990, define small business as business whose annual turnover is not

more than Two million Naira (N2 million) but not exceeding N40 million

and Labour size of not more than 10 – 35 workers.

viii. Medium scale business: Enterprise with total cost including working

capital but excluding cost of land above N40 million but not exceeding

N150 million, with a Labour size of between 36 – 100 workers.

ix. Large scale business: Enterprise with total cost (including working

capital but excluding cost of land) above N150 million and a labour size

of over 100 workers.

CHAPTER TWO

LITERATURE REVIEW

2.1 DEFINITION AND CHARACTERISTICS OF SMALL $ MEDIUM

SCALE BUSINESS AND FINANCE

Small and medium scale business differs in definition because it varies

from industry to industry and from one country to another country Typically,

what one may consider or say is a small or medium scale business in on

industry may be large scale business to another in term of equity share

capital, staff strength and their composition for example Bread making

industry may be term large scale to some people but to some like Automobile

Engineering company may be a very small scale because of the capital

intensity involves.

Small or medium scale businesses that are been owned independently

and which is not dominant in field of operation.

Small scale business enterprises are seen by central bank of Nigeria,

according to credit guidelines state small enterprise has those with annual

turnover not exceeding Forty Million Naira (N40m) excluding cost of land or

with maximum turnover not more that N40 million.

According to company and Allied Decree No: 1 of 1990 section 367 (2)

define small scale business enterprise as company whose annual turnover is

not more that N40 million or whose act asset value (net worth) is not more

than N1 million.

Hence, small scale business is defined as any business employing

reasonable number of people and whose investment in machinery and

equipment should be moderately considerable.

On the other hand, medium scale business are those with annual

turnover not exceeding N40 million with labour size of between 10 – 35

workers.

Definition of finance: According to I.M Pandify, finance can be defined in an

academic discipline that concerns with the study, the use and management of

all means of settlement available to small and medium scale business.

We can not conclude that finance is limited to funds settlements; it is

also an associated finance in small and medium scale enterprises.

CHARACTERISTICS OF SMALL AND MEDIUM BUSINESS

According to center for economic development, any small and medium

business is characterized by at least two of the following features.

a. Management is independent usually the manager are also owners.

b. Capital is supplied and an individual or small group holds ownership.

c. The area of operation is mainly local, worker and owners are one home

commonly but market need not be local.

d. The business is small when compared to unit in its field.

Perhaps the most functional definition of small business is the one given

by the united nations industrial development organization (UNIDO) which

suggests that a small scale business is characterized by at least two of the

following:

e. Ownership and management are usually vested in the same industrial

individual that is, the management is not independent and the managers are

usually the owners.

f. The small and medium scale business controls small share of the

market and therefore constitute a little quote in the large size market.

g. Capital is made available by the owner and policy decisions are in the

hands of the individual or small group of entrepreneur.

h. The area of operation is localized and workers and owners concentrate

in the local community. Some also have branches in the towns but most of

such branches serve as mere depots.

i. The owners participate very actively in all decisions making in day to

day operational basis with a high degree of rigid control.

Generally, the characteristic of small and medium scale business can be

seen as follows:

a. They are owned and managed by private individual or group

b. They are usually localized and are not very big in size.

c. Their decisions are easily taken.

d. They need little or no legal formalities for existence.

2.2 SOURCES OF ADMINISTERING FINANCE TO SMALL AND MEDIUM

FIRMS

Financial activities give life to business when it is managed, but if it is

mismanaged, the business goes into immediate liquidation.

Finance is needed to obtain all other business resource. Its inadequacy

means that an organization cannot function properly. This call for the

attention of financial manager.

Sources of finance are generally classified into three via short terms

medium term and long term source of finance.

Short Term Finance: Short term is used when prospect are; that the debt

can be repaid within one year so when the period for which it is needed is

maintained. Short term debt is also used sometimes when the expectation of

payment is not very high. Examples of short term finance are commercial

bank credit, delaying payment to supplier advance payment by customer,

trade credit, factory commercial paper investory financing, retailed earning

etc.

Factoring: Factory means setting trade for immediate cash to a factory

whom changes commission. The procedure in this finance source is that firm

sells its account receivable to a factory

A factory is a bank or other financial institution; they buy the receivable

less a certain percentage as service charges will be the total amount to be

received by the selling firms. The only important thing here is that, the selling

firm can receive money before the accounts are matured.

Furthermore, the factory may or may not perform the function of risk

bearing.

Commercial Bank Credit: Here, shorts loan and largely overdraft are

negotiated and are largely function of long standing banker customer

relationship when a bank loan is extended to a customer such facilities are

generally made in a form of NOTE. Which is written and signed statement in

which the borrower agrees to repay the loan pins interest when due.

Delaying Payment by Customers: This is the cheapest way of financing by

making the customer to pay up promptly or in advance of goods they are yet

to be supplied. Some firms used the money collected for production and later

send the goods produced to their various customers.

Advance Payment by Customers: This is the cheapest way of financing by

making the customer to pay promptly or in advance of goods they are yet to be

supplied some firms use the money collected for production and later send

the goods produced to their various customers.

Retained Earnings: This earning is firm normal operation as well as gains

from such transaction as sales of plants and investments in marketable

securities or bank terms deposits which pay interest. Retained passed by the

board and are sometime called RESERVES.

Medium Term Financing: This refers to that financing source that requires

repayment at a period longer than one year. As average repayment period of

five years can be stated for this type of financing source.

Most commercial banks hardly entertain medium term source of

finance, because of the mode of operation and profit limiting ventures.

The three well – known terms financing sources are term loan, Hire

purchasing agreement and equipment.

Term Loan: This usually have maturity between financing two to six years

payments and are usually made on monthly, quarterly, semi – annual basis so

that the whole loan will have been mortised by this form of fixed assets are

usually expected to serve as security for this type of loan.

Hire Purchase Agreement: This is another method by which business

enterprise can make use of the assets without an initial payment without

actually paying the whole payment (cost) of the items that is an initial deposit

is made after which he can posses the asset. Under this arrangement the

buyer is allowed to pay a certain agreed sum periodically, until the cost is

paid after which the ownership of the asset passes over to him. The periodical

payment will cover the principle aim and interest.

Least Agreement: A firm can also raised fund by entering into agreement

with supplier of capital items. A lease is a contractual established obligation

by the lease to pay leaser or series payments for the use of certain assets. A

business can make use of expensive equipment without owing it through this

arrangement

Long Term Financing: The debt obligation created through the long term

financing sources takes longer than ten years to mature. Repayment period is

not less than ten years on the average long term financing can be divided into

equity financing and debt sources.

Equity Financing: These are those capital contribution made by the

business share holders or owners. This includes common stock, preference

stock, retained earnings etc.

Debt Financing: These are those capital contribution made by bonds which

can be secured or unsecured (mortgage bond and unsecured debenture).

2.3 FINANCING THE TRADITIONAL SMALL FIRM

According to J. Padtly the typical small business even the successful

one, can not look to the general capital properly, it may be able to obtain a

mortgage from a bank or saving and loan equipment may perhaps be

purchased under a conditional sales contract or be leased after the business

has survived a few years.

Bank financing may be available on a seasoned basis but not for

performance growth.

Trade credit will typically represent the bulk of out side financing (that

is funds not supplied by the owner) available to the firm.

Financial ration must be of major and covering importance to the small

firm. Such analysis on a regular basis is essential to ascertain whether the

firm is operating with requisite managerial efficiency where as a larger,

stronger firm may have the finance strength to fall below its industry

standards and still recover, the small firm is well advised to compare them

with industry standard

Working capital management is of overwhelming importance for most

small firm. Because that amount of funds available is limited, liquidity is

crucial.

Trade credit appears to be an easy way of obtaining funds yet trade

credit is obtained on terms that generally call for payment within 30 day,

since inventories typically represent a large percentage of total assets, a

small firm inventories policy must be stressed large firms usually offer credit

so to meet competition. Small firm may also have to extend credit. The large

firm is likely to have an established credit department but now does the small

firm evaluate credit risks? What volume of account receivable can be built up

without endanging both the solvency and the liquidity of business. All these

are critical questions for the manager of a small business current liability

management is also important for the small firm. Although trade credit is

relatively easy to obtain, it is often costly if discount are available but not

taken the effective interest of such credit can be extremely high as we know,

not taking discounts on term of 2 / 10 net 30 implies a 36 percent interest

rate. Also there is a temptation to be a perpetual slow payer, but these involve

dangers. Supplier may refuse and credit and may even quote higher prices.

As the volume of operation become larger the increased flow may give

the proprietor a false sense of affluence. He moves to a larger home with

spacious yard and pool, and he buys the lastest model car. Since his

business is going fine, he feels the firm can afford to take on more debt. What

he may be doing is bleeding his business or at least removing retailed earning

that is really needed to finance growth.

Many traditional small business industries are today being conducted

under franchise arrangement franchising represent a devise whereby the

training and experience required for a particular line of business is sold to a

proprietor on a rental contract basis. Sometime franchises also include a

valuable trademark or calls for the supply of some key items. The franchiser

may, though bulk buying be able to sell supplier to the franchisee at lower

cost than otherwise would be available. But as may worth while franchise

operators know obtaining a franchise is not necessarily the road to riches, the

owners of the franchised operation may be required to pay an excessive price

for the trade mark, especially inputs and suppliers or managerial advice.

In summary, three areas of finance are of the utmost importance to

firms in traditional small business industries. Firstly, the proprietor of the

traditional small business must rely on internal finance (retail earning) to a

great extent which would help the management to a larger firm.

Secondly, to survive in the long run, he must be somehow better play in

relative standard game in which financial ration analysis can help him to

excel.

The working capital management is critical to the small entrepreneur, if

he fails here, he will not remain solvent and his firm will go out of business.

2.4 FINANCING PATTERN OF A SMALL FIRM DEVELOPMENT a. STAGE FINANCING PATTERN

Formation Personal saving, trade credit, government agencies e.g SSICS, PBN, NACRDB

b. A Rapid Growth Internal financing, trade credit, bank credit venture capital.

c. Growth and Maturity Going public, money and capital markets.d. Maturity and Industry

Decline Internal financial, share purchase diversification, merger.

2.5 NEEDS FOR FINANCING SMALL AND MEDIUM SCALE BUSINESS

ENTERPRISES

The persistent lack of finance for establishment and operation of small

and medium scales, occasioned by the inability and / or unwillingness of the

deposit money banks to grant long – term credit to the real sector of the

economy led to the establishment of development finance institutions and the

introduction of numerous finding programmes for the development of SMES,

particularly to the post independence era.

In spite of these institutions and funding programs highlighted like

(1) Small scale industries credit scheme

(2) National economic reconstruction fund (NERFUND)

(3) The agricultural credit guarantee scheme fund (ACGSF)

(4) Interest draw back programme by CBN commenced in too 2 with initial

capital of N2 million.

(5) The small and medium industries equally investment scheme (SMEIS),

there continued to be a persistent cry against inadequate finance for the

development of SME subsector. The deposit money banks that were

expected to grant adequate credit to the sector were hampered by the fact

that they borrowed short and had to tend short as well. Apart form this, the

risk associated with credit administration of small group of uncoordinated

producers that lacked adequate collateral was capable of diminishing.

Therefore, finance is very vital in business organization has it serves a

weapon against liquidation.

Small and medium scales enterprises need capital for the following reasons:

1. Capital expenditures

2. Increase inventories

3. Increase cost balance and other liquidity

4. Decrease in automatic liabilities mainly account payable.

5. For expansion purposes.

6. For contingencies.

2.6 PROBLEM ASSOCIATED WITH FINANCING SMALL AND MEDIUM

SCALE ENTERPRISE NIGERIA

According to F.O Okafor in his book financial management and revised

edition, the growth of any small and medium problems especially when it

comes to categorized into two aspects on the opinion of enterprises and other

on financial institution.

Financial institution, especially commercial bank generally, regards

small scale business as high risk and “sun set” enterprise. Consequently the

institution are afraid to grant the enterprise credit without adequate

protection against loss of investment by way of collateral, which the enterprise

often find difficult to provide, the measure that have so far taken by the

government to assist small and medium business have been directed toward

providing finance and technical services, but generally there has not been a

satisfactory coordinate scheme to help small and medium scale business in

Nigeria initially. It was small and medium scale business credit scheme that

was employ to act as its agent by federal government, which was established

in 1960’s but later Nigeria bank for commerce and industries was told to

assist government in channeling the credit to the industrialist simply because

small and medium scale business credit scheme authorities were

unenthusiastic to provide their effective matching funds partly because most

of the protect finances were unsuccessful.

The procedure made by the policy makes for delivering assistance to

small and medium scale business is to be found in the annual central bank of

Nigeria credit guideline, which diverted that a specified minimum proportion

of these banks loans and advance should be given to small and medium scale

business. But still as earlier mentioned, the commercial bank / merchant

bank prefer to pay central bank penalties than lending the small and medium

scale business because of the reason of great investment risk.

1987 / 88, Tuyil pharmaceutical limited requested for loan from

commercial bank but was rejected on a flimsy excuse that the industry is

state parasitical one could view the reason from the unenthusiastic nature of

commercial bank unwillingness to loan small and medium scale industrial

money.

More so, Tuyil pharmaceutical limited as a privates enter[rose applied

for loan in recent years after that of 1988 but was not granted, hence the

reason for government restriction on loan is in top gear which directly affected

the progress of the company since 1989, where the company has being

recording losses and low revenue because of inadequate fund.

Government policy also contributed to the improper financing of small

and medium scale business in Nigeria. The government policy can be as a

result of deregulation of interest rate, restriction on amount loan able, low

demand by government for their service and lack of necessary fiscal

incentives.

Tuyil pharmaceutical limited was reflected based on government

restriction which reduced the capacity of the company to increase production

for economic development of the nation.

Deregulation of rate of interest embarked by the government has

reduced the ability of the industrialist to seek for loan from the banks for

industrial growth. They also refused and charge high interest rate of loan to

discourage small and medium scale business to seek for loan in the bank.

This sector would be put to half for some period of time which directly

affects the economic development

Another factor which affects small and medium scale business is time

an application is made and the time the loan is given out. In most cases the

time lapses is always to long; which both the borrower and financial

institution contribute to the delay. This problem has from the past

contributed to the slow rate development of small and medium scale business

because the rate that the repayment time of loan is far and tend to make the

industrialist to relax his effort to work hard for loan recovery. In a case of

Tuyil pharmaceutical limited, ministry of commerce and industries lend them

the sum of N250, 000:00 in 1986 July, the term for loan was not stipulate,

but it was expected to be paid back when contract gotten were paid meaning

that if the contract is paid in 30 years time, then the loan will be paid then

this further show how time lag disturbs the progress of development.

Another problem facing small and medium scale extension of

commercial banks can only play limited role in development banking because

they prefer to give short term self liquidation loans such as bank overdraft.

This was so because the bulk of their resources structure and quick profit

motive. They are not in a position for long gestation period. Hence, financing

small and medium scale business can be difficult as they need long term loan

2.7 DEVELOPMENT AND IMPORTANCE OF SMALL AND MEDIUM

SCALE ENTERPRISE IN NIGERIA

The contribution of the small and medium scale industries in promoting

industrial and economic development are well documented in the literature.

Specially, the SMIs can help in the achievement of the following economic

development objectives:.

1. Employment generation: Globally, employment generation is one of

most important reasons for promoting the development of small and medium

industries. This is more so in the developing countries in which a large

proportion of the labour force is unemployed. Studies have shown that SMES

account for a large proportion of employment size in many countries. In

Nigeria, the small and medium enterprises sub – sector has been expanding,

especially since the mid 1980s, following the prolonged recession in the

economy which forced many large enterprise to lay off large proportion of their

work force.

2. Utilization of local resources: Small and medium scale industries are

known for their creativity in the utilization of local raw materials, that so not

require high level technology to process. In Nigeria, for instance,SMIs are

concentrated in such enterprises as food processing, fextiles, wood works,

leather products soap and detergent sub – sector that require simple

technology and the raw materials are in abundance. Small enterprise also

recycles discarded by product of large firms as primary inputs in their own

production processes.

3. Output expansion: In many middle income economies, small and

medium industries contribute substantially to the national output. In Nigeria,

however, the output of the sector is low. Although the small and medium

enterprises, sector as a whole account for about 70 percent of total industrial

employment, its contribution to manufacturing output is estimated at only 10

15 percent, indicating very low productivity in the sector.

Also, smaller enterprises are more flexible than larger ones in meeting

new consumer requirements that utilize local resources.

4. Transformation of indigenous technology: All economies have

transited from household artisan industries over time to the modern

industrial set up which witnessed phenomenal upgrading in skills, machinery

and equipment and management practices. Historical evidence indicates that

most of today’s giant corporation began as very small firms. These include

equines of Dublin and Philips international of the Netherlands developing

countries can team from the experience of these giant and create a conducive

environment that will enable small and medium enterprise to adapt imported

technologies, modernize their process and grow to become large corporation.

5. Increase in revenue base of government: Through various firm of

taxes, including personal and company income taxes, SMIs contributes to

increasing government revenue.

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 HISTORICAL BACKGROUND OF TUYIL PHARMACEUTICAL

Tuyil was founded in Ilorin, Kwara State in 1996 as a small

pharmaceutical drug enterprise that made drugs available to people in Ilorin

and to the drug business outlets. Its played a positive role in Ilorin Township

as at the time it was established. Tuyil pharmaceutical industry was

established with just 10 staffs at No 22 stadium Road Ilorin, Kwara State on

1st of May 1996. Leadership, one of the staff represent the factory manager,

two represent the quality control manager in the laboratory while others are

staff working in the company.

The first product that was manufactured by the company was

paracetamol. Some few months later vitamin C tablets and Dide Karaole was

produced and in the same vain, Syrup itne start forming. Syrup and

suspension like misteny suspension and Tutrion and others were produced in

two to three years after the establishment of the industry. In 2005, Tuyil

pharmaceutical industry limited, moved to their main site which was located

along Yidi Road Ilorin, Kwara State. The site was commissioned on 2nd June

2005 by the Director General NAFDAC Prof Mrs. Dora Akuyili and the

Governor of Kwara State in person of Dr. Bukola Saraki. The company has

branches in Lagos, Kano Bida and so on. The company has over 500 workers

apart from factory manager, production manager and quality control manager,

administrative manager. The products now come in different form.

3.2 THE VISION OF THE COMPANY

It mission is to become one of the best drug producer in Nigeria and

even the world at large by being the undisputed leader in the National

Generics Industry. It differentiate itself by balancing its portfolio with Generic

and innovative activities by the strategic depth of its vertical integration.

3.3 RESEARCH DESIGN

The researcher adopted the following so as to get the necessary data

required.

1. Administration of questionnaire to selected staff of the organization

2. Face to face interview with some senior personnel of the establishment.

The questionnaires were designed to seek questions that are relevant to

the objective of the study, which formed the basis of the analysis in chapter

four.

3.4 IDENTIFICATION OF POPULATION AND SAMPLE SIZE

Although population is the group that a study is carried out on and

from which the conclusion is to be drawn. In several research work, the

population differ in sizes while some are large, some are small. In this study,

the population size used is based on the selected case study and a careful

and through examination of their activities and performances over past year

was looked into. However, in determining the sample size, the Ilorin branch of

the company that is Tuyil pharmaceutical industry was considered whole

population of all departments. The senior staff, the junior staff and few

members of top executive.

3.5 METHOD OF DATE COLLECTION

The researcher chose the use of questionnaire for this study because,

out of all the survey methods, it is most appropriate for this nature, in that it

helps to secure the needed information. The major primary data collection

technique used is the questionnaire type, for the simple reason that the

respondents are not easily accessible and time as got to be saved. The answer

given by the respondents were filled in the questionnaire and this serves as a

record that can be referred to any time.

However, this was supplemented by personal interview with the head of

departments, and some employees in the organization. It was designed to

sample respondent view about the research topic “financial administration

and its managerial efficiency in business enterprise” with the major objective

of identifying the success and managerial efficiency of financial

administration in small and medium scale business enterprise.

3.6 QUESTIONNAIRE DESIGN AND ADMINISTRATION

The questionnaire in this study consists Ten (10) questions in all with

alternative answers to the question. The questionnaire was designed mainly

for the staff of Tuyil pharmaceutical industry Ilorin, to sample their opinion

on the critical analysis of financial administration and its managerial

efficiency in small and medium scale enterprise.

The distribution and collection of the questionnaire were personally

handled by the researcher. The conclusion of this research was based on the

statistical information gathered from the administered questionnaire

3.7 QUESTIONNAIRES ASSUMPTIONS

In designing the questionnaire, the following assumptions were made:

i. That the questions are simple and respondents would easily understand

them

ii. That the respondent will honestly answer the question, that is, as

objectively as possible without any basis.

iii. That the use of questionnaire as a source of collecting information for

this research project would help to get the needed information.

3.8 METHOD OF DATA ANALYSIS

After collection of the data, tablets were draw to show the result of each

question and later those data were analysed and interpreted in accordance

with the response to the questions.

Responses collected through interview and questionnaires were

tabulated and assigned percentage. Chi – square as a statistical tool was

used. However, immense contribution during the hypothesis testing using the

simple percentage and tables and chi – square depicts:

Where; FR= frequency of respondents responses.

TN= Total Number of respondents of the population

100= constancy in the % of respondent for each item.

Contained in the questionnaire.

The formular for chi – square is:

X2 = n∑ (oj – ej) 2 ej Where: j = 1

oj = The observed or actual frequencies.

ej = The expected frequencies

n = number of categories

X2 = chi – square.

The decision rule: Reject Ho if X2 calculated is > critical value of X2.

CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 DATA INTERPRETATION FROM FIELD

This chapter is concerned with the presentation, analysis and

interpretation of data collected from the field through the use of

questionnaire. The aim of this chapter is to present in tabular form, analysis

and interpret there upon the data and to also validate the research hypothesis

using the chi – square methods. The data collected were presented and the

analysis of the data was used as a basis for validation or refuting earlier

stated hypothesis.

In order words, this chapter brings into focus the view of the respondent

and the information used were details of data collected through the

questionnaires administered.

4.2 DATA ANALYSIS AND PRESENTATION OF FINDINGS

The focus here is the analysis and interpretation of data collected from

Tuyil pharmaceutical Ilorin and testing the hypothesis formulated through the

questionnaire administered to determine the impact of financial

administration and its managerial efficiency in business enterprises.

4.3 ANALYSIS OF RETURNED QUESTIONNAIRE

In analyzing the data, simple statistical description of averages,

percentages and chisquare were used.

Therefore, for the purpose of this project, simple statistical description of

percentage was used in analyzing the data collected.

A total number of thirty questionnaires were distributed and

administered out of which Twenty two were duly completed and returned.

The completed questionnaires were mutually processed and the data

were responses, representing a response rate of seventy three percent (73.3%).

SECTION ‘A’

Background of the respondentAge of the respondent

No of response Percentage

A 20 – 30 years 3 3/29 x 100 = 10.3%B 31 – 40 years 18 18/29 x 100 =

62.1%C 41 – 50 years 2 2/29 x 100 = 6.9%D 50 and above 6 6/29 x 100 =

20.7%Total 29 100%

Sources: Field Survey 2006

Comment: from the above table 10.3% of the respondents are between

the age of 20 – 30 years, the highest respondent are from those that fall

between the age of 30 – 40 years which is 62.1% and only 6.9% fall between

the age group of 41 – 50 years while 20.7% are those that are above 50 years

and above.

Table 4.3 ‘B’Years of establishment

No of respondent

Percentage

A 2 – 3 years 2 2/29 x 100 = 6.9%

%B 3 – 5 years 7 7/29 x 100 = 24.1%C 5 – 7years 12 12/29 x 100 =

41.4%D 7 years and above 8 8/29 x 100 = 27 .

6%Total 29 100%


Comment: from the above table 6.9% of the respondents have been with the

company for 2 to 3 years, the highest respondents are those that fall between

5 – 7 years which is 41.4% while 7 years and above fall between 27.6%.

Table 4.3 (c)Education Qualification

No of Respondent

Percentage

A WASC / GCE NIL B OND 8 8/29 x 100 = 27.6%C HND / BSC 21 21/29 X 100 =

72.4%Total 29 100%


Comment: from be above table 27.6% are those with OND holders while 72.4%

of the respondents falls between those that have HND / BSC holders.

Table 4.3 (d)

Ownership structure awareness of credit facilities and other necessary

information obtained.

Question: what form of ownership is Tuyil Ltd?

Form of ownership

No of respondent

Percentage

A One man business

18 18/29 x 100 = 62.4%

B Partnership 7 7/29 x 100 = 24.1%C Co – operatives 4 4/29 x 100 = 13.8%D Family business E Private ltd

company

Total 29 100%Sources: Field Survey 2006

Comment: from the above table, 62.1% falls into the highest

respondents representing one man business and seven respondents falls

between the percentage of 24.1% representing partnership while the

remaining falls between 13.8% representing co – operative form of business.

4.3 (e) Benefited

Question: Has Tuyil pharmaceutical benefited from the following credit facilities?

Credit facilities Aware Not aware

Total

A Nigeria bank for commerce & industry 21 8 29B Nigeria industrial development bank (NIDB) 18 11 29C Small scale industrial credit scheme

(SSICS)22 7 29

D Small and medium scale enterprises loan 26 3 29E National economic reconstruction find

(NERFUND)15 14 29

Total 102 43 145 100Sources: Field Survey 2006

Comment: form the above table 70.3% of the respondents are aware of

the credit facilities listed above and only 29.7% are those that are not aware of

the credit facilities.

4.3 (f)

Question: Has your company benefited from any of the facilities listed? If no

why?.Reason for not Benefiting

Nos of Respondent

Percentage

A Lack of information 8 8/29 x 100 = 27.6%B Interest rate charged 10 10/29 x 100 =

34.5%C No collateral security 10 10/29 x 100 =

34.5%D Small nature of

business Nil

E Difficulty 1 1/29 x 100 = 3.4%Total 29 100

Source: Field Survey 2006.

Comments: from the above table, 27.6% of the respondents boycotted

credit scheme because of lack of information while 34.5% one these

respondents that go for great scheme because of interest rate charged and no

collateral of security while only 3.4% respondents boycotted because of

difficulty in procedure of the loan.

Table 4.5 (g)

Question: Do you consider obtaining bank loan necessary in situation where

the capital base of the industry can not satisfy the financial requirement of

the business? Decision Nos of

RespondentsPercentage

A Strongly agree 6 6/29 x 100 = 20.7%

B Agree 11 11/29 x 100 = 37.9%

C Strongly disagree

5 5/29 x 100 = 17.2%

D Disagree 2 2/29 x 100 = 6.90%

E Undecided 5 5/29 x 100 = 17.2% Total 29 100%

Source: Field Survey 2006.

Comment: from the above table 20.7% of the respondents strongly

agreed, the highest respondents is from those that agree with 37.9% while

17.2% strongly disagreed, 6.9% and 17.2% are those respondents are

undecided.

Table 4.3 (h)

Question: Do you agree that, the establishment of various credit scheme

for financing small and medium scale business industries as significant

impact on the growth and development of small and medium scale business

in Nigeria?

Decision Nos of Respondents

Percentage

A Strongly agree 19 19/29 x 100 = 65.55

B Agree 7 7/29 x 100 = 24.1%

C Strongly disagree

3 3/29 x 100 = 10.4%

D Disagree E Undecided


Comment: from the above the table 65.5% of the respondents strongly

agree that the establishment of various credit scheme has benefiting effect on

small and medium scale industries while 24.1% of the respondents agreed

and 10.4% strongly disagreed.

Table 4.3 (i)

Question: Do you agreed that interest paid has serious effect on the

profitability of small and medium scale business?

Decision Nos of Percentage

RespondentsA Strongly agree 27 27/29 x 100 =

75.9%B Agree 7 7/29 x 100 = 24.1%C Strongly

disagree

D Disagree E Undecided


Comments: form the above table, it shows that 75.9% are those

respondents that strongly agreed that the interest rate has an adverse effect

on profitability of small and medium scale business and 24.1% are those

respondents that agreed. Nobody disagreed with the fact.

Table 4.3 (j)

Question: what was the initial working capital Tuyil Pharmaceutical

invested into the business?

Amount of capital Nos of Response Percentage A 1million –

500,000

B 500,00 – 100,000 8 8/29 x 100 = 27.6%C 100,000 – 50,000 16 16/29 x 100 =

55.2%D 50,00 – 10,000 5 16/29 x 100 =

17.2%E 10,000 – 5000


Comments: from the above table, 27.6% of the respondents are those

whose initial capital was between N500,000 – N100,000 and those with

working capital between N100,000 – 50,000 is 55.2% while 17.2% are those

whose working capital is between N50,000 to N10,000.

Table 4.3 (k)

Question: from what source did your capital come from?

Formal / Informal Nos of Respondents Percentage A Personal savings 12 12/29 x 100 =

41.4%B Relatives 2 2/29 x 100 = 6.9%C Co – operatives 7 7/29 x 100 =

24.1%D Loans 3 3/29 x 100 =

10.3%E Grants 5 5/29 x 100 =

17.2%F Other (not specified)

Total 29 100%%Sources: Field Survey 2006

Comments: from the above table, it shows that 41.4% are those

respondents that derive their finds from personal saving, 6.9% derive their

funds from relative, 24.1% derive their funds form co – operatives 10.3% from

loans while 17.2% derive their funds from grants.

4.4 TEST OF HYPOTHESIS

Chi – square is used to test the hypothesis of this study and the

formular is given as follow:

X2 = (oj – ej ) 2 EjWhere:

X2 = The calculated chi – square

Oj = A set of observed value

Ej = A set of expected value

The chi –square test according to hannagan (1982) is a non – parametric

test which is used to determine the significance of discrepantly existing

between the expected and the observed frequency of data. In other word, the

test will be used to establish the extent to which an assumption or the null

hypothesis is justified.

A level of significance of 0.05 was used in this analysis. Then the

calculated and tabulated chi – square was compared with each other.

A null hypothesis was then used to either reject or accept on the basis of

the result obtained from the comparison.

The null hypothesis is accepted if the calculated chi – square is less

than the tabulated chi – square on the other hand, a null hypothesis will be

rejected if the calculated chi – square is greater than the tabulated chi –

square.

In an instance, where the null hypothesis (Ho) as rejected, the

alternative hypothesis (Hi) will be accepted as an indicator of real situation.

TEST OF HYPOTHESIS 1

Research hypothesis: What form of ownership is Tuyil Pharmaceutical

company?

Form of Ownership No of Response

Percentage

A One man business 18 62.4%B Partnership 7 24.1%C Co – operatives 4 3.8%D Family business E Private ltd

company

Total 29 100%

Oj Oj Oj – ej (oj – ej)2 (Oj – ej) 2 Ej

18 9.7

8.3333 69.4435 7.1592

7 9.7

2.7 7.29 0.7515

4 9.7

5.7 32.49 3.3495

11.2602

X2 0.05 = X2 0.05 = 0.1032

11.2602 > 0.103

Ho: There is no significant difference between response and form of

ownership?

Test Of Hypothesis 2

Research hypothesis: Has Tuyil Pharmaceutical benefited from the

following credit facilities?

Table 4.4.2.

Credit facilities Aware Not aware

Total

A Nigeria bank for comm. And industry 21 8 29B Nigeria industrial development bank

(NIDB)18 11 29

C Small scale industrial credit scheme (SSICS)

22 7 29

D Small and medium scale enterprise loan 26 3 29E National economic reconstruction and

(Nerfund)15 14 29

Total response 102 43 145Percentage 70.3 29.7 100

Oj Oj Oj – ej (oj – ej)2 (oj – ej) 2

Ej21 20.4 0.6 0.36 0.017618 20.4 2.4 5.76 0.28222 20.4 1.6 2.56 0.12526 20.4 5.6 31.36 0.16415 20.4 5.4 29.16 1.4298 8.6 0.6 0.36 0.041

11 8.6 2.4 5.76 0.6697 8.6 1.6 2.56 0.2973 8.6 5.6 31.36 3.6414 8.6 5.4 29.16 3.390

10.055

X2 0.05 = X2 0.05 = 0.711. (4) (1) 4

Decision Rule: Reject Ho if X2 > X2 table

Otherwise do not reject Ho.

X2 10.05 >X2 0.711.

Ho: Reject hypothesis ho since there is no significant difference

between awareness of facilities and credit facilities.

Hi: There is significant different between awareness of facilities and

credit facilities.

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

INTRODUCTION

The last chapter gives a general review of the whole research study. In

line with the major results highlighted and interpreted in chapter four, this

chapter take a step further to summarise notable findings arising from the

study. Recommendations based on findings are also discussed in the last

chapter.

5.1 SUMMARY OF FINDINGS

The research work was carried out within an environment that is not too

conducive in term of time factor. Although, the work still become worthwhile

despite the time constraint.

Likewise, the unco – operative attitudes of some of the respondents

which came as a deterrent to the success of this work. Never the less, the co –

operative actions of other respondents helped to cover up the sabotaging act.

The work has been able to come up with the following finding as

summarized despite the problems faced during the work.

The first chapter gives a comprehensive detail on the background of the

study, statement of the research problem, the justification of study, also

research objective, scope of study; it also shows briefly the research

methodology and research hypothesis intended to be used.

The second chapter focuses on the literature reviews. In the chapter, all

topic terms and concepts relating to the research exercise were carefully

defined and examined.

Chapter three, contains the research methodology in this aspects, two

types of sources of data collection were used namely primary and secondary

source. Questionnaires were used for deriving answer from workers while the

other required information were derived form secondary sources mainly from

journals, newspapers and publication of the company.

The forth chapter contains the analysis of data and its presentation.

Aspects under this chapter include, the analysis of the questionnaire

distributed, presentation of data and test of hypothesis. Chi – square was

used based on the result of the questionnaire.

However, finding and results form the test hypothesis shows that:

1. Tuyil pharmaceutical company is a one man business and derives its

capital form personal savings.

2. Tuyil pharmaceutical company is aware of credit facilities provided. By

the government

3. The interest rate charged on the credit facilities is high and discourage

company from obtaining it.

4. The interest rate charged has a serious impact on the profitability ratio

of the company.

5.2 CONCLUSION

Form the research, it could be seen clearly that financial administration

and its managerial efficiency has a vital role in the life of small and medium

scale business therefore its should be handle with care.

Generally, the impact of finance on any business organization is very

important and should be handling with care.

Furthermore, the government should try to reduce the interest rate

charged on loans given to businessman, if they want the companies to

progress and reduce poverty form our nation and the world at large.

In addition, the citizens should be encouraged to buy from products

that are made in our country rather than made abroad goods.

Finally, workers should be encouraged in form of training and

development on their job to appraise their level of skill and knowledge about

the job and monetary aspect should not be left out of it to boost their moral.

5.3 RECOMMENDATION

In surveying the problems of small and medium scale business in

Nigeria, some observations have been made on what should addressed to

remove barriers studying in the way of small and medium scale industries

form attracting loans form financial institutions. The following were

recommended:

1. The government should set up interest free loan guarantee scheme so as

to enable small and medium scale enterprise have easy access to loan.

2. The government should also provide a place where expert advice and

data will be provided for the small and medium scale enterprise.

3. Wealthy individuals and institutions in the country should also set – up

trust and foundation that would complement the effort of the

government in providing assistance to small and medium scale business.

4. There is urgent need in the present economic dispensation to evolve a

new financing philosophy in leaving to the small and medium scale business

through favourable discount policies, development of credit formation

and exchange, to guarantee scheme and development of a completely new

orientation towards tending critical.

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