working capital management practices … val's thesis.pdf · the work in this thesis is...

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WORKING CAPITAL MANAGEMENT PRACTICES REQUIRED

BY SMALL AND MEDIUM SCALE ENTERPRISES FOR

EFFECTIVE OPERATIONS IN

DELTA STATE, NIGERIA

BY

OROKA, OTHUKE VALENTINE

PG/Ph.D./O9/52120

A THESIS SUBMITTED TO THE

DEPARTMENT OF VOCATIONAL TEACHER EDUCATION

IN PARTIAL FULFILMENT OF THE REQUIREMENTS

FOR THE AWARD OF THE DEGREE OF

DOCTOR OF PHILOSOPHY (Ph.D.)

IN BUSINESS EDUCATION

DECEMBER, 2013.

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APPROVAL PAGE

This thesis has been approved for the Department of Vocational Teacher

Education, University of Nigeria, Nsukka.

By

…………………………. …………………….

Prof. E. E. Agomuo Internal Examiner

(Thesis Supervisor)

………………………… ………………………

External Examiner Prof. (Mrs.) C. A. Igbo

(Head of Department)

……………………………….

Prof. Ike Ifelunni

(Dean, Faculty of Education)

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CERTIFICATION

Oroka, Othuke Valentine a post graduate student with Registration

Number PG/Ph.D/09/52120 in the Department of Vocational Teacher

Education (VTE), has satisfactorily completed the requirements of the research

work for the award of the degree of Doctor of Philosophy (Ph.D) in Business

Education.

The work in this thesis is original and has not been submitted in part or

in full for any other diploma or degree of this or any other University.

…………………………. ………………………

Oroka, Othuke Valentine Prof. E. E. Agomuo

(Candidate) (Supervisor)

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DEDICATION

This thesis is dedicated to my father; Prof. (Chief) Orona Oroka, for the

unquantifiable role he played in the completion of this work.

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ACKNOWLEDGEMENTS

In writing this project, the researcher is grateful to all those who contributed in

various ways to the successful completion of this thesis. The acknowledgements will

be incomplete without firstly recognizing the supremacy of God, the giver of wisdom

and knowledge.

My sincere thanks are due to many people. First, I am greatly indebted to my

supervisor, Prof. E. E. Agomuo, who ignited the zeal and motivation that inspired me

to embark on this intellectual exercise. He is thanked immensely for his

encouragement, useful suggestions and constructive criticisms of this work. Despite

his busy schedule when he was Head of Vocational Teacher Education (VTE) and

while he was on sabbatical leave, he has made out time to ensure that his students

make progress.

I am equally indebted to all the lecturers in the Department of Vocational

Teacher Education, especially Prof. (Mrs.) C.A. Igbo (present Head of VTE), Prof. N.

J. Ogbazi (Design Reader at proposal), Prof. (Mrs.) C.A. Obi (immediate past Head of

VTE), Dr. E.A.C. Etonyeaku (Content Reader both at proposal and Faculty seminar)

and Dr. (Mrs.) L. N. Onuigbo (Design Reader at Faculty seminar) of the Department

of Educational Foundations for their vital suggestions that helped to put this study in

proper focus.

I will do my conscience a great harm if I fail to acknowledge my lovely wife;

Emily Othuke Oroka (Mrs.) and my children; Eric Ajiri Othuke and Valentine Othuke

Oroka (Jnr.) for their love, patience, cooperation and understanding during the period

of writing this thesis. To all others too numerous to mention, the researcher says thank

you.

Oroka, Othuke Valentine

(PG/Ph.D./09/52120)

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TABLE OF CONTENTS

Page

Title page - - - - - - - - - i

Approval Page - - - - - - - - ii

Certification - - - - - - - - - iii

Dedication - - - - - - - - - iv

Acknowledgements - - - - - - - - v

Table of Contents - - - - - - - - vi

List of Tables - - - - - - - - xi

List of Figure - - - - - - - - - xiii

Abstract - - - - - - - - - xiv

CHAPTER 1: INTRODUCTION - - - - - 1

Background of the Study - - - - - - - 1

Statement of the Problem - - - - - - - 15

Purpose of the Study - - - - - - - 17

Significance of the Study - - - - - - - 17

Research Questions - - - - - - - - 20

Hypotheses - - - - - - - - - 21

Delimitation of the Study - - - - - - - 22

CHAPTER 11: REVIEW OF RELATED LITERATURE - - 23

Conceptual Framework - - - - - - - 24

• Sources of financing working capital required by Small and

Medium Scale Enterprises for effective operations - - 36

• Cash management practices required by Small and Medium

Scale Enterprises for effective operations - - - 47

• Account receivable management practices required by Small

and Medium Scale Enterprises for effective operations - 57

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• Inventory management practices required by Small and


• Accounts payable management practices required by Small

and Medium Scale Enterprises for effective operations - 68

• Investment management practices required by Small and


• Factors influencing working capital management - - 77

• Challenges and Importance of working capital management- 82

• Characteristics, Problems and Roles of Small and Medium

Scale Enterprises - - - - - - - 86

Theoretical Framework - - - - - - - 93

• Conservative Approach to Working Capital Management - 94

• Aggressive Approach to Working Capital Management - 97

• Moderate Approach to Working Capital Management - 98

• Aggregate Approach to Working Capital Management - 100

Related Empirical Studies - - - - - - - 102

Summary of Reviewed Literature - - - - - - 109

CHAPTER 111: METHODOLOGY - - - - - 112

Research Design - - - - - - - - 112

Area of the Study - - - - - - - - 113

Population for the Study - - - - - - - 114

Sample and Sampling Technique - - - - - - 114

Instrument for Data Collection - - - - - - 116

Validation of the Instrument - - - - - - 117

Reliability of the Instrument - - - - - - 118

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Procedure for Training the Research Assistants - - - - 119

Method of Data Collection - - - - - - - 120

Method of Data Analysis - - - - - - - 120

CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA - 122

Research Question 1 - - - - - - - - 122




Research Question 5- - - - - - - - 130


Hypothesis 1 - - - - - - - - - 134

Hypothesis 2 - - - - - - - - - 136

Hypothesis 3 - - - - - - - - - 137

Hypothesis 4 - - - - - - - - - 139

Hypothesis 5 - - - - - - - - - 140

Hypothesis 6 - - - - - - - - - 141

Findings - - - - - - - - - 143

Discussion of Findings - - - - - - - 148

CHAPTER 5: SUMMARY, CONCLUSION AND

RECOMMENDATIONS - - - - - 165

Re-statement of the problem - - - - - - 165

Summary of the Procedures Used - - - - - - 167

Summary of Findings - - - - - - - 168

Implications for Business Education/ SME Operators - - - 173

Conclusion - - - - - - - - 174

Recommendations - - - - - - - - 176

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Suggestions for Further Studies - - - - - - 178

References - - - - - - - - - 180

Appendices

Appendix A- Letter to Respondents - - - - - 189

Appendix B- Questionnaire - - - - - - 190

Appendix C- Population Distribution of Managers and Accountants of Small

and Medium Scale Enterprises in the three Senatorial

Districts

of Delta State - - - - - - - 197

Appendix D- Sample Distribution of Managers and Accountants of Small

and Medium Scale Enterprises in the three Senatorial Districts

of Delta State - - - - - - - 198

Appendix E- Letter to Validates - - - - - - 199

Appendix F- Summary of Suggestions Made by Validates and the

Corrections Effected on the Questionnaire - - 200

Appendix G- SPSS Output Reliability Coefficients of the Instrument - 201

Appendix H- List of Sampled Small and Medium Scale Enterprises in the

three Senatorial Districts of Delta State - - - 203

Appendix 1- Descriptive Statistics for Research Questions - - 235

Appendix J- Clusters for Research Questions - - - - 240

Appendix K- Group Statistics and Independent T-test for Hypothesis 1 241

Appendix L- Group Statistics and Independent T-test for Hypothesis 2 244

Appendix M- Group Statistics and Independent T-test for Hypothesis 3 247

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Appendix N- Group Statistics and Independent T-test for Hypothesis 4 250

Appendix O- Group Statistics and Independent T-test for Hypothesis 5 253

Appendix P- Group Statistics and Independent T-test for Hypothesis 6 256

Appendix Q- Summary of Group Statistics and Independent Samples Test

for Hypothesis 1-6 - - - - - - 259

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LIST OF TABLES

1 Mean Responses of Respondents on Sources of Financing Working

Capital Required by Small and Medium Scale Enterprises for

Effective Operations - - - - - - - 123

2 Mean Responses of Respondents on Cash Management Practices

Required by Small and Medium Scale Enterprises for


3 Mean Responses of Respondents on Account Receivable

Management Practices Required by Small and Medium Scale

Enterprises for Effective Operations- - - - - 127

4 Mean Responses of Respondents on Inventory Management

Practices Required by Small and Medium Scale Enterprises for

Effective operations - - - - - - - 129

5 Mean Responses of Respondents on Accounts Payable Management



6 Mean Responses of Respondents on Investment Management



7 Two-tailed t-test Result of The Mean Responses of Managers

and Accountants on the Sources of Financing Working Capital




And Accountants on The Cash management Practices Required

by Small and Medium Scale Enterprises for



and Accountants on The Inventory management Practices Required



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and Accountants on The Accounts Receivable Management




and Accountants on The Accounts Payable Management Practices




and Accountants on The Investment Management Practices



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LIST OF FIGURE

Fig 1- Model of WCM Components Required by SMEs for Effective

Operations - - - - - - - - 24

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ABSTRACT

The main purpose of this study was to determine the working capital management

practices required by Small and Medium Scale Enterprises (SMEs) for effective

operations in Delta State, Nigeria. Six research questions were raised for the study

which include; what are the sources of financing working capital required by SMEs

for effective operations and six null hypotheses were formulated for the study which

include; there is no significant difference between the mean responses of managers

and accountants on the cash management practices required by Small and Medium

Scale Enterprises for effective operations in Delta State. A descriptive survey design

was adopted for this study. The population for the study consisted of 3,627

respondents, made up of 2,012 managers and 1,615 accountants from the 2,012 Small

and Medium Scale Enterprises operating in Delta State, as registered with the Ministry

of Commerce and Industry. The proportionate stratified and systematic random

sampling techniques were employed to select a sample size of 1,110 respondents made

up of 616 managers and 494 accountants, which is 30.6% of the population. A

Working Capital Management Practices Questionnaire (WCMPQ) was used as the

instrument for the study, which was face validated by five experts; two from the

Department of Vocational Teacher Education, University of Nigeria Nsukka, two from

the faculty of education, Delta State University, and one professional in the industry.

The Cronbach Alpha Reliability Coefficient of 0.81 was obtained for the study. The

instrument was administered on personal contact by the help of 18 trained research

assistants. Out of the 1110 copies of questionnaire administered, 990 were retrieved

and used for the study. The data collected were analyzed using the mean and standard

deviation in answering the six research questions while t-test analysis was employed

in testing the six null hypotheses at 0.05 level of significance. The findings obtained

includes: (1) SMEs in Delta State highly require both long-term and short-term

sources in financing their working capital; (2) SMEs in Delta State highly require most

cash management practices. Amongst others, it was recommended that Business

educators, especially accounting educators should be innovative in their instruction by

equipping their students with the relevant skills on cash management, accounts

receivables management, inventory management, accounts payable management, and

investment management; which will enable these students to stand the better chance of

succeeding when they establish SMEs.

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CHAPTER 1

INTRODUCTION

Background of the Study

Working capital management amongst Small and Medium Scale

Enterprises (SMEs) appears to have been relatively neglected despite the fact

that a high proportion of failures in businesses, is due to poor decisions

concerning the working capital of enterprises (Tewolde, 2002).

Management of working capital is an important component of corporate

financial management because it directly affects the profitability of the firms.

But what could working capital and working capital management mean?

According to Bhattacharya (2009), the concept of working capital was first

evolved by Karl Marx in 1914, though in a somewhat different form, and the

term he used was “variable capital”. Working capital is the capital required to

finance a firm’s day-to-day operational activities. It can be defined as current

(short-term) assets minus current (short-term) liabilities. Adequate working

capital is vital in maintaining a firm’s liquidity. On the other hand, working

capital management is concerned with the management of a firms short-term

assets (stocks, debtors and cash), short-term liabilities (creditors and

borrowing), and short-term cash flows (Park and Gladson, 2003). McMenamin

(2005) noted that the goal of working capital management is to secure the

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optimum investment in working capital consistent with the overall financial

goal of shareholder wealth maximization.

Working capital management is often denoted by its components. Hence,

the Average Collection Period (ACP); the Inventory Conversion Period (ICP)

and the Average Payment Period (APP) are various components of working

capital management explained by Mathuwa (2009). According to him, the

Average Collection Period (ACP) is the time taken to collect cash from

customers. The Inventory Conversion Period (ICP) refers to the time taken to

convert inventory held in the firm into sales, the Average Payment Period

(APP), is the time taken to pay the firms suppliers. More explicitly, Planware

(2011) outlined the components of working capital management to consist of:

cash management; accounts payable management; accounts receivable

management; investment management; inventory management, marketable

security management; and cash equivalent management.

In explaining the components Planware (2011) stated that, Cash

management deals on cash planning to ensure there is optimum cash balance to

run the business profitably; accounts payable management deals on an

enterprise purchases of goods and services from their customers in the form of

creditors to meet the operations of the business; accounts receivable

management is the extension of credit facilities to customers at the benefit of

the enterprise; investment management denotes proper planning of the

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enterprise investment to ensure the required rate of return is exceeded;

inventory management deals on planning of the enterprise stocks to avoid

stockout and proper utilization of the firms stock; marketable security

management are short term interest bearing money market investments to

enable a return to be earned on the temporarily idle money of the enterprise;

and cash equivalent management is the organization of near monies like stock,

promissory note and cheques for easy conversion into cash to run the enterprise.

Small and Medium Scale Enterprises may have an optimal level of

working capital that maximizes their value. Raheman & Nasr (2007) posited

that large inventory and a generous trade credit policy may lead to high sales.

Large inventory reduces the risk of stock out. The credit may stimulate sales

because it allows customers to assess product quality before paying. Another

component of working capital is account payables. Delaying payments to

suppliers allows a firm to assess the quality of bought products, and can be an

inexpensive and flexible source of financing for the firm. On the other hand,

late payment of invoices can be very costly if the firm is offered discount for

early payment. A popular measure of working capital management is the cash

conversion cycle i.e. the time lag between the expenditure for the purchases of

raw materials and the collection of sales of finished goods. The longer this time

lag, the larger the investment in working capital (Deloof, 2003). A longer cash

conversion cycle might increase profitability because it leads to higher sales.

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However, corporate profitability might also decrease with the cash conversion

cycle, if the costs of higher investment in working capital rise faster than the

benefits of holding more inventories and/or granting more trade credit to

customers.

Therefore, the management of these components of working capital

management discussed above will in no doubt help the success of Small and

Medium Scale Enterprises in generating value. Infact, efficiency in managing

the working capital of SMEs determine their end results, since one of the major

goal of a business is to maximize profits.

However, important the components of working capital management is

to Small and Medium Scale Enterprises, the existence of working capital

management practices, begins with the sources of financing working capital

which forms the bedrock for its existence and continuous survival. There would

be no working capital in enterprises without its financing. Due to the role

sources of financing working capital plays in Small and Medium Scale

Enterprises gave rise for its consideration amongst the variables of working

capital management for this study. Some of the sources of financing working

capital are retained earnings, ploughed back profit, bank loan, supplier’s credit,

accruals, promoters fund, equity finance, long-term debt, asset-based financing,

thrift savings, unsecured financing, and borrowing from friends and family.

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In an ideal situation, working capital management would not be

necessary because there would be no uncertainty, no transaction costs, and no

scheduling costs of production or constraints of technology. The unit costs of

producing goods will not change with the amount produced. Businesses will

borrow and lend at the same interest rate. Capital, labour and product markets

would reflect all available information and would be perfectly competitive.

In such an ideal situation there would be little need to hold any form of

inventory other than a limited amount of goods in process during production.

But such an ideal business assumes that demand is exactly known in advance,

that suppliers keep to their due dates, production can be smoothed and orders

executed directly without costs and delays. There would be no need of holding

cash for working capital other than for the initial costs, because it could be

possible to make the payment from every receipt of sales. There would also be

no need for receivables and payables if customers pay cash immediately and the

firm would also make its payment promptly. However, problems of working

capital exists because these ideal assumptions are never realistic and therefore

working capital levels make a significant part of a firms investment in assets

and these assets have to be financed implying that investments may have

benefits as well as costs.

In line with the premise above, Kaur (2010) stated that the management

of working capital is one of the most important and challenging aspect of the

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overall financial management. Merely more effective and efficient management

of working capital can ensure the survival of a Small and Medium Scale

Enterprise. In the same vein, Fess (2011) noted that the measure of working

capital has long been accepted as a useful tool for financial analysis. Yet a

critical review of the structure of this concept, as it is currently applied, raises

some very serious questions concerning its validity as a measure of current

positions among Small and Medium Enterprises.

The Small and Medium Industries and Equity Investment Schemes

(SMIEIS) defined Small and Medium Enterprises (SMEs) as any enterprises

with a maximum asset base of N200 million excluding land and working capital

and with the number of staff employed not less than 10 or more than 300. Small

and medium enterprises have been defined along a broad continuum of size and

type. In terms of size measures used to classify SMEs include employment,

assets and revenue. According to Akabueze (2002), business activities that meet

these criteria will be considered as eligible Small and Medium Scale

Enterprises (SME) and these can partake in Small and Medium Industries and

Equity Investment Scheme (SMIEIS).

The ultimate objective of any firm including SMEs is to maximize profit.

But, preserving liquidity of the firm is an important objective too. The problem

is that increasing profits at the cost of liquidity can bring serious problems to

the firm. Therefore, there must be a trade off between these two objectives of

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the firms. One objective should not be at the cost of the other because both have

their importance. If profit is not cared about, the firm cannot survive for a

longer period. On the other hand, if liquidity is not cared about, the firm may

face the problem of insolvency or bankruptcy. For these reasons working

capital management should be given proper consideration, as these will

ultimately affect the profitability of the firm (Ghosh and Maji, 2003).

Tewolde (2002) noted that working capital investment and related short-

term finances originate from three main business operations- purchasing,

producing and selling. These can be considered as consequences of business

operations. However, as much as the operations affect the balances of working

capital investment and finances, the later also determines the cost and flexibility

with which the operations are performed. Efficient management of working

capital investments and related short-term debts can be used to make the

purchasing, producing and selling operations cheaper and more flexible. In the

latter sense, purchasing, producing and selling are used as instruments for the

management of business operations, which in the mean time create benefits and

costs. Therefore, the relevance of working capital investment and short-term

debts originate from these benefits and costs. Beyond doubt efficient

management of both items can help the success of firms in generating value.

Therefore, managing working capital investments, finances and operations

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internally within firms and the efficiency with which firms co-operate among

themselves determine their end result.

The importance of managing working capital is magnified when it refers

to firms in developing economies like Nigeria. These firms have many

problems (McComick, 1999), such as being small in size (in terms of volume of

investment and sales) and lack of resources. The list of problems is long and

includes low levels of product and process technology. Financially, firms in

developing countries lack the opportunity of getting the benefit of financial

markets. Even if financial markets exist the small firms have less opportunity to

go public and benefit from the financial markets as sources of finance. So,

because of these reasons proper working capital management is even more

important in developing countries than developed countries (Fisha Zion, Von

Eije & Lutz, 2001).

Efficient working capital management involves planning and controlling

current assets and current liabilities in a manner that eliminates the risk of

inability to meet due short term obligations on the one hand and avoid

excessive investment in these assets on the other hand. Many surveys have

indicated that managers and accountants spend considerable time on day-to-day

problems that involves working capital decisions (Deloof, 2003; Eljelly, 2004;

Raheman & Nasr, 2007). One reason for this is that current assets are short-

lived investments that are continually being converted into other asset types.

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With regard to current liabilities, the firm is responsible for paying these

obligations on a timely basis. Working capital management is an essential part

of short-term finance of a Small and Medium Scale Enterprise. With an

efficient working capital management, a business can release capital for more

strategic objectives, reduce financial cost and improve profitability. During the

recent financial crisis of 2009, characterized by economic meltdown in the

United States of America, many companies suffered from the consequences of

their poor working capital management and were unable to keep their business

moving because of the lack of knowledge by managers and accountants on

working capital management (Lind, 2011).

A manager is the person responsible for planning and directing the work

of a group of individuals, monitoring their work, and taking corrective action

when necessary in an organization. Managers may direct workers directly or

they may direct several supervisors who direct the workers. The manager must

be familiar with the work of all the groups he/she supervises, but does not need

to be the best in any or all of the areas. It is more important for the manager to

know how to manage the workers than to know how to do their work well. A

manager also has the power to hire, fire, promote and motivate employees (Rey,

2012). In the context of this study, managers are those responsible for

overseeing the daily routine of Small and Medium Scale Enterprises. Therefore,

the manager could be the owner of the SME or somebody employed by the

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owner to run the activities of the enterprise. The managers function in line with

working capital management practices, deals on taking appropriate decisions on

the amount to be invested in the working capital of SMEs and how the

investment in working capital is properly deployed to avoid deficiency or

neither excess in any of the composition of working capital management

practices.

On the other hand, an accountant is a person who observes records,

classifies, identifies, summarizes, measures, interprets and communicates

financial reports (accounting data) so as to enable the users to make informed

decisions and judgment about a business enterprise. According to Muabor

(2008), an accountant is a person who has passed the accountancy examinations

of one of the recognized accountancy bodies and completed the required work

experience. In the context of this study, an accountant is a person employed by

the owner of a Small and Medium Scale Enterprise, to keep records of all

financial transactions and to prepare financial report for decision making. The

accountant prepares financial report on the working capital of SMEs to

ascertain the profitability or loss of the enterprise. It behooves on managers and

accountants of SMEs to be knowledgeable in the management of working

capital for efficiency to be attained in their enterprises.

Kaur (2010) opined that, the inefficient management of working capital

not only reduces profitability but ultimately may also lead a concern to financial

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crises. On the other hand, proper management of working capital leads to

material savings and ensures financial returns of the optimum level even on the

minimum level of capital employed. Both excessive and inadequate working

capital is harmful for a firm. Excessive working capital leads to unremunerative

use of scarce funds. On the other hand, inadequate working capital usually

interrupts the normal operations of Small and Medium Scale Enterprises.

Without efficient management of working capital the growth of Small and

Medium Scale Enterprises would be hampered, resulting in underdevelopment

of the industrial sector of the nation.

The future of the industrial development of this nation depends, to a

large extent, on the growth and development of the potentials of Small and

Medium Scale Enterprises. The basis for this expectations lies in the proven

capabilities and time-tested distinct functions and characteristics of SMEs to

stimulate growth and general development. Unfortunately, Arebgeyen (1999)

noted that the efforts of the Small and Medium Scale Enterprises to grow,

modernize and expand rapidly are still being constrained by their inability to

mobilize funds for expansion and inaddition for them to appropriately manage

their working capital. In order for SMEs in Nigeria particularly Delta State to

survive, grow, expand and modernize in the increasingly competitive business

sector therefore, it is imperative for them (SMEs) to have a good knowledge of

working capital management for effective operations.

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According to Delta State Directory in Anyia (2006), the structure of the

Delta State Industrial sector is dualistic. It is characterized by a large numbers

of small and medium scale enterprises and a few numbers of large scale firms.

The structure of the industrial sector size, the small and medium scale

businesses accounted for 65.5% and 32% respectively, while the large scale

businesses accounted for only 2.5%. However, in terms of output the small

scale businesses and the medium scale businesses accounted for 10% and 5%

respectively, while the large scale businesses accounted for 85% of industrial

output. The small scale businesses tend to be rural based, while the medium

scale businesses produce in urban areas in competition with numerous micro-

businesses. The geographical distribution of Small and Medium Scale

Enterprises in Delta State show a heavy concentration of activities in South and

North Senatorial districts of the state, probably due to availability of basic

infrastructure that is relatively well developed.

In the Delta State Industry Directory (2010), there is a record in the

sharp rise of yearly establishments of Small and Medium Scale Enterprises in

Delta State by entrepreneurs, which has led to a wide spread and large number

of Small and Medium Scale Enterprises operating in the state. Despite the

continuous increase of Small and Medium Scale Enterprises in the state, there is

also a rise in collapse of SMEs due to so many challenges they face like:

environmental constraints, the competitive market for customers, and financial

27

constraints; which inappropriate working capital management practice is

inclusive. The aforementioned reasons made the researcher to consider Delta

state most appropriate to carry out the study on working capital management

practices required by Small and Medium Scale Enterprises for effective

operations.

Given to the above reasons, Small and Medium Scale Enterprises in

Delta require a cursory look on the knowledge of working capital which is

concerned with the problems that arise in attempting to manage the current

assets, the current liabilities and the interrelationship that exist between them in

business organization. The term current assets refers to those assets which in

the ordinary course of business can be, or will be, converted into cash within

one year without undergoing a diminution in value and without disrupting the

operations of the SME. The major current assets are cash, marketable securities,

accounts receivables and inventory. Current liabilities are those liabilities which

are intended, at their inception, to be paid in the ordinary course of business,

within a year, out of the current assets or earnings of the concern. The basic

current liabilities are accounts payable, bills payable, bank overdraft, and

outstanding expenses. The goal of working capital management is to manage

the firm’s current assets and liabilities in such a way that a satisfactory level of

working capital is maintained. This is because if the firm cannot maintain a

satisfactory level of working capital, it is likely to become insolvent and may

28

even be forced into bankruptcy. The current assets should be large enough to

cover its current liabilities in order to ensure a reasonable margin of safety.

Each of the current assets must be managed efficiently in order to maintain the

liquidity of Small and Medium Scale Enterprises while not keeping too high a

level of anyone of them (Mathuwar, 2009).

Amongst the components of working capital management (cash

management; accounts payable management; accounts receivable management;

investment management; inventory management, marketable security

management; and cash equivalent management) discussed in the background of

this work, the study only focused on; cash management, accounts receivable

management, inventory management, accounts payable management and

investment management. The reason being that, these variables focused on are

mostly commonly used among any size of enterprises; whether small, medium

or large scale. On the other hand, marketable security management and cash

equivalent management were excluded from this study because they are mostly

used among large scale enterprises, since SMEs are not easily involved in

money market trading’s (Chen, Wang & Lin, 2009).

On the variables mentioned in the preceding paragraph, researchers have

approached working capital management in numerous ways while some studied

the impact of proper or optimal inventory management; others studied the

management of accounts receivables trying to postulate an optimal way policy

29

that leads to profit maximization (Deloof, 2003; Mayasami, 2009; Gill, Biger &

Mathur, 2010). Hence, this study carved out another niche by determining

working capital management practices required by Small and Medium Scale

Enterprises for effective operations in Delta State, with the view of establishing

the focused components of working capital management’s (sources of financing

working capital, cash management, account receivables management, inventory

management, accounts payable management, and investment management)

level of requirement as a practice by Small and Medium Scale Enterprises for

effective operations (profitability, optimal resource utilization, retained

earnings, and liquidity) in Delta State, Nigeria.

Statement of the Problem

Despite the fact that Small and Medium Scale Enterprises are the engine

room behind a nation’s development, yet this sector is bedeviled by several

constraints amid poor working capital management practices which continues

to mar its laudable objectives. It has been widely accepted that the profitability

of a business concern vis-à-vis Small and Medium Scale Enterprises (SMEs) in

Delta State largely depends upon the manner in which its working capital is

managed(Planware, 2011). Both excessive and inadequate working capital is

harmful for a firm. Excessive working capital leads to unremunerative use of

30

scarce funds. On the other hand, inadequate working capital usually interrupts

the normal operations of SMEs.

Small and Medium Scale Enterprises often encounter several problems

in their working capital management like: not knowing the required sources of

financing working capital; inappropriate management of cash flows; no laid

down collection policies of accounts receivables; frequent inventory stock-out;

poor controlling of accounts payables; and non-evaluation of risk on investment

(Lyytinen, 2009). More so, Tewolde (2002) identified that most firm’s vis-à-vis

Small and Medium Scale Enterprises are characterized with both internal and

external problems: Internally, firms hold inappropriate levels of working

capital- resulting to uncontrolled cost of holding the working capital items and

externally, the firms lack proper policies and practices of co-operation with

their suppliers and customers on financial matters.

Against the background of the foregoing, it therefore became imperative

to determine working capital management practices required by Small and

Medium Scale Enterprises for effective operations in Delta State, in order to

establish the extent SMEs require working capital management practices for

effective operations.

31

Purpose of the Study

The main purpose of this study was to determine the working capital

management practices required by Small and Medium Scale Enterprises for

effective operations in Delta State, Nigeria. Specifically, the study determined

the:

1. sources of financing working capital required by Small and Medium

Scale Enterprises for effective operations in Delta State

2. cash management practices required by Small and Medium Scale

Enterprises for effective operations in Delta State

3. accounts receivable management practices required by Small and

Medium Scale Enterprises for effective operations in Delta State

4. inventory management practices required by Small and Medium


5. accounts payable management practices required by Small and


6. investment management practices required by Small and Medium


Significance of the Study

The findings of this study would be of tremendous benefit to the

management of Small and Medium Scale Enterprises (SMEs), on the required

32

practices of the components of working capital like: cash management

practices, accounts receivables management practices, inventory management

practices, accounts payable management practices, and investment management

practices. The understanding and application of these working capital

management components, will in turn lead to the profitability, liquidity,

reduction of financial cost, and ease of releasing more capital for the strategic

objectives of SMEs.

The findings of this study, would also be useful to agencies and

associations of Small and Medium Scale Enterprises like; Small and Medium

Scale Enterprise Development Agency of Nigeria (SMEDAN), and Nigerian

Association of Small and Medium Scale Enterprises (NASME). It provides

updated and relevant information to these agencies and associations on the

various sources of financing working capital available to SMEs. Haven been

updated on the sources of financing working capital; these agencies and

associations would better channel their workshops, seminars, conferences and

trainings on various strategies Small and Medium Scale Enterprises in Nigeria

vis-à-vis Delta State can engage in, to appropriate these funds and how the

funds could be proper utilized to gain efficiency amongst SMEs.

Another benefit of this study would be to the Government. Since 1974,

the Small-Scale Industry (SSI) division in the Federal Ministry of industries

was established to be the policy making and implementation unit responsible

33

for the administration of Small and Medium Scale Enterprises development

programmes. The findings of this study will aid the Government through this

agency to be informed of the various working capital management practices

(i.e. cash management practices, accounts receivables management practices,

inventory management practices, accounts payable management practices, and

investment management practices) and thus, these practices will engender the

formulation and implementation of favourable policies that would enhance the

working capital management practices of Small and Medium Scale Enterprises

in Delta State, Nigeria.

Also, the result of this study will be beneficial to business educators,

especially accounting educators on key areas they would focus on in equipping

students with the relevant skills on cash management, accounts receivables

management, inventory management, accounts payable management, and

investment management; which will enable business education students to stand

the better chance of succeeding when they establish Small and Medium Scale

Enterprises.

Furthermore, researchers in Business Education and other related

disciplines in this area of study, would find this study very useful as a reference

material. Thus, this will help to increase the data bank of these future

researchers on the specific objectives of: cash management practices, accounts

receivables management practices, inventory management practices, accounts

34

payable management practices, and investment management practices, leading

these researchers to adopt or adapt the working capital management practices

most suitable in their studies or researches.

Research Questions

The following research questions were answered, in line with the

purpose of the study:

1. What are the sources of financing working capital required by Small

and Medium Scale Enterprises for effective operations in Delta State?

2. What are the cash management practices required by Small and

Medium Scale Enterprises for effective operations in Delta State?

3. What are the accounts receivable management practices required by

Small and Medium Scale Enterprises for effective operations in Delta

State?

4. What are the inventory management practices required by Small and


5. What are the accounts payable management practices required by


State?

6. What are the investment management practices required by Small

and Medium Scale Enterprises for effective operations in Delta State?

35

Hypotheses

The following null hypotheses formulated for the study, were tested at

0.05 level of significance:

Ho1: There is no significant difference between the mean responses of

managers and accountants on the sources of financing working capital

required by Small and Medium Scale Enterprises for effective

operations in Delta State


managers and accountants on the cash management practices required by

Small and Medium Scale Enterprises for effective operations in

Delta State


managers and accountants on the accounts receivable management

practices required by Small and Medium Scale Enterprises for

effective operations in Delta State


managers and accountants on the inventory management practices




managers and accountants on the accounts payable management

36

practices required by Small and Medium Scale Enterprises for

effective operations in Delta State


managers and accountants on the investment management practices



Delimitation of the Study

There are many factors that affect the effective operations of business

organizations from achieving their set objectives. Generally, the study focused

on working capital management practices required by Small and Medium Scale

Enterprises for effective operations in Delta State, Nigeria. Specifically, the

study also focused on the following areas of working capital management:

sources of financing working capital, cash management, accounts receivable

management, accounts payable management, investment management and

inventory management. The study is delimited to only managers and

accountants of Small and Medium Scale Enterprises in the three senatorial

zones of Delta State, because they are in the managerial level of these

enterprises. The questionnaire served as the instrument for gathering data.

Though, the results of this study could be generalized to other areas with similar

characteristics as those within this study.

37

CHAPTER 11

REVIEW OF RELATED LITERATURE

This chapter focused on the review of related literature on working

capital management practices required by Small and Medium Scale Enterprises

(SMEs) for effective operations in Delta State, Nigeria. The related literature

was reviewed under the following sub-headings:

1. Conceptual Framework

• Sources of financing working capital required by Small and Medium

Scale Enterprises for effective operations

• Cash management practices required by Small and Medium Scale

Enterprises for effective operations

• Accounts receivable management practices required by Small and

Medium Scale Enterprises for effective operations

• Inventory management practices required by Small and Medium Scale


• Accounts payable management practices required by Small and


• Investment management practices required by Small and Medium

Scale Enterprises for effective operations

• Factors influencing working capital management

• Challenges and Importance of working capital management

• Characteristics, Problems and Roles of Small and Medium Scale

Enterprises

2. Theoretical Framework

• Conservative Approach to Working Capital management

• Aggressive Approach to Working Capital management

• Moderate Approach to Working Capital management

• Aggregate Approach to Working Capital management

3. Related Empirical Studies

4. Summary of Reviewed Literature

38

Conceptual Framework

The interrelationships between the variables of this study are

schematized in figure 1 below for clarity and proper understanding.

.Bank Loan

.Suppliers Credit

.Accruals

.Promoters Fund

.Equity Finance

.Long-term debt

.Asset based Financing

.Thrift Savings

.Unsecured Financing

.Borrowing from Friends

& Family etc.

.Optimal resource utilization

.Liquidity

.Profitability

.Solvency

.Retained Earnings

Fig 1: Model of WCM Components Required by SMEs for Effective

Operations

WORKING CAPITAL

MANAGEMENT (WCM)

SOURCES

OF

FINANCING

WCM

COMPONENTS

ACCOUNTS

RECEIVABLE

MANAGEMENT

ACCOUNTS

PAYABLE

MANAGEMENT

CASH

MANAGEMENT

INVENTORY

MANAGEMENT

SMALL & MEDIUM SCALE

ENTERPRISES (SMEs)

EFFECTIVE

OPERATIONS

OF SMEs

INVESTMENT

MANAGEMENT

39

Working capital management is the grease that keeps the effective

operations of Small and Medium Scale Enterprises running. From figure 1

which is designed by the researcher for this study, it is apparent that the sources

of financing Working capital are: Bank loan, supplier’s credit, accruals,

promoters fund, equity finance, long-term debt, asset-based financing, thrift

savings, unsecured financing, and borrowing from friends and family. These

sources of financing working capital form a major bedrock and existence of

working capital management. When the components of working capital

(accounts receivable management, accounts payable management, cash

management, inventory management, and investment management) are well

managed in running Small and Medium Scale Enterprises; the resultant effect

would be the effective operations (optimal resource utilization, liquidity,

profitability, solvency, retained earnings, and ability to meet short-term

obligations) of SMEs.

Small and Medium Scale Enterprises constitute a vital engine in

economic growth and development of any nation (Oroka, 2011). Ottih (2000)

deposed that very many people wrongly employ the terms “small and medium

scale enterprises” and “entrepreneurship” interchangeably. Entrepreneurships

are not only small-scale or medium-scale enterprises although most

entrepreneurship starts off in the small business mode. Therefore,

entrepreneurship can be small, medium or large-scale organization.

40

The question has always been “how small is a small-scale business”?

There appears to be no consensus on the definition of small and medium scale

enterprises. Only operational definitions are available; the definition varies a

great deal across countries, individuals, institutions and organizations and this

arises as a result of different levels of economic advancement.

Okojie (2005) defined small and medium scale enterprises as businesses

that can be established by individuals as a sole-proprietor, partnership-

consisting of few persons or company, which cannot take more than fifty

persons. According to him, The European Commission (EC) initiated a set of

definition of the small and medium enterprises excluding agriculture, forestry

and fishing as:

• Micro enterprises: from 1-9 employees.

• Small enterprises: from 10-99 employees

• Medium enterprises: from 100-249 employees.

The Central Bank of Nigeria Monetary Policy circular No. 22 of 1996

has defined a small or medium scale business enterprises as any manufacturing

or service enterprise whose business turnover does not exceeds N500,

000(including land and working capital) and or the annual turn-over did not

exceed N5 million.

In the 1990 budget, Federal government of Nigeria (CBN) also defined

small/medium scale enterprises, for the purpose of commercial bank loans as

41

those enterprises with annual turnover not exceeding N500, 000 and for

Merchant Bank loans, those enterprises with capital investments not exceeding

N2m excluding cost of land or maximum and of N5M.

The Small and Medium Industries and Equity Investment Schemes

(SMIEIS) defined Small and Medium Enterprises (SMEs) as any enterprises

with a maximum asset base of N200 million excluding land and working capital

and with the number of staff employed not less than 10 or more than 300. Small

and medium enterprises have been defined along a broad continuum of size and

type. In terms of size measures used to classify SMEs include employment,

assets and revenue. According to Akabueze (2002), business activities that meet

these criteria will be considered as eligible Small and Medium Scale

Enterprises and this can partake in small and medium industries and equity

investment scheme (SMIEIS).

It is important to take cognizance of the qualitative factors that

distinguish a small business from a large firm. In the United States of America,

the committee for economic development has identified four characteristics to

describe the domain of a small business (Hodgetts and Kuranthko, 1998) in

(Oghenerukevwe & Oroka, 2006). The factors are:

• Management of a small business is independent, since the manager

usually owns the firm

42

• An individual usually supplies capital or a few individuals hold

ownership

• The areas of operation is primarily local, although the market is not

necessarily local

• The firm is small in comparison with the largest competitors in the

industry.

The United Nations Industrial Development Organization (UNIDO) in

SMIEIS (2001) however, defined small-scale business as any business having

employee of less than or equals one hundred and fifty (150). The Federal

Republic of Nigeria National Development Plan (1975) specified that a small-

scale business is a manufacturing establishment which employs less than ten

people or whose investment in manufacturing and equipment is not greater than

600.000 naira. Based on this definition, it means that other economic sectors

such as service and commercial organizations are not considered.

The industrial research unit of Obafemi Awolowo University, Ile-Ife

according to Obitayo (1991) defined small-scale business as one whose total

assets in capital equipment and working capital are less than 250,000 naira and

employing fewer than 50 full time workers. The new industrial policy (1986)

defined small-scale business/industry as those with total investment of between

one hundred thousand Naira and two million Naira excluding land but including

43

working capital. This definition is silent on the number of workers and other

criteria.

Obi (2011) quoting the Nigerian Association of Small and Medium

Enterprises (NASME) (2003) stated that a micro enterprise, is any enterprise

whose capital investment excluding cost of land is not more than 10 million

naira and/or with a workforce of not more than 30 full-time workers and/or with

a turnover of not more than 2 million naira. While, NASME defined a small

enterprise as any enterprise whose capital investment excluding cost of land is

between 10 million naira and 100 million naira and/or with workforce of

between 31 and 70 full time workers and/or with a turnover of not more than 10

million naira.

The Company and Allied Matter Act (1990) subsection 351 (1) in

Agbobu (2003) formally and legally defined a small-scale business as follows:

a) It is a private company having a share capital

b) The amount of its turnover for that year is not more than #2

million or such amount as may be fixed by the Cooperate

Affairs Commission.

c) None of its member is an alien

d) Its net asset value is not more than 1 million naira or as such

amount as may be fixed by the commission.

e) None of its members is a government corporation or agent or

its nominee

f) The directors between them hold not less than 51 percent of its

equity.

44

Small and Medium Scale Enterprises and/or Small and Medium

Industries, are some of the terms that are used interchangeably to describe small

business organizations. They are heterogeneous groups because they embrace a

wide variety and diverse forms ranging from village handcraft centers and

weavers, small machine shops, restaurants and computer software firms using

sophistication and skills. They could operate in very different markets and

social environments. While some owners are poor, others are not. Some are

dynamic, innovative, and growth oriented, others are traditional and prefer to

remain small (Osuala, 2004).

According to Zimmerer, Scarborough and Wilson (2009), in the United

States, a common delineation of a small business is one that employs fewer than

100 people. Small businesses thrive in virtually every industry, although the

majority of small companies are concentrated in the service and retail industry.

In the US economy, small companies employ 51 percent of the nation private

sector work force, even though they possess less than one fourth of total

business assets. Almost 90 percent of small business actually employs fewer

than 20 workers. Because they are primarily labour intensive, small business

naturally creates more jobs than big businesses. Small companies create 70

percent of the net new jobs in the economy.


economic growth and development of any nation. The important role played by

45

SMEs in developing economies has been increasingly realized over the past

years. While the performance levels of small businesses have traditionally been

attributed to general managerial factors such as manufacturing, marketing and

operations, working capital management have a consequent impact on small

business survival and growth (Kargar and Blumenthal, 1994). The management

of working capital is important to the financial health of businesses of all sizes.

The amounts invested in working capital are often high in proportion to the

total assets employed and so it is vital that these amounts are used in an

efficient and effective way. However, there is evidence that small businesses

are not very good at managing their working capital. Given that many small

businesses suffer from under capitalization, the importance of exerting tight

control over working capital investment is difficult to overstate.

A firm can be very profitable, but if this is not translated into cash from

operations within the same operating cycle, the firm would need to borrow to

support its continued working capital needs. Thus, the twin objectives of

profitability and liquidity must be synchronized and one should not impinge on

the other for long. Investments in current assets are inevitable to ensure delivery

of goods or services to the ultimate customers and a proper management of

same should give the desired impact on either profitability or liquidity. If

resources are blocked at the different stage of the supply chain, this will prolong

the cash operating cycle. Although this might increase profitability (due to

46

increase sales), it may also adversely affect the profitability if the costs tied up

in working capital exceed the benefits of holding more

According to Bhattacharya (2009), the concept of working capital was

perhaps first evolved by Karl Marx, though in a somewhat different form, and

the term he used was “variable capital”. Working capital as current assets minus

current liabilities and their view was elaborated by Park and Gladson (2003).

This definition is also known as “net working capital”. Current assets are

sometimes called as “gross working capital”. The current assets can be divided

to four primary components: (1) cash and cash equivalents; (2) marketable

securities; (3) accounts receivable; and (4) inventory and the three major items

of current liabilities are: (1) accounts payable; (2) expenses payable, including

accrued wages and taxes; and (3) notes payable (Chen, Wang, & Lin, 2009).

Narrower definition for working capital is inventory + accounts receivable –

accounts payable. This definition emphasizes operating efficiency of a firm.

Articles with all kind of definitions to working capital are accepted in this study

to the group of articles from which analyses are made. Making decisions that

affect to working capital is called working capital management (Planware,

2011).

Working Capital is defined as a company’s total investment in current

assets or assets that a company expects to be converted into cash within a year

or less (Keown; Martin; Petty; & Scott, 2005). It is employed to structure and

47

grow a business, and to finance daily operations. Working Capital Management

is then concerned with the difference in the firm’s current assets and current

liabilities, and the decisions related to net working capital allocation (ibid).

Lyytinen (2009) noted that Working Capital may be defined according to

the following concepts:

1. Gross Working Capital: It refers to the firm’s investment in total

current or circulating assets.

2. Net Working Capital: The term “Net Working Capital” has been

defined in two different ways:

i. It is the excess of current assets over current liabilities. This is, as a

matter of fact, the most commonly accepted definition. Some people

define it as only the difference between current assets and current

liabilities. The former seems to be a better definition as compared to

the latter.

ii. It is that portion of a firm’s current assets which is financed by long-

term funds.

3. Permanent Working Capital: This refers to that minimum amount of

investment in all current assets which is required at all times to carry out

minimum level of business activities. In other words, it represents the

current assets required on a continuing basis over the entire year. The

following are the characteristics of this type of working capital:

48

a. Amount of permanent working capital remains in the business in one

form or another. This is particularly important from the point of view of

financing. The suppliers of such working capital should not expect its

return during the life-time of the firm.

b. It also grows with the size of the business. In other words, greater the

size of the business, greater is the amount of such working capital and

vice versa

Permanent working capital is permanently needed for the business and

therefore it should be financed out of long-term funds.

4. Temporary Working Capital: The amount of such working capital

keeps on fluctuating from time to time on the basis of business activities.

In other words, it represents additional current assets required at different

times during the operating year. For example, extra inventory has to be

maintained to support sales during peak sales period. Similarly,

receivable also increase and must be financed during period of high

sales. On the other hand investment in inventories, receivables, etc., will

decrease in periods of depression. Suppliers of temporary working

capital can expect its return during off season when it is not required by

the firm. Hence, temporary working capital is generally financed from

short-term sources of finance such as bank credit.

49

5. Negative Working Capital: This situation occurs when the current

liabilities exceed the current assets. It is an indication of crisis to the

firm.

Gordon, (2010) is of the view that Working capital management is

concerned with the problems that arise in attempting to manage the current

assets, the current liabilities and the interrelationship that exists between them.

The term current assets refer to those assets which in the ordinary course of

business can be, or will be, converted into cash within one year without

undergoing a diminution in value and without disrupting the operations of the

firm. The major current assets are cash, marketable securities, accounts

receivable and inventory. Current liabilities are those liabilities which are

intended, at their inception, to be paid in the ordinary course of business, with

in a year, out of the current assets or earnings of the concern. The basics current

liabilities are accounts payable, bills payable, bank overdraft, and outstanding

expenses.

According to him, the goal of working capital management is to manage

the firm’s current assets and liabilities in such a way that a satisfactory level of

working capital is maintained. This is so because if the firm cannot maintain a

satisfactory level of working capital, it is likely to become insolvent and may

even be forced into bankruptcy. The current assets should be large enough to

cover its current liabilities in order to ensure a reasonable margin of safety.

50

Each of the current assets must be managed efficiently in order to maintain the

liquidity of the firm while not keeping too high a level of any one of them. Each

of the short-term sources of financing must be continuously managed to ensure

that they are obtained and used in the best possible way. The interaction

between current assets and current liabilities is therefore, the main theme of the

theory of working management. The basic ingredients of the theory of working

capital management may be said to include its definition, need, optimum level

of current assets, the trade-off between profitability and risk which is associated

with the level of current assets and liabilities.

However important Small and Medium Scale Enterprises are to the

development of a nation, they must make critical financial decisions about their

working capital management, in order for them to be efficient in their

operations. With an efficient working capital management, SMEs can release

capital for more strategic objectives, reduce financial cost and improve

profitability.

Sources of Financing Working Capital Required by Small and Medium

Scale Enterprises for Effective Operations

Now, it is worthwhile to understand the means to financing working

capital. Working capital or current assets are those assets, which unlike fixed

assets change their forms rapidly. Due to this nature, they need to be financed

51

through short-term funds. Short-term funds are also called current liabilities.

Pfohl, Elbert & Hofmann (2003) stated that the following are the major sources

of raising short-term funds:

Supplier’s Credit

At times, business gets raw material on credit from the suppliers. The

cost of raw material is paid after some time, i.e. upon completion of the credit

period. Thus, without having an outflow of cash the business is in a position to

use raw material and continue the activities. The credit given by the suppliers of

raw materials is for a short period and is considered current liabilities. These

funds should be used for creating current assets like stock of raw material, work

in process, finished goods, etc.

Bank Loan for Working Capital

This is a major source for raising short-term funds. Banks extend loans

to businesses to help them create necessary current assets so as to achieve the

required business level. The loans are available for creating the following

current assets:

• Stock of Raw Materials

• Stock of Work in Process

• Stock of Finished Goods

• Debtors

52

Banks give short-term loans against these assets, keeping some security

margin. The advances given by banks against current assets are short-term in

nature and banks have the right to ask for immediate repayment if they consider

doing so. Thus bank loans for creation of current assets are also current

liabilities.

Promoter’s Fund

It is advisable to finance a portion of current assets from the promoter’s

funds. They are long-term funds and, therefore do not require immediate

repayment. These funds increase the liquidity of the business.

Any working capital investment needs to be paid at the time of

acquisition (cash purchase) or at a later time (credit purchase). This ability to

make cash payments or the assumption of credit is a source of financing. Due to

many factors (the firm being a high liquidity risk, culture, linkages), the

availability of credit as a source of financing may or may not be an alternative

to management.

Working capital investments can be financed with internally generated or

externally acquired financing alternatives. Some firms solve their financing

problems by borrowing or securing their current assets (external financing) and

others by selling their current assets (internal financing). When firms borrow on

the strength of their current assets, the major sources of short-term finances

53

include trade credits, accruals, short-term bank loans, collateral papers,

commercial papers, and factoring accounts receivable (Van Horne, 1998).

Firms would rather sell for cash than on credit, but competitive pressure

forces most companies to offer trade credits. Unlike credit from financial

institutions, trade credit does not rely on formal collateral but on trust and

reputation (Fisman, 2001). Trade credits create the accounts payable. Accounts

payable is a form of short-term financing common to all businesses with a

credit purchase policy. It originates when buyers are not required to pay for

goods upon delivery but are allowed a short deferred period before payment is

due, which may or may not include discount for earlier payment. During this

period the seller of the goods extends credit to the buyer. There are three types

of credit: open account, promissory note payable and trade acceptance (Van

Horne, 1998).

The short and long-term financing sources have differing effects on the

trade-off between profitability and liquidity risk (Block and Hirt, 1992). For the

purpose of working capital financing, the profitability of short and long-term

debt is considered from the point of interest cost. The higher the interest cost

the lesser the profitability and vice-versa. From a lender’s point of view a long-

term loan has in general higher interest charge compared to a short-term loan

due to the risk involved in lending for a longer period of time. Short-term loans

are more risky from borrowers’ point of view, because of the problem to get

54

cash in the short-term, and the higher variability of interest rates compared to

that of the long-term loans (Moyer, Mcguigan & Kretlow, 2004). To the

borrower, long-term loans are more expensive but less risky, while short-term

loans are more risky but less expensive. Therefore, management must get an

optimum point between the two.

The question arising here is how to mix both short term and long term

funds while financing required working capital. The guiding approach is known

as ‘matching approach’. It suggests that if the need is short term purpose, raise

short – term loan or credit and if the need is for a long term, one should raise

long term loan or credit. Thus, maturity period of the loan is to be matched with

the purpose and for how long. This is called matching approach. This matches

the maturity period of the loan with the period for how long working capital

requires.

Empirically, Fisman (2001) showed short-term credit; particularly

supplier credit is positively correlated with capacity utilization because firms

lacking credit face inventory shortages leading to lower capacity utilization.

Petersen and Rajan (1997) argue that even in the United States, with extremely

well developed financial markets, trade credit is the largest single source of

short-term financing. Fisman, particularly claims in developing countries where

formal lenders are limited, trade credit plays an even more significant role in

funding firm’s activities.

55

The financing logic is that, temporary current assets are financed with

short-term loans and the permanent current assets with long term debt or equity

capital. However, the actual investment and financing mix match-up depends

on management’s approach towards risk and profitability (Van Horne and

Wachowicz 2000; Moyer, Mcguigan and Kretlow, 2004).

As a result of the unsynchronized nature of business activities and cash

flows, already discussed, and the effluxion of time in converting assets into

cash, a financing requirement is created (Ross, Westerfield & Jaffe, 1996). The

financing of working capital contributes to the composition and structure of

long-term and short-term financing of a business. The forms of finance, which

can be used to fund working capital, namely long-term finance and short-term

finance are presented and discussed below:

Long-term Sources

There are four main sources of long-term funds, which may be used to

fund working capital, namely equity, long term debt, off-balance sheet

financing and asset-based financing.

Equity Finance can be used as a source of finance for working capital,

however, the cost of equity finance tends to be higher than debt. If the cash

conversion cycle is protracted and risky, an argument can be made for relying

on this form of finance (Gallinger, 1997).

56

The decision to use long-term debt depends on the explicit and implicit

costs of this form of finance. This in turn necessitates a careful consideration of

the interest rate, maturity or payment dates, loan size, borrower risk, collateral,

restrictive covenants, purpose of the loan, and standard terms and conditions

(Ross, Westerfield & Jaffe 1996). For example restrictive covenants place

certain operating and financial constraints on the borrower, such as the

borrower may be required to maintain a minimum level of working capital.

While long-term debt may not provide much financial flexibility, it ensures that

a pre-determined level of finance will be available for a pre- determined period

of time. This attribute minimizes the risk of an abrupt shortage of finance which

in turn could have serious implications for liquidity (Gitman, 1997).

Some businesses use off-balance sheet financing to keep financial

statements clean and not distort financial ratios (Hill, Kelly & Highfield, 2010).

Types of off-balance sheet financing include unfunded pension liabilities,

leases, and unconsolidated subsidiary debt, in-substance defeasance of debt and

project financing with unconditional commitment arrangements, and the sales

of accounts receivable and inventory. The sale of accounts receivable and

inventory, as collateral is commonly known as factoring. Once the account

receivable or inventory is purchased by the factor it is the property and

responsibility of the owner or factor. Factors need to be aware that if businesses

57

sell accounts receivable to generate cash, then this could lead to a long-run cash

shortage as they use the proceeds to meet current obligations.

Asset-based financing is a secured long-term loan that uses such assets

as marketable securities, accounts receivable, inventories, fixed assets (plant,

equipment and real estate) as collateral for loans. Asset-based financing may

involve a number of options such as pledging assets, selling assets, and leases,

mortgaging, loan-option-agreements, pensions and factoring assets (Hill, Kelly

& Highfield, 2010).

When it comes to the primary source of repayment for an asset-based

loan then the value of the asset that represents the security for the loan becomes

an important consideration.

Some researchers (Kallberg and Parkinson, 1984; Van Auken &

Holman, 1995; Gallinger, 1997) argue that businesses that use this form of

financing have a higher probability of failure than those that do not. Funding of

working capital from asset-based finance is used by businesses that do not have

access to lower cost debt, or during inflationary times, or when the risk of

insolvency is high. A primary consideration for this loan is whether assets

secured by the loan have the liquidation value necessary to support the loan.

Asset-based lenders are mainly interested in the asset valuation and the present

financial performance of the business. Historical results will certainly be

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reviewed, but current trends and business projection tend to receive greater

attention.

Short-term Sources

The short-term decisions are the operational decisions because once

implemented they are easier to change than is the case with long term decisions

as was made evident above (Hill, Kelly & Highfield, 2010). The literature

identifies two main sources of short-term funds, spontaneously generated

sources such as accounts payable, provisions and accruals, and non-

spontaneously generated sources such as unsecured and secured short-term

borrowings and financing instruments.

Accounts payable, which arises directly from the business's operations,

represents a valuable source of internal spontaneous unsecured short term

financing and cash flows. Accounts payable is the largest single conduit for

cash outflow in most businesses.

As a source of funding, accounts payable is constrained by the amount of

purchases on credit and the credit period negotiated. The size of accounts

payable depends on trade credit terms offered by suppliers to their customers

and the volume of goods and services acquired under these terms (Richards and

Laughlin, 1980). Payment of suppliers depends on the bargaining strength of

the business, which is often determined by its credit rating. There are normally

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no costs such as interest and financing charges associated with this form of

financing, provided payment is made within the stipulated period.

Accruals are another discretionary source of spontaneous funding. These

comprise expenses that are incurred before payment is made. The most

common forms of accruals are expenses for interest payments, taxes or

dividends, wages and salaries. Accruals arise as a result of the periodic payment

for goods and services, such as on a weekly, monthly or annual basis (Van

Horne & Wachowicz, 2000). Accruals generally are unsecured as no assets are

pledged as collateral and attract no explicit costs providing payment is made on

due date.

Unsecured financing is short-term financing obtained from the money

market without pledging any specific assets as collateral (Gitman, 1997). It is

often referred to as financial statement lending as the loan is generally based on

the strength of the income statement and balance sheets of the business.

Unsecured loans can be based on the financial strength of a business, the cash

flow generating potential, the potential of operations to assist in repaying the

loan. Unsecured loans can be made if the creditworthiness of the customer is

adequate and the creditor is capable of repaying.

Finance sources of working capital management acts as a guiding

principle to the manner that working capital should be managed. According to

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Keown, Martin, Petty & Scott 2005, there are three types of financing under

this principle:

• Temporary Financing (current liabilities)

• Permanent Financing (intermediate to long term liabilities)

• Spontaneous Financing (trade credit and other account payables)

A temporary financial decision for asset investment is composed of

current assets that will be liquidated and not replaced within the working year

(ibid). This is the financing acquired through current liabilities in the form of

short-term notes payables (e.g. bank loans, commercial paper, and loans

secured by account receivables and inventories).

A permanent financial decision for asset investment, however, is an

investment that the firm expects to hold for more than a year (ibid). Permanent

(to cover fixed costs) will not be investigated under this study due to the

dissertation scope, nevertheless temporary (to cover variable costs) and

spontaneous (to cover operational costs) asset investment is directly related to

working capital requirements, and will therefore be part of the investigation.

In order to determine what sources of finance are available to a Small

and Medium Scale Enterprises, we need to investigate its standard capital

structure. Therefore, haven explored the finance sources of working capital

management available for Small and Medium Scale Enterprises, it is imperative

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for SMEs to take advantage of these sources in order for them to be effective in

their operations.

Cash Management Practices Required by Small and Medium Scale

Enterprises for Effective Operations

Cash management is one of the key areas of working capital

management. Cash is the most liquid current assets. Cash is the common

denominator to which all current assets can be reduced because the other major

liquid assets, i.e. receivable and inventory get eventually converted into cash.

This underlines the importance of cash management. The term “Cash” with

reference to management of cash is used in two ways. In a narrow sense cash

refers to coins, currency, cheques, drafts and deposits in banks. The broader

view of cash includes near cash assets such as marketable securities and time

deposits in banks. The reason why these near cash assets are included in cash is

that they can readily be converted into cash. Usually, excess cash is invested in

marketable securities as it contributes to profitability(Deloof, 2003).

Cash is one of the most important components of current assets. Every

Small and Medium Scale Enterprise should have adequate cash, neither more

nor less. Inadequate cash will lead to production interruptions, while excessive

cash remains idle and will impair profitability. Hence, the need for cash

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management. According to The Institute of Cost Works Accountant of India

(2011), cash management assumes significance for the following reasons:

Significance

• Cash planning - Cash is the most important as well as the least

unproductive of all current assets. Though, it is necessary to meet the

firm’s obligations, yet idle cash earns nothing. Therefore, it is essential

to have a sound cash planning neither excess nor inadequate.

• Management of cash flows - This is another important aspect of cash

management. Synchronizations between cash inflows and cash outflows

rarely happens. Sometimes, the cash inflows will be more than outflows

because of receipts from debtors, and cash sales in huge amounts. At

other times, cash outflows exceed inflows due to payment of taxes,

interest and dividends etc. Hence, the cash flows should be managed for

better cash management.

• Maintaining optimum cash balance - Every firm should maintain

optimum cash balance. The management should also consider the factors

determining and influencing the cash balances at various point of time.

The cost of excess cash and danger of inadequate cash should be

matched to determine the optimum level of cash balances.

• Investment of excess cash - The firm has to invest the excess or idle

funds in short term securities or investments to earn profits as idle funds

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earn nothing. This is one of the important aspects of management of

cash.

Thus, the aim of cash management is to maintain adequate cash balances

at one hand and to use excess cash in some profitable way on the other hand.

Motives or desires for holding cash refer to various purposes. The

purpose may be different from person to person and situation to situation. There

are four important motives to holding cash (Institute of Cost Works Accountant

of India, 2011)):

• Transactions motive - This motive refers to the holding of cash, to meet

routine cash requirements in the ordinary course of business. A firm

enters into a number of transactions which requires cash payment. For

example, purchase of materials, payment of wages, salaries, taxes,

interest etc. Similarly, a firm receives cash from cash sales, collections

from debtors, return on investments etc. But the cash inflows and cash

outflows do not perfectly synchronize. Sometimes, cash receipts are

more than payments while at other times payments exceed receipts. The

firm must have to maintain sufficient (funds) cash balance if the

payments are more than receipts. Thus, the transactions motive refers to

the holding of cash to meet expected obligations whose timing is not

perfectly matched with cash receipts. Though, a large portion of cash

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held for transactions motive is in the form of cash, apart of it may be

invested in marketable securities whose maturity conform to the timing

of expected payments such as dividends, taxes etc.

• Precautionary motive - Apart from the non-synchronization of expected

cash receipts and payments in the ordinary course of business, a firm

may be failed to pay cash for unexpected contingencies. For example,

strikes, sudden increase in cost of raw materials etc. Cash held to meet

these unforeseen situations is known as precautionary cash balance and it

provides a caution against them. The amount of cash balance under

precautionary motive is influenced by two factors i.e. predictability of

cash flows and the availability of short term credit. The more

unpredictable the cash flows, the greater the need for such cash balances

and vice versa. If the firm can borrow at short-notice, it will need a

relatively small balance to meet contingencies and vice versa. Usually

precautionary cash balances are invested in marketable securities so that

they contribute something to profitability.

• Speculative motive - Sometimes firms would like to hold cash in order to

exploit, the profitable opportunities as and when they arise. This motive

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is called as speculative motive. For example, if the firm expects that the

material prices will fall, it can delay the purchases and make purchases

in future when price actually declines. Similarly, with the hope of buying

securities when the interest rate is expected to decline, the firm will hold

cash. By and large, firms rarely hold cash for speculative purposes.

• Compensation motive - This motive to hold cash balances is to

compensate banks and other financial institutes for providing certain

services and loans. Banks provide a variety of services to business firms

like clearance of cheques, drafts, transfer of funds etc. Banks charge a

commission or fee for their services to the customers as indirect

compensation. Customers are required to maintain a minimum cash

balance at the bank. This balance cannot be used for transaction

purposes. Banks can utilize the balances to earn a return to compensate

their cost of services to the customers. Such balances are compensating

balances. These balances are also required by some loan agreements

between a bank and its customers. Banks require a chest to maintain a

minimum cash balance in his account to compensate the bank when the

supply of credit is restricted and interest rates are rising.

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Thus cash is required to fulfill the above motives. Out of the four

motives of holding cash balances, transaction motive and compensation motives

are very important. Business firms usually do not speculate and need not have

speculative balances. The requirement of precautionary balances can be met out

of short-term borrowings.

The basic objectives of cash management are (Institute of Cost Works

Accountant of India, 2011)):

(1) to make the payments when they become due and

(2) to minimize the cash balances. The task before the cash management is to

reconcile the two conflicting nature of objectives:

1. Meeting the payments schedule - The basic objective of cash management

is to meet the payment schedule. In the normal course of business, firms have to

make payments of cash to suppliers of raw materials, employees and so on

regularly. At the same time firm will be receiving cash on a regular basis from

cash sales and debtors. Thus, every firm should have adequate cash to meet the

payments schedule. In other words, the firm should be able to meet the

obligations when they become due.

The firm can enjoy certain advantages associated with maintaining adequate

cash. They are:

a. Insolvency - The question of insolvency does not arise as the firm will be

able to meet its obligations.

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b. Good relations - Adequate cash balance in the business firm helps in

developing good relations with creditors and suppliers of raw materials.

c. Credit worthiness - The maintenance of adequate cash balances increase the

credit worthiness of the firm. Consequently it will be able to purchase raw

materials and procure credit with favorable terms and conditions.

d. Availing discount facilities - The firm can avail the discounts offered by the

creditors for payments before the due date.

e. To meet unexpected facilities - The firm can easily meet the unexpected cash

expenditure in situations like strikes, competition from customers etc. with little

strain.

So, every Small and Medium Scale Enterprises should have adequate

cash balances for effective cash management.

2. Minimizing funds committed to cash balances - The second important

objective of cash management is to minimize cash balance. In minimizing the

cash balances two conflicting aspects have to be reconciled. A high level of

cash balances will ensure prompt payment together with all advantages, but at

the same time, cash is a non-earning asset and the larger balances of cash

impair profitability. On the other hand, a low level of cash balance may lead to

the inability of the firm to meet the payment schedule. Thus the objective of

cash management would be to have an optimum cash balance.

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There need for cash management therefore, due to the non-

synchronization of cash receipts and disbursements. For this purpose, the cash

inflows and outflows have to be forecasted over a period of time say 12 months

with the help of cash budget. The cash budget will pin point the months when

the firm will have an excess or shortage of cash.

Cash management is concerned with how a firm manages its cash levels

and operations (cash collections and payments), cash investments and

disinvestments, and cash borrowing and lending. According to Scherr (2004)

cash management deals with determining the optimal level of cash, the

appropriate types and amounts of short-term investments in cash as well as the

efficient methods and controls of cash collections and disbursements. Because

many transactions of a company involve the receipt or disbursement of cash, its

efficient management has a great significance for the management’s success in

the process of achieving organizational objectives.

Efficient cash management can be instrumental in preventing losses from

fraud or theft, to maintain a sufficient amount of cash, to make necessary

payments and to have a reasonable balance for emergencies. It also prevents

unnecessarily large amounts of cash from being held idle in bank accounts that

produce little or no revenues. Cash and short-term interest bearing investments

are the firm’s least productive assets. Unlike the firm’s other liquid assets

(inventories and accounts receivable), cash is not required for producing goods

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or services. When firms hold cash in currency and in non-interest bearing

accounts they obtain no direct return. So, why hold cash and marketable

securities at all? Couldn’t the firm’s resources be better used elsewhere?

Despite the seemingly low returns, there are several good reasons why firms

hold cash and marketable securities and we consider each of these motives with

some detail.

Cash normally would not be needed if it were not for the market

imperfections and resulting transaction costs of urgently needing cash at short

notice if the need arises and there is no enough cash (von Eije and Westerman,

2001). The reasons for holding cash are divided into four main categories,

transactions, precautionary, speculative, and compensating (Van Horne and

Wachowicz, 2000).

The purpose of cash management is to determine and achieve the

appropriate level and structure of cash, and marketable securities, consistent

with the nature of the business's operations and objectives (Gitman, 1997;

Scherr, 2004). Cash and marketable securities should be managed so as to

achieve a balance between the risk of insufficient liquid or near liquid

resources, and the cost of holding excessively high levels of these resources. In

order to achieve and maintain this balance, which is subject to continual

dynamic processes, both the motive and the appropriate level of cash needs to

be established and monitored (Richards & Laughlin, 1980). In order to do this a

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variety of activities need to be undertaken, because of the integrative nature of

cash to the operation of the business. For example, since all the business's assets

are paid for with cash and are converted through time back into cash activities

by means of improving cash forecasts, synchronizing cash flows, using float,

investing excess cash, speeding up cash receipts, and delaying cash payments.

This will have a considerable impact on the minimum level of cash necessary to

maintain a particular level of liquidity.

If a business improves its forecasts and arranges its affairs so that cash

inflows are synchronized with cash outflows, and transaction balances can be

reduced, the level of working capital can also be reduced. If working capital is

financed from debt, the reduction in the magnitude of working capital will

result in lower interest payments which in turn will give rise to improved profit,

greater efficiency and productivity, and enhanced return on assets and return on

equity (Miller, 1991).

Proper cash management depicts effective operations of Small and

Medium Scale Enterprises. This is because losses will be minimized,

profitability of the business will increase, and consistency with the nature of the

Small and Medium Scale Enterprise objectives can be easily attained.

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Accounts Receivable Management Practices Required by Small and

Medium Scale Enterprises for Effective Operations

Given a choice, every Small and Medium Scale Enterprise would prefer

selling its produce on cash basis. However, due to factors like trade policies,

prevailing marketing conditions, etc., businesses are compelled to sell their

goods on credit. In certain circumstances, a business may deliberately extend

credit as a strategy of increasing sales. According to Pfohl, Elbert & Hofmann

(2003), extending credit means creating a current asset in the form of ‘Debtors’

or ‘Accounts Receivable’. Investment in this type of current assets needs proper

and effective management as it gives rise to costs such as:

i. Cost of carrying receivable (payment of interest etc.)

ii. Cost of bad debt losses

Thus the objective of any management policy pertaining to accounts

receivables would be to ensure that the benefits arising due to the receivables

are more than the cost incurred for receivables and the gap between benefit and

cost increases resulting in increased profits. An effective control of receivables

helps a great deal in properly managing it. Each business should, therefore, try

to find out average credit extended to its client.

Each Small and Medium Scale Enterprise should project expected sales

and expected investment in receivables based on various factors, which

influence the working capital requirement. From this it would be possible to

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find out the average credit days using the above given formula. A business

should continuously try to monitor the credit days and see that the average

credit offered to clients is not crossing the budgeted period. Otherwise, the

requirement of investment in the working capital would increase and, as a

result, activities may get squeezed. This may lead to cash crisis (Kaur, 2010).

Credit sales create accounts receivable because firms give more time

before their customers are required to pay. Allowing credit increases sales but it

has also costs of managing accounts receivable and the possibility of bad debts.

Therefore, management needs to install control mechanisms over credit sale

policies and credit customers. The controlling process is intended to detect

deviations from policy and to provide signals of deviations from expectations.

Some of the deviations may be due to uncontrollable random external factors

but others may be controllable. So, the main objective of credit and accounts

receivable control is to give signals when (non-random) deviations in sales,

collection expenses, receivables turnover and bad debts occur (Scherr, 2004).

Small and Medium Scale Enterprises need to compare the outcomes of

credit sales policy and the trend in the balance of accounts receivable with what

was estimated. In establishing policies regarding terms of sale and credit

granting standards, management makes expectations on accounts receivable

turnover and resulting bad debts. In order to control the collection of account

receivable, the deviation from expected payment patterns has also to be

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observed. If expectations are not realized or there are deviations, it may signal

problems like changing customer characteristics, inaccurate policy forecasts or

improper policy implementations. According to Scherr (2004), common signals

include receivables ageing, days sales outstanding and average collection

period.

When a signal is detected, it is up to the managers to investigate and to

assess the reason for the deviation. Managers must then take the necessary

corrective action, which will vary with the cause of the deviation and which

may include applying collection efforts and changing sales policies.

Once the firm decides to sell its goods on credit it should establish

control policies to check if any debtor is falling behind schedule, in which case

the firm will have to make collection efforts. Collection policy refers to

obtaining payments of past-due accounts. Receivable collection management

begins by developing an information system for monitoring outstanding

receivables in order to check if customers are taking more time. In case any

credit customer is found to be overdue for more than the receivables monitoring

criteria established, different types of collection efforts can be applied (Drury,

2008). A Small and Medium Scale Enterprise can use the following procedures

for customers that are overdue and may refuse to grant credit in the meantime:

First: send a letter informing the customer of the past due status of the account.

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Second: make a telephone call to the customer. Third: employ a collection

agency. Fourth: take legal action against the customer.

Accounts receivable management results from credit sales. The purpose

of credit sales is to stimulate sales in order to expand market share and if

possible enhance production capacity efficiency. If the benefits exceed the costs

of credit sales, the business's performance should be enhanced, and should be

reflected in key performance criteria such as efficiency, productivity, and return

on equity (Gitman, 1997; Scherr, 2004).

The management of accounts receivable is largely determined by the

business's credit policy. The investment in accounts receivable, debtors, as with

all investment decisions, must earn a rate of return in excess of the required rate

of return. Major risks that arise from granting credit include bad debts and

debtor delinquency, because they reduce the returns from the investment in

accounts receivable, and if inadequately monitored can impact severely on the

business's financial performance (Bhattacharya, 2009).

Credit policy and collection policy have to be actively managed because

they affect the timing of cash inflows, sales, profits and accounts receivable

risks (Schmidt, 1996). Any changes in credit and collection policy have a direct

impact on the average outstanding accounts receivable balance maintained

relative to a business's annual sales. Thus a business should take special efforts

to monitor both credit granting and credit collection processes.

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According to Chiou & Cheng (2006) Credit policy involves three

factors: the credit selection, credit standards, and credit terms. Credit selection

concerns the decision of whether or not to grant credit and if so, how much

credit to extend. This is done by means of categorizing customers by both risk

factors, common attributes, establishing standards, evaluating risks and

selecting appropriate responsibilities. As credit decisions have an impact on

cash flows the first stage is to establish credit control to assess creditworthiness

of customers, prior to making a credit sale. To determine who should receive

credit, granting credit requires consideration of the debtor's creditworthiness.

Credit standards are the minimum level of creditworthiness which a

potential debtor would need to score in order to qualify for the granting of

credit (Gitman, 1997). In the normal course of business credit standards are

periodically modified. Key variables that need to be considered when tightening

or relaxing credit standards include the impact on sales volume, the investment

in account receivable, the cost of recovering monies due, and bad debts. A

relaxation of credit standards would be expected to stimulate sales volumes, and

vice versa if credit standards are tightened. The granting of more liberal terms

has the potential to create a larger and less liquid investment in receivables.

Unless sales increase at least proportionally to the increase in receivables,

deterioration in liquidity will be reflected in lower receivables turnover and a

more extended collection period.

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Credit terms specify the debtor's repayment schedule and comprise

issues such as the cash discount, the cash discount period, and the credit period.

Any changes in these three variables may affect sales, the investment in account

receivable, bad debts and profits. For example a decision to increase the cash

discount should be evaluated by comparing the profit increases attributable to

the added sales, the reduction in accounts receivable investment and the

reduction in bad debts to the cost of the discount. On the other hand a decision

to decrease the cash discount should be evaluated by comparing the profit

decreases attributable to the added sales, the increase in accounts receivable

investment and the increase in bad debts to the cost of the discount (Sherr,

2004).

Once credit has been granted, and credit sales have been made, accounts

receivable has to be collected. The goal of collection management's goal is to

ensure that payments are received according to schedule, otherwise a greater

investment in accounts receivable will be needed. If receipts from accounts

receivable can be speeded up, without prejudicing sales or customer goodwill,

less capital will be needed to fund accounts receivable, and less money will be

spent on recovery, because of administration, investigation, collection and bad

debt costs (Chang, Dandapani & Prakash, 1995). In order to achieve

satisfactory performance by debtors, several tactics have been suggested. These

include adding finance charges for late payment, providing incentives for early

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payment, shortening the credit period contractual, or trading only for cash,

discounting or factoring accounts receivable to speed up the cash inflows, and

outsourcing accounts receivable.

Inventory Management Practices Required by Small and Medium Scale


Inventory constitutes an important item in the working capital of many

business concerns vis-à-vis Small and Medium Scale Enterprises. Net working

capital is the difference between current assets and current liabilities. Inventory

is a major item of current assets. A good inventory management is important to

the successful operations of most organizations, unfortunately the importance of

inventory is not always appreciated by top management. This may be due to a

failure to recognize the link between inventories and achievement of

organizational goals or due to ignorance of the impact that inventories can have

on costs and profits. Working capital requirements are influenced by inventory

holding. Hence, the need for effective and efficient management of inventories.

According to Breuer (2009), Inventory includes all types of stocks. For

effective working capital management, inventory needs to be managed

effectively. The level of inventory should be such that the total cost of ordering

and holding inventory is the least. Simultaneously, stock out costs should also

be minimized. Small and Medium Scale Enterprises, therefore, should fix the

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minimum safety stock level, re-order level and ordering quantity so that the

inventory cost is reduced and its management becomes efficient.

According to Scherr (2004), inventory planning helps to match inventory

requirements to sales and production needs. It also helps to know inventory

acquisition and usage during lead-time, quantity on hand and on order as well

as the levels of safety stock. There are different methods of planning inventory

needs including managerial opinion (or judgmental) and time series data.

Scherr, contends that forecasts based on opinion relies on the analysis of

subjective inputs obtained from various sources, such as, opinions of sales staff,

managers and executives as well as consumer surveys. Forecasts on time series

data are based on observations taken at regular intervals over a period of time

(daily, weekly, monthly etc.) and are made on the assumption that future

inventory demand can be estimated from past. The accuracy of inventory

planning depends on whether the forecast is made in conditions of relative

certainty or uncertainty.

A firm's profitability depends on the successful sale of its product or

service. For non-service oriented businesses, sufficient inventories must be

available to meet demand. In determining an optimal level of goods in

inventory, sales must be forecasted and developed. Since sales depend on many

factors outside of a business' control, inventory management can be very

challenging. Holding inventory levels at less than what is needed to support

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sales will cost the firm business. On the other hand, since holding inventory

involves costs such as storage and insurance expenses, excess inventory must

also be avoided if minimal cost and maximum profits are desired (Maysami,

2009).

He noted that typical questions in determining optimal inventory levels

include:

• How many units of particular products must the firm hold in stock?

• How many units must be ordered or produced at a given time?

• When should the order be placed?

In a manufacturing firm, it is assumed that inventories represent half of

current assets. Inventory is also the component of working capital that can be

best affected by a firm itself. There are three possible types of inventories in a

typical manufacturing firm: inventories of raw materials, work-in-progress and

finished goods. Raw materials are goods that have not yet been taken to

production in a firm. Work-in-progress includes materials that are already in the

production process, but have not been completed yet and are therefore not ready

to be sold. The inventory of finished goods is for completed products that can

be sold to customers (Arnold, 1998). Typically, the more finished the product

is, the more working capital is tied up in the inventory.

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The size of inventory is affected by several factors: it depends on the

predictability of sales and production, the length of time required by

production, and the nature of the product. If the product is perishable by nature,

stock levels are held low, whereas other types of products are held in stock in

order to offer better choice for customers (Arnold, 1998).

It is challenging for a firm to find the right balance between the costs of

holding inventories and costs arising from low inventory levels. Holding

inventories at high levels ties up working capital and increases additional

storage and insurance costs. Also the risk of obsolescence and deterioration is

higher. On the other hand, by holding larger stocks, a company can ensure that

its production is not disturbed because of lack of materials, which keep their

customers satisfied. In addition, gaining remarkable discounts through

purchasing in large quantities is attractive to some companies and leads to

higher level of inventories. Through this procedure, a firm is able to increase its

profits as long as the costs of holding larger inventories are less than the amount

of discount.

When inventory level is held low, orders need to be done more often,

which leads to higher administration costs and more physical handling of the

goods. Administration costs come from extra work, such as typing and

checking ordering forms, accepting and checking arrived goods, and checking

the invoices. There is also a risk of stock-outs, which may cause losses of sales

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and profits in short period, and loss of goodwill in the long-run. (Arnold, 1998;

Mott, 2005).

To balance the conflicting factors related to the management of

inventories, many models for managing inventories have been developed. The

purpose of these models is to assist in finding the optimal level for inventory.

For example, economic order quantity (EOQ) is used to calculate the inventory

level where the total inventory holding costs and ordering costs are in

minimum, and Just-in-time (JIT) is based on long-term contracts with suppliers

and deliveries exactly in needed amounts and times (Mott, 2005).

Inventory, to many small business owners is one of the more visible and

tangible aspects of doing business. Raw materials, goods in process and

finished goods all represent various forms of inventory. Each type represents

money tied up until the inventory leaves the company as purchased products.

Likewise, merchandise stocks in a retail store contribute to profits only when

their sale puts money into the cash register. In a literal sense, inventory refers to

stocks of anything necessary to do business. These stocks represent a large

portion of the business investment and must be well managed in order to

maximize profits (Hedrick, Barnes, Davis, Whybark & Krieger, 2011). In fact,

many small businesses cannot absorb the types of losses arising from poor

inventory management. Unless inventories are controlled, they are unreliable,

inefficient and costly.

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Accounts Payable Management Practices Required by Small and Medium

Scale Enterprises for Effective Operations

The management of accounts payable is the other side of the

management of accounts receivable. Accounts payable of one Small and

Medium Scale Enterprise are accounts receivable of another Small and Medium

Scale Enterprise. Management of accounts payable in working capital cycle

deals with debts owed to customers from goods and services, and the logic of

payment terms. From the perspective of an individual company, the best way to

deal with their accounts payable is to take the full credit period if no financial

incentives are offered. If a firm makes payments earlier than required, it loses

profits, because the need for financed working capital increases. In case

discounts are offered, the situation should be analyzed by calculating the

effective annual rate of interest earned by the discount. If it is more than the

cost of capital used up by the early payment, the discount should be taken

(Mott, 2005).

From another point of view, delaying payments to the supplier, the

quality of product bought can be assessed before paying. A firm can also use it

as an inexpensive and flexible source of financing. But then again, paying late

may become costly if the supplier offers discounts for early payment. The

traditional view on accounts payable has been that more profitable firms pay

their bills faster. On the other hand, speeding up the payments to the suppliers

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may lead to increase of profitability because of the substantial discounts offered

for prompt payment (Deloof, 2003).

Accounts payable, a current liability, refers to the credit, which has been

extended to a business by its suppliers. The decision to make use of supplier

credit needs should be carefully assessed in terms of alternative sources of

finance, discounts, credit limits, public image with respect to its credit rating,

transaction costs, administrative costs, information costs, control costs, the

value of the relationship with creditors, buying power of the purchasers, the

credit terms, stability and general practices of suppliers, and risk factors.

If the availability and cost of supplier credit are better than other forms

and sources of finance, then supplier credit should be used. Once this decision

has been taken accounts payable management will probably investigate the

extent to which it can stretch accounts payable without jeopardizing its credit

status with suppliers. The motive for stretching accounts payable is to finance

the investment in current assets from trade creditors and hence reduce the need

for a level of working capital. Creditors may tolerate this practice as long as the

business abides by the rules the creditor has established. The decision to stretch

accounts payable is a function of ethical, legal and economic considerations. If

management decides to stretch accounts payable, it must make an attempt to

quantify the costs so as to determine the maximum stretching period consistent

with value maximization. If delaying the payments is impossible, because there

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is the possibility of damaging the firm's future, reputation and credit standing,

(Gitman, 1997) then the cash outflows need to be carefully managed.

There are numerous approaches discussed in the literature that

management can consider when managing accounts payable. Some of these

include outsourcing accounts payable, using purchasing cards, setting up

disbursement systems, scheduling accounts payable, aging accounts payable,

forecasting accounts payable, budgeting, monitoring accounts payable-to-

purchases ratio, evaluating the number of days purchases outstanding in

payables, monitoring the aging schedule, analyzing payment patterns and

variances, and sequential approach and the integer-programming approach of

structuring current liabilities(Scherr, 2004).

According to Mullins (2009) accounts Payable is part of the expenditure

cycle. The expenditure cycle is a subsystem of the both the cash management

system and the accounting system. The other parts of the expenditure cycle are

purchasing, receiving, and warehousing. Each of these subsystems should have

controls to ensure that its overall objective will be met.

Accounts Payable" is used in accrual-based accounting to record debts

that have been incurred but not yet paid. Accounts payable are obligations

(debt, liabilities) that will be settled at a future time. They are considered

"current liabilities," which means that the debt will be settled with current assets

during the current operating cycle.

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The basic phases of an accounts payable process are (ibid):

• Ensure that the process provides for an analysis of accounts payable.

• Establish policies and procedures for the authority to commit funds and

segregate duties while maintaining maximum efficiency.

• Optimize the use of cash by coordinating with receivables, investments,

purchasing, and other departments to maximize profitable cash flow and

disbursement float.

• Ensure that the system properly records and reports payables.

• Monitor and reevaluate the system.

Accounts payable has four objectives (ibid):

1. Provide reliable data to management

2. Ensure efficient and effective management of disbursements to

maximize disbursement float

3. Minimize unnecessary or premature expenditures

4. Ensure the accurate recording and reporting of payables

Generally, a good disbursement system will minimize the amount of cash on

hand and make sure that all assets are working for the entity.

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Investment Management Practices Required by Small and Medium Scale


Unlike investments in fixed assets which generate cash inflows over long

periods of time, current assets have a cash-to-cash conversion cycle of less than

twelve months (Scheer, 2004). Nonetheless, an investment has to be made in

current assets, and as with all investments the returns should exceed the

required rate of return, otherwise the business's success will be jeopardized.

Moreover, in the interests of efficiency and productivity, this investment needs

to be carefully managed. The investment in current assets should comprise the

best possible combinations of cash, debtors, inventory, and prepayments, which

enable the effective and efficient utilization of the investment in fixed assets.

Thus the composition and structure of current assets is an important issue and is

worthy of consideration (Gitman, 1997).

Cash and marketable securities is the most liquid of all the current assets.

Unless cash is invested, it does not earn an explicit rate of return. Marketable

securities which are highly liquid, short term interest bearing government and

non-government money market investments enable a return to be earned on

temporarily idle money (Gitman, 1997). Even if most of the business's cash is

invested in marketable securities, the rate of return will be less than the

business's required rate of return because of risk and term structure

considerations. The characteristics of the cash and marketable securities of a

business are described by (Ross, Westerfield & Jaffe, 1996):

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a) the nature of the demand for cash,

b) working capital requirements, and

c) the investment in fixed assets.

Nonetheless, Small and Medium Scale Enterprises are obliged to hold

cash and marketable securities because of the need to satisfy financial

agreements (the contractual motive), make planned expenditure (the

transactions motive), protect the business against unexpected short term cash

demands (the safety motive), and, invest in unexpected short-term opportunities

that may arise (the speculative motive). The consequences of having inadequate

liquid resources can be severe, primarily by impacting on liquidity, but also by

dislocating business decisions towards short payback low profit operations in

order to survive.

According to Padachi (2006), the classic traditional approach to cash

management stresses that idle cash is necessary to prevent liquidity problems.

However, idle cash carries with it an opportunity cost in either lost income

revenue or excess interest payments on the lines of credit. In contrast, the

contemporary approach contends that the investment in cash should be subject

to the same criteria as investments in other types of assets, namely, the required

rate of return.

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Having discussed much on working capital management, and the

financial capabilities of a small company, a discussion of capital investment

decision making is necessary to align a product portfolio investment decision to

company objectives, given the nature of a small business. Decisions like

investing in a product portfolio for future operations require only those

variables, like costs and revenues that are associated with the specific

alternative courses of action to be reported (Drury, 2005). The relevant costs

and benefits required for decision-making are only those that will be affected by

the decision in consideration (ibid).

A capital investment decision normally represent the most vital decision

that an organization makes, since it commits a substantial proportion of

resources to actions that are likely to be irreversible (Drury, 2005). It is then

necessary to identify a series of steps needed to investigate before executing a

decision.

A decision model in management accounting literature should include

the following steps:

1) Define the Objective

2) Search alternative courses of actions to realize the objective

3) Identify events or states of nature that limit achieving the objective

4) Define the set of outcomes for the various possible combinations of actions

and events

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5) Measure the effectiveness of outcomes to the objective

6) Select a course of action

According to literature, a decision model has an objective that is a

function of elements related to that decision objective (Drury, 2005).

If the change in the term structure of interest rates is aimed at providing

a stimulus to the economy, then there is the impact on business cycles that

needs to be considered when investing in current assets. The phases of the

business cycle, recession, slump, recovery and boom, all have implications for

working capital. In a recession period, the level of consumption contracts. The

result is lower sales and decreasing profits, and with rising stocks of unsold or

unprocessed inventory unless production levels are reduced, the level of

working capital is likely to rise temporarily and with it will be an increase in the

need for cash. With the onset of a recession a business may apply more

restrictive credit policies thereby reducing credit sales, and hence debtors.

Inflation will be falling while unemployment and interest rates usually rises.

Unprofitable businesses may also go into liquidation during this phase. This

phase is followed by a slump when unemployment is high and economic

growth is declining. There is a low level of capital utilization. The need for

working capital should decrease as economic growth contracts. But as the

economy bottoms out the recovery of the economy is characterized by

expanding production, as interest rates once they have peaked will start

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declining. The replacement of old machinery, rising consumption expenditure,

increasing profits and buoyant business expectations, means there is economic

growth, lower inflation and lower interest rates.

Thus as a result of the economic growth the need for working capital

increases and thus debtors and inventory may increase notably. During an

expansionary period, the increase in sales and hence production needs to be

paid for, which generally leads to an increased demand for cash. However as

the acceleration in the economy occurs towards the upper turning point of this

phase an overheated economy may result in increased prices, high expectations,

increased investments, increased profits, labour shortages and production

bottlenecks. Then the boom turns into a recession and the above cycle starts

again.

Thus expansions and contractions in the business cycle influence the

investment in working capital in aggregate, and the composition of the

constituent components of the investment in working capital, and the sources

and costs of financing working capital. Some businesses tend to build up

working capital when the economy is strong, but then sell off inventories and

have net reductions of receivables when the economy slacks off. Since the

direction and the duration of the business cycle cannot be forecasted with any

degree of certainty the management of the financing and investment in working

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capital is an ongoing challenge, and needs to be carefully managed (Peel,

Wilson, & Howorth, 2000).

Factors Influencing Working Capital Management

The factors influencing the working capital decisions of a firm may be

classified as two groups, such as internal factors and external factors. The

internal factors includes, nature of business size of business, firm’s product

policy, credit policy, dividend policy, and access to money and capital markets,

growth and expansion of business etc. The external factors include business

fluctuations, changes in the technology, infrastructural facilities, import policy

and the taxation policy etc. These factors are discussed in brief in the following

lines (Institute of Cost & Works Accountant, 2011).

I. Internal Factors

A. Nature and size of the business

The working capital requirements of a firm are basically influenced by

the nature and size of the business. Size may be measured in terms of the scale

of operations. A firm with larger scale of operations will need more working

capital than a small firm. Similarly, the nature of the business - influence the

working capital decisions. Trading and financial firms have less investment in

fixed assets. But require a large sum of money to be invested in working

capital.

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Retail stores, business units require larger amount of working capital,

whereas, public utilities need less working capital and more funds to invest in

fixed assets.

B. Firm’s production policy

The firm’s production policy (manufacturing cycle) is an important

factor to decide the working capital requirement of a firm. The production cycle

starts with the purchase and use of raw material and completes with the

production of finished goods. On the other hand production policy is uniform

production policy or seasonal production policy etc., also influences the

working capital decisions. Larger the manufacturing cycle and uniform

production policy – larger will be the requirement of working capital. The

working capital requirement will be higher with varying production schedules

in accordance with the changing demand.

C. Firm’s credit policy

The credit policy of a firm influences credit policy of working capital. A

firm following liberal credit policy to all customers requires funds. On the other

hand, the firm adopting strict credit policy and grant credit facilities to few

potential customers will require less amount of working capital.

D. Availability of credit

The working capital requirements of a firm are also affected by credit

terms granted by its suppliers – i.e. creditors. A firm will need less working

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capital if liberal credit terms are available to it. Similarly, the availability of

credit from banks also influences the working capital needs of the firm. A firm,

which can get bank credit easily on favorable conditions will be operated with

less working capital than a firm without such a facility.

E. Growth and expansion of business

Working capital requirement of a business firm tend to increase in

correspondence with growth in sales volume and fixed assets. A growing firm

may need funds to invest in fixed assets in order to sustain its growing

production and sales. This will, in turn, increase investment in current assets to

support increased scale of operations. Thus, a growing firm needs additional

funds continuously.

F. Profit margin and dividend policy

The magnitude of working capital in a firm is dependent upon its profit

margin and dividend policy. A high net profit margin contributes towards the

working capital pool. To the extent the net profit has been earned in cash, it

becomes a source of working capital. This depends upon the dividend policy of

the firm. Distribution of high proportion of profits in the form of cash dividends

results in a drain on cash resources and thus reduces company’s working capital

to that extent. The working capital position of the firm is strengthened if the

management follows conservative dividend policy and vice versa.

G. Operating efficiency of the firm

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Operating efficiency means the optimum utilization of a firm’s resources

at minimum cost. If a firm successfully controls operating cost, it will be able to

improve net profit margin which, will, in turn, release greater funds for working

capital purposes.

H. Co-ordinating activities in the firm

The working capital requirement of a firm is dependent upon the co-

ordination between production and distribution activities. The greater and

effective the co-ordinations, the pressure on the working capital will be

minimized. In the absence of co-ordination, demand for working capital is

reduced.

II. External Factors

A. Business fluctuations

Most firms experience fluctuations in demand for their products and

services. These business variations affect the working capital requirements.

When there is an upward swing in the economy, sales will increase,

correspondingly, the firm’s investment in inventories and book debts will also

increase. Under boom, additional investment in fixed assets may be made by

some firms to increase their productive capacity. This act of the firm will

require additional funds. On the other hand when, there is a decline in economy,

sales will come down and consequently the conditions, the firm try to reduce

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their short-term borrowings. Similarly the seasonal fluctuations may also affect

the requirement of working capital of a firm.

B. Changes in the technology

The technological changes and developments in the area of production

can have immediate effects on the need for working capital. If the firm wish to

install a new machine in the place of old system, the new system can utilise less

expensive raw materials, the inventory needs may be reduced there by working

capital needs.

C. Import policy

Import policy of the Government may also effect the levels of working

capital of a firm since they have to arrange funds for importing goods at

specified times.

D. Infrastructural facilities

The firms may require additional funds to maintain the levels of

inventory and other current assets, when there is good infrastructural facilities

in the company like, transportation and communications.

E. Taxation policy

The tax policies of the Government will influence the working capital

decisions. If the Government follows regressive taxation policy, i.e. imposing

heavy tax burdens on business firms, they are left with very little profits for

distribution and retention purpose. Consequently the firm has to borrow

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additional funds to meet their increased working capital needs. When there is a

liberalized tax policy, the pressure on working capital requirement is

minimized.

Thus the working capital requirements of a firm are influenced by the

internal and external factors.

Challenges and Importance of Working Capital Management

As described earlier, there are several trade-offs related to the

management of each working capital component. Therefore the management of

working capital as a whole is also a complicated task, since there are many

factors that need to be considered and balanced. For example, companies have

to make decisions whether to make small orders and keep low inventory levels

to avoid tying up working capital, or to take advantage of discounts and

purchase in bigger quantities. Higher inventory levels reduce the risk of stock-

outs and enable uninterrupted production, which increase the customer

satisfaction, but large inventories also tie up working capital and increases

costs. Granting credit to customers can be part of marketing and may lead to

higher sales, but at the same time working capital is tied up in the accounts

receivable. When dealing with accounts payable, it has to be considered if the

discounts of early payments should be taken advantage of, or should the

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companies use the long credit periods and decrease the need for financed

working capital (Lind, 2011).

The challenge of working capital management as a whole is finding the

right balance between the management of each working capital component. Is

there enough communication between the operations that affect firm’s working

capital management? Working capital should be managed in cooperation within

a company even if the management of its different components can be

considered as individual tasks. In order to achieve the most efficient ways to

manage working capital, the managers responsible for purchasing, inventories,

sales, and production should together find the optimal level for firm’s working

capital.

Working capital is the life blood and nerve Centre of a business. Just as

circulation of blood is essential in the human body for maintaining life, working

capital is very essential to maintain the smooth running of a business. No

business can run successfully without an adequate amount of working capital.

The purpose of working capital is to ensure the effective and efficient

utilization of the business's investment in assets. The main advantages of

maintaining adequate amount of working capital according to Buchmann

(2009) are as follows:

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1. Solvency of the business: Adequate working capital helps in

maintaining solvency of the business by providing uninterrupted flow of

production.

2. Goodwill: Sufficient working capital enables a business concern to make

prompt payments and hence helps in creating and maintaining goodwill.

3. Easy loans: A concern having adequate working capital, high solvency

and good credit standing can arrange loans from banks and other on easy

and favourable terms.

4. Cash Discounts: Adequate working capital also enables a concern to

avail cash discounts on the purchases and hence it reduces costs.

5. Regular supply of raw materials: Sufficient working capital ensures

regular supply of raw materials and continuous production.

6. Regular payment of salaries, wages and other day-to-day

commitments: A company which has ample working capital can make

regular payment of salaries, wages and other day-to-day commitments

which raises the morale of its employees, increases their efficiency,

reduces wastages and costs and enhances production and profits.

7. Exploitation of favourable market conditions: Only concerns with

adequate working capital can exploit favourable market conditions such

as purchasing its requirements in bulk when the prices are lower and by

holding its inventories for higher prices.

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8. Ability to face Crisis: Adequate working capital enables a concern to

face business crisis in emergencies such as depression because during

such periods, generally, there is much pressure on working capital.

9. Quick and Regular return on Investments: Every Investor wants a

quick and regular return on his investments. Sufficiency of working

capital enables a concern to pay quick and regular dividends to its

investors as there may not be much pressure to plough back profits. This

gains the confidence of its investors and creates a favourable market to

raise additional funds i.e., the future.

10. High morale: Adequacy of working capital creates an environment of

security, confidence, high morale and creates overall efficiency in a

business.

Working capital meets the short-term financial requirements of a

business enterprise. It is a trading capital, not retained in the business in a

particular form for longer than a year. The money invested in it changes form

and substance during the normal course of business operations. The need for

maintaining an adequate working capital can hardly be questioned. Just as

circulation of blood is very necessary in the human body to maintain life, the

flow of funds is very necessary to maintain business. If it becomes weak, the

business can hardly prosper and survive. Working capital starvation is generally

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credited as a major cause if not the major cause of small business failure in

many developed and developing countries.

Characteristics, Problems and Roles of Small and Medium Scale

Enterprises

Small and Medium Scale Enterprises are better delineated by their

characteristics. Small and Medium Scale Enterprises have the following

characteristics:

• They require relative small capital to start.

• They offer a relatively high labour to capital ratio

• They improve toward and backward linkage between economically,

socially and geographical diverse sectors.

• They are breeding grounds for entrepreneurial talent.

• In some cases, they act as ancillaries to large industries.

• They serve as training ground for local skills and entrepreneurs.

• They serve as channel for mobilizing local savings.

• They act as catalyst to reduce the migration of manpower from the rural

to the urban area

• They are highly flexible in operations.

• They are positioned to absorb business shocks and adjust to business

cycle (Ogbu, 2006).

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The aforementioned characteristics make it easier to differentiate

Small and Medium Scale Enterprises from large scale firms. More so,

according to the Bolton Committee (1971), a firm is small if it has the

following characteristics:

(a) It has a relative small share of their market: Because of this, it lacks

any real power to affect its environment –it cannot influence market

prices to any significant extent service by change the qualities of

goods and service it sells

(b) It is managed by the owners or part -owners in a specialized way:

This means that the owners of the small firm are actively involved in

the management of the enterprise. They take the major decisions,

just as they carry out all major management functions. This implies

that there is no formalized management structure. Even though there

may be supervisors or foremen in the enterprise, their management

roles are strictly limited.

(c) It is independent in the sense that it does not part form part of a

large enterprise. Ultimate authority for the control of business

resides within the firm and not outside it as would happen if it were a

subsidiary.

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Small-scale enterprises are normally faced with problems or challenges,

which at times are too much, for many of them to succeed, in contributing to the

development of the sector. Despite the numerous encouragements from the

government and efforts put in by the entrepreneurs Small-scale entrepreneurs

are affected by problems which are summarized under the following:

Lack of access to credit: Most small firms are refused loans when applied

from the formal financial intermediates, due to inability to fulfill conditions

such as collateral security. It is therefore now common to see most of the

Small Scale Enterprises resorting to traditional sources of finance. Often,

owners have to rely on personal savings which is very small.

Political problems: Government affects virtually every enterprise (big or

small) and every aspect of life. They act in two ways – promoting and

constraining their business activities. Constant change of government also

affects the operations of Small and Medium Scale Enterprises.

Technological problems: Due to the technological backwardness Nigeria

is facing, developed countries directly or indirectly exercise control over

what we produce and how we produce them, hence our rate of development

is at the whims and caprices of our present technological level. As a result,

people are discouraged to set up their own enterprise and this also affects

the operations of Small and Medium Scale Enterprises.

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Infrastructural problems: As a follow up to the above point raised, the

problem of electricity, water supply, transportation, communications,

hospitals, inadequate office accommodation and lack of storage facilities

also discourages the operations of Small and Medium Scale Enterprises.

The non-existence of these facilities has retarded the rate of

industrialization and economic development.

Poor accounting system: Most small-scale enterprises do not keep

accurate and appropriate records of their transactions. This hinders their

ability to trace their growth profile, assess and evaluate the accounting

system and also hinders them access to financial institutions.

Economic problems: These are factors that can change economic turns of

small-scale enterprises. They include competition, price fluctuations,

votality of interest rates, and fluctuations of the Naira against foreign

currencies.

Natural hazards: Natural hazards like flood, drought, and erosions,

windstorms and pests etc. are menace to small-scale enterprises particularly

in the agricultural sector. Too much rainfall can course floods and erosions,

which endangers the growth of crops and at large affects small-scale

business owners in the agricultural sector.

Some other challenges faced by Small Scale Enterprises are:

(a) Insufficient information on markets

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(b) Management capability lag

(c) High cost of machinery / equipment’s

(d) Lack of reliable data.

(e) Competitive products.

(f) Lack of industrial site and enabling environment

(g) Societal attitudes, which has preference for imported goods.

(h) Little knowledge of E-business

Jones, George and Hill (2000) highlighted some global challenges small-

scale businesses face, which includes:

Building a competitive advantage: This deals with the ability of one

organization to outperform other organizations because it produces

desired goods or services more efficiently and effectively than its

competitors.

Maintaining ethical standards: while mobilizing organizational

resources, managers at all level are under considerable pressure to

increase the level at which their organizations perform. Pressure to

increase performance can be healthy for an organization because it

causes managers to question the organizations operation and it

encourages them to find new and better ways to plan, organize, lead and

control. However, too much pressure can be harmful.

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It may induce managers to behave unethically in dealing with

individuals and groups both inside and outside the organization. For

example, a purchasing manager for a large retail chain might bring

inferior clothing as cost-cutting measure, as to secure a large foreign

contract by offering bribes to foreign officials. In 1995, two former

Honda officials were convicted of accepting bribes from several large

U.S auto dealers to increase the supply of cars to dealers and thus

increase the dealers’ profits.

Managing a diverse workforce: Another challenge for mangers is to

recognize the need to treat human resources in a fair and equitable

manner. In our era when the age, gender, race, ethnicity, relation an

socio-economic background of the workforce are changing, managers

must establish employment procedure and practices that are fair and do

not discriminate against any organizational members. Also, managers

should recognize the performance enhancing possibilities of a diverse

workforce, such as the ability to take advantage of the skills and

experience of different kinds of people.

Utilizing new information systems and technologies: Another

challenge for managers facing pressure to increase performance is the

utilization of new information systems and technologies. This co-

ordination helps to improve quality and increase the face of innovation.

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Microsoft, Hitachi, Xerox, and other companies make extensive use of

information system such as e-mail, the Internet, and video

teleconferencing, accessible by means of personal computers, to build a

competitive advantage.

Small and Medium Scale Enterprises is believed to be the engine room

for the development of any economy, like that of Nigeria. This is manifested

according Akabueze (2002) in the following ways:

Employment Generation

� Employing generation capacity of about 58% of global working

population

� Small and Medium Scale Enterprises also play the critical role of

principal safety net for the bulk of the population in developing

economies, and

� Their labour intensity structure accounts for their recognition as a job

Creation avenue

� 30% contribution to global GDP.

Rural Development

� Small and Medium Scale Enterprises constitute major avenues for

income generation and participation in economic activities in the lower

income and rural brackets of developing societies especially in

agriculture, trading and services, and

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� The employing opportunities offered apparently reduce rural-urban

migration and allowed for even development.

Economic growth and industrialization

� National economic development prospects hinge on entrepreneurial

energy of vibrant Small and Medium Scale Enterprises as most by

business concern grew from small scale to become big icons, and

� As they grow, they protect nations from the geographical cost- benefit

permutations of a few multinationals who are ever prepared to close up

their businesses and relocate at the slightest provocation or appearance

of economic downturn.

Theoretical Framework

According to Rappaport (2006), in empirical studies, the use of

background theory is important. Theory is used as a background to decide on

what research approaches to follow and what data to collect in order to analyze

the research and to arrive at a conclusion about the study. Given that a business

has to continually adapt to the changing external environment, and determine

the appropriate level and mix of the investment in current assets and the

financing of the current assets, the conservative, aggressive, moderate and

aggregate approaches are common, which serve as theories or policies useful in

the management of working capital of firms vis-à-vis Small and Medium scale

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Enterprises (Beaumont-Smith, 1997; Gitman, 1997; Schnee, 2001;

McMenamin, 2005). The type of theory, approach or policy relates to the firms

general network to the investing and financing of its working capital needs.

According to Bhattacharya (2009), the conservative, aggressive and moderate

approaches to working capital management were propounded by Karl Marx in

1914 while the aggregate approach to working capital management was

propounded by David Ricardo in 1931.

Conservative Approach to Working Capital Management

According to Karl Marx 1914, the conservative approach to managing

working capital is characterized by the management of large amounts of cash,

marketable securities, accounts receivable, inventories, and uses permanent

capital to finance all permanent asset requirements to meet some or all of the

seasonal demands. As far as investment is concerned a conservative working

capital approach is the “play-it-safe” philosophy. As it is most conservative, the

policy will attempt to provide sufficient long-term financing to cover all

anticipated eventualities.

A conservative approach implies relatively high investment in current

assets in relation to sales: the current assets to sales ratio will be comparatively

high and asset turnover ratios correspondingly low. In the conservative

approach stock and cash levels will generally be kept high to avoid stockout

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and cashout (illiquidity) costs. There is also likely to be a sizeable investment in

short-term bank deposits and other short-term liquid investments. The firm

(inclusive of Small and Medium scale Enterprises), finances all its current asset

requirement with long-term requirements with long-tern funds, including its

peak temporary requirements. In operating a conservative policy, short-term

funding may only be called upon as a fall-back or emergency source of funding:

any short-term surpluses would be invested in easily liquidated short-term

investments.

At its most extreme, the conservative working capital approach assumes

somewhat unrealistically, the absence of any spontaneous funding from current

liabilities such as trade creditors. Spontaneous funding is the type of funding

which occurs virtually automatically when a company or enterprise acquires

goods and services from its suppliers on credit (McMenamin, 2005). For

example, when purchasing raw materials for production these will usually be

provided on a period of credit, such as 30days, by the supplier. The supplier is

in effect providing spontaneous, short-term (30-day) finance for the enterprise.

As the conservative approach relies on long-term financing, it makes it a

more expensive policy to follow than one which allows for an element of short-

term financing. However, it is also a low risk working capital policy as the firm

is not dependent upon access to short-term funds and is not therefore exposed to

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the volatility of short-term interest rates or to unexpected changes in general

economic conditions. The more a firm relies on borrowing funds short term, the

greater its risk exposure to sudden changes in macroeconomic circumstances

such as government changes in monetary policy. Changes in government policy

could introduce more stringent credit and lending restrictions on financial

institutions together with an increase in interest rates. In contrast, long-term

financing, although generally more expensive, is more certain and stable with

regard to the term of the finance, its costs and its conditions. The firm pays a

price for certainty and stability in its sources of finance.

The conservative approach to working capital management is related to

this study on working capital management practices required by Small and

Medium Scale Enterprises for effective operations in Delta State, because this

approach (conservative approach), dealt with the first specific objective of this

study; sources of financing working capital required by Small and Medium

Scale Enterprises for effective operations in Delta State. Some of the long term

sources of financing working capital considered in this study are: promoter’s

fund, equity financing, long term debt, off balance sheet financing, and asset

based financing.

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Aggressive Approach to Working Capital Management

Karl Marx the proponent of aggressive approach to managing working

capital emphasizes the management of smaller holdings of cash, marketable

securities, accounts receivable, inventories and financing all seasonal needs and

part of permanent current assets with short-term credit. The balance, including

fixed assets, is financed with long term funds. A firm that adopts an aggressive

working capital approach-also known as the “lean and mean” approach-

operates at the opposite end of the working capital policy spectrum. In this case,

all aspects of policy management are the reverse of the conservative policy. An

aggressive policy relies on minimum investment in current assets and is highly

dependent on access to short-term financing (Gitman, 1997; McMenamin,

2005).

With an aggressive policy, total investment in current assets will be kept

to a minimum. The current assets to sales ratio will be much lower and the

current asset turnover rates much higher in comparison to a conservative policy.

In terms of financing, a firm following an aggressive working capital policy

will use long-term finance to fund its investment in permanent fixed assets and

also a substantial part of its permanent current assets. Short-term financing will

be used to fund temporary current asset needs and also part of the current asset

needs and also part of the permanent current asset requirement. Compared with

the conservative and moderate policies, an aggressive policy will achieve

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higher returns but will also carry higher risk due to its higher dependency on

short-term finance. Short-term credit and borrowing arrangements require

regular renewal with lenders and a firm may encounter difficulties renewing

short-term credit facilities in times of economic stringency.

The aggressive approach to working capital management is related to

this study on working capital management practices required by Small and

Medium Scale Enterprises for effective operations in Delta State, because the

aggressive approach, also dealt with the first specific objective of this study;

sources of financing working capital required by Small and Medium Scale

Enterprises for effective operations in Delta State. The aggressive approach

emphasizes the use of short term funds or spontaneous funds in financing the

working capital of enterprises. Some of the short term sources of financing

working capital discussed in this study are: accounts payable financing,

unsecured financing, and borrowing from friends and family.

Moderate Approach to Working Capital Management

The moderate approach also postulated by Karl Marx in 1914 according

to Bhattacharya (2009), lies between the aggressive and conservative

approaches where temporary short-term assets are financed with short-term

loans, while fixed assets and the permanent level of current assets are financed

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with long-term loans (Gitman, 1997). With a moderate policy, long-term funds

are used to finance the investment in fixed assets and the permanent component

of current asset investment. Temporary, or seasonal, current assets are financed

by short-term sources of finance.

The moderate policy is less risky than the aggressive, but more risky

than the conservative policy. The firm only resorts to short-term financing when

seasonal and other temporary demands require it. For example, arranging bank

overdrafts, to finance the peak seasonal working capital needs at Christmas time

for bookshops and toy stores. Returns under a moderate policy are

correspondingly higher than under a conservative policy but lower than under

an aggressive policy. The moderate approach follows the maturity matching

principle which states that; the financial manager should match the maturity

term of the asset with the same maturity term of finance used to acquire the

asset. In other words long-term assets are financed with long-term sources of

finance and long short-term assets are financed with short-term sources of

finance (McMenamin, 2005).

Furthermore, the moderate approach to working capital management is

related to this study on working capital management practices required by

Small and Medium Scale Enterprises for effective operations in Delta State,

because this approach (moderate approach), also dealt with the first specific

objective of this study; sources of financing working capital required by Small

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and Medium Scale Enterprises for effective operations in Delta State. The

moderate approach finds a mid-point of financing a firm’s working capital

between long-term sources and short-term sources. I.e., long-term funds are

used to finance the investment in fixed assets and the permanent component of

current asset investment. Temporary, or seasonal, current assets are financed by

short-term sources of finance. Various Small and Medium Scale Enterprises

employ a combination of both long term funds and short term funds in

financing their working capital.

Aggregate Approach to Working Capital Management

From the reviewed literatures, it is evident that the focus of working

capital management is on the individual components of working capital.

Schilling (1996) contends that these individual components of working capital

are managed atomistically because they have different purposes and functions.

This is reflected in the job titles, descriptions and qualifications required of

finance, production, purchasing, treasury, marketing, credit and inventory

supply managers. Despite the accepted practice and convenience of

atomistically managing these components, it has been argued by Kallberg and

Parkinson (1984) that they need to be managed in aggregate not withstanding

the complex linkages among them. Furthermore the nature of the business and

the type of market or industry sector in which a business operates will affect its

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working capital requirements (Beaumont-Smith, 1997) and thus the

management of working capital.

The aggregate approach with David Ricardo in 1931 as the proponent

according to Bhattacharya (2009), is of the view that working capital decisions

made in one area impact on each of the other areas. The investment in inventory

can be affected by accounts payable financing. The investment and

management of accounts receivable and inventory is also closely related

(Gitman, 1997, Madura and Veit, 1988). Some investment and financing

decisions only affect the timing of the cash flows for one part of the operating

cycle, while other decisions affect the amount and timing of the cash flows of

several elements on the time line. Therefore all the components must be

included to reduce the possibility of working capital decisions that do not meet

expectations (Hill and Sartoris, 1992). According to David Ricardo, the

working capital components should not only be managed individually, but as a

whole to improve the investment and financing decision (Schilling, 1996).

Managers and accountants need to manage cash, inventory, accounts

receivable, prepayments, accruals and accounts payable which have different

life expectancies for different businesses which function in different market

sectors or industries, in addition to having differing cash flow amounts,

turnovers and timing.

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More so, the aggregate approach is related to this study; working capital


effective operations in Delta State, because it dealt with specific objectives

two(2) to Six (6). These specific objectives dealt with the components of

working capital management (cash management, accounts receivables

management, inventory management, accounts payable management, and

investment management) and how their level of required practices by Small and

Medium Scale Enterprises will result to effective operations (profitability,

optimal resource utilization, retained earnings, liquidity etc.).

Related Empirical Studies

Although working capital is the concern of all firms, it is the small firms

that should address this issue more seriously. Given their vulnerability to a

fluctuation in the level of working capital, they cannot afford to starve of cash.

Anyia (2006) conducted a study on “financial impediments to the growth of

small and medium-scale businesses operating in Delta State”. The major

purpose was to identify the financial impediments to the growth of small and

medium-scale businesses operating in Delta State. A descriptive survey

research design was adopted for the study. The five point likert questionnaire

was the instrument used for the study. The findings of the study revealed that

the major hindrance to the growth of small and medium-scale businesses in

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Delta State is the difficulty of raising funds. Also, poor financial management

practices posed hindrances to the growth of small and medium-scale businesses.

Based on the findings of this study, Anyia recommended that small and

medium-scale businesses operators should first and foremost, carryout a

feasibility study to estimate the amount of money needed for a business before

venturing into it and that, financial agencies and government should avoid

laying down stringent lending conditions for small and medium-scale

businesses operators in sourcing for funds externally.

This present study is related Anyia’s study because both of them dealt

with finance in relation to Small and Medium-scale enterprises. Though,

Anyia’s study created a vacuum by studying the financial impediments of small

and medium-scale businesses with major focus on sourcing for fund. This

present study filled the gap by including how these funds can be properly

invested following laid down management practices and thus managing the

working capital of small and medium-scale enterprises for effective operations

in their business concerns.

Okoro (2006) carried out a study on strategies for improving the

financial management practices of small and Medium Scale Entrepreneurs in

Niger Delta of Nigeria. The major purpose of the study was identify to the

strategies for improving the financial management practices of small and

medium scale entrepreneurs in the Niger Delta region. The study adopted a

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survey research design. The population which was entirely surveyed for the

study consisted of 78 entrepreneurs in the Niger Delta who registered with the

National Association for Small and Medium Scale Enterprises (NASME) in

May 2003.

The findings are that the respondents agreed that 10 out of the 15 fund

sourcing strategies are ways of enhancing fund sourcing avenues. They agreed

that eight out of 14 control strategies are ways for improving financial

management. The respondents saw the nine strategies identified for evaluation

of funds as necessary for improvement of financial resources management. It

was concluded that financial management practices can be effectively improved

through the application or adoption of the identified strategies. It was

recommended that the Federal Ministry of Industry should encourage practicing

entrepreneurs to gain relevant knowledge in financial management by

organizing workshops and training programmes on financial resources

management.

This study on working capital management practices required by Small

and Medium Scale Enterprises for effective operations in Delta State, is related

to Okoro’s study because both studies dealt on financial management in relation

to Small and Medium Scale Enterprises. However, Okoro’s study has created a

vacuum for this present study in that while Okoro’s study majorly focused on

strategies identified for evaluation of funds as necessary for improvement of

119

financial resources management; this present study focused on only working

capital management practices of SMEs which is an aspect of financial

management, and how efficiency could be achieved in these SMEs.

Lazaridis and Tryfonidis (2006) investigated the relationship between

working capital management and corporate profitability of listed companies in

the Athens Stock Exchange. The study adopted a correlational design. A sample

of 131 listed companies for period of 2001-2004 was used to examine this

relationship. The financial statement of the firms and structured interview were

used as the instrument for the study. Mean, standard deviation and multiple

regression analysis were used to answer the research questions and to test the

null hypothesis respective. The result from regression analysis indicated that

there was a statistical significance between profitability, measured through

gross operating profit, and the cash conversion cycle. From those results, they

claimed that the managers could create value for shareholders by handling

correctly the cash conversion cycle and keeping each different component to an

optimum level.

The study conducted by Lazaridis and Tryfonidis (2006); on the

relationship between working capital management and the profitability of firms

in the Athens Stock Exchange. Lazaridis and Tryfonidis’s study is related to

this present study that also dealt on working capital management. While

Lazaridis and Tryfonidis’s study adopted a correlational design, this present

120

study adopted a descriptive survey design. However, their study created a

vacuum for this present study, in that this study determined the components of

working capital management (sources of financing working capital, cash

management, account receivables management, accounts payable management,

inventory management, and investment management) required by Small and

Medium Scale Enterprises for effective operations (profitability, optimal

resource utilization, retained earnings, liquidity etc.). However, why the study

of Lazaridis and Tryfondis concentrated on only profitability, in this present

study profitability is only one amongst other components in measuring effective

operations of SMEs, which makes this study broader.

Huynh and Jyh-tay (2010) studied the relationship between working

capital management and profitability in Vietnam. The main purpose was to

investigate the relationship existing between profitability, the cash conversion

cycle and its components for listed firms in Vietnam stock for the period of

2006-2008. The correlational design was adopted for the study, and secondary

data of financial statement from 130 listed companies in Vietnam stock market

were sampled for the study. The descriptive statistical tool of mean and

standard deviation was used to answer the research questions while the

correlation matrix was used to test the null hypotheses at 0.05 level of

significance. Results from analysis of relationship between working capital

management and profitability on Vietnam stock market indicated that there is a

121

negative between number of day’s accounts receivable, number of day’s

inventories and profitability. So, the researchers concluded that managers can

increase profitability by reducing the number of days for accounts receivable

and inventories.

The study of Huynh and Jyh-tay is related to this present study because

both studies dealt on working capital management. While this present study

adopted a descriptive survey design, the study of Huynh and Jyh-tay (2010)

adopted a correlational design. However, the study of Huynh and Jyh-tay

created a vacuum for this present study. The study of Huynh and Jaytay (2010)

only used accounts receivables and inventories as components of working

capital management; on the other hand, this present study used cash, accounts

receivable, inventory, accounts payable and investment as components of

working capital. Hence, this present study is wider in content scope.

In the study carried out by Mclnnes (2000), on working capital

management: Theory and evidence from New Zealand Listed Limited Liability

Companies, the study aimed on how working capital is managed by New

Zealand listed limited liability companies. This is achieved by applying New

Zealand data collected by means of a postal questionnaire to an empirical

working capital management model. To obtain a comprehensive quantitative

picture regarding working capital management practices, a sample of 125

limited liability companies listed on the New Zealand Stock Exchange with

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registered addresses in New Zealand, was obtained from the New Zealand

Investment Yearbook (1999). The survey was undertaken by means of a

structured questionnaire that was mailed to the potential respondents. The

Statistical Package for Social Sciences (SPSS) was used in analyzing the data.

The main findings indicated that businesses in New Zealand consider working

capital management an important issue, yet a large group of respondents

ignored the survey. It is evident that the respondents placed greater emphasis or

importance on the financing decision, with the investment decision largely

taken for granted.

Mclnnes’s study is related to this present study because, both studies

focused on working capital management. Both studies adopted the survey

design and the questionnaire was the instrument used by both studies. While the

questionnaires in this present study were administered on personal contact

distribution, the mailing system was used to administer the questionnaires in

Mclnnes study. However the gap identified in Mclnnes study is that no specific

statistical tool was mentioned for data analysis except the SPSS. This present

study filled the gap by using mean and standard deviation for answering the

research questions and t-test in testing the null hypotheses by the use of SPSS.

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Summary of Reviewed Literature

This chapter reviewed pertinent related literature in the area of working

capital management practices required by Small and Medium Scale Enterprises

for effective operations. The literature reviewed disclosed that Small and

Medium Scale Enterprises constitute a vital engine in economic growth and

development of any nation. Also, the reviewed literature revealed that there is

no universally accepted definition of Small and Medium Scale Enterprises.

However, the Small and Medium Industries and Equity schemes (SMIEIS)

defines Small and Medium Enterprises (SME) as any enterprises with a

maximum asset base of N200 million excluding land and working capital and

with the number of staff employed not less than 10 or more than 300.

The authors whose works were reviewed agreed that efficient working

capital management involves planning and controlling current assets and

current liabilities in a manner that eliminates the risk of inability to meet due

short term obligations on the one hand and avoid excessive investment in these

assets on the other hand. The finance Sources of Working Capital were looked

into, and the evidence from literature revealed that the two major sources of

financing working capital management are: short term sources (suppliers credit,

bank loans, promoters fund, account payables and accruals) and long term

sources (equity finance, long term debt, off-balance sheet financing and asset-

based financing).

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Also, the various components of working capital management which

includes; cash management, accounts receivable management, inventory

management, accounts payable management, and investment management were

thoroughly reviewed. The reviewed literatures showed that; Cash is one of the

most important components of current assets. Every Small and Medium Scale

Enterprise should have adequate cash, neither more nor less; that the

management of accounts receivable is largely determined by the business's

credit policy; that investment in accounts receivable, debtors, as with all

investment decisions, must earn a rate of return in excess of the required rate of

return; that a good inventory management is important to the successful

operations of most organizations; that management of accounts payable in

working capital cycle deals with debts owed to customers from goods and

services, and the logic of payment terms; and that investment has to be made in

current assets, and as with all investments the returns should exceed the

required rate of return, otherwise the business's success will be jeopardized.

The four theories or approaches reviewed in the literature, showed that

the conservative approach. Aggressive approach and the moderate approach to

working capital management were directly related to the first specific objective

while the aggregate approach to working capital management had a direct

relation number 2 to number 6 specific objectives. The aggregate approach

emphasizes that working capital components should not only be managed

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individually, but as a whole to improve the investment and financing decisions.

Managers and accountants need to manage cash, inventory, accounts receivable,

prepayments, accruals and accounts payable which have different life

expectancies for different businesses which function in different market sectors

or industries, in addition to having differing cash flow amounts, turnovers and

timing.

The empirical studies reviewed in this study, concentrated on the

relationship between working capital management and the profitability of firms;

these studies found out that working capital management had an impact on the

profitability of firms. These studies have created a vacuum for this present

study, in that this study determined the working capital management practices

required by Small and Medium Scale Enterprises for effective operations.

However, why the other studies concentrated on only profitability, in this

present study, profitability is only one amongst other components in measuring

effective operations of Small and Medium Scale Enterprises, which made this

study broader in content scope. More so, the study of Mclnnes (2000), it was

discovered that no specific statistical tool was mentioned for data analysis

except the SPSS. The aforementioned gaps are what this study filled.

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CHAPTER 111

METHODOLOGY

This chapter dealt with the methods and procedures for carrying out this

study. It is organized under the following sub-headings: the research design,

area of the study, population of the study, sample and sampling technique,

instrument for data collection, validation of the instrument, reliability of the

instrument, procedure for training the research assistants, method of data

collection and method of data analysis.

Research Design

A survey design was adopted for this study. Ebenuwa-Okoh (2011)

citing Kerlinger (1993) stated that survey is a descriptive research method

aimed at discovering relative incidences, distribution and of inter-relationships

of educational, sociological, psychological, political and economic variables.

This implies that survey gathers information about variables not individuals; the

researcher therefore examines the opinions, attitudes or feelings of individuals

about a particular problem. This design is considered most appropriate for the

study because survey studies, utilizes questionnaires, observations, tests, and

interviews as tools in obtaining information. The data collected are exposed to

127

analysis before relevant conclusions are made. In this study, the opinions of

respondents were sought to achieve the purpose of the study.

Area of the Study

The study was carried out in the three senatorial Districts of Delta State;

North, Central and South comprising of twenty-five (25) Local Government

Areas. North District consisted of Ukwani, Udokwa West, Udokwa East, Ika

South, Ika North-east, Aniocha South, Aniocha North, Oshimili South, and

Oshimili North Local Government Areas (LGA’s) with 284 SMEs. Central

Districts consisted of Ethiope West, Ethiope East, Okpe, Sapele, Uwvie,

Ughelli South, Ughelli North, and Odu Local Government Areas (LGA’s) with

1,243 SMEs. South Districts consisted of Isoko South, Isoko North, Bomadi,

Burutu, Patani, Warri South, Warri North, and Warri South-west Local

Government Areas (LGA’s) with 485 SMEs (See Appendix C).

In the Delta State Industry Directory (2010), there is a record in the

sharp rise of yearly establishments of Small and Medium Scale Enterprises in

Delta State by entrepreneurs, which has led to a wide spread and large number

of Small and Medium Scale Enterprises operating in the state. Despite the

continuous increase of Small and Medium Scale Enterprises in the state, there is

also a rise in the collapse of SMEs due to so many challenges they face like:

environmental constraints, the competitive market for customers, and financial

128

impediments (Anyia, 2006); which inappropriate working capital management

practice is inclusive. The aforementioned reasons made the researcher to

consider Delta state most appropriate to carry out the study on working capital


effective operations. The three senatorial Districts of Delta State were used for

the study, to have a well representation from the entire State.

Population for the Study

The population for the study consisted of 3,627 respondents, made up of

2,012 managers and 1,615 accountants in the 2,012 Small and Medium Scale

Enterprises operating in Delta State, and registered with the Ministry of

Commerce and Industry (Delta State Industry Directory, 2010). Appendix C

presents the population distribution according to Senatorial Districts. The

reason for using only managers and accountants of SMEs was because they are

in a better position to respond to issues on working capital management, since

they are in the managerial level of SMEs.

Sample and Sampling Technique

The sample for the study consisted of 1,110 respondents, made up of 616

managers and 494 accountants, which is 30.6% of the population for the study

drawn from the 616 SMEs sampled for the study. Both proportionate stratified

and systematic random sampling techniques were employed to arrive at the

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sample size for the study. The proportionate stratified random sampling

technique was employed to choose three (3) LGA’s each in the three (3)

senatorial districts of Delta state and 616 SMEs which is also 30.6% of the

entire registered SMEs in the state. The justification for using 30.6% is that

when a population is more than 2000; ¼ (25%) is representative enough as a

sample size (Silverman, 2007). In this study, the researcher used 30.6% which

is more than ¼ (25%) for effective representation of the sample size. The

essence of using the proportionate stratified sampling technique was to ensure

that the sample is representative of the strata/ senatorial districts. Hence, 3

LGA’s each were chosen from each senatorial districts and 30.6% was applied

for each senatorial districts to arrive at the sampled SMEs (Ebenuwa-Okoh,

2011). The actual subjects in the sample were selected through systematic

random sampling technique. This involved applying the sample interval (K) to

the subset of each category (i.e. Managers and accountants). For example since

managers of Small and Medium Scale Enterprises were 2,012, the sample

interval was determined by K=N/n. Where; K =sampling interval,

N=population size and n=sample size. The K for managers category

=2.012/616=3. This meant that every 3rd

manager on the list was selected. The

first subjects were randomly selected from the population between the numbers

1-3, and from that point onwards every subsequent 3rd

name on the list was

automatically included in the sample until the sample size of 616 for the

130

category of managers was obtained. The same procedure was repeated for the

accountant’s category to arrive at a sample of 494 accountants from the

population. Where a SME do not have an accountant, only the manager was

used. The Sample distribution of managers and accountants of Small and

Medium Scale Enterprises in the three Senatorial Districts of Delta State is

vividly presented in Appendix D.

Instrument for Data Collection

A Working Capital Management Practices Questionnaire (WCMPQ) was

used as the instrument for this study. It was developed by the researcher and it

is a 62-item questionnaire containing seven (7) sections (A-G). It was structured

on a five-point rating scale as follows: “Very Highly Required” (5); “Highly

Required” (4); “Required” (3); “Somewhat Required” (2); and “Not Required”

(1).

Section A contained 2 items, which elicited responses on the general

information of respondents; while Section B dealt with research question 1. It

contained 10 items, which elicited responses on sources of financing working

capital management practices needed for the effective operations of Small and

Medium Scale Enterprises.

Section C dealt with research question 2. It contained 10 items, which

elicited responses on cash management practices needed for the effective

operations of Small and Medium Scale Enterprises.

131

Section D dealt with research question 3. It contained 10 items, which

elicited responses on account receivable management practices needed for the

effective operations of Small and Medium Scale Enterprises.

Section E dealt with research question 4. It contained 10 items, which

elicited responses on inventory management practices needed for the effective

operations of Small and Medium Scale Enterprises.

Section F deals with research question 5. It contained 10 items, which

elicited responses on accounts payable management practices needed for the

effective operations of Small and Medium Scale Enterprises.

Section G deals with research question 6. It contained 10 items, which

elicited responses on investment management practices needed for the effective

operations of Small and Medium Scale Enterprises (See Appendix B).

Validation of the Instrument

The face validity of the research instrument was determined by five

experts; two from the Department of Vocational Teacher Education (Business

Education Unit) University of Nigeria, Nsukka, two experts from the faculty of

education (one from the department of Technical and Business Education; and

the other from the Department of Educational Psychology) of Delta State

university, and one professional in the industry; Egbo & Sons Associate. Their

constructive criticisms were used to improve and prepare the final copy of the

132

instrument. The researcher made a summary of their comments and the

corrections effected (See Appendix F). The researcher also ensured the

instrument measured what it is supposed to measure by ensuring that every

aspect of the research questions was properly covered in the questionnaire.

Reliability of the Instrument

In order to determine the reliability of the instrument, a trial test of the

instrument using 30 managers and 30 accountants in Edo State, which was not

part of the area under study, was conducted. The 60 respondents were randomly

selected. Their responses on the instrument were used to determine its

reliability using Cronbach Alpha (α) Reliability test for internal consistency of

the instrument.

The following coefficients were obtained for the six sections: (B) .81,

(C) .82, (D) .82, (E) .82, (F) .80, and (G) .81. A grand co-efficient of .81 was

obtained which is a strong indicator of the stability of the instrument overtime,

and which showed that the instrument is highly reliable. According to Ogbazi

and Okpalla (1994), if the reliability coefficient is .6 and above, then the

instrument is deemed reliable.

The choice of Cronbach Alpha’s reliability was based on the fact that:

the questionnaire items are of multiple response type; it provides for a more

stable measure of homogeneity; and when using Likert-type scales it is

133

imperative to calculate and report Cronbach’s alpha coefficient for internal

consistency reliability for the scales one is using (George & Mallery, 2003).

The Statistical Package for Social Sciences (SPSS) was used to compute

the reliability coefficient of the instrument (See Appendix G).

Procedure for Training the Research Assistants

Eighteen (18) research assistants were trained by the researcher on

personal contact administration and retrieval of the research instrument, to and

from the respondents. These research assistants were year three students from

Delta State College of Education, Mosogar. The research assistants were chosen

because part of their course is on entrepreneurship in business education 11.

After successive training on the mastery of the items in the questionnaire which

lasted for one week on a daily basis, the researcher tested the research assistants

to ensure they have a good understanding on the completion process of the

instrument. Evidence from the test showed they have a good knowledge on the

completion process of the questionnaire. The choice of the eighteen research

assistants is to enable two each to cover the nine (9) Local Government Areas

in the three (3) senatorial districts sampled for this study. This helped to avoid

the delays inherent in the mailing system, as well as boosted the rate of return

of the research instrument.

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Method of Data Collection

The instrument for data collection was administered on 616 managers

and 494 accountants. The research assistants used the list of Small and Medium

Scale Enterprises operating in Delta State, as registered with the Ministry of

Commerce and Industry. Copies of the questionnaire were distributed and

collected within a period of six weeks. Out of the 1110 copies of questionnaire

administered, 990 were retrieved and used for the study which is made up of

556 managers and 434 accountants. This rate of return represents eighty-nine

percent (89%).

Method of Data Analysis

The mean and standard deviation were employed in answering the six

research questions, while t-test was employed in analyzing the six null

hypotheses formulated at 0.05 level of significance.

In calculating the mean for the various items, the response category in

the questionnaire were rated in scales as follows:

Response Category Point Boundary Limit

Very Highly Required (VHR) 5 4.50-5.00

Highly Required (HR) 4 3.50-4.49

Required (R) 3 2.50-3.49

Somewhat Required (SR) 2 1.50-2.49

Not Required (NR) 1 1.00-1.49

The questionnaire items were reported and described as: “Very Highly

Required”; “Highly Required”; “Required”; “Somewhat Required”; and “Not

135

Required” based on the boundary limits above. The choice of employing t-test

statistic in testing the six null hypotheses is because, the t-test is used when

testing the hypothesis about the difference between two populations means. In

this study, the two mean populations were managers and accountants of Small

and Medium Scale Enterprises in Delta State.

The decision rule for analyzing the null hypotheses was that when the

calculated t-value is greater than the Table value at 0.05 level of significance,

the null hypothesis will be rejected while if the calculated t-value is less than

the table value at 0.05 level of significance the null hypothesis will be accepted.

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CHAPTER 1V

PRESENTATION AND ANALYSIS OF DATA

In this chapter the data collected from the respondents in answering the

research questions and testing the hypotheses for the study are presented and

analyzed using the appropriate tools.

Research Question 1

What are the sources of financing working capital required by Small and


To answer this research question, the data generated in Section B of the

questionnaire were analyzed and presented as shown in Table 1

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Table 1

Mean Responses of Respondents on Sources of Financing Working Capital Required by

Small and Medium Scale Enterprises for Effective Operations S/N Items −

X SD Decision

1

2

3

4

5

6

7

8

9

10

Equity finance as a source of financing working capital

by Small and Medium Scale Enterprises for effective

operations

Long-term debt as a source of financing working capital

for the retained earnings of Small and Medium Scale

Enterprises

Asset-based financing as a source of funding working

capital for effective operations of Small and Medium

Scale Enterprises

Accounts payable as a valuable source of financing in

working capital to meet short-term obligations of Small

and Medium Scale Enterprises

Accruals as a discretionary source of financing in

working capital for optimal resource utilization of Small


Bank loans stands as a source of financing working

capital for the liquidity of Small and Medium Scale

Enterprises

Promoters fund as a source of financing working capital

by Small and Medium Scale Enterprises for effective

operations

Borrowing from friends and family constitute as a vital

source of financing in working capital for the

profitability of Small and Medium Scale Enterprises

Thrift as a source of financing working capital for

effective operations of Small and Medium Scale

Enterprises

Unsecured financing as a source of financing working

capital for the solvency of Small and Medium Scale

Enterprises

3.91

4.02

2.83

4.01

3.95

4.20

3.57

4.18

4.36

2.91

1.16

.98

1.40

1.08

1.05

.84

1.25

.90

.73

1.41

Highly Required

Highly Required

Required

Highly Required

Highly Required

Highly Required

Highly Required

Highly Required

Highly Required

Required

Cluster Mean 3.79 1.08 Highly Required

N=990

The data in Table 1 revealed that items 1, 2, 4, 5, 6, 7, 8 and 9 had mean

scores ranging from 3.57 to 4.36 which were the boundary limit for highly

138

required. This implies that managers and accountants responded to the fact that:

equity finance; long term debt; accounts payable; accruals; bank loans;

promoters fund; borrowing from friends and family; and thrift are highly

required sources of financing working capital by Small and Medium Scale

Enterprises for effective operations in Delta State. However, items 3 and 10

showed that the mean scores of the respondents (managers and accountants)

ranged from 2.83 to 2.91 which were the boundary limit for required. This

revealed that managers and accountants responded to the fact that: asset based

financing and unsecured financing are required sources of financing working

capital by Small and Medium Scale Enterprises for effective operations in Delta

State. The standard deviation values which ranged from .73 to 1.41 showed that

the opinions of the respondents were not too far from the mean. Since the

cluster mean was 3.79, therefore, managers and accountants agreed to majority

of the items as highly required sources of financing working capital by Small

and Medium Scale Enterprises for effective operations in Delta State.

Research Question 2

What are the cash management practices required by Small and Medium Scale

Enterprises for effective operations in Delta State?

To answer research question 2, the data generated in Section C of the


139

Table 2

Mean Responses of Respondents on Cash Management Practices Required by Small and

Medium Scale Enterprises for Effective Operations S/N Items −

X SD Decision

1

2

3

4

5

6

7

8

9

10

Maintaining optimum cash balance as a practice by Small

and Medium Scale Enterprises for effective operations

Management of cash inflows as a facilitator for effective

operations of Small and Medium Scale Enterprises

Sound cash planning policies as a practice by Small and


Investment of excessive cash as a practice for effective


Monitoring cash outflows as a practice by Small and


Small and Medium Scale Enterprises in Delta State should

synchronize their cash inflows with their cash outflows as

a practice for effective business operations

Cash receipts should be forecasted as a practice for

effective operations by Small and Medium Scale

Enterprises

Cash expenditures should be forecasted as a practice for

effective operations by Small and Medium Scale

Enterprises

Staff dealing with cash should be trained periodically as a

practice for effective operations by Small and Medium

Scale Enterprises

Staff handling cash should be rotated at intervals as a

practice for effective internal controls by Small and

Medium Scale Enterprises

4.07

4.27

4.31

3.94

4.00

3.59

3.06

3.85

3.54

3.49

1.10

.83

.76

1.03

.99

1.31

1.25

1.13

1.09

1.20

Highly Required

Highly Required

Highly Required

Highly Required

Highly Required

Highly Required

Required

Highly Required

Highly Required

Required

Cluster Mean 3.81 1.07 Highly Required

N=990

Data in Table 2 showed that items 1, 2, 3, 4, 5, 6, 8 and 9 had mean

scores ranging from 3.54 to 4.31 which were within the boundary limit for

highly required. This implies that managers and accountants responded to the

aforementioned items on cash management practices required by Small and

140

Medium Scale Enterprises for effective operations in Delta State as highly

required. However, items 7 and 10 revealed that the mean scores ranged from

3.06 to 3.49 which were within the boundary limit for required. This implies

that managers and accountants responded to the fact that: Cash receipts should

be forecasted as a practice for effective operations by Small and Medium Scale

Enterprises; and Staff handling cash should be rotated at intervals as a practice

for effective internal controls by Small and Medium Scale Enterprises, as

required. The standard deviation values which ranged from .76 to 1.31 showed

that the opinions of the respondents were not too far from the mean. However,

since the cluster mean was 3.81, it therefore implies that managers and

accountants agreed to majority of the items on cash management practices as

highly required by Small and Medium Scale Enterprises for effective operations

in Delta State.

Research Question 3

What are the accounts receivable management practices required by Small and


To answer research question 3, the data generated in Section D of the


141

Table 3

Mean Responses of Respondents on Accounts Receivable Management Practices

Required by Small and Medium Scale Enterprises for Effective Operations S/N Items −

X SD Decision

1

2

3

4

5

6

7

8

9

10

Account receivables controlled as a practice for effective

operations by Small and Medium Scale Enterprises

Small and Medium Scale Enterprises should evaluate the

average credit extended to customers as a practice for their

effective business operations

Small and Medium Scale Enterprises should project

expected sales and expected investment in receivables as a

practice for effective business operations

Account receivables to customers should go with a time lag

for repayment as a practice for effective operations of

Small and Medium Scale Enterprises

Management of Small and Medium Scale Enterprises

should formulate policies guiding accounts receivables as a


Terms of agreement should be made for every credit sales

as a practice for effective operations of Small and Medium

Scale Enterprises

Management should make expectations on account

receivable turnover and resulting bad debts as a practice for


Enterprises

Management should review accounts receivable policies

from time to time as a practice for effective operations of


Collection policy should be made for obtaining payments

of past due accounts as a practice for effective operations

of Small and Medium Scale Enterprises

Staff should be trained in credit and collection policies as a

practice for the effective operations of Small and Medium

Scale Enterprises

3.93

3.67

3.62

4.15

2.95

3.79

3.19

3.04

2.75

2.79

1.04

1.14

1.15

.94

1.48

1.23

1.44

1.47

1.50

1.41

Highly Required

Highly Required

Highly Required

Highly Required

Required

Highly Required

Required

Required

Required

Required

Cluster 3.39 1.28 Required

N=990

Data in Table 3 showed that items 1, 2, 3, 4 and 6 had mean scores

ranging from 3.62 to 4.15 which were the boundary limit for highly required.

142

This implies that managers and accountants responded to the aforementioned

items on accounts receivable management practices as highly required by Small

and Medium Scale Enterprises for effective operations in Delta State. However,

items 5, 7, 8, 9 and 10 showed that the mean scores from 2.75 to 3.19 which

were within the boundary limit for required. This implies that managers and

accountants responded to these items on accounts receivable management

practices as required by Small and Medium Scale Enterprises for effective

operations in Delta State. The standard deviation values which ranged from .94

to 1.50 showed that the opinions of the respondents were not too far from the

mean. The Table further revealed a cluster mean of 3.39 which was within the

boundary limit for required, implying that managers and accountants on a

general note responded to accounts receivable management practices as

required by Small and Medium Scale Enterprises for effective operations in

Delta State.

Research Question 4

What are the inventory management practices required by Small and Medium

Scale Enterprises for effective operations in Delta State?

To answer research question 4, the data generated in Section E of the


143

Table 4

Mean Responses of Respondents on Inventory Management Practices Required by Small

and Medium Scale Enterprises for effective operations S/N Items −

X SD Decision

1

2

3

4

5

6

7

8

9

10

Minimum stock level should be fixed as a practice for the


Enterprises

Inventory management policies should be made as a

practice for optimal resource utilization of Small and


Sales forecast should be developed in inventory

management as a practice for the effective operations of


Excess inventories should be avoided as a practice for

effective internal controls of Small and Medium Scale

Enterprises

Inventory stock-out should be avoided as a practice for the


Enterprises

On-the-job training should be organized for staff on

inventory management needed as a practice for the


Enterprises

Inventories should be ordered following laid down

guidelines as a practice for effective operations of Small


Inventory planning should be made at regular intervals as a

practice for effective operations of Small and Medium

Scale Enterprises

Inventories should be properly checked on arrival as a


Scale Enterprises

Economic Order Quantity (EOQ) and Just-in-Time (JIT)

should be used to ascertain inventory level as a practice for


Enterprises

3.98

2.91

2.81

4.11

4.22

2.80

2.84

2.71

4.09

2.43

1.01

1.37

1.41

.89

.84

1.42

1.41

1.30

.92

.90

Highly Required

Required

Required

Highly Required

Highly Required

Required

Required

Required

Highly Required

Somewhat Required


N=990

The data in Table 4 revealed that items 2, 3, 6, 7 and 8 had mean scores

144

ranging from 2.71 to 2.91 which were within the boundary limit for required.

This implies that managers and accountants responded to the aforementioned

items on inventory management practices as required by Small and Medium

Scale Enterprises for effective operations in Delta State. While, items 1, 4, 5

and 9 showed that the mean scores ranged from 3.98 to 4.22 which were within

the boundary limit for highly required. This implies that managers and

accountants agreed to these items on inventory management practices as highly


Delta State. However, item 10 had a mean score of 2.43 which is in-between

the boundary limit of somewhat required. This means, managers and

accountants are in-different on if Economic Order Quantity (EOQ) and Just-in-

Time (JIT) should be used to ascertain inventory level as a practice for effective

operations of Small and Medium Scale Enterprises. The standard deviation

values which ranged from .84 to 1.42 showed that the opinions of the

respondents were not too far from the mean. In synopsis, the Table further

revealed the cluster mean of 3.29 which is within the boundary limit for

required, implying that managers and accountants on a general note responded

to the items on inventory management practices as required by Small and

Medium Scale Enterprises for effective operations in Delta State.

Research Question 5

What are the accounts payable management practices required by Small and


145

To answer this research question, the data generated in Section F of the


Table 5

Mean Responses of Respondents on Accounts Payable Management Practices Required

by Small and Medium Scale Enterprises for Effective Operations S/N Items −

X SD Decision

1

2

3

4

5

6

7

8

9

10

Management should set up disbursement system in

managing accounts payable as a practice for effective


Accounts payable policies and procedures should be

formulated as a practice for effective operations of


The duties of staff handling accounts payable should

be segregated as a practice for effective operations of


Accounts payable systems should be monitored and

reevaluated at intervals as a practice for effective


Accounts payables should be controlled as a practice

for effective operations of Small and Medium Scale

Enterprises

Accounts payables received from customers should go

with a time frame for payment as a practice for


Enterprises

Terms of agreement should be made for every credit

receipt as a practice for effective business operations


Staff should be trained on credit payment policies as a


Scale Enterprises

Management should review accounts payable policies

from time to time as a practice for effective operations


Management should project limits on accounts

payable as a practice for effective operations of Small


2.24

2.78

2.69

2.91

2.83

3.94

3.32

2.70

2.86

2.76

1.08

1.30

1.29

1.39

1.44

1.13

1.38

1.33

1.30

1.32

Somewhat Required

Required

Required

Required

Required

Highly Required

Required

Required

Required

Required


N=990

146

The data in Table 5 revealed that items 2, 3, 4, 5, 7, 8, 9 and 10 had

mean scores ranging from 2.69 to 3.32 which were within the boundary limit

for required. This implies that managers and accountants responded to these

items on accounts payable management practices as required by Small and

Medium Scale Enterprises for effective operations in Delta State. Exception to

all other items, were items 1 and 6 which showed that the mean scores of

managers and accountants were 2.24 and 3.94 respectively. This revealed that

in item 1, managers and accountants were in-different to the fact that

Management should set up disbursement system in managing accounts payable

as a practice for effective operations of Small and Medium Scale Enterprises.

While in item 46, managers and accountants responded that accounts payables

received from customers should go with a time frame for payment as a practice,

as highly required for effective operations of Small and Medium Scale

Enterprises. The standard deviation values which ranged from 1.08 to 1.44

showed that the opinions of the respondents were not too far from the

individual means. Since the cluster mean of 2.90 is within the boundary limit

for required, therefore, managers and accountants responded to majority of the

items on accounts payable management practices as required by Small and

Medium Scale Enterprises for effective operations in Delta State.

Research Question 6

What are the investment management practices required by Small and Medium

Scale Enterprises for effective operations in Delta State?

To answer research question 6, the data generated in Section G of the


147

Table 6 Mean Responses of Respondents on Investment Management Practices Required by

Small and Medium Scale Enterprises for Effective Operations S/N Items −

X

SD Decision

1

2

3

4

5

6

7

8

9

10

The rate of return on investments should be considered

before actually investing in working capital as a practice


Enterprises

Investment policies should be formulated as a practice


Enterprises

Risk on investments should be evaluated as a practice for


Enterprises

Management should engage in training on best

investment practices as a practice for effective operations


All idle cash should be invested into the business as a


Scale Enterprises

Investment decisions are left only in the hands of

management as a practice for effective operations of


Contractual agreements should be reached for every

investment made as a practice to facilitate effective


Investment policies and procedures should be reviewed

periodically as a practice for effective operations of


Liquidity and profitability should be major determinants

of investment in working capital as a practice for


Enterprises

Investment conversion period (i.e. cash-to-cash

conversion cycle) should be considered before investing

into business transactions as a practice for effective


4.04

2.81

3.62

2.80

3.87

4.12

3.64

2.73

3.91

3.25

1.01

1.47

1.33

1.33

1.15

1.03

1.26

1.34

1.08

1.35

Highly Required

Required

Highly Required

Required

Highly Required

Highly Required

Highly Required

Required

Highly Required

Required


N=990

The data in Table 6 revealed that items 1, 3, 5, 8 and 10 had mean scores

148

ranging from 3.62 to 4.12 which were within the boundary limit for highly

required. This implies that managers and accountants responded to the

aforementioned items on investment management practices as highly required

by Small and Medium Scale Enterprises for effective operations in Delta State.

While, items 2, 4, 6, 7 and 9 showed that the mean scores ranged from 2.73 to

3.25 which were the boundary limit for required. This implies that managers

and accountants responded to these items on investment management practices

as required by Small and Medium Scale Enterprises for effective operations in

Delta State. The standard deviation values which ranged from 1.01 to 1.47

showed that the opinions of the respondents were not too far from the mean. In

synopsis, the Table further revealed the cluster mean of 3.48 which was within

the boundary limit for required, implying that managers and accountants on a

general note responded to the investment management practices as required by

Small and Medium Scale Enterprises for effective operations in Delta State.

Hypotheses Testing

Null Hypothesis 1 (Ho1)

There is no significant difference between the mean responses of managers and

accountants on the sources of financing working capital required by Small and


To test this hypothesis, data extracted from Appendix K and Q were used

and the results presented in Table 7

149

Table 7

Two-tailed t-test Result of The Mean Responses of Managers and

Accountants on the Sources of Financing Working Capital Required by

Small and Medium Scale Enterprises for Effective Operations

s/n Managers

n=556

Accountants

n=434

df t-cal

t-crit Decision

−

X SD −

X SD

1 3.79 1.24 4.06 1.04 988

3.60 <1.96 NS

2 3.39 1.02 4.10 0.90 -2.89 <1.96 NS

3 2.72 1.42 2.97 1.35 -2.82 <1.96 NS

4 3.93 1.15 4.12 0.97 -2.82 <1.96 NS

5 3.87 1.13 4.04 0.95 -2.42 <1.96 NS

6 4.12 0.92 4.31 072 -3.64 <1.96 NS

7 3.51 1.28 3.66 1.20 -1.88 <1.96 NS

8 4.21 0.91 4.15 0.89 0.99 <1.96 NS

9 4.35 0.75 4.37 0.71 0.33 <1.96 NS

10 2.90 1.40 2.93 1.43 -0.28 <1.96 NS

GM 3.74 1.12 3.87 1.11 -0.57 <1.96 NS

NB: GM (Grand Mean)

The data in Table 7 show the analysis of t-test used to test the significant

difference of the mean responses of managers and accountants on the sources of

financing working capital required by Small and Medium Scale Enterprises for

effective operations in Delta State. The statistical result shows that all the items

tested are not significant. Also, the grand mean of the calculated t-value of -

0.57 at 988 degree of freedom is less than the t-table value of 1.96 at 0.05 level

of significance. The null hypothesis of no significant difference between the

mean responses of managers and accountants on the sources of financing

working capital required by Small and Medium Scale Enterprises for effective

operations in Delta State is therefore accepted. This means that managers and

150

accountants responses on the sources of financing working capital required by

Small and Medium Scale Enterprises for effective operations in Delta State, are

the same or similar.



accountants on the cash management practices required by Small and Medium


To test this hypothesis, data extracted from Appendix L and Q were used


Table 8


Accountants on The Cash management Practices Required by Small and

Medium Scale Enterprises for Effective Operations

s/n Managers

n=556

Accountants

n=434

df t-cal

t-crit Decision

−

X SD −

X SD

1 4.15 1.07 3.97 1.11 988

2.65 >1.96 S

2 4.22 0.90 4.33 0.74 -2.22 <1.96 NS

3 4.31 0.81 4.32 0.84 -0.30 <1.96 NS

4 3.93 1.04 3.96 1.01 -0.46 <1.96 NS

5 4.04 0.95 3.95 1.04 1.42 <1.96 NS

6 3.57 1.33 3.63 1.28 -0.73 <1.96 NS

7 3.00 1.27 3.14 1.23 -1.80 <1.96 NS

8 3.79 1.15 3.92 1.09 -1.81 <1.96 NS

9 3.55 1.07 3.51 1.11 0.61 <1.96 NS

10 3.49 1.25 3.49 1.13 1.43 <1.96 NS

GM 3.81 1.08 3.82 1.11 -0.03 <1.96 NS

151

The data in Table 8 show the analysis of the t-test used in testing the

significant difference between the mean responses of managers and accountants

on the cash management practices required by Small and Medium Scale

Enterprises for effective operations in Delta State. Evidence from the statistical

result shows that only item 1 was significant. The grand mean of the calculated

t-value of -0.03 at 988 degree of freedom is less than the t-table value of 1.96 at

0.05 level of significance. Based on the result, the null hypothesis of no



Enterprises for effective operations in Delta State is therefore accepted. This

means that managers and accountants did not respond to cash management

practices required by SMEs for effective operations in Delta State, differently.



accountants on the accounts receivable management practices required by


To test hypothesis 3, data extracted from Appendix M and Q were used


152

Table 9


Accountants on The Accounts Receivable Management Practices Required

by Small and Medium Scale Enterprises for Effective Operations

s/n Managers

n=556

Accountants

n=434

df t-cal

t-crit Decision

−

X SD −

X SD

1 3.94 1.03 3.93 1.05 988

0.13 <1.96 NS

2 3.58 1.19 3.78 1.05 -2.81 <1.96 NS

3 3.60 1.18 3.65 1.10 -0.70 <1.96 NS

4 4.27 0.84 3.98 1.03 4.89 >1.96 S

5 2.88 1.44 3.04 1.52 -1.67 <1.96 NS

6 3.87 1.14 3.68 1.34 2.50 >1.96 S

7 3.22 1.40 3.15 1.50 0.71 <1.96 NS

8 2.99 1.49 3.11 1.45 -1.23 <1.96 NS

9 2.75 1.49 2.75 1.52 0.46 <1.96 NS

10 2.82 1.37 2.75 1.46 0.03 <1.96 NS

GM 3.39 1.26 3.38 1.30 0.04 <1.96 NS

The data in Table 9 show that there is a significant difference in the

mean responses of managers and accountants in respect to only items 4 and 6.

The grand mean of the calculated t-value of 0.04 at 988 degree of freedom

which is less than the t-table value of 1.96 at 0.05 level of significance, shows

that the null hypothesis of no significant difference between the mean responses

of managers and accountants on the accounts receivable management practices


Delta State is therefore accepted. This means that managers and accountants

responses on the accounts receivable management practices required by SMEs

for effective operations in Delta State, are similar.

153



accountants on the inventory management practices required by Small and


To test this hypothesis, data extracted from Appendix N and Q were used


Table 10


Accountants on The Inventory management Practices Required by Small

and Medium Scale Enterprises for Effective Operations

S/N Managers

n=556

Accountants

n=434

df t-cal

t-crit Decision

−

X SD −

X SD

1 4.03 0.94 3.91 1.09 988 1.99 >1.96 S

2 2.84 1.38 2.99 1.36 -1.70 <1.96 NS

3 2.87 1.39 2.73 1.43 1.53 <1.96 NS

4 4.06 0.91 4.17 0.86 -1.90 <1.96 NS

5 4.22 0.83 4.21 0.85 0.20 <1.96 NS

6 2.83 1.43 2.77 1.41 0.65 <1.96 NS

7 2.84 1.41 2.84 1.42 0.00 <1.96 NS

8 2.66 1.32 2.77 1.27 -1.39 <1.96 NS

9 4.03 0.96 4.17 0.85 -2.31 <1.96 NS

10 2.35 0.93 2.53 0.85 -3.16 <1.96 NS

GM 3.27 1.15 3.31 1.14 -0.11 <1.96 NS

The data in Table 10 show the analysis of the t-test used in testing the


on the inventory management practices required by Small and Medium Scale

Enterprises for effective operations in Delta State. The statistical result shows

that, only item 1 was significant. The grand mean of the calculated t-value of -

0.11 at 988 degree of freedom is less than the t-table value of 1.96 at 0.05 level

of significance. The null hypothesis of no significant difference between the

154

mean responses of managers and accountants on the inventory management


operations in Delta State is therefore accepted. This means that managers and

accountants did not responded to the inventory management practices required

by SMEs for effective operations in Delta State, differently.



accountants on the accounts payable management practices required by Small

and Medium Scale Enterprises for effective operations in Delta State

To test this hypothesis, data extracted from Appendix O and Q were used


Table 11


Accountants on The Accounts Payable Management Practices Required by

Small and Medium Scale Enterprises for Effective Operations

S/N Managers

n=556

Accountants

n=434

df t-cal

t-crit Decision

−

X SD −

X SD

1 2.45 1.02 1.98 1.09 988

7.05 >1.96 S

2 2.73 1.32 2.84 1.28 -1.25 <1.96 NS

3 2.66 1.28 2.74 1.35 -0.99 <1.96 NS

4 3.06 1.38 2.71 1.37 3.92 >1.96 S

5 2.88 1.43 2.76 1.44 1.27 <1.96 NS

6 3.92 1.09 3.97 1.18 -0.67 <1.96 NS

7 3.36 1.39 3.28 1.36 0.88 <1.96 NS

8 2.69 1.34 2.71 1.31 -0.18 <1.96 NS

9 2.82 1.32 2.92 1.26 -1.19 <1.96 NS

10 2.72 1.36 2.81 1.27 -1.04 <1.96 NS

GM 2.93 1.29 2.87 1.29 0.27 <1.96 NS

155

The data in Table 11 show the analysis of t-test used in testing the


on the accounts payable management practices required by Small and Medium

Scale Enterprises for effective operations in Delta State. The result shows that

exception to others, only item 1 and 4 were significant. The grand mean of the

calculated t-value of 0.27 at 988 degree of freedom which is less than the t-table

value of 1.96 at 0.05 level of significance, revealed that the null hypothesis of

no significant difference between the mean responses of managers and

accountants on the accounts payable management practices required by Small

and Medium Scale Enterprises for effective operations in Delta State is

therefore accepted. This means that managers and accountants responses on the

accounts payable management practices required by SMEs for effective

operations in Delta State, are the same or similar.



accountants on the investment management practices required by Small and


To test this hypothesis, data extracted from Appendix P and Q were used


156

Table 12


Accountants on The Investment Management Practices Required by Small

and Medium Scale Enterprises for Effective Operations

S/N Managers

n=556

Accountants

n=434

df t-cal

t-crit Decision

−

X SD −

X SD

1 4.00 0.98 4.09 1.04 988

-1.27 <1.96 NS

2 2.81 1.43 2.80 1.51 0.11 <1.96 NS

3 3.60 1.10 3.57 1.52 7.51 >1.96 S

4 2.80 1.32 2.80 1.35 0.05 <1.96 NS

5 4.01 1.03 3.69 1.26 4.42 >1.96 S

6 4.28 0.81 3.91 1.22 5.77 >1.96 S

7 3.61 1.06 3.59 1.39 7.99 >1.96 S

8 2.78 1.30 2.65 1.38 1.54 <1.96 NS

9 3.91 1.12 3.92 1.04 -0.13 <1.96 NS

10 3.47 1.24 2.95 1.37 8.66 >1.96 S

GM 3.53 1.14 3.40 1.31 1.08 <1.96 NS

Table 12 show the analysis of the t-test used in testing the significant

difference between the mean responses of managers and accountants on the

investment management practices required by Small and Medium Scale

Enterprises for effective operations in Delta State. The statistical result shows

that items 1, 2, 4, 8 and 9 were not significant while items 3, 5, 6, 7, and 10

were significant. However, the grand mean of the calculated t-value of 1.08 at

988 degree of freedom which is less than the t-table value of 1.96 at 0.05 level

of significance, shows that the null hypothesis of no significant difference

between the mean responses of managers and accountants on the investment


157

effective operations in Delta State is therefore accepted. This means that

managers and accountants did not respond to the investment management


operations in Delta State, differently.

Findings

1. It was found that Small and Medium Scale Enterprises in Delta State

highly require financing their working capital through: equity finance,

long-term debt, accounts payable, accruals, bank loans, promoters’ fund,

borrowing from friends and family, and thrift. While majority of them

(SMEs) require financing their working capital through: asset based

financing, and unsecured financing.


highly require the following cash management practices: maintaining

optimum cash balance, managing cash inflows, have sound cash

planning policies, invest excessive cash, monitor cash out flows,

synchronizes their cash outflows with their cash inflows, forecast cash

expenditures, and train staff dealing with cash periodically. While SMEs

in Delta State require the following cash management practices: cash

receipts should be forecasted, and staff handling cash should be rotated

at intervals.

158


highly require the following accounts receivable management practices:

accounts receivables are controlle, average credit extended to customers

are evaluated, accounts receivables to customers goes with a time lag for

repayment, expected sales and investment in receivables are projected,

and terms of agreement are made for every credit sales. While managers

and accountants also agreed that SMEs require the following accounts

receivable management practices: SMEs should formulate policies

guiding accounts receivable, reviewing accounts receivable policies from

time to time, managing accounts receivable turnover and resulting bad

debt, collection policy being made for obtaining payments of past due

accounts, and staff should be trained in credit and collection policies.


highly require the following inventory management practices: minimum

stock level is fixed, excess inventories are avoided, inventory stock out

are avoided, and inventories are properly checked on arrival. While

Small and Medium Scale Enterprises in Delta State require the following

inventory management practices: inventory management policies being

made for optimal resource utilization, sales forecast are developed in

inventory management for effective operations, on-the-job training are

should be organized for staff on inventory management, inventories

159

should be ordered following laid down guidelines, and inventory

planning being made at regular intervals. More so, SMEs somewhat

require Economic Order Quantity (EOQ) and Just-in-Time (JIT) as a

practice to ascertain inventory level.


highly require one accounts payable management practice amongst

others which is; accounts payables received from customers goes with a

time frame for payment. While Small and Medium Scale Enterprises in

Delta State somewhat require one accounts payable management

practice: management should set up disbursement systems in managing

accounts payable. furthermore, SMEs require the following accounts

payable management practices: accounts payable policies and

procedures should be formulated, duties of staff handling accounts

payable should be segregated, accounts payable systems should be

monitored and reevaluated at intervals, accounts payables should be

controlled, terms of agreement should be made for every credit receipt,

staff should be trained on credit payment polices, management should

review accounts payable policies from time to time and management

should project limit on accounts payable.

160


highly require the following investment management practices: the rate

of return on investment should be considered before actually investing in

working capital, risk on investment are evaluated, all idle cash should be

invested into the business, investment decisions should be left only in the

hands of management, contractual agreements should be reached for

every investment made, and liquidity and profitability should be major

determinants of investment in working capital. While managers and

accountants of Small and Medium Scale Enterprises in Delta State

agreed that SMEs require the following investment management

practices: investment policies should be formulated, management should

engage in training on best investment practices, investment policies and

procedure should be reviewed periodically, and investment conversion

period should be considered before investing into business transactions.

7. It was found that there was no significant difference between the mean

responses of managers and accountants on the sources of financing

working capital required by Small and Medium Scale Enterprises for

effective operations in Delta State.


responses of managers and accountants on the cash management practice

161

required by Small and Medium Scale Enterprises for effective operations

in Delta State.


responses of managers and accountants on the accounts receivable

management practices required by Small and Medium Scale Enterprises

for effective operations in Delta State.


responses of managers and accountants on the inventory management


operations in Delta State.


responses of managers and accountants on the accounts payable

management practices required by Small and Medium Scale Enterprises

for effective operations in Delta State.


responses of managers and accountants on the investment management



162

Discussion of Findings

In this section the findings are discussed under subheadings as follows:

Sources of Financing Working Capital Required by SMEs for Effective

Operations

The findings of the study revealed sources of financing working capital

as highly required by Small and Medium Scale Enterprises for effective

operations in Delta State. The results revealed that the major sources of

financing the working capital of SMEs

in Delta State for their effective

operations are: equity finance; long term debt; accounts payable; accruals; bank

loans ; promoters fund; borrowing from friends and family; and thrift, which

are in consonance with the views of Pfohl, Elbert & Hofmann (2003). They

deposed that the major sources of financing the working capital of businesses

vis-à-vis Small and Medium Scale Enterprises are: supplier’s credit, bank loans,

promoter’s fund, equity finance, long-term debt, off-balance sheet financing,

asset-based financing, accounts payable, accruals and unsecured financing.

Empirically, Fisman (2001) showed short-term credit; particularly

supplier credit is positively correlated with capacity utilization because firms

lacking credit face inventory shortages leading to lower capacity utilization.

Petersen and Rajan (1997) argue that even in the United States, with extremely

well developed financial markets, trade credit is the largest single source of

short-term financing. Fisman, particularly claims in developing countries where

163

formal lenders are limited, trade credit plays an even more significant role in

funding firm’s activities.

According to researchers, such as: Van Horne and Wachowicz (2000);

Moyer, Mcguigan and Kretlow, (2004), the working capital financing logic is

that, temporary current assets are financed with short-term loans and the

permanent current assets with long term debt or equity capital. However, the

actual investment and financing mix match-up depends on management’s

approach towards risk and profitability. In the words of Keown, Martin, Petty &

Scott (2005) finance sources of working capital management acts as a guiding

principle to the manner that working capital should be managed in order for

SMEs to attain efficiency in their operations.

The result of this study from Table 1 has also lead to the implication that

Small and Medium Scale Enterprises in Delta State require asset-based

financing and unsecured financing as major sources of financing their working

capital for their effective operations. In corroborating this finding, researchers

(Kallberg and Parkinson, 1984; Van Auken & Holman, 1995; Gallinger, 1997)

argue that businesses that use these forms of financing have a higher probability

of failure than those that do not. Funding of working capital from asset-based

finance is used by businesses that do not have access to lower cost debt, or

during inflationary times, or when the risk of insolvency is high. A primary

consideration for this loan is whether assets secured by the loan have the

164

liquidation value necessary to support the loan. Asset-based lenders are mainly

interested in the asset valuation and the present financial performance of the

business. Historical results will certainly be reviewed, but current trends and

business projection tend to receive greater attention.

The result of the analysis in Table 7 revealed that there was no


on the sources of financing working capital required by Small and Medium

Scale Enterprises for effective operations in Delta State. This means that

managers and accountants responses on the sources of financing working

capital required by SMEs for effective operations in Delta State, are the same or

similar. Hence, the importance of finance in promoting the growth of small

business has been acknowledged in prior studies on small business growth and

development (Marfo-Yiadom & Agyei, 2012; Abor and Biekpe, 2006). They

have identified finance as the most important constraint to growth in the small

business sector. In their studies, shortage of working capital is the main reason

for small business closures.

The data answering the research questions showed that all other sources

of financing working capital are highly required except for asset-based

financing and unsecured financing which were required, From the perspective

of the researcher, the reason why asset-based financing and unsecured financing

are not as highly required like the others is because these sources of financing

165

working capital are not usually common with SMEs since their asset base is

usually small. Rather, asset-based financing and unsecured financing are

commonly used by large firms in financing their working capital.

Cash Management Practices Required by SMEs for Effective Operations

The result of the findings in Table 2 revealed that Managers and

Accountants responded to most of the cash management practices as highly


Delta State. Some of the cash management practices which they highly require

include: maintaining optimum cash balance; managing cash inflows, having

sound cash planning policies; investing excessive cash; monitoring cash out

flows; synchronizing cash outflows with their cash inflows; forecasting cash

expenditures; and training staff dealing with cash periodically. The result

above, confirms the views of Gitman (1997) and Scherr, (2004) that the purpose

of cash management is to determine and achieve the appropriate level and

structure of cash, and marketable securities, consistent with the nature of the

business's (SMEs inclusive) operations and objectives. Similarly the result

agrees with the findings of Marfo-Yiadom & Agyei (2012) who noted that

every business uses cash balances. Cash is used to pay creditors, pay for

purchases, and pay wage and salaries to employees. It is also used to acquire

non-current assets. Furthermore, it is required to pay interest on loans and

taxation. Cash is the most liquid and the most coveted asset of a business. It is

166

the life blood of every enterprise. The success of a business depends to a large

extent on how the firm’s cash is managed. According to Lasher (2000), bad

cash management practices can make a strong company weak to the point of

failure. He stressed that especially among small firms; it is uncommon for

companies to be simultaneously profitable and bankrupt.

However, the study also revealed that Small and Medium Scale

Enterprises in Delta State require the following cash management practices for

the effective operations of SMEs: cash receipts should be forecasted and staff’s

handling cash should be rotated at intervals. Hence, Deakins, Logan and Steele

(2001) noted that managing cash flow and cash conversion cycle is a critical

component of overall financial management for all firms, especially those who

are capital constrained and more reliant on short-term sources of finance. The

findings of this study is at variance with the study of Tewolde (2002) who

found that firms controls cash collections by separating duties for sequential

cash operations, handling and recording. Therefore, proper cash management

depicts effective operations of Small and Medium Scale Enterprises. This is

because losses will be minimized, profitability of the business will increase, and

consistency with the nature of the Small and Medium Scale Enterprise

objectives can be easily attained.

In the result of the analysis in Table 8, it was found that there was no


167


Enterprises for effective operations in Delta State. This means that managers

and accountants did not respond differently on the cash management practices

required by SMEs for effective operations in Delta State. This result is in

agreement with Tewolde (2002) who observed that all managers of the

transition firms believe that the management of cash levels has a pivotal role in

creating firms value. However, the firms’ value creation potential in this area is

hampered by the lack of managerial empowerment and uncertainty due to the

privatization process. They are restricted to the control function, which is

evidenced by the strict control mechanisms imposed over the levels of cash,

receivables and inventory as well as operations of cash collections, cash

payments, purchases and sales.

From the view of the researcher, cash receipts being forecasted as a

practice and staff handling cash being rotated as a practice by Small and

Medium Scale Enterprises were responded to as required exception to the other

items on cash management practices which were highly required because cash

receipts are not usually planned for by SMEs and due to inadequate staff among

SMEs, rotation of staff handling cash will almost be impossible.

168

Accounts Receivable Management Practices Required by SMEs for

Effective Operations

It was found that Small and Medium Scale Enterprises in Delta State

require accounts receivable management practices as occasioned by the cluster

mean of 3.39 in Table 3. This supports the view of Kaur (2010) who opined

that, the inefficient management of accounts receivable not only reduces

profitability but ultimately may also lead a business concern to financial crises.

The result further reveals that Small and Medium Scale Enterprises in Delta

State highly require the following accounts receivable management practices

for effective operations: accounts receivables should be controlled, average

credit extended to customers should be evaluated, accounts receivables to

customers should go with a time lag for repayment, expected sales and

investment in receivables should be projected, and terms of agreement should

be made for every credit sales. This result supports the views Pfohl, Elbert &

Hofmann (2003), advising that the objective of any management policy

pertaining to accounts receivables would be to ensure that the benefits arising

due to the receivables are more than the cost incurred for receivables and the

gap between benefit and cost increases resulting in increased profits. An

effective control of receivables helps a great deal in properly managing it. Each

business should, therefore, try to find out average credit extended to its client.

169

However, the study also revealed that the following accounts receivable

management practices are required by Small and Medium Scale Enterprises in

Delta State, as indicated by the boundary limit of 2.75 to 3.19 in Table 3: SMEs

should formulate policies guiding accounts receivable, management should

review accounts receivable policies from time to time, management should

make expectations on accounts receivable turnover and resulting bad debt,

collection policy is should be made for obtaining payments of past due

accounts, and staff should be trained in credit and collection policies. This

findings is supported by Bhattacharya( 2009) who opined that major risks that

arise from granting credit include bad debts and debtor delinquency, because

they reduce the returns from the investment in accounts receivable, and if

inadequately monitored can impact severely on the business's financial

performance.

Still on the issue of accounts receivable management practices Marfo-

Yiadom & Agyei (2012) stated that because of the prominence of credit

transactions it was necessary to find out the relative percentage of turnover that

represented credit sales. Out of the respondents who conducted business on

credit basis about 60 percent had between 10-30 percent on credit. The rest

could not determine the percentage of their credit sales because of poor or no

records kept.

170

In the result of the analysis in Table 9, it was found that there was no


on the accounts receivable management practices required by Small and

Medium Scale Enterprises for effective operations in Delta State. This means

that managers and accountants responses on the accounts receivable

management practices required by SMEs for effective operations in Delta State,

are the same or similar. On accounts receivables Lind (2011) noted that the

management of accounts receivables needs to be in balance: if the collection

policy of a firm is stringent, it may reduce bad debts and the resources tied up

in receivables, but at the same time, it probably affects sales negatively as well.

On the other hand, profits from credit sales do not benefit a firm unless the

account is collected.

Inventory Management Practices Required by SMEs for Effective

Operations

The result in Table 4 revealed that out of ten items, only four inventory

management practices are highly required by Small and Medium Scale

Enterprises in Delta State for effective operations, which include: minimum

stock level should be fixed, excess inventories should be avoided, inventory

stock out should be avoided, and inventories should be properly checked on

arrival. These findings are in consonance with Breuer (2009) who deposed that

a good inventory management practice is important to the successful operations

171

of most organizations, unfortunately the importance of inventory is not always

appreciated by top management. Similarly this finding agrees with the view of

Scherr (2004), who noted that inventory planning helps to match inventory

requirements to sales and production needs. It also helps to know inventory

acquisition and usage during lead-time, quantity on hand and on order as well

as the levels of safety stock.

However, the study also revealed that six out of the ten items in Table 4

had mean ratings ranging between 2.71 to 2.91indicating that Small and

Medium Scale Enterprises in Delta State merely require the following inventory

management practices: inventory management policies should be made for

optimal resource utilization, sales forecast should be developed in inventory

management, on-the-job training should be organized for staff on inventory

management, inventories should be ordered following laid down guidelines,

and inventory planning should be made at regular intervals. Furthermore,

Economic Order Quantity (EOQ) and Just-in-Time (JIT) as being used to

ascertain inventory level was responded to as somewhat require. Supporting

these findings, Breuer (2009) stated that the major challenge with inventory

management is due to the failure of firm’s vis-à-vis Small and Medium Scale

Enterprises in recognizing the link between inventories and achievement of

organizational goals or due to ignorance of the impact that inventories can have

on costs and profits. In supporting the view of Breuer on the challenges of

172

inventory management practices, Maysami (2009) advised that since holding

inventory involves costs such as storage and insurance expenses, excess

inventory must also be avoided if minimal cost and maximum profits are

desired.

From the result of the analysis in Table 10, it was found that there is no


on the inventory management practices required by Small and Medium Scale


and accountants responses on the inventory management practices required by

SMEs for effective operations in Delta State, are the same or similar. This

finding is supported by Baig (2012) who in his study reported that managers of

most firms’ stated that the main purpose for managing inventory is to safe

guard against shortages and to keep production running. However, only the

financial managers of private firms consider the costs of materials inventory as

significant for the management to give it special attention. The approach that all

firms apply in order to achieve the objectives of materials inventory

management is by strictly controlling and buying just in time for production.

Moreover, all the private firms minimize the inventory level for managing cost

of holding of material inventory. However no one is applying economic order

quantity for this purpose. All the firms are using FIFO method for costing and

average cost method for valuation of material inventory.

173

Observing these findings, the researcher noted Economic Order Quantity

(EOQ) and Just-in-Time (JIT) as being used to ascertain inventory level was

responded to as somewhat require by Small and Medium Scale Enterprises.

This means SMEs are in-different about the use of EOQ and JIT in ascertaining

their stock level. The possible reason from the view of the researcher is that

staff running SMEs are not adequately trained in the use of EOQ and JIT in

determining their stock level.

Accounts Payable Management Practices Required by SMEs for Effective

Operations

In Table 5, it was found out that Small and Medium Scale Enterprises

merely require most of the accounts payable management practices as indicted

by mean ratings between 2.69 to 3.32. Out of ten items, only one accounts

payable management practice is highly required by Small and Medium Scale

Enterprises in Delta State for effective operations which is; accounts payables

received from customers should go with a time frame for payment. The findings

of this research corroborate the views of Mullins (2009) and Scherr (2004) who

opined that accounts payable are obligations (debt, liabilities) that will be

settled at a future time. They are considered "current liabilities," which means

that the debt will be settled with current assets during the current operating

cycle.

174

However, the study revealed that eight out of the ten items in Table 5

had mean ratings between 2.69 to 3.32 indicating that Small and Medium Scale

Enterprises in Delta State require the following accounts payable management

practices: accounts payable policies and procedures should be formulated,

duties of staff handling accounts payable should be segregated, accounts

payable systems should be monitored and reevaluated at intervals, accounts

payables should be controlled, terms of agreement should be made for every

credit receipt, staff should be trained on credit payment polices, management

should review accounts payable policies from time to time, and management

should project limit on accounts payable. Also, responses to item one revealed

that SMEs somewhat require, that management should set up disbursement

systems in managing accounts payable.

Inspite of the challenges of managing accounts payable, various studies

by Chandra (2008); Cunningham et al (2000); and Fafchamps (1998) stated that

businesses make sales on credit for two basic reasons: (1) selling on credit may

be more convenient than selling for cash and (2) offering credit will encourage

customers to buy items they might not otherwise purchase. Chandra (2008) and

Fafchamps (1998) noted that while business firms would like to sell on cash,

the pressure of competition and the force of custom persuade them to sell on

credit. It is valuable to customers as it augments their resources-it is particularly

appealing to those customers who cannot borrow from other sources or find it

175

very expensive or inconvenience to do so. Chandra’s study revealed that 50

percent of the respondents conducted their business on both cash and credit

basis. Another 42 percent did business on cash only basis, whiles the remainder

did business on credit only basis. Because of the prominence of credit

transactions it was necessary to find out the relative percentage of turnover that

represented credit sales. Out of the respondents who conducted business on

credit basis about 60 percent had between 10-30 percent on credit. The rest

could not determine the percentage of their credit sales because of poor or no

records kept.



on the accounts payable management practices required by Small and Medium

Scale Enterprises for effective operations in Delta State. This means that

managers and accountants responses on the accounts payable management

practices required by SMEs for effective operations in Delta State, are the same

or similar. In agreeing to this finding, Deloof (2003) found out that delaying the

number of days of accounts payable has a negative relation to the profitability

of firms’ vis-à-vis SMEs in Delta State. According to him, the best explanation

for this is that less profitable firms wait longer to pay their bills.

The data in table 5 revealed that accounts payable received from

customers should go with a time frame for payment as a practice was responded

176

to as highly required because every Small and Medium Scale Enterprise would

want to know when their debtors are likely to pay their debt. More so, majority

of the items were responded to as required because they are more of policies

that would enhance the effective operations of SMEs.

Investment Management Practices Required by SMEs for Effective

Operations

The result in Table 6 revealed that out of ten items, four investment

management practices are highly required by Small and Medium Scale

Enterprises in Delta State for effective operations, which include: the rate of

return on investment should be considered before actually investing in working

capital, risk on investment should be evaluated, all idle cash should be invested

into the business, investment decisions should be left only in the hands of

management, contractual agreements should be reached for every investment

made, and liquidity and profitability should be major determinants of

investment in working capital. These findings is supported by the study of

Scheer (2004) who noted that investment has to be made in current assets, and

as with all investments the returns should exceed the required rate of return,

otherwise the business's success will be jeopardized. Moreover, in the interests

of efficiency and productivity, this investment needs to be carefully managed.

The investment in current assets should comprise the best possible

combinations of cash, debtors, inventory, and prepayments, which enable the

177

effective and efficient utilization of the investment in current and fixed assets.

To corroborate Scheer’s findings, Drury (2005) deposed that capital investment

decision normally represent the most vital decision that an organization makes,

since it commits a substantial proportion of resources to actions that are likely

to be irreversible. It is then necessary to identify a series of steps and

appropriate practices needed before executing investment decisions in firm’s

vis-à-vis Small and Medium Scale Enterprises.

The study further to revealed that Small and Medium Scale Enterprises

in Delta State merely require the following investment management practices:

investment policies should be not formulated, management should engage in

training on best investment practices, investment policies and procedures

should be reviewed periodically, and investment conversion period should be

considered before investing into business transactions. Studying investment

management practices by firms, Baig (2012) found out that the composition of

working capital in total assets is slightly excessive in private firms i.e. 58%

(when compared to the global ratio of 50%) given the manufacturing nature of

the activities that the firms are in. Particularly, the private firms with an average

of 58.4% of total investment tied up in working capital assets show excessive

investment in current assets. The comparative trend over the ten years of

current assets to total assets composition supports the argument that private

firms have recorded increasing trend of investment in current assets, while

178

Public firms have recorded decreasing trend. He discovered that both the

private and public firms have invested most of their working capital assets in

inventory followed by receivables and lastly in cash.



on the investment management practices required by Small and Medium Scale


and accountants did not respond differently on the investment management

practices required by SMEs for effective operations in Delta State. In agreeing

to this finding, Baig (2012) stated that the objectives of investment management

practices is constrained by lack of working capital investment, skilled labour

and managerial empowerment by top management (managers and accountants

inclusive) of firms.

179

CHAPTER V

SUMMARY, CONCLUSION AND RECOMMENDATIONS

Re-statement of the Problem


economic growth and development of any nation. Inspite of the fact that Small

and Medium Scale Enterprises are the engine room behind a nation’s

development, yet this sector is bedeviled by several constraints amid poor

working capital management which continues to mar its laudable objectives.

From literatures, it is evident that many writers highlight the importance of

working capital management, yet, there is evidence that small businesses are

not very good at managing their working capital. Given that many small

businesses suffer from under capitalization (Peel & Wilson, 1996; Mclnnes,

2000).

Small and Medium Scale Enterprises often encounter several problems

in their working capital management like: not knowing the required sources of

financing working capital; inappropriate management of cash flows; no laid

down collection policies of accounts receivables; frequent inventory stock-out;

poor controlling of accounts payables; and non-evaluation of risk on investment

(Lyytinen, 2009). More so, Tewolde (2002) identified that most firm’s vis-à-vis

Small and Medium Scale Enterprises are characterized with both internal and

external problems: Internally, firms hold inappropriate levels of working

180

capital- resulting to uncontrolled cost of holding the working capital items and

externally, the firms lack proper policies and practices of co-operation with

their suppliers and customers on financial matters.

Against the background of the foregoing, it therefore became imperative

to determine working capital management practices required by Small and

Medium Scale Enterprises for effective operations in Delta State. Specifically,

the study sought six objectives. Six research questions were answered in the

study while six hypotheses were tested at 0.05 level of significance.

To address this problem, therefore, the following specific objectives

were pursued:

1. sources of financing working capital required by Small and Medium


2. cash management practices required by Small and Medium Scale

Enterprises for effective operations in Delta State

3. accounts receivable management practices required by Small and


4. inventory management practices required by Small and Medium


5. accounts payable management practices required by Small and


6. investment management practices required by Small and Medium


181

Summary of the Procedures Used

The descriptive survey design was adopted for this study. The population

for the study consisted of 3,627 respondents, made up of 2,012 managers and

1,615 accountants from the 2,012 Small and Medium Scale Enterprises

operating in Delta State, as registered with the Ministry of Commerce and

Industry. The sample consisted of 1,110 respondents made up of 616 managers

and 494 accountants, representing 30.6% of the population. A Working Capital

Management Practices Questionnaire (WCMPQ) was used as the instrument for

this study. It is a 62-item questionnaire containing seven (7) subscales (A-G),

structured on a five-point likert rating scale. The face validity of the research

instrument was determined by five experts while the reliability of the

instrument was obtained from the response of 30 managers and 30 accountants

in Edo State, which were not part of the area under study. A grand co-efficient

of .81 was obtained for the study using Cronbach Alpha Reliability Coefficient.

Eighteen trained research assistants were used by the researcher on personal

contact administration and retrieval of the research instrument, to and from the

respondents. Nine hundred and ninety copies of the instrument were duly

completed and returned, representing eighty-nine percent rate of return. The

data were personally collated and scored by the researcher. The scored data

were analyzed using mean and standard deviation for the six research questions

182

while the t-test statistic was used to test the six null hypotheses at 0.05 level of

significance.

Summary of Findings

Based on the data analyzed, the findings of the study are summarized as

follows:

1. Small and Medium Scale Enterprises (SMEs) in Delta State highly

require the financing of their working capital through: equity finance,

long-term debt, accounts payable, accruals, bank loans, promoters fund,

borrowing from friends and family, and thrift. While majority of them

(SMEs) merely require the financing of their working capital through:

asset based financing, and unsecured financing.

2. Small and Medium Scale Enterprises in Delta State highly require the

following cash management practices: maintaining optimum cash

balance, manage cash inflows, having sound cash planning policies,

investing excessive cash, monitoring cash out flows, synchronizing their

cash outflows with their cash inflows, forecasting cash expenditures, and

training staff dealing with cash periodically. While SMEs merely require

the following cash management practices: cash receipts should be

forecasted, and staff handling cash should be rotated at intervals.

183


following accounts receivable management practices: accounts

receivables should be controlled, average credit extended to customers

should be evaluated, accounts receivables to customers should go with a

time lag for repayment, expected sales and investment in receivables

should be projected, and terms of agreement should be made for every

credit sales. While majority of SMEs merely require or are in-different

on the following accounts receivable management practices: SMEs

should formulate policies guiding accounts receivable, management

should review accounts receivable policies from time to time,

management should make expectations on accounts receivable turnover

and resulting bad debt, collection policy should be made for obtaining

payments of past due accounts, and staff should be trained in credit and

collection policies.


following inventory management practices: minimum stock level should

be fixed, excess inventories should be avoided, inventory stock out

should be avoided, and inventories are properly checked on arrival.

While Small and Medium Scale Enterprises in Delta State merely require

the following inventory management practices: inventory management

policies should be made for optimal resource utilization, sales forecast

184

should be developed in inventory management, on-the-job training

should be organized for staff on inventory management, inventories

should be ordered following laid down guidelines, inventory planning

should be made at regular intervals, and Economic Order Quantity

(EOQ) and Just-in-Time (JIT) should be used to ascertain inventory

level.

5. Small and Medium Scale Enterprises in Delta State highly require only

one accounts payable management practice amongst others which is;

accounts payables received from customers should go with a time frame

for payment. While managers and accountants representing Small and

Medium Scale Enterprises in Delta State agreed that they merely require

the following accounts payable management practices: management

should set up disbursement systems in managing accounts payable,

accounts payable policies and procedures should be formulated, duties of

staff handling accounts payable should be segregated, Accounts payable

systems should be monitored and reevaluated at intervals, accounts

payables should be controlled, terms of agreement should be made for

every credit receipt, staff should be trained on credit payment polices,

management should review accounts payable policies from time to time

and management should project limit on accounts payable.

185


following investment management practices: the rate of return on

investment should be considered before actually investing in working

capital, risk on investment should be evaluated, all idle cash should be

invested into the business, investment decisions should left only in the

hands of management, contractual agreements should be reached for

every investment made, and liquidity and profitability should be major

determinants of investment in working capital. While majority of Small

and Medium Scale Enterprises in Delta State require the following

investment management practices: investment policies should be

formulated, management should engage in training on best investment

practices, investment policies and procedures should be reviewed

periodically, and investment conversion period should be considered

before investing into business transactions.

7. There was no significant difference between the mean responses of

managers and accountants on the sources of financing working capital


in Delta State.


managers and accountants on the cash management practice required by

186


State.


managers and accountants on the accounts receivable management




managers and accountants on the inventory management practices


in Delta State.


managers and accountants on the accounts payable management




managers and accountants on the investment management practices


in Delta State.

187

Implications for Business Education/ SME Operators

The findings of this study have positive implications for business

education, which includes:

The knowledge gained from this findings on working capital


effective operations in Delta State will aid business educators to improve the

curriculum on key areas they would focus on in equipping students with the

relevant skills and knowledge on appropriate working capital management

practices that would enable business education students to set-up viable and

successful Small and Medium Scale Enterprises.

The findings of the study will immensely assist researchers in Business

Education and other related disciplines in this area of study, as a reference

material. Thus, this will help to increase the data bank of these researchers on

updated working capital management practices required by Small and Medium

Scale Enterprises for effective operations.

The findings of this study would tremendously benefit the management

of Small and Medium Scale Enterprises, as to the management of their working

capital for efficiency to be attained in the enterprises operations. The

understanding and application of working capital management, will in turn lead

188

to the profitability, liquidity, reduction of financial cost, and easy access to

release more capital for the strategic objectives of SMEs.

The findings of this study, would be useful to agencies and associations

of Small and Medium Scale Enterprises like; Small and Medium Scale

Enterprise Development Agency of Nigeria (SMEDAN), and Nigerian

Association of Small and Medium Scale Enterprises (NASME). It provided

updated and relevant information to these agencies and associations that would

enable them to channel their workshops, seminars, conferences and trainings

leading to an increased efficiency in the operations of Small and Medium Scale

Enterprises.

Conclusion

Based on the findings of the study, the following conclusions were drawn:

Small and Medium Scale Enterprises in Delta State responded that both

long-term and short-term sources are highly required in financing their working

capital; while managers and accountants did not differ significantly in their

mean responses on the sources of financing working capital required by Small

and Medium Scale Enterprises for effective operations in Delta State.

Small and Medium Scale Enterprises in Delta State highly require most

cash management practices; while managers and accountants did not differ

189

significantly in their mean responses on the cash management practice required


Small and Medium Scale Enterprises in Delta State merely require most

accounts receivable management practices; while managers and accountants did

not differ significantly in their mean responses on the account receivable


effective operations in Delta State.

Small and Medium Scale Enterprises in Delta State require most

inventory management practices; while managers and accountants did not differ

significantly in their mean responses on the inventory management practices


Delta State.


accounts payable management practices; while managers and accountants did

not differ significantly on the accounts payable management practices required



investment management practices; managers and accountants did not differ

significantly in their mean responses on the investment management practices

190


Delta State.

Recommendations

Based on the findings and conclusions drawn from the study, the

following recommendations were made:

1. Business educators, especially accounting educators should be

innovative in their instruction by equipping business education students

with the relevant skills on cash management, accounts receivables

management, inventory management, accounts payable management,

and investment management; which will enable business education

students to stand the better chance of succeeding when they establish

Small and Medium Scale Enterprises.

2. The management (Managers and Accountants) of Small and Medium

Scale Enterprises should update themselves through various trainings

and workshops on relevant working capital management practices like:

cash management practices, accounts receivables management practices,

inventory management practices, accounts payable management

practices, and investment management practices. The understanding and

application of these working capital management practices, will in turn

191

lead to the profitability, liquidity, reduction of financial cost, and ease of

releasing more capital for the strategic objectives of SMEs.

3. The agencies and associations of Small and Medium Scale Enterprises

like; Small and Medium Scale Enterprise Development Agency of

Nigeria (SMEDAN), and Nigerian Association of Small and Medium

Scale Enterprises (NASME) should channel their workshops, seminars,

conferences and trainings on various strategies Small and Medium Scale

Enterprises in Nigeria vis-à-vis Delta State can employ in sourcing funds

to finance their working capital. These workshops and training will

better inform SMEs on appropriate sources of funds and how these funds

could be proper utilized to gain efficiency amongst SMEs.

4. Since 1974, the Small-Scale Industry (SSI) division in the Federal

Ministry of industries was established to be the policy making and

implementation unit responsible for the administration of Small and

Medium Scale Enterprises development programmes. Therefore, SSI

should be fully abreast of Small and Medium Scale Enterprises

challenges of inappropriate working capital management practices, for

proper favourable policies to be made.

5. Since the government through the Small-Scale Industry (SSI) division in

the Federal Ministry of industries was established to be the policy

making and implementation unit responsible for the administration of

192

Small and Medium Scale Enterprises development programmes; SSI

should be informed of the various working capital management practices

(i.e. cash management practices, accounts receivables management

practices, inventory management practices, accounts payable

management practices, and investment management practices), to enable

them formulate and implement favourable policies that would enhance

the working capital management practices of Small and Medium Scale

Enterprises.

Suggestions for Further Studies

The following suggestions were made for further research:

1. A study should be conducted to examine the financial management

practices needed for the effective operations of Small and Medium Scale

Enterprises in Delta State

2. A study should be conducted to investigate external sources of financing

working capital as a major impediment to the of Small and Medium

Scale Enterprises in Delta State

3. A study should be carried to determine accounts receivable management

practices required for the effective operations of Small and Medium

Scale Enterprises in Niger-Delta

193

4. A study should be carried to determine investment management practices

required for the effective operations of Small and Medium Scale

Enterprises in Niger-Delta

5. The current study should be carried out in other areas of the Federal

Republic of Nigeria (FRN).

194

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203

APPENDIX A

WORKING CAPITAL MANAGEMENT PRACTICES

QUESTIONNAIRE (WCMPQ)

Department of Vocational Teacher

Education

(Business Education Unit)

University of Nigeria,

Nsukka.

September, 2011.

Dear Respondent,

REQUEST FOR COMPLETION OF QUESTIONNAIRE

I am a Postgraduate student of the above named department and

institution. The attached descriptive instrument is meant to elicit your candid

opinion on an academic research specifically tagged “Working Capital

Management Practices Required by Small and Medium Scale Enterprises for

Effective Operations in Delta State”.

You are therefore, obliged to kindly respond to the items on the

questionnaire as your views will be of immense assistance in achieving the

objectives of this study. Please be honest in your responses as they will be

treated with utmost confidentiality and anonymity. The information will not be

used for any other purpose than that stated.

Thank you for your anticipated favourable response.

Yours faithfully,

Sgd.


(Researcher)

204

APPENDIX B

QUESTIONNAIRE ITEMS

Section A: General Information Please complete the following questionnaire items in each section by

ticking (√) in the brackets or fill the most appropriate category that best

represents your opinion

(1) Name of Industry …………………………………………………….

(2) Position Held: Manager ( ) Accountant ( )

NB: Use the following guidelines to indicate your level of agreement or

disagreement to the questionnaire items in sections B-G. They are:

VHR - Very Highly Required =5

HR - Highly Required =4

R - Required =3

SR - Somewhat Required =2

NR - Not Required =1

S/N Section B: Sources of Financing Working

Capital Required by Small and Medium

Scale Enterprises for Effective

Operations

VHR HR R SR NR

1 Equity finance as a source of financing

working capital by Small and Medium Scale


2 Long-term debt as a source financing

working capital for the retained earnings of


3 Asset-based financing as a source of

funding working capital for effective

operations of Small and Medium Scale

Enterprises

4 Accounts payable as a valuable source of

financing in working capital to meet short-

term obligations of Small and Medium

Scale Enterprises

5 Accruals as a discretionary source of

financing in working capital for optimal

resource utilization of Small and Medium

Scale Enterprises

6 Bank loans as a source of financing working

205

capital for the liquidity of Small and


7 Promoters fund as a source of financing

working capital required by Small and

Medium Scale Enterprises for effective

operations

8 Borrowing from friends and family as a

source of financing in working capital for

the profitability of Small and Medium Scale

Enterprises

9 Thrift as a source of financing working

capital for effective operations of Small and


10 Unsecured financing as a source of

financing working capital for the solvency


Section C: Cash Management Practices

Required by Small and Medium Scale


1 Maintaining optimum cash balance as a

practice by Small and Medium Scale


2 Management of cash inflows as a facilitator

for effective operations of Small and


3 Sound cash planning policies is as a practice


effective operations

4 Investment of excessive cash as a practice



5 Monitoring cash outflows as a practice by

Small and Medium Scale Enterprises for

effective operations

6 Small and Medium Scale Enterprises in

Delta State should synchronizes their cash

inflows with their cash outflows as a


7 Cash receipts should be forecasted as a

practice for effective operations by Small


206

8 Cash expenditures should be forecasted as a

practice for effective operations by Small


9 Staff dealing with cash should be trained

periodically as a practice for effective

operations by Small and Medium Scale

Enterprises

10 Staff handling cash should be rotated at

intervals for effective internal controls by


Section D: Account Receivables

Management Practices Required by



1 Account receivables controlled as a practice

for effective operations by Small and


2 Small and Medium Scale Enterprises should

evaluates the average credit extended to

customers as a practice for their effective

business operations

3 Small and Medium Scale Enterprises should

project expected sales and expected

investment in receivables as a practice for

effective business operations

4 Account receivables to customers should go

with a time lag for repayment as a practice



5 Management of Small and Medium Scale

Enterprises should formulate policies

guiding accounts receivables as a practice

for effective business operations

6 Terms of agreement should be made for

every credit sales as a practice for effective


Enterprises

7 Management should make expectations on

account receivable turnover and resulting

bad debts as a practice for effective


207

Enterprises

8 Management should review accounts

receivable policies from time to time as a

practice for effective operations of Small


9 Collection policy should be made for

obtaining payments of past due accounts as

a practice for effective operations of Small


10 Staff should be trained in credit and

collection policies as a practice for the

effective operations of Small and Medium

Scale Enterprises

Section E: Inventory Management

Practices Required by Small and

Medium Scale Enterprises for Effective

Operations

1 Minimum stock level should be fixed as a

practice for the effective operations of


2 Inventory management policies should be

made as a practice for optimal resource

utilization of Small and Medium Scale

Enterprises

3 Sales forecast should be developed in

inventory management as a practice for the


Scale Enterprises

4 Excess inventories should be avoided as a

practice for effective internal controls of


5 Inventory stock-out should be avoided as a

practice for the effective operations of


6 On-the-job training should be organized as a

practice for staff on inventory management

needed for the effective operations of Small


7 Inventories should be ordered following laid

down guidelines as a practice for effective


208

Enterprises

8 Inventory planning should be made at

regular intervals as a practice for effective


Enterprises

9 Inventories should be properly checked on

arrival as a practice for effective operations


10 Economic Order Quantity (EOQ) and Just-

in-Time (JIT) should be used to ascertain

inventory level as a practice for effective


Enterprises

Section F: Accounts Payable

Management Practices Required by



1 Management should set up disbursement

system in managing accounts payable as a



2 Accounts payable policies and procedures

should be formulated as a practice for


Scale Enterprises

3 The duties of staff handling accounts

payable should be segregated as a practice



4 Accounts payable systems should be

monitored and reevaluated at intervals as a



5 Accounts payables should be controlled as a



6 Accounts payables received from customers

should go with a time frame for payment

required for effective operations of Small


7 Terms of agreement should be made for

209

every credit receipt as a practice for

effective business operations of Small and


8 Staff should be trained on credit payment

policies as a practice for effective


Enterprises

9 Management should review accounts

payable policies from time to time as a



10 Management should project a limit on

accounts payable as a practice for effective


Enterprises

Section G: Investment Management

Practices Required by Small and

Medium Scale Enterprises for Effective

Operations

1 The rate of return on investments should be

considered before actually investing in

working capital as a practice for effective


Enterprises

2 Investment policies should be formulated as



3 Risk on investments should be evaluated as



4 Management should engage in training on

best investment practices as a practice for


Scale Enterprises

5 All idle cash should be invested into the

business as a practice for effective


Enterprises

6 Investment decisions should be left only in

the hands of management as a practice for


210

Scale Enterprises

7 Contractual agreements should be reached

for every investment made as a practice to

facilitate effective operations of Small and


8 Investment policies and procedures should

be reviewed periodically for effective


Enterprises

9 Liquidity and profitability should be major

determinants of investment in working

capital as a practice for effective operations


10 Investment conversion period (i.e. cash-to-

cash conversion cycle) should be considered

before investing into business transactions

as a practice for effective operations of


211

Appendix C

Population Distribution of Managers and Accountants of Small and

Medium Scale Enterprises in the three Senatorial Districts of Delta State

S/N Senatorial

Districts

No. of LGS’s

in the

Districts

No. of

Managers in

the District

No. of

Accountants

in the

District

Total

1

2

3

North

Central

South

9

8

8

284

1,243

485

261

986

368

545

2,229

853

Total 25 2,012 1,615 3627

Source: Delta State Industry Directory (2010). Number of Managers and

Accountants in the Registered Small and Medium Scale Enterprises in North,

Central and South Senatorial Districts of Delta State. Ministry of Commerce

and Industry.

212

Appendix D

Sample Distribution of Managers and Accountants of Small and Medium

Scale Enterprises in the three Senatorial Districts of Delta State

S/N Senatorial

Districts

No. of

Sampled

LGS’s in the

Districts

No. of

Sampled

Managers

in the

District

No. of

Sampled

Accountants

in the

District

Total

1

2

3

North

Central

South

3

3

3

87

381

148

80

302

112

167

683

260

Total 9 616 494 1,110

See Appendix I for Detailed Sampled List of SMEs

213

Appendix E

Letter to Validates’ Department of Vocational Teacher Education

(Business Education Unit)

University of Nigeria,

Nsukka.

14th

September, 2011.

…………………………………………..

…………………………………………..

…………………………………………..

Dear Sir,

REQUEST FOR VALIDATION OF RESEARCH INSTRUMENT

I am a Postgraduate student of the above named department and

institution carrying out an academic research specifically tagged “Working

Capital Management Practices Required by Small and Medium Scale Enterprises for Effective Operations in Delta State”. Attached herewith are

sheets containing the purpose of the study, research questions, hypotheses and

draft copies of the instrument. Kindly vet the instrument for content, clarity and

suitability for use in collecting data for the study.

Specifically, you are requested to reward/delete/add items as appropriate

and make general comments or suggestions for improving the instrument

towards meeting the purpose of the study.

Thanks for your assistance.

Yours faithfully,


(Researcher)

Validates Name……………………………………………………….

Signature……………………………………………………………….

Comments……………………………………………………………..

214

Appendix F

Summary of Suggestions Made by Validates and the Corrections Effected

on the Questionnaire

Item Suggestion Correction Effected

Section A General

information

Section B

Item 5

Item 9

Section C Item 18 & 19

Item 20

Section D Item 21-30

Section G Item 59

Remove all general

information that are not

necessary for collecting data

for the study

Sources of financing in

working capital management

practices was reframed to be

“sources of financing working

capital”

Change the word from

“accruals” to “accrual”

Use a generally accepted name

for the word “Osusu”

The emphasis should be on

cash budget and cash flow

Effective operations of SMEs

should be changed to effective

cash control

Debtors collection period

should be emphasized

Delete “working capital for

effective operations”

This was effected, which

reduced the general

information items on

respondents from 6 to 2

The sentence was reframed

The change was effected

The word was changed to

thrift savings



The emphasis was properly

included in the items

The words were deleted

215

Appendix G

SPSS Output on Cronbach Alpha Reliability Coefficients of the Instrument

N Mean Variance SD

Statistics for Scale 60 29.1042 30.8187 5.5515

Mean Min Max Range Min/Max Variance

Item Means 3.638 3.313 3.979 .6667 .2013 .0729

Item Variance 1.075 .7017 1.411 .7092 2.011 .0714

Inter-Item Correlations .3824 .0415 .5861 .5446 14.127 .0191

Scale Mean Scale Variance Item Total Squared Alpha

Correlation Multiple

Item Total Correlation

Item 1 25.1250 25.0479 .6046 .4909 .7988

Item 2 25.7917 23.2748 .5351 .3693 .8063

Item 3 25.6667 24.6525 .4260 .4474 .8219

Item 4 25.2500 25.2128 .5134 .4587 .8081

Item 5 25.6250 22.9202 .6578 .5104 .7874

Item 6 25.7083 24.3387 .4473 .3116 .8192

Item 7 25.1250 23.9840 .6134 .5202 .7949

Item 8 25.4375 24.0811 .6432 .4751 .7920

Item 9 25.1260 25.5729 .7146 .4709 .8188

Item 10 25.7827 23.3338 .6251 .4293 .8663

Average Reliability Coefficient for Section B = .8114

Item 11 25.6847 24.7835 .4660 .5174 .8219

Item 12 25.2512 25.6738 .6234 .5287 .7881

Item 13 25.6490 22.9292 .6578 .5304 .8174

Item 14 25.8073 24.3737 .4473 .4216 .8662

Item 15 25.1250 23.9850 .6884 .5102 .7949

Item 16 25.4375 24.0891 .6902 .5451 .7440

Item 17 25.1650 25.0969 .6746 .6709 .7988

Item 18 25.7597 23.2848 .5771 .4393 .8913

Item 19 25.6467 24.6175 .6760 .4474 .8819

Item 20 25.2820 25.6728 .6434 .4587 .8081

Average Reliability Coefficient for Section C = .8213

Item 21 25.6460 22.3402 .7378 .5104 .8274

Item 22 25.8083 24.9987 .4973 .3116 .8192

Item 23 25.9250 23.9840 .6834 .5202 .7949

Item 24 25.6375 24.0811 .6932 .4751 .7920

Item 25 25.1660 25.0479 .5446 .5309 .7988

Item 26 25.7687 23.2748 .5351 .5693 .7963

Item 27 25.7897 24.6525 .4260 .5474 .8419

Item 28 25.4320 25.2128 .5134 .4587 .8381

Item 29 25.6790 22.9202 .6578 .5104 .7974

Item 30 25.8903 24.3387 .4473 .3116 .8592

Average Reliability Coefficient for Section D = .8165

216

Item 31 25.1250 23.9840 .6734 .5202 .7849

Item 32 25.4445 24.0811 .6892 .4751 .7920

Item 33 25.1850 25.8579 .6456 .4309 .7968

Item 34 25.7927 23.2998 .5631 .4293 .8573

Item 35 25.6657 24.6535 .4260 .4474 .8459

Item 36 25.2480 25.2948 .5934 .4887 .8911

Item 37 25.8960 22.8802 .6658 .5404 .7894

Item 38 25.5433 24.6487 .4723 .4216 .8922

Item 39 25.8760 23.8940 .6224 .6102 .7969

Item 40 25.5695 24.0081 .6542 .6251 .7940

Average Reliability Coefficient for Section E = .8241

Item 41 25.1390 25.0849 .6466 .4909 .7998

Item 42 25.6937 23.2748 .5541 .3693 .8063

Item 43 25.8757 24.6525 .4670 .5174 .8439

Item 44 25.2544 25.2748 .5434 .4587 .8421

Item 45 25.6740 22.9672 .6898 .5104 .7894

Item 46 25.9821 24.3387 .5473 .3167 .8342

Item 47 25.1760 23.9840 .6334 .5295 .7679

Item 48 25.6895 24.0811 .6432 .4742 .7980

Item 49 25.7530 25.0479 .6046 .4909 .7448

Item 50 25.8647 23.2748 .5351 .3656 .8063

Average Reliability Coefficient for Section F = .8033

Item 51 25.4447 24.6525 .5260 .5174 .8219

Item 52 25.2830 25.2128 .5434 .4587 .8521

Item 53 25.6720 22.5632 .5778 .5104 .7574

Item 54 25.7683 24.9287 .4873 .4416 .8862

Item 55 25.1240 23.2340 .6234 .5402 .7679

Item 56 25.4725 24.9611 .6732 .5651 .7940

Item 57 25.8910 22.9202 .6678 .6104 .7874

Item 58 25.6543 24.9887 .4573 .4116 .8192

Item 59 25.6540 23.8640 .6434 .5302 .7949

Item 60 25.6715 24.9411 .6532 .5651 .7920

Average Reliability Coefficient for Section G = .8073

Alpha

Reliability Coefficients for 60 Items .8140

217

Appendix H

List of Sampled Small and Medium Scale Enterprises in the three

Senatorial Districts of Delta State

A. North District

S/N Establishment Type Address No. of

Respondents

1 Dell Hotel Hospitality 11, Dugbere, Agbor 2

2 Aiji Petroleum Ltd. Petroleum Lagos/Asaba Express

Road, Agbor

2

3 All Saints Gift

Stationary

Educational 19/141 Lagos Ajaba

Rd., Agbor

1

4 Beckerlay-Tech Nig.

Ltd

Industrial 1 milver Close, Boji-

Boji Owa, Agbor

2

5 Clemolen Petroleum

Ltd

Petroleum Lagos/Asaba Road,

Agbor

2

6 Festy Pharmacy Pharmacetical 13 Old L/Asaba road,

Agbor

1

7 Hero Block industry Building Benin/Asaba express

way, Agbor

2

8 Judex Ventures (Nig.)

Ltd

General 91 Old L/Asaba Rd.

Boji-Boji Owa,

Agbor

2

9 Model Laboratories Medical 121 Old L/Asaba ,

Kogos House, Agbor

2

10 Oscarteddy

Enterprises Nig. Ltd

General 96 Lagos/Asaba Rd.,

Agbor

2

11 Pace hotel Hospitality 33 Charles Street,

Agbor

2

12 S.S. Owabor General 89 Old L/AsABA Rd.

Boji-Boji Owa,

Agbor

2

13 Salmon Block

Industry

Building Benin/Asaba Express

way, Agbor

2

14 Specialist Eye

Hospital

Medical Lagos/Asaba Express

way, Agbor

2

15 Camel Paints &

Chem. Ind. Ltd

Chemical 1, Yaya close, Agbor 2

16 Chris Nora Block

Industry

Building Lagos/Asaba Rd.,

Agbor

2

17 Emoota Farms Agriculture Lagos/Asaba Express 2

218

Rd., Agbor

18 Kenise Aluminum

Work

Building Agidiehe No 91,

B/Onitsha Rd., Agbor

2

19 Panaft Ltd General Obeti, Agbor 1

20 Sunshine Hotel Hospitality L/Asaba Express way

Umunede, Agbor

2

21 Tessy Block Industry Building B/Asaba Express

way, Agbor

2

22 Tony Chuks

Petroleum

Petroleum L/Asaba Express way

Umunede, Agbor

2

23 Udevison Farm Agriculture 1, Obianke Lane, B.B

Owa, Agbor

2

24 Udo Martins Nig. Ltd General B/Asaba Express way

, Agbor

2

25 Cephas Zest Co. General 167, L/Asaba Rd.,

Agbor

2

26 Ayidu Soap &

Cosmetic Industry

Chemical Boji-Boji Owa,

Agbor

2

27 Apaco Foam &

Chemical Ind. Ltd

Chemical 3, Mwibike Cresent/

Owa Eket Rd., B.B.

Owa, Agbor

2

28 J. Johnson Pharmacy Pharmaceutical 21, Old L/Asaba Rd

B.B. owa, Agbor

2

29 Fritech Aluminium

Company

Building 160, Old L/Asaba

Rd., Agbor

2

30 Obijon Petroleum Petroleum B/Asaba express

way, Agbor.

2

31 Akpala & sons

Enterprises

General Akwukwu-Igbo 2

32 Alabisco Fashion

Home

Fashion Ogbeani Qtrs.

Akwukwu-Igbo

2

33 Buchi’s Laundry

Services

Laundry 24, Ogbeani Qtrs.

Akwukwu-Igbo

1

34 Chidex inter-way

Centre

General Ogbeani Qtrs.

Akwukwu-Igbo

2

35 Chutex Holdings Nig. General Ogbeyese Qtrs.

Akwukwu-Igbo

2

36 Dirish Sons &

Daughters Stores

General Ogbeani Qtrs.

Akwukwu-Igbo

2

37 Evico Investment Building 78, Iyase Qtrs.

Akwukwu-Igbo

2

219

38 Exodus Tailors Clothing 5, council Rd.

Akwukwu-Igbo

1

39 J-Omens Commercial

Agencies

General 57 Ogbeyese Qtrs.

Akwukwu-Igbo

2

40 Mekus video Vision

plaza

Entertainment 24b council Rd

Akwukwu-Igbo

2

41 Mossey Nig.

Enterprises

General 21, Ogbeani Qtrs.

Akwukwu-Igbo

2

42 Ndu Best Investment

Nig. Ltd

General 3B Council Rd.,

Akwukwu-Igbo

2

43 Ndubest & Ifeco

Investment (Nig)

General 2 Secretariat Rd,

Opp. LGA,

Akwukwu-Igbo

2

44 Nig. Medicine Store Medical 4, Ogbe-oniha Qtrs.

Akwukwu-Igbo

1

45 O.G. Technical

Works

Mechanics Opp. UBA Bank 2

46 With God Commerce

Centre

General 3 Ogbeani Qtrs.

Akwukwu-Igbo

2

47 Abassido Kings

Tailor

Clothing 78, umejei Rd. Ibusa 2

48 Bisel Business centre Business

Services

74A, Umejei Rd.

Ibusa

1

49 Brothers Electrical &

Electronics Works

Electrical 82A, Umejei Rd.

Ibusa

2

50 C.K.C. Hotels Hospitality Isieke Quarters Ibusa 2

51 Chidisco Investment

(Nig.)

General 70, Umejei Rd. Ibusa 2

52 Chukzy Prints Printing 76, Umejei Rd. Ibusa 2

53 Conbestcon Ent. General 45, Umejei Rd. Ibusa 2

54 Contemporary Arts &

Craft Co.

Art works 95, Umejei Rd. Ibusa 2

55 Elegance Kichen Foods 86, Umejei Rd. Ibusa 2

56 Emma S. Refrigirator

& Airconditioner

Tech.

Refrigerator 121, Umejei Rd.

Ibusa

2

57 Favour Superstores Provisions 90, Umejei Rd. Ibusa 2

58 Franklib Afrique

Consultant Ltd

Services 74, Umejei Rd. Ibusa 2

59 Gaswi Supermarket Provisions 124, Umejei Rd.

Ibusa

2

220

60 Global & Sons Metal

work

Welding Umuodafe Qtrs.

Ibusa

2

61 A.I. Philips & Sons

Nig. Ent.

General 295B Nnebisi Rd,

Lion House, Asaba

2

62 A.K. Nmah & Co. General Akuebolo Qtrs, cable

point, Asaba

2

63 Abel-Jes (Nig.) Ltd General 1A Kwekagbor

Street, Asaba

2

64 Abua Investment &

trust Co. Ltd

Financial 70 Ekwo lane, Asaba 2

65 Asaba Hiltin Hotel Hospitality 2 St. Brigids Rd.,

Asaba

2

66 Asaba Textile Mill

Plc

Clothing 10 Dennis Osadebey

Rd., Asaba

2

67 Becky Ben

Enterprises; Tutsy

Exclusive

General 23, Ogbotobo

Cresent, Asaba

2

68 Budget savings &

loans company Ltd

Financial 293 Nnebisi Rd.,

Asaba

2

69 Commix Network

Ltd

Communication 1A Kwekagbor St,

Asaba

2

70 Contech Resources &

Co. Ltd.

Services Lion House, 295B

Nnebisi Rd. Asaba

2

71 Cross Culture Entertainment 7/8 Ebenuwa St. opp

Lion House, Asaba

2

72 Delcoms Systems

Ltd.

Information

Technology

1, Ibusa Rd., Asaba 2

73 Emis Int. Security

Services Ltd

Security

Services

29, Niger St. Cable

Point, Asaba

2

74 Geecom integrated

Services

Surveying Nnebisi Rd., Asaba 2

75 Grand Hotels Hospitality Nnebisi Rd., Asaba 2

76 Infant Jesus academy Education Old Anwai Rd.,

Asaba

2

77 Kristil Industries Nig.

Ltd

General 218 Nnebisi Rd.,

Asaba

2

78 Tripod Corporate

(Ind) Ltd

Services 5 Nzeka Str., Asaba 2

79 P A I Ventures General 7 Anwai Rd., Asaba 2

80 Osyfin Nig. Ltd Technical 24, Ibusa rd., Asaba 2

81 Victory Motel Hospitality Allor Rd., Asaba 2

221

82 Mike white Motels Hospitality 1 Oni edozien Str.,

Asaba

2

83 ACIJ Systems

Venture

I.T 35, Denis Osadebey

way, Asaba

2

84 Amah Ucha General 77 Kwale Rd., Asaba 2

85 Usonia Nig. Ent. General Km 11 A/Benin Rd.,

Asaba

2

86 Edike & Sons Ent. General 72 A/Benin Rd.,

Asaba

2

87 Buvo Hotels Hospitality 12 Nnebisi Rd.,

Asaba

2

Total 167

B. Central District


Respondents

1 Abifa Oil Ltd Petroleum Along Eku/Abraka

Rd., Abraka

2

2 Abraka Turf club Hospitality Esiri Str. Oria,

Abraka

2

3 Academic Bookshop

& Stationaries

Educational 305 Old S/Agbor Rd.,

Abraka

1

4 Adonia interbiz Business

Services

7 College Rd.,

Abraka

2

5 Ahmed’s Collection Boutique 10 police station Rd.,

Abraka

2

6 Aisosa Bakers choice

& Catering Services

Confectionery Old S/Agbor Rd.,

Otorho, Abraka

2

7 Allenz Global

Services

General Aso Rock Old

S/Agbor, Abraka

2

8 Authentic World

Boutique

Boutique Along College Rd.,

Abraka

1

9 Acod Petro Nigeria

Ltd

Petroleum Along Eku/Abraka

Rd., Abraka

2

10 Automat

Engineering

Mechanics 24 New S/Agbor Rd.,

Abraka

2

11 Benbo fast food

Depot

Foods Campus 2 main Gate

DELSU, Abraka

2

12 Benbo Hotel Entertainmen

t

Ekrejeta, Abraka 2

222

13 Bentobi

Electrical/Electronics

Electrical 2. Otorho Rd. Abraka 2

14 Best Way

Supermarket Store

Provision 133 old S/Agbor Rd.,

Abraka

1

15 Big Time Xplosive

barbing Saloon

Saloon Opp Oceanic bank

Abraka

1

16 Blevic Engineering

Services Ltd

Services Along police station

Rd., Abraka

2

17 Building Materials

Nig. Ent.

Building Old A/sapele Rd.,

Abraka

2

18 Buovo Filling

Station

Petroleum Along Eku/Abk. Rd.,

Abraka

2

19 Caloos Educational

Centre

Educational 328 Old A/Sapele

Rd., Abraka

1

20 Chusco Global

Resources Nig. Ltd

General Along old S/Agbor

Rd., Abraka

2

21 Chalone Dynamic

Ventures & Services

General Along old S/Agbor

Rd., Abraka

2

22 Christo Stores Nig. General 22 New S/Agbor Rd.

Abraka

2

23 Cyber Spring

Business Centre

Business

Services

429 old sapele Rd.,

Abraka

1

24 De Favours

Bookshop

Educational 45 Along A/Kwale

Rd., Abraka

1

25 Happy Chucks

trading Coy. Nig.

General 3 new S/Abraka rd.,

Abraka

1

26 Divine favour frozen

foods Ent.

Foods 392 old S/Abraka Rd.

Abraka

2

27 Divine Heritage

Bookshop

Educational 26 A/Kwale Rd.

Abraka

2

28 Dogood design &

Embriodery

Fashion Old S/Agbor Rd.

Abraka

1

29 Double Delight Fast

Food

Foods Along E/Abraka Rd.,

Abraka

2

30 Down Drill Water

Well Nig. Ent.

Services 21 S/Agbor Rd,

Abraka

2

31 Dream Seed

investment Ltd

Communicati

on

Along Police Rd.

Abraka

2

32 Easy Entertainment

plaza

Entertainmen

t

330 old S/Agbor Rd.

Abraka

2

33 Ego Restaurant Foods 34 along S/Agbor Rd. 2

223

Abraka

34 Emepat Petrol

Station

Petroleum Along E/Abraka Rd.

Abraka

2

35 Enita pools Agency Financial 8 Emore Str. Abraka 2

36 Equator Cement

Store

Building Ekrejeta Abraka 2

37 Ethiope Properties Properties 212 old S/Agbor Rd.

Abraka

2

38 Etiosa Emma

Business Centre

Business

Services

Old S/Agbor Rd.

Abraka

1

39 Ewhrudjakpor

Nelson Motor

Mechanic Workshop

Mechanics Old S/Agbor Rd.

Abraka

1

40 Excellent Aluminum

product Co.

Building 22 S/Agbor Rd.

Abraka

2

41 Fedico Foot Wears Fashion Old S/Agbor Rd.

Abraka

2

42 Festac Barbing

saloon/video Club

Saloon 1 Okpogoro str.

Abraka

1

43 Flonna Ventures Building 152 old S/Agbor Rd.

Abraka

2

44 Fortitude medicine

Store

Pharmaceutic

als

357 old S/Agbor Rd.

Abraka

1

45 Franchise Nig. Ltd General 20, along police

station Rd. Abraka

2

46 Frayo (Nig.) Ent. General Sapele/Agbor Rd.

Abraka

2

47 Friends of Jesus

bookshop

Educational 1 Okpogoro Str.

Abraka

1

48 Galatians Bookshop Educational 3 new S/Agbor Rd.

Abraka

1

49 Godsend Art Printing 107 old S/Agbor Rd.

Abraka

2

50 Ground Source

Engineering Co.

Services 10 New S/Abraka Rd.

Abraka

2

51 Happy chucks

trading Coy Nig.

General 3 New S/Agbor Rd.

Abraka

2

52 Heroes Electronics

Coy

Electrical 125 old A/Sapele Rd.

Abraka

2

53 Hommies Collection Boutique 22 Sapale/Agbor Rd.

Abraka

2

224

54 Ilori Driving School Mechanics 321 old A/Sapele Rd.

Abraka

2

55 Ima KingsHaircut Saloon Along old Sapele Rd.

Abraka

1

56 J. E. Obire Nig.Ent. General Along Abraka/Kwale

Rd. Abraka

2

57 Jaflex Central

Restaurant

Foods 1 Omono Str. Abraka 2

58 Jobrenda

Educational Centre

Educational Campus 2 main gate,

Abraka

2

59 Joe-Martins block

industry

Buildings Along Eku/Abraka

Rd. Abraka

2

60 John-Paul

Supermarket &

Associates

General Along old

Sapele/Agbor Rd.

Abraka

2

61 Jomax Business

Centre

Business

Services

Campus 2 main gate

DELSU, Abraka

1

63 Klassic Haircut

Saloon

Saloon 281 Ekrejeta, Abraka 1

64 Krista Palace Foods Agbarah Quarters,

Abraka

2

65 Ladies World Fashion 23 police station Rd.

Abraka

2

66 Lady B Restaurant Foods 347 old S/Abraka Rd.

Abraka

1

67 Law Barbing Saloon Saloon 499 old S/Agbor Rd.

Abraka

1

68 Lexicon Global Ent. General 292 Ekrejeta, Abraka 2

69 Looking Good

Barbing Saloon

Saloon 347 old A/Sapele Rd.

Abraka

1

70 Louder Computer

Systems

Business

Services

4 Otorho Road,

Abraka

2

71 Mama Africa

Restaurant

Foods Along old S/Agbor,

Abraka

2

72 Matthew Welding

Construction

Welding Along New S/Agbor

Rd. Abraka

1

73 Mayor Tech. Communicati

on

409 old S/Abraka Rd.

Abraka

2

74 Mega Hotel Hospitality Ajonomi, Abraka 2

75 Memphis Place Foods New S/Agbor Rd.

Abraka

2

225

76 Perekomo Watch/

Household Repair

Services

Services 351 old S/Abraka Rd.

Abraka

1

77 Mudi Beach Entertainmen

t

Mudiaga Beach

Avenue, Abraka

2

78 New Discovery

Mechanic Workshop

Mechanics Along S/Agbor Rd.

Abraka

2

79 Oadukpor Tech. Eng.

Works

Mechanics 50 New S/Agbor Rd.

Abraka

2

80 Oasis

Business/Educational

Centre

Business

services

357 old S/Abraka Rd.

Abraka

1

81 Ojeta Abraka Coca-

cola

Drinks Along police station

Rd. Abraka

2

82 One Love Ventures General 2 College Rd. Abraka 2

83 Oruarive Community

Bank Nig. Plc

Banking 2 College Rd. Abraka 2

84 Osioh Nig. Ent.

Block Industry

Building 23 along new

S/Agbor Rd. Abraka

2

85 Pellucio Oil Petroleum Old S/Agbor Rd.

Abraka

2

86 Peoples Spot Foods OPP POST Office

Abraka

2

87 PeterSide Modern

Dry Cleaning

Services

Laundary 36 OKpogbo Str.

Abraka

1

88 Phomes Frozen food Foods 18 New S/Agbor Rd.

Abraka

2

89 Potters Book Mart Educational Beside Emole filling

Station, Abraka

2

90 Praise & Sons Block

Services

Building Along New

Sapele/Agbor Rd.

Abraka

2

91 Prestige Cyber Café

& Business Centre

Business

Services

Opp. PHCN, Abraka 2

92 Prince Tony Int.

Books Services

Educational 125 old S/Abraka Rd.

Abraka

2

93 Promise Photos/

Video Production

Photography Campus 2 Gate

DELSU, Abraka

1

94 Rejiga Petrol

&Allied Services


Rd. Abraka

2

226

95 Rino Brasky Hotel Hospitality Along new S/Agbor

Rd. Abraka

2

96 Ripples A.K.A (Bar

& Restaurant)

Foods Abraka/Kwale Rd.

Abraka

2

97 S-Music Studio Entertainmen

t

357 ols S/Abraka Rd.

Abraka

2

98 Sabes Sonny Nig.

Ent.

General 16 new A/Agbor Rd.

Abraka

2

99 Sam Tech. Business

Centre

Business

Services

9 new S/Agbor Rd.

Abraka

2

100 Seun Int. Car

Upholstery

Motor Parts Along Sapele/Agbor

Rd. Abraka

1

101 Spot De Ese-Jones Foods 24 along police

station Rd. Abraka

1

102 St Kizito Holdings General Along New S/

Abraka Rd. Abraka

2

103 Sun Cord Petrol

Station

Petroleum Along Eku/ Abraka

Rd. Abraka

2

105 T.G. Vessex Nig. Ltd General Along Eku/ Abraka

Rd. Abraka

2

106 Total Filling Station Petroleum Along Eku/ Abraka

Rd. Abraka

2

107 Toyin Black

Attraction

Fashion Along college Rd.

Abraka

1

108 Tripple Choice

Frozen Foods

Foods Along collge Rd.

Abraka

2

109 Uncle Ben & Coy General 31 A/Eku Rd. Abraka 2

110 Uncle Jose Drilling

& Plumbing

Water

Drilling

24 Otorho Rd.

Abraka

2

111 Varsity Business

Centre

Business

Services

Along old S/Abraka

Rd. Abraka

2

112 Vicky Bar &

Restaurant

Foods By Monkey Joint

Juction Along old

Abraka

1

113 Vomacol Nig. Ltd General 420 old

Abraka/Sapele Rd.

Abraka

2

114 Washington Guest

House

Hospitality Along Eku/ Abraka

Rd. Abraka

2

115 Zak Igherigbe

Cement Store

Building 10 Ojeta, Abraka 2

227

116 Abraka River Resort

Motel

Hospitality Ekrejeta, Abraka 2

117 Beni Paul Petroleum Petroleum Along Eku/ Abraka

Rd. Eku

2

118 Blue point Petrol Petroleum Along Eku/ Abraka

Rd Eku

2

119 C.K. Ogedengbe

Motors

Transportatio

n

Along Warri Rd. Eku 2

120 Christopher Lagos

Fishery/Poultry

Agriculture 59B 1st Urhusi Str.

Eku

2

121 Covenant Hotels Hospitality Along Warri/ Eku

Rd. Eku

2

122 Delta Pool ltd Financial 68 Warri/ Eku Rd.

Eku

2

123 Elzingo Nig. Ltd General Along Eku/Abraka

Rd. Eku

2

124 Fetega Filling

Station


Rd. Eku

2

125 Glamour Oil Ltd Oil & Gas 5 New Sapele Rd.

Eku

2

126 A.S.B.E Oil Nig. Ltd Oil & Gas 158 Jakpa Rd.

Effurun

2

127 Advanced Coating

technology Nig. Ltd

Paints Plot 60A Airport Rd.

Effurun

2

128 Afosa Cybercafe Services P.T.I Campus,

Effurun

2

129 Agofure Motors Ltd Transportatio

n

154 PTI Rd. Effurun 2

130 Airborne Express

international

Communicati

ons

2 GRA/Refinery Rd.

Effurun

2

131 Akpodiogaga

Emeyese Esq A.S.

Emeyesesn & Co.

Legal

Services

152 P.T.I. Rd.

Effurun

1

132 Akpos (Nig.) Ltd General 108 PTI Rd. Effurun 2

133 Alerub Construction

Coy Ltd

Construction 199 PTI Rd. Effurun 2

134 Al-Rosi Consult Professional 9 Iyede Close, Off

Enerhen Rd. Effurun

2

135 Amicable Assurance

Plc

Insurance Effurun 2

136 Angene Surveyors & Surveys 30 Oil Mill Rd, 1

228

Consultant Jascas Yard Alegbo

Effurun

137 Aremuzel

Construction

Furnishing Co.

Construction Effurun 2

138 B.G. Technical ltd Oil & Gas 29th

Str. DDPA

Housing Estate

Ugborikoko, Effurun

2

139 Batex Nig. Ltd General 164 PTI Rd. Ohimor

lane off Ughelli Rd.

Effurun

2

140 Baywood

Continental Ltd

Oil & Gas 7 Rev. abirhire Rd.

Effurun

2

141 Bliss Party Planners Entertainmen

t

Shop 19, farm

Kitchen Shopping

Complex, Effurun

1

142 Briscoe Nigeria Plc Automobile 71 Enerhen Rd.

Effurun

2

143 Cacoon International

Ltd

General 54 Enerhen Rd.

Effurun

2

144 Cado Tropical Ltd General 228 PTI Rd Effurun 2

145 Carl Dave

Consultants Ltd

Services 14B Oruke Str.

Enerhen Effurun

2

146 Caroline Motor Care Saloon 82 Airport Rd.

Effurun

2

147 CFAO Motors Automobile 49 Effurun/Warri Rd,

Effurun

2

148 Club Paradisco Hospitality Effurun/ Sapele Rd.

Opp. Urhobo

College. Effurun

2

149 Communication

Trends Ltd

Communicati

on

3 Eku house Enerhen

Junction, Effurun

1

150 Complete Aluminum

Enterprise

Building 15 Effurun/Sapele

Rd. Effurun

2

151 Connect Card Links Communicati

on

Edewor shoping

Complex Block 1,

Effurun

2

152 Cross Mac (Nig.)

Enterprises

General 68B Enerhen Rd.

Effurun

2

153 Dag/Amed Nig. Ltd General Levities Enerhen Rd.

Effurun

2

229

154 Dan Odiete & Co. Properties Bagun House, 31

Effurun/Sapele Rd.

Effurun

2

155 Davidsco Electrical

Works

Electrical 19 Effurun/Sapele

Rd. Effurun

2

156 De Tunji Aluminum

Products

Building 30, Effurun/ Sapele

Rd. Effurun

2

157 Delattre-Belons Nig.

Ltd

Oil & Gas Refinery Rd. Effurun 2

158 Delcon engineering

Coy Ltd

Industrial End of Sedco Rd.

Effurun

2

159 Delta Animal Centre Services Oil Refinery Rd.

Effurun

2

160 Delta Geosciences

Coy. Ltd

Oil & Gas 152 PTI Rd. Effurun 2

161 DGC International Services 152 PTI Rd. Effurun 2

162 DHL WorldWide

Express

Communicati

on

31 Effurun/Sapele

Rd. Effurun

2

163 Divine Ventures General Futeb Shopping Plaza

opp. Refinery Rd

Effurun

1

164 Domap Nig. Ltd Services 31 Airport Rd.

Effurun

2

165 Double Delight Club Hospitality Effurun/Sapele Rd.

Effurun

2

166 Dunlop Tyre

Distributors

Motor Parts 152 PTI Rd. Effurun 2

167 E.D. Itesa &

Associates

Surveys Plot 25 William pemu

Avenue Effurun

2

168 Earth Science

International

Services Ltd

Oil & Gas Jakpa Rd. Effurun 2

169 Edewor International

Ltd.

General Edewor Shopping

centre Effurun

2

170 Ekurume &

Associates

Services O.R.C. House

Effurun/Sapele Rd.

Effurun

1

171 Electromech Nig.

Co.

Services 11 Airport Rd.

Effurun

2

172 Elexdickens Nig. Ltd General Kilometer 3 Refinery

Rd. Effurun

2

230

173 Elso computer

Centre

Business

Services

7 Water Resources

Rd. Effurun

2

174 Emiola Naturalistic

Hospitality

Medical 100 Enerhen Rd.

Effurun

1

175 Ento Chemicals Ltd Chemicals 152 PTI Rd. Effurun 2

176 Equity Indemnity

Insurance coy

Financial Block 3 Edewor

shopping Centre

Effurun

2

177 Eruben Nig. Ltd Construction 60 Ugborikoko Okere

Rd. Effurun

2

178 Esco Superstores

Ltd.

General 21 Udu Rd. Effurun 2

179 Espo Nig. Coy Ltd Services 1 Emma Sideco Str.

Effurun

2

180 Eterna oil & Gas Plc Oil & Gas 200 Refinery Rd.

Effurun

2

181 Fadekins Business

Enterprises

Business

Services

143, Effurun/Sapele

Rd. Effurun

2

182 Fenog Plaza Hotel Hospitality Refinery Rd. Effurun 2

183 Faith construction

Ltd.

Construction Kilometer 2 Refinery

Rd. Effurun

2

184 Fetub Nig. Ltd. General Enerhen Rd. Effurun 2

185 Fhomo Nig. Ltd General 54 NNPC housing

Complex Rd. Effurun

2

186 Future concerns Nig.

Ltd

General Block 1, Flat 1, 2nd

Edewor Estate

Effurun

2

187 G.G.C. Power

Engineering Ltd

Electrical 179 Jakpa Rd.

Effurun

2

188 G.H. Engineering

services Nig. Ltd

Construction 75A Airport Rd.

Effurun

2

189 Gardenia hotel Hospitality 42 Effurun-warri Rd.

Effurun

2

190 Geomatrix Surveys

Ltd

Surveying 152 PTI Rd. Effurun 1

191 Gitco Ltd General 179 Effurun/Sapele

Rd. Effurun

2

192 Globetrust Nig. Ltd Financial Oleh House 178

Effurun/Sapele Rd.

Effurun

2

193 GloryLux Associates Industrial Km 14 Sapele Rd. 2

231

Industries Nig. Ltd Effurun

194 Goldlink Insurarance

Co. Ltd

Financial 5 NNPC Housing

Estate Rd. Effurun

2

195 Gracil Nig. Ltd General 8, Ovie Palace Rd.

Effurun

2

196 Great Nig. Insurance

Coy

Insurance 152 PTI Rd. Effurun 2

197 Habib Nig. Bank ltd Financial 79A Effurun-Sapele

Rd. Effurun

2

198 Halliburton Energy

Services Nig Ltd.

Oil & Gas MCC Yard off energy

Rd. Effurun

2

199 Hitel International

Ltd

General Enerhen Village

Effurun

2

200 Indemnity Finance

Ltd.

Financial Blakky Thomas

Complex

2

201 Interior Decorations

Desting Co.

Clothing 4F Airport Rd,

Effurun

2

202 International Energy

Services Ltd

Oil & Gas 98 Effurun-Sapele

Rd. Effurun

2

203 International Health

Management

Services Ltd

Medical Gbonuwa Towers, 43

Airport Rd. Effurun

2

204 International Trading

& Logistic Co. Ltd

General 1 Edewor Estate Rd.

Enerhen, Effurun

2

205 Intralog Ltd Oil & Gas 1 Edewor Estate Rd.

Enerhen, Effurun

2

206 Ishaka Hotel Ltd Hospitality Refinery Rd. Effurun 2

207 Isoko Plant &

Associate

Construction Airport Rd, Effurun 2

208 J.M. Jotech

Technical Nig. Ent.

General 20 Airport Rd.

Effurun

2

209 Jimbiz Nig. Ventures General 54 Enerhen Rd.

Effurun

2

210 Jiri Ice Cream &

Snacks

Catering 1 Enughe Str., off

Ugborikoko Rd.

Effurun

1

211 Joba frozen Foods Catering Plot 511B, 10th

Str.

Bendel Estate,

Effurun

1

212 Jobcon Nig.

Company

General 199, PTI Rd. Effurun 1

232

213 Jo-El-Pao Nig.

Enterprises

General Ugbosi Shopping

Centre, 50

Effurun/Sapele Rd.

Effurun

2

214 Joetim International

Ltd

General 67 Effurun/Sapele

Rd. Effurun

2

215 John Holt Plc Industrial 71 Enerhen Rd.

Effurun

2

216 John Thompson Ltd Surveys 111 Airport Rd.,

Ugboroke Effurun

2

217 Jorotom Group of

Companies Ltd

General 9 Mosheshe Str.

Effurun

1

218 Jowil Nig. Ltd General 22 Effurun/Sapele

Rd. Effurun

2

219 Kaddara Plastic Ltd Plastic NPA Express Way

By NNPC Fly Over

2

220 Ken Sampson Ltd General 27 Enerhen Rd.

Effurun

2

221 Kevwe Construction

Ltd

Building Refinery Rd. Effurun 2

222 Ladox engineering

Company Ltd

General 5 Recreational Close

off water resources

Rd. Effurun

2

223 Lambert Ogaga

Enterprises

General 34, Okorotomu str,

Alaka, Effurun

2

224 Law Union & Rock

Insurance of Nig.

Financial 54, Sapele/Effurun

Rd. Effurun

2

225 Lawyer-Egbe & Co. Legal 15 Effurun/Sapele

Rd. Effurun

1

226 Leadway Assurance

Co. Ltd.

Financial 54 Warri/Sapele Rd.

Effurun

2

227 Linkso Nigeria Ltd. General 85 Edewor Estate

Effurun

2

228 Lurniz Biz Nig. Ltd. General Caravan 57 NNPC

Depot

2

229 Mallard Bay Drilling

Nigeria Ltd

Oil & Gas 19 Alloh Close, off

Enerhen Rd. Effurun

2

230 Management

information systems

company Ltd

I.T 3, 6th

Rd. Opp. NNPC

Ogborikoko Effurun

1

231 Markeason I.T 47 Effurun-Sapele 1

233

Telecoms Ltd Rd. Effurun

232 Mathimur Ltd General 48, Airport Rd.

Effurun

2

233 MBC International

Bank Ltd

Financial 124 Effurun/ Sapele

Rd. Effurun

2

234 MBC Securities Ltd Financial 49 Sapele/ Effurun

Rd. Effurun

2

235 McNair Nigeria Ltd General Klm 6, Refinery Rd.

Effurun

2

236 Micro Products Ltd Financial 83, Airport Rd.

Effurun

2

237 Midwest Inn Hospitality Effurun/ Sapele Rd.

Effurun

2

238 Mobitel Ltd Communicati

on

Edewor Shopping

Complex, Effurun

1

239 Mygere Plant Hiring Construction 41 Ugborikoko Rd.

Effurun

2

240 Nem Insurance PLC Financial 54 Effurun-Sapele

Effurun

2

241 NICON Insurance

Plc

Financial 24 Effurun-Sapele

Rd. Effurun

2

242 Nigdel Ltd Industrial 94 Effurun/Sapele

Rd. Effurun

2

243 O & J Nigeria Ltd General 85 Airport Rd.

Effurun

2

244 O. Eddy & Sons Ltd General 31 Airport Rd.

Effurun

2

245 Obean Global

Enterprises

General 50, Effurun/ Sapele

Rd Effurun

2

246 Raycon Construction

Co.

Construction Km 3 Refinery Rd

Effurun

2

247 Redex Company General 41 Effurun/Sapele

Rd. Effurun

2

248 River Valley plaza Hospitality Effurun 2

249 Super maritime Nig.

Ltd

Shipping 57 Effurun/Sapele

Rd. Effurun

2

250 UNIC Insurance

PLC

Financial New Nig. Bank

Building, 2nd

Floor,

57 Effurun

2

251 Godwin Ogbunie

Motor cycle

Mechanics 1 Okose st. Agbarha

otor

1

234

Mechanic

252 Jonah Mechanical

Works

Mechanics Sawiko Junction,

Owevwe, Agbarha

Otor

1

253 Adjarho Patrick Ltd Mechanics 91 Old Ughelli/ Warri

Agbarho

2

254 Agofure Petroleum

Ltd

Oil & Gas Opp Unity Sec. Sch.,

Ughelli/ Patani Rd.

Agbarho

2

255 Anthony Welding &

Fabrication

Welding 6 Orokpokpor Str.

Agbarho

2

256 Binite Ochuko

Welding &

Fabrication

Welding 29 Orokpokpor Str.

Agbarho

1

257 Blessing Esegine

Motor Cycle

Mechanic

Mechanics 13 Ughelli/Patani Rd.

Agbarho

1

258 Glory Afon Welding

& Fabrication Works

Welding 73 Ughwrughelli Rd.

Agbarho

2

259 Gods Favour Bakery Confectioner

y

6 Dietake Str., Off

Up Agbarho Rd.

2

260 Race oil Ltd Petroleum 1 Oguname Str.

Agbarho

2

261 Felix Mamah

Welding &

Fabrication Works

Welding 34 Orhokpokpo Str.

Agbarho

1

262 Friday Odogun

Welding &

Fabrication Works

Welding 13 Orhokpokpo Str.

Agbarho

1

263 Candy Petroleum

Coy. Ltd

Petroleum 7 Ughelli/ Warri Rd.

Ughelli

2

264 Divine Success

Bakery

Confectioner

y

6 Ekiugbo/ Ughelli

Rd. Ughelli

2

265 Dora Bakery Confectioner

y

37B Ekiugbo/ Warri

Rd. Ughelli

2

266 Godswill

Emasebemre

Upholstery

Motor Parts 3 Oseri Str. Ughelli 2

267 Godwin Amasa

(Technician)

Mechanics 7 Ekuigbo Ughelli 1

268 Kelly Umukoro Mechanics 39 Ekuigbo Ughelli 1

235

(Technician)

267 Kess Baker Confectioner

y

38 Imowhe Str.

Ughelli

2

268 Onejiri & Sons

(Nig.) Ltd

Petroleum 53 Ekuigbo Ughelli 2

269 Epanoe Nigeria Ltd Surveys 13 Okpara Rd Ughelli 2

270 John Obonatazie

Olokor

Painting 4 Utuonuyo Str.

Ughelli

2

271 Sam-Welding &

Fabrication Works

Welding 12 Uduere Str.

Ughelli

1

272 Disciples bakery Confectioner

y

2A Clark

Bekederemo Str.

Ughelli

2

273 Aberhire Ventures Pharmaceutic

al

1A College Rd Otu-

Jeremi Ughelli

2

274 Delta Glass Coy. Ltd Industrial Kilometer 17, Patani

Ughelli

2

275 Ola-Ojo Press Ltd Industrial 38 Adonovwe Str.

Ughelli

2

276 Travellers Café Restaurant Ekuigbo Ughelli 2

277 Abel Oloku Spraying

Works

Painting 23 Ezewu Str.

Ughelli

1

278 Abraham Adeke

Welding Works

Welding 4 Ophan Rd. Ughelli 1

279 Abu Agnes Hair

Dressing Saloon

Saloon 35 Olotu Str. Ughelli 1

280 Afedia Felix Diesel

Machanic

Mechanics 14 Ighovoja Lane

Ughelli

2

281 Al-Digital

Communication

Business

services

31 Afiesere Rd.

Ughelli

2

282 Alfromars Welding

& Fabrication Ind.

Nig.

Welding 309 Ughelli/Patani

Rd. Ughelli

1

283 Aloba Wilson

Welding &

Fabrication

Welding 309 Ughelli/Patani

Rd. Ughelli

1

284 Ama Ohoror Printing

Press Co.

Printing 95 Upper Afiesere

Rd. Ughelli

2

285 Amoris Bakery Confectioner

y

4A Oteri Rd. Ughelli 2

286 Andrew Onuah Motor Parts 190 Ughelli/ Patani 2

236

(Upholstery) Rd. Ughelli

287 Andy Bakery Confectioner

y

6 Okiki Str. Ughelli 2

288 B & V Bakery Confectioner

y

32 Oghenevweta Str.

Ughelli

2

289 Barrack Int.

Construction Co.

Construction 122 Afiesere Rd.

Ughelli

2

290 Benjamin Okoye

Uphostery Works

Motor Parts 85 Afiesere Rd

Ughelli

2

291 Benson Ukpeje

Welding

Welding 54 Afiesere Rd.

Ughelli

1

292 Bluff Joshua

Welding &

Fabrication

Welding 1 Aro Rd. Ughelli 1

293 Bright Miller Bakery Confectioner

y

10 Prince Okorare

Str. Ughelli

2

294 Ceejays

Communications

Services

Communicati

on

50 Afiesere Rd.

Ughelli

2

295 Chi Best Aluminium Building 163 Ughelli/ Patani

Rd. Ughelli

2

296 Christopher Kofi

Welding Works

Welding 79 Emuekpa Rd.

Ughelli

2

297 City Bakery Confectioner

y

8 Afiesere Rd.

Ughelli

2

298 Cletus Welding

Company


Ughelli

1

299 Concord Bakery Foods 12A Orubu Str.

Ughelli

2

300 D.O.A. Best Bakery Confectioner

y

40 Omotor Str.

Ughelli

2

301 DamDav

Construction Coy.

Construction 11 Olori Str. Ughelli 2

302 D Okoye & Sons

(Uphostery)

Motor Parts 38 Isoko Rd. Ughelli 2

303 David Oghenemaro

Welding &

Fabrication

Welding 37 Iwhakpokpo Rd

Ughelli

1

304 Deluxe Bakery Confectioner

y

113 Afiesere Rd

Ughelli

2

305 Edafe-Edeh & Coy Mechanics 3 Otovwodo Isoko Rd 2

237

Ughelli

306 Elo Bakery Confectioner

y

Along Ekredjebo Rd.

Ughelli

2

307 Emma Welding

Works

Welding 6 Orisejobo Str.

Ughelli

1

308 Escort Bakery Confectioner

y

Gas Plant by

Ogheneweta

2

309 Excel bakery Confectioner

y

3 Okielumena Str.

Ughelli

2

310 Feldor Sewing

Institute

Clothing Ekredjebu Rd. by the

First Convent Ughelli

2

311 Fredeco Int. (Nig.)

Company

Painting 36 Post Office Rd.

Ughelli

2

312 Friday Obodhoghor

Uphostery

Motor Parts 52 otovwodo Rd.

Ughelli

2

313 God is Good Bakery Confectioner

y

4B Salvation str.

Iwhrekpokpo Layout

Ughelli

2

314 God’s Blessing

bakery

Confectioner

y

35 Aro Rd. Opp

A.G.G.S. Ughelli

2

315 God’s Love bakery Confectioner

y

45A Sadjere Str.

Ughelli

2

316 God’s Own Bakery Confectioner

y

5 Dortile Str. Off

Uloho Avenue,

Ughelli

2

317 GOD’s Sufficiency

Bakery

Confectioner

y

2 Edjere Str. Ughelli 2

318 God’s Will Bakery Confectioner

y

18 Orubu Str. Ughelli 2

319 God’s Time Bakery Confectioner

y

2 Egone Str. Ughelli 2

320 Godsent Bakery Confectioner

y

13 Orubase Str.

Ughelli

2

321 Godwin Adasa

Motor Mechanic

Motor Parts Ughelli/Patani Rd

Ughelli

2

322 Golon Uphostery Motor Parts 139 Isoko Rd.

Ughelli

1

323 Greg O. Eseridbe

(Refrigirator)

Refrigeration 128 Ughelli/Patani

Rd. Ughelli

2

324 Hope Imo Nig. Ent.

Ughelli

General 9 Oharisi Str. Ughelli 2

238

325 Ideal Bakery Confectioner

y

9B Amedu Close

Ughelli

2

326 Idu-Oja Construction

& Oil Field Services

Oil & Gas 4 Isoko Rd. Ughelli 2

327 Ighoteri (Nig.)

Company

Welding 38 Otovwodo Opp.

Ovie Palace Ughelli

2

328 Igrah International

Coy.

Mechanics 6 Emowhe Str.

Ughelli

2

329 Itobi Felix Welding

& Fabric Works

Welding 10 Oduaran Str.

Ughelli

2

330 Itu Abraham

Welding &

fabrication

Welding 1 Post Office Rd.

Ughelli

1

331 J. A. Ogeli

Enterprises

Electricals 126 Ughelli/Patani

Rd Ughelli

2

332 Jesus Bakery Confectioner

y

6 Onubu Str., Behind

NNPC Ughelli

2

333 Jet Bakery Confectioner

y

56 Otovwodo Rd.

Ughelli

2

334 Joe-Jebe (Nig.)

Company

Welding 189 Ughelli/ Patani

Rd. Ughelli

2

335 John O. Oduara &

Sons Ent.


Ughelli

1

336 Majel Nig. Ltd Printing 49 Isoko Rd. Ughelli 2

337 Kan-Bit Designs &

Prints

Business

Services

31 Afiesere rd

Ughelli

2

338 Kelly Bakery Confectioner

y

110 Iwhrekporkpor

Ughelli

2

339 Kenny Bakery Confectioner

y

23 Mudi Erhenede

str. Ughelli

2

340 Kess Bakery Confectioner

y

12A Otovwodo Rd.

Ughelli

2

341 Linus Okoro

Uphostery

Motor Parts 22 Market Rd.

Ughelli

1

342 Majel Nigeria Ltd Printing 118 Market Rd.

Ughelli

2

343 Manager Eko Motor

Mechanics

Mechanics 25 Edoge Str. Ughelli 2

344 MAO Akpudi (Nig.)

Ltd.

Welding 77 Isoko Rd. Ughelli 2

345 Marano Bakery Confectioner 11 Ben Oru Close 2

239

y Ughelli

346 Mavis Bakery Confectioner

y

1 Odibo Str. Ughelli 2

347 Mena Welding &

Fabrication Nig. Ltd.

Welding 26B Dortile Str.

Ughelli

1

348 Miketoma Welding

& Construction Coy

Welding Igwhre-Ovie Rd. by

Aributt Concrete

Works, Ughelli

1

349 Michael Ogho &

Sons Nig. Ent.

Mechanics 100 Isoko Rd., Shell

Gate, Ughelli

2

350 Nero Ugbiyobi

International Coy

Welding 27 Ughelli/ Patani Rd

Ughelli

1

351 Nig. Kpaka Welding

& Fabrication Works

Welding 9 Ahwinahwi Str.

Ughelli

1

352 Nobel Bakery Confectioner

y

Iwhreovie Rd., off

Ughelli/Asaba Rd.

Ughelli

2

353 Obire Victor Motor

Machanic

Mechanics 313 Ughelli/ Patani

Rd. Ughelli

2

354 Obruche Bakery Confectioner

y

I4 Ovririe Str.

Ughelli

2

355 Ochuko Bakery Confectioner

y

14A Eremu Str.

Ughelli

2

356 Ochunogor Lucky

Upholstery

Motor Parts 9 Amakata Str. Off

Isoko Rd. Ughelli

2

357 Oghogho Otomi

Welding &

Fabrication Works

Welding 190 Ughelli/ Patani

Rd Ughelli

1

358 Omovo Bakery Confectioner

y

40 Igbudu Avenue

Ughelli

2

359 Onos bakery Confectioner

y

15 Iwhrekpokpor Rd.

Ughelli

2

360 Oshevi F.M.P.C.S

Ltd

Rentals 7 Osia Str. Ughelli 1

361 Otor-Edo Airobor

Company (Nig.) Ltd.

Rentals 92 Upper Afiesere

Rd. Ughelli

2

362 Our Savior bakery Confectionery Ughelli/Warri Rd

Ughelli

2

363 Sam-Ema Tech. Co.

Nig.

Motor Parts 303 Ughelli/ Patani

Rd Ughelli

2

240

364 Skyrose Nig.

Enterprise

Laundary 50 Afiesere Rd.

Ughelli

1

365 Solo Motor Nig. Coy Mechanics 181 Ughelli/ Patani

Rd. Ughelli

2

366 Tom Ohwo & Sons Financial 52 Afiesere Rd.

Ughelli

2

367 Victory Bakery Confectionery 6B Temile Str.

Ughelli

2

368 Beta Glass Plc Manufacturing Kilometer 17

Warri/Patani Rd

Ughelli

2

369 Willy Signs & Arts

Studio

Art Works Ogheneweta Junction

Ughelli

1

370 Tomketa Nig. Works Welding 156 Ughelli/ Patani

Rd Ughelli

2

371 Uruemu Bakery Confectioner

y

2nd

Emekpa Str.

Ughelli

2

372 Roland Odjus Ent. Welding 77 Isoko Rd Ughelli 2

373 Quality Investment General 15 Edoge Str. Ughelli 2

374 Excellence

educational consult

Educational 23 urhoworo, Ughelli 2

375 Brother makilo felix

welding &

Fabrication

Welding 12 Okpokor, Street 1

376 Evans Ogodogbo

Upholstery

Motor Parts 1 Arovie Str. Afiesere 2

377 Samitec Nig. Ltd. Mechanics 124 Afiesere 2

378 Samuel Omoisi

Welding

Welding 10 Okpokpo Str.

Afiesere

1

379 Jonah Mechanic

Works

Mechanics 1 Okose Str. Agbara

Otor

2

380 Race oil Petroleum Ughelli/Patani

Express Way,

Agbarho

2

381 Saturday mechanics Mechanics 22 Odjegba Str.,

Agbaro

2

Total 683

241

C. South District


Respondents

1 Ajurenmisan

Mattu Enterprise

General 3 Juren Mattu Str. Koko 1

2 Akali Earth

Metals

Welding Plot 1, 3, 5, 7, 9, & 11 Dr.

Omaghomi ofioritse Rd.

Koko

2

3 Asamsco Nig. Ltd Welding 25 Olomu Rd Koko 2

4 Atoll Project

Support Nig. Ltd

Agriculture Ajakpa House, off NPA

Koko

2

5 B B Gere &

Associates

Educational 1 Total Rd. Koko 1

6 Benco Furniture

Enterprise

Furniture Estate Quarters Koko 2

7 Desmond Tosan

Oyowe Enterprise

General 12 Atuwaste 11 Way Koko 2

8 Eloko Omuvie

Enterprise

Wood Works Comfort House, By Roli

Hotel Beach Town Koko

1

9 Eversons Fish

Farm

Agriculture Km 4, Koko- Ugbenu Rd

Koko

2

10 Eyiomat Farm Agriculture 4 Egbe Rd Koko 2

11 Gab-Ella Builders

& Materials Ltd

Building Gabella Block factory,

New Rd Koko

2

12 Goeserve

Structural Ltd

Agriculture 1 Koko Beach Rd Koko 1

13 God’s Grace

Welding shop Ent.

Welding 72 Koko Beach Rd. Koko 2

14 Jaforson Ice Food

& Products Nig.

Ent.

Agriculture 2 Total Rd. Koko 2

15 Jomagho Ventures

Ltd

Agriculture Ologbo Rd Juction Koko 2

16 Josh Enterprise Agriculture 20 Atuwatse 11 Way Koko 1

17 Lawrence Oil Mill

Enterprise

Agriculture 20 Atuwatse Way Koko 2

18 Madam Iyayi

Kpenosen Trading

Store

General 20 Atuwatse Way Koko 2

19 Michasin General C/O Roli Hotels Hotels 1

242

Reources Ltd Ltd. Koko

20 Omagbetse Guest

house &

Supermarket

Hospitality 47 Atuwatse 11 Way,

Koko Beach

2

21 Opubeni

Investment Coy.

General Plot 0022 Korobe Rd.

Koko

2

22 Pikenso Industries Soap

Manufacturing

128 koko Beach Koko 2

23 Suzzy table Water

Coy Ltd

Water Plant 5 Suzzy Str. Off Korobe

Rd. Koko

1

24 Todes

International Coy

Petroleum Oyowe’s Compound

Ogbugbu Qtr.s Koko

2

25 Yiwason Nig.

Enterprise

Agriculture 1 Chairman Lodge Rd.

Koko

2

26 Anthony

Electrical &

Electronics Coy

Electricals 17 Ekerive Str. Koko 1

27 Air Liquide Nig.

Plc

Oil & Gas 71A Airport Rd Warri 2

28 Akowho Services

Ltd

Oil & Gas 1 Ovonomo Str. Warri 2

29 Ali-Rezi Ltd Oil & Gas 72 Eboh Rd. Okumagba

estate Warri

2

30 Al-Rosi Consult Services 9 Iyede Close Warri 1

31 Andies Nig.

Enterprises

General 1B Sido Str. Warri 2

32 Apple-Crown

Insurance Ltd

Insurance 127 Warri/ Sapele Rd

Warri

2

33 Arco Marine &

Oilfield Services

Ltd

Oil & Gas 75 Enerhen Rd Warri 2

34 Applied-Tech

Management

Consultants Ltd

Services 4 Airport Rd Warri 1

35 Atuche (Nig.)

Enterprises

General 17 Lower Erejuwa Rd

Warri

2

36 Avadell Carpet Furnitures 8 Okumagba Avenue

Warri

2

37 Award Press Ltd Printing 47 Airport Rd Warri 2

38 BCIS Ltd Information

Technology

105 Airport Rd Warri 2

243

39 Benigan

Forwarders Ltd

Shipping Plot NPA New Port Gate

Complex Warri

1

40 BETTA Educational 5 Effurun/Warri Rd, Warri 2

41 BCP International

Nig. Ltd

Oil & Gas Peace of Peace, Hospital

Rd. Warri

2

42 Billy O. Idundun

& Sons

General 7 Ekpen Str. Okere Warri 2

43 BJ Services Coy

Nig. Ltd

Oil & Gas Enerhen Rd Warri 2

44 Blackie Thomas

Nig. Ltd

Oil & Gas 43 airport Rd Warri 2

45 BOC Gases Oil & Gas 8 IGL Rd McDermott

Warri

1

46 BOI-Tee Nig. Ltd Oil & Gas 36 Airport Rd Warri 2

47 Brawal Shipping

Nig Ltd

Shipping Old NPA Premises Warri 2

48 BSS Support &

Services Ltd

Services 112 Ajamimogha Rd

Warri

2

49 Building Services

Products Ltd

Building 41 Udu Rd. Warri 1

50 Business

Computers &

Information

System Ltd

Information

Technology

Plot 105 Airport Rd Warri 2

51 C & I Leasing

PLC

Oil & Gas 30 Deco Rd. Warri 2

52 Callnet Nig. Ld I.T. 3 Effurun/ Sapele Rd.

Warri

2

53 Capital Bank

international

Banking 33 Warri/Sapele Rd. Warri 2

54 Casche Nig. Ltd Oil & Gas Opp Old Airport Rd Warri 1

55 Chiments surveys

& Services Ltd

Surveys 6 okumagba Avenue Warri 2

56 City-code Trust

ltd

Financial 177 Warri/ Sapele Rd

Warri

2

57 Computer

Powerhouse Int.

Ltd

Information

Technology

43 Airport Rd Warri 2

58 Conmics

International Ltd

General 6 Okpikpi Str. Warri 2

59 Council for the Agency C/O Ministry of Works & 1

244

Regulation of

Engineering In

Nig.

Transport Warri

60 Daddo Maritime

Services Ltd

Shipping UAC House, 24 Sapele Rd

Warri

2

61 Dec oil & Gas

Nig Ltd

Oil & Gas Off Chevron Hospital Rd.

Edjeba Warri

2

62 Delta Brothers

Ltd

General 37 Warri/Sapele Rd Warri 2

63 Delta Institute of

technology

Educational 3 Edewor Shopping Centre

Warri

2

64 Der Kurier Air

Action Couriers

Courier 67 Warri/ Sapele Rd Warri 1

65 Dorman Long &

Amalgamation

Engr. Ltd

Iron & Steel 27 Warri/ Sapele Rd Warri 2

66 Dowens &

Company

Surveys 82 Ekpen Str. Warri 2

67 DPMS Ltd Information

Technology

20A Okumagba Avenue

Warri

2

68 Dubrai

Contractors Ltd

Construction 6 Okumagba Avenue

Warri

2

69 Dukas & Dukas

(Nig.) Ltd

Surveys 16 okumagba Avenue

Warri

2

70 Dyday

international Ltd

Construction Old Port Premises Warri 2

71 E.D. Itesa &

Associates

Surveying Warri- Sapele Rd Warri 2

72 Epaco Holding

Ltd

General 1 Hausa Rd. Warri 2

73 ETPM Globestar

Yard

Iron & Steel McDermott Rd. Warri 2

74 ETUS

International Ltd

General 57 Ginuwa Rd Warri 2

75 Felisco Nig. Ent. General 14 Etuvwewe Str. Warri 2

76 Figad Nig. Ltd General 297 Warri/ Sapele Rd

Warri

2

77 Godson

Investment

Company

General 91B Okumagba Avenue

Warri

2

78 Hotel & Catering Hospitality Ighogbadu Rd Warri 2

245

services Ltd

79 IAL Nig. Limited Services 84 Warri/ Sapele Rd Warri 2

80 Idama Hotel Hospitality 24 Okumagba Avenue

Warri

2

81 Intertec

Engineering

(Nig.) Ltd

Industrial Bungalow 8, Cristal Palace

Estate Edjeba, Warri

2

82 Iresa-Adu

Company Ltd

General 69, Airport Rd. Warri 1

83 J.E. Kajopa Ent. General 2 McDermott Rd Warri 2

84 J.J. Scot Group of

Companies

Transportation 17 Ogunu Rd Warri 2

85 Jimstrong Nigeria

Ltd

General 20 Deco Rd Warri 2

86 Joopa Nig. Ltd General 56 Okere Rd Warri 1

87 Jovee Wireless

communications

Ltd

I.T 229 Warri/ Sapele Rd

Warri

2

88 Kagho Industrial

Enterprises Ltd

Industrial Warri/ Sapele Rd Warri 2

89 Kegbru Int.

Company

General 289 Warri/ Sapele Rd

Warri

2

90 Ken Chucks Nig.

Enterprises

General 5 Eboh Rd. Warri 1

91 Lumann Nig. Ltd Industrial 137 Warri/ Sapele Rd.

Warri

2

92 Manhattan General 52 First Marine Gate 2

93 Mawa Maritime

Ltd

Shipping 177 Warri/ Sapele Rd

Warri

2

94 McDermott Nig.

Ltd

Steel Mcdermott Rd Warri 2

95 Mercyfaith

Insurance Brokers

Ltd


Warri

1

96 Midland Printing

Press

Printing 31 Odion Rd. Warri 2

97 Multinational

Tech. Ltd

I.T 45 upper Erejuwa Str.

Warri

1

98 Nelson Uti

Insurance Brokers

Ltd

Financial 50 Warri/ Sapele Rd.

Warri

2

246

99 Obinath

Enterprises (Nig.)

General 76 Cementary Rd Warri 2

100 Pakoson Nig. Ent. General 1 Mcdermott Rd Warri 1

101 Palm Grove Motel Hospitality Upper Erejuwa Rd Warri 2

102 Premium

Insurance Brokers

Ltd


Warri

2

103 Richwilson

Services Ltd

Services 6 Ighogbadu Rd Warri 2

104 Robert Johnson

Nigeria Ltd


Warri

1

105 Saidi Stargate

Hotel Ltd

Hospitality Airport Rd Warri 2

106 Samemu Services

Ltd


Warri

2

107 SDV Nig. Ltd Oil & Gas 9 Robert Rd Warri 2

108 Sea Investment

Ltd

General 119, Okumagba Avenue

Warri

2

109 Skyward

Resources Ltd

General 93, Okumagba Avenue

Warri

2

110 Steelways Nig.

Ltd

Steel Merogun Waterside Warri 2

111 Rope Rigging

Nig. Ltd

General Old NPA Premises Warri 1

112 Rotu Industrial

Ent.


Warri

2

113 Structec Nig. Plc Steel Warri/ Sapele Rd Warri 2

114 Skyobin

Investment Ltd

General 35 Okumagba Rd Warri 2

115 Delta Independent

Newspaper

Printing 119 Okumagba Avenue

Warri

2

116 Tidex Nig. Ltd Oil & Gas Berie Str. Warri 1

117 Toneiko

Development Co.

Ltd

Services 16 Okere Rd Warri 2

118 United

Goephysical Nig.

Ltd

Oil & Gas Merogun Waterside, off

McDermott Rd Warri

2

119 Veenel

Enterprises

General 61 Okumagba Avenue

Warri

2

247

120 Wemtraco Nig.

Ltd

General 70 Cementary Rd Warri 2

121 Yisco Printing

Enterprises

Printing 33 market Rd Warri 1

122 Ifeanyi Chukwu

& Coy Ltd

Transportation 1 link Rd Warri 2

123 IMC Limited General 7 Deco Rd Warri 2

124 Oculyn

International

Agency Ltd

General 18 Efesoma Str. Warri 2

125 Odibo Hotels &

catering Services

Hospitality 2 Emuhi Rd Warri 2

126 Ascon oil Ltd Petroleum Benin/ Asaba Express

Way Emuhu Warri

2

127 Norman industries

Ltd

Industrial Warri/ Sapele Rd Warri 2

128 Aggresion Int.

Services Co. Ltd

Services 72 Eboh Rd Warri 1

129 IFEX LTD General 72 Warri/ SApele Rd.

Warri

2

130 Water Treatments

Consultant Ltd

Water

Resources

16 Eboh Rd Warri 2

131 Ade Survey &

Associates

Services 95 market Rd Oleh 1

132 Aluta Memorial

Hospital

Health 207 Ogbmudia Rd Oleh 2

133 Atase United

Trading Company

General 1 I.D.C. Rd Oleh 2

134 Chardan

Enterprises

General 70 I.D.C. Rd Oleh 2

135 Asuiz Electronics Electronics 170 Emore Rd Oleh 1

136 David O. Otowa

Enterprises

General Ogbemudia Rd Oleh 2

137 Dentop Computer

Systems Company

Information

Technology

118 Emore Rd Oleh 1

138 Emma-Eghove &

Company

General 140 Emore Rd Oleh 2

139 Emson Computer

Services

I.T 100 emore Rd Oleh 1

140 Eno Gen. Ent. General 197 Emore Rd Oleh 2

141 Figbo Marketing General 235 Ogbemudia Rd Oleh 2

248

Coy

142 Gom Tech. Ent. General 6 New Emede Rd Oleh 2

143 Iveno Bakery &

Iveno Farms

Agriculture 2 Ilolo Str. Oleh 2

144 Justus-Ebele

Micheal

Enterprises

General 59 Oleh Main Market Rd

Oleh

2

145 Lawrico Int.

Company

General 159 Emore Rd Oleh 2

146 Sontech

Enterprise

General 9 Ibrahim Kesfa Rd Oleh 1

147 Alabi Mechanic

Workshop

Mechanics Bomadi Water side 1

148 Funtare Hotels

Ltd.

Hospitality Behind Bomade Police

Barracks

1

Total 260

Grand Total 1,110

Source: Delta State Industry Directory (2010). List of Registered Small and

Medium Scale Enterprises in the North, Central and South Senatorial Districts

of Delta State: Ministry of Commerce and Industry.

249

Appendix 1

Descriptive Statistics for Research Questions

Research question One

Descriptive Statistics

Mean Std. Deviation

Equity finance as a source of financing working capital by Small and Medium Scale Enterprises for effective operations

3.91 1.162

Long-term debt as a source of financing working capital for the retained earnings of Small and Medium Scale Enterprises

4.02 .975

Asset-based financing as a source of funding working capital for effective operations of Small and Medium Scale Enterprises

2.83 1.397

Accounts payable as a source of financing in working capital to meet short-term obligations of Small and Medium Scale Enterprises

4.01 1.078

Accruals as a discretionary source of financing in working capital for optimal resource utilization of Small and Medium Scale Enterprises

3.95 1.054

Bank loans stands as a source of financing working capital for the liquidity of Small and Medium Scale Enterprises

4.20 .841

Promoters fund as a source of financing working capital by Small and Medium Scale Enterprises for effective operations

3.57 1.250

Borrowing from friends and family as a source of financing in working capital for the profitability of Small and Medium Scale Enterprises

4.18 .897

Thrift as a source of financing working capital for effective operations of Small and Medium Scale Enterprises

4.36 .732

Unsecured financing as a source of financing working capital for the solvency of Small and Medium Scale Enterprises

2.91 1.416

Research question Two Descriptive Statistics

N Mean Std. Deviation

Maintaining optimum cash balance as a practice by Small and Medium Scale Enterprises for effective operations

990 4.07 1.096

Management of cash inflows as a facilitator for effective operations of Small and Medium Scale Enterprises

990 4.27 .833

Sound cash planning policies as a practice by Small and Medium Scale Enterprises for effective operations

990 4.31 .757

Investment of excessive cash as a practice for effective operations of Small and Medium Scale Enterprises

990 3.94 1.029

Monitoring cash outflows as a practice by Small and Medium Scale Enterprises for effective operations

990 4.00 .991

Small and Medium Scale Enterprises in Delta State should synchronizes their cash inflows with their cash outflows as a practice for effective business operations

990 3.59 1.305

Cash receipts should be forecasted as a practice for effective operations by Small and Medium Scale Enterprises

990 3.06 1.254

Cash expenditures should be forecasted as a practice for effective operations by Small and Medium Scale Enterprises

990 3.85 1.126

Staff dealing with cash should be trained periodically as a practice for effective operations by Small and Medium Scale Enterprises

990 3.54 1.086

Staff handling cash should be rotated at intervals as a practice for effective internal controls by Small and Medium Scale Enterprises

990 3.49 1.200

Valid N (listwise) 990

250

Research question Three Descriptive Statistics

N Mean

Std. Deviation

Account receivables controlled as a practice for effective operations by Small and Medium Scale Enterprises

990 3.93 1.040

Small and Medium Scale Enterprises should evaluate the average credit extended to customers as a practice for their effective business operations

990 3.67 1.138

Small and Medium Scale Enterprises should project expected sales and expected investment in receivables as a practice for effective business operations

990 3.62 1.147

Account receivables to customers should go with a time lag for repayment as a practice for effective operations of Small and Medium Scale Enterprises

990 4.15 .936

Management of Small and Medium Scale Enterprises should formulate policies guiding accounts receivables as a practice for effective business operations

990 2.95 1.477

Terms of agreement should be made for every credit sales as a practice for effective operations of Small and Medium Scale Enterprises

990 3.79 1.234

Management should make expectations on account receivable turnover and resulting bad debts as a practice for effective operations of Small and Medium Scale Enterprises

990 3.19 1.442

Management should review accounts receivable policies from time to time as a practice for effective operations of Small and Medium Scale Enterprises

990 3.04 1.471

Collection policy should be made for obtaining payments of past due accounts as a practice for effective operations of Small and Medium Scale Enterprises

990 2.75 1.502

Staff should be trained in credit and collection policies for the effective operations of Small and Medium Scale Enterprises

990 2.79 1.409


Research question Four Descriptive Statistics

N Mean

Std. Deviation

Minimum stock level should be fixed as a practice for the effective operations of Small and Medium Scale Enterprises

990 3.98 1.011

Inventory management policies should be made as a practice for optimal resource utilization of Small and Medium Scale Enterprises

990 2.91 1.373

Sales forecast should be developed in inventory management for the effective operations of Small and Medium Scale Enterprises

990 2.81 1.408

Excess inventories should be avoided as a practice for effective internal controls of Small and Medium Scale Enterprises

990 4.11 .890

Inventory stock-out should be avoided as a practice for the effective operations of Small and Medium Scale Enterprises

990 4.22 .841

On-the-job training should be organized for staff on inventory management needed as a practice for the effective operations of Small and Medium Scale Enterprises

990 2.80 1.422

Inventories should be ordered as a practice following laid down guidelines for effective operations of Small and Medium Scale Enterprises

990 2.84 1.415

251

Inventory planning should be made at regular intervals as a practice for effective operations of Small and Medium Scale Enterprises

990 2.71 1.297

Inventories should be properly checked on arrival as a practice for effective operations of Small and Medium Scale Enterprises

990 4.09 .918

Economic Order Quantity (EOQ) and Just-in-Time (JIT) should be used to ascertain inventory level as a practice for effective operations of Small and Medium Scale Enterprises

990 2.43 .898


252

Research question Five Descriptive Statistics


Management should set up disbursement system in managing accounts payable as a practice for effective operations of Small and Medium Scale Enterprises

990 2.24 1.076

Accounts payable policies and procedures should be formulated as a practice for effective operations of Small and Medium Scale Enterprises

990 2.78 1.302

The duties of staff handling accounts payable should be segregated as a practice for effective operations of Small and Medium Scale Enterprises

990 2.69 1.289

Accounts payable systems should be monitored and reevaluated at intervals as a practice for effective operations of Small and Medium Scale Enterprises

990 2.91 1.388

Accounts payables should be controlled as a practice for effective operations of Small and Medium Scale Enterprises

990 2.83 1.435

Accounts payables received from customers should go with a time frame for payment as a practice for effective operations of Small and Medium Scale Enterprises

990 3.94 1.127

Terms of agreement should be made for every credit receipt as a practice for effective business operations of Small and Medium Scale Enterprises

990 3.32 1.378

Staff should be trained on credit payment policies as a practice for effective operations of Small and Medium Scale Enterprises

990 2.70 1.325

Management should review accounts payable policies from time to time for effective operations of Small and Medium Scale Enterprises

990 2.86 1.296

Management should project a limit on accounts payable as a practice for effective operations of Small and Medium Scale Enterprises

990 2.76 1.322


Research question Six Descriptive Statistics


The rate of return on investments should be considered before actually investing in working capital as a practice for effective operations of Small and Medium Scale Enterprises

990 4.04 1.006

Investment policies should be formulated as a practice for effective operations of Small and Medium Scale Enterprises

990 2.81 1.466

Risk on investments should be evaluated as a practice for effective operations of Small and Medium Scale Enterprises

990 3.62 1.334

Management should engage in training on best investment practices for effective operations of Small and Medium Scale Enterprises

990 2.80 1.330

All idle cash should be invested into the business as a practice for effective operations of Small and Medium Scale Enterprises

990 3.87 1.145

Investment decisions should be left only in the hands of management as a practice for effective operations of Small and Medium Scale Enterprises

990 4.12 1.025

253

Contractual agreements should be reached for every investment made to facilitate effective operations of Small and Medium Scale Enterprises

990 3.64 1.256

Investment as a practice policies and procedures should be reviewed periodically for effective operations of Small and Medium Scale Enterprises

990 2.73 1.337

Liquidity and profitability should be major determinants of investment in working capital as a practice for effective operations of Small and Medium Scale Enterprises

990 3.91 1.082

Investment conversion period (i.e. cash-to-cash conversion cycle) should be considered before investing into business transactions as a practice for effective operations of Small and Medium Scale Enterprises

990 3.25 1.345


254

Appendix J

Clusters for Research Questions

Mean

Std.

Deviation

Cluster 1 3.7940 1.07827

Cluster 2 3.8120 1.06915

Cluster 3 3.3880 1.28400

Cluster 4 3.2900 1.14877

Cluster 5 2.9030 1.18347

Cluster 6 3.4790 1.99079

255

Appendix K

Group Statistics and Independent T-test for Hypothesis 1 T-Test for Ho1

Group Statistics

Category N Mean

Std. Deviation Std. Error Mean


Manager 556 3.79 1.239 .053

Accountant 434 4.06 1.037 .050

Long-term debt as a source of financing working capital for the retained earnings of Small and Medium Scale Enterprises

Manager 556 3.96 1.024 .043

Accountant 434 4.10 .904 .043


Manager 556 2.72 1.421 .060

Accountant 434 2.97 1.353 .065

Accounts payable as a valuable source of financing in working capital to meet short-term obligations of Small and Medium Scale Enterprises

Manager 556 3.93 1.149 .049

Accountant

434 4.12 .969 .047


Manager 556 3.87 1.126 .048

Accountant 434 4.04 .948 .046

Bank loan stands as a source of financing working capital for the liquidity of Small and Medium Scale Enterprises

Manager 556 4.12 .915 .039

Accountant 434 4.31 .721 .035


Manager 556 3.51 1.283 .054

Accountant 434 3.66 1.204 .058

Borrowing from friends and family as a source of financing in working capital for the profitability of Small and Medium Scale Enterprises

Manager 556 4.21 .906 .038

Accountant 434 4.15 .885 .042

Thrift as a source financing working capital for effective operations of Small and Medium Scale Enterprises

Manager 556 4.35 .746 .032

Accountant 434 4.37 .714 .034


Manager 556 2.90 1.403 .060

Accountant 434 2.93 1.433 .069

256

Independent Samples Test

Levene's Test for Equality of

Variances t-test for Equality of Means

F Sig. t Df

Sig. (2-

tailed)

Mean Differen

ce

Std. Error

Difference

95% Confidence Interval of the

Difference

Lower Upper


Equal variances assumed

26.819 .000 -3.600 988 .000 -.266 .074 -.411 -.121

Equal variances not assumed

-3.679 983.183 .000 -.266 .072 -.408 -.124

Long-term debt as a used in financing working capital for the retained earnings of Small and Medium Scale Enterprises


1.416 .234 -2.290 988 .022 -.143 .062 -.265 -.020


-2.326 973.247 .020 -.143 .061 -.263 -.022



3.470 .063 -2.822 988 .005 -.252 .089 -.427 -.077


-2.840 950.204 .005 -.252 .089 -.426 -.078

Accounts payable as a valuable source of financing in working capital to meet short-term obligations of Small and Medium Scale Enterprises


9.311 .002 -2.821 988 .005 -.194 .069 -.329 -.059


-2.880 982.138 .004 -.194 .067 -.326 -.062



13.631 .000 -2.416 988 .016 -.163 .067 -.295 -.031


-2.468 982.239 .014 -.163 .066 -.292 -.033

Bank loans stands as a source of financing working capital for the liquidity of Small and Medium Scale Enterprises


10.141 .001 -3.638 988 .000 -.195 .054 -.300 -.090


-3.744 987.885 .000 -.195 .052 -.297 -.093



4.142 .042 -1.875 988 .061 -.150 .080 -.307 .007


-1.890 955.183 .059 -.150 .079 -.306 .006

Borrowing from friends and family as a vital source of


1.180 .278 .994 988 .321 .057 .057 -.056 .170

257

financing in working capital for the profitability of Small and Medium Scale Enterprises


.996 940.049 .319 .057 .057 -.055 .169

Thrift as a source financing working capital for effective operations of Small and Medium Scale Enterprises


3.529 .061 -.334 988 .739 -.016 .047 -.108 .076


-.335 948.030 .737 -.016 .047 -.107 .076



.525 .469 -.283 988 .777 -.026 .091 -.204 .152


-.283 921.231 .778 -.026 .091 -.204 .153

258

Appendix L


Group Statistics

Category N Mean Std. Deviation Std. Error Mean

Maintaining optimum cash balance by Small and Medium Scale Enterprises as a practice for effective operations

Manager 556 4.15 1.077 .046

Accountant 434 3.97 1.113 .053


Manager 556 4.22 .897 .038

Accountant 434 4.33 .739 .035


Manager 556 4.31 .759 .032

Accountant 434 4.32 .754 .036


Manager 556 3.93 1.041 .044

Accountant 434 3.96 1.014 .049

Monitoring cash outflows as a practice by Small and Medium Scale Enterprises for effective operations

Manager 556 4.04 .952 .040

Accountant 434 3.95 1.038 .050

Small and Medium Scale Enterprises in Delta State should synchronizes their cash inflows with their cash outflows as a practice for effective business operations

Manager 556 3.57 1.326 .056

Accountant

434 3.63 1.278 .061

Cash receipts should be forecasted as a practice for effective operations by Small and Medium Scale Enterprises

Manager 556 3.00 1.270 .054

Accountant 434 3.14 1.230 .059


Manager 556 3.79 1.148 .049

Accountant 434 3.92 1.093 .052


Manager 556 3.55 1.065 .045

Accountant 434 3.51 1.113 .053

Staff handling cash should be rotated at intervals for effective internal controls by Small and Medium Scale Enterprises

Manager 556 3.49 1.254 .053

Accountant 434 3.49 1.125 .054

259


Levene's Test for

Equality of Variances t-test for Equality of Means

F Sig. t Df

Sig. (2-

tailed) Mean

Difference Std. Error Difference


Difference

Lower Upper

Maintaining optimum cash balance by Small and Medium Scale Enterprises as a practice for effective operations


.003 .955 2.652 988 .008 .186 .070 .048 .323


2.641 915.440 .008 .186 .070 .048 .324



8.267

.004 -2.221 988 .027 -.118 .053 -.223 -.014


-2.274 985.041 .023 -.118 .052 -.220 -.016



.323 .570 -.299 988 .765 -.015 .049 -.110 .081


-.300 933.244 .765 -.015 .048 -.110 .081



.080 .778 -.462 988 .644 -.030 .066 -.160 .099


-.464 941.285 .643 -.030 .066 -.159 .098

Monitoring cash outflows i as a practice by Small and Medium Scale Enterprises for effective operations


3.465

.063 1.422 988 .155 .090 .063 -.034 .215


1.407 889.074 .160 .090 .064 -.036 .216

Small and Medium Scale Enterprises in Delta State should synchronizes their cash inflows with their cash outflows for effective business operations


1.278

.259 -.726 988 .468 -.061 .084 -.225 .103


-.729 945.646 .466 -.061 .083 -.224 .103

Cash receipts should be forecasted as a practice for effective operations


.076 .783 -1.803 988 .072 -.145 .080 -.302 .013

260

by Small and Medium Scale Enterprises


-1.810 943.617 .071 -.145 .080 -.301 .012



2.638

.105 -1.809 988 .071 -.130 .072 -.272 .011


-1.820 950.204 .069 -.130 .072 -.271 .010



2.717

.100 .610 988 .542 .042 .070 -.094 .179


.607 910.259 .544 .042 .070 -.095 .180

Staff handling cash should be rotated at intervals as a practice for effective internal controls by Small and Medium Scale Enterprises


5.236

.022 1.428 988 .153 .110 .077 -.041 .260


1.448 968.943 .148 .110 .076 -.039 .258

261

Appendix M


Group Statistics

Category N Mean Std.

Deviation

Std. Error Mean

Account receivables controlled as a practice for effective operations by Small and Medium Scale Enterprises

Manager 556 3.94 1.033 .044

Accountant 434 3.93 1.049 .050

Small and Medium Scale Enterprises should evaluate the average credit extended to customers required for their effective business operations

Manager 556 3.58 1.193 .051

Accountant 434 3.78 1.053 .051

Small and Medium Scale Enterprises should project expected sales and expected investment in receivables for effective business operations

Manager 556 3.60 1.182 .050

Accountant 434 3.65 1.101 .053

Account receivables to customers should go with a time lag for repayment required for effective operations of Small and Medium Scale Enterprises

Manager 556 4.27 .837 .035

Accountant 434 3.98 1.027 .049

Management of Small and Medium Scale Enterprises should formulate policies guiding accounts receivables for effective business operations

Manager 556 2.88 1.439 .061

Accountant 434 3.04 1.521 .073

Terms of agreement should be made for every credit sales for effective operations of Small and Medium Scale Enterprises

Manager 556 3.87 1.135 .048

Accountant 434 3.68 1.343 .064

Management should make expectations on account receivable turnover and resulting bad debts for effective operations of Small and Medium Scale Enterprises

Manager 556 3.22 1.398 .059

Accountant 434 3.15 1.497 .072

Management should review accounts receivable policies from time to time for effective operations of Small and Medium Scale Enterprises

Manager 556 2.99 1.487 .063

Accountant 434 3.11 1.450 .070

Collection policy should be made for obtaining payments of past due accounts for effective operations of Small and Medium Scale Enterprises

Manager 556 2.75 1.491 .063

Accountant 434 2.75 1.517 .073


Manager 556 2.82 1.372 .058

Accountant 434 2.75 1.455 .070




F Sig. T Df Sig. (2-tailed)

Mean Differenc

e Std. Error Difference


Difference

Lower Upper

Account receivables controlled as a practice for effective operations by Small and Medium


.620 .431 .127 988 .899 .008 .067 -.122 .139

262

Scale Enterprises Equal variances not assumed

.127 923.766 .899 .008 .067 -.123 .140

Small and Medium Scale Enterprises should evaluate the average credit extended to customers required for their effective business operations


13.483 .000 -2.806 988 .005 -.204 .073 -.346 -.061


-2.849 973.109 .004 -.204 .072 -.344 -.063

Small and Medium Scale Enterprises should project expected sales and expected investment in receivables for effective business operations


3.404 .065 -.699 988 .485 -.051 .073 -.196 .093


-.705 957.891 .481 -.051 .073 -.194 .092

Account receivables to customers should go with a time lag for repayment for effective operations of Small and Medium Scale Enterprises


7.002 .008 4.886 988 .000 .290 .059 .173 .406


4.766 824.928 .000 .290 .061 .170 .409

Management of Small and Medium Scale Enterprises should formulate policies guiding accounts receivables for effective business operations


5.004 .026 -1.665 988 .096 -.157 .094 -.343 .028


-1.654 904.833 .098 -.157 .095 -.344 .029

Terms of agreement should be made for every credit sales for effective operations of Small and Medium Scale Enterprises


32.153 .000 2.495 988 .013 .197 .079 .042 .351


2.445 845.523 .015 .197 .080 .039 .355

Management should make expectations on account receivable turnover and resulting bad debts for effective operations of Small and Medium Scale Enterprises


5.808 .016 .710 988 .478 .066 .092 -.116 .247


.704 898.474 .482 .066 .093 -.117 .248

Management should review accounts receivable policies from time to time for effective operations of Small and Medium Scale Enterprises


1.104 .294 -1.226 988 .221 -.115 .094 -.300 .069


-1.230 941.209 .219 -.115 .094 -.300 .069

263

Collection policy should be made for obtaining payments of past due accounts for effective operations of Small and Medium Scale Enterprises


.551 .458 .001 988 .999 .000 .096 -.189 .189


.001 922.693 .999 .000 .096 -.189 .189



4.578 .033 .835 988 .404 .075 .090 -.102 .253


.829 903.496 .407 .075 .091 -.103 .254

264

Appendix N


Group Statistics

Category N Mean Std.

Deviation

Std. Error Mean

Minimum stock level should be fixed for the effective operations of Small and Medium Scale Enterprises

Manager 556 4.03 .940 .040

Accountant 434 3.91 1.093 .052

Inventory management policies should be made for optimal resource utilization of Small and Medium Scale Enterprises

Manager 556 2.84 1.378 .058

Accountant 434 2.99 1.364 .065


Manager 556 2.87 1.389 .059

Accountant 434 2.73 1.430 .069

Excess inventories should be avoided for effective internal controls of Small and Medium Scale Enterprises

Manager 556 4.06 .908 .039

Accountant 434 4.17 .862 .041

Inventory stock-out are avoided for the effective operations of Small and Medium Scale Enterprises

Manager 556 4.22 .839 .036

Accountant 434 4.21 .845 .041

On-the-job training should be organized for staff on inventory management needed for the effective operations of Small and Medium Scale Enterprises

Manager 556 2.83 1.429 .061

Accountant 434 2.77 1.413 .068

Inventories should be ordered following laid down guidelines for effective operations of Small and Medium Scale Enterprises

Manager 556 2.84 1.413 .060

Accountant 434 2.84 1.419 .068

Inventory planning should be made at regular intervals for effective operations of Small and Medium Scale Enterprises

Manager 556 2.66 1.315 .056

Accountant 434 2.77 1.272 .061

Inventories should be properly checked on arrival for effective operations of Small and Medium Scale Enterprises

Manager 556 4.03 .963 .041

Accountant 434 4.17 .852 .041

Economic Order Quantity (EOQ) and Just-in-Time (JIT) should be used to ascertain inventory level for effective operations of Small and Medium Scale Enterprises

Manager 556 2.35 .930 .039

Accountant 434 2.53 .846 .041




F Sig. t Df Sig. (2-tailed)

Mean Differenc

e

Std. Error

Difference

95% Confidence

Interval of the Difference

Lower Upper

Minimum stock level should be fixed for the effective operations of Small and Medium Scale Enterprises


12.470 .000 1.989 988 .047 .129 .065 .002 .256


1.953 855.025 .051 .129 .066 .000 .258

265

Inventory management policies should be made for optimal resource utilization of Small and Medium Scale Enterprises


.685 .408 -1.696 988 .090 -.149 .088 -.322 .023


-1.698 934.780 .090 -.149 .088 -.321 .023



2.234 .135 1.529 988 .127 .138 .090 -.039 .315


1.524 917.513 .128 .138 .090 -.040 .315

Excess inventories should be avoided for effective internal controls of Small and Medium Scale Enterprises


.001 .977 -1.899 988 .058 -.108 .057 -.220 .004


-1.911 951.051 .056 -.108 .057 -.219 .003

Inventory stock-out should be avoided for the effective operations of Small and Medium Scale Enterprises


.155 .694 .195 988 .845 .011 .054 -.095 .116


.195 927.571 .845 .011 .054 -.095 .116

On-the-job training should be organized for staff on inventory management needed for the effective operations of Small and Medium Scale Enterprises


.199 .656 .654 988 .513 .060 .091 -.119 .238


.655 935.065 .513 .060 .091 -.119 .238

Inventories should be ordered following laid down guidelines for effective operations of Small and Medium Scale Enterprises


.005 .944 .000 988 .999 .000 .091 -.178 .178


.000 928.767 .999 .000 .091 -.178 .178

Inventory planning should be made at regular intervals for effective operations of Small and Medium Scale Enterprises


1.117 .291 -1.390 988 .165 -.115 .083 -.278 .048


-1.396 944.133 .163 -.115 .083 -.278 .047

Inventories should be properly checked on arrival for effective operations of Small and Medium Scale Enterprises


1.217 .270 -2.307 988 .021 -.135 .059 -.250 -.020


-2.342 972.650 .019 -.135 .058 -.249 -.022

Economic Order Quantity (EOQ) and Just-in-Time (JIT)


4.238 .040 -3.160 988 .002 -.181 .057 -.293 -.069

266

should be used to ascertain inventory level for effective operations of Small and Medium Scale Enterprises


-3.197 965.147 .001 -.181 .057 -.292 -.070

267

Appendix O


Group Statistics

Category N Mean

Std. Deviation Std. Error Mean

Management should set up disbursement system in managing accounts payable for effective operations of Small and Medium Scale Enterprises

Manager 556 2.45 1.018 .043

Accountant 434 1.98 1.089 .052

Accounts payable policies and procedures should be formulated for effective operations of Small and Medium Scale Enterprises

Manager 556 2.73 1.319 .056

Accountant 434 2.84 1.280 .061

The duties of staff handling accounts payable should be segregated for effective operations of Small and Medium Scale Enterprises

Manager 556 2.66 1.283 .054

Accountant 434 2.74 1.296 .062

Accounts payable systems should be monitored and reevaluated at intervals for effective operations of Small and Medium Scale Enterprises

Manager 556 3.06 1.381 .059

Accountant 434 2.71 1.374 .066

Accounts payables should be controlled for effective operations of Small and Medium Scale Enterprises

Manager 556 2.88 1.430 .061

Accountant 434 2.76 1.442 .069

Accounts payables received from customers should go with a time frame for payment required for effective operations of Small and Medium Scale Enterprises

Manager 556 3.92 1.086 .046

Accountant 434 3.97 1.178 .057

Terms of agreement should be made for every credit receipt for effective business operations of Small and Medium Scale Enterprises

Manager 556 3.36 1.393 .059

Accountant 434 3.28 1.359 .065

Staff are trained on credit payment policies for effective operations of Small and Medium Scale Enterprises

Manager 556 2.69 1.336 .057

Accountant 434 2.71 1.312 .063

Management should review accounts payable policies from time to time for effective operations of Small and Medium Scale Enterprises

Manager 556 2.82 1.321 .056

Accountant 434 2.92 1.261 .061

Management should project a limit on accounts payable for effective operations of Small and Medium Scale Enterprises

Manager 556 2.72 1.359 .058

Accountant 434 2.81 1.274 .061


Levene's Test for


F Sig. t df

Sig. (2-

tailed)

Mean Differen

ce

Std. Error

Difference


Difference

Lower Upper

268

Management should set up disbursement system in managing accounts payable for effective operations of Small and Medium Scale Enterprises


3.246 .072 7.054 988 .000 .474 .067 .342 .606


6.996 898.980 .000 .474 .068 .341 .608

Accounts payable policies and procedures should be formulated for effective operations of Small and Medium Scale Enterprises


1.078 .299 -1.252 988 .211 -.104 .083 -.268 .059


-1.257 942.800 .209 -.104 .083 -.267 .059

The duties of staff handling accounts payable should be segregated for effective operations of Small and Medium Scale Enterprises


.041 .839 -.986 988 .325 -.081 .083 -.243 .081


-.984 925.849 .325 -.081 .083 -.244 .081

Accounts payable systems should be monitored and reevaluated at intervals for effective operations of Small and Medium Scale Enterprises


.033 .855 3.916 988 .000 .346 .088 .172 .519


3.919 932.722 .000 .346 .088 .173 .519

Accounts payables should be controlled for effective operations of Small and Medium Scale Enterprises


.263 .608 1.266 988 .206 .116 .092 -.064 .297


1.264 926.767 .206 .116 .092 -.064 .297

Accounts payables received from customers should go with a time frame for payment required for effective operations of Small and Medium Scale Enterprises


1.141 .286 -.667 988 .505 -.048 .072 -.190 .093


-.661 891.870 .509 -.048 .073 -.191 .095

Terms of agreement should be made for every credit receipt for effective business operations of Small and Medium Scale Enterprises


1.353 .245 .876 988 .381 .077 .088 -.096 .251


.879 940.994 .380 .077 .088 -.095 .250

Staff should be trained on credit payment policies for effective operations of Small and Medium Scale Enterprises


.649 .421 -.182 988 .856 -.015 .085 -.182 .151


-.182 937.975 .855 -.015 .085 -.182 .151

Management should review accounts payable policies from


4.004 .046 -1.190 988 .234 -.099 .083 -.262 .064

269

time to time for effective operations of Small and Medium Scale Enterprises


-1.196 949.070 .232 -.099 .082 -.261 .063

Management should project a limit on accounts payable for effective operations of Small and Medium Scale Enterprises


6.417 .011 -1.039 988 .299 -.088 .085 -.254 .078


-1.048 955.737 .295 -.088 .084 -.253 .077

270

Appendix P


Group Statistics

Category N Mean

Std. Deviation

Std. Error Mean

The rate of return on investments should be considered before actually investing in working capital for effective operations of Small and Medium Scale Enterprises

Manager 556 4.00 .983 .042

Accountant 434 4.09 1.035 .050

Investment policies should be formulated for effective operations of Small and Medium Scale Enterprises

Manager 556 2.81 1.434 .061

Accountant 434 2.80 1.506 .072

Risk on investments should be evaluated for effective operations of Small and Medium Scale Enterprises

Manager 556 3.60 1.095 .046

Accountant 434 3.57 1.518 .073


Manager 556 2.80 1.316 .056

Accountant 434 2.80 1.349 .065

All idle cash should be invested into the business for effective operations of Small and Medium Scale Enterprises

Manager 556 4.01 1.027 .044

Accountant 434 3.69 1.259 .060

Investment decisions should be left only in the hands of management for effective operations of Small and Medium Scale Enterprises

Manager 556 4.28 .810 .034

Accountant 434 3.91 1.216 .058


Manager 556 3.61 1.060 .045

Accountant 434 3.59 1.394 .067

Investment policies and procedures should be reviewed periodically for effective operations of Small and Medium Scale Enterprises

Manager 556 2.78 1.303 .055

Accountant 434 2.65 1.377 .066

Liquidity and profitability should be major determinants of investment in working capital for effective operations of Small and Medium Scale Enterprises

Manager 556 3.91 1.115 .047

Accountant 434 3.92 1.039 .050

Investment conversion period (i.e. cash-to-cash conversion cycle) should be considered before investing into business transactions for effective operations of Small and Medium Scale Enterprises

Manager 556 3.47 1.236 .052

Accountant 434 2.95 1.372 .066

271




F Sig. t Df Sig. (2-tailed)

Mean Differen

ce

Std. Error

Difference


Difference

Lower Upper

The rate of return on investments should be considered before actually investing in working capital for effective operations of Small and Medium Scale Enterprises


.476 .490 -1.267 988 .205 -.082 .064 -.208 .045


-1.259 906.581 .208 -.082 .065 -.209 .046

Investment policies should be formulated for effective operations of Small and Medium Scale Enterprises


3.472 .063 .113 988 .910 .011 .094 -.174 .195


.112 908.025 .911 .011 .094 -.175 .196

Risk on investments should be evaluated for effective operations of Small and Medium Scale Enterprises


128.747 .000 7.505 988 .000 .624 .083 .461 .787


7.218 758.697 .000 .624 .086 .454 .793



.294 .588 .052 988 .959 .004 .085 -.163 .172


.052 919.648 .959 .004 .085 -.163 .172

All idle cash should be invested into the business for effective operations of Small and Medium Scale Enterprises


35.654 .000 4.422 988 .000 .321 .073 .179 .464


4.314 825.470 .000 .321 .074 .175 .468

Investment decisions should be left only in the hands of management for effective operations of Small and Medium Scale Enterprises


56.887 .000 5.771 988 .000 .373 .065 .246 .499


5.503 717.755 .000 .373 .068 .240 .506



72.288 .000 7.991 988 .000 .623 .078 .470 .776


7.732 787.103 .000 .623 .081 .465 .782

272

Investment policies and procedures should be reviewed periodically for effective operations of Small and Medium Scale Enterprises


5.637 .018 1.544 988 .123 .132 .086 -.036 .300


1.534 905.035 .125 .132 .086 -.037 .301

Liquidity and profitability should be major determinants of investment in working capital for effective operations of Small and Medium Scale Enterprises


2.007 .157 -.127 988 .899 -.009 .069 -.145 .127


-.128 957.866 .898 -.009 .069 -.144 .126

Investment conversion period (i.e. cash-to-cash conversion cycle) should be considered before investing into business transactions for effective operations of Small and Medium Scale Enterprises


2.005 .157 8.662 988 .000 .720 .083 .557 .883


8.551 879.945 .000 .720 .084 .555 .885

273

Appendix Q

Summary of Group Statistics and Independent Samples Test for

Hypothesis 1-6

Group Statistics

VAR00007 N Mean Std. Deviation

Std. Error Mean

Hypothesis 1 Managers 556 3.7360 .54161 .17127

Accountant 434 3.8710 .52069 .16466


Accountant 434 3.8160 .38379 .12136


Accountant 434 3.3820 .47382 .14984


Accountant 434 3.3090 .70715 .22362


Accountant 434 2.8720 .50082 .15837


Accountant 434 3.3270 .54277 .17164


Levene's Test for


F Sig. T df Sig. (2-tailed)

Mean Difference

Std. Error Difference


Difference

Lower Upper

Hypothesis 1 Equal variances assumed

.001 .971 -.568 18 .577 -.13500 .23758 -.63414 .36414


-.568 17.972 .577 -.13500 .23758 -.63420 .36420


.010 .923 -.034 18 .973 -.00600 .17579 -.37532 .36332


-.034 17.961 .973 -.00600 .17579 -.37538 .36338


.187 .670 .044 18 .965 .01000 .22587 -.46453 .48453


.044 17.745 .965 .01000 .22587 -.46502 .48502


.003 .959 -.113 18 .911 -.03600 .31840 -.70493 .63293

274


-.113 17.997 .911 -.03600 .31840 -.70494 .63294


.000 .999 .274 18 .787 .05700 .20814 -.38028 .49428


.274 17.562 .787 .05700 .20814 -.38106 .49506


.048 .829 1.077 18 .296 .27000 .25081 -.25693 .79693


1.077 17.928 .296 .27000 .25081 -.25708 .79708

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