CASH BUDGET: A TOOL FOR DECISION MAKING IN AN ORGANIZATION

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY:

Every rational economic unit has some objectives to attain, individual, corporate bodies in government have objectives to achieve. To achieve their respective objectives, resources have to be made available, unfortunately nature did not distribute her resources abundantly, whilst objectives and needs are numerous and varied as they are various economic units.

In order to make resources available, cash is needed, according to investopedia, cash is legal tender or corns that can be used to exchange goods, debt or services some time it can also incluces the value of assets that can be converted into cash immediately, as reported y a company.

Acoring to Shine Mat (15 June 2012): companies have those primary motives for holding cash and hey are:

The transaction motive

The precautionary motive

The speculative motive.

The transation motive enables firms and companies to conduct their ordinary business making purchases and sales. The precautionary motive depends on the predict ability of cash flow and the ability of company to borrow a short notice. This motive enable a firm to provide enough funds as a protection against unexpected opportunity that may arise. Moreover, sound working capital management require the maintenance of adequate amount of cash. The organization must plan towards its and this plan is know as budgeting a subset of corporate plan.

1.2     STATEMENT OF PROBLEM

Budget is one of the controlling instruments used by the management, it is a plan or estimate to be attained by an enterprise. In this study, efforts are made ot find solution to the following problems. The problem of why budget cases failed to be realized it is because of insufficient capital. Another problem that management face is their liability ot manage (long term) cash budget and forecast which may take up to two years, this is because of instability in the inflow and outflow of cash. Cash balances my fluctunate considerably within a single accounting period, there by making cash short tall that can put a company in serious jeiopardy. To solve this, it is quite common to create and maintain cash forecasts on a weekly basis. If there may be large or unusually cash balances indicated in the cash budget. these balances are dealt with in the financing budget where suitable investment is indicated for them.

1.3            OBJECTIVE OF THE STUDY:

The main objective of this study is to investigate cash budget as tool for decision making in an organization specifically, the researcher wants to:

i         Determine where cash budget is actually a basis for decision making in an organization.

ii        Know the impact of conducting continuous cash budget

iii       The level of which cash budget has help organizations increasing more wealth and effective management

iv       How cash budget allows management to establish the amount of credit that it can extend to customers without beginning to have problem’s with liquidity.

v        Know how cash budget help the organization to avoid having a cash shortage during when you have numeral expenses.

vi       To know how management manages it inflow and out flow

1.4     RESEARCH QUESTIONS

i         Is cash budget actually basis for decision making in an organization?

ii        What impact is continuous cash budget is to management?

iii       Does cash budgets help organization to create wealth and run an effective management?

iv       Does cash budget help management to determine the amount of dividend or credit to be given to the customers?

v        How does cash budget help the management in avoiding having cash shortage?

1.5     Formation of Hypothesis

The following are formulated for the study Hypothesis 1

H0: Cash budget does not make decision making in business organization easy and reliable.

HI: Cash budget make decision making in business organization easy and reliable.

Hypothesis II

H0: Cash budget have not brought efficiency and effective decision making in business organization.

HI: Cash budget has brought efficiency and effective decision making in business organization.

1.6     Significance of the study

The significance of this study are:

1       It provides the yardstick for control of operation’s in a business organization or any firm

2       It provides reference material for others who might wish to conduct enquire into similar area.

3       It makes possible the control over operation revenue and cost.

4       It instills in executive as well as their sub-ordinates the habit of basing decision on investigating studies and research. It with widen the knowledge of the research on the subject matter.

5       It generate and recommend to be government means of initiating the objectives of the cash budgeting.

1.7     SCOPE OF THE STUDY

The scope of this study is to analyze the cash budget tool for decision making in business organization especially that of Nigeria bottling Company Onitsha. The work is focused on Nigeria Bottling Company Onitsha due to certain obvious factors such as financial and time constraints and non-disclose of information by the management of the company.

1.8     DEFINITION OF TERMS

Budget: It is a future plan of action express in quantitative terms, financial or monetary terms. It is also defined as a financial and quantitative statement prepared and approved prior to a given period of time specifying the policies to be pursue for the attainment of some set of objectives. It might be include income expenditure and employment of capital.

Cash: It can be defined as those monetary items that are immediately available for use at any point in time. Cash can be refer to money in the physical form or currency such as bank notes and coins.

Accounting:

It is the process of recording, classifying, seleting, measuring, interpreting and communicating financial data or an organization to enable users make decision.

Budgeting:

It is a process, this means budgeting is a number of activities performed in order to prepare a budget. it is also the crafting of the plan for future events, applying laid down concepts for proper / implementation, monitoring, evaluation and control in order to achieve defined goal.

Cash budgeting:

This is a financial budget which is prepare in an organization, it shows in summary form the expected cash receipt and expected cash payment during the budget period.

1.9     HISTORY OF NIGERIA BOTTLING COMPY

Coca-cola first arrived in Nigeria in 1951. That same year, the Nigerian Bottling company Ltd (NBC) was incorporated to bottle and sell carbonated non-alcoholic beverages. NBC has the sole franchise to bottle coca-cola products in Nigeria.

Coca-cola was an instant hit with the Nigeria consumer and has remained so. Over the next six decades, NBC has continued on its journey keeping its promise of refreshing consumers, strengthening its communities, enriching the workplace land preserving the environment while recording many memorable milestones along the way. To mention a few.

1953:

Production of coca-cola began at a bottling facility in Ebute-metta, Lagos state. The same year the company opened its first bottling plant in Apapa.

1960:

The year Nigeria gained independence, NBC exceeded the one million case a year mark.

1961:

Commissioned its second bottling facility at Ibadan, Oyo state and rapidly expanded its operation over the next couple of years.

1972:

Listed its shares on the Nigerian stock Exchange and became a publicly quoted company

1991:

Acquired the Eva premium water and Schweppes brands.

2001:

Became a member fo the newly formed coca-cola Hellenic Bolling Company S.A Can anchor Bottling group with operations in 28 countries worldwide)

2003:

Launched the five alive juice brand

2004:

Launched pet packaging for its sparkling soft drinks category

2006:

Launched the energy drink, burn

2007:

Launched on-the-go can packaging or core brands coca-cola, fanta and sprite in 2006

2008:

Introduced the more environmentally friendly “ultra” glass packaging for its returnable glass Bottling product segments.

2010:

Today the operations stands at 13 facilities and 59 depots across the country.

2011:

The company was recognized for its corporate social responsibility activities as the most socially Responsibility Company in Nigeria and most environment friendly company at he social enterprise Reporting Awards. The company obtained Nigeria’s first food safety systems certification (FSSC) 22000.

From 2011 till date there is not new product in the company.