Thesis Abstract

Abstract
Effective cash and credit management policies are crucial for businesses to maintain liquidity and avoid potential liquidations. This research project aims to evaluate the impact of such policies as instruments for managing liquidity risk and preventing the need for liquidations. The study will analyze various cash and credit management strategies implemented by companies across different industries to understand their effectiveness in ensuring financial stability. The research will involve a comprehensive review of existing literature on cash management, credit management, liquidity management, and the relationship between these factors and business solvency. By synthesizing information from academic journals, industry reports, and case studies, the project aims to identify best practices and common pitfalls in cash and credit management. Furthermore, the study will utilize quantitative analysis to examine the financial performance of companies based on their cash and credit management practices. Key financial metrics such as cash conversion cycle, current ratio, quick ratio, and days sales outstanding will be used to assess the efficiency of cash and credit utilization. By comparing the financial performance of companies with robust cash and credit management policies to those with poor practices, the research aims to establish a correlation between effective management of cash and credit and overall financial health. In addition, the project will investigate the impact of external factors such as economic conditions, industry trends, and regulatory environment on cash and credit management decisions. By considering both internal and external influences, the research seeks to provide a holistic understanding of the challenges and opportunities in implementing sound cash and credit management policies. The findings of this research project are expected to contribute valuable insights to businesses looking to enhance their liquidity management practices and mitigate the risk of financial distress. By identifying the factors that influence the success of cash and credit management policies, companies can proactively implement strategies to optimize their cash flow, minimize credit risk, and avoid potential liquidations. Overall, this research project will offer a comprehensive analysis of the role of cash and credit management policies in maintaining financial stability and avoiding liquidity crises. The insights gained from this study can help businesses make informed decisions to improve their cash and credit management practices and ultimately enhance their long-term sustainability.

Thesis Overview

INTRODUCTION

1.1            General introduction and background of the study

The management of an organization’s capital relates to the finance and investment of non-human resources, that is, physical and monetary assets, for the purpose of maximum benefit in terms of profitability.  According to Frear (1980) profitability is determined in part by the way in which a company manages its working capital elements, especially the company’s management policies in respect of cash and account receivable/payable.  Basically, there would be a drop in profit if the basic element of working capital were raised without a corresponding rise introduction or margins. So one of the principal functions of a financial manager is to provide the arrect amount of each elements of working capital at the right time and in the appropriate place to realize the greatest return on investment. A business which is basically profitable in a capital intensive industry with high level of inventory turnover but does not have an effective/efficient policies for it’s’ working capital constituents, especially cash, can easily be stopped by a temporary set-back into liquidation because it has no room to maneuver.