IMPACT OF FUNDS MANAGEMENT ON PROFITABILITY OF TERTIARY

IMPACT OF FUNDS MANAGEMENT ON PROFITABILITY OF

TERTIARY INSTITUTIONS

A CASE STUDY OF; BISHOP BARHAM UNIVERSITY

COLLEGE - KABALE

BY

NANZIRI PROSCOVIA

06/U/9295/EXT

A research report submitted in partial fulfillment of the requirement for the

award of Bachelor of Commerce of Makerere University.

SUPERVISOR

MR. TIBAINGANA M

AUGUST, 2010

i

DECLARATION

I. NANZIRI PROSCOVIA, do here by declare that this research work produced on,

IMPACT OF FUNDS MANAGEMENT ON PROFITABILITY OF TERTIARY

INSTITUTIONS a case study of; Bishop Barham University College – Kabale is my

original work and has never been submitted before or to any institution of higher

learning for the award of a degree.

Signature …………………………………. Date ………………………………….

ii

APPROVAL

This research report has been read and approved as having the basic requirement for

the award of the degree of Bachelor of Commerce of Makerere University.

Signed………………………………. Date…………………………

MR. TIBAINGANA M

(SUPERVISOR)

iii

DEDICATION

I dedicate this piece of work to my boss Mr. Joseph Oluga and my colleagues at work

Apofia, Ronald and Nelson and also to my lovely mum Mrs. Kyazze whose role in my

academic pursuits has remained un challenged.

iv

ACKNOWLEDGEMENT

My efforts and endeavors in the evolution of this report would be futile if it was not for

God who always provided life and all that was necessary during and up to this point.

I am highly grateful to my supervisor MR. TIBAINGANA M who was always

available and generously guided me and corrected me in all areas with constructive

comments and with wealth of good suggestions and improvements.

My sincere thanks go to my fellow students especially Kigaiga Bulaimu who assisted me

in the general discussions,

I am also grateful to the following friends, Carol Namujju and Ruth whom we shared

many things at the university when things were not well and other discussion group

members; Katushabe Ronald, Oweka Apollo, Edward Ishingoma, Jolly, Moses, Mukama

and Tinka.

v

TABLE OF CONTENTS

DECLARATION ...................................................................................................... i

DEDICATION ........................................................................................................ ii

APPROVAL ........................................................................................................... ii

ACKNOWLEDGEMENT ....................................................................................... iv

TABLE OF CONTENTS ........................................................................................ v

LIST OF TABLES .................................................................................................. x

ABSTRACT .......................................................................................................... xi

CHAPTER ONE ................................................................................................... 1

1.0 Introduction .................................................................................................... 1

1.1 Background for the study ............................................................................... 1

1.2 Statement of the problem ............................................................................... 2

1.3 Purpose of the study. ..................................................................................... 2

1.4 Objectives of the study. .................................................................................. 2

1.5 Research Questions ....................................................................................... 3

1.6 Scope of the Study ......................................................................................... 3

1.6.1 Geographical Scope .................................................................................... 3

1.6.2 Time Scope ................................................................................................. 3

1.6.3 Subject scope .............................................................................................. 3

1.7 significance of the study ................................................................................. 3

CHAPTER TWO ................................................................................................... 5

LITERATURE REVIEW ........................................................................................ 5

2.0 Introduction .................................................................................................... 5

2.1 Funds management ....................................................................................... 5

2.2 Funds management policy ............................................................................. 5

vi

2.2.1 Funds management procedures in the organization ................................... 6

2.2.2 Funds management and short term investment .......................................... 7

2.2.3 Funds management and accounting principles ........................................... 8

2.2.4 Funds management and bank account ....................................................... 9

2.2.5 Funds management and funds flow projections .......................................... 9

2.2.6 Funds management and funds transfers ................................................... 10

2.3 Profitability .................................................................................................... 10

2.3.1 Profit maximization .................................................................................... 11

2.4 Elements of profitability ................................................................................ 12

2.4.1 Market Share ............................................................................................. 12

2.4.2 Growth/ Expansion .................................................................................... 12

2.4.3 Company Share Prices ............................................................................. 13

2.4.4 Increase in sales ....................................................................................... 13

2.5 Concepts of profitability ................................................................................ 13

2.5.1 Gross profit ................................................................................................ 13

2.5.2 Profit before depreciation .......................................................................... 13

2.5.3 Operating profits ........................................................................................ 13

2.5.4 Profit before tax ......................................................................................... 13

2.5.5 Return on investment ................................................................................ 14

2.6. Types of profits ............................................................................................ 14

2.6.1 Normal Profits............................................................................................ 14

2.6.2 Abnormal profits ........................................................................................ 14

2.7 Importance of profits ..................................................................................... 14

2.8 Relationship between funds management and organizational performance 15

2.9 Conclusion ................................................................................................... 16

vii

CHAPTER THREE ............................................................................................. 17

METHODOLOGY ............................................................................................... 17

3.0 Introduction .................................................................................................. 17

3.1 Research design and strategy ...................................................................... 17

3.2 Survey population......................................................................................... 17

3.3 Sampling design ........................................................................................... 17

3.4 Sample size .................................................................................................. 18

3.5 Data sources ................................................................................................ 18

3.5.1 Primary source .......................................................................................... 18

3.5.2 Secondary source ..................................................................................... 19

3.6 Data collection tools ..................................................................................... 19

3.6.1 Questionnaire ............................................................................................ 19

3.7 Data collection methods ............................................................................... 19

3.7.1 Interviews .................................................................................................. 19

3.7.2 Observation ............................................................................................... 19

3.7 Data processing analysis and presentation .................................................. 19

3.7.1 Data processing ........................................................................................ 19

3.7.2 Data analysis ............................................................................................. 20

3.7.3 Data presentation ...................................................................................... 20

3.8 Anticipated problems .................................................................................... 20

CHAPTER FOUR ............................................................................................... 21

PRESENTATION, INTERPRETATION AND DISCUSSION OF FINDINGS ...... 21

4.1 Introduction .................................................................................................. 21

4.2 Background information about the respondents ........................................... 21

4.2.1 Respondents according to gender ............................................................. 21

viii

4.2.2 Marital status ............................................................................................. 21

4.2.3 Age range .................................................................................................. 22

4.2.4 Level of education ..................................................................................... 23

4.2.6 Period respondents have worked with the institution ................................. 23

4.2.7. Job position of the respondent. ................................................................ 24

4.2.8 Period respondents spent in the job positions ........................................... 25

4.3 Funds management ..................................................................................... 25

4.3.1 Existence and practice of funds management policies .............................. 25

4.3.2. Respondents reasons for their answers in table 9.................................... 26

4.3.3. Management policies in place .................................................................. 26

4.3.4: Are policies followed diligently? ................................................................ 27

4.3.4. The effectiveness of the fund policies ...................................................... 27

4.3.5. Actions to employees who acts contrary to the policies ........................... 28

4.3.6. Does the institution often surfers from financial distress .......................... 28

4.2.3 Frequency by which the fund management policies are revised ............... 29

4.4. Profitability ................................................................................................... 30

4.4.1. Trend of the profitability levels of the institution ........................................ 30

4.4.2. Reasons for the trend in table 14 ............................................................. 31

4.5. Relationship between fund management and profitability ........................... 32

4.4.1 Effective fund management and profitability levels.................................... 32

4.5.2. Contribution of fund management policies on profitability ........................ 32

4.4.3 Correlation between funds management and profitability of the institution.33

CHAPTER FIVE ................................................................................................. 35

SUMMARY, CONCLUSION AND RECOMMENDATIONS ................................ 35

ix

5.1 Introduction .................................................................................................. 35

5.2 Summary of the findings ............................................................................... 35

5.2.1 Fund management methods...................................................................... 35

5.2.2 Profitability ................................................................................................. 35

5.2.3 Relationship between cash management on organizational performance. 35

5.3 Conclusion ................................................................................................... 36

5.4 Recommendations ....................................................................................... 36

5.5 Areas for further research ............................................................................ 37

x

LIST OF TABLES

Table: 1 showing the sample size of respondents’ category. ............................. 18

Table 2: showing gender of respondents ........................................................... 21

Table 3: showing marital status of respondents ................................................. 21

Table 4: showing Age range of respondents ..................................................... 22

Table 5: showing level of education ................................................................... 23

Table 6: showing duration in service .................................................................. 24

Table 7: Showing job positions of respondents. ................................................. 24

Table 8: Showing duration on job service ........................................................... 25

Table 9: showing Practice of fund management ................................................ 25

Table 10: showing whether management policies are in place .......................... 26

Table 10: showing whether policies followed diligently...................................... 27

Table 11: showing effectiveness of fund management....................................... 27

Table 12: showing whether the institution often surfers from financial distress. . 29

Table 13: showing frequency by which the fund management policies are revised30

Table 14: showing Trend of profitability levels .................................................... 30

Table 15: showing cash management and organizational performance............. 32

Table 16: showing Contribution of fund management policies on profitability .... 33

Table 17: Showing Correlation between fund management and profitability of the

institution. ........................................................................................................... 34

xi

ABSTRACT

This study was an attempt to evaluate the extent to which Fund management affects the

profitability level of tertiary institutions. The study was guided by the following

objectives; to establish the funds management policies used in Bishop Barham

University College, to examine the levels of profitability over the past three years, and to

find out the relationship between funds management and profitability of a tertiary

institution.

The study employed descriptive, cross sectional and explanatory design.

Questionnaires in addition to library research were applied in order to collect data.

Primary and secondary data sources were made of use and data was analyzed using

statistical package for social scientists presented in form of tables, frequencies and

percentages. The respondents under study were employees of Bishop Barham

University College - Kabale

The study mainly focused on how cash is managed and how the process affects the

profitability levels. The study thus revealed that the management of funds involves

aspects like; authorization of payments, documentation of all transactions, investing idle

cash in short term investments, operating a bank account, following the principles of

accounting, budgeting and budget control, preparing cash flow projections and others

which need to be equally accorded great attention because failure in any will have a

negative impact on the attainment of the pre-determined goals.

The study further revealed that the mode of fund management greatly determines how much profits the institution will have. Issues such as routine training of staff, proper handling of cash and planning and budgeting for liquidity are crucial factors that need not to be underestimated while managing funds

1

CHAPTER ONE

1.0 Introduction

This chapter presents the background of study, problem statement, purpose of the

study, study objectives, research questions, scope of the study and the significance of

the study.

1.1 Background for the study

Funds management is defined as the procedures, measures and methods undertaken

by the company to control cash. It involves controlling expenditures, proper book

keeping, and recording of all the transactions undertaken by the company. Profitability

refers to the ability of the company to have excess of revenues over costs of generating

such incomes. (Lipsey 1983)

Funds management is a sensitive factor in managing business. Cash plays a major role

in the production of quality goods and services. Cash is the life blood of all businesses.

No business enterprise can run without cash. Cash performs various functions in the

organization like buying study materials used in the libraries, paying workers salaries

and wages, putting up new structures, buying facilities like computer to facilitate the

proper running of the institution as well as monitoring activities of organization. Cash

therefore is used in undertaking all business risks. (Pandey 1998)

Poor funds management involves, having lots of cash lying on the bank account which

could be invested in the short term investments that yield quick returns, delay of

payments of workers and suppliers which lead to loss of discounts, making payments

without proper authorization, not documenting transactions in books of accounts, not

preparing regular financial reports which could help in follow-up and monitoring of

activities as well as guide decision making.

Funds management and profitability of an organization are closely related in a sense

that the former leads to the latter. If funds of an organization are not well managed that

organization cannot raise any profit and as a result it will fail to operate due to shortage

2

of funds and eventually close down business. Therefore an organization will do all it

takes to be profitable such as ensuring proper internal control systems, budget and

budgetary control and laying the right marketing strategy.(Kakuru 1993).

1.2 Statement of the problem

The majority of higher institutions of learning especially private ones have had

difficulties in the management of funds due to failures to draw a line between the

institution and its owners. Many times the institutions are run like personal property

where money decisions are made without much thought and consideration however

sensitive they may be. A lot of expenditure is done outside the budget. Bishop Barham

University College is experiencing persistent decline in profits. The college is always

hard up when it comes to liquid cash. Workers are always complaining about late

payment of their salaries which is always in arrears especially the part time lecturers.

Suppliers are always writing threatening demand notes, others have even stopped

giving any credit to the college. Statutory deductions in form of NSSF and PAYE are in

arrears of as far back as 2005. A lot of money is paid in penalties for late remittance of

those statutory deductions. Utilities service providers like Umeme and National Water

have on many occasions disconnected the college power and water lines for

nonpayment. All this is a characteristic of poor funds management. Thus this study

seeks to find out the impact of poor funds management to profitability of an

organization.

1.3 Purpose of the study.

The main purpose of the study is to establish the impact of funds management on the

profitability of Bishop Barham University College.

1.4 Objectives of the study.

To establish the funds management policies used in Bishop Barham University College.

To examine the levels of profitability over the past three years.

To find out the relationship between funds management and profitability of a tertiary

institution.

3

1.5 Research Questions

What fund management policies are used by Bishop Barham University College?

What are the levels of profitability for the passed three years?

What is the relationship between funds management and profitability of a tertiary

institution?

1.6 Scope of the Study

1.6.1 Geographical Scope

Due to time constraints, the study will focus on the accounting department of Bishop

Barham University College in Kabale Municipality, Kabale district.

1.6.2 Time Scope

The investigation will cover a period of 5 years from 2004/2005 to 2008/2009, this has

been done to ensure reliability and adequacy of the data gathered.

1.6.3 Subject scope

The study will focus on funds management and profitability of higher institutions as

independent and dependent variables respectively.

1.7 Significance of the study

The study that’s going to be carried will be of great importance to the following parties.

Future researchers

The study findings will complement on the existing literature on the impact of cash

management on profitability that can be used by researchers for literature review.

Directors

The study finding will help the directors in designing proper funds management policies

to guide decision making. The study findings will help the directors to buy computer

accounting packages for storing data concerning funds.

4

Policy makers

The findings will help the policy makers and other stakeholders in fund management to

take appropriate measures about the best use of cash in the any organization.

General public

Also other interested individuals may be inspired by the study findings to carry out

further studies on the subject matter and will lead to an improved data base on the

impact of fund management on profitability.

Researcher

The findings also will lead the researcher to obtain the academic qualification awarded a

degree of Bachelor of Commerce and gain skills of doing research.

5

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction

This chapter presents the literature on funds management and organizational

profitability.

2.1 Funds management

According to Pandey (1998) funds management is concerned with the managing of

funds flows into and out of the organization, funds flows within the firm and funds

balances held by the organization at the point of time by financing deficits or investing

surplus funds. Fund management consists of taking the necessary actions to maintain

adequate levels of funds to meet operational and capital requirements and obtain the

maximum yield on short term investments of pooled idle funds. Therefore, a good cash

management programme is a very significant component of the overall financial

management.

2.2 Funds management policy

These are set of guidelines established by the business to ensure that it has optimal

cash balances at any time. The organization seeks to match the cash receipts and

disbursements so that there are no redundant funds balances or potentially establishing

funds deficits Kakuru, (1993). He observed that a good policy should ensure that that;

1 There is efficient management of funds receipts and disbursements.

2 Advance funds planning so that the organization is not overwhelmed by un-

anticipated movements in fund flows

3 Investment of surplus funds to earn a return and planning for deficits well in

advance.

6

2.2.1 Funds management procedures in the organization

According to Pandey (1998) fund management is the firm’s policy which is usually a

combination of three variables, funds standards, funds terms and collection efforts and

strategies. According to studies conducted by Ball (1995), Cowan (2000), Eltermon et

al. (2001) fund management is very important for both profit making and non profit

making not only at local level but also at international level.

Masson (1990) advocates for budgeting as a tool of fund management as it directs your

spending, like “money” has a way of just disappearing unless it is guided into the

direction you want it to go. Masson defines a funds budget as a summary statement of

the organization’s expected funds inflows and outflows over a projected time. It provides

information on the timing and magnitude of expected funds flows and out flows over a

period. This helps managers to determine the future funds needs and how to finance

them. Rigler (2000) contends that fund management should be employed through

carefully designed using forecast to help an organization to avoid over and under

investing, maximize profits by investing idle funds, determine minimum balance to be

maintained in bank and also take advantage of discounts offered by suppliers by

making timely payments.

As quoted by Leonard (1977) accountants always recognize cash and bank balance as

a balance sheet asset. However, from a funds management view point funds is an asset

only when properly used. If left idle and un invested, much potential additions of

resources is lost. In this situation funds has been allowed to become a manager’s

liability. Failure to invest idle funds can lead the enterprise loose considerable additional

funds for an organization. A positive approach in developing an effective fund

management and investment programme produces additional income. Such additional

funds can alleviate some of the operating budget pinches.

Medura (2000) emphasizes that when managing funds flows, speeding collection is an

important aspect of fund management which deals with processing the cheques or

liquid cash a company invests or receives. It is quite inefficient to keep cheques

received in advance but to deposit them may run the business effectively.

7

Efficient funds management go further to speed up the processing of in coming

cheques thus putting the funds to work faster and they try to stretch out their own

payment as quickly as possible. Zucher (2000) adds that a clear funds collection policy

is needed since not all customers pay in cash. Cash collection efforts should aim at

accelerating funds inflows.

Cowan (2000) asserts that the global funds challenge studies revealed that effective

control of funds disbursements can also result in more availability of funds. Studies

indicated that disbursements are more pressing and have to be met on time, these

include payments to outsiders like suppliers, government and those paid to insiders

include employees, salary and owners dividends. Westerman (2002) adds that delaying

disbursements result into availability of funds. However, a firm has to be careful not to

spoil its reputation with suppliers. Cowan and Westerman studies are thus in agreement

with Pandey (1998) who contended that when determining optimum funds balance, a

balance between too much and too little should be identified.

Leonard (1977) further broke fund management into various components and these

include short term investment, bank balance, accounting principles, funds flow

projections and fund transfer.

2.2.2 Funds management and short term investment

Fenstermaker (1966) asserts that not only is it important to realize what short term

investments programme can do for an institution but equally essential to be aware that

the fuel for any working capital investment programme is supplied by daily management

and control of funds resources of the organization. The effectiveness of fund

management operations determines to a large extent the size of the investment

programme. Funds management investment function are so inter-related that although

two similar organizations may have comparable funds revenues, the average short term

investment portfolio of one could double that of the other because of the differences in

funds administration.

Hill (1970) observed that excessive idle funds must be considered an indication of

inefficient management.

8

Fenstermaker (1966) observed that the primary goal of good working capital

administration is to maximize balances available for short term investment; these are

two related goals that should not be overlooked. An efficient management programme

should control all bank account balances at a proper level to compensate banks for their

service, likewise the programme will ensure that sufficient liquid funds are available to

pay current bills on time and to take advantage of all proper funds discounts on

suppliers involves realizing that investments provide the pay off for fund management

efforts, one should ask how much of the working capital of an institution can be invested

on an average annual basis. Experience shows that 100% of an average funds

resource is an attainable goal even while maintaining adequate compensating bank

balances at all times which means that 100% of the total average funds resources are

used for institutional benefit.

2.2.3 Funds management and accounting principles

Leonard (1997) observed that accounting records and methods must be designed for

proper safe guarding of funds as well as for audit verification of all transactions.

Procedures for funds entries may not be adaptable to immediate online information

which is so vital to effective short term management of funds and the investment of idle

funds. Therefore cash managers should design supplemental procedures and records

as are necessary to supply accurate daily information on deposited funds and released

disbursements. The point is that accounting policies and procedures should be

designed to facilitate fund management through simplification of funds and bank

accounts. However, the need for current daily information should not be ignored merely

because official records do not provide it in a manner normally associated with online

computer systems.

Leonard (1977) recognizes that it is appropriate here to consider the basic principles

affecting accounting records when investment transactions take place. It is essential to

recognize that investment transactions are not expenses, but an expense of one asset

(funds) for another (investment). Therefore, the purchase of a short term investment

represents a debit to an investment account and a credit to funds.

9

2.2.4 Funds management and bank account

According to Leonard (1977) argues that business enterprises must design ways of

properly managing their current accounts and improving on their relationships with the

bank. The bank performs a lot of services to and on behalf of the organization and

therefore may deserve a reward in terms of commission and interest. These services

include extending bank loans, clearing cheques, standing orders, credit transfers.

However the enterprise is obliged to put necessary controls to improve its relationships

with the bank by paying back loans and overdrafts in time as agreed, ensure proper

amounts and entries on transfers, authorization on this is also an important aspect to

note.

In addition the management also should have well equipped staff capable of reconciling

the funds books and the bank statements so as they agree from time to time to avoid un

necessary loss as a result of error. All these will impact on the performance of the

organizational performance as funds will be available to expend.

2.2.5 Funds management and funds flow projections

Regarding the importance of cash forecasts Leonard (1977) states good receipts and

disbursements forecast is the most basic working tool of corporate cash management.

A funds flow forecast allows the finance manager to anticipate financial invents and to

plan necessary action. Investment maturities will be scheduled to meet expected funds

needs to extent of financial emergencies requiring liquidation. Leonard recognizes two

distract systems for preparing funds forecasts.

The adjusted net income method and the cash receipts and disbursements method. The

former used budget forecasts for six-twelve month or more. Budgeted sales less

expected produce net income. When non cash costs are added back funds forecast

results. However, this reveals the balance or shortage of funds at the end of the period.

The funds forecasting referred to as the funds receipts and disbursements is a short

range projection based on daily or weekly funds receipts and disbursements for

expenses.

Hill (1970) emphasizing the importance of accurate forecasts, said “to the corporate

10

financial officer intent on careful funds management, funds forecasts are a necessity;

the effectiveness of his management will be greatly influenced by the accuracy and

dependability of the forecasts. In forecasting daily or weekly receipts,. Receipts records

from the prior year are probably the best basis for such projections. A daily funds flow

forecast will also signal dates on which funds requirements exceeds available funds. On

such days the fund’s manager will be prepared to liquidate sufficient investments to

meet current needs.

Although there are certain peculiarities in forecasting funds receipts and funds

disbursements at each institution, the main receipt and disbursement categories have

common characteristics at all institutions.

2.2.6 Funds management and funds transfers

In day to day funds management there are primary reasons why the financial managers

may need to transfer large sums quickly. One purpose may be to move funds from one

bank account where excess funds are on deposits to an account in another bank where

funds are needed to cover checks already released. The second purpose may be to

move funds to a bank from which an investment is being purchased and in which

purchasing institution does not have an account. Speed and reliability are of prime

importance when considering the transfers.

2.3 Profitability

Economists refer to profitability as the net increase in the wealth of the business funds

flows plus change in the value of the firm’s assets. This definition incorporates the time

dimension and therefore, implies the discounted value of the stream of benefits Lipsey

(1983). From an economic perspective, a business is profitable if the return on equity

exceeds the cost of equity, which implies that the spread is positive and consequently

its market-to-Book value (M/B) ratio is greater than 1 Hax, (1984).

The Accountants’ concept of profit differs from that of the economists, the accounting

definition of profit is based on the accrual principle and includes non funds items. Even

if we assume that all items of revenue and expenses are on funds basis still there would

11

be difference between accounting profits and funds profits. The accountant charges

depreciation, which is a non-funds item, to compute accounting profit, thus the operating

funds flow (i.e. funds from operations) or funds profit can be found out by adding

depreciation to the accounting profit. Pandey (1995).

From the accounting perspective, a business is profitable if earnings are positive

The figure of accounting profit is also distorted because of the optimal ways of treating

depreciation, research and development expenditures, goodwill and patents and

inventory valuation. The price level changes further complicate the measurement of

profit.

Profits are normally obtained after analyzing costs and income. Profitability is therefore

achieved when the firm’s revenue are greater than the costs incurred in production.

Mathematically profits = Total revenue – Total costs Frankwood (1993).

2.3.1 Profit maximization

Lipsey (1983) defines profits as the difference between revenues received from selling a

firms output and the costs it incurs in purchasing these output.

Pandey (1995) defined profit maximization as the maximizing of any currency income of

firms. The desire to maximize profits is assumed to motivate all decisions taken within a

firm and each decisions are un influenced by who takes them thus the theory abstracts

from the peculiaties of the persons taking the decisions (Lipsey, 1983).

The assumption of profit maximization allows economists to predict firm behavior.

Economists do this by studying the effect hat each of the choices available to the firm

would have on its profits. They then predict that the firm will select the alternative that

will produce the largest profits. Profit maximization objective has, however been

criticized in recent years. It is argued that profit maximization assumes perfect

competition and in the face of impact modern markets, it cannot be a legitimate

objective of the firm.

Horngren (1982) reveals that the favorite objective of top management is to maximize

profitability. The trouble is that profitability doesn’t mean the same thing to all people. Is

12

it net income?, Income before taxes?, Net income percentage based on revenue?, Is it

an absolute amount?, a percentage?. Quite often managers stress net income or

income percentages without tying the measure into the investment associated with the

generation of income.

2.4 Elements of profitability

2.4.1 Market Share

Hax (1987), the decline in unit’s costs produced by an increase of accumulated

production has led to the isolation of market share as a primary variable to identify the

strength of the strategic position of a business within a given industry. Those who

advocate this view, primarily among them is the Boston Consulting Group, which states

the following chain of casual relationships.

High Market --------High Accumulated-------Low Unit--------High Profitability

Share Volume Cost

The association between market share and profitability has received some empirical

support in the work of project PIMS (Profitability Impact On Marketing Strategies) Gale

and Sultan (1975).

Henderson (1991), proposes the “rule of three and four” which indicates that a stable

competitive market never has more than three significant competitors, the largest of

which has not more than four times the market share of the smallest. He further

stresses that a ratio of 2:1 in the market share between any two competitors seems to

be the equilibrium point in which it is neither practical nor advantageous for neither

competitors to increase or decrease share.

2.4.2 Growth/ Expansion

It is a mechanism to identify the capability for funds generation as well as the

requirements of funds for each business unit. Lewis (1989), notes that the firm is

presented in terms of a portfolio of businesses each one offering a unique contribution

with regard to growth and profitability. The firm is then viewed not just as a single

monolithic entity, but as composed by many largely independent units whose strategic

directions are to be distinctively addressed. The growth rate is a key indicator to

13

describe the external attractiveness of a business. However Marakon (1980) notes that

growth and profitability are not generally tightly linked, in fact they tend to compete or

tradeoff.

2.4.3 Company Share Prices

Share price refers to the price at which the company’s shares are traded in the market.

An increase in company’s profitability will bring about an increase in its share prices

because shareholders will be assured of a higher return Ward (1992).

2.4.4 Increase in sales

A sale is actually one dimension of promotion, which in turn is a component of the

marketing process. In most consumer goods firms, sales and product marketing have

historically been managed as separate but equal departments, with the result being

unnecessary competition. An increase in the company’s sales is likely to bring about an

increase in its profitability Moncrief (1997).

2.5 Concepts of profitability

2.5.1 Gross profit

It is the difference between the revenue from sales and cost of goods sold like

manufacturing costs.

2.5.2 Profit before depreciation

Interest and taxes, this equals to the revenue less all operating expenses except

depreciation, interests and taxes.

2.5.3 Operating profits

It refers to the difference between the gross profit and operating expenses consisting of

general and administration and selling expenses and depreciation. An interest charge

on the borrowed money which is subtracted. The operating profit may also be known as

profit or earnings before interest and taxes. It measures the performance of the

organization operations with regard to the source of financing. Drury (2006).

2.5.4 Profit before tax

14

It is the difference between profit before tax and interest charges. It may also include

non-operating profit.

2.5.5 Return on investment

ROI expresses divisional profit as a percentage of the assets employed in the division.

Consider a situation where division A earns a profit of $1 million and division B a profit

of $2 million. We cannot conclude that Division B is more profitable than Division A

since we should consider whether the divisions are returning a sufficiently high return on

the capital invested in the division. ROI provides a useful overall approximation on the

success of a firm’s past investment policy by providing a summary measure of the ex-

post return on capital invested. (Kaplan and Atkinson 1989).

2.6. Types of profits

There are majorly two types of profits namely;

2.6.1 Normal Profits

These are profits which are in the line of the organization’s expectations, i.e. profits that

the firm is expecting to earn in a given period of time. (Birungi and Mutego 2004)

2.6.2 Abnormal profits

Are profits that are obtained by the firm beyond is expectations for example if the

organization expected to earn a profit of 7,000,000/= but instead it earns a profit of

10,000,000/= the difference between the actual and the expected profits is the abnormal

profits (3,000,000/=)

2.7 Importance of profits

It gives a good reputation to the management of the organization as they are proved to

be excellent managers of the activities of the firm Lipsey (1983).

Profits can be ploughed back in the business and can be used expand the company

operations, acquisition of new and improved machinery Pandey, (1995).

15

Profits may improve the relationship between the management and the owners of the

organization in the way that if the organization is making profits the shareholders will

have more confidence in its management Marshall, (1982)

2.8 Relationship between funds management and organizational performance

Properly managed funds will result to high levels of profits Kakulu (2005). Funds

planning enhances adequate management funds inflows and funds outflows which help

organizations action their short term and long term objectives and goals. Safe custody

of funds avoids authorized use of funds and mismanagement of funds which enable

organizations to institute appropriately use of funds will give away a drive to profitability

as funds can be used only when it should be used and the excess be invested in short

term investments which can yield a return to the institution but these should be in light of

in short and long term objectives (Van Horne, 1995). Furthermore, (Ricci et el 2000)

reports that well managed funds is directly related to performance objectives in

organizations.

Madora (2000) asserts that financial managers need to control funds disbursements for

an organization to boost their performance levels to international levels which should be

seen in terms of profits earned during the financial period. Control of funds involves

control of funds received, petty funds, funds banked, funds cheques, so as to budget for

future requirement of the organization. these budgets warns the organisation when its

profits or losses in advance such that in case of a loss forecast corrective actions are

taken .this however requires the organisation to well trained and equipped staff. Pandey

(1995).

Frankwood (1993). asserts that by investing idle funds in savings account or other short

term investment products a firm is in position to earn a return in form of interest , yields

which can be used to offset some expenses there by contributing to profitability.

16

2.9 Conclusion

Funds management is very important for all organizations both profit making and non-

profit making organizations. Existing organizations seeking to survive or expand are

faced with multiple constraints to include among others; fixed capital, market

infrastructure and above all, of inadequate business skills, Large (2002). This implies

that a lot of emphasis is required during synchronization of funds resources that is funds

inflows and outflows. This should be guided by funds planning, focusing at minimizing

obstacles to obtaining weekly monthly targets, while maximizing organizational

opportunities available to accelerate funds inflows for better and improved

organizational performance.

17

CHAPTER THREE

METHODOLOGY

3.0 Introduction

This chapter presents the methods that will be used to collect the data from the field. It

includes the introduction, research survey, study population, sampling method, sources

of data, data collection methods and tools, investigative procedure, data processing and

presentation, data analysis and the likely limitations to the study.

3.1 Research design and strategy

1 Descriptive research design.

This describes the existing phenomenon. It will be used to describe the variables and

the circumstances on the ground. It will also be used to describe results from

questionnaires and interviews.

2. Explanatory research design,

This tends to explain why the phenomenon continues to exist and to what extent it is

disastrous. So it will be to explain why the profitability is in the current state and to what

extent it is unfavorable.

3. Correlation research design,

This shows relationship between variables. The researcher will use this to show the

relationship between funds management and profitability of the organization.

3.2 Survey population

The researcher will base her investigation on the views of the employees and directors

of Bishop Barham University College-Kabale who are directly involved in management

of funds and also those who are not directly involved in funds management but are

affected by the actions of those directly involved such as the lecturers and the lower

support staff.

3.3 Sampling design

The population will be divided into two big clusters. One for people who are directly

18

involved in funds management and another for people not directly involved in funds

management. will be divided into two clusters of the academic and non-academic staff.

The researcher will then use simple random sampling to select the sample in each

cluster. For example a sample from procurement and stores department, the public

relations, the secretaries and messengers to form the non academic cluster and then a

sample from the full time lecturers and a sample from part time lecturers to form the

academic cluster. Purposive design will be used because certain people such as the

directors and accountants must be chosen to provide particular information.

3.4 Sample size

The study will use a total number of 40 respondents. This sample size is chosen for

convenience. It will include directors, managers, accountants, academic staff and non

academic support staff.

Table: 1 showing the sample size of respondents’ category.

Category of respondents Number of respondents

Directors 4

Administrators 5

Accountants 5

Academic department 20

Support Staff 6

Total 40

Source: primary data

3.5 Data sources

This will include primary and secondary sources.

3.5.1 Primary source

The primary source will include interviews, questionnaires and part observation

during the research process.

19

3.5.2 Secondary source

Secondary sources will include journals, magazines, text books, publications,

management reports, internet materials, research reports.

3.6 Data collection tools

3.6.1 Questionnaire

This is a list of questions on a given topic which the researcher gives his respondents

to fill and return. While collecting the primary data, semi structured questionnaires both

open and closed ended will be given to respondents. Closed questions provide

alternatives to choose from while open ended questions allow the respondents to give

their free opinion on the subject matter. Questionnaires will enable the researcher to get

first hand information. The closed questionnaires help the researcher to guide the

respondent so that he/she does not answer what is unnecessary while the open ended

questionnaires enable the researcher to get additional information as well as get the

respondents’ perception on cash management and its impact on organizational

profitability.

3.7 Data collection methods

3.7.1 Interviews

Face to face interviews will also be employed for clarity and some necessary assistance

may be given to respondents in instances where they may need clarification on certain

issues in the questionnaires that seem to disturb them.

3.7.2 Observation

Seeing how cash receipts and disbursements are handled review of some documents

for accuracy and authorization, recording system, motivation by employees and to as

well observe the body language of the respondents during the face to face interviews

will be possible through observation.

3.7 Data processing analysis and presentation

3.7.1 Data processing

20

After collecting data from the field, data will be edited and coded ready for presentation.

Editing will be done for purpose of consistency, reliability and accuracy of information.

Questionnaire from the field will be scrutinized to cross check for the errors,

inconsistencies and incompleteness in the questionnaire. Coding will be used to code

responses in numerical terms and will be later entered into the computer system for

easy analysis and interpretation.

3.7.2 Data analysis

Data will be analyzed using SPSS to summarize the data and to obtain significant

relationship between the two variables. Correlation and regression will be used to

analyze the data and make conclusion.

3.7.3 Data presentation

After analysis, data will be presented using frequency tables and pie charts.

3.8 Anticipated problems

1 False information especially from the accounts officers in away to cover their

irregularities

2 The busy office schedule of some officer will cause less attention to the

researcher.

3 Failure by some respondents to return the questionnaires and some not willing to

take part in the study.

4 Inaccessibility to sensitive information that is very necessary for the study.

5 Lack of cooperation from respondents due to sceptism since most people view

researches as spies.

21

CHAPTER FOUR

PRESENTATION, INTERPRETATION AND DISCUSSION OF FINDINGS

4.1 Introduction

This chapter presents survey findings and their interpretation. It is divided into four

sections. Section 4.1 discusses the background information about respondents; section

4.2 presents funds management while section 4.3 profitability and 4.4 presents the

relationship between funds management and profitability.

4.2 Background information about the respondents

4.2.1 Respondents according to gender

Response from different sexes were obtained to have unbiased gender information.

This is shown in table 2

Table 2: showing gender of respondents

Gender Frequency Percentage (%)

Male 22 55

Female 18 45

Total 40 100


From the above table, 55% of the respondents were male and 45% were female. This

therefore indicates that both sexes were considered in the study thus there was no

gender bias in the sample.

4.2.2 Marital status

Responses on marital status were considered to find out whether respondents were

stable in the work they do and findings are indicated in table 3

Table 3: showing marital status of respondents

22

respondents frequency Percentage (%)

Single 9 22.5

Married 28 70

Widowed 2 5

Others 1 2.5

Total 40 100


From table 4.3 above, 22.5% of the respondents were single, 70.0% were married,

5.0% were divorced, and 2.5% widowed. This therefore indicates that the majority of the

respondents are stable in the work they do.

4.2.3 Age range

Responses on the age range were obtained in order to have viable information from

people of sound mind. This is shown in table 4

Table 4: showing Age range of respondents

Respondents Frequency Percentage (%)

Under 25 8 20

25-35 16 40

35-45 10 25

Above 45 years 6 15

Total 40 100


From the above, 25% of the respondents were under 25 years of age, 40% were

between 25-35 years, 25%were between 35-45 years and 15% were above 45 and

above years. This therefore indicates that the information got is got from experienced

and people of sound mind thus the information are viable.

23

4.2.4 Level of education

Findings on the level of education were captured to reveal whether respondents could

be able to interpret the questionnaires given to them by the researcher and responses

were noted and presented in table 5

Table 5: showing level of education

respondents Frequency Percentage(%)

O-level 1 2.5

A- level 3 7.5

Diploma 13 32.5

Degree 18 45

Post Graduate 5 12.5

Total 40 100


From the above table, 12.5% of the respondents were post graduates, 45% were

graduates, 32.5% were diploma holders, 7.5% A-level leavers, 2.5% O-level leaver.

This indicates that the respondents had the capacity to interpret the questionnaires

given to them. This means that the date given is reliable.

4.2.6 Period respondents have worked with the institution

Responses on the period the respondents have spent on the jobs captured to find out

their seriousness on job, loyalty and general labour turnover. The results are captured in

table 6

24

Table 6: showing duration in service


0-3 8 20

3-5 16 40

5-8 10 25

8+ 6 15

Total 40 100


From table 20.0% of the respondents had spent less than 3 years, 40.0% had spent 3 to

5 years, 25.5% had spent between 5 and 8 years and 15.0 were 8yers and above. This

indicates that respondents were serious and committed to their job, loyal to the

institution and also have experience in their work. Hence the responses collected are

viable.

4.2.7. Job position of the respondent.

In an attempt to find out the positions the respondents they hold in the institution, it was

found out that some were top managers, others middle managers while others were

lower level workers as in table 7

Table 7: Showing job positions of respondents.


Top managers 4 10

Middle managers 23 57.5

Lower workers 13 32.5

Total 40 100


From the table above, it is revealed that 10% of the respondents were top managers,

57.5% were middle managers and 32.56% of the respondents were lower workers. This

indicates that the information was got from the right people who had reliable information

on the study.

25

4.2.8 Period respondents spent in the job positions

Responses on the period the respondents have spent on the job positions captured to

find out their experience and results are captured in table 8

Table 8: Showing duration on job service

respondents Frequency Percentage (%)

0-3 10 25

3-5 16 40

5-8 12 30

8+ 6 15

Total 40 100


From table 25% of the respondents had spent less than 3 years on their job positions,

40.0% had spent 3 to 5 years, 30% had spent between 5 and 8 years and 15% were

8yers and above. This indicates that respondents had experience in their work hence

the responses collected is therefore reliable.

4.3 Funds management

In an attempt to examine the funds management systems, relevant questions were

asked and responses noted.

4.3.1 Existence and practice of funds management policies

An attempt was undertaken to find out whether the institution practice any fund

management policies and findings are depicted in table 9

Table 9: showing Practice of fund management

26


Yes 30 75

No 10 25

Total 40 100

source: primary data

The above table shows that 75% accepted that the institution practice some funds

management policies, 25% answered no. This therefore indicates that there are fund

management policies. However, further research on how effective these policies are,

respondents indicated that these policies are just in place but not effective, monitored

and supervised.

4.3.2. Respondents reasons for their answers in table 9

From the study findings, it was revealed that for those who answered yes argue that this

is management requirement and necessary for every organization and therefore should

be in place. The 25% who disagreed, some were not sure while others were sure they

were non existent. However even those who agreed argue that these policies in place

but are not effective and therefore are not bearing the fruits to the institution as required.

4.3.3. Management policies in place

In an attempt to find out the fund management policies in place, responses were as in

table 10

Table 10: showing whether management policies are in place


Yes 30 75

No 10 25

Total 40 100

source: primary data

From table 11, its depicted that 75% of the respondents accepted that policies of

managing cash exists while 25% denied their existence. However those who answered

yes gave the existing policies which included budgeting and planning, authorization of

27

payments, documentation of transactions, operating a bank account, systematic fund

transfers and following the principles of accounts. Further studies revealed that these

policies are poorly used due to laxity in enforcement as well as poor monitoring and

supervision of such policies which has affected the profitability of the institution in terms

of inflated expenditures and non disclosure of some incomes especially for small items.

4.3.4: Are policies followed diligently?

Findings were carried out to ascertain whether the funds management policies are

followed when dealing with the institution’s money. Results are indicated in table 11.

Table 11: showing whether policies followed diligently

Respondents frequency Percentage (%)

Yes 17 25

No 23 75

Total 40 100


From the table above, 25% of the respondents accepted that the policies are followed,

and 75% answered no indicating that the policies are not followed. However even those

who said are followed, indicate that a few are followed well like; authorization of

payments and budgeting. Further findings revealed that the implementation of budgets

is still poor whereby payments are made out of budgets which in one way contribute to

the poor profitability of the institution.

4.3.4. The effectiveness of the fund policies

An attempt was undertaken to find out the effectiveness of the funds management

policies by those respondents who confirmed their existence and findings are depicted

in table 12

Table 12: showing effectiveness of fund management


28

Very effective 6 20

Fairly effective 24 80

Not effective at all - -

Total 30 100

The above table shows that 20% of the respondents accepted that the funds

management policies are very effective, 80% fairly effective. This therefore indicates

that the existence of fund management policies is not viable and therefore they are not

doing enough to contribute to the organisational performance. However, further

research indicates that those who claim the policies to be effective were managers who

could be trying to cover their weaknesses.

4.3.5. Actions to employees who acts contrary to the policies

Findings were pursued to ascertain the extent to which employees who acts contrary to

policies are reprimanded.

Some respondents asserted that it depended on the religion and whose son or

daughter; if one is a Anglican and son or daughter to a clergy, can be pardoned even for

several times but non Anglicans whose parents are not even clergy are penalized to the

extent of the fault. This indicates that the poor performance and low profitability level are

as a result of the recruitment policy and the poor management of the human resources.

Further studies also revealed that, it depends on the intended objectives of the plaintiff,

where if the intention is to fraud then is penalized or even expelled from service. While

as if the mistake was not intended then, he or she is pardoned. However findings to how

they differentiate the intentional from non intentional fault was not provided by the

respondents. This kind of disorganization may explain the low levels of profitability of

the institution.

4.3.6. Does the institution often surfers from financial distress

An attempt was undertaken to find out whether the institution some times surfers from

financial distress and findings are depicted in table 13

29

Table 13: showing whether the institution often surfers from financial distress.


Yes 30 75

No 10 25

Total 40 100

The above table shows that 75% accepted that the institution more often is seen

suffering from financial distress, 25% answered no. This therefore indicates that the

institution is always in financial pinches and this was attributed to poor fund

management policies. This there means that they contributing to the low levels of

profitability of the institution.

4.2.3 Frequency by which the fund management policies are revised

This section has aimed at establishing how relevant particular controls can be

maintained by checking the frequency by which the accounting records are availed to

management. The results are presented as below.

30

Table 14: showing frequency by which the fund management policies are revised

Variable Frequency Percentage (%)

Rarely 8 27

Annually 10 33

Not sure 12 40

Total 30 100

Source: Primary Data

Of the 40 respondents only 30 responded to the question of how frequently the policies

are revised and 27% indicated that are rarely revised, 33% annually, 40% were not sure

whether are revised or not. This implies that the policies are not always revised to adjust

for weaknesses. However, even if they were revised there has been no change on the

profitability levels of the institution.

4.4. Profitability

4.4.1. Trend of the profitability levels of the institution

Findings were carried out to ascertain whether the trend of profitability levels of the

institution the past five years and results are indicated in table 22

Table 15: showing Trend of profitability levels


Increasing 5 12.5

Staggering 5 12.5

Decreasing 28 69.5

Not sure 2 5.5

Total 40 100


From the table above, 12.5% strongly agreed that the profits of the firm have been

increasing, 12.5% agreed, 69.5% were decreasing, 5.5% were not sure of the trend.

31

This explains that the profits of the institution have been decreasing. This according to

findings has been due to poor fund management policies in place.

4.4.2. Reasons for the trend in table 14

From the study findings, it was identified that the company is suffering from cash

pinches whereby cannot pay suppliers in time, pay workers in time, low growth rate and

development which are sound features of low or no profits to the organisation.

Those who were not sure reveals that they see the institution in one position, it does not

grow un like the top managers who show personal development and therefore they

surely not sure of the increases or decreases in the profitability of the institution.

Other respondents revealed that profits were increasing and they based their argument

on the increase on the in take which is not a conclusive evidence of increasing profits.

Their findings depicts a decreasing trend of the profitability levels has impacted

negatively on the general performance of the institution

Findings also reveals that the profitability trend in table 14 has been due to poor fund

management styles of which involves recruiting staff not based on skills but on religion,

abrupt authorization of expenditures outside the budgets, poor tracing of all the inflows

which has ended into fraud of some funds, poor monitoring and supervision of those

involved in the management of cash, some invoices are inflated by workers which all

has been due to poor management styles.

32

4.5. Relationship between fund management and profitability

4.4.1 Effective fund management and profitability levels.

In an attempt to find out whether fund management influences the level of

organizational profitability and responses were got as in table 16.

Table 16: showing cash management and organizational performance


Strongly agree 18 45

Agree 12 30

Not sure 5 12.5

disagree 5 12.5

Strongly disagree 0 0

Total 40 100


From the above table, it was found out that 45.0% strongly agreed that fund

management influences the level of organization profits, 30.0% agreed, 12.5% were not

sure, 12.5% disagreed and none of the respondents strongly disagreed. This indicates

that there is a positive relationship between funds management and organization’s

profitability.

4.5.2. Contribution of fund management policies on profitability

In an attempt to find out whether there is a contribution of funds management policies

on the profitability levels of the institution and responses found out that as in table 17.

33

Table 17: showing Contribution of fund management policies on profitability

respondents Frequency Percentage (%)

Strongly agree 18 45

Agree 14 35

Not sure 6 15

disagree 2 5

Strongly disagree 0 0

Total 40 100


From the above table, it was found out that 45.0% strongly agreed that fund

management policies can influence the levels of profits of the institution, 35.0% agreed,

15.0% were not sure, 5.0% disagreed and none of the respondents strongly disagreed.

This indicates that if funds are poorly managed it can lead to low profits of the

institution.

4.4.3 Correlation between funds management and profitability of the institution.

In an attempt to find out the relationship between fund management and organizational

profits using the statistical package for social scientists and results were indicated in

table 18

34

Table 18: Showing Correlation between fund management and profitability of the

institution.

Correlations

Fund management

Profitability

Fund management Pearson Correlation 1.000 .872

Sig. (2-tailed) . .000

N 40 40

Profitability Pearson Correlation .872 1.000

Sig. (2-tailed) .000 .

N 40 40

** Correlation is significant at the 0.02 level (2-tailed).

From the table above, findings shows a strong significant positive relationship between

the variables (r2= 0.760**, p>0.02) which presupposes that if funds are properly

managed it contributes to the profitability of the institution by 98.8%. Therefore 24%

represents other determinants that affect profitability levels of the institution other than

fund management it is depicted that there is a strong positive correlation between fund

management and profitability of the institution.

35

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction

This chapter presents the summery of finding of the study, conclusion, and

recommendations as guided by the research objectives and areas that need further

studies.

5.2 Summary of the findings

The study findings revealed that fund management involves rigorous activities such as

but not limited to; authorization of payments, documentation of all transactions,

investing idle cash in short term investments, operating a bank account, following the

principles of accounting, budgeting and budget control, preparing cash flow projections.

5.2.1 Fund management methods

The study findings also revealed that there are poor funds management methods where

cash is spent extravagantly and without planning.

5.2.2 Profitability

The study findings also depicted that the profitability levels of the institution is seen in

increase of profit margin, increase in sales, increase in market share, and increase in

share price and reduction in the transaction costs. However findings revealed that the

institution’s profits have been decreasing.

5.2.3 Relationship between cash management on organizational performance.

It was found out that fund management influences the level of institutions profitability as

it is evident from the correlation which showed a strong positive relationship significant

at 0.02 between the two variables.

36

5.3 Conclusion

Research findings depicts that fund management in the institution has been poorly

management which might have contributed to the low profit levels of the organization.

The fund management together with the management policies have a lot of

weaknesses.

Findings on the profitability levels of the organization have been staggering over the

past five years, poor fund management being responsible

From the findings in chapter four, it is evident that funds management has a positive

effect on the profitability performance of the institution. Once the methods and

procedures of funds management are inconsistent and vague, profitability will thus be

negatively affected yet if the methods are good profitability will be enhanced.

5.4 Recommendations

With much gratitude given to the institution in terms of improvement made in the

process of managing funds, the findings in the study justify the following

recommendations.

Improvements should be made in the recording system of cash and authorization for

cash out flows by a known personnel and well stipulated guidelines should be followed

by the staff of managing cash like proper documentation and spending according to the

budgets. The Institution should involve all the staff in the management of cash says in

planning and budgeting.

The institution should also strengthen internal control systems and have financial

management training for the managers because their decisions greatly affect the

financial position of the institution. This would go along with minimizing the costs of poor

cash management and performance will be enhanced.

Further recommendation concerns the use of computerized accounting packages for

maintaining the books of accounts. In addition there should be proper checks and strict

37

monitoring of the budget movements as well as reconciliation with the bank to avoid

loses due to errors that may occur in the books but this is easy when there is good

relationship between the two parties.

5.5 Areas for further research

The following areas are recommended for further research;

(i) Fund management and performance of Tertially institutions.

(ii) The impact fund management on liquidity of Tertially institutions.

(iii) The effect of inventory management and profitability of tertially institutions.

38

REFERENCES

1. Albrecht K and Zemke (1985). Doing Business in the New Economy, Dow Jones-Irwin,

Homewood.

2. Arora

3. Baggott Joseph (1989). Costing and Management Accounting, Richard Clay Ltd,

Bungany, Suffolk Great Britain.

4. Batty Joseph (1980). Costing and Management Accounting For Students, Third edition.

Institute of cost and management accountants, Heinemann London.

5. Birungi Patrick and Others (1999) Principles of Economics Makerere University,

Uganda Printing and Publishing Corporation.

6. Drury Collins (2000), Management and Costing Accounting 4th

Edition, Chapman and

Hall Publisher.

7. Evans G. Thomas and Others (1985). International Accounting and reporting Macmillan

Publishing Company.

8. Frank Wood and Sangster (1993). Business Accounting 2 (7th

Edition), Pitman

Publishing, London.

9. Harper W.M. (1982). Cost and Management Accounting Vol 2, Richard day (The

Chancer Press) United Bungay, uffolk Great Britain.

10. Hax C. Arnoldo (1984). Strategic Management an Intergrated Perspective, Cassel,

London.

11. Horgren Charles (1982), Cost Accounting (5th Edition), Prentice Hall, New Jersey.

12. Kamukama Nixon (2006). Costing and Management Accounting first Edition Revised,

MUBS, New Vision Publishing Uganda.

13. Kaplan, A. Atkinson (1998). Advanced Management Accounting, 5th

edition, Prentice

Hall.

14. Lalla, B.M, I.C Jan (2000). Cost Accounting, 3rd

Edition, Asoke Prentice Hall of India

Private Ltd.

15. Pandey I.M (1995) Essentials of Financial Management, Vishal Printers, Delhi.

39

APPENDIX I

QUESTIONNAIRE FOR EMPLOYEES AND DIRECTORS OF BISHOP BARHAM

UNIVERSITY COLLEGE-KABALE

Dear respondent,

Am NANZIRI PROSCOVIA, a student of Makerere University carrying out a study on the topic

THE IMPACT OF FUNDS MANAGEMENT ON PROFITABILITY OF TERTIARY

INSTITUTIONS and kindly request you to spare me some of your valuable time to respond to

my questionnaire. All the response given will be used for academic purpose and treated with

utmost confidentiality.

Thank you.

40

SECTION A: General Information about Respondents

I. What is your gender?

a) Male b) Female

II. What is your age bracket?

a) Under 25 years b) 25 – 35 years

c) 35 – 45 years d) above 45 years

III. What is your marital status ?

a) Single b) Married

c) widowed d) Others Specify ……………….

IV. What is your level of education?

a) O-Level b) A-Level

c) Diploma d) Degree

e) Other (specify) --------------------------------------------------------------

V. For how long have you been an employee of this organization?

a) 0 – 3 years b) 3 -5 years

c) 5 – 8 years d) over 8 years

VI. What is your position? ……………………………..

VII. For how long have you been in that position? ……………………..

Section B:

1. Does your organization practice any funds management policies?

a) Yes b) No

2. Give reasons for your answer above.

41

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

3. If yes what management policies are used?

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

4. Are the policies followed diligently?

a) Yes b) No

5. If yes, how effective are these policies in the management of the organization’s in and outflow

of funds?

a) Very effective b) fairly effective c) Not effective at all

6. What happens if an employee ignores or acts contrary to the policies?

………………………………………………………………………………………………………

………………………………………………………………………………………………………

7. Does the institution often suffer financial distress?

a) Yes b) No

8. If yes, would you attribute it to the cash management style?

a) Yes b) No

9. How often are the cash management policies revised? …………………………………………

42

Section C

10. What has been the trend of the profitability levels of the institution?

a) Increasing b) staggering

c) Decreasing d) Not sure

11. Give reasons for your answer.

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

.

12. What are the indicators of the trend chosen?

………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

13. Are those indicators in favor of the institution?

a) Yes b) No

14. Would you attribute the institution’s profitability trend to funds management style?

a) Yes b) No


………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

43

Section D

16. Do you think having effective funds management policies determines the total profits

generated during the financial year.

a) Strongly agree b) Agree

c) Not sure d) Disagree

e) Strongly disagree

17. Does funds management policies in place contribute to the profitability level of the

institution? a) Yes b) No


………………………………………………………………………………………………………

………………………………………………………………………………………………………

………………………………………………………………………………………………………

19. What would you wish to be improved upon or changed in the management of cash?

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------

20. Kindly give any other comment (s) you may have regarding the overall process of cash

management

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------

THANK YOU SO MUCH

IMPACT OF FUNDS MANAGEMENT ON PROFITABILITY OF TERTIARY

Documents

Transcript of IMPACT OF FUNDS MANAGEMENT ON PROFITABILITY OF TERTIARY