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BACKGROUND OF THE STUDY
Credit management is a term used to identify accounting functions usually conducted under the umbrella of accounts receivables. Essentially, this collection of processes involves qualifying the extension of credit to a customer, monitors the reception and logging of payments on outstanding invoices, the initiation of collection procedures, and the resolution of disputes or queries regarding charges on a customer invoice. When functioning efficiently, credit management serves as an excellent way for business to remain financially stable. Competent credit management seeks to not only protect the vendor from possible losses, but also protect the customer from creating more debt obligations that cannot be settled in a timely manner. Several factors are used as part of the credit management process to evaluate and qualify a customer for the receipt of some form of commercial credit. This may include; gathering data on the potential customer’s, current financial condition including the current credit score.
ITERATURE REVIEW
In pursuance of this study “Credit Management on the profitability of a manufacturing firm”. The researcher designs this chapter to review the related literature. This chapter aims at gathering some of the available information on this matter in order to have an insight into what credit management on the profitability of a manufacturing firm is all about. I.M Pandy (2002) saw trade credit as a short term source of finance. He also said that, it is the credit that a customer gets from a supplier of goods in the normal course of a business. Therefore, it is mostly an informal arrangement between the supplier and the buyer as no legal documents are signed. I.M Pandy (2002), pointed out that trade credit may also take the form of bills payable. This happens when the buyer signs a bill – a negotiable instrument to obtain trade credit of which in his balance sheet, it appears as bills payable and it is said to be formal since a bill is a formal acknowledgement of an obligation to repay an outstanding amount. To supplier, any trade credit granted to a customer appears as account receivable, sundry debtors, bills receivable depending on the one that is applicable.
SETTING CREDIT POLICY AND REGULATION
The term credit policy may mean different things to different people. But according to the chambers dictionary, it simply refers to “the laid down rules and procedures which a firm have chosen to guide her in the granting of credit to her customers. However, according to Enarke Yarhe (1989), he identified three decision credit policy variables with which a firm must adopt so as to make a good policy arrangement. It includes;
Credit Terms
These are those stipulations which a firm adopts as conditions under which the customer can buy on credit: It includes:- A. The Credit Period:- This is the length of time for which the credit is extended to the customer. It is generally stated in terms of a net date. For instance, if a firms credit terms are net 45, a customer is expected to repay his credit obligation within a maximum of 45 days. B. The Cash Discount:- This is a reduction in payment offered to customer)s) to reduce him to pay his credit obligations within a specified period which will be earlier than the normal credit period. It is a tool which a firm uses to increase sales and also accelerate collection of debts from customers.
DEDICATION
ACKNOWLEDGEMENT
ABSTRACT
CHAPTER ONE
1.0 Introduction
1.1 Background of the Study
1.2 Statement of the Problem
1.3 Objective of the Study
1.4 Formulation of Research Hypotheses
1.5 Research Questions
1.6 Significance of the Study
1.7 Scope of the Study
1.8 Limitations of the Study
1.9 Definition of Terms
CHAPTER TWO
2.0 Literature Review
2.1 Reasons for granting credit
2.2 Setting credit policy and Regulation
2.2.1 Credit Standards
2.2.2 Credit Terms
2.2.3 Collection Efforts
2.3 Credit Policy Goals
2.3.1 Optimal Credit Policy
2.4 Credit Policy Variable Analysis
2.4.1 Credit Analysis
2.4.2 Credit Scoring
2.4.3 Collection Policy and Procedures
2.4.4 Establishing Internal Collection Procedure
2.4.5 Other Collection Procedures References
CHAPTER THREE
3.0 Research Methodology
3.1 Research Design
3.2 Area of Study
3.3 Sources of Data
3.4 Population of the Study
3.5 Instrument of Data Collection
3.6 Validation of the Instrument
3.7 Reliability of the Instrument
3.8 Method of Data Analysis
3.9 Sample Design and Determination of Sample Size
CHAPTER FOUR
4.0 Presentation, Analysis and Interpretation of Data
4.1 Analysis and Interpretation of Data
4.2 Test of Hypotheses
4.3 Test of Hypothesis
CHAPTER FIVE
5.0 Summary of Findings, Conclusion and Recommendations
5.1 Summary of Findings
5.2 Conclusion
5.3 Recommendations
Bibliography
Appendix 1
Appendix II
