Description

ABSTRACT

The aim of this research work is to appraise “The impact of credit management
on the profitability of a manufacturing firm focused on Unilever Nigeria Plc Aba”.
This is because; trade credit is a short term source of finance and sometimes
take the form of bills payable. The statement problem of this research banks
about the poor level of credit management and also the problems which the
firms encounter as a result of high-rate of bad debts. The objective of this
research study is to highlight the effects of the credit management on the
profitability of the company as well as to highlight the advantages of effective
and efficient management of trade credit amongst others. Furthermore, this
research work will be of immense significance to the staff of Unilever Nig. Plc
Aba as well as the students and the researcher since it aims at providing effective
means of reducing default in collection of accounts. Also, research questions like;
could a company’s liquidity problem be attributed to bad debt? On the average,
how long do you allow credit to customers? Etc. research instrument used were
questionnaires for the purpose of obtaining the desired result. In treating and
analyzing the data collected, an extensive use of tabular information and
percentages were of great importance. In the light of the findings and
conclusions of this work, the following recommendations are put up: that then
should be a regular review of credit policies to suit the changes in the business
environment and that an enquiry unit should be established to take
responsibility for prospective credit’s assessments amongst others.

TABLE OF CONTENTS

Title page =
Approval Page
Dedication =
Acknowledgement = = = = = = = iv
Abstract = = = = = = = = = v
Table of contents = = = =

CHAPTER ONE

1.0 Introduction = = = = = = = 1
1.1 Background of the Study = = = = = = 1
1.2 Statement of the Problem = = = = = 3
1.3 Objective of the Study = = = = = = 5
1.4 Formulation of Research Hypotheses = = = 6
Research Questions = = = = = = 7
Significance of the Study = = = = = = 8
Scope of the Study = = = = = = = 9
Limitations of the Study= = = = = = 9
Definition of Terms = = = = = = 10
CHAPTER TWO
Literature Review = = = = = = 12
Reasons for granting credit = = = = = 14

2.2 Setting credit policy and Regulation = = = = 17
2.2.1 Credit Standards = = = = = = = 18
2.2.2 Credit Terms = = = = = = = 18
2.2.3 Collection Efforts = = = = = = = 19
2.3 Credit Policy Goals = = = = = = 20
2.3.1 Optimal Credit Policy = = = = = = 20
2.4 Credit Policy Variable Analysis = = = = 22
2.4.1 Credit Analysis = = = = = = = 23
2.4.2 Credit Scoring = = = = = = = 24
2.4.3 Collection Policy and Procedures = = = = 26
2.4.4 Establishing Internal Collection Procedure = = = 26
2.4.5 Other Collection Procedures = = = = = 27
2.4.6 Monitoring Receivables = = = = = = 28
References = = = = = = = = 34

CHAPTER THREE
3.0 Research Methodology = = = = = = 35
3.1 Research Design = = = = = = = 35
3.2 Area of Study = = = = = = = 36
3.3 Sources of Data = = = = = = = 36
3.4 Population of the Study = = = = = = 37
3.5 Instrument of Data Collection = = = = = 38
3.6 Validation of the Instrument = = = = = 38
3.7 Reliability of the Instrument = = = = = 39
3.8 Method of Data Analysis = = = = = = 39
3.9 Sample Design and Determination of Sample Size = = 40

CHAPTER FOUR
4.0 Presentation, Analysis and Interpretation of Data = = 42
4.1 Analysis and Interpretation of Data = = = = 42
4.2 Test of Hypotheses = = = = = = 55
4.3 Test of Hypothesis 1 = = = = = = 56

CHAPTER FIVE
5.0 Summary of Findings, Conclusion and Recommendations 68
5.1 Summary of Findings = = = = = = 68
5.2 Conclusion = = = = = = = = 69
5.3 Recommendations = = = = = = 71
Bibliography = = = = = = = 73
Appendix 1 = = = = = = = = 75
Appendix II = = = = = = = = 76

CHAPTER ONE

INTRODUCTION
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.

BRIEF HISTORY OF UNILEVER NIGERIA PLC ABA
Unilever Nigeria Plc is a public liability company quoted on the Nigerian
stock exchange since 1973 with Nigerian’s currently having 49 percent of
equity holidays established in Nigeria. Unilever Nigeria Plc started as a soap
manufacturing company and is today’s one of the eldest surviving
manufacturing organization in Nigeria. The company changed its name to
“Unilever Nigeria Plc” in 2001.
The company is into the manufacture and marketing of household
toiletries and favorites which are manufactured in their various factory
locations in Nigeria. This is because they are so deeply committed to meet the
everyday needs of people everywhere in Nigeria. Such factors are located at
Lagos, Agbara, Oregun and Aba. Its staff strength is about one thousand eight
hundred (1,800) employers. They also have indirect employees like contract
staff and others who range from our forty thousand employees throughout the
country.
The company has also made provision for assistance in fields of health,
education, children welfare and potable water hygiene as part of its social
responsibility programme in the Nigerian communities.

Conclusively, Unilever Nigeria Plc from research has been found to be
involved in both credit and cash transactions with its customers.