CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Financial management framework comprises the processes, systems, internal controls and

practices relating to the way the organizations or institutions manages its revenues, expenses,

assets, liabilities, and contingencies. It also includes its policies for managing risk and

monitoring its financial and operational performance, including budget performance and

reporting on these functions, both internally and externally (Ali & Isak, 2019).

In the health care sector, financial management can now be defined as strategizing the

organization’s financial direction as well as the performance of its day-to-day financial

operations. Therefore, financial management has a dual purpose. The first is to determine the

strategic financial direction of the organization. This function is usually performed at the

executive level of the financial ladder by the chief financial officer (CFO). The primary job is

to prepare and present the organization’s strategic financial plan to the board for endorsement

1and approval. In many organizations, this job may also include the treasury function, which

is charged with investing the organization’s financial assets in the most prudent manner as set

down in board approved investment policies (Berger, 2007).

The second purpose is management of day-to-day financial operations. The organization’s

second-in-command finance officer, often called the controller, usually carries this out. This

function means making sure that the payroll and the suppliers are paid and that the revenues

generated by the operation are billed out in an accurate and timely manner and collected

efficiently with a minimum of write-offs (Berger, 2007).

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Suitable financial management practice also plays an important role in helping service

establishment gain access to capital which is essential for business growth and profitability. A

good financial management practice system should ensure the succeeding quantitative

characteristics are met: understand ability, significance, materiality, reliability, and substance

over form, carefulness, completeness, comparability, suitability and an equilibrium between

benefit and cost yet they continue to lack in most private service companies (Demba, 2013).

Michael (2016) provides a good description of the six major objectives of health care

financial management, in addition to the accounting and reporting functions, which he

identifies as the following: To generate income; To respond to regulations; To facilitate

relationships with third-party payers; To influence method and amount of payment; To

monitor physicians; To protect the organization’s tax status.

Performance is also affected by financial constraints, financial illiteracy, lack of financial and

marketing information, poor financial management skills, poor working capital management,

ownership structure, rigid regulatory frameworks and macroeconomic factors (Addo, 2017).

These affect Sestet profits, net worth and operational costs. Establishment needs financial

management skills, financial information, research and innovation, network and partnership

with all stakeholders to enable them outsource finances, expertise, innovative investments

and market (Nene, 2014).

1.2 Statement of the Problem

Financial management has a primary and a secondary role in the financial health of the health

care organization. Its secondary role is reporting financial results periodically, usually

monthly. Its primary role, however, is as a broker of information. The people who control the

information usually have quite a bit of power in any organization. The finance division of

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most organizations, and in most industries, has generally been the storer and reporter of

information (Berger, 2007).

No organization can achieve success without the proper financial information on which to

base its decisions. The whole purpose of having and using information is to make the most

appropriate decisions. Making decisions is every manager’s number one priority. Making the

proper decisions is a function of experience and appropriate information (Berger, 2007).

In the study of Town & Busia (2017) they argued that, a good enterprise financial

management system should ensure the following qualitative features are met:

understandability, significance, materiality, consistency, and element over form, practicality,

completeness, comparability, appropriateness and an equilibrium between benefit and cost

yet they continue to the absence in most micro and small enterprise.

Lack of financial management practices in private hospitals for decision making and lack of

practical skills is as a vast amount barrier to the establishments as is the powerlessness to

access their performances. Some Hospitals in Nigeria used accounting as they to manage the

daily activities of their operations, but it is irrelevant to maintain credible financial

management that will give birth to sustainable performance.

None of the reviewed studies have sought to explain how financial management practice with

working capital management, investment decisions, and financing decisions impacted the

performance of private hospitals. Nothing of these domestic and international studies have

motivated on health care financial management and performance in private hospitals in

Kwara State, Nigeria. This is the gap that the study would investigate and solving that

problem.

1.3 Objectives of the Study

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The main objective of this study is to examine the relationship between health care financial

management and performance in private hospitals in Kwara State, Nigeria. The following are

the specific research objectives;

To examine the effect of working capital management on performance in private hospitals in

Kwara State.

To ascertain the effect of investment decisions on performance in private hospitals in Kwara

State.

To determine the effect of financing decisions on performance in private hospitals in Kwara

State.

1.4 Research Questions

To achieve the above objectives the following research questions were posed.

 To what extent does working capital management relate to performance in private

hospitals in Kwara State?

 To what extent does investment decisions relate to performance in private hospitals in

Kwara State?

 To what extent does financing decisions relate to performance in private hospitals in

Kwara State?

1.5 Research Hypotheses

The research was predicted on the following null hypotheses:

H01: There is no significant relationship between working capital management and

performance in private hospitals in Kwara State.

H02: There is no significant relationship between investment decisions and performance in

private hospitals in Kwara State.

H03: There is no significant relationship between financing decisions and performance in

private hospitals in Kwara State.

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1.6 Significance of the Study

The study is carried out to obtain information and increase the knowledge so far accumulated

on the subject matter titled health care financial management and performance in private

hospitals in Nigeria.

This study will be significant for hospitals to get them the concept that related the health care

financial management and performance. Strategy creators were using the information gained

from this study for their design, formulation regarding financial management practice. This

research provides academic support to students and lecturers of accounting discipline.

Future investigators would, therefore, use the findings of this study to further advances and

future research projects that were found this study significant. This study would benefit for

the opportunity, researchers looked for literature about the influence of health care financial

management on performance, who is interested in carrying out for additional study in this

playing field.

1.7 Scope and Limitation

The theoretical parameter of the study is health care financial management and performance

in private hospitals. Geographically, the study focuses on selected private hospital in Kwara

State.

The values for analysis will be computed from the 2019/2020 annual financial statement.

1.8 Organization of the Study

This research work is divided into five chapters. Chapter one introduces the subject matter of

health care financial management as it relates to the performance in private hospitals in

Nigeria. Chapter two critically examines and reviews relevant and related literatures. It

focuses on the empirical literature and establishes a theoretical basis for the analysis of the

study. In chapter three, the research methodology of investigation is presented. Data

presentation and analysis of results, using relevant statistic techniques, are discussed in

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chapter four. Chapter five summarizes, concludes and provides useful policy

recommendations as well as recommendations for further studies.

1.9 Definition of Terms

Health care financial management: It is defined as strategizing the organization’s financial

direction as well as the performance of its day-to-day financial operations.

Performance: This is the actual output or results of a firm as measured against its intended

outputs (or goals and objectives), growth and survival of the firm.

Working capital management: The is the management of the capital of the hospital which

is used in its day-to-day trading operations, calculated as the current assets minus the current

liabilities.

Investment decisions: This is how the funds of the hospital are to be invested into different

assets such as medical equipment and tools.

Financing decisions: This are basically financial decisions related to raising of finance for

the survival of the hospital. It involves identification of various sources of finance and the

quantum of finance to be raised from long-term and short-term sources.

CHAPTER TWO

LITERATURE REVIEW

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This chapter is focused on the various subheading; conceptual framework, theoretical

framework, empirical review.

2.1 Conceptual Review

This subheading discusses extensively on relating to health care financial management and

performance in private hospitals in Nigeria.

2.1.1 Financial Management

Financial management is the name of planning, directing, monitoring, organizing, and

controlling of the monetary resources of an organization in organization every department

need finance to meet their daily requirements that’s mean every activity in the organization

depend upon the availability of finance.it also called as life blood of any organization. Any

organization whether it’s big or small needs finance to fulfil its daily operational activities.

The main purpose of every organization is to earn maximum profit. Every organization needs

finance to meet its requirement in the economic world (Paramasivan & Subramanian, 2009)

According to Hamptors (2001), the financial management is a well-organized controlling of

monetary resources for the collection of correct data according to its logical consistent and

accounting methods. The main purpose of financial management is to understanding of

financial statement of an organization. Financial statement like balance sheet and income

statement shows the current position of an organization at a particular time period. Financial

statements provide us the use full information about the organization debtor and creditor.

Nyer (1999) also defines it “Financial statements provide a summary of the accounting of a

business enterprise, the balance-sheet reflecting the assets, liabilities and capital as on a

certain data and the income statement showing the results of operations during a certain

period”.

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Financial management implication result in an increased company’s performance and

company profitability financial management is very important for every department of the

organization. It’s very important for many functional department-like personnel, marketing

and production department. Its cover wide area of business activity with multidimensional

approaches. In many functional area of the organization. The good financial management

companies are operationally efficient.it shows the good image for investors and regulatory

authorities.

According to managers contracted to make decisions in the large, open corporation and

received compensation for services rendered. Thus, the contractual nature of the publicly held

corporation provided specialization between owners who specialized in risk bearing and

managers who specialized in decision management. Examined the financial practices in

Pakistan corporate sector. The study reviewed the financial behavior and practices of

different segments of the Pakistan private corporate sector with a view to bring out the

differences between public and private limited companies, medium, large and small

companies, Pakistan and foreign companies and companies in different industrial categories.

Proposed that the modern corporation based upon the efficient separation of ownership and

managerial control (Mazzarol, 2014).

Owners purchased shares that entitle them to the residual returns in the firm after obligations

had been paid. This privilege, however, required that the owners bear the risk of zero or

negative returns. Corporate investment, dividend, compensation and financial policies

interconnected and debt and equity substituted Governance structures rather than just

financial structures. A firm with higher asset would find debt financing very costly. The

board of directors not only supervised the management team, but also as a way by which to

cut down the cost of capital for projects that involved limited redeployed ability Corporate

restructuring shifted a firm from an internal governance system that characterized by low

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investment in monitoring and bonding and large residual losses in the form of excessive

diversification towards a new equilibrium that characterized by low residual losses and high

monitoring costs Investment appraisal was one of the important areas of management

practices There were a number of apprehensions in investment appraisal, the method of

appraisal (Net present value, internal rate of return and payback period) and objectives and

constraints in project selection (Mwangi Makau & Kosimbei, 2014).

The better performance that led to quality gave rise to an immense challenge for corporations.

These could also help companies to develop a comparative advantage in terms of future

forecasting for the companies. Therefore, it was imperative that in the corporate sector, main

focus for overcoming the financial concerns be placed on corporate debt management and

restructuring. One of the important sources of financing in corporate firms was the use of

debt.

The study of healthcare financial management is fascinating and rewarding. It is fascinating

because so many of the concepts involved have implications for both professional and

personal behavior. It is rewarding because the healthcare environment today, and in the

foreseeable future, is forcing managers to place increasing emphasis on financial implications

when making operating decisions. First and foremost, financial management is a decision

science. Whereas accounting provides decision makers with a rational means by which to

budget for and measure a business’s financial performance, financial management provides

the theory, concepts, and tools necessary to make better decisions (Mbogo, 2011).

2.1.2 The Role of Financial Management in the Health Services Industry

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Until the 1960s, financial management in all industries was generally viewed as descriptive in

nature, its primary role being to secure the financing needed to meet a business’s operating

objectives. A business’s marketing, or planning, department would project demand for the

firm’s goods or services; facilities managers would estimate the assets needed to meet the

projected demand; and the finance department would raise the money needed to purchase the

required land, buildings, equipment, and supplies. The study of financial management

concentrated on business securities and the markets in which they are sold and on how

businesses could access the financial markets to raise capital. Consequently, financial

management textbooks of that era were almost totally descriptive in nature (Halvorson,

2005).

Today, financial management plays a much larger role in the overall management of a

business. Now, the primary role of financial management is to plan for, acquire, and utilize

funds (capital) to maximize the efficiency and value of the enterprise. Because of this role,

financial management is known also as capital finance. The specific goals of financial

management depend on the nature of the business, so we will postpone that discussion until

later in the chapter. In larger organizations, financial management and accounting are

separate functions, although the accounting function typically is carried out under the

direction of the organization’s chief financial officer (CFO) and hence falls under the overall

category of “finance.” (Darling, 2005).

In general, the financial management function includes the following activities:

Evaluation and planning: First and foremost, financial management involves evaluating the

financial effectiveness of current operations and planning for the future.

Long-term investment decisions: Although these decisions are more important to senior

management, managers at all levels must be concerned with the capital investment decision

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process. Such decisions focus on the acquisition of new facilities and equipment (fixed

assets) and are the primary means by which businesses implement strategic plans; hence, they

play a key role in a business’s financial future.

Financing decisions: All organizations must raise funds to buy the assets necessary to

support operations. Such decisions involve the choice between the use of internal versus

external funds, the use of debt versus equity capital, and the use of long-term versus short-

term debt. Although senior managers typically make financing decisions, these choices have

ramifications for managers at all levels.

Working capital management: An organization’s current, or short term, assets, such as

cash, marketable securities, receivables, and inventories, must be properly managed to ensure

operational effectiveness and reduce costs. Generally, managers at all levels are involved, to

some extent, in short-term asset management, which is often called working capital

management.

Contract management: Health services organizations must negotiate, sign, and monitor

contracts with managed care organizations and thirdparty payers. The financial staff typically

has primary responsibility for these tasks, but managers at all levels are involved in these

activities and must be aware of their effect on operating decisions.

Financial risk management: Many financial transactions that take place to support the

operations of a business can increase a business’s risk. Thus, an important financial

management activity is to control financial risk.

In times of high profitability and abundant financial resources, the finance function tends to

decline in importance. Thus, when most healthcare providers were reimbursed on the basis of

costs incurred, the role of finance was minimal. At that time, the most critical finance

function was cost accounting because it was more important to account for costs than it was

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to control them. Today, however, healthcare providers are facing an increasingly hostile

financial environment, and any business that ignores the finance function runs the risk of

financial deterioration, which ultimately can lead to bankruptcy and closure (Glaeser, 2004).

In recent years, providers have been redesigning their finance functions to recognize the

changes that have been occurring in the health services industry. Historically, the practice of

finance had been driven by the Medicare program, which demanded that providers (primarily

hospitals) churn out a multitude of reports to comply with regulations and maximize

Medicare revenues. Third-party reimbursement complexities meant that a large amount of

time had to be spent on cumbersome accounting, billing, and collection procedures. Thus,

instead of focusing on value-adding activities, most finance work focused on bureaucratic

functions. Today, to be of maximum value to the enterprise, the finance function must

support cost-containment efforts, managed care and other payer contract negotiations, joint

venture decisions, and integrated delivery system participation. Finance must help lead

organizations into the future rather than merely record what has happened in the past (Allen

& Bombardieri. 2008).

In this text, the emphasis is on financial management, but there are no unimportant functions

in health services organizations. Managers must understand a multitude of functions, such as

marketing, accounting, and human resource management, in addition to financial

management. Still, all business decisions have financial implications, so all managers—

whether in operations, marketing, personnel, or facilities—must know enough about financial

management to incorporate financial implications in decisions about their own specialized

areas. An understanding of the theory and principles of financial management will make them

even more effective at their own specialized work.

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2.1.3 Current Challenges

In April 2009, the Healthcare Financial Management Association released its Healthcare

Finance Outlook. A survey and interviews of 100 healthcare thought leaders were used to

forecast issues likely to affect healthcare finance over the next ten years and preparations

organizations should be making to deal with these issues.

In order of importance, survey respondents identified the following near-term actions:

1. Develop a long-term business plan for physician integration.

2. Implement substantial and sustainable cost-containment strategies.

3. Amend strategic and capital plans to account for potential shifts in revenue.

4. Develop a strategic plan for recruitment, retention, and training.

5. Develop strategies to align information technology with transformations in payment and

care delivery structures.

6. Redesign care processes and delivery systems to better integrate professional and facility

components of care.

7. Forge innovative alliances with other service providers and explore such pursuits as

regional health initiatives, micro financing approaches, and employer relationships.

8. Ensure that online customer service capabilities keep pace with consumer expectations.

9. Significantly increase resources/planning for services delivered outside the traditional

hospital setting.

10. Seek merger partner(s) to gain efficiencies of increased size and access to capital.

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Taken together, these actions confirm that financial issues are of primary importance to

today’s healthcare managers. The remainder of this book is dedicated to helping you confront

and solve these issues. (In addition to this survey, several other surveys have been conducted

in recent years regarding the concerns of health services managers.3)

2.1.4 Working Capital Management

In order to understand the importance of working capital one has to understand the working

capital cycle which is described as the core for working capital management. Arnold (2008)

said that working capital cycle includes all the major dimensions of business operations. It is

quite clear that a bad management of a single account in this cycle might cause a big trouble

for the non-living entity which might leads to its death. Therefore, the management of

working capital and balance between components of working capital is extremely important

for the smooth running of business.

Similarly, the basic aim of financial management is to maximize the wealth of the

shareholders and in order to achieve this; it is necessary to generate sufficient sales and profit.

However, sales do not convert in to cash instantly. The time between purchase of inventory

items (raw material or merchandise) for the production and their conversion into cash is

known as operating cycle or working capital cycle. Therefore, working capital management

deals with the act of planning, organizing and controlling the components of working capital

(current asset and liability) like cash, bank balance, inventory, receivables, payables,

overdraft and shortterm loans (Paramasivan & Subramanian, 2009). Abdul & Mohamed,

(2007) defined working capital management as it is concerned with the problems that arise in

attempting to manage the current asset, current liabilities and the interrelationship that exists

between them.

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Working capital management is a managerial accounting strategy focusing on maintaining

efficient levels of both components of working capital (that is, current assets and current

liabilities) in respect to each other (Robert, Mark & Rabih, 2011). Working capital

management ensures that a company has sufficient cash flow in order to meet its short-term

debt obligations and operating expenses. Implementing an effective working capital

management system is an excellent way for many companies to improve their earnings, (Erik

& Herbert, 2010). The two main aspects of working capital management are ratio analysis

and management of individual components of working capital. Ratio analysis helps the

management to identify areas of focus, such as inventory management, cash management,

accounts receivable and payables management.

Working capital management involves, the process of managing the activities and processes

related to working capital (Vedavinayagam, 2010). The aim is to ensure that there are checks

and balances to ensure that the amount of cash flowing into the business is enough to sustain

the company's operations. This must be an ongoing process that must be evaluated using the

current level of assets and liabilities. Working capital management may involve

implementing short- term decisions that may or may not carry over from one financial period

to the next, (Kesseven, 2006).

Kulkanya (2012) define working capital management as the administration of current assets

in the name of cash, marketable securities, receivables and staff advances, and inventories.

Adina (2010), demonstrates that good working capital management must ensure an

acceptable relationship between the different components of a firm’s working capital so as to

make an efficient mix, which will guarantee capital adequacy. Therefore, working capital

management should make sure that the desirable quantities of each component of the working

capital are available for management.

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Working capital management is defined by Kehinde (2011), as the management of

investment in current assets and the financing of the current assets, and involves setting

working capital management policy and carrying out that policy in a business's daily

operations, to achieves its goals and objectives, such as shareholder wealth maximization,

Competitive advantage, and growth. Working capital management in view of Ashiq Ali

(2011) based on purpose of working capital ensures the effective and efficient utilization of

the business's investment in fixed assets. According to Kehinde (2011), if performance

criteria such as liquidity, solvency/bankruptcy, efficiency, profitability and Economic Value

Added are considered, it will be clearly apparent that the business must hold and manage the

different levels of working capital which are appropriate to its performance criteria. Sharma

and Satish (2011), see working capital management from efficiency perspective and can be

measured and achieved through the cash conversion efficiency, days operating cycle and days

working capital.

2.1.5 Investment Decisions

Investment is an allocation of resources for medium or long term and the expected effect is to

recover the investment costs and have a high profit. Besides financial resources, material and

human resources are used as well. The economic and financial environments influence

investments, so expected results are uncertain. (Avram et al., 2009) Investment decisions are

made after a complete analysis of the investment project. One of the basic factors that

influence the decision is the risk factor of the investment. This risk exists because it is

uncertain that the cost of the investment will be recovered and a profit will be gained.

Investment, investment decisions and investment behaviour can be studied from two points of

view. Investment can be analysed and studied empirically and theoretically. The empirical

and theoretical approaches of investment behaviour do not have much in common.

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The historical and institutional considerations are essential in understanding the investment

behaviour. Jorgenson notes that it is an incomplete view that the empirical and theoretical

researches are carried out separately. The economic theory is used in possible explanations

for the investment behaviour. This fact separates the econometric work from empirical

generalization, which hasn't been econometrically tested. It is important that econometric

models of investment behaviour are tested in order to find out whether they perform

satisfactorily in the econometric work or not. (Jorgenson, 1967).

The decision to make an investment in an operating or financial asset is taken on the basis of

business evaluation. The evaluation has the objective of building a business case for the

investment proposal. It requires an overall perspective of the business, of the company’s

positioning on strategy, marketing, and production. It requires an understanding of the

company’s risks and returns and it must integrate aspects of tax, commercial agreements, and

possible liabilities. It requires knowledge of the project, through the construction,

commissioning ramp-up and production stages. In addition to analytical skills, business

evaluation involves judgement, experience and wisdom.

There are essentially four parts to the evaluation of an investment opportunity. These are

the strategic evaluation, the economic evaluation, the technical evaluation and the financial

evaluation. Not all of these are relevant to all companies or to all investments.

The strategic evaluation considers key factors for the success of the project, such as

the company’s ability to penetrate the market and the structure of competition in the industry.

The markets that most companies operate in are competitive, resulting in a drive

for efficiency and effectiveness. The company must be able to understand the dynamics of

the industry and harness this knowledge profitably. Strategic evaluation encompasses

an overall knowledge of the company’s current and future activities, including the company’s

17
anticipated projects. The company does not only exist in the context of its market.

Beyond its markets, the company exists within a system of law, society and politics.

Knowledge of, and an anticipation of the changes in, the external factors, such as public

opinion and the regulatory environment, that may impact on the business’s ability to

execute its business plan, is essential for the strategy of a business to be successful.

The financial evaluation is the function within the business evaluation that examines

all the available information from a financial viewpoint. The merits of the investment are

examined on the basis of the investment costs and the cash flows that will be generated from

the investment. It includes the synthesis and financial quantification of the company’s

knowledge of the key factors for success, and an assessment of the risks to the company.

The technical evaluation is usually a staged process that occurs with the design of the

equipment for the operation. Within the various engineering disciplines and industries

there are differing names for the stages, but generally they consist of concept, prefeasibility,

feasibility and final design.

The aim of an economic evaluation is to assess the costs and benefits of the project to

all stakeholders in the project. This is a much broader view than the financial evaluation

mentioned earlier. Another important difference is that in the opinion of the

economists performing the analysis, market values and prices may not be a true reflection

of the costs and benefits to all the stakeholders. In this case, the economic analysis may

include adjustments to account for these anomalies. Once the project has been assessed, a

decision needs to be taken on whether to invest in it or not.

2.1.6 Financing Decisions

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Financing decisions are essential for firms to ensure operational functionality and to enable

growth. As they are subject to different restrictions and opportunities, it is reasonable to

assume that private and public firms behave differently in their investment and financing

choices. On the one hand, public firms have access to organized capital markets and,

supposedly, are better positioned to raise external funds than their privately owned

counterparts. On the other hand, ownership in modern listed joint-stock companies is widely

dispersed, leading to an unemotional, performance-centered relationship between

shareholders and the firms they own. Since their ownership is concentrated, private firms

suffer less from agency conflicts that will result from the separation of ownership and

control, and often managers are also owners of the company (Ang, Cole, and Lin, 2000).

Opposed to that, publicly traded firms tend to have diversified ownership structures, where

the management holds little to no share in the firm. The mere existence of these differences

and their effects on corporate decisions seems undisputed. By comparing public and private

firms’ investment and financing decisions, we aim to quantify the extent to which these

distinctions distort investment and financing decisions.

2.2 Theoretical Review

The section reviews theories that anchor the study in terms of variables.

Capital Structure Irrelevant Theory: The theory signifies that capital structure as

irrelevant to a firm’s value. Modigliani and Miller (1958) in his theory states that a firm’s

market value is determined by its profitability and not its choice of capital structure. The

theory describe financing decisions, capital structure, dividend policy, cash management, risk

management policy, cross shareholdings and diversification are all irrelevant for the

shareholders and value of the company, and that profitability is the only factor that matters.

The study assumes that there are no taxes, no transaction costs and no bankruptcy costs. The

19
theory assumes that the market is perfect, and all investors have all the necessary information

in the market, that will optimize their returns, and taxation has no effect on debts. But in the

real world, there are taxes, transaction costs and bankruptcy costs, differences in borrowing

costs, information asymmetries and debt has a tax benefit as it is tax deductible.

Trade-off Theory: Modigliani and Miller (1958) argue that optimal capital structure needs to

be reached by outsourcing all possible alternatives in capital structure. The theory recognizes

the tax benefit from interest payments which is tax deductible. Frank and Goyal (2003),Frank

and Goyal (2008) points that SMEs should analysis various financial instruments costs-

benefits outcome. Interior financial solutions are optimized to balance marginal costs with

marginal benefits. Leverage has a positive relation with profitability and trade-off theory

concur that profitable firms should borrow more, but profitable firms prefer retained earnings

over debt. Profitable firms enjoys interest tax shield, hence bankruptcy costs are low. There is

a positive relation between debt and assets tangibility. SMEs through trade-off theory can

maximize performance by analyzing investments through costs-benefits criteria.

Pecking Order Theory: Myers (1984) argued that SMEs prefers retain earnings, internal to

external financing, debt to equity and short-term debt to long-term debt. Due to information

asymmetry and the costs of information, retained earnings are preferred than debt and debt is

preferred than equity. SMEs prefer finances that do not interfere with their ownership. SMEs

owners/managers know the performance, profitability and growth prospects of their firms.

External lenders expect SMEs to explain their investment plans and expose internal

information and operations. Mazzarol (2014) argued that SMEs size, profitability and growth

prospects are related to leverage as proposed by pecking-order theory. Newman et al. (2012)

argued that, under pecking-order theory leverage is negatively related to profitability and

positively related to size and assets tangibility of SMEs. SMEs prefer finances that do not

20
require assets as collateral, such as their savings, families and friends, leasing, trade credit

and bank overdrafts.

2.3 Empirical Review

The section highlights key studies relevant to the study.

Joshi and Abdullah (1996) examined some aspects of management accounting techniques and

performance valuation systems by utilizing data based on a questionnaire survey of 42

medium and large size companies located in the State of Bahrain. The study found that the

conventional form of budget controllability principle was practiced to a great extent. It was

concluded that bonus is affected by budget performance along with new assignments, but not

salary.

Ong'onge (2009) conducted a descriptive survey, using a population of 1,200 registered

savings and credit Cooperative Societies (SACCOs) in Nairobi, a sample size of 40 SACCOs

was selected using a simple random sampling method. Primary data was collected using a

semi-structured questionnaire. Descriptive statistics especially percentages were used to

establish the budgetary process used by the SACCOs. The study found that budgets in

SACCOs serve to aid control, aid both short and long-term planning, communicate plans, and

coordinate activities and also to evaluate performance. Majority of SACCOs used a

combination of both top-down and bottom-up approach when preparing budgets.

Chemweno (2009) evaluated how the firm has employed an operational budget as a

management tool. It set out to determine how operational budgeting practice is actually done,

the basis of budget formulation and to what extent the budgets are used as a management and

control tool. The study concentrated on companies offering mortgage financing in Kenya.

21
The data was collected mainly through detailed questionnaires and analyzed using descriptive

statistics by way of summary statistics, tables and percentages. The study revealed that

budgets are normally prepared on an annual basis. It was found that all the major Kenyan

mortgage financing institutions have an operational budgeting process which they considered

extremely important since it is outlined in the organization’s objectives, targets, means of

achievements, cost of achievement and responsibilities.

Mwaura (2010) conducted an investigation into the participatory budget setting and budget

commitment as a factor that affects performance of the NSE listed companies. This study

used a causal research design to identify cause and effect relationship. The population of

interest in this study comprised 55 companies listed where it considered only 53 still

operating ones. Data for this study was both quantitative and qualitative hence both

descriptive and content analysis techniques was employed. The descriptive statistical tools

helped the researcher to describe the data and determine the extent used. In addition, to

quantify the strength of the relationship between the variables, the researcher used a multiple

regression. The study concluded that budgetary participation affects return on capital

employed and return on assets to a great extent. It was further found that budgetary

participation affects return on investment and budget commitment to moderate extents.

Badu (2011) conducted an investigation of budgeting and management accounting techniques

at Ernest Chemist Laurea. The aim of this study was to conduct research concerning the

budgeting practice in Ernest Chemist, a pharmaceutical company based in Ghana, and

identify the perception of the budgeting experts in the company and assess their views

towards the current status of the company. This research was necessary in order to assess the

possibility of solving any problem this organization may face in designing an effective

budgeting and management accounting techniques system. A self-designed interview

questionnaire was sent to a member of staff in the company to seek his views on the problems

22
and concerns regarding budgeting and management accounting techniques in the

organization. The results of the study indicated that the appropriate system of budgeting and

management accounting techniques had been adopted and used to prepare the pharmacy’s

budgets but there were a few problems associated with ethical issues which were also

revealed.

Marcormick and Hardcastle (2011) carried out a study on management accounting techniques

and organizational performance in government parastatals in Europe. A sample of 40

government parastatals were used for establishing the relationship between management

accounting techniques and organizational performance, secondary data was used and a period

of ten years was reviewed. A regression model was used for data analysis and the results of

data analysis revealed a positive relationship between management accounting techniques

and organizational performance of government parastatals.

Karanja (2011) examined the effect of management accounting techniques process in Saccos

with specific reference to SACCOs in Nyeri County. Descriptive research design was chosen

because it enables the researcher to generalize the findings to a larger population. The

population of this study was the 120 finance officers of SACCOs in Nyeri according to

ministry of cooperative development and marketing 2011. From each stratum the study

selected 30% of stratum population using simple random sampling method. Primary data is

information gathered directly from respondents and for this study the researcher used

questionnaires. The study concludes that finance and administration departments participated

in management accounting techniques processes. Management accounting processes are not

intimately linked with considerations of labor controls. Participation of all the stakeholders

makes the budgetary process too lengthy and time consuming.

In their study, Nickson and Mears (2012) examined the relationship between management

accounting and performance of state ministries in Boston Massachusetts, a sample of five

23
ministries were examined to test the relationship between management accounting and

performance of state ministries, secondary data was used and a review of 10 years was used,

a regression model was used for data analysis and a statistical positive relationship was found

between management accounting and performance of state ministries. The results of the

regression analysis concluded that proper management accounting measures led to

performance of state ministries.

A study by Serem (2013) examined the management accounting in Non-Governmental

Organizations and its effects on their performance. The research target population consisted

of 7,127 Non-Governmental Organizations as provided in the Non-governmental

Organization Board of Kenya. 30 NGO’s were selected using convenience judgmental

sampling technique for this study, both local and international organizations with

headquarters in Nairobi and its environs. The study findings established that a weak positive

effect of management accounting on performance of NGO’s in Kenya and suggested the need

of sensitizing employees on management accountings so as to improve its consequent effect

of performance.

Mafasiya et al. (2010) found that SMEs contribute to employment creation, poverty

alleviation, GDP, innovations, income and wealth creation, increased exports, economic

growth and development. Inadequate research and innovations in SMEs cause poor

performance. In Ghana, SMEs had not been fully incorporated in the economy before

inception of the Economic Recovery Program (ERP) (Abort. SMEs have been found to

improving efficiency and effectiveness of resources, markets and industries, and facilitating

long-term economic growth in poor countries. Balling et al. (2009) found that SMEs are

financially constrained due to lack of financial management skills, financial information,

higher interest rate, low creditworthiness, low collateral and information asymmetry.

24
Tiwari et al. (2007) also found that financial institutions perceive SMEs as risky ventures,

with information asymmetries, and require adequate collateral to minimize their risks.

Fafchamps et al. (1994) found that asymmetric information affects SMEs more than larger

firms. Being innovative constitutes higher loan demand for SMEs, and existing debt restrict

further borrowing. SMEs innovativeness relies on the quantity of external funds, as most

young SMEs do not have adequate resources to finance operations and investments.

Mafasiya et al. (2010) document a negative relationship between profitability and bank

lending. Banks prefer highly profitable firms hence such firms prefer retained earnings than

debts. They may decline lucrative projects that apply for loans.

Abor and Biekpe (2007), Tang et al. (2007) found that SMEs in Ghana sort growth,

profitability and a market expansion strategy, focusing on innovation and research, networks

and partnership, costs efficiency, quality products/services/processes and after-sales services.

Schafer found that banks need to invest in innovative information technologies to embrace

electronic banking such as mobile money, agency banking and internet banking. So as to

improve efficiency and effectiveness on banking, that is, minimizes the transaction costs for

SMEs and maximizes returns on banks. Online SME businesses are more profitable,

convenient and generate more revenues than convectional SMEs. SMEs can research online

for banking products, interest rates comparison and choose lenders that best fit their interests.

SMEs prefers e-banking for conveniences, efficiency and effectiveness, round the clock

services and access to their accounts remotely.

25
 CHAPTER THREE

METHODOLOGY

3.1 Research Design

According to Kombo & Tromp (2006), research design is the strategy for study and the plan

by which the strategy is to be carried out specifying the methods and the procedure for the

data collection, measurement, and analysis of data. The study design used in this research is

descriptive survey design. This is a method of collecting information by interviewing or

administering a questionnaire to a sample of individuals, (Kombo & Tromp, 2006). This type

of design is also useful when collecting information about people’s attitudes, opinions, and

habits (Kombo et al.2006). This therefore was within the focus of this study.

3.2 Population of the Study

According to Sekaran and Bougie (2013), population refers to the entire group of people,

events, or things of interest that the researcher wishes to investigate and from which they can

make inferences based on the sample statistic. In this study the population primarily is made

up of staffs (non-medical staffs and medical staffs) of hospital in Kwara State. Further the

data was gotten from the administrative units of the hospital, the accessible population as at

the time of this research is summed to be 54 personnel.

3.3 Sample and Sampling Procedure

26
Sample is a section or part of an entire population of people or things which are studied to

obtain information about the research variables (Sekaran & Bougie, 2013). In this study,

simple random sampling technique was used to select the sample to be included in the study.

The method was chosen because every element in the population had an equal chance of

being selected as the sample. According to Sekaran (2013) simple random sampling has the

lease bias and offered the most generalization and hence for the study to be more

representative, it was important that the right method was chosen. However, based on the

accessible population, the researcher adopts the censured sampled approach, which means the

population of the study will be used as the study sampled.

3.4 Research Instrument

According to Osuala (1990) the questionnaire constitutes the main source of data on samples

of human population. Questionnaire usually form the main source of data collection for the

business and social studies. In order to collect data for the study, the survey instrument

designed was in structured form to capture both demographic details of participants and

guided for study objective responses. The questionnaire was designed using the 5 points

Likerts scale ranging from 5=Strongly Agree to 1=Strongly Disagree. The instrument as

directly handed on the respondents as a way of enhancing participation.

3.5 Validity and Reliability of Instruments

According to Asika (2004) validity is the ability of the scale to measure what it is designed to

measure. There are different types of validity but for the purpose of this study, the content

validity will be used. The content validity will measure how well the content of the

measuring instrument will measure what it is designed to measure. The instrument will be

given to the project supervisor to make necessary input and corrections before it will be

administered on sampled respondents.

27
Reliability is a measure of the stability or consistency of the scores. It can also be defined as

the ability for test or research findings to be repeatable. The test re-test reliability test will be

conducted on 20 respondents of the sampled respondents over an interval of two weeks to

ascertain the reliability of the instrument before it will be administered on sampled

respondents.

3.6 Method of Data Collection

In order to generate data for the research, we will use the two major sources namely, primary

and secondary sources. The primary data used was the questionnaire, oral interview and

observation. Questionnaires are used to elicit data from respondents who are subjects for the

research with the aim of concluding data, processing them to collate and measure the

subjects.

3.7 Method of Data Analysis

The data obtained from the field work are refined for all purpose and understanding. In order

to achieve this we have used both description and inferential statistics to give meaning to the

data. The descriptive analysis was done using simple percentage and the inferential analysis

used the Spearman Rank Order Correlation Coefficient to establish the relationship between

the examined variables, all of this was done using the SPSS software. The choice of this tool

was based on the nature of data generated from the survey instrument used.

3.7.1 Model Specification

The study utilized the regression analysis with the equation of the form

Y=α+X1+X2+X3 +ε. …………………..1

The model provided a statistical technique for estimating the relationship between health care

financial management and performance in private hospitals.

Y=α+b1X1+b2X2+b3X3 +ε……………..2

Where:

28
α =constant/the interception point of the regression line.

Y= Performance

X1= Working capital management

X2= Investment decisions

X3= Financing decisions

ε = error term

CHAPTER FOUR

DATA ANALYSIS AND INTERPRETATION

4.1 Introduction to Data Analysis

The aim of this chapter is to present, analyse and interpret data collected from questionnaire.

The data were presented using table, simple percentages, mean and grand mean as

appropriate statistical tool.

Socio-economic characteristics of the respondent

Table 4.1 Socio-economic characteristics of the respondent

Gender Frequency Percentage

Male 39 40.2

Female 58 59.8

Total 97 100.0

Age

29
20-29 years 34 35.1

30-39 years 32 33.0

40-49years 20 20.6

50years 11 11.3

Total 97 100.0

Department/Unit

Audit 13 13.4

Account 31 32.0

Admin 41 42.3

Others 12 12.4

Education Qualification

SSCE 2 2.1

ND/OND/NCE 26 26.8

HND/B.Sc 43 44.3

M.Sc 9 9.3

Ph.D Nil Nil

Others 17 17.5

Total 97 100.0

Professional Qualification

ICAN 17 17.5

ACCA 6 6.2

CIBN 5 5.2

Others 15 15.5

None 54 55.7

Total 97 100.0

30
 Table 4.1 above showed that 39(40.2%) of the respondent are males while 58(59.8.0%) are

their female counterparts. 34(35.1%) of the respondent are aged 20-29years, 32(33.0%) are

aged 30-39years, 20(20.60%)are aged 40-49years and 11(11.3%) is aged 50years and above.

13(13.4%) are from audit unit, 32(33.0%) are from account unit, 41(42.3%) are from admin

unit and 12(12.45) are from others unit in the hospital and 2(2.1%) had secondary school

certificates, 26(26.8%) had NCE/OND while 43(44.3%) had tertiary school certificates, such as

HND/B.Sc. and 9(9.3%) had M.Sc./MBA also 17(17.5%) had other certificates. It was also

revealed that 17(17.5%) are qualified member of ICAN, 6.2% had certified as a member of

ACCA while 15(15.5%) had CIBN and also, the largest value were constituted the largest value

of 54(55.7) had none of the certificate at university of Ilorin. Majority of the respondents were

not certified as shown in the above table. From the data one can see those females are more

interested in hospital job than their male colleagues this may be due to the fact that majority of

them are young and administrative staff of the hospital. Also, majority of the respondent were

HND/B.Sc holders from different.

Working_Experience
above 10
years
15%

6-10 years
24%
>5years
61%

31
Figure 1.0: Working Experience

Figure 1.0 show that 61% of the respondents in the organization have less than 5 years

working experience,24% also fell in between 6-10 years working experience and 15% of the

had 10 years and above working experience.

Management Level

60

50

40

30

20

10

0
Top Level Middle Level Lower Level

Figure 2.0

The figure 2.0 above showed that majority of the respondents are in the position of middle

level officer followed by top management and the lowest is those who are in the lower level

management

32
 Research Question 1: To what extent does working capital management relate to

performance in private hospitals in Kwara state?

Table 4.1 the effects of working capital management relate to performance in private

hospitals in Kwara state?

S/N Statement SA (%) A (%) U (%) D (%) SD (%) Mean S.D

1 34(35.1) 47(48.5) 9(9.3) 7(7.2) - 4.11 0.85

2 35(36.1) 40(41.2) 20(20.6 2(2.1) - 4.11 0.80

3 35(36.1) 39(40.2) 13(13.4 7(7.20 3(3.10 3.99 1.04

4 27(27.8) 40(41.2) 22(22.7 8(8.2) - 3.89 0.91

5 30(30.9) 44(45.4) 16(16.5 5(5.2) 2(2.2) 3.98 0.94

Grand Mean = 4.01

Response on the effects of working capital management relate to performance in private

hospitals in Kwara state shown that average collection period has an effect on the performance

of the hospital and inventory turnover in days has an influence on performance of the hospital

(means=4.11) ranked highest followed by average payment period relates to the performance

33
 of the hospital (mean=3.99) inventory management is a common practice in the hospital

(mean=3.98) the lowest rated cash conversion cycle has a long-term influence on the hospital

with (mean=3.89). This implied that average payment period relates to the performance of the

hospital, inventory management is a common practice in the and cash conversion cycle has a

long-term influence on the hospital were inadequate in most of the hospital in kwara state

since their mean of 3.99, 3.98 and 3.89 are lower than grand mean of 3.50.

Research Question 2: To what extent does investment decisions relate to performance in

private hospitals in kwara state?

Table 4.2 the effects of investment decisions on performance in private hospitals in

kwara state?

S/N Statement SA (%) A (%) U (%) D (%) SD (%) Mean S.D

1 39(40.2) 50(51.5) 7(7.2) 191.0) - 4.31 .65

2 30(30.9) 39(40.2) 19(19.6 9(9.3) - 3.93 .94

3 26(26.8) 50(51.2) 12(12.4 7(7.2) 2(2.1) 3.93 .93

4 30(30.9) 42(43.3) 21(21.6 4(4.1) - 4.01 .84

5 35(36.1) 33(34.0) 24(24.7 5(5.2) - 4.01 .91

34
 Grand Mean = 4.00

Response on the effects of investment decisions relate to performance in private hospitals in

Kwara state shown that the hospital employs internal rate of return (IRR) to improve value of

the business, investment security, and its project (Means =4.31) ranked highest followed by

payback period (PBP) ensure accurate investment decision by the studies hospital and the

profitability index (PI) used by the hospital has attract resourceful investment decision have

the same mean value of (4.01) while the lowest rated item are the hospital carried out

investment decision through NPV for capital budgeting and investment planning and payback

period (PBP) is an effective technique employed by the organization for capital investment

with ( mean = 3.93). This implied that the hospital carried out investment decision through

NPV for capital budgeting and investment planning and payback period (PBP) is an effective

technique employed by the organization for capital investment were inadequate in most of the

hospital in Kwara state since their mean of 3.93 and 3.93 are lower than grand mean of 4.00.

Research Question 3: To what extent does financial decisions relate to performance in

private hospitals in Kwara state?

Table 4.3 the effects of financial decisions on performance in private hospitals in kwara

state?

S/N Statement SA (%) A (%) U (%) D (%) SD (%) Mean S.D

1 40(41.20 40(41.20 10(10.3 5(5.2) 2(2.1) 4.14 .94

2 40(41.20 44(45.4) 10(10.3 3(3.10 - 4.24 .76

35
3 35936.1) 43(44.3) 10(10.3 7(7.2) 2(2.1) 4.05 .97

4 34(35.1) 48(49.5) 10(10.3 5(5.3) - 4.14 .80

5 36(37.1) 40(41.2) 5(5.5) 6(6.2) - 4.09 .88

Grand Mean = 4.13

Response on the effects of financial decisions relate to performance in private hospitals in

kwara state shown that the financial decision made is for improved performance (means =

4.24) ranked highest followed by investment decision made is for improved performance and

financial risk management is performed for securing performance (mean = 4.14) financial

control and assessment are a common practice in my organization for effective decision

( mean = 4.09) the lowest rated item is divided decisions made is for improved performance

( mean=4.05). This implied that financial control and assessment are a common practice in

my organization for effective decision and divided decisions made is for improved

performance were inadequate in most of the hospital in Kwara state since their mean of 4.09

and 4.05 are lower than grand mean of 4.13

Table 4.4 Private hospitals performance in Kwara state

S/N Statement SA (%) A (%) U (%) D (%) SD (%) Mean S.D

1 40(41.2) 41(42.3) 9(9.3) 4(4.1) 3(3.1) 4.10 .96

2 35(36.1) 45(46.4) 8(8.2) 5(5.2) 4(4.1) 4.05 1.01

36
3 30(30.9) 45(46.4) 14(14.4 5(5.2) 3(3.1) 3.97 .97

4 38(39.2) 45(46.4) 8(8.2) 6(6.2) - 4.18 .83

5 35(36.1) 40(41.2) 9(9.3) 6(6.2) 7(7.2) 3.93 1.16

Grand Mean = 4.04

Response on the firm performance in private hospitals in Kwara state shown that the return

on investment has boosted the hospital profit margin through strategic financial management

practices performance (means = 4.18) ranked highest followed by the hospital return on

assets has been improved through effective financial management (mean = 4.10) return on

equity has been favourable through effective financial management (mean = 4.05), return on

capital employed has greatly improved over the long-period of time (mean = 3.97) the lowest

rated item is profit after tax (PAT) has improved consistently in a long period of time

( mean=3.93).

This implied that return on capital employed has greatly improved over the long-period of

time and profit after tax (PAT) has improved consistently in a long period of time were

inadequate in most of the hospital in Kwara state since their mean of 3.97 and 3.93 are lower

than grand mean of 4.04.

Table 4.5: Pearson’s correlation between working capital, investment decision, financial

decision and firm performance

Variables firm performance

working capital .978**

37
 investment decision .99**

financial decision .98**

** Correlation is significant at the 0.01 level (2-tailed)

Table 4.13 shows that the results of correlations between independent variables Working

Capital, Investment Decision, Financial Decision with dependent Firm Performance. The

correlation coefficient for Working Capital was 0.978, Investment Decision with correlation

coefficient of 0.953 and Financial Decision with positive correlation coefficient of 0.992.All

the three independent variables were positively satisfaction and significant as p-values

(0.000) were lower than 0.05.

Table 4.6: Model Summary

Adjusted R Std. Error of

Model R R Square Square the Estimate

1 .994a .988 .987 .54241

a. Predictors: (Constant), FINANCIAL, INVESTMENT, CAPITAL

From the table above the coefficient of correlation was 0.994 between the dependent and

independent variables. The coefficient of determination was 0.988. The independent variables

Financial, Investment, Capital can be explained 98.83% of the variation in Firm Performance

Table 4.7: Significant of the regression model

Sum of Mean

Model Squares df Square F Sig.

Regression 2226.123 3 742.041

Residual 27.362 93 .294 2522.139 .000b

Total 2253.485 96

38
a. Dependent Variable: PERFORMANCE

b. Predictors: (Constant), FINANCIAL, INVESTMENT, CAPITAL

The above table shows that p-value was 0.000 and less than alpha value of 0.05. Hence, reject

the null hypothesis and conclude that a significant portion of the variation in the dependent

variable is explained by the linear model

Table 4.8: Multiple regressions between working capital, investment decision, financial

decision and firm performance.

Variables Unstandardized T Sig

Coefficients B

(Constant) -2.401 -7.504 .000

CAPITAL .449 4.787 .000

INVESTMENT -.238 -3.141 .002

FINANCIAL .893 14.666 .000

a. Dependent Variable: Satisfaction

Table 4.8 revealed the coefficient for between Working Capital, Investment Decision, and

Financial Decision versus Firm performance. The Working Capital, Investment Decision,

Financial Decision were significant with p-value less than 0.05. Overall firm performance

was linearly related to other independent variables such as Working Capital, Investment

Decision, and Financial Decision

4.2 Testing of Hypothesis

The study revealed that the null hypothesis is not valid and hence should be rejected as results

showed that respondents are not completely satisfied with the level of all firm performance in

private hospitals in Kwara state.

39
Table 4.9: Research results

Research Hypothesis Results

There is no significant relationship between working capital Rejected

management and performance in private hospitals in Kwara state.

There is no significant relationship between investment decision Rejected

and performance in private hospitals in Kwara state.

There is no significant relationship between financial decision and Rejected

performance in private hospitals in Kwara state.

Table 4.9 shows that all the three hypotheses were rejected in this study. There was a

positive relationship between Working Capital, Investment Decision, Financial Decision and

firm performance in private hospitals in Kwara state.

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

This chapter entails the discussion of findings, summary of the finding of the study,

conclusion drawn and also the recommendation made.

5.1 Discussion of Findings

From the test, it was found that health care financial management has a significant

relationship with firm performance of private hospitals in Nigeria. This entails that for a firm

to improve performance, it must rely on effective working capital management as a dynamic

process focused on improvement profit, sales, and organisational effectiveness.

40
The first hypothesis state that, there is no significant relationship between working capital

management and performance of private hospitals in Nigeria was rejected after testing the

extent of relationship between working capital managements and firm performance. This is

result is in agreement with the findings of Chemweno (2009) evaluated how the firm has

employed an operational budget as a management tool. It set out to determine how

operational budgeting practice is actually done, the basis of budget formulation and to what

extent the budgets are used as a management and control tool. The study concentrated on

companies offering mortgage financing in Kenya. The data was collected mainly through

detailed questionnaires and analyzed using descriptive statistics by way of summary statistics,

tables and percentages. The study revealed that budgets are normally prepared on an annual

basis. It was found that all the major Kenyan mortgage financing institutions have an

operational budgeting process which they considered extremely important since it is outlined

in the organization’s objectives, targets, means of achievements, cost of achievement and

responsibilities.

The second hypothesis states that, there is no significant relationship between investment

decisions and performance of private hospitals in Nigeria was rejected after testing the extent

of relationship between investment decisions and firm performance. This implies that the

effective investment decisions-making has a positive relationship with performance indices

such as increase in return on investment. This is in agreement with the findings Badu (2011)

conducted an investigation of budgeting and management accounting techniques at Ernest

Chemist Laurea. The aim of this study was to conduct research concerning the budgeting

practice in Ernest Chemist, a pharmaceutical company based in Ghana, and identify the

perception of the budgeting experts in the company and assess their views towards the current

status of the company. This research was necessary in order to assess the possibility of

solving any problem this organization may face in designing an effective budgeting and

41
management accounting techniques system. A self-designed interview questionnaire was sent

to a member of staff in the company to seek his views on the problems and concerns

regarding budgeting and management accounting techniques in the organization. The results

of the study indicated that the appropriate system of budgeting and management accounting

techniques had been adopted and used to prepare the pharmacy’s budgets but there were a

few problems associated with ethical issues which were also revealed.

The third hypothesis states that, there is no significant relationship between financing

decisions and performance of private hospitals in Nigeria was rejected after testing the

hypothesis. This means that strategic financing decisions will lead to overall performance of

private hospitals in Nigeria. This is in line with the findings of Karanja (2011) examined the

effect of management accounting techniques process in Saccos with specific reference to

SACCOs in Nyeri County. Descriptive research design was chosen because it enables the

researcher to generalize the findings to a larger population. The population of this study was

the 120 finance officers of SACCOs in Nyeri according to ministry of cooperative

development and marketing 2011. From each stratum the study selected 30% of stratum

population using simple random sampling method. Primary data is information gathered

directly from respondents and for this study the researcher used questionnaires. The study

concludes that finance and administration departments participated in management

accounting techniques processes. Management accounting processes are not intimately linked

with considerations of labor controls. Participation of all the stakeholders makes the

budgetary process too lengthy and time consuming.

5.2 Summary of Findings

The findings of the study are summarized here under for ease of understanding.

1. The study found that working capital management relates positively and significantly

(.000) with firm performance of private hospitals in Nigeria.

42
2. The study found out that there is a positive and significant (.002) relationship between

investment decisions and firm performance of private hospitals in Nigeria.

3. It was found in the study that financing decisions relates positively and significantly (.000)

with firm performance of private hospitals in Nigeria.

5.3 Conclusion

The study from the on-set had set out to examine the nature of relationship between health

care financial management and performance in private hospitals in Nigeria. The study has

raised three pertinent research questions that reflects the dimensions of financial management

and from the data obtained and analysed, there were some clear findings that there is a

positive and significant relationship between health care financial management and

performance in private hospitals in Nigeria. It was therefore concluded that health care

financial management is a tool for improving performance in private hospitals in Nigeria.

5.4 Recommendations

The following recommendations were made based on the findings:

Based on the findings of this study, the following recommendations are suggested:

For hospital and healthcare institutions to enhance the financial management techniques and

to gain competitiveness of healthcare institutions the study recommends’ that hospital and

healthcare institutions should be synthesized and moreover all socio economic parameters

needed for adoption of these techniques should be put in place in order for hospital and

healthcare institutions realize is impact in their business and to continue to survive in this

strict and ever dynamic competitive environment.

Hospital and healthcare institutions should pay attention to sound management of their

financial management practices components since the results show that they do affect

performance.

43
The studied hospital needs management to understand the relationship that exists between

various financial management components and performance and the direction that they affect

the profit for effective management of the working capital.

The managers of studied hospital should maintain a more restrictive credit policy as well as

good corporate governance be entrenched in their overall operations.

5.5 Suggested Area for Further Study

The aspect of health care financial management in relation to performance in private

hospitals in Nigeria is paramount to ensure competitiveness in the healthcare sector. It is

suggested that further research be conducted in this area (financial management) to clearly

find out the extent to which an effective implementation of health care financial management

can affect the effectiveness of the organization operation.

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 APPENDICES

APPENDIX 1: COVER LETTER

DEPARTMENT OF ACCOUNTING,
COLLEGE OF SOCIAL AND MANAGEMENT SCIENCES,
AFE BABALOLA UNIVERSITY, ADO-EKITI, EKITI STATE.

Dear Respondent,
I am a final year student of the above named university, I am carrying out a research on
"HEALTH CARE FINANCIAL MANAGEMENT AND PERFORMANCE IN
PRIVATE HOSPITALS IN KWARA STATE". Please be informed that the research work
is purely for academic purpose. Your assistance is unavoidably needed in order to make this
research work a success. I therefore promised that all information given in this regard will be
treated confidentially and strictly used for the purpose of this research. I will be very grateful
for a timely response to the questionnaire as these are very important to this research project.
Thank you.
Yours faithfully,
ABDUL, Kareemat Mubo
APPENDIX 2 : QUESTIONNAIRE
INSTRUCTION: Please tick  against the most appropriate option that matches your
response to each of the question and fill the blank spaces where required in each section.
SECTION A:
RESPONDENTS’ BIO DATA
1. Gender: Male ( ) Female ( )
2. Age: 20 - 29 ( ) 30-39( ) 40 - 49 ( ) 50 & above ( )
3. Name of Hospital: ……………………………………………………………………..
4. Department/unit: Audit ( ) Accounts ( ) Admin( ) Others (Please Specify)
……………………..
5. Academic Qualifications: SSCE () ND/NCE/OND ( ) HND/B.Sc. ( )
M.Sc./MBA/MPP ( ) Ph.D. ( ) Others (Please specify) ……………………………..
6. Professional Qualifications: ICAN ( ) ACCA ( ) CIBN ( )
Others (please specify)…………………………………………………….
7. How long have you been working in the hospital? Less than 5years ( ) 6-10years ( )
above 10years ()
8. Management Level: Top level( ) Middle level ( ) Lower level ( )

SECTION B:
SA- Strongly Agree A- Agree U- Undecided D- Disagree SD- Strongly Disagree
S/N THE EFFECT OF WORKING CAPITAL MANAGEMENT ON SA A U D SD

51
 PERFORMANCE IN PRIVATE HOSPITALS IN NIGERIA
1. Average collection period has an effect on the performance of the
hospital.
2. Inventory turnover in days has an influence on performance of the
hospital.
3. Average payment period relates to the performance of the hospital.
4. Cash conversion cycle has a long-term influence on the hospital
performance.
5. Inventory management is a common practice in the hospital.

S/N THE EFFECT OF INVESTMENT DECISIONS ON PERFORMANCE IN SA A U D SD

PRIVATE HOSPITALS IN NIGERIA
1. The hospital employs Internal Rate of Return (IRR) to improve value of the
business, investment security, and its project .
2. The hospital carried out investment decision through NPV for capital
budgeting and investment planning.
3. Payback Period (PBP) is an effective technique employed by the
organization for capital investment.
4. Payback Period (PBP) ensure accurate investment decision by the studied
hospital.
5. The profitability index (PI) used by the hospital has attract resourceful
investment decision.

THE EFFECT OF FINANCING DECISIONS ON PERFORMANCE IN

S/N PRIVATE HOSPITALS IN NIGERIA SA A U D SD
1. Investment decisions made is for improved performance.
2. Financing decisions made is for improved performance.
3. Dividend decisions made is for improved performance.
4. Financial risk management is performed for securing performance
5. Financial control and assessment are a common practice in my organization
for effective decision.
S/N FIRM PERFORMANCE SA A U D SD
1. The hospital Return on Assets has been improved through effective
financial management.
2. Return on Equity has been favorable through effective financial
management.
3. Return on Capital Employed has greatly improved over the long-period of
time.
4. Return on investment has boosted the hospital’s profit margin through
strategic financial management practices.
5. Profit after tax (PAT) has improved consistently in a long period of time.

52