ASSESMENT OF CURRENT ASSET MANAGEMENT IN CASE OF ABYSSINIA

BANK MARAKI BRANCH

A SENIOR ESSAY PAPER SUBMITTED TO DEPARTMENT OF ACCOUNTING AND

FINANCE FOR PARTIAL FULFILMENT OF THE REQUIRMENT FOR BA DEGREE
IN ACCOUNTING AND FINANCE

PREPARED BY

NAME ID
1. HABTAMU ADEBABAY 01674/11
2. KOYILNG ANBEW 01774/11
3. MARIE TADESSE . 01784/11
4. AGUMAS SHITAYE .05818/10
5. MARU DAGNEW . .05740/10

UNIVERSITY OF GONDAR

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

ADVISOR: INS MARITU

JUNE 2021

GONDAR ETHIO
AKNOWLEDGMENT
First of all we to would like to express our deepest and heart full thanks to Almighty God and St
Mary and also our advisor instructor Maritu to her valuable professional advice from the
beginning to the end of this research paper, next our thanks goes to all respondents who spent
their valuable time in filling questionnaire. . our last but not least thanks for the university of
Gondar maraki Campus department of Accounting and Finance for design such project through
which students develop their knowledge.
 ABSTERACT

This study aims at assessing the current asset management in Abyssinia Bank at maraki branch.
So as to achieve stated objective the study adopted a mixed method research approach. In this
regard, primary source of data were used. To this end, the necessary data were collected
through self-administered questionnaire and interview conducted with the finance manager of
the bank. The researchers used census sampling technique to select target population among
employees and the researchers used descriptive method of data analyzing. The analysis of the
data rivaled that the change of the policy of the bank affects asset management. This affects
customers satisfaction in getting service. Therefore it is important to the company to consult the
employees when the organization aims to change the policy.so that employees become award of
change and got ready to accept the change and their performance would be improved.in addition
to this the bank hold cash for transaction motive that means for with drawl of customer but it is
not enough, so it is better if the bank hold cash for speculative motive or investing in profitable
area. There are factors that affect the management of current asset of the Bank. Those factors
are company policy, risk attitude of the management, level of competition in the industry and
government policy that mentioned by the respondent. Therefore the researchers recommends
that is better if the bank avoid these factors that are related to the banks to meet the vision and
mission of the bank to competing with other private banks those solutions are changing the
attitude of the banks manage, changing the policy the bank as needed and also changing the
banks policy to the government policy as needed. The bank grants short terms and long term
loans to the customer as the result of analysis reveals but some respondents say that the bank
grant short term loans for nine months and above, therefor this may benefit the banks current
asset management of the bank and its profitability.
ACRONOYM

CA Current asset
CBE Commercial bank of Ethiopia
BOA Bank of Abyssinia
ALS Asset liablity management
TABLE OF CONTENTS

CONTENTS
PAGE

ABSTERACT.................................................................................................................................................I

ACRONOYM ... . II

CONTENTS ...III

1. INTRODUCTION.....................................................................................................................................1

1.1 Background of the study .....................................................................................................................1

1.2 BACKGROUND OF THE ORGANIZATION 2

1.3 Statement of the Problem ..3

1.4 reasearch qustion ..3

1.5 reaserch objective ...3

1.5.1 general objctive .4

1.6 Significance of the study… .. .4

1.7 Scope of the study...................................................................................................................................4

1.8 Limitatiom of the study ..4

1.9 The organization paper ...4

CHAPTER TWO ...5

2. Literature Review.......................................................................................................................................5

2.1.1 Concept of current asset................................................................................................................5

 2.1.2 Types of the current asset.............................................................................................................6

2.1.3 Importance of current asset...........................................................................................................7

2.1.4 Current asset management and its benefits...................................................................................7

2.1.5 PRICIPLES AND COMPONENTS OF CURRENT ASSET MANAGEMENT........................8

2.1.6 CASH MANAGEMENT..............................................................................................................8

2.1.7 INVENTORY MANAGEMENT.................................................................................................9

2.1.8 ACCOUNT RECEIVABLE MANAGEMENT...........................................................................9

2.1.9 Short term investment management............................................................................................11

2.1.10 LIQUIDITY MANAGEMENT................................................................................................13

2.1.11 Factors that determine the level of investment in current asset................................................16

2.2 Empirical review................................................................................................................................17

CHAPTER THREE.....................................................................................................................................19

3. RESEARCH METHDOLOGY...............................................................................................................19

3.1. Research design................................................................................................................................19

3.2 Research Approach

19
3.3 Data type and source..........................................................................................................................20

3.4 Methods of Data Collection...............................................................................................................20

3.5 Target population

20
3.6 Sample size and Sampling Technique...............................................................................................20

3.7 Method of Data Analysis and presntaion .............................................................................................21

 CHAPTER ONE

1. INTRODUCTION

1.1 Background of the study

In financial sector current asset management is important to their liquidity and profitability.
Current asset involves investment in cash, account receivable, and inventory, which are non-
interest between profitability and liquidity. This is particularly true as the major role of financial
manager of a bank business is to spend great deal of their time managing current asset and
current laiblies.in addition the financial manager is involved in managing for term fund,
negotiating credit term, monitoring the usage of cash, managing account receivables and keeping
an eye on inventory movement., (DELOO, 2005).

If cash comes faster back into company and be invested in a new cycle of procurement,
production and sale of goods, it generates grater return to initial cash investment if cash does not
come fast enough back into company, the company has borrowed more cash from bank to carry
business process. In line with this idea (ROSE, 2000) states that financial intermediaries provide
variety of service, economies that make the transformation of claim in doing this the financial
intermediaries composition by interest rate, bank in general expected to undertake effective asset
management particularly current asset for the fact the current asset are the basic existence of
customer in banking system.

current asset is generally listed first on a company ’s balance sheet, any will be presented in the
order of liquidity that means they will appear in the following order cash (which includes
currency, checking account, petty cash, temporary investment, account receivable, inventory,
supplies and prepaid expense, as well it strength motivates banking process of saving promotes
investment. In light of the benefit the Ethiopian banking policy of 1994 E.C gives due emphasis
to strengthening the public and private banking companies in and outside country among those
Abyssinia bank is one of them. However enhancing the company capacity with its current asset
depends on sound full asset management.Thus the realization of organization performance and
development, however, is strongly linked with various factors like organizational polices are
banking technology, resource (asset management undoubtedly the management maters to
1
customer and further destiny of existence( (Panday, 2007) thus, it is crucial that the management
of current asset are responsible for the goals, process and out com of the organization .this
indicates that the success of the business organization

1.2 Background of the organization

In any era where commercial banking services were in an inchoate stage and striding towards
transforming different sectors of economy, bank of Abyssinia founders believed in the need for
bank that gives comprehensive commercial banking services. The bank of Abyssinia (BOA) was
open in 1996 with enthused initiation and detemination. The name Abyssinia was resembles
bravery and character which are the core attributes of bank of Abyssinia it identity demarcated
with a sense of hope and optimism and belief as it is perfectly displayed in its logo, Adey Ababa
brings the promise of a new beginning .bank of Abyssinia brings very sense to all customer it
engages with .working with and through bank of Abyssinia brings sustained success with help of
a bank that is a symbol of determination and hard work current asset management of the bank is
done by opening different account in (BoA) another foreign and local bank by managed its cash
on hand source from (Google and website of the bank). Currently bank of Abyssinia serves 2.8
million customers via 532 branches and 114 ATMs nationwide as of September 2020.

2
1.3 Statement of the Problem
A current asset is cash and any other company asset that will be turning to cash with one year
from date shown in the heading of company’s balance sheet (if company has operating cycle that
length of its operating cycle considered to be a current asset). (Roose2005). One of the major
problems of financial sector is Improper management of current asset which will have greater
impact for the survival of the company, because of liquidity problem, loss of profit, unable to full
fill customer demand on fear to survive unlike other financial institution bank more likely to fail
due to liquidity problem unable honor their promise to redeem deposit demand, lack of adequate
is often one the first sign that bank is serious financial trouble. Bank may begin to lose deposit
which erodes its supply of cash and force the institution which dispose first more liquid asset,
(ROSE, 2005).Problem of ensuring their accountability bank a sound current asset management
may have critical impact on bank day-to-day operation. Abyssinia bank currently uses different
technique to manage its current asset such as liability, asset limit, payment and settlement
account and reserve account. We was observe from other studies there are both area and time
gap. For instance, Dennis otieno onyango (2014) was conducted a study and focused on current
asset management practices which was a case study of of the the small and medium enterprises
in Kenya. On the other hand, Tesema Asrat and Abebe Firms (2011) was conducted a study on
current asset management in case of commercial bank of Ethiopia. Therefore, there is a gap to
study area and time gap.

1.4 Research question

1. How to identify the source of its current asset?
2. How the management does manage the current assets.

3 How often do the managers apply asset management methods while delivering service?

4. What are factors affect current asset management?

1.5 Objective of the study

1.5.1 General objective

The general objective of the study is to assess the current asset management of Abyssinia bank
maraki branch.

1
 1.5.2 Specific objective
The followings are specific objectives of the reasearch

1. To identify strategies used to manage current asset management.

2. To asses the source of finance for its current asset.

3. To examine the problems that faced current asset management.

4. To identify the managements current asset management method to delivering service.

1.6 Significance of the study

The study is uses to identify problems that challenge current asset management and help banks
to design and implement effective current asset management strategies. In addition the
researchers believes that the study might be helpful to the reader to have practical understanding
to current asset management in the Ethiopian context, and make further studies to answer why
this process is adopted in Ethiopia and why the corresponding outcomes followed. The study was
also initiate other researches for further study. And also it used for CBE to assess their current
asset.
1.7 scope of the study

The study was conducted on the assessment of current asset management. The scope of the
study is limited only primary source of data that means to conduct will be uses interviews
and questionnaires to assess the current asset management. The study covers only the
assessment of current asset in Abyssinia bank Gondar maraki branch.
1.8 Limitation of the study
The limitation this study is the researchers depends on the use of primary data because the
researchers finding and conclusion is depend on this data.

1.9 Organization of the paper

The study would be organized in to five chapters. The first chapter introduces the background of
the study, statement of problems, objective of the study, significance of the study, scope of the
study, limitations of the study and organization of the study. The second chapter would be
discussed the related literatures review. The third chapter would discuss Research design,

2
methodology of the sturdy, the fourth chapter descries the data analysis, interpretation, and
presentation part of the study and the last chapter would present about the conclusion and
recommendations part of the study

CHAPTER TWO

2. LITERATURE REVIEW
In this chapter related literature reviews is related to findings and mainly incorporated the two
types of related literature reviews. This is Theoretical related literature reviews and Empirical
reviews of the research. Theoretical related literature reviews includes the following main points
of related literature reviews .it includes concepts of current asset, type of current asset,
importance of current asset, current asset management and its benefits, principal and component
of current asset management ,cash management ,inventory management ,objective of inventory
management ,account receivables management, objective of account receivables management,
liquidity management ,short term investment management ,factors that determine the level of
investment in current asset and in addition to this Empirical reviews also incorporated the
following related research reviews about current asset management practice in financial sector, it
includes; Mohammed (2009) conducted a study titled "effect of working capital management in
Tehran stock exchange”. Bahamian et al (2015) posit that the short-term financing needs of a
business are closely tied to the efficient management of current asset. Dennis otieno ponying
(2014) make research on current asset management practice in which was a case study of small
and medium enterprises in Kenya. Trademark Asrat and Abebe Girma (2005) conducted a
research on current asset management in case of commercial bank of Ethiopia Arba Minch
branch.

2.1. THEORETICAL REVIEW

2.1.1 Concept of current asset

Current asset cash and any other company asset that will be turning to cash within one year from
the date shown in heading of the company’s balance sheet.

3
Current asset is generally listed on company’s balance sheet and will be presented in the order of
liquidity. That means they will appear in the following order :(cash which includes currency,
checking account, petty cash,), temporary investment, account receivable, inventory, supplies,
and prepaid expense. Supplies and prepaid expense will not literally be converted to cash; they
are including because they will allow the company to avoid paying cash for these items during
up going year). (Bringham1995).

2.1.2 Types of the current asset

Cash is an asset that is currency from coins. Any currency on hand and in checking account
balances. Because cash is non-draining asset, first usually attempt to keep their cash balances to
the minimum level required to sustain the operation.

Cash equivalents are the liquid current asset. Money that can be withdrawn from regular bank
account or money market account qualifies as cash.

Assets that can be quickly converted to cash, such as Treasury bill, any short-term municipal
bonds are cash equivalent. Two general criteria to determine, if current asset is a cash equivalent
is if it matures in less than three months if it can be converted quickly. (Roose2000)

Short term investment that Maturin more than three months but under year are also considered as
current asset. If company has more money on hand than it needs for near future, it may invest
some of its cash in short term investment. This fund can be liquidated but it takes more effort
than with drawing cash. The companies’ money is working front and increasing the overall
revenue. (Rose P.S, 1999)

Account receivables are one-step further removed from cash in terms of liquidity once a
company delivers its product or service. The customer owes the Company money, until that
money is paid, it is considered as receivable. Not all customers will pay for the service or
product they receive of those customers that do pay, not all them will do so in timely fashion. If a
company’s account receivable is growing faster than its revenues, it has not been paid for many
of its goods or service. (NVEN R. P1985).

Inventory is also viewed as a current asset, any items or services that have already been
completed but not sold are considered inventory. Companies that sell physical goods usually

4
carry an inventory. Less liquid than the first three current assets inventory ties up cash items
need to be sold in order to add cash to the company revenue, the companies that provide service
do not carry inventories.

A prepaid expense is considered as current asset. Because it reduces the amount of the future
expenses. Generally, a company can pay in advances for advertising services. It may choose to
purchase more supplies than currently needed. There are examples of the prepaid expenses
although this are really liquid assets they don’t reduces future expenses in the future can equal
abettor revenue bottom line (NVEN R.P 1985)

2.1.3 Importance of current asset

Current asset is important to business because they are asset that are used to fund day to day
operation and pay ongoing expense depending on the nature business current asset can range
from barrels of crude oil to back goods to foreign currency. Current asset is important because
they indicate how much cash company essentially has accesses to within the next 12 months
outside of third party sources. It is indicative of how the company fund is ongoing day-to-day
operation and how liquid firms. The ratio of current asset to current liability is particularly
important in judging liquidity current asset on accounting balance sheet represent the total value
of all assets that can readily to cash. (Rose 1999).

2.1.4 Current asset management and its benefits

Current asset management is concerned with the problems that arise attempting to manage the
current asset and interrelation ship that exist between them. The current asset management is the
handling of CA set of a company. The main principle in current asset management is to keep the
proper flow of income, any liability in managing current asset also into account the long term
investment of a

Company but short term asset another name for current assets is important in determining
liquidity of a company. (Pandy, 2007)

Khangh et al (2015) posit that the short term financing need of a business is closely related to
efficient management current asset. If the firms optimize its current asset management it will
have advantage to make available additional capital in order to conduct more strategic objectives,
increase profitability and minimize interest cost.
5
Khang say that the fundamental objectives of the management of current asset are as follows; to
maximize the amount of current liability in order for the company to working capital and
improve the return on capital fir the business.

2.1.5 PRICIPLES AND COMPONENTS OF CURRENT ASSET MANAGEMENT

The following are the general principle of current asset management

Principle of risk variation; Risk here refers the ability of firm to meet its obligations when they
become due for permanent. Larger investment in current asset become less dependences on
short-term borrowing increase liquidity reduce risk and there decrease the opportunity for gain or
loss.

Principle of equality position; the principle is concerned with planning the total investment in
current asset.

Principle of maturity payment; this principle is concerned with planning the sources of finance
for current asset and the component comports comprises (FRIED)

2.1.6 CASH MANAGEMENT

Cash is the one the current asset of the business, it is needed at all to keep the business going.

Business concern should always keep sufficient cash for meeting its obligation.

For some person cash is money in the form of currency or cash in hand for other person.

MOTIVES OF HOLDING CASH

TRANSACTION MOTIVES; Accompany need cash formatting transaction in the day to day
operation the indeed to make purchase, pay expenses, tax dividends. In order to meet business
obligation in such situation it is nessacery to maintain adequate cash balances thus, the firm with
the motive of meeting root line business payment keeps cash balances. (PANDY.1999)

PRECAUTIONARY MOTIVE; Accompany required to keeping cash for meeting various

contingencies through cash inflows and cash out flows are anticipated but there may be
variations.

6
 SPECULATIVE MOTIVE; It related to handling for investing in profitable opportunities,
such as opportunities do not come in regular manner. Factors deterring cash balances.

SYCHRONIZATION OF CCASH FLOW; It requires the financial manager first select

planning horizon over which estimate the cash inflows and cash out flows as they are expected to
occur in each the sub period with the horizon. The typical planning horizon for the cash
management is one year with twelve months being with the sub period. (Pandy 1999)

SHORT COST; even with carefully constructed cash budget, the company should have shortfall
in its cash need. The all could be expected and to cover the impact the cash budget is designed to
cover the shortage

2.1.7 INVENTORY MANAGEMENT

Inventory is collection of unsold products waiting to be sold. Inventor is listed as a current asset
on a company’s balance sheet, every enterprise needs inventory for smooth running of its
activities, it serves as a link between production and distribution process. There is generally a
time lag the higher the requirement for requirement for inventory.

Objectives of the inventory management

The objective of inventory management is operational and financial. The operational objectives
mean that materials and spears should be available insufficient quantity, so the work is not
distributed for want of inventory. The financial objective means that invest minimum working
capital should be looked in it (PANDY, 1996)

2.1.8 ACCOUNT RECEIVABLE MANAGEMENT

Account receivable represents amount owned to business. This is the companies as result of sale
goods and services in the ordinary course of business. This claims of the firm against its
customers and part its current asset. The purpose of maintaining or investing receivable is meet
competition and to increase the sales and profit.

Account receivable management is the process of decision relating to investment in trade

debtors. We have already stated that certain investment in receivable is necessary to increase the
sales and profit of the company. (BRING HAM, 1996)

7
 OBJETIVES OF RECEIVABLE MANAGEM3NT

To promote sales and profit entitled that point is reached where the return on investment is
further funding of receivable where the further funding of receivable is less than the cost of funds
raised to fences that additional credit. Receivable management involves the careful consideration
of the following aspects this are forming of credit policy, executing of credit policy and
formulating and executing credit policy. Account receivables also known as trade policy.

Principle of collection

Certain principles have been found especially used in field of collection and maybe grouped in
the following area.

COLLECT THE MONEY; the primary objective a person is responsible for collection is to
collect the money cloth to the term of the obligation as possible. There should never be any
doubt as to the individuals is engaged in particular task. The debtor has an obligation to pay with
in term of agreement.

SYSTEMATIC FOLLOW UP: -after initial contact with delinquent customer, it is important to
keep additional contact on strict schedule.

DISCUSE THE ACCOUNT: - Once the collector gets the customer to talk the delinquent
account. The collector is well on the way to receiving payments. That is why emphasis is placed
on investing the debtor to talk. The objective the discuss ion is to get the debater explanation the
delinquency.

CREDIT POLICY ADMINSRATION

In consideration extension of credit, there are three primary policy variables.

Credit standard

Term of trade

Collection policy

8
Credit standard of the firm determines the nature of credit risk based on payments, financial
ability currently worth and other factors. When an account receivable is edit has been extended
to the term trade.

TERM OF TRADE; the stated term credit extension will have strong impact on the eventual
size of the account receivable balances.

CREDIT POLICY; in assessing credit policy, number, quantitative measures may be applied to
the credit department of the firms (Credit research foundation 19990).

2.1.9 Short term investment management

Credit management

Credit management refers to the process of deciding whether or not extends credit to particular
customers. It usually involves two steps gathering relevant information and determines credit
worthiness. (Sinkey2002)

Once customer requests a loan, a bank offers by analyze all available information to determine
whether the loan meets the bank risk returned objectives. Bank get information on borrowers
through various sources such as loan application, borrowers account with bank of statement of
account with other bank, statement of asset and liabilities in the case of companies their balance
sheet and profit and loss account for three years, record of the register of companies, personal
contact including personal interview. Some the above sources are discussed below.
(SINKY2002)

LOAN APPLICATION

Some bank requires borrowers to fill in answer to detail questionnaire the customer have to sate
some their concern, its constitution when they established, place of the business, name bankers
with detailed of assets owned and particular of charges there on. They must also state in the
application the purpose and period for and source as well as the term of repayment.

9
 FINANCIAL STATEMENT

The borrower should be requested to supply the latest statement, preferably audited of his
liabilities and asset it will be very helpful to banker it o three previous years ’ statement are
available. A copy his income tax return will be help full in enabling the bank to know the detail
of its net income it will be harem possible to form the capital resources of the borrower. His
wealth tax statement will similar enable a bank to form an estimate of his assets, his tax sales
return will indicate the figure of his sales. In case of limited company, the audited balance sheet
and profit and loose account for the last three years should be liked in two. (PANDY 2007)

OTHER SOURCES

Other sources of the information about the borrower including reporting press regarding
purchase and also be referred to with advantage to companies should be made for finding out if
there are any prior charges or mortgagee on the company’s asset.

General principle or good lending, there are some general principle of good lending which a
banker follow when appraising a credit request, a speed and national inters, suitability.

Safety

“Safety’’ is the best lending principle, when a banker lends he must feel certain that advance is
safe; that is the money will definitely come bank it for example, the borrower invests the money
in unproductive or speculative venture, or the borrower himself is dishonest, the advance would
borrower in jeopardy similarly if the borrower suffers looses in its business due to his
incompetence the recovery the money become difficult to the banker.

Business development and credit analysis

Business development is the process of marketing at banks service t existing and potential
customers with lending; it involves identifying new credit customer and soliciting their banking
business as well as maintaining deanship with current customers and cross selling. Not credited
service. Every bank employee, from ruler up to member of board of directors is responsible for
business development. Each employ regularly comes in to contact with potential customer and
can sell bank service. To encourage marketing efforts, many banks in developed countries use

10
incentive plans to reward employees who success fully cross-sell service or ring new business
into bank. (THOMAS 1999)

CREDIT EXCUITION AND ADMINISTRATION

The formal credit desertion can be made individual or by committee depending on banks
organizational structure, this structure varies with banks size number of employees, and type of
loan handled. A banks board of director normally has the final say for approving loans, which are
large in amount. Typically lending officers has independent authority to approve loan up to some
fixed amount. Larger loans are formally reviewed by committee made of the bank’s senior officer
and presented by the loan officer and supporting analysis, as presented by the loan officer and
supporting analysis and make collective decision. Loan committee meet regularly to monitor the
credit approval process and once loan has been approved formalized the purpose the loan the
terms repayment schedule by the borrower. This condition may include late principal and interest
repayment on the sale of substantial assets, a declaration of bankruptcy, breading any restrictive
loan covenant (FRIED M1995)

The officer than check that all loan decantation is presented and in order the borrower signs the
agreement along with other guarantors, collateral if necessary and receive the loan proceeds.

CREDIT REVEIEW

The loan review effort is directed a reducing risk as well as handling problematic loans and
liquidating assets of failed borrower. Effective credit management separates loan review from
credit analysis execution and administration. The review proceed can divided into the following
points

2.1.10 LIQUIDITY MANAGEMENT

Bank can experience illiquidity when cash out flow (due deposit with drawl, loans etc.) exceeds
cash inflow (new deposit loan repayment etc.) they can resolve cash deficiency either by creating
additional liabilities or by selling asset. Bank has access to various forms of borrowing such as
federal funds market or discount window. (ROOSE 2000)

They also obtain funds some asset can be readily in secondary market. The decision on how to
obtain to funds depends on the situation.

11
If the need or fund is tempura, an increase in short-term liabilities (from the federal fund market
or this count window) may be Appropriate. However, if the need is Permanente a policy for
increasing deposit or selling liquid asset may be approached, because some assets are marketable
than other in the secondary market. Banks asset compaction can affect its degree of liquidity. At
an extreme bank could ensure sufficient liquidity with achieving reasonable return on their asset,
which conflicts with liquidity objective. Although treasury securities are liquid, their yield is low
relative to bank loans investment in other need securities. Bank should main the level of liquid
asset that will satisfy their liquidity needs but uses their remaining fund satisfy their objective.
As the secondary market for loans has become an active bank more able to satisfy their liquidity
needs with higher proportion of loans while striving for higher profitability. (Jeff Mandura
2008).

STRATEGIES FOR LIQUIDITY MANAGERS

Liquidity managers have developed several board strategies for dealing with bank
liquidity problems.

Asset liquidity management (or asset conversion) strategies

The old approach to meeting liquidity needs is known as asset liquidity management /in its
purest form, this strategy marketable security. When liquidity is needed selected asset
predominantly in cash banks for funds are this liquidity management straggle is often called asset
conversion because liquid funds are raised, by converting non cash assets into cash among the
most popular liquid assets are treasury bill, federal fund loans deposit held with other banks,
municipal to banks bond assets liquidity are treasury securities banker ’s acceptance and
Eurocurrency loans. To liquid management than relying on borrowing, finally liquid asset
generally carries the lowest rates of return of financial asset. Bankers investing heavily in liquid
not have to be so well prepared or liquid demand (Bring ham 1995)

Borrowed liquidity (liability) management strategies

In the 1960s and 1970s many banks led by the largest industry, began to raise more their liquid
funds through borrowing in the money market. This borrowed liquidity strategies; often-called
purchased liquidity or liability management it is purest from calls for borrowing enough

12
immediately spendable funds to cover all anticipated demands for liquidity. Borrowing liquid
funds able to a number of advantages baked can choose to borrow any when actually needs funds
unlike strong liquefy in.

Balance sheet (asset and liability) management strategies

Due to the risk in hornet in relying and the cost of storing liquidity in asset, most banks
compromise in choosing their liquidity management strategy and use both asset management and
liability management. Under balanced liability management strategy some of expected demand
for liquidity are stored in asset, while other anticipated liquidity needs are backstopped by
advance management for lines of credit from corresponding banks or supplier of funds. Under
expected cash needs is typically met form near term borrowing. Long-term liquidity needs can be
planned for, fund to meet them parked in short term and medium term loans, and securities that
will roll over in to cash as those liquidity needs arise.

The demand for and supply of bank liquidity

Bank need for liquidity: - immediately spend able fund can view with the demand supply
framework. For most banks the most pressing demand for spend able fund come from two
source. Customers withdrawing money from their deposits and Credit request from customers
the bank wishes to keep, there in the form of new loan request, renewal of expiring loan
agreement for drawing up on existing credit lines. Other sources of liquidity demand include
paying obligation arising from bank borrowing, such as loan they may have received from other
bank or central bank (I. e the federal reserve) similarly cash dividend to the bank stockholders
periodically gives rise to demand of immediately spend able cash to meet the forgoing demand
liquidity: banks can draw up on several potential sources of supply. The most important source
normally is receipts of new customer’s deposits, both from newly opened accounts and from new
deposits placed opened accounts and from new deposits placed in existing account. Another
important element in the supply of bank liquidity comes from customers repaying their loans,
which provides fresh fund for meeting liquidity needs as do sales of bank asset especially
marketable securities from the bank investment portfolio. Liquidity also comes from revenue
generated by selling no deposit service and from borrowing in the money market. Timing is
critical to liquidity management bankers must plan carefully now, when and where needed

13
liquidity fund can be raised. Most liquidity problem in the bank from outside the bank because of
financial activities of its customers. In effect, customer ’s liquidity problems gravitate towards
their bank.

The essence of liquidity management problem for a bank may be described in two ways. Rarely
the demand for bank liquidity and particular moment in time the bank must continuously deals
with either liquidity deficit or liquidity surplus. There is tradeoff between bank liquidity and
profitability. The more bank resource it tied up in readiness to meet demand for liquidity the
lower is that bank expected profitability (other fact on constant) that will have significance
implications for the bank’s profitability.

2.1.11 Factors that determine the level of investment in current asset

Management of working capital is one aspects of financial management that can either make or
move the future of the company. A profitable company can easily go underground if the liquidity
position of the company is not viable enough to with stand temporal cash shock. The
management of working capital financing is so important that may in situation of higher learning
have made the study of working capital management a large chunk of their financial
management modules.

Working capital management or what many call current asset financing needs to be optimal so as
not to harm a business from both profitability perspective and liquidity perspective. The problem
that many managers encounter while trying to strike a balance between profitability and liquidity
as far as their current asset financing is concerned is to identify what needs to be considered in
order to achieve a company's objective both financial and non-financial objectives. Schools of
thought which a company can choose to follow three working capital policy formulations.
Depending on the strategy plan of a company theorist in working capital management have been
able to come up with the idea of identifying two parts of working capital. The fixed element and
fluctuating element of working capital. (pandy 2004)

1. Aggressive school of thought: - this is group of companies that finances all fixed portion of
working capital and sizable portion of working capital with short-term funds. This is considered
by many to be a very risky but profitable.

14
2. Matching school of thought: - here practitioners match tenure of funds with the nature of
asset that the fund will finance. The only problem here is the ability the ability of the
management to clearly distinguish fixed from fluctuating working capital.

3. Conservative school of thought: - under this school of thought the ideal way of financing
investment in working capital with long term finance and then a reasonable portion of the
fluctuating working capital with long term funds. This prudent way of managing the liquidity
positions of a business but might be at the expense of profitability. Ten determinants of current
asset financing are, nature of business, overall economic conditions, company ’s policy, risk
attitudes of managers, levels of competition in the industry, government policy and legislation,
term of trade, size of company, customer’s data base of company, and length of working capital.
(Sandy 1999)

2.2 Empirical review

Mohammed (2009) conducted a study titled "effect of working capital management on
profitability of listed companies in Tehran stock exchange" he investigated 92 companies
between the year (1996-2005) in his study the current asset criteria

Were the variables of collection period, the inventory turnover period and the conversion cycle
while the portion of profitability was gross profit to total assets ratio. The study results pointed to
significant inverse relationship between the company's profitability and account receivable
collection period, of inventory turnover period and the cash conversion days.

Khangah et al (2005) posit that short-term financing needs of business are closely tied to the
efficient management of current asset. If the firm optimizes its current asset management it will
have the advantage to make available additional capital in order to conduct more strategic
objectives, increase profitability and minimizes the interest cost. Khagah said that the
fundamental objectives of the management of current asset are as follows; to maximize the
amount of current liability in order for the company to working capital and improve the return on
capital for the business.

Dennis otieno onyango (2014) make a research on current asset management practices, which
was a case study of the small and medium enterprises in Kenya. Evidence was collected from
selected enterprise in Nairobi. In this research methodology, he employed the survey method to
15
collect data from the respondents. Survey is a method of data collection in which information is
collected through oral or written questions. In this research, the target population comprised of
small and medium enterprises with in Nairobi. Since it is time consuming, expensive and
impractical in most cases to collect data from all units ’ inference were between drawn on sample
of sixty from population based on the study of a small number of representative ’s unites samples.
The study also engaged in the use of structured questionnaires that was pilot pilot tested in order
to ensure that the questions asked were relevant, data validity as well as reliability. The results
that current asset management is a very broad subject and includes more element than this paper
presents. It is very interesting to study firms with the banking business. Due to the limitation
imposed on this study were not covered and area suggested for further study.

Tesema Asrat and Abebe Girma (2005) conducted a research on the assessment of current asset
management of commercial bank Arbamich branch. The researchers investigate the data
depending on the year (2001-2006). In this study the researchers employed interview questions
as primary data and unpunished Annual report of the bank as well as published audited financial
statements of the bank branch as secondary data. Sampling technique was used to answer the
research question and to analyze the result table and percentage was used.

The result of the findings indicates that in year 2005greater cash on hand from the total current
asset as compared with the whole year’s there was opportunity cost due to lack of investment
area for idle cash. Therefore, the bank has no liquidity problem. The major source of for the bank
is the interest charged and collected from loans and advance extended to clients. Finally, the
researcher forwarded the following recommendations. The bank should assess the short term
investment to be made, the banks cash asset deposit in foreign banks are higher than local bank's
therefore in order to decrease the risk that may be occurred and the difficulties litigating for
potential problems the bank should decrease depositing its cash account in foreign banks and
increase depositing in the local bank.

16
 CHAPTER THREE

3. RESEARCH METHDOLOGY

Research methodology is the specific procedures or techniques used to identify, select,

process, and analyze information about a topic. In a research paper, the methodology section
allows the reader to critically evaluate a study's overall validity and reliability. (Burns &
Grove 2003).

3.1 REASERCH DESIGN

According to Polit & Hungler (2004) descriptive research refers to research studies that have as
their main objective the accurate portrayal of the characteristics of persons, situations or groups
Descriptive studies are often described as studies that are concerned with finding out “what is ”. It
attempts to gather quantifiable information that can be used to statistically analyze a target
audience or a particular subject. Description research design is used to observe and describe a
research subject or problem without influencing or manipulating the variables in any way.
Descriptive research refers to set methods and procedures that describe research variables in
which the research method in order to answer who, what, when and how. Because the major
purpose of descriptive research is description of the state of affairs as it exists at present.

The type of research design for this study is descriptive type of research design. Then this study
describes and critically to assesses the problem that challenge current asset management in
Abyssinia bank maraki branch.

3.2. Research Approach

Research approaches are plans and the procedures for research that span the steps from broad
assumptions to detailed methods of data collection, analysis, and interpretation. Crotty, M.
(2003).

According to Creswell (2009), there are three approaches of research Quantitative, qualitative
and mixed research approach.

In order to achieve the stated objective, the researchers are use mixed approach. because the core
assumption of this form of study is that the combination of qualitative and quantitative

17
approaches provides a more complete understanding of a research problem than either approach
alone. Mixed methods research is an approach to inquiry involving collecting both quantitative
and qualitative data, integrating the two forms of data, and using distinct designs that may
involve philosophical assumptions and theoretical frameworks.

3.3 Data Type and source

The research is conduct on primary source of data .The primary source of data is help to collect
information for specific purpose of the study by using interview and questioner. Interview gives
as detail information about specific objective of the study. And questioner is bringing us general
information about general objective of the study in this structured Primary source of data is
collects from managers, employees and customers of Abyssinia bank in Maraki branch. As well
as obtained from questionnaire (both open ended and close ended)

3.4 Methods of Data Collection

For conducting an effective research accurate and reliable data are very important therefore, the
necessary information was collected through census method of data collection. In this study
primary source of data were , used Primary data is collected using questioner and interview.
Interview gives detail information about specific objectives of the studying the study-structured
interview is use, in the questioner form. The questioner is both close ended and open ended is
use.

3.5 Target population

The population includes all elements that meet certain criteria for inclusion in a study.
Population is the entire gathering of element about which assessment of current asset
management Are made. Alternatively, a group of variable that is being studied. The population
under this research is the employees. There are 12 employees in Abyssinia bank maraki branch.

3.6 Sampling Technique and Sample Size

The sample is a subset of population selected to participate in a research study. It defines the
selected groups of elements, that is, individuals, groups or organizations. The sample is chosen
from the study population that is commonly referred to as the ‘target population or accessible
population’ (Burns & Grove 2003:233; Polit & Hungler2004:290).

18
The sample size is the number of sampling units selected from the population for investigation
(chandan et al, 2010).

Census method is the method of statistical enumeration where all members of the population are
studied. A population refers to the set of all observations under concern.

A census can provide detailed information on all or most elements in the population, thereby
enabling totals for rare population groups or small geographic areas. It is a time-consuming and
costly method.

The total target population of Maraki branch in Abyssinia bank is only 12 employees. From
those target populations the researchers select all respondents in the sample size by using Census
Survey. Because the number of population less than 30.
The reason behind using this technique is:
To get relevant and sufficient information.
To get more information and minimize risk.
It enables the researchers to freely select the respondents who fit for this question

3.8 Methods of Data analysis and presentation

The researchers was used for data analysis is different systems among them editing.
Coding and tabulation. Editing is used to involves the inspection of questionnaires on a
raw data and necessary for each questions and defecting the most glaring omission in
accuracy detail.

Coding is a technical procedure by which data are categorized through coding the raw
data to transferred in to symbolic usually numerals. They may be tabulated and
counted. This can by specifying the categorizes in to which remains to be place. The
number was depend up on the number of question on the questionnaires. Coding is
open ended questions. This can be done through developing consistent set of standards
to each questions.

Tabulation can be consisting of simply counting the number facts that fall in to various
groups. It communication the result of the study, can be used for several purpose (i.e. to
19
calculate summary statistic). Tabulation can be done by hand; it is facilitated
determining the empirical distribution. Variables and frequencies will numerate in each
table for calculation of various statistics and communicative distributions will be
employed to observer with less than or equal to specify quantities determined.

20
COST AND TIME BUDJET
Time schedule

NO Activity April May1 June July

1 Topic X
selection

2 Preparation of x x
proposal

3 Collection of X
useful material

4 Data x
collection

5 Data analysis x X
and final write

6 Submission of X
research

7 presentation X

21
FINANCIAL BUDJET

DESCRIPTION QUANTITY PER UNIT TOTAL COST

(BIRR)

PAPER 250 0.50 125

PEN 3 10 30

FLASH 1 240 240

INTERNET 200(MB) 0.50 100

TYPIST 1 150 150

CONTINGENCY 400

TOTAL COST 1045

22
 CHAPTER FOUR

4. DATA ANALYSIS AND INTERPRETATION

This chapter presents the analysis and interpretation of the data and major findings of the study.
As mentioned in Chapter three the intended information for this study were gathered from
employees of the branch. In doing so the data collecting techniques, in this chapter collected data
analysis through descriptive analysis

4.1 Background characteristics of respondents

Before discussing the data related to major questionnaires of the study, summary of demographic
characteristics of respondents were presented data. But all of the questionnaires were returned.
Table 4.1demographic characteristics of respondent
No Items Category N (r) Percentage[%]
1 Age 18-25 1 8.33
26-35 8 66.67
36-45 3 25
Total 12 100
2 education Diploma
level
BA degree 10 83.33
Msc degree 2 16.67
Total 12 100

3 services year 1-4 7 58.33

5-9 4 33.33
10-14 1 8.33

23
 15-20
Total 12
Total 100
Source questionnaires 2021 by researchers
Concerning the three distribution of the population of the study as shown on above table 4.1,
8.33%, 66.67%, and 25% of the respondent were under the age of 18-25, 26-35, and 36-45
respectively.
According to the above table indicates that most of the employees were grouped in productive
age. This shows that the employees of the bank are in good manner in order to manage the
current asset and they have their own initiation to do their work.
According to the educational background as shown on above table 4.1,83.33%and 16.67%of the
respondents was BA degree and Msc degree holders. This indicates that the employees of the
bank all they are ready to accept technological advancement to develop the service of the bank
regarding to the current asset.
The table also tries to illustrate about the service year of the respondents as seen in the table,
58.33%33.33% and 8.33%of respondents were between 1-4, 5-9, and 10-14services year
respectively. This shows that most of the employees are experienced therefore they manage the
current asset of the bank in good manner.

4.2 Major sources of current asset

Table 4.2 sources of current asset for branch bank
No Items No % age
1 Cash 7 58.33
2 accounts 2 16.67
receivable
3 Short term 3 25
investment
,4 inventories
Total 12 100
Source questionnaires 2021by the researchers
In response to the above table 3.2 58.33%, 16.67%, and 25% of the major asset of the bank was
cash, account receivable and short term investment respectively. The study was also sought to
assess the extent of current asset availability in the branch.The data shows cash, account
receivable and short term investment were the major source of current asset of the branch bank.
The researchers concluded that the bank has a current asset which is more liquid than other type
24
of asset. Cash is the most liquid in financial industry, next to cash, cash equivalent, and account
receivable is liquid asset of the bank. In addition to this short term security also the most liquid
asset of the bank next to cash and cash equivalent

4.3 current asset management in the branch bank

Table 4.3 current asset management

No Items Excellent very good Good Bad

1 How do you No % No % age No % age No % Total

measure the age age
banks
current asset 9 75 3 25 100
management
practices
2 How do you 3 25 3 25 6 50 100
measures
the banks
cash
management
practices
3 How do you 2 16.67 8 66.67 2 16.67 100
evaluate the
management
commitment
in efficient
current asset
practice
Source: survey questionnaires, 2021
Items in the table 3.3 tried to find out that bank are successful in the management of current asset
or not. According to the first item in the table 75% of respondents were said very well and 25%
of respondents said that good, according to this Abyssinia bank maraki branch have good current

25
asset management system. Based on the second item the table indicates 25% of respondents said
excellent and 25% of the respondents said that the bank has very good and 50% of the
respondents said that good cash management practices. Therefore, the researchers concluded that
the bank cash management systems are in good manner but not effective. For this reason, it is
advisable to manage its cash in proper way.

Under the third item which asked in the table the respondents answered that 16.67% excellent
66.67% of them said very good and 16.67 % of them said good, regarding to this item the major
percent of the respondents said that the management commitment on current asset of the branch
was efficient but by the contrary one respondent said that good so there is some inefficiencies on
current asset by the management for that matter it is better if the bank employee come with some
objectives to minimize the risk on current asset management.
According to the interview the researchers concluded that the bank use asset liability
management (ALM) technique to manage the current asset of the bank. This means that liability
management is mechanisms address the risk faced by the bank due to miss match between asset
liability either due to liquidity or change in interest rate.

4.4 Account receivable management

Account receivable represents an amount owned by the business. These are the companies as
result of Sal of goods and services in the ordinary course of business. This claims of the firm
against its customers and part of its current asset. The purpose of managing or investing
receivable is meet competition and to increase the sales and profit.
Account receivable management is the process decision relating to investment in trade debtor.
We have already stated that certain investment in receivable is necessary to increase the sales
and profit of the company.

TABLE 4.4 Account receivable management

For six months for one year For four months for nine months

Items
1 for how N( r) %age N(r) %age N(r) % age N( r) % age
long the
bank gives 2 16.67% 3 25 % 7 58.33%
short term
loan?

(Source the questionnaire 2021 by the researchers)

26
The above table indicates that (16.67% )of the respondent response the bank gives loan for six-
month and (25%)respondents said that the bank provide loan for one year and 58.33 % of the
respondents respond that the bank provide short term loan for nine months. As we know short
term loans are the loans that the bank grants to its customers that have short period of time that
means less than one year. In this table the majority of respondents answered that the bank
provide short term loan for one year.so the bank fulfill the theory of that we know long term loan
are loans that the organization grants to its customers for more than one year. This type of loan
are used for long term investment that generate more profit to the investor

Table 4.5 Types of the loans

No Items long term loan short term loan both other loan
1 What N % age N( r) % age N( r) % age N( r) % Total
type of (r) age
loan the
bank 2 16.67% 7 58.33% 3 25% 100
grants to
its
customers

(Source questionnaires 2021 by the researchers)

As the above table shows that the bank grants loan to its customers. most of the respondent
(58.3%)of the respondents stated that the type of that the bank grants to its customers is short
term loan 25% of respondents respond that the bank provide loan to its customers is both short
term loan and long term loan and also 16.67% of the respondents said that the bank provide long
term loan. all the above type of loan are granted by Abyssinia bank but at higher percent the
bank provide short term loan to its customers and next to this bank provide both short term and
long term loan to its customers. Therefore the bank has ability to provide both short term and
long term of loan.
Table 4.6 credit policy
No Items Credit standard collection term of trade Other credit
policy policy
8 What is N( r) % age N( r % age N(r) % age N(r) % Total
lending ) age

27
 policy 8 66.67% 2 16.67% 2 16.67% 100%
of the
bank
8 2 2 12
(Source the questionnaire 2021 the researchers)
As the above table indicates that Abyssinia bank maraki branch have lending policy. The bank
use the credit standard policy and collection policy when the researchers keep it in percentage
credit standard is the most appropriate lending policy in the bank (66.67 ).Credit standard is the
guide line issued by the company that are used to determine if the potential is credit worth.
Credit standard is often credit after careful analysis of paste borrowers and market conditions and
are designed to risk of borrower not making credit payments or defaulting on loaned money. In
assessing collection policy, a number of quantitative measures may be applied to the credit
department of the bank.

Table 4.7 Account receivable management

No Items collect money maintain Preserve Get the
systematic good will customers to
follow up discuss the
amount
11 Which N( r % age N( r) % age N(r) % N(r) % age Total
principle ) age
of
collection 4 33.33% 6 50% 2 16.67% 100 %
does your
bank used
to collect
its
delinquent
accounts
Total 4 6 2 12
(Source questionnaires, 2021 by the researchers)
In the above table the finding indicates that the bank use maintaining systematic follow up in the
most form the other principles (50 %) percent to collect its delinquent accounts, 33.33% of the
respondents respond that the bank uses collect the money and also 16.67 % of respondents said
28
that the bank also uses get the customers to discuss the amount. Therefore the researchers
concluded that mostly the bank uses maintain systematic follow up to collect its delinquent.

Table 4.8 Aspects of receivable management.

No Item forming of executing Both other policy

credit policy credit policy
Which N( r) % age N( r) % age N( r) % age N(r) % Total
aspect of age
receivable
management 4 33.33% 1 8.33% 7 58.33% 100%
that your
bank uses?
4 1 7 12
(Source questionnaires 2021) by the researchers
The above table shows that those 7 respondents (58.33 % of the total respondents respond that
the bank use both forming of credit policy and executing of credit policy to manage its receivable
and 33.33% of respondents said that the bank used to forming of credit policy in order to manage
their receivable and also 8.33% of respondents said that the bank use executing credit policy to
manage its receivable respectively.
Forming credit policy- is the bank used to manage its account receivable by formulating its credit
policy.
Executing credit policy is come after formulating credit policy, its proper execution is very
important. The evaluation of credit applications and finding out the credit worthiness of
customers should be under taken.

4.5 cash management of the bank

The reason to hold cash for one bank is expressed as follows; - to pay salary and wage, for
payment of debt, to pay tax and dividend and customers with drawls. depending the above reason
respondents responds , 5, 4, 2, 1(41.67%, 33.33%, 16.67%, 8.33%)of the respondents response
the hold the cash for customers withdrawal, to pay salary and wage, to pay tax and dividend,
payment of debt and all of the above reasons respectively. from this the researchers concluded
that reason for holding cash in the bank is for customer’s withdrawal as most of respondent ’s
response. This shows that the bank hold the cash for day to day transaction in bank. Therefore
29
the researchers concluded it is better to invest in profitable areas rather than holding cash for day
to day transaction only.

Table 4.9 idle cash management

No Item in short term In long term tied up in the both
security investment bank investment
Where
sector
does
your N(r) % N( r) % age N( r) % age N( r) % age Total
bank age
invested
the idle
cash
6 50 % 4 33.33% 1 8.33% 1 8.33% 100%
6 4 1 1 12
(Source questionnaires2021) by the researchers
As observed from above table the bank invested majority of their idle cash in the short term
security that is 50 % and 33.33 of the idle cash on long term investment, the remaining 8.33 of
the idle cash from tied up capital and both in securities.
From this the researchers believes that the bank invents much of its idle cash in short term
securities.so it is applicable activities.
Short term securities area an account in the current asset section of the bank balance sheets. This
account contains any investment that a bank has made that will expire within one year.

30
 Table 4.10 Motives for holding idle cash
No Item Transaction precautionary speculative
motives motive motive
What are N(r) % age N(r) % age N( r) % age Total
motives for
holding cash for 9 75% 1 8.33% 2 16.67% 100%
your bank?
Total 9 1 2 12
(Source questionnaires 2021) by researchers
Based on the above table the researchers observed that the bank holds majority its idle cash for
transaction motives based on (75%) of the respondents response. that means for the data to day
operation of the bank. The two respondents (16.67%) of respondents said for speculative motive,
this means that there is the cash that the bank holds for investing on profitable opportunities such
as opportunity do not come regular manner and 8.33% of respondents said that for precautionary
motive. Therefore the researchers concluded that the bank hold the cash for transaction motives
that means the bank holds cash for making transaction in day to day operation the cash indeed to
make purchase, paying expenses, tax and dividend.

4.6 Miss management of current asset.

Table 4.11 Miss Management of current asset
No Item strongly agree Agree disagree strongly
disagree
Does miss N( r) % age N( r) % age N( r) % N( r) % age Total
management age
of current
asset have 5 41.67% 6 50% 1 8.33% 100 %
impact
5 6 1
(Source questionnaires 2021) by the researchers
Based on the above table the respondents said that miss management of current asset has impact
on service of the bank. According to the above table 50%, 41.67%, 8.33% of respondents
response, the respondents said that is agree strongly agree, and strongly disagree respectively.
31
Therefore the researchers observed that miss management of current asset have impact on
service of the bank such as impact on day to day transaction, giving loan to customers, paying
debt and Generally on liability of asset.
The benefits of managing current asset
Managing current asset has some benefits to the bank and other business companies.
The following are some benefits from the major:-
To determine the liquidity of the bank
For the long term investment
To keep the proper flow of the bank
Depending on the respondent’s response 50 %,16.67%, and 33.33% of the managing the current
asset has benefits to determine the liquidity of the bank, for long term investment and to keep
proper flow of the bank respectively.so the researchers understand that managing current asset
has a major benefit by the bank to determine liquidity of the bank.

4.7 Major factors that affects current asset management

Finally the study attempts to determine factor affecting current asset management in Abyssinia
bank maraki branch. The finding of the study indicates that current asset management was
affected in various ways.
Overall economic conditions.
Level of competition in the industry.
Risk attitude of the management.
Level of working capital.
The above factors suggested as a problem for managing of current as in the branch respondents.
According to the interview with finance manager of the bank the researchers understand that; the
level of working capital, working capital is the deference between the bank current asset and
current liability.For well running of the firms managing of working capital is simple daily
occurrence it can easily handle. The impact of the working capital changes are reflected in firms
cash flow statement. A positive working capital figures (current asset are greater than current
liability) means the cash inflows the period measures. In contrast negative working capital
position means that the bank has spent that more cash out flow than it bought in managing its
working capital or commitment in year, overall economic conditions there are five important
crucial factors that affects the current asset of the bank, this area the income of the country and
economic level always affects the bank current asset inflation rate when inflation is high bank
tend to suffer. This is because inflation tends affect the value currency, economic policy, and
exchange rate, if the law and regulation and government policy:-increased regulation typically
means a higher work load for people for financial services.

32
CHAPTER FIVE

5. CONCLUSION AND RECOMMENDATION

5.1 Conclusion
In this chapter conclusion of the finding were drown and also some possible recommendation
were forwarded on the basis of finding of the study. To concluded this paper, the data which are
collected have been analyzed and interpreted within the boundaries of of its constraints.so the
issues addressed in this study are shortly concluded in the following presentation.
The main objective of this study were to find out the effect of current asset management by
making through assessment of the current asset management of the Abyssinia bank maraki
branch. In doing so the study tried to present and analyzed the data that have been primary
source. Based on the finding of the study, the following conclusions were drowning.
The analysis of the total disclosed that cash was the major source of current asset among account
receivable, short term investment, and inventories.
Concerning the banks current asset management system the bank have a well current asset
management system as respondents response in the questionnaire rather than other banks in the
banking industry. The branch management system of current asset and this management system
have benefits to the bank.

33
According to the data gathered efficiency of the bank current asset management of the branch
was efficient.
Abyssinia bank gives short and long term loan to its customers in higher percent as well as the
bank grants guarantee loans so, this is appreciable practices in the bank.
The bank has high amount of idle cash for this the bank incurred high amount of opportunity cost
due to failing of investing the excess amount in suitable area.
Miss management of current asset of the bank has impact on the service of the bank. Most the
respondents agree on this idea.so the bank manages its current asset in good manner.
According to the interview the researchers concluded that the bank use asset liability
management (ALM) technique to manage the current asset of the bank. This means the ALM is a
mechanism to a dress the risk faced by bank due miss match due to a miss match asset and
liabilities either due to liquidity or change in interest rate.
According to the interview with finance manager of the bank the researcher concludes that level
of working capital, is the difference between a bank’s current asset and current liability. For well-
run firms managing working capital is simple daily occurrence it can easily handle. The impact
of working capital changes are reflected in firm ’s cash flow statement. The positive working
capital figures (current asset are greater than current liability) means the cash inflows of the
period measures. In contrast negative working capital position means that the bank has spent
more cash out than it bought in managing its working capital or commitment in a year, overall
economic conditions: - there are important crucial factors that affects the bank current asset, the
incomes of the country and its economic level always affects the bank current asset, inflation rate
when inflation is high bank tend to suffer. This is because inflation tends to affect the value of
current asset and government policy:-increased regulation typically means a higher work load for
people for financial services.

34
5.2 Recommendation
Based on the finding of the study, they would like to forward recommendations.
A bank grants short term loan for one year but some respondents said that the bank gives for two
years, so this may affects bank's profitability for this matter it is advisable if the bank fixes the
time period of short term loan.
The lending policy of the bank is credit standard but some respondents said that the bank use
collection policy. Changing policy affects customer satisfaction in getting services. Therefore it
is better to the branch to consult the employees when the bank aims to change the policies, so the
employees become aware of the changes get ready to accept the changes.
The bank hold the cash for transaction motives that means for customer ’s withdrawal but this is
not sufficient for the bank to say that the bank is profitable so, it is better the bank holds cash for
speculative motive that is invested in profitable areas in the banking industry.
There are factors that affects the management of current asset of the bank that mentioned by the
respondents. Therefore the researchers recommends it is better to if the bank avoid these factors
that are related to the banks to meet vision and mission of the bank to competing with other
private bank those solutions are changing the attitudes of banks manager, changing the policy of
the bank as needed and also changing the bank's policy as needed

35
 REFERENCES

 Bringham E.F (2004) “fundamental financial management 7th edition” Dryden

press USA

 BLACK (2006) “fundamental financial management 3rd edition “, the order press New
York

 Credit Research Foundation 2000

 Dennis otieno onyango (2014) “research on current asset management”in Kenya small
and medium enterprise

 Kochw Timothy (2000) “banking and management (3rd Edition) “the orden press New
York

 I.M pand (2001) financial management 8th edition’’vikas publishing house.

 I.M pandy (2007) “financial management 9th edition” New Delhi, India vikas publishing
house

 I.M Pandy (2009) “financial management 7th Edition’’, New Delhi, Vikas publishing
house.

 Neven R.P (2005) “fundamentals of management (4th Edition)”, southwestern published

company

 Sinkey J.F (2002) “Commercial bank of financial management (6th Edition)”, prentice hall
in New Jercy

 ROSE PS (2007) “commercial bank management 4th edition”, M.C Gram in company.

 ROSE S.A (2000) “fundamental and corporate finance 4th edition’’, M.C graw in
company.

 TESSEMA and ASRAT (2005) research on current asset management in Arba Minch
commercial bank of Ethiopia.

Thomas Endomands (2006) “Survey of accounting 3rd edition “Philip old

36
APPANDEX
University of Gondar maraki Branch
Department of accounting and finance
Dear respondents
This questionnaires is designed to gather data on the attitude of current asset management on
Abyssinia bank burie branch.
The data to be collected through the questionnaire, this questionnaire is valuable to meet the
objective of this study. Therefore you are kindly requested to fill and return the
questionnaires .the information you supply should be used for purpose only and kept
confidential.
General instruction
Please do not write your name.
Please try to answer all questions.
Put ‘’x’’ mark in the box.
Pleas follow the direction given in each part.
You can choose more than one choices.
Part one personal information
Age A.18-25 B.26-35 C.36-45
Education level A. Diploma B. BA degree C. Msc degree.
Service year A.1-4 B. 5-9 C. 10-14 C. 15-2 0 E. >20
Part 2
Data on current asset management of the bank.

1. What are the major current asset of the bank?

A. account receivable B. inventory C. cash D. short term investment E .if any
specify it
2. How do you judge the banks current asset management practice?
A. excellent B. very good. C . good D. bad

37
3. What look likes the evaluation of the efficiency of your current asset management
commitment practice?
A. Excellent B. Very good C. Good D. Bad

4. Dose a bank gives the short term loan?

A. for six months B. for one year C. for menthes D. for nine menthes

5. What type of loan does Abyssinia Bank grant to its customers?

A. Long term loan B. Short term loan C. Other types of loan
.6 What are the lending policies of the bank?
A. Credit standard B. Term of trade C. Collecting policy
D. Other lending policies

.7, Which principle of collection does your bank use to collect its delinquent account?
A. Collect the money B. Maintain systematic follow up C. Preserve good will
D .To get customer to discuss about account
8 Which aspect of receivable management your bank use?
A. Forming credit policy B. Formulating and executing collection policy
C. Executing of credit policy
D. If any other policy specify
9. From which investment alternative does your bank invest idle cash?
A. In short term securities B. In long term investment
C. The cash is tied up in the bank D .In the other investment sector
10 What are motives of holding cash in your bank?
A. Transaction motive B. Speculation motive C. Precautionary motive
D. If their motive specifies it
.11 Mismanagement of current asset has impact on service of bank?
A. Strongly agree B. Agree C .Disagree D Strongly disagree

38
12 What is the benefit of managing current asset of the bank?
A. To determine the liquidity of the bank
B. For long term investment
C. To keep the proper flow of the bank
D .If the other reason please specify it

Part 3

Interview Questions

1, what are the factors that affect the banks current asset management?
2 What type of technique does your bank use to manage current asset of the bank?

39
40