1.1 Introduction
The term financial management strategy focuses on the discipline of finance with a long term purpose in line with the strategic goals of the firm or enterprise. The essence of financial management strategy is not only to manage the flow of funds in the organization but to align them with the good intention to meet the goals and objectives of the firm to maximize the financial wealth of business owners. Zietlow et al., (2007) noted that financial management is the creation of wealth, planning and monitoring of a business’ financial assets, improving its profitability and generating the required return to capital providers. Financial management practices include all aspects of management that affect the finances of the company and what is needed to achieve the overall objective of the organization (Alhassan, Erasmus & Portia, 2018).
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitations of the Study and Definition of technical terms.
1.2 Background of Study
The first major federal financial management reform took place just after world war in late 1919, treasury secretary carte glass created the forerunners of the current fiscal operations bureaus. Financial management service and the bureaus of public Debt by approving the positions of the commissioner of Account and deposit. The commissioner of the public debt, the officials appointed to these positions oversaw the various organizations that comprised the new bureau of account and deposits later renamed the bureau of accounts and the bureau of the public debt. The former of these two bureaus was the first direct ancestor of today's financial management service.
Although the predecessors of today's fiscal service organizations were established in 1919, most federal payment functions remained decentralized until 1933. That year, president Franklyn D. Roosevelt issued an executive order mandating the transfer of the executive department's disbursing clerks to the newly established division of disbursement, which was assigned of the Bureau of accounts. One result of this order was the creation regional disbursing offices.
Eventually, 27 of these facilities were established to handle the ever increasing number of checks issued by the government. Today, thanks to improved technology and the gradual replacement of checks by electronic funds transfer, financial management service maintains only four payment sites.
In June 1940, congress approved a reorganization plan that created the treasury department's fiscal service and a career fiscal assistant secretary position. Under the plan, the fiscal service was assigned three components: The Bureau of accounts, the Bureau of the public debt and the office of the treasury of the public united stated. There evidently was considerable bureaucratic inertia while the fiscal service was established in 1940, yet the first fiscal assistant secretary was not appointed until 1945.
Problem with foreign debt is when the burden accelerates so high that it negatively affects the growth and development of other sectors. Udeh (2013) highlighted that increased debt burden has led to the adoption of several measures capable of reducing the debt burden affecting the growth prospects of most countries that so much depend on foreign loan. These measures cover from debt rescheduling to outright cancellation. To worsen the situation, the resultant effect of debt serving leads to increase of increased deficit. This of course causes a great challenge to the economy as huge portion of the country’s income is being used up.
Government spending is a function of her income. Like corporate entities’ government articulate her expected income and expenditure on yearly basis in a budget. This is a plan of action prepared by government or corporate entity expressed in financial terms, for a given period, usually a year. Sometimes the expected expenditure exceeds the expected income, when that happens, it is known as budget deficit in financial parlance. The short fall income is in most cases financed through borrowing with attendant cost and associated terms and conditions relating to payment patterns at maturity. Essien et al., (2016), observes that borrowing by countries is occasioned by inability to raise enough revenue from local sources for the administration of government business. Borrowed fund if well applied is expected to accelerate economic growth and development in a country.
Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Impact of Financial Management Strategies and Debt Control in Public Enterprises.
1.3 Statement of Problems
Investigation revealed that the issue of external debt burden in Nigeria has become an immense status bestriding the main stream of international economy, and politics. Foreign aids are no longer used as instrument of assistance but as a weapon of oppression, suppression and perpetual under development. Public enterprises undergo these problems as:
- To know the ability of the managers in their decision making.
- Lack of availability of timely, relevant and reliable financial and non-financial information.
- Problem of risks identification.
- Inadequate accountability.
1.4 Aim and Objectives of Study
The aim of the study is to examine the Impact of Financial Management Strategies and Debt Control in Public Enterprises. In achieving this aim, the following specific objectives were laid out as follows:
- To examine the budgets been one of the managerial tools used in the financial management of public enterprises.
- To find out whether the accounting system and financial control operates efficiently.
- To ensure the availability of timely, relevant and reliable financial and non financial information.
- To investigate whether the management engage in wasteful extravagant or unrewarding expenditure detriments to financial system.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- Has budgets been one of the managerial tools used in the financial management of your enterprise?
- Are your accounting system and financial control efficient operates properly?
- Does your management engage in wasteful extravagant or unrewarding expenditure detriments to your financial system?
- How often does your management achieve its policy objectives?
1.6 Research Hypothesis
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: There is no significant correlation between the government legislation and the operation of the public enterprise.
- H1: There is a significant correlation between the government legislation and the operation of the public enterprise.
Hypothesis Two
- H0: There is no significant relationship on the financial management and debt management tools in the daily operations of enterprise.
- H1: There is a significant relationship on the financial management and debt management tools in the daily operations of enterprise.
1.7 Significance of Study
The study will be relevant to economic policy formulators and Government investors, foreign international organizations, private, individuals and firms. It will be helpful to citizens informing them of how the impact of external debt will improve their Output thereby their standard of living.
To the researcher, this work is essential or beneficial hence it is a learning process and also an insight of the need for finance, its management, debt and its control in public enterprise. The research topic is adequate for the education on the way public enterprises manage their finance as well as the control of its debt for public interest.
The study will also be a good guide to many future researchers who would wish to improve on what the present research has done such as parishioners' and Chartered Institute of Bankers of Nigeria (CIBN) as it will serve as a guide for future research work.
1.8 Scope of Study
The scope of the study focuses on the Impact of Financial Management Strategies and Debt Control in Public Enterprises. The study is limited to Imo Transport Company and Abia Line Transport Company.
1.9 Limitations of the Study
During the course of this study, many things militated against its completion, some of which are:
- Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
- Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this establishment to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
- Research material: availability of research material is a major setback to the scope of the study.
- Frequent power failure: This made the researcher append more money on fuel to ensure sustainable power.
- Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
1.10 Definition of Terms
Principles and terminologies are subject to various interpretations depending on the context in which they are used for the purpose of this study the major operating terms are defined as follows:
Public Enterprises: An emprise owned and controlled by the government, maximum contribution for efficient operation of the organization.
Financial Manager: This is one who plans for the acquisition and utilization of funds to make maximum contribution for efficient operation of the organization.
Financial Management: To manage activities this is concerned with the planning and controlling of the firm’s financial resources
Shareholder: This means an owner of shares in a business/company.
Public Services: Government parastatals that provide civil services, which are not owned at profit maximizing.
Financial Institution: This is a place where loans can be obtained (long or short-term) they include banks etc.
Funds: This is the sum of money saved or made available for a particular purpose.
Loan: This means things especially sum of money that is being given out or lent out to be repaid with time and interest.
