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CASH MANAGEMENT AND PROFITABILITY IN PRIVATE SCHOOLS

A CASE STUDY OF BLOOMING HIGH SCHOOL

BY
OMER

A RESEARCH REPORT SUBMITTED IN PARTIAL FULFILLMENT OF THE
REQUIREMENT OF THE AWARD OF MASTER BUSINESS
ADMINSTRATION AT ATILIM UNIVERSITY

September 2020

1

i

ii

ACKNOWLEDGEMENT

I would like to express my sincere gratitude to my beloved brother’s warsame and
abdiqani, and my sisters Hana and hibo for their love and financial support
...


Thanks go to my supervisor dogan canzlier who kept on guiding me when I was writing
this dissertation, I appreciate his friendly encouragement and guidance during the course
...


TABLE OF CONTENTS

iii

DECLARATION
...

APPROVAL
...

DEDICATION
...

ACKNOWLEDGEMENT
...
vii
ABSTRACT
...
1
1
...
1
1
...
1
1
...
2
1
...
2
1
...
0 Objectives of the sturdy
...
5 Research Questions
...
6
...
Scope of the study
...
6
...
Geographical scope
...
6
...
Time scope
...
7
...
3
1
...
0
...
4

CHAPTER TWO
...
5
2
...
5
2
...
5
2
...
2 Importance of holding cash
...
2 Cash management techniques
...
2
...
6
2
...
2 Cash collection
...
2
...
8
2
...
4 Managing of cash outflows
...
3
...
9
2
...
1 Cash control
...
3
...
Cash allocation
...
2 Profitability
...
3 Relationship between cash management and profitability
...
14
METHODOLOGY
...
1
...
14
3
...
14
3
...
study population
...
4 Sampling design
...
5 Sampling size
...
6Data sources
...
6
...
15
3
...
2 Secondary data
...
6 Data collection tools
...
6
...
15
3
...
2 Interview guide
...
7 Data processing, analysis and presentation
...
7
...
16
3
...
2 Data analysis
...
7
...
16
3
...
16

CHAPTER FOUR
...
0 PRESENTATION, INTERPRETATION AND DISCUSSION OF FINDINGS
...
1 Introduction
...
2
...
17
4
...
1 Findings on the gender of the respondents
...
2
...
18
v

4
...
3 Educational level
...
3 Results on objective one
...
20
4
...
1 Findings on the schools plan for cash
...
3
...
21
4
...
2 Findings on the cash banked,
...
4
...
22
4
...
3 Findings on the dividend shares
...
5 Results on objective three
...
24
4
...
1 Findings on how cash in and out flows, cash planning influence the level of
profitability
...
25
SUMMARY, CONCLUSION AND RECOMMENDATIONS
...
0 Introduction
...
1 Summary of findings
...
2 Conclusions
...
3 Recommendations
...
4Areas of further research
...
28
APPENDIX 1: QUESTIONAIRE
...
33

vi

LIST OF TABLES

Table 1 Showing composition of respondents
...
17
Table 3: Age of respondents
...
19
Table 5: Aim for cash plan
...
21
Table 7: cash banked
...
22
Table 9: Share holders and dividends
...


The research was forecast on achieving the following objectives; to establish cash
management techniques used in Blooming high school
...


A descriptive study design was adopted during the study; information was obtained from
primary sources using questionnaires and interviews and purposive sampling was used
and 30 respondents were interviewed and these included directors, head teachers, bursar,
and PTA members
...


Recommendations suggested include the following, organization has to put into place
controls to ensure that cash is safe, parents to even pay even during holidays as a way of
boasting the school collections which in turn will enable allocations to made in time, as
the schools’ surpluses and deficits are concerned, the school needs to invest such monies
in projects beneficial to the school, should also use more of the accrual basis of cash out
flow than the cash basis in order to maintain the school liquidity at an optimal level
...
0 Introduction
1
...

Cash management is an essential tool which aims at establishing the financial position of
the organization
...
Cash management is concerned with the
management of cash flow that is to say inflow and out flow of cash, this seeks to archive
control of cash by paying obligations like meeting organizational needs[Kakuru 20001
...

Most businesses are set up with the aim of making profit
...

According to Kakuru [2001] profitability is the ability of a firm to earn returns on
investment
...
The indicators of profitability include return on assets,
return on capital employed and sufficient cash flows
...

Kategaya (1987) argues that the public seems interested in the developments in primary
schools where he cited a big number of private students that have shown steady progress
for example Green Hill Academy, Sir Apollo Kagwa
...

Blooming high school is located in Hargeisa district in Somalia
...


1
...

Cash management techniques are adopted by organizations in order to ensure effective
investment of cash and to achieve profitability both in the short run and long run (Puxty
and Dodds 1991)
...
John Namaliga in boodhari town in berbera district (New
vision 20th 2008)
...


1
...

The purpose of the study was to establish the relationship between cash management and
profitability of private schools
...
4
...

i
...


ii
...


iii
...


2

1
...

i
...


What is the profitability of Blooming high school?

iii
...
6
...
Scope of the study
1
...
1 Content scope
The study was limited to cash management techniques, factors that determine
profitability and the role of cash management on profitability
...
6
...
Geographical scope
...

1
...
3
...

The study was carried out between the months of January and may for a period of five
years that is 2019-2020
...
7
...
The variables are in the boxes while the
relationships are shown by arrows as shown above
...
8
...
Significant of the study
i)

The study enabled schools to appreciate the importance of cash management
techniques
...


iii)

The study provided as reference and guidance to further students and
researchers
...
0 introduction
This chapter reviews the different existing literature of different scholars, the definition
of cash management, the appropriate cash management techniques, the indications of
cash management, profitability and the relationship between cash management and
profitability
2
...
It includes policies and procedures adopted by the management of an entity
to assist in achieving the management policies, laws and regulations of cash, the
prevention and detection of fraud and error, promoting orderly, efficient operations (Van
Horme1995)
...
The term cash includes coins, currency and cheques held by the firm and
balances on its bank accounts
...

Pandey (1998) noted that cash management is concerned with management of cash flows
into and out of the firm, cash flow within the firm and cash balances lent by the firm at a
time of financing deficit surplus cash
...
1
...

According to puxty and Dodds (1999), it is essential to keep some of the organization’s
resources in cash by any business unit
...



Transaction motive recognized that the organization has to carryout daily
transactions in order to protect its profitability position
...

5



Precautionary motive, cash is needed to Cashion the organization against any
unforeseen problems like failure of emergency work force problems, failure of
electric system and such problems have negative implications on the
organizations profitability
...




For speculative motive the organization maintains cash balances in order to take
advantage of any profitability venture that may UN expectedly crop up like a
sudden fall in price of scholastic materials
...
It will not be able to take on such advantages and additional incomes and
savings from such events will be lost ( Puxty and Dodds 1999)

2
...
2
...
It involves preparation of forecasts of cash receipts and payments so as to give
out an idea of the future financial requirements
...
with efficient cash planning system, the financial needs of the school will be
met, with reduced possibility of the cash balances which lowers the school’s profitability
and cash deficits which can lead to school’s failure
...

A cash budget is a summary statement of the firm projected time period
...
The researcher is wondering whether Blooming high school actually
budgets for inflows and outflows of cash
...
2
...
A number of methods are designed to speedup the collection
process and they include the following;

-

Reducing the period it takes for payment from clients to reach the account of the
school
...


-

Reducing the collection float; according to Pandey (2003),the collection float is
the total time it takes a cheque to reach the business, from the time it is put in the
mail by the client to when cash is actually available for use in the school
...
This can be managed efficiently
by two ways i
...
using a lock box system and billing up multiple collection
centers
...

Mills (1994), in his discussion, he recognized that lock box system involves a cost
to run and therefore the school will only be profitable if the benefits of its use
exceed the cost of financing it
...
2
...

According to van holme (1995), the purpose of managing cash balance is to avoid having
idle cash reserves or having deficits that cannot be invested preferably in short term
ventures like treasury bills and other forms of commercial paper
...
The investment selected for this purpose should meet the
following criteria
...
The instruments should have a low default risk so that interest and
principle repayment will be realized (Kakuru 2001)
...

Investments can easily and quickly be converted into cash with minimum
possibility of a loss
...


2
...
4 Managing of cash outflows
Generally different scholars argue that cash disbursements should be delayed as much as
possible without hurting corporate image of the organization or defaulting on the
obligations of the organization
...

The way of delaying disbursements that were generally agreed upon by above scholars
include;
 Predicting banking habits of the work force and paying out the wage bill
accordingly
...
During this period the school will be able to make
profits out of that money
...

8

 Maximizing the disbursement float through selecting geographical optimal
disbursement banks
...

2
...
0 Indicator of cash management
2
...
1 Cash control
This is the overall attitude and actions of management regarding control system of cash in
the entity
...
According
to Hamilton (2001) an obvious aim of a school is to control and manage its cash affairs in
such away as to keep cash balance at a minimum level and invest surplus cash in
investment opportunities
...



Control over cash received
...




Control over petty cash expenses should be budgeted for, that is to say petty cash
should be reconciled by an independent person and the level and location of cash
floats should be laid down formally and based on the needs of the organization
...
3
...
Cash allocation
Sources of cash should clearly be highlighted and cash should be allocated accordingly,
for example cash paid in line with supply of essential requirements used in the school
should be used to acquire such requirements or materials
...
The need to
hold cash may be attributed to motives like transaction motive in order to protect
profitability positions of school, for precautionary motive that is cash is needed to
Cashion the school against any unforeseen problems like failure of electric system,
emergency work force problems which have a negative implication on the school’s

9

profitability and speculative motive where the school maintains cash balances in order to
take advantage of any profitability venture that may unexpectedly crop up
...
2 Profitability
...


Balunywa (19995) observed that present traditional economists take profit maximization
as the objective of a firm
...
How
ever Balunywa in his view noted that any good performed organization should be able to
realize profits
...
In deed profits of a business are the end result of
operation and indication of its good performance
...
If the
school relies more on loans, costs such as interest rates will not be avoided and this has a
negative impact on profitability
...

In this case the cost of capital is usually increased by related dividends and interest rates
from providers
...
The greater the default risks the higher the interest rates lenders charge on
loans and the lesser the profitability
...


10

According to Limpsey (1993) organization profitability is affected by many factors and
this include change in demand, change in prices of both inputs and out put such as capital
and labor4 then level of staff productivity
...
No matter how it is measured or defined, profit of a long period of time is
the clearest indication of firms’ ability to satisfy the principle claims and desires of
employees and stake holders
...
3 Relationship between cash management and profitability
...
cash out flows will exceed cash
inflows due to numerous expenditure such as payment for taxes, dividends, seasonal
inventory buildings
...
If the company does not have near cash assets to convert and meet such
payments, profitability will be threatened
...
If it’s not wisely
invested the school will lose profits on this idle cash
...


Lynch (2003) noted that one of the major aims of cash management is to accelerate cash
inflows and delay cash out flows
...
Once cash inflows are accelerated, the costs of management and cash
collection will most likely reduce while profitability will be enhanced, however the
reduction of the credit period might negatively affect sales which most likely reduce
profits
...
Over delaying to pay staff salaries and wages may result in to resentment of
work, low morale, low productivity, and low productivity, high labor turn over, strikes,
frauds and theft which increase operating costs that reduce profitability
...
Pandey noted that there is no advantage in paying sooner than greed
...
Thus delaying payments enables the
school to realize extra profits from retained funds
...
However the higher these balances are, the
more profitability will be fore gone
...
On the other hand if cash management seeks to boost profitability,
investments are highly risky but profitable and the business is threatened as there will be
no cost to meet the operating obligations as they fall due
...


To Mantile Etaal (1995), Hamilton (2001) and van Horme (1995) one of the primary
objectives of a cashier is to maintain a sound liquid position of the school in order to
meet motives of holding cash
...
The school maintains optimum neither just enough, nor too much,
nor too little cash balance
...

This model provides a formal approach for determining the schools optimum cash
balance under certainty
...
The limitation of Baumol is that it does not allow cash flows to
fluctuate
...


With an efficient cash planning system, financial needs of the school will be met with
reduced profitability of idle cash balances which lowers the schools profitability and cash
defeats which cause schools failure (Kakuru 2001)

12

The purpose of managing cash balance is to a void having idle cash reserves or having
deficit that can not be covered easily (Kakuru 2003)
...


13

CHAPTER THREE
METHODOLOGY

In this chapter the researcher presents the methods that were used in data collection,
analysis and presentation
...

3
...
Research design
In order to collect the necessary data, the researcher used descriptive and case study
design where descriptive seeks to describe the phenomenon as the existing and a case
study design was used in deep understanding of the problem than generalizing the
findings across the population and the study was both qualitative and quantitative
...
2 Study area
The research was conducted in Blooming high school in Hargeisa district in Somalia
3
...
Study population
The population under the study included specific categories of individuals selected from
the population
...

3
...


14

3
...

Table 1 Showing composition of respondents

Stratum

Sample of respondents

Director

2

Head teacher

2

Bursar

2

PTA

24

Total

30

Source: primary data
3
...

3
...
1 Primary data
This is raw data collected by the researcher from the field
...
6
...
It will be obtained from the schools records, management
reports, text books, journals and news papers
...
6 Data collection tools
3
...
1 Questionnaires
This is a set of questions used to collect information which is latter analyzed to provide
results necessary for solving a given research problem
...

15

3
...
2 Interview guide
This is where the researcher approaches the respondents and puts questions directly to
respondents and then records the replies
...
7 Data processing, analysis and presentation
3
...
1 Data processing
Data was edited, coded and tabulated for completeness, accuracy, easy interpretation and
understanding
...
7
...

3
...
3 Data presentation
The findings were presented using tables
...
8 Anticipated limitations of the study
1
...

2
...

3
...


16

CHAPTER FOUR
4
...
1 Introduction
This chapter presents the findings of the research as well as the interpretation and
analysis of both the primary and secondary data on cash management and profitability in
primary schools
...


The research questions were what are the cash management techniques used, what is the
level of profitability, and the relationship between cash management and profitability

In the presentation of findings, tables and figures were used in computing frequencies and
percentages to describe and analyze the findings, written information and draw
conclusions from the research
...
2
...
2
...
It was found out that females were less concerned about cash and profit
making and the reasons they were advancing were naturally made to receive from Males,
and some were still referring to their culture and traditional norms
...
In an interview with much as the director
emphasized that male staff inculcate discipline among pupils in the school and also that
males do not have “offs” as it is in females, there is still gender inequality among the
staff
...
2
...
3%

36-45

4

13
...
33%

Total

30

100%

Source: Primary data

The research reveals that 10% are those who make it up to the age of 25, 73
...
3% and 3
...
This means
that 100% of the respondents had some knowledge about cash and profit management
...
This there fore should not be taken for granted that all the population
interviewed follow in their right age groups
...

The response from some of the PTA members were of the view that stake holders must
be mature as out outlined in cap 110 laws of Somalia vol V (business law)

18

4
...
3 Educational level
Table 4: Academic levels of respondents
Category

Frequency

percentage

Primary

0

0%

A level

4

13
...
6%

Degree

8

26
...
3%

Total

30

100%

Source: Primary data

Findings show that 13
...
26
...
6% and 13
...
This means that all people employed by
the school have attained a certain level education and knowledge
...
This further justifies the importance of
teachers collages, institutes as well as universities in as far as imparting knowledge and
skills to people seems necessary
...

Further more according to the primary seven head teacher, a school is a center of
knowledge and stake holders must have a certain level of knowledge as a way of leading
by example
...
3 Results on objective one
...

4
...
1 Findings on the schools plan for cash
Table 5: Aim for cash plan
Category

Frequency

Percentage

Strongly agree

22

73
...
3%

Not sure

1

3
...
3% strongly agree that cash planning is a management tool,
23
...
3% were not sure
...
It is from these documents that informed decisions can be
made as regards forecasts, budgets, disbursements, allocations and controls and any other
relevant aspect beneficial to the school
...
Having good cash planning in place shall lead to proper utilization of this cash
as per planned utilities/ investments and hence leading to increased profitability
...


20

4
...
2 Findings on school’s allocations of cash
Table 6: Allocation of cash
Category

Frequency

Percentage

Strongly agree

27

90%

Agree

3

10%

Not sure

0

0%

Disagree

0

0%

Strongly disagree

0

0%

Total

30

100%

Source: Primary data

The findings revealed that 90% strongly agreed that the school makes allocations for
cash, 10% agreed to the statement
...
The findings clearly brings out the
ideas of Kakuru 2001, Van Holmes 1995 as well as Pandey 2003 that cash should only be
out when delay is no longer necessary and possible and non beneficial
...

This was further supported by the schools’ bursar as all allocations to be made have to be
authorized by the director as he is the head of the school
...
3
...
3%

Agree

5

16
...
3% of the sample population strongly agreed that cash is
banked, 16
...
It was found out that the school holds an
account that keeps the school money and from which drawings are made to make the
necessary disbursements
...
“Am responsible to the schools’ banking and also a signatory to it”
says the school bursar
...

4
...
2 Findings on how staff productivity contributes to profitability
Table 8: staff productivity and profitability
Category

Frequency

Percentage

Strongly agree

30

100%

Agree

0

0%

Not sure

0

0%

Disagree

0

0%

22

Strongly disagree

0

0%

Total

30

100%

Source: Primary data

From the table above 100% of all respondents interviewed strongly agreed that staff
productivity and profitability are inseparable in other wards they all move in the same
direction were as 0% disagreed
...
It was found out
that the more are the customers the more are the cash inflows and also the more are the
costs effectively reduced or spread across which leads to high profits
...
6m in the
year 2010 were as cash was 0
...
The researcher found out that all the
findings were in line with Van Holmes (1995), Pandey (2003) view of managing
outflows of cash as well as Puxty and Dodds (1999) transaction motive towards
profitability
...
8m, 1
...
6m,
1
...
51m, (source: Tara primary Balance sheet and income statements 2006-2010) it
was able to recruit good teachers as already seen in table 4 that increased on the
performance levels
...

More still members on the PTA emphasized staff productivity and profitability should be
given more attention to enable the school work up to the set objectives
...
4
...
From the table it is evident that all respondents where aware that
there were no shares in the school and there are no dividends given out
...

More still all the capital injected in the school was a sole effort of the proprietor…
...

All losses that occur directly affect the proprietors incomes were as the profits realized
boost the proprietors’ incomes as to whether to make more allocations or hold back the
less resources realized
...
5 Results on objective three
...
5
...
000


...



...
669*

1
...
(2-tailed)


...


30

30

Correlation Coefficient
Sig
...
Correlation is significant at the 0
...


The table shows strong significant positive relation ship as indicated by spearman
correlation coefficient as 0
...
05(2-tailed)
...


24

This is because cash management has an influence on profitability for example if cash
planning, cash collection, cash allocation, cash budget are emphasized when carrying out
cash management then profitability will be good
...

5
...

The act of formulating and administering the questionnaire was all new, challenging yet
enriching
...
Findings are drawn and recommendations are made
...

5
...
It
was also found out that a good plan for cash has enabled the school in making
informed decisions like making renovations on the school buildings,
construction of new buildings for example the main hall and the kitchen, plus
fencing of the school
...
For example in the period of 5 years the school has been able to
buy text books worth 1
...
2m on average per term have
always been provided
...
The cardinal goal was to impart knowledge
to pupils of the country and then profits come as an added advantage
...
It was found out that
cash at hand is so tempting and also given the fact that the school contains
different people both staff and pupil who come from different environments,
any thing can happen
...


iv)

Staff productivity and profitability move in the same direction meaning that
the higher the staff is productive, the higher is the profit margin level and the
reverse is UN doubtable
...
8m, 1
...
6m, 1
...
51m,
realized in the period 2006-2010 respectively
...
6m, 11
...
3m for a period of five years
...
The issues of changes in demand,
prices of both in puts and out put such as capital and labour all act as key
aspects in influencing staff profitability of the organization as sighted by
Limpsey (1993)
...
It was found out that the three variables move in the same
direction implying a slight move in any of the variable consequently affects
other variables
...


This implies that cash inflows, outflows and cash

planning are strongly inter linked in profit making
...
2 Conclusions
...
Given the
size and complexity of the organization and the partnership as a whole, business with out
cash management would have been a big dream
...
However, learning being a process as it
were, there is always room for improvement, thus the following recommendations are
suggested
5
...
For an effective management of cash, the organization has to put into place
controls to ensure that cash is safe
...
The school should encourage parents to even pay even during holidays as a way
of boasting the school collections which in turn will enable allocations to be made
in the due time
...
As far as the schools’ surpluses and deficits are concerned, the school needs to
invest such monies in projects beneficial to the school for example cultivating
maize, cassava, banana to mention it that will deliver the school in times it is
registering deficits
...
The school should use more of the accrual basis of cash out flow than the cash
basis in order to maintain the school liquidity at an optimal level
...
4Areas of further research
...

Areas that need further research are:
i)

School management and professionalism

ii)

Private salary scale

iii)

Examination setting in private schools vis-à-vis setting in government schools

iv)

Resource efficiency and effectiveness in private schools
...

Block B Stanley and Hirt A Geoffrey (1987), Fundamentals of financial management (4th
edition) Irwin, Horme Wood
...
3, No page 7- 13
...

Kakuru Julius (2001), Financial decisions and business (2nd edition) Business publishing
group Hargeisa
...
p (2003), Survival growth and prodigality values and challenges,
manufacturing firms in somalia
Lynch foulks (2005), financial management and control, foulks lynch publishers
...

Mills Geofrey(1994), finance decision and corporate performance, journal of
international finance,vol13,NO
...
8 page 12-15
Pandey IM (1998), Financial Management (7th edition) vikas publishing house
...
Collin(1991), Financial management method and
meaning(2nd ED ) Champman
Shiff (1992), Finance decisions and corporate performance, a journal of international
Finance
...


28

APPENDIX 1: QUESTIONAIRE
QUESTIONNAIRE TO THE MANAGEMENT AND STAFF OF BLOOMING
HIGH SCHOOL

Dear Respondent,
I am a student of Atilim University conducting an academic research study
...

With respect, the researcher request you to spare sometime and answer the questions
attached
...

I the researcher appreciate your co-operation
...
Gender
Female

Male

2
...
Education level
Primary
A level
Certificate
Diploma
Degree
Post graduate
Others specify ……………………………………………
4
...
CASH MANAGEMENT
5
...

Strongly agree

Agree

Not sure

Disagree

Strongly disagree

6
...

Strongly agree

Agree

Not sure

Disagree

Strongly disagree

7
...

Strongly agree

Agree

Not sure

Disagree

Strongly disagree

8
...

Strongly agree

Agree

Not sure

Disagree

Strongly disagree

9
...

Strongly agree

Agree

Not sure

Disagree

Strongly disagree

10
...

Strongly agree

Agree

Not sure

30

Disagree

Strongly disagree

SECTION C: PROFITABILITY

12
...

Strongly agree

Agree

Not sure

Disagree

Strongly disagree

13
...

Yes

No

If no, how often do you give share holders dividends?
At least once in two years
Rarely
Never
Not sure

SECTION D: RELATIONSHIP BETWEEN CASH MANAGEMENT AND
PROFITABILITY
14
...

Strongly agree

Agree

Not sure

Disagree

Strongly disagree

15
...

Strongly agree

Agree

Not sure

Disagree

Strongly disagree

16
...

Strongly agree

Agree

Not sure

31

Disagree

Strongly disagree

32

APPENDIX II: INTERVIEW GUIDE
INTERVIEW GUIDE TO THE MANAGEMENT AND STAFF OF BLOOMING
HIGH SCHOOL

1
...

2
...
Do you hold surplus cash after all payments? And how often do you ensure its
safety?
………………………………………………………………………………………
4
...

5

---