ABSTRACT

The study was aimed to assess cash management practice in commercial

bank o Ethiopia Gununo branch. The main objective of the study was to
assess cash management practice, in order to performance of commercial
bank and to with cash management theory. The researcher used a type of
descriptive research by using both primary and secondary data. The data
collected from interview and questioner with department of cash
management commercial bank of Ethiopia Gununo branch. To concludes
cash management activates of Ethiopia was functioning well. Finally the
study concludes that commercial bank of Ethiopia Gununo branch have
been evaluate cash management strategy of commercial bank, amount of
cash collected and operation in accordance with cash management good.

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 Acknowledgement
First of all I would like to thank our God for that he made me to reach to this
moment also I would like to thank our Advisor Negalign M . For the advise and
encouragement he gave me for the accomplishment of paper. Last but not least I
would like to thank CBEG brench.

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 . CHAPTER ONE
1. Introduction ------------------------------------------------------------------------------------------1
1.1 Background of the study--------------------------------------------------------------------------1
1.2 statement of the problem --------------------------------------------------------------------------3
1.3 objectives of the study -----------------------------------------------------------------------------4
1.3.1 General objectives --------------------------------------------------------------------------------4
1.3.2 Specific objective --------------------------------------------------------------------------------4
1.4. Significance of the study ------------------------------------------------------------------------- 4
1.5 scope of the study ---------------------------------------------------------------------------------- 4
1.6 Limitation of the study --------------------------------------------------------------------------- 5
1 .7 organization of the paper -------------------------------------------------------------------------5
2. REVIEW OF RELATED LITERATURE
2.1 Definition of cash, management and cash management ………………………………..6
2.1.1 Definition of cash ………………………………………………………………………6
2.1.2 Definition of management ……………………………………………………………. 6
2.1.3 Definition of cash management ………………………………………………………..7
2.2 objective of cash management ……………………………………………………………7
2.2.1 Meeting payment schedule ……………………………………………..………………7
2.2.2 Minimizing funds committed to cash balance …………………………..………………7
2.3 Elements of cash management ………………………………………..…………………..7
2.4 cash balance requirements ………………………………………………………………….8
2.4.1 Transaction motives ………………………………………………………………………8
2.4.2 Precautionary motive ……………………………………….……………………………..9
2.4.3 Speculative Motive (Requirements) ………………………………………………………..9
2.4.4 Compensating Motive ……………………………………………………………………… ……….9
2.5 Cost of Holding Cash …………………………………………………………………………..….....10
2.6 Cash Planning …………………………………………………………………………………………10
2.6.1 Cash Forecasting and Budgeting ……………………………………………..………………….11
2.6.1.1 Short Term Cash Forecast …………………………………………….………………………..11
2.6.1.2 Long –term cash forecasting …………………………………………………..…….. ………13

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2.7 Investing Idle cash …………………………………………………………………………………..14
2.7.1 Treasury bill …………………………………………………………………….…………………14
2.7.2 Negotiable certificate of deposit ……………………………………..…………………. ……..14
2.7.3 Commercial Paper …………………………………………………………..………………………………………15

2.7.3 Bankers acceptances -------------------------------------------------------------------------------.15

2.7.4 Repurchase agrement --------------------------------------------------------------------------------15
2.8 managing cash receipts and payments --------------------------------------------------------------.16
2.8.1 Imp rest system of cash Funds ---------------------------------------------------------------------.16
2, 8.2 Cash change fund ------------------------------------------------------------------------------------16
2.8.3 Cash gap -----------------------------------------------------------------------------------------------17

2.9 Sstatements of cash flows ----------------------------------------------------------------------------17

2.9.1 Operating activity --------------------------------------------------------------------------------- 17
2.9.2 Investing activity ---------------------------------------------------------------------------------- 18
2.9.3 Financing Activiy ------------------------------------------------------------------------------------------ 18

2. 10 Merits and de merits of cash management -- --------------------------------------------------18

2.1.10.1. Merits of cash management ----------------------------------------------------------------- 18
2.10.2 Demerits of cash management -----------------------------------------------------------19
3. Chapter Three
3.1 Research Methodology
3. 2 Research design and methodology ------------------------------------------------------------20
3.3 Data source and type --------------------------------------------------------------------------- 20
3.4 Population and Sampling techniques --------------------------------------------------------20
3.5 Method of data collection --------------------------------------------------------------------20

Chapter Four
4 Data analysis, presentation and interpretation -----------------------------------------------21
4.1 Questionnaire analysis------------------------------------------------------------------------21
4.2 General profile of the respondents --------------------------------------------------------- 21
4.3 Cash management practice in CBEG, Branch ------------------------------------------ -23

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4.4 Theoretical application of cash management ---------------------------------------------27
4.5 Money market investment ---------------------------------------------------------------28
4.4.7 Petty cash fund -------------------------------------------------------------------------29
4.4.8 Cash administration -------------------------------------------------------------------32
4.4.9 Problem of cash management -------------------------------------------- ---------33
Chapter FIVE
5. Summery, conclusion and recommendations -------------------------------------- 34
5.1Summery --------------------------------------------------------------------------------34
5.2 Conclusions ----------------------------------------------------------------------------36
5.3 Recommendation --------------------------------------------------------------------37
Appendix ------------------------------------------------------------------------------38- 41

Reference -------------------------------------------------------------------------

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 CHAPTER ONE
1. Introduction
1.1 Background of the study
Cash is the beginning of a company’s operation cycle; it is usually the starting point for a
company system of control. It includes all currency and demand deposit balance held by the
firm. Although cash needed by a firm to pay its expense, purchase raw materials, repay debt
and so forth. The organization to improve its performance of business as well as to introduce
new business opportunity cash is very important since cash is the most powerful working
Capital, the collection and payment of cash must studied carefully. Cash is money, which firm
cash disburse immediately without any restriction. Now a day cash include coins, currency, and
checks held by the firm and balance in its back account the basic characteristic or near cash asset
is that they can readily converted in to cash (PANDY.1999).Cash is hold by a firm for several
reasons. An important for holding is to meet the firm Day-to-day transaction. There working
cash balance must maintained to provide ready access to fund. It is the ultimate output expected
to realize by several services activities. Thus, a major function of the financial manager is to
maintain a sound cash position. Cash shortage will disrupt the organization service given
operation while excess cash will simply remain idle without contribution anything towards the
firm profitability(PANDES, 1990).Cash may more appropriate explain as current asset a deposit
in bank that can be withdrawal immediately and used for business purpose. Cash management is
one of the key areas of working capital management .Apart from the fact that it is the most liquid
current asset can be reduced because the major liquid asset, that is, receivable and inventories get
eventually converted in to cash. Cash management is the most important in banking industry
than any current asset, because it used to pay the firm’s short-term obligations. The main aim of
cash management is to maintain adequate control over cash position to keep the firm liquid and
to use excess cash in some profitable way. The bank should require having proper cash
management otherwise, it neither meet the demand of the depositors nor achieve the required
profitability. Moreover, commercial bank Ethiopia is one of the largest commercial bank in the
country. All of these lead to undertake the research study focus on cash management practice in
commercial bank of Ethiopia, Gununo Branch.

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cash management is the managing and controlling of cash over the institution cash is the first
asset in the portfolio of CBE . cash management does not inviolable having the optimum neither
exclusive nor deficient amount of cash . cash management requires that the company know how
much cash if need and where that cash it at all time monitoring and controlling of cash is often
neither vary through nor systematic ("E.f.Brigam Louise G" Intermediate financial mgt 5th
Edition )p 723 -725 ). Cash is one of the most important assets in business enterprise because it
helps the as medium of exchanging or means of acquiring good are service. cash includes
currency a coin personal checks as well as money on deposit with bank. since cash is liquid asset
if needs appropriate management to the organization financial position in addition careful
security of cash from transaction is required because cash may be readily misappropriated. in
order to relieve financial constraint on investment financial intermediaries are expected to play a
decisive role in bringing about different way of raising the required level of funds through the
application of proper financial management system. Therefore financial manager has the
responsibility of deciding the credit term guaranteed to customers. The cash account includes
balance on deposit with in finance institution.(Thomas,et al 2001:316)cash management serves
as the mean to keep the functioning by making the best use of cash or liquid resources of a
bank. Therefore, is very much interested in establish procedures for increasing the efficiency of
cash management. It increase cash availability, which improves customers services and increase
revenue by investing idle cash and interest charged on loan of services fiercely .(Thomas,et al
2001:316).

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 1.2 statement of the problem
Mobilization of financial resources arises for the purpose of productive investment is very low.
In order to receive financial constraints on investment, financial intermediaries expected to play
a decisive role in bringing about efficient way of raising the required level of fund through the
application of proper financial management system. Cash is clearly the single most important
element of banking operation; especially in an environment like Ethiopia where banking
technology and the culture of credit are not yet ddeveloped. Now a day, in every developing
country the central issue of economic development is the Problem of managing scarce resource
via efficient and effective way of cash management system for bringing a better economic
growth of a country the study is mainly concerned about cash management of analysis in CBE
Gununo branch. The cash management is a powerful tolls for control of both efficient and
effective of cash However, what measure taken by the banker to make the bank cash
management system more efficiency and effective. Cash was blood life of the organization and
also very vital component which had the power of the country if needs to establish controll
mechanism which enables private government organization and the country as a hole to monitor
and regulate the economy of country. In most developing country had various identifiable risk
such as misuse fraud cash shortage and unstable economy. To reduce the above problem all
employees were subject to close supervision .The bank statement were reconciled department
after they were received form cashier offices. cash was highly to sensitive for theft, fraud and
loose. Therefore this study was tried to investigate and asses of failure of cash collection and
disbursement procedure, weakness and other problem related to cash management of CEB
Gununo Branch. This study tries to address the following research question
 Does the bank assess its weakness and strength regarding with cash Management
practice?
 Does the organization face the problem in cash management practice?
 What are the short-term sours of finance (cash)?
 Does the bank prepare its cash budget?
 Does the bank utilize its idle cash for investment purpose?

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 1.3 objectives of the study
This study aimed to evaluations of cash management practice in commercial bank of Ethiopia,
Gununo branch.
1.3.1 General objectives
The general objective of the study is to assess cash management practices.
1.3.2 Specific objective
 To compare the actual practice of CBE, Gununo .
 To assess its strength and weakness with regarding to the cash management practice.
 To describe the bank short term financing effort of its short-term obligation.
 To identify techniques of cash management.
 To identify source of cash, when cash shortage occurs.

1.4. Significance of the study

The basic reason for undertaking the study is provide concrete information (data) about
evaluation of cash management practice in CBEG, branch.

 The study provides relevant recommendation and conclusion by assessing

 The theoretical and description for better method for cash management practice in the
organization.
 The study will attempted to find out problem related with cash management. and as such
better approach to deal with maintain good cash management level in any organization it
will be provide information for future research those who want to conduct a detail
research regarding to this topic.

1.5 scope of the study

The coverage of the study scope was limited one of the area which considered in the study on
evaluation of cash management practice in CBEG, branch and it is mainly concentrate with the
most liquid current asset that is how the organization manage its cash.

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 1.6 limitation of the study
Initially it was hoped that this study will be conducted successfully .however, it’s Found to be
difficult conduct the study is the following;
 Lack of available material and reference those are relevant to the study.
 Time and data are the main constraints.
 Shortage of finances searches the necessary data.
 Lack of secondary data from the organization because the staff management UN willing
give the necessary information especially anal report and important documentary data

1.7 organization of the paper

The paper would consists of five chapter the first chapter is introduction which includes
background of the study, statement of the problem, objective of the study Significant of the
study, scope of the study , and organization of the paper. The second chapter would be review
of related literature the third chapter deals with the research methodology. The last chapter of the
study includes summery, conclusion and possible recommendation.

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 CHAPTER TWO

2. REVIEW OF RELATED LITERATURE

2.1 Definition of cash, management and cash management

2.1.1 Definition of cash

Cash is any medium of exchange that a bank will accept, face value and liquid, high Quality
fixed income instrument, with (an absolute value) duration of less than one year. It includes
currency and coin on hand, bank deposit, personal check, bank draft, money Order, credit card
and the like (mosich, 1989). Cash is both the most important and the least productive asset that a
business possesses. On The one hand, it is important because bills must pay in cash. If cash is
not available in sufficient quantity at the right time, obligation cannot be meeting. In addition,
The Company became insolvent. Possessing value in other asset may be little consolation if they
cannot turn in to cash needed or at least serves as collateral for needed loans (R.L. Thomson,
1987).
2.1.2 Definition of management
Many authors have defined the word management in indifferent ways. (Plunkett and Attner,
1980) define ’’management is the process of setting and achieving goals Through the execution
of five basic management functions (planning, organizing staffing, directing and controlling)
that utilize human, Financial and resource’’. “E.E.L Breech called it is the social processes of
planning, coordination. Control and motivation’. It is clear that management is partly the
process of done through people and partly the Creative and energetic combination of the skill
and talent of the individual concerned with Doing thing (pettinger, 1999).

2.1.3 Definition of cash management

Cash management is inn general major importance in business enterprise because cash is
means of acquiring good and service. Thus, the goals of cash management is to maximize the
amount of cash the firm must hold for use in conducting its normally a business Activities yes, at
the same time , to have sufficient cash to take trade discount. To maintain Its credit rating and to
meet unexpected needs. Cash management is the process of maximizing the liquid asset through
the Acceleration of the receivable and the disciplined control of disbursement (htl. Hwww-

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ask.for). generally, cash management is center on forecasting and internal control the
responsibility of management with respect to cash is.

 To assure that there is sufficient cash to carry on operations

 To invest idle cash and
 To prevent losses of cash due to theft or misappropriation.

2.2 objective of cash management

The objectives of cash management are twofold:- a. to meet the cash disbursement needs
(payment schedule) and b. to minimize fund committed to cash balance.
2.2.1 Meeting payment schedule
In the normal course of business, firms have to make payment of cash on a continuous and
regular basis to supplier of good, employees and so on. At the same time, there is a cconstant
inflow of cash through collection from debtor. Cash is, therefore, aptly Described, as the “o to
lubricate the ever- turning wheels of business; without it the Process grinds to stop’’. A basic
objective of cash management is to meet the payment Schedule that is, to have sufficient cash to
meet the cash disbursement need the importance of sufficient cash to meet the payment schedule
can hardly be Overemphasized the advantages of adequate cash are_
1. It prevents insolvency or bankruptcy arising out of in inability of a firm to meet its obligation.
2. The relationship with the bank is not strained
3. It helps in fostering good relation with trade creditors and suppliers of raw materials as
prompt payment may help their own cash management.
2.2.2 Minimizing Funds Committed to Cash Balance
Minimizing the cash balance, two conflicting aspect have to be reconciled. High level of cash
will as shown above Ensure prompt payment together with all the advantages. But it also implies
that large funds will remain idle, also cash is a non-earning asset and the firm will have to forgo
profit. A low level of cash balances on the other hand may mean failure to meet the payment
schedule (M.Y Khan P.K Jain, 2000.p.7.3-7.4).

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 2.3 Elements of Cash Management
Cash management made up of four major elements
 Forecasting future cash flow
 Mobilizing and managing the cash flow
 Maintaining banking relation and
 Investing surplus cash balance

Forecasting can be defined as the ability to calculate, predict, or plan future event or
condition using current or historical data. A cash budget monitors how much money will be
available for investment. When it will become available and for how long. Cash mobilization
involves techniques used to assemble fund and make them readily available for investment.
Maintain good relation with bank, saving and loan association, investment banks,
commercial paper dealer, and security analysis is an important part of cash management.
Bankers prefer compensating balances to fee payments because deposits are the main source
of the bank’s loan able funds. A cash budget should provide on estimate of the organization
cash requirement for disbursement by month, weeks, or days.
2.4 Cash balance Requirement (Motives)

There are four primary reasons maintain cash balances:-

 Transaction requirement
 Precautionary requirement
 Speculative requirement
 Compensating balance requirement
2.4.1 Transaction Motives

An important reason for maintaining cash balance is the transaction motive. These refer to the
holding of cash to meet routing cash requirement to fore finance the transaction that firms
carries on in the ordinary course of bussinees.To insure that the firm can meet its obligation
when payment become due in a liquation in which disbursement are in excess of the current
receipts. It must be adequate cash balance. The requirement of cash balance to meet routine
cash needs is known as the transaction motive and such motive refers to the holding of cash to
meet anticipate obligation whose timing is no perfectly synchronize with cash receipts.

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 2.4.2 Precautionary Motive
The cash balance held in reserve for such random and unforeseen fluctuations in cash flows
Caused Precautionary balance. In other word, precautionary motive of holding cash implies the
need to hold cash to meet unpredictable obligation .Thus, Precautionary cash balance served to
provide cushion to meet unexpected contingencies. The more unpredictable are the cash flows,
the larger it need for such balance. The unexpected cash needs at short notice may be the result
of –
Flood, strikes and failure of important customers
Bills may present for earliest here expected
Unexpected slow down in collection of account receivable and
Sharp increase in cost of low material
Another factor, which has a bearing on the level of such cash balance is the availability
of short-term credit. If the firm can borrow a short notice to pay for unforeseen
obligations, it will need relatively small balance and vice versa.
2.4.3 Speculative Motive (Requirements

It refer to the desire of affirm to take advantage of opportunity which present themselves at
unexpected moment and which are typically outside the normal course of the business.
Firm aims to exploit profitable opportunities and keep cash in reserve do so. The Speculative
motive helps to take advantage of :-
 An opportunity to purchase row materials at reduces prices on payment of immediate
cash.
 A chance to speculate on interest rate movements by buying securities when interests are
expected to decline.
 Delay purchase of raw material on the anticipation of declaring price, and Make
purchase at favorable price.

2.4.4 Compensating Motive

Bank provides variety of service to business firms, such as clearance of cheque, supply of credit
information transfer of fund and loan.

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While for some of these service banks charge a commissition or fee, for other they seek in
indirect compensation. Usually clients are require to maintain a minimum balance of cash at
bank since this balance cannot utilized by firm for transaction purpose, the bank themselves can
use the amount to earn a return such balance are compensating balance(my khan and o.k.
jain,P.7-7.3).
2.5 Cost of Holding Cash
When a firm holds cash in excess of some necessary minimum, it incurs an opportunity lost.
The opportunity cost of excess cash (heed currency or bank deposit) is the interest income that
could be earn in the next best use, such as investment in remarkable securities. Given the
opportunities cost of holding Cash, why would affirm hold cash in excess of its compensating
balance requirements? The answer is that a cash balance must maintain to provide liquidity
necessary for transaction need playing bills. if the firm maintains too small a cash balance it
may run out of cash. if this happens, the firm may have to raise cash on short term basis. This
could involve for example, selling marketable security or borrowing involves various costs. As
noted above holding cash has an opportunity cost. To determine the appropriate cash balance
the firm must weight the benefit of holding cash against this cost. To be optimal banks must use
different method of managing cash, like preparation of cash budget, investing idle cash different
financial instruments opportunities.
2.6 Cash Plan
Cash planning is a technique to plan and control the use of cash. It protects the financial
condition of the firm by developing a project cash settlement from a forecast of expected cash
inflows and outflows for a given period. The forecast may be based on the present operation for
the anticipated feature operation. Cash planning may be done on daily, weekly or monthly base.
The period and frequency of cash planning generally depends up on the size of the firm and
philosophy of management. Large firms prepare daily and weekly forecast. Medium size firms
may usually prepare weekly and monthly forecast. Small size firms may not prepare formal
forecasts because of non availability of information and small scale types of operations (pandey,
1999).

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 2.6.1 Cash Forecasting and Budgeting
Cash budget is the most significant device to plan and control receipts and payments. A cash
budget is a summary settlement of the firms expected cash inflow and outflow over the project
10period. Cash forecast are needed to prepare cash budget. Cash forecasting may be done on
short-term or long-term basies.Generally, forecast covers periods of one year or less considered
a short-term; those extending beyond one year considered as long-term. Forecasting provides a
basis on which to measure the difference between actual event and a plan, so that nature and
extend of corrective action can more clearly defined.
2.6.1.1 Short Term Cash Forecast
It is comparatively easily to make short-term forecasts. The important function of short-term
forecasts is:-
 To determine operating cash requirement.
 To develop credit policy.
 To purchase of material.
 To anticipate short-term financing.
 To scheduling payment in connecting with capital expenditures cycles. and
 To manage investment of surplus cash.

The short-term forecasts help in determining the requirement for a pre-determined period to run
business. If the cash requirements were not determined, it would not be possible for the
management to know how much cash balance to be kept in hand, to what extend bank financing
defends up on and whether surplus funds would be available to investing in marketable
securities. One of the significant roles of short-term forecast is to point when the money will be
needed, when it can be repaid. With such forecasts in hand, it will not be different for the
financial manage to negotiate short iterm financing arrangements with banks. The other function
of the short-term for cast is to help in managing the investment of surplus cash in marketable
securities. Carefully and skillfully designed cash forecasts helps a firm to:-
 Select securities with appropriate maturities and reasonable risk.
 Avoid over and under investing and

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Maximize profit by investing idle money ( pandey, 1999).
Short-term forecasting methods the two most common used methods of short-term cash
forecasting are:-
 To receipt and disbursement method and
 To adjusted net income method.

To receipt and disbursement method:-cash flows in and out most companies in a continuous
basis the prime aim of receipt and disbursement forecasts is to summarize these flows during
predetermining period. In case of those companies where cash item of income and expense
involves flow of cash. This method is favored to keep a close control over cash. Three broad
sources of cash inflows can be identified:-
1. Operating
2. Non-operating
3. Financially

Cash sales and collection from customers are the most important part of operating cash inflows.
Developing sales forecast is the first step in preparing cash forecast. A precaution should be
taken in to forecast sales as accurately as possible. Increase of cash sale, cash received at the
time of sale. On the other hand, cash released after sometimes if sale is credit the time is
releasing cash on credit sale depend up on the firm credit policy reflected in the average
collection period. Non-operating cash inflows include sale of old asset and dividend in terms
income. The magnitude of these items is generally small when internally generated cash flows
are not sufficient .The firm report to external financial recourses. This constitutes financial cash
inflow (pandey, 1999).The next step in the preparation of cash budget is estimation of cash flows,
which include the following:-
1. Operating out flow:-cash purchase, payment of payable, advance to supplies wage, salaries,
other operating expense.
2. Capital expenditure:-it is relatively is to predict the expenses of therefore over short run
firms usually prepare this budget ,the before capital expenditure are predictable for the purpose
of cash budget.

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3.Contractual payment:-repayment of loan and interest and lose payment. And
4.Discretionary payment:- ordinal and preference dividend.

II. To adjusted net income method:-This method of cash forecasting involves the tracing of
working capital flows. It is some time called sources and uses approach.
Two objectives of adjusted net income approach are
 To project the company need for cash at further date.
 To show whether the company can generate the required fund internally, and if not, how
much will be borrowed or raised in the capital market. In preparing adjusted net income
forecasts item such as net income.depreciation, tax, dividend etc. Can easily be
determined the company annual operating by budget. The benefits of adjusted net income
methods are:-
 If the highlights the movements in the working capital items, and thus helps to
keep a control on affirm working capital.
 It helps in anticipation of a firm financial requirement.

The major limitation of this method is it fails to trace cash flows, and therefore, its utility in
controlling daily cash operation is limited (pandey, 1999).
2.6.1.2 Long –term cash forecasting
Long-term cash forecast may make for two three or five year. As with short-term forecast,
company’s practice may differ on duration of long term forecast. To suit their particular needs.
Long term cash forecasting reflect the impact of growth expansion or acquisition it is also
indicate financing problem directing from those development (pandey, 1999)
The major uses of the long-term cash forecast are-
 Indicate as company future financial needs It helps to evaluate proposed capital project.
It points the cash required to finance these project as well as the cash to be generate by
the company to support them.
 It helps to improve cooperation planning long term cash forecast compete each division
to plan for future and to formulate project carefully.

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 2.6 Investing Idle cash

The primary function of a bank is to act, as a depositor for it is customer. Funds and to meet the
credit need of its service area but deposit flow and how demand are subject to high degree of
uncertainty with respect to their director magnitude and timing. A commercial bank must have
back up sources of liquidity to cope with these uncertain flows it is to meet its legal and social
responsibility as a depository and a lender. Investing ideal cash has two primary functions. The
first function is it is a major contributor to earnings. The second function of investing ideal cash
is providing the bank with liquidity to meet expected or unexpected cash need. Because the
minimum investment required purchasing money market instrument is generally very large, the
market is dominated by commercial bank, is states and local government, financial and non
bank institution and more recently mutual fund. This large investor purchase money market
instrument convert, temporary cash surpluses in to interest bearing investment.
The principal market instruments are:-
 Treasury bill
 Negotiable certificate of deposit
 Commercial paper
 Banker agreement

Investment of temporarily idle cash in selected type of marketable securities is an element of

good financial management. Such holding are regarding as a secondary cash reserve capable of
quick conversion to cash at any time although producing steady of return (meignetal, 1989)
2.7.1 Treasury bill

These are the most frequently issued marketable securities. They are sold weekly or monthly on
auction basis and have maximum maturity of one year. Treasury bill does not carry an interest
coupon its interest return is difference between the price paid auction and that received when
sold or received at maturity. Although, it is ‘liquid’ because it can be quick converted into cash
without undue risk of capital loss.

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 2.7.1Negotiable certificate of deposit
In essence, a negotiable certificate is receipt issued by a bank or saving and loan association in
exchange for deposit of fund. The banks agree to pay the amount deposited plus interest to the
bears of receipt on the date specified on the certificate. When well known corporation with a
good credit rating wish to borrow money for a short period of time, it issued promissory note
called commercial paper.
2.7.1 Commercial Paper
When a well- known corporation with a good credit rate wishes to borrow owner to the short
period of time it issued promissory note called commercial paper.
2.7.3 Bankers Acceptances
Drafts that a customer has drawn on a bank and which bears the bank promise to pay
them at maturity called bankars acceptances . Tha acceptance retlece the obligation of the
bank and the drawer to pay the face amount.
2.7.4 RePurChase Agrement
A repurchase agreement is a contract in money market instrument . A borrower how needs
fund for a few days enter in to contract to securities : usually treasury bills from his invemtory
and agerees to purchase them back later at a given price . often the price stated simply as that
amount necrtain yield basis to the buyer for the time involved . Generally these money market
secureti purchased primarily to earn interest on temporally cash balance these invsetmente are
of short duration and often a high degree of safety for their principal amount beseuse the
issuers have highest credit rating . In addition to short, duration ivnrestment , which listed
above, there also investments which are of long duration.This type of investment are called
capital market investment investor this market can commit fund for lonregr period of time and
purch sesecurity with geater degree of risk in expectation of higher return . Capital markets
investment alternative include various kind of bond and capital stock. To sum up banks can
invest their of the above two market (money and capital marekt) accordingly in order to have
return on ther cash . And they must use recitpt to payment and receivable in order too identify
the idle cash from what type of transaction it will be flow and to control it fasts (mittre gasseh
.1981 ).2.7.6

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Bill Disconting drawn by Surplus fund may be deployed to purchase discount bill Bill of
exchange drawn by seller (drawer ) on the buyer drawn by(drawer ) for the value of good
delivered to him. During the tendency of the bills if the seller needs of fund .
He may get dicounte on maturity the bill should be presented to drawee for payment . A bill of
exchange is a self liquidate investment . Bill discounting is superior to inter corporate depoit
for investing surplus fund while parking surplus fund in bill discount it should insured that the
bills are trade bill arising out of genuine commercial transaction and as far possibelt they
shuld backed by latre of caredit acceptance by bank to ensure absolute safety of fund .
2.8 Managing CASh Receipts and payments
2.8.1 Imprest system of cash Funds
The term imp rest cash fund ( or petty cash fund refers to a fund) of fixed amount used for small
expenditure that are most comvenienlty paid in cash The imp rest fund is restored to it is
original amount at frequent interval by issuane of a check on the general bank account payable
the custody of the fund. The replenishment check is equal in amount the expenditure made from
the fund . Imp rest cash fund placed in the custody of responsible employees thus serve to
maintain control over cash without involed procedures for small payment.

The size of petty cash fund should be sufficient to meet the normal need of small cash payment of
thee period of two or three weeks as each cash payment is made a voucher or receipt it placed
in the fund the voucher or receipt are reviewed and canceled when the petty cash fund is
replenished when units cash its exhausted and at end of the accounting period so that the
expense paid from the fund are recorded in the project period and the year end cash balance is
stated correctly (mosich A.N 19 8 90)
2,8.2 Cash Chang Fund
Retail stores and other business that receive cash directly from customers must maintain a fund
of fund currency and coin order to make change. Drawing a check for the required amount of
debiting the account cash on hade and crediting cash on bank may establish the fund at the end
of cash business day the lost amount of cash received during the days is deposited and the
original amount of the change fund is retained (fees warn ).

21
 2.8.3 cash gap
Is is simple concept that helps operating people understand how their action affects
accompany cash flow . Although a desirable cash gap varies with the economic sector
geography and season the cocncept can used to improve cash management any company no
matter haw the industry traditional and the natural of business often set the typical cash gap in a
given industry some industry are inherently higher cash gaps flow other.
Some of the ways to reduce the cash gap are –
 Increase the payable period and
 Decrease collection period (Hampton. 1989

2.9 Statement of Cash Flows

The statement of the flow explains haw company obtained and used cash during some period.
The sources of cash known as cash inflows and the uses called cash outflow .The statement
classified cash receipt (inflows) and payment ( i .e outflw)
In to three categories;-
 Operating activity
 Investing activity
 Financing activity

The following section defines there activity and outline the type of cash flows that are normally
classified under cash category .
2.9.1 Operating Activity
Operating activity includes cash in flows and out flows generated by running (i.e operating the
business some of the specific item that shown under this section is as flows :-
1) Cash receipt from sales commission fees receipt from and dividend.
2) Cash payment for inventory salaries
Operating expense interest and taxes note that gain and loss are included in this section
the total cash collected from the sale of asset is included in investing activity section

22
 2.9.2 Investing Activity
Investing activities include cash flows that are generated though companies pucheres or sale of
long term opretaonalls asset invstente in other company and its lending acetivites some items
include in this section follows.
i.Cash receipt from the sale of property property plan and equipmen marketabale secreitsy as
the collection of loans .
ii Cash receipt from the sale of property plan and equipment or marketable security as well as
long made to other determine cash flows investing activities may also require an analysis of
change in the begging and ending account.

2.9.3 Financing Activiy

Financing activity included cash inflows and out flows associate with the company own quality
treancastion of its borrowing activity.The following are some item a appearing under the
financial activity ;-
a) Cash receipt from the issued of stock and borrowed fund.
b) Cash payments for the purchase of treasury stock repayment of dept and
payment of dividend.

Each flwo from finiancing acivitey can frequentily be determined by simply analyzing the
change in the balances of liability equity account (kdmonds. etat ,2001) .
2. 10 MERITS AND DE MERITS OF CASH MANAGEMENT
2.1.10.1.MERITS OF CASH MANIGEMENT
The viability of cash may be mattrof life or death asufficiency of cash can keep an unsuccessful
firm going despite losses. Conversely ,this infifciency can bring faller in the face of actual
prospective earnings.

23
An efficient cash management through a relevant and timely cash budget may enable a firm to
obtain optimum working capital and ease the strains of cash shortage facilitating temporay
investment of cash and proving fund for normal growth. Facilitating temporary investment of
cash and providing fund for normal growth.
3. cash may be said to be like the blood stream in a living body for it is very mach the life –
blood of business it must be kept ciriculaating aroun theareteresof the business because it
circulation get clogged sickness and death may occur as they do when close forms in artery.
4.cash management involves balance changes and other cash flows that do not appear in the
profit and loss account such as capital expenditure.
5. while a regularization in cash flow enables a management to achieve a more effective
planning sophistication in handling cash enables a firm to cut down on the amount that it must
keep in order to just in any given level of operation.
2.10.2 Demerits of cash management
1.It may offer solution of compensation which is not justified on the bases of a concrete nation
particularly when the business economy operation in uncertain world .
2.It considers economic recession as the main sours of uncertainty but ignores technological.
3.The cost of holding cash is the profit that could have earned had the funds been put to anther
use .

24
 3.Chapter Three
3.1 Research Methodology
3.2 Research Design and methodology
Resecrch design was descriptive type to asses cash management of CBEG many sources of this
research would primany date and secondary date conducted. The select research method
employed for this particular study was descriptive method.
3.3 Data type and sources
In the engagement of the research, both primary and secondary data were collected. The primary
data would collected by interview of qucstioner. secondary data on the other hand ,would be
collected from various sources which include weekly,quaterly and annual reports to head office
of the bank manuals and books which are available in library and in the organization were also
use as secorary data source .
3.4. population and sample Techniques .
The total population of the bank was 23 , for this study was define as 10 officers in the cash
management department of the selected from the bank who has an idea about cash buaget (
liquidity planning ) and inyestment decisions as well as daily cash operation of the bank and
personel department which information about background objectives and major activities of the
bank would gathere
3.5 Methods of Date collection
The collected data was present using statement type of presentation and descriptive method
of data onelysis technigue was applied in this study.Aim of discipline was to summarize asset
data .This type of information is extremely help full to invstors who wish to make most from
their investmenets and the results was present in the tables and percentage.

25
 CHAPTER FOUR
4 DATA ANALYSIS , PRESENTATION AND INTERPRETION
This part of research is going to present analysis and interoretation using the primary and
secondary data gathered through questionnaire from CBE Gununo branch employes and
manager.
4.3 Questionnaire Analysis
Is this part the researcher is going to analysis and interpret data obtain from the respondent
through qurstioner. The sample taken out of commercial bank of employees Gununo branch the
research have distributed 10 respondants to gather appropriate data. The researcher analyzed the
data collected from 10 respondants to infer the major problems that exist in CBE Wolaita
Gununo branch and given recommendation for those problems.
4.3.1General profile of the Respondents
The respontdent,s the ganreal profiles like gender age education status and working experience
stated in the table below
Table 4. demographic characteristics
description Number of respondent Percentage %
1 Sex Male 6 60%
Female 4 40 %
Total 16 100 %
2 Age From 18-25 2 20
From 26-35 6 60
From 36-45 2 20
Above 46 0
Total 10 100 %
3 Mortal states Married 6 60
Un married 4 40
Total 10 100 %
4 Educational status cerficate/ 0 0
Preparatory 0 70
Diploma 3 30
Degree 7 0
master 0

26
 Above master 0 0
Total 10 100 %
5 Work experience in the bank
Lest than5 years 4 40
5-10yeras above 3 30
15 years 3 30

Total 10 100 %
6 Work position : Clerk 4 40
Accountant 3 30
Auditor 2 20
Manager 1 10
Total 10 100 %

As we have seen the above tables 4.1 out of the total respondent majority 6 (60)%) are male and
the rest 4(40%)are female From the above observation ,the researchers conclude that the
organization employed more of male than female.
When we observe the age range majority of respondent, s 6(60%)whose age range between 26-
35yeras other 2 (20)%them are between 34-45 years and the rest 3(30%) have diploma and the
rest 7 (70 %)have the first degree. Based on the respondent answer , the researchers conclude
that majority of employees have degree and the rest have diploma.
The employees working expeicnce as shown in the above table.The employees are working in
the bank less than 5 years that are 4 (40%)other are working for 5-10 years that are 3 (30%) are
accountants 2(20%) are auditor and the rest 1 (20%) and 1(10%)are working in the bank for 10-
15 years and above 15 years respectively. From the above table description majority the
employees have well working experience because they are working at least 5 years.
When we observe the working position of the worker most of 40 (40%) are clerk 3(30%) are
accountants 2(20%) are auditor other 1(10%) of them are manager undertaking in working
position accountant auditor manager respectively.

27
4.4.2 Cash Management practice in CBEG , Branch
The bank practice more elaborate fore of cash management must be able to accurately asses there
current cash position and more fairly ,reliable predication at key interval about how mach they
will need to meet the organization expense in addition to this the bank mange its cash in
effictvely it become the comepetitor in the rapidly growing business environment and to be
profitable organization for the long period of time
Table 4.1 About effectiveness of cash management practice.
Q/No Description Number of Percentage( %)
respondents
1 Does the bank manger its cash
effectively?

A. Yes 6 60
B. No 4 40

Total 10 100%

As we have seen from the above table, more of 10 (60%) more replied that the bank cash
management practice is very good and the rest 4 (40%) were forwarded that cash management
practice of the bank good and excellent respectively
The researcher conclude that the bank should be improve its strength and reducing its weakness
to be more effective in cash management opiretion and also the bank give more emphasis area
more related to cash management operation for instance deposit mobilizations and cash
collection and cash discernment.

28
4,3,3 Theoretical Application of cash management
Generally banking industry is user of modern technology and skilled man power ,so there must
be applied the technical concept by matching with its practice that is help to facilitate its opreion
and cash management activity.

Table 4.2 about theoretical application of cash management

Q/No Description Number of respondent percetege%
3 Does the bank apply the theoretical
aspect of cash management?
A. Yes
B. No 10
0
Total 10 100%

As we observed from the above table ,all 10(100%) of the respondent are resplide that the bank
apply the theoretical aspect of cash management.
The researches conclude that based on the respondent answers . The bank applies the theortiacl
aspect of cash management It is importance to economic development and increases its profit in
competive market environment.
Table 4.2 about the difference between the theoretical aspects with employee,s real practice.

29
4 If you answer is" Yes" in question
No 3.Do you find any difference
between the theoretical with your
practice in the aspect of ?
A. Internale control activities
B. cash disbursement 5 50
C. collection from customer 2 20
D. In other operation area 0 0
3 30

Total 10 100%

As it appeared in the above table form the 10 respondents 3(30%)replied that there is difference
in other operation area of the bank. The other 5(50%) forwarde that there is a diffenece
internal control activities and that rest 2(20)of them are replied that there is difference in cash
collection from customer. From the respondents points view the researchers conclude that the
bank has a difference other opretion area the not specified provided as the bank has a difference
in internal control opretion. Therefore the bank should give emphasis all operation area to
mimnimize the differenceraised from theoretical application with the emeployee,s real
practices.In the above question those who answered there is difference in theoretical aspect with
real practice of employees of the bank, there were given a spaces to write their opinion from
many some important unique and critical opinion replied are specified below

30
 Q/on Description Number of Percentage %
respondents
5 Does the bank has polices and
procedures in cash management ?
A. yes
B. No 10 100
0 0
Total 10 100%

Table 5 about polices and procedures in cash management ?As shown the above table ,all
10(100%) respondents forwarded that the bank has policy and procedure in cash management
operations. The researchers conclude that policy and procedures are framework of cash
management operation. Because of this none of them replied the bank has not policy and
procedure in its cash management practice.

Q/no Description Number of Percentage (%)

respondent
6
How long the policy period in the
forecasting future cash flow A. one
Year or less
B. beyond one Year 0 100%
C. Does not forecast 0
10
Total 10 100%

31
 As shown the above table, CBEG , branch did not forecast future cash flow. These the need to
give attention forecasting of future cash flow in order to mobilize easily different type of cash
and near cash related operation.
Based on the above question the researchers prepared the reason and the period the bank forecast
future cash flow but only the bank use budget allocated from head office.
4.3.5 Investment of Idle cash
Investment of temporary idle cash in selected type of marketable security is an element of good
financial management. Such holding are regarded as secondary cash as reserve, capable of quick
conversation to cash any time although providing a steady rate of return.
Table 4.7 about investment of idle cash in CBEG branch
Q/no Description Number of Percentage ( %)
respondent
7 Does the bank invest idle cash ?
A. yes 2 20
B. No 8 80
total 10 100%

As shown from the above table 8(80 %) of the respondent not replied answer about the primary
reason the bank invest idle cash. The rest 2(20%) forwarded that it invest take necessary due
care in investments of idle cash.

The researchers conclude based the respondents forward, the bank does not invest idle cash in
the country investments market, CBEG, branch should be involves those asset that are near to
cash and quickly converted in to cash although they provide interest and that low investments
risk.

32
 4.3.6 Money Market Investment
The money market is a market for shot –term investment that is close substitute for money. The
short –term investment are liquid, easy marketable with little chance of loss or low default risk
and lost executing transactions.
Table 3.8 abut money market instrument of CBEG branch
Q/No Description Number of Percentage %
respondents
8 Does the deal with money market
instrument?
A. Yes 2 20
B. No 8 80
Total 10 100 %

As we have seen from the above table most of 8(80%) respondent are replied that the bank does
not deal with the money market instrument , but the rest 2(20%) them forwarded that the bank
deal with money market instrument.As indicated in the above table explanation , the majority of
the respondent replied the bank is not deal with money market instrument this shown as the bank
not engaged in money market instrument.

33
Table 4.9 about type of market instrument the CBEG
Q/No Description Number of Percentage
respondent %
9 If your answer is "Yes" in question number 8 what
are the main type of money market instrument of the
bank 0 0
A. Treasury bill 0 0
B. Negotiable certificate of deposit 0 0
C. Commercial paper 0 0
D. Banker acceptance and repurchase agreement 0 0
E. Bill of exchange 0 0
F. All are the main market table security of the
bank 2 20
G. Answer not provided 8 80
Total 10 100%

As shown from the above table majority 8(80%)of the respondents not replied answer, but the
rest 2(20%) forwarded that all are the main money market table instrument of the bank . As
indicated in the above table , most of the respondents not provided question.
Because these researchers believe that, that bank does not deal with the above type of money
market instrument .The CBEG , branch should take in to consideration in habiting this type
instruments that are backbone of a business especially organization engaged on cash serviced
activities. Based on provided space the employees of the written the following opinion, w/c are
the major benefit of the bank (i.e. head office level) generate from the instrument, it selected
from number of opinion provided by them. This opinion specified as follows:-

34
  It increases its advantage by sharing the market and expends market growth.
 It meets short cash needs and generates additional interest.
 It provides fund (i.e. source of income).
 It helps to use surplus funds
 It economizes the use of cash and
 It facilitates the financial mobility from one sector to the other
4.4.7 petty cash fund

In most organization, that is frequent need for the payment of relatively small amount such as for
postage due, transportation charges. At the same time, establish a petty cash fund to meet cash
payment for petty and receiving day-to-day expense.In the CBEG, branch to set a petty cash the
following criteria are taken into consideration
 The different expense should be micro expense
 The expense should replenished by the branch after the established fund is consumed.
And
 The expense which needs petty cash find is not exceeding 400 birr

Table 4.10 about petty cash fund in CBEG, branch

Number of Percentage (%)
Q/No Description respondent
10 Is there a petty cash
fund?
A. Yes 10 100
B. No 0 0
Total 10 100%
As we have seen from the about table, all of 10(100%) the respondent replied that the bank has a
petty cash fund.
From the respondent answer, the researchers give its opinion that is the bank maintain petty cash
fund, w/c is important for day-to-day cash management operation of the organization and easily
expensed those need small expenses.

35
 Table 4.11 about a petty casher for handling a petty cash document
Q/No Number of respondent percentage%
description
11 Is there a petty cashier for handing
A petty cash document?
A. Yes 9 90
B. No 1 10
Total 10 100%

As it shown in the above table, more of the 9 (90%) respondents forwarded that, the bank has a
petty cashier to handle a petty cash document, and the rest replied that the bank has not a petty
cashier.From the respondent point of view, the researcher concludes that bank use a petty cashier
to handle its petty cash document. The CBEG, branch always maintain the petty cash fund in the
amount of originally created or formally revised the cash book is prepared.

4.4.8 CASH ADMINISTRATION

In practicing of cash management services, the manager (Administrative organ) must address
questions like, what should we do with whatever excess cash we might have and how would
really ever know for certain if we did have any excess cash? If not they have not considered
such question, they may be undermining their company’s long term prospective and even their
short term stability
Table 4.12 about cash administration system in CBEG branch
Q/N0 Description Number of Percentages( %)
respondents
12 Does the bank habit to practice
good cash administration system
A. Yes 8 80
B. No 2 20
Total 10 100%

As we have seen from the above table, most of the respondents 8(80%) replied that the bank has
good cash administration system, but rest 2(20%) of them forwarded that the bank has not good
cash administration system.

36
Based on the above table explanation the majority expondants answered, the majority of them
are replied that the bank has good cash administration system and the agree with the bank
operate in line with a good administration bodies.
Table 4.13 about the bank give focus in the cash management operation
Q/N0 Description Number of Percentage(%)
respondents
13 If your answer is “Yes” in question number 15,
where the area the bank management strongly focus
in cash management operation?
A. At internal control operation 2 20
B. When cash disburse to borrow depositor 1 10
C. When cash collect from customer 1 10
D. Take the necessary control in all area of cash 6 60
operation

Total 10 100%

As it is appeared in the table, from the total respondents 6(60%) are replied that the bank focus
on all area of cash operation. 2(20%) of them are forwarded that the bank focus on internal
control operation. 1(10%) of them replied that the bank focus when cash disburse to its costumer,
and the rest 1(10%) 0f them are replied that them bank has focused, when cash collect from
customers. The researchers conclude that the banks focus all area of operations especially
internal control activates and when cash disburse to borrow and collect from its customers

37
 4.4.9 PROBLEM OF CASH MANAGEMENT
Cash is the most sensitive asset. Bank business almost entirely relates with cash operation. It
need to ask itself on a fairly regular basis, how we can best make that cash work for the bank. If
try to answer such question, their financial position will be stabilize and cash flow becomes more
predictable. In addition, it becomes effective its cash operation that it is profitable organization
and the leading on in the business world.
Table 4.14 about problem of cash management in CBEG branch
Q/No Description Number of Percentage
respondent (%)
14 Has a problem in cash management practices
in your bank?
A. Yes 8 80
B. No 2 20
Total 10 100%

As we have seen from the table above table, majority 8(80%) of them are replied that the bank
has not problem in managing its cash operation. Moreover, the rest 2(20%) them are forwarded
that the bank has a problems in managing its cash service.
Therefore, majority of the respondent agree that the bank has not a problem in managing its cash
operation. The management body’s design police and procedure operate by gives emphasis
activities concerning to the organization cash control (i.e.by preparing cash receipt and payment
documents) in order to minimize cash oriented problems.

38
 5. Chapter FIVE
5.1 Summery, conclusion and recommendations
5.2 Summery

An overriding concept in current asset management is that less liquid an asset is the higher the
required return. In cash management, the primary goal should keep the balance as lowers.
Possible, consistence with the idea of marinating adequate find for transaction purpose and
compensating balance having this in mind the research attempted to use different type of
description method (questioners and interview) to understand the cash management position of
the bank associated with other current asset the liability of the bank.
Cash is a medium exchange that a bank will accept for deposit and immediate credit to all the
depositor accounts cash includes currency, coins and negotiable instrument such as check, bank
draft, and money order amount in checking and or saving account. At bank cash is usually
divided in to cash on hand and cash in bank but in financial reporting these are combined in to
one amount and report and as ‘’ cash’’As displayed in (table of analysis the
CBEG, branch has two sources of fund (cash) head office source and internal source, the former
sources is the annual budgets allocated by head office, the later include commission transfer of
money from branch to branch (i,e. interval about how much they will need to meet the
organization expense.

The CBEG, branch applies theoretical concept cash management. It mach the theoretical with the
bank employees real practice. According to the respondent answer, the bank has little difference
in theoretical application with its practice. According to the respondent answer the bank has little
difference in theoretical application with practices
CBEG branch this are polices and procedure of management of cash operation but the bank has
not their on cash budget formulation which the annual? Budget allocated by head offices
CBEG branch has any excess cash balance sent the head office the office invest this excess cash
balances different investment area. Because these reason, the branch has not power to invest
excess cash balance in investment market.

39
CBEG branch has not power to deal in money market instrument. This is the function of head
office. As described in the above paragraph. It only excess cash balance sent to the head office
and head office engaged in this money market instrument.

Petty cash fund is a frequent need for the payment to relative small amount such as postage due
for transportation charges at the same time established fund to meet cash payment for petty and
receiving day-to-day expense.

CBEG branch their own techniques due to manage cash operation the most accepted method the
bank apply dual control of cash is the requirement and an area provide cash operation with
holding limit. The CBEG, branch has two sources of fund (cash) head office source and internal
source, the former sources is the annual budgets allocated by head office, the later include
commission transfer to money from branch to branch (i,e. local transfer commission), income on
desposits of money and other sources.

The CBEG, branch uses sources of document to record cash received which known as receipt
vouches.
CBEG branch has holding limits accordance with need of cash requirement. When the bank
carries excess limit, it is permitted to do so desired to sent a way the portion to head office.
To control cash receipt and payment from theft. Fraud and miss appropriation accounting
procedure has a great roll in an organization. To control cash the bank its own procedure
To avoid the accountability of cash from theft, from fraud or misappropriation,
commercial bank of Ethiopia Gununo branch used both accounting and administrative
control procedure.

40
 5.2 Conclusions

As the funding indicates in all the chapters, which is clearly the cash is the most important
element of banking operation, especially, in an environment like Ethiopia where banking
technology and the culture of credit are not well developed. Hence, the importance of manual for
the proper leading of cash is therefore evident. Based on this concept the bank has operational
manual, which requires the staff to familiarize themselves through with to aspect of this manual.
The CBEG, branch effective in its cash management operations. Because it has long time
experience in Ethiopia, banking history and well-experienced offices management and skillful
employees. This result the bank designed internal control systems, ensures safeguarding of
assets, and contributes to effective and efficient operation. So far, the study visualizes the
successful practices and resorts of operation and shortcoming of the bank in it is over all disclose
of financial information with great attention of cash management operation. Hence in this section
we attempted to highlight the major findings of analysis that are strength and weakness described
as follows:-

1. The strengths of the bank need to be encouraged, the main ones are the following:-
 The bank made effort in mobilization of deposits and increment of cash assets,
which are helpful for expansion of loans and advances and other operation too.
 The bank successful in management of cash operation. Which is importance for it
to facilitate activities that are day to day the services transaction, to penetrate easily
in to the market, and to increase earnings.
 Internal control procedure applied by the bank for controlling cash receipts and
payment is appreciable and it is coherent to the guidelines to internal control in the
universal internal control procedures;

41
 2. The weakness of bank need improvement:
o Forecasting of future cash flow
o Investments of idea cash
o Dealing in money market instrument
o Preparation of cash budget and
o Preparation of branch manual

5.3 Recommendation
In spite of the above strong points, the following recommendations should be given appropriate
consideration to improve the weak side of the bank.
In recommended that the CBEG, branch should forecast future cash flow. Because
forecasting future cash flow is the most significant device to control of cash receipt and
payment.
The idle cash of the bank invested only in head office level. Instead of investing in head
office, the bank should have to see their different investment opportunities as to enhance
its performance.
It recommended that the branch have deals with money market instrument. Because it
helps as additional sources of fund in addition to the common income sources.
The cash budget in CBEG, branch prepared by only head office level. Ti should be
advisable preparation of its own cash budget. Because it is important to forecasts the
general future business condition of the bank.
Head office prohibits administrating idle cash balance that excess in the branch. It is
preferable for the bank to avoid trip with cash, to minimize risk and overcome the
problem of dalliance. Instead of trip with cash, the bank should seek demand deposit in
other bank to overcome these problem;
It is advisable the branch to have own up dated manuals to enhance or ensure an effective
cash control mechanisms.

42
 Appendeix
Arba Minch university
College of Business and Economics
Department of Accounting and Finance
Dear respondant his questionnere is designed to gather data for the purpose of conducting
research work titled cash management practices in commercial bank of Ethiopia in the case of
Wolait Gununo branch it is prepared in partial of bachelor degree in accounting and finance.
Therfore,your genuine ,frnak and timely response has great importance to determain the success
of this study.Hence I kindly requested you to spend a few minutes to fill this.
General profile of the Respondents
i Sex Male ለ Female ለ
ii Age 18-25 ለ 26-35 ለ 36-45 ለ Above 46 ለ
iii Educational status Diploma ለ Degree ለ master ለ
iv Work experience in the bank Less than5 years ለ 5-10yeras ለ above 15 years ለ
v Work position :Clerk ለ Account ለ Audito ለ Managerለ

General data
1. Does the bank manger its cash effectively?
A .Yes
B. No

2. If your answer is Yes in the questioner no 1 How does the cash management practice in
your bank?
A/ satisfactory C/ v/good
B/ Good D/ Excellent
3 Does the bank apply the theoretical aspect of cash management?
A. Yes
B. No

4. If you answer is" Yes" in question No 3.Do you find any difference between the theoretical
with your practice in the aspect of ?
A. Internale control activities
B. cash disbursement
C. collection from customer
D. In other operation area

43
 5. Does the bank has polices and procedures in cash management ?
A. yes
B. No

C. Does not forecast

6. How long the policy period in the forecasting future cash flow
A. one Year or less
B. beyond one Year
7. Does the bank invest idle cash ?
A. yes
B. No
8. Does the deal with money market instrument?
A. Yes
B. No

9. If your answer is "Yes" in question number 8 what are the main type of money market
instrument of the bank ?
A. Treasury bill
B. Negotiable certificate of deposit
C. Commercial paper
D. Banker acceptance and repurchase agreement
E. Bill of exchange
F. All are the main market table security of the bank
G. Answer not provided

10.Is there a petty cash fund?

A.Yes

B.No
11. Is there a petty cashier for handing a petty cash document?
A.Yes
B.No

12. Does the bank habit to practice good cash administration system
A.Yes
B.No

44
13. If your answer is “Yes” in question number 12 where the area the bank management strongly
focus in cash management operation?
E. At internal control operation
F. When cash disburse to borrow depositor
G. When cash collect from customer
H. Take the necessary control in all area of cash operation

14. Has a problem in cash management practices in your bank?

A. Yes
B. No

45
 6 Reference
1.Brigam,Eugenef,(2002) Financial Management

2. CBE operational manual

3.Fees Warren,Principle of accounting (16th edi)

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