Funds Flow Analysis of the Insurance Companies in Nigeria

Funds Flow Analysis of the Insurance Companies in Nigeria

Abstract of Funds Flow Analysis of the Insurance Companies in Nigeria

Funds refer to cash equivalent or to working capital. The fundamental concept of working capital is relatively simple. It is used to denote the excess of current assets over current liabilities. The excess is sometimes referred to as “Net working capital and it can also be referred to as company’s assets which, in normal course of business, are convertible into other assets.

The concepts of funds flow analysis may be referred to as the following terms:

Sources and application of funds statement; funds flow statement; movement of funds statements, and statement of changes in financial statement.

The need for funds flow analysis arises because the profit and loss account and balance sheet do only show the disposition of the company at the beginning and end of the accounting periods, but do not show or identify the movements in assets and liabilities during the year and the effects on the net liquid funds.

However, funds are important to an organization such that no organization can exist and continue to remain in business without adequate funds to meet its short term and long term obligations as well as meet their day transactions.

Considering the peculiar nature of the industry, the following constitute the insurance funds;

Premium income from clients; other incomes such as annuities receivable.

The researcher decided to conduct a study on the funds flow analysis in an insurance industry to enable him to determine the peculiar ways by which this industry raises trades and uses their funds.

To facilitate the study, empirically two hypothesis were drawn and subsequently a field study was under taken to establish the validity or non-validity of the hypothesis. Both primary and secondary data were collected. But due to insufficient primary data the researcher based most of his work on secondary data, which includes oral interviews held with top officials of some insurance companies and by distributing questionnaires to 100 insurance companies.

This research work did not only identify the problems but also offered solutions to the problems encountered by the insurance industry.