MATTU UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE
CASH MANAGMENT PRACTICE IN COMMERCIAL BANK OF
ETHIOPIA (CASE STUDY ON HURUMU BRANCH)

A PROPOSAL PAPER SUBMITTED TO ACCOUNTING AND

FINANCE DEPARTMENT IN PARTIAL FULFILLMENT FOR THE
REQUIREMENT OF BA DEGREE IN ACCOUNTING AND
FINANCE

SUBMITTED BY: YOHANNIS WAYESA

ADVISOR: MARTHA M

Dec 2024 Mattu, Ethiopia

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CHAPTER ONE................................................................................................1
Introduction.....................................................................................................1
Background of the Study..............................................................................1
Background of the Organization..................................................................2
Statement of the Problem............................................................................3
Objective of Study........................................................................................4
General Objectives....................................................................................4
Specific Objectives....................................................................................4
Significance of the Study.............................................................................4
Scope of the Study.......................................................................................5
CHAPTER THREE...........................................................................................5
Research Methodology and Design..............................................................5
Area of the Study.......................................................................................5
The Research Design.................................................................................5
Data Type and Source...............................................................................5
Method of Data Collection.........................................................................5
Sample Size and Sampling Technique......................................................6
Data collection instrument........................................................................6
Time and Budget Breakdown..........................................................................7
Time Breakdown...........................................................................................7
Budget Breakdown.......................................................................................7
REFERENCES.................................................................................................8
CHAPTER ONE

Introduction
Background of the Study

Cash is a medium of exchange that the bank will accept for deposit and
immediate credit to depositor account that include currency and coins,
personal checks, bank drafts, money order credit cards, select drafts and
so on (Planket, 1986). Cash management is one part of the financial
management system. It is a proper use of an entities cash resource,
since the bank play a major role in facilitating the way of financial sector
operates with banks utilize. Cash is important for understanding not only
banking behavior but also for the role that the bank play in the
transmission mechanism by effective cash management banks can
reduce cash balance at the minimum level and at the same time
customers requirement can be insured banks are business established
that safeguard can be insured banks are business established that
safeguard people’s money and use it to loan and investment, cash
management services as the mean to keep the bank functioning by
making the best use of cash or liquid resources of the bank. Therefore
banks are very much interested in establishing procedure for increasing
the efficiency of their Management. Among the procedure carefully
prepared cash forces (short-term and long term) and investment of idle
cash is the major ones. (WWW. Docstoc. Com2:00 PM). Commercial
Bank of Ethiopia gives various type of service to their customers for
example the mobilization of financial resources and lending the
resources to the business community mobilization of Financial resource
arises from the fact that the amount of productive investment is very
low. In order to receive financial constraints on investment financial
intermediaries are expected to play a deceive role is bringing about
 efficient way of rising the required level of funds through application of
proper financial management system. There for financial managers how
cash the bank should carry, the specific types of securities to issue and
how much of the firms earning to Retain versus to pay dividends,
(www.com bank eth.com)

The State Bank of Ethiopia was established in 1942 with on objectives

Background of the Organization

the duties of both commercial and central bank is 1963 established as

Share Company to take over the commercial banking activities of the
state bank of Ethiopia. In the 1974 revolution, commercial Bank of
Ethiopia got its strength by emerging with privately own Addis Ababa
Bank. Since then it has been playing significant role in the
development end over the country. The Commercial Bank of Ethiopia
which is striving to embark in to world class commercial bank
hindering the state of the art and reliable service to its millions of
customers both locally and abroad. The business strategy of the bank
focuses in the stake holders its services. On April 30, year 2011 the
number of branches reached 364 stretches across the length breadth
of the country. CBE combines a wide capital base with more than 9700
talented and committed employees. In 2011 whom it regard as its key
asset for employees. In 2011 whom it regard as its key asses for
banking development. The state owned commercial bank of Ethiopia
still dominates the market in terms of asset capital and customer base
and Branch Network, deposit the growing competition from Private
Bank over the last 15 years. This makes it one of the most reliable and
strong commercial Bank in the country and the region. Its strong
capital base above 67 years of rich experience in the market and large
branch network through the country enable the bank to accommodate

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 large demand for banking service, Bank from private and public
companies and to increase its overall revenue on sustainable base the
fundamental component of our mission statement includes customers.
These are the most important asset we continuously revise our attitude
towards the customers with the view to securing. Maximum customers
satisfaction in order to optimally meet the need of our customers and
efficiently manage our business we are committed to enhancing long
term share holder have, the other is to get quality customers
employees are very important Quality customers service is possibility
only through motivated and skilled employees to this end the bank is
highly concerned for the wellbeing of its employees. It tries to develops
a work force that enjoy working for and prides itself is associated with
bank and we believe that our success 3 always emanates from the
effort we continuously expert on securing reliability and public
confidence from the community at large.

Statement of the Problem

Management is responsible for controlling and protecting of the

business like inventory, receivables, plant assets and cash. Cash
management is one part of financial management system that focus on
internal control and forecasting the future cash requirement.
(www.Investopedie –com.6:00 pm). Cash is the most important element
of banks day today activity. By effective cash management banks can
reduce the excess cash at optimum level and ensure customers’
requirements. Cash management involves neither excess not deficient
amounts of cash on hand at right time proper cash management requires
that the bank know how much cash is need as well as how much it has
and where that cash is at all time. Cash management also require
knowing the amounts of fund available for investment and the length of
time that can be must. (Planket, 1986). Banks are increasing becoming

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 innovative and anticipating the needs of corporate towards
standardization, enterprise resources planning integration,
reconciliation, real time reporting, providing an end view as cash
management value chain besides offering the ability to reach and be
reached their own customers the mounting pressure from competition
forces the banks to look an information technology vendor who offer
better solution and services in cash management (www. Hcltech. Com.
9:50 am at local). Eventhough, cash management receive a priority for
financial institution especially Commercial Banks little is known on how
effectively monitor its cash flow, how to accelerate collection receipt and
optimize timing of disbursement, maximizing interest relate collection
receipt and optimize timing of disbursement, maximizing interest
earning and properly secured investment. Therefore this study will try to
investigate a solution for the following basic research questions.
 What are the source of short term financing used by CBE?
 How the bank control cash receipt and disbursement.
 Does the bank have idle cash?
 Does the bank has cash budget?
 Does the bank possess cash?

Objective of Study

General Objectives

 The general objective of the study will focus on the cash

management practices of CBE in Hurumu.

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 In addition the above mentioned general objective the study has the
Specific Objectives

following specific objectives.

 To identify the source of short term finance in the bank.
 To assess the internal control of cash receipts and disbursement.
 To assess the bank’s its cash budget.
 To identify and asses idle cash its investment area.
 To compare theoretical aspect of cash management practice with in
actual practice of CBE.

Significance of the Study

This study will benefit CBE of Hurumu Branch by identifying factors
that affect the internal control over cash and suggesting possible
recommendation. It also reflects the researcher cash management
practice of Hurumu Branch with its limitation and weakness and give
possible commentive idea or solution as to how the financial manager
of the banks of Hurumu Branch should control its cash under the
proper management of cash.

Here the study will focus on the assessment of cash management

Scope of the Study

practices of CBE of Hurumu branch.

CHAPTER THREE
Research Methodology and Design

Area of the Study

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 The study will conduct on the cash management practice of
commercial bank of Ethiopia at Hurumu branch.

The Research Design

For this study descriptive design type of research, will be used.

Because, the aim of the study describe the actual cash management
practice of Hurumu branch.

Data Type and Source

For this study, the researcher will use both quantitative and
qualitative data type especially the later one. The researcher also use
both primary and secondary source of data.

Method of Data Collection

For primary method of data collection closed questioner and

unstructured interview will be used rather than other method of data
collection because in order to understand the real cash management
practice need to observe the activities. The secondary data will be
collected by reviewing the company published and unpublished
journals, magazines and reports.

Sample Size and Sampling Technique.

From a total population of ten (10) employees of CBE six employees

will select as a sample size by using judgmental sampling techniques.
Because this six employees are especially engaging in the area of cash
management practice.

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 In this study the researcher will use at least three data collecting
Data collection instrument

instruments: and conducting interview with the selected sample

respondents. But, the researcher will also use official documents for
the sake of maximizing crosschecking to secure the validity of the
sources of the study.

Questioner

The study will employ the use of questionnaires to collect the primary
data. Questionnaires are appropriate for this study because, it help to
collect information that is not directly observable as they inquire about
feelings, motivations, attitudes, accomplishments as well as
experiences of individuals. They further observe that questionnaires
have the added advantage of being less costly and using less time as
instruments of data collection. The questionnaire, will be conducted as
semi-structured, will be administered through drop and pick-later
method to the sampled population.

Interview

To undertake the proposed study the researcher will also intends to

conduct interview with well-informed individuals on the study subject.
The researcher has strong belief that interview permits greater depth
of responses which are not possible through any other means. Thus,
the purpose of the interview is to collect more supplementary opinion
to stabilize the questionnaire responses. Indeed, the interview will be
performed with the bank managers and workers. Semi-structured

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 items will be prepared to conduct the schemed interview with the
above respondents.

Time and Budget Breakdown

No. Activates Period of accomplishment

Time Breakdown

1 Title Selection Dec 1-15/2024

2 First draft proposal preparation Dec 20-30/2024
3 Submission of first draft personal Jan 12/2024
4 Discussion with advisor and taking Jan12-15/2024
correction
5 Submission of final personal draft Jan 20/2024
6 Sample selection Jan21-23/2024
7 Data collection Jan24-25/2024
8 Data interpretation Jan26-28/2024
9 Writing first draft of the report & Jan29-30/2024
submission
10 Taking the correction and drawing Feb 1 – 10/2024
the conclusion on and
recommendation.
11 Submission of the final draft and July 10-15/2024
defending

Budget Breakdown

The cost that will be needed for the accomplishment of this study is shown in the table given
below

N Item Unit Price Quantity Total cost

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 1 Stationary Cost
- Paper 200 2 216
- Pen 5 5 25
- Pencil 4 10 40
- Ruler 2 5 10
- Binder 100 2 200
- Transport and
other
Total Stationary Cost 403
2 Other Costs
- Photocopy 2 500 1000
- Secretary Cost - - -
- Mobile Card 25 8 200
Total Other Costs 1700
Grand total cost 2103

REFERENCES
 Arens. Lobeck. 2001. Auditing integral Approach 9th. Edition.
 Bringham.F, 1995. Fundamental of financial Managing 7th
edition.
 Dav`s, Dukes, Dychkam. 1995. Intermediate Accounting 3rd
edition.
 Kieso. Weygadite, war filed.2001. Principle of Auditing 9th
edition.
 Kockw, timothy, mach Donald.1995. Bank management 4th
edition
 Planket. 1986. Fundamentals of managerial finance 2nd edition.

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 Raymond, P. Nevell 1985 fundaments of managerial finance 7th
edition.
 Rose Stephen. 1995. Fundamental management and corporate
finance 4th edition.

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