PROFIT MAXIMIZATION: A STRATEGIC TOOL FOR SURVIVAL OF BUSINESSES IN NIGERIA

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Author

Presented To

Department of Entrepreneur

TABLE OF CONTENTS

     Pages

Title Page                                                                                  i

Certification                                                                              ii

Dedication                                                                                iii

Acknowledgement                                                                      iv

Abstract                                                                                   v

Table of Content                                                                        vi

CHAPTER ONE: Introduction

1.0     Background of the Study                                                  1

1.1     Statement of the Problem                                                  2

1.2     Objective of the Study                                                       3

1.3     Research Questions                                                          4

1.4     Statement of Hypothesis                                                   4

1.5     Significance of the Study                                                   5

1.6     Scope of the Study                                                           6

1.7     Limitation of the Study                                                     6

1.8     Organization of the Study                                                 6

1.9     Historical Background of Dangote Cement Industry            8

1.10   Definition of terms                                                            9

CHAPTER TWO: Literature Review

2.0     Introduction                                                                    13

2.1     Current Literature Review                                                 14

2.2     Meaning of Profit                                                              11

2.3     Types of Profit                                                                  16

2.4     Approaches to Profit Maximization                                     17

2.5     Theory of Profit                                                                18

2.6     Profit Maximization in Business                                        24

2.7     Limitation of Profit Maximization as an Objective in Business25

2.8     Importance of Profit                                                          27

2.9     Justification of Maximization in Business                          28

CHAPTER THREE

3.0     Introduction                                                                    31

3.1     Restatement of research Questions and Hypothesis            32

3.2     Research Design                                                              32

3.3     Characteristics of Study Population                                   33

3.4     Sampling Design and Population                                       33

3.5     Source of Data                                                                 35

3.6     Method of Data Collection                                                 35

3.7     Administration of Data Collection Schedule                        36

3.8     Procedure for Processing Data                                           36

3.9     Statistical Method                                                            37

3.10   Justification of Statistical Tool                                          37

3.11   Limitation of Methodology                                                 38

CHAPTER FOUR: Data Presentation Analysis and Interpretation

4.0     Introduction                                                                    39

4.1     Presentation of Respondents Bio-Data                               40

4.2     Presentation of Research Questions                                   43

4.3     Test of Hypothesis                                                            49

4.3.1  Statement of Hypothesis 1                                                49

4.3.2  Statement of Hypothesis 2                                                52

CHAPTER FIVE: Summary, Conclusion And Recommendation

5.0     Introduction                                                                    55

5.1     Summary                                                                        55

5.2     Conclusion                                                                     56

5.3     Recommendation                                                           57

Bibliography                                                                   59

Questionnaire                                                                61

 CHAPTER ONE

INTRODUCTION

1.0   BACKGROUND OF STUDY

 The ultimate goal of every firm in business is profit i.e. (Profit Maximization) and cost minimization in order to maximize shareholder wealth. Many industries today are facing problems due to the expansion through increases sales and the introduction of new product. Some on the other hand are facing problem of contraction owing to the introduction of substitute material.  It is vital that management should be in position to plan for these changing levels of activities.

Apart from the problem of contraction and expansion during economic depression, an enterprise may be faced with the alternative of closing down or selling it at a price below the total cost.

Hence profit planning and control becomes difficult as a result of product offered and the action of competitor. In order to solve the problem created by the above situation profit, planning, cost, and their behaviour at different separating level, one of the most important tools developed by accountants to assist management in meeting the challenges is cost volume profit analysis.

According to I.M Pandey the analytical technique used to study the behavior of profit in response to changes in volume, cost and price, is called “Cost volume profit analysis” It is  a device used to determine the usefulness of the profit planning process of the firm.

The entire field of profit planning has become associated with the cost volume profit relationship in organization. In micro-economics course, profit  maximization is frequently cited as the goal of the firm; Profit maximization stressed the efficient use of  capital resources but it is not specific with respect to the time frame over which profit are to be measured; Profit maximization function largely as a theoretic goal with  economist using it to prove how firms behave rationally to increase profit.

Unfortunately, it ignores many real-world complexities that financial management firms must deal everyday with. Two major factors not considered by the profit maximization are Uncertainty and timing.

1.1   STATEMENT OF PROBLEM

The rising magnitude of the incessant profit or loss in Nigeria business organization over the year has become a thing of concern to managers; government, Policymakers, academia, entrepreneurs, financial analysis, economist and other stakeholders in the country’s economy. Various studies have been carried out to explain with empirical evidence, the factors driving profit and loss in business organization

The challenges facing most firms is numerous particularly during the period of economic depression or recession characterized by high liquidation of many companies, merger and acquisition, low technological powers, shortage of foreign exchange to buy needed raw material, high cost of production, erratic powers supply, high volume of imported goods and the advanced state of competition has affected drastically the maximization profit and cost maximization in most business organisation.

In a competitive world the key factors are cost price turnover and profit and these are factors which no business organization can ignore.

1. Management is faced with the problem of how to make effective and efficient use of their available scarce resources in order to achieve the objective of profit maximization.
2. Most management and organization lack under-standing on the importance of cost minimization as an effective tool or technique that has help in the sustainability on most business organization.
3. Most organization is faced with high cost of production which has led to inefficient utilization of the cost volume profit analysis technique.   

1.2   OBJECTIVE OF THE STUDY

Profit planning and control are essential ingredients of every successful business in the world. The efficiency of management is measured by the amount of profit or loss in a given accounting year. The general objective of this study therefore will be;

1)           To find a way of making use of scarce resource in order to achieve profit maximization.

2)           To highlight the importance of profit using cost volume profit analysis over other forms of technique.

3)           To identify the problems encountered in the economy that leads to lack of practical application of profit maximization.

4)           To evaluate the extent to which the use of profit maximization on Dangote Cement Plc has been efficient.

1.3   RESEARCH QUESTIONS

1)           Does your organization use cost volume profit analysis as a tool for profit planning and control?

2)           Apart from cost volume profit analysis; what other techniques do you employ in the profit planning and control?

3)           What problems does Dangote Cement Plc encounter in the profit planning and control?

4)           In what ways specifically has the application of cost volume profit analysis helped the organization to achieve efficiency and effectiveness?

1.4      STATEMENT OF HYPOTHESIS

1.     HO:   Cost volume profit analysis as a tool for profit planning and control is  not used in Dangote Cement Plc.

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