THE FACTORS AFFECTING THE CONCEPT OF PROFITABILITY AS A GUIDE TO POLICY DECISION

By

OKPARA NDUBUISI

Presented To

Department of Accountancy

TABLE OF CONTENTS

Title page ii

Approval page iii

Dedication iv

Acknowledgement v

Table of content vi

Chapter one

1.0 Introduction 1

1.1 background of the study 1

1.2 Statement of problem 4

1.3 Purpose of the study 5

1.4 Significant of the study 6

1.5 Scope and limitation of the study 7

1.6 Definition of terms 8

Chapter two

2.0 literature review 9

2.1 Definition of profitability and policy decision 9

2.2 Causes that leads to poor profitability 10

2.3 Importance of casting methods

on profitability of business 12

2.4 Solutions to the effects of profitability 13

Chapter Three

3.0 summaries of findings 16

3.1 Conclusion 18

3.2 Recommendation 19

Bibliography 20

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The concept of profitability can be defined as that concept which provides the management with alternative courses of action according to the various degree of profitability stating clearly in relevant cost accounting from the cost and benefits associated with individuals projects which enables management to select the most profitable.

Most of the policy decisions of manufacturing industries are generally directed towards profitability. Policy decision under this concept has a direct effect of increasing and enhancing the general profitability of the manufacturing industries concerned.

The origin of this concept can be traced back to the era of industrial revolution. Pride to this era, industries was run as a family concerned just to maintain a states quo.

Due to the increase in trade, brought about by the industrial revolution, most businesses grow from the usual family arrangement to large groups and consortia.

Resources were pulled together and handed over to other people to manage for the owners. Naturally, resources owners must expect of a profitable return from their investment.

This urgent obligation forced management to seek ways of carrying out the activities so as to make profitable return to the resource owners. Investment grow in all dimension until the first and second world war in which after it, manufacturing industries increased in large number, grew in importance and also in meeting the improved living demands of the over-developing world.

Material must have to be bought in enough quantity to avoid stack-out and at the same time check over-stocking.

Labour that is a very volatile community must be allowed to operate in a conducive environment so as to reap the benefit as hiring labour.

Generally ecological consideration must be reviewed thereafter, site is acquired, structures erected,, machines and equipment installed. Manufacturing industries moves with the changing technology, meet it's social responsibility operate under government stipulations, pay tax and when due, meet the expectations of shareholders.

High administrative cost, cost of changing technology, price competition, scare resources, falling economy, cost of government restriction, the need for maximization of shareholders wealth, poor capital bases etc must be accommodated and adjusted in such a way that total cost of manufacturing of product will not only be less than sales revenue but give a good profit margin.

This situation of operation under many uncompromising variables gave rise to the need for policy decision on such thing as :

1. Setting an industry

2. Expansion of an existing product

3. Introduction of a new product

4. A change in product design

5. Sell or process further

6. Close down

7. The replacement of Labour by machinery.

The cost accountant supplies statements of anticipation cost and profit relation to such problems aforementioned.

1.2 STATEMENT OF PROBLEM

This research work entitled factors the concept of profitability as a guide to policy decision, a focus on manufacturing industries to determine the factors affecting the concept in some elected manufacturing industries in Enugu local government metro polices.

SUB - PROBLEMS

1 To know the present function of the concept in chosen examples of industries on such things as:

(a) The objectives of the concepts

(b) The basis on which it was selected

(c) The significance of the concept

(d) The general awareness of the existence of the concept among selected industries.

(e) Department covered by the concept

2 what are the reactions of the industries to these factors affecting concept

3 What are the resources of the industries to the factors affecting the concept?

4 To make recommendation based on the finding about the factors affecting the concept.

1.3 PURPOSE OF STUDY

This research study on factors affecting the concept is formed by the need to explaining the causes of selected industries through the concepts.

The profitability of industries encourages them to assume their social responsibilities and participate effectively and concretely in the economic growth of the economy of Enugu local government Area in particular.

The research work looked into the policy decision of some of the selected industries, factors affecting their execution. The factor effects were also qualified in terms of their companies profit decision. The research work developed on the concept of profitability from which it determined the exogenous, endogenous and political factors. It equally looked on how management contribute negatively towards the concept, and how the production schedule in terms of efficiency and cost saving to determine how they were arranged to achieve the set project objectives.

1.4 SIGNIFICANCE OF THE STUDY

The study of the factors affecting the concept of profitability as a guide to policy decision in manufacturing industries in Enugu local government Area is unique to the extent that is pursues a focus in trying to X- ray the concept and it's factors affecting it. But the extent of the study done is significant in the sense that it will provide both sound theoretical and practical base for future research and inventors in this particular area having know the establishing a manufacturing industries and factors affecting it.

Finally, it will enable the researcher to have in-depth knowledge of this study and open a new area of further research for students and industrial researcher.

1.5 SCOPE AND LIMITATION OF STUDY

The local government Area of study area inaugurated an the 14^th of may 1976, under the local government Edict 1976. Enugu local government (Establishment) instrument 1976, N0 15 volve 2.

The local government area of study has a total land area of 74. O359km. It is made up of six (6) autonomous communities with Enugu as its administrative headquarters:

Enugu as its administrative of the local government area are as follows:

Amechu

Awkwnanaw obeagu

Akwuke

Ugwuaji

Nike

As a result of the acute time constraints and other words while conducting the research, it was seen reasonable to limit the scope of the study to Enugu local government or metro-police.

1.6 DEFINITION OF TERMS

In order to appreciate what the project topic is all about, it is necessary to understand the terms used.

CONCEPT OF PROFITABILITY: This is the concept which provides managers of manufacturing industries with alternative courses of action according to the various degree of profitability starting clearly in relevant lost accounting form, the costs and benefits associated with individual projects which enables them to select the must profitable.

POLICY: Policy means principles and objectives which guides decision making as particular maters and which expresses broad intention or attitudes of a manufacturing industries.

INDUSTRY: This means the activities of processing manufacturing goods on a large scale using extensive plant and equipment or a class of firms that are sufficiently similar in their main activities or products to be grouped together for the purpose of descriptions.

MANUFACTURING: This means the process of changing raw materials into finished goods lising plants and equipment's.