AN APPRAISAL OF THE PROFIT MAXIMIZATION: A STRATEGIC TOOL FOR SURVIVAL OF BUSINESSES IN NIGERIA
As we all know the objective of any business venture is to maximize profit. Hence all the decisions with respect to new projects, acquisition of assets, raising capital, distributing dividends e.t.c are studied for their impact on profits and profitability.
Profit maximization theory is based on profits and profits are a must for the survival of any business. Therefore, this research work focused on the effectiveness of profit maximization on Dangote Cement Plc as a case study.
The data used was gathered with the aid of a questionnaire and Chi-Square (x2 ) method of data analysis was applied in analyzing the data.
Based on the findings, the research reviewed that profit maximization occurs with efficient and effective use of resources by the employees in an organization. It also brings to the fore an organizations Strengths, Weaknesses, Opportunities and Threats in an attempt to be relevant and meet customer needs.
It was also discovered that cost volume profit analysis is the technique that is being used at Dangote Cement Plc when planning for profit cost. Hence, it is recommended that Business owners and Organizations interested in maximizing profit must review their cost structure regularly, must be diligent in cutting frivolous cost and boost productivity amongst employees. Furthermore, they must ensure that they make adequate provisions for contingency funds to help control risks and external factors that could hinder the progress of the business.
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
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.
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.
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.
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;