ABSTRACT
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
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.
H1: Cost volume profit analysis as a tool for
profit planning and control in Dangote Cement Plc.
2. HO: The application of cost volume profit
analysis has not helped Dangote Cement Plc to be efficient and effective in its
operations.
H1: The application of cost volume profit
analysis has helped Dangote Cement Plc to be efficient and effective in its
operations.
3. HO: Dangote Cement Plc does not employ other
techniques in profit planning and
control apart from cost volume profit analysis.
H1: Dangote Cement Plc employs other techniques
in profit
planning
and control apart from cost volume profit analysis.
1.5 SIGNIFICANCE
OF THE STUDY
It
is hoped that this study will be of importance to students (Accounting, Banking
and Finance, Business Administration, Economics etc) staff and management of
business organization, the individuals in banking profession and the
shareholders of the companies.
The
students are to be aware of the role played by profit maximization in business
organization. Profit maximization is an essential tool in all business
organization.
In
a competitive world, the key factors are cost, price turnover and profit, and
these are factors which no business organization can ignore. Therefore, the
significance of the study is as follows:
1. How
the study of profit maximization and cost minimization of Dangote Cement Plc knows
how their profit margin is increasing over time.
2. It is
useful to student in schools since it will serve as a source of reference to
them in the nearest future.
3. It
is useful to the state since it is used by government in making decision for
improvement of the states.
4. It
is useful to the economy as a whole since it is used by policy makers to
maximize profit in the economy.
5. It
is a basis for understanding, contribution, margin pricing, related short run
decisions and transfer pricing.
1.6 SCOPE OF THE STUDY
This
study is to analyze the effectiveness of profit maximization tool in business
growth in Nigeria as a tool for profit planning and control in general but with
particular reference to Dangote Cement Plc. This is with the view of finding
out how the company, has been able to manage cost in order to maximize profit.
1.7 LIMITATION
OF THE STUDY
The
study of the effectiveness of profit maximization as strategic tool in business
growth in Nigeria using Dangote Cement Plc., Lagos State. In carrying out this
study, I was faced with number of constraints some of which are:
FINANCE:
Inadequacies of funds affected expenses on distribution and collection of questionnaires
to respondent and from respondents; printing of questionnaires and other
transport expenses in conducting the research.
TIME:
There is need to observe lots of protocols in respects to levels of management
before the collection soring that the primary data collected would be dependable
to some extent, also the rationing of time so as to accommodate my other
courses.
Nevertheless,
these constraints were taken care of and with limited errors and
variances.
1.8 ORGANISATION
OF THE STUDY
The
study is presented in five chapters. The first chapter introduces the study and
establishes the problem to be addressed in the study. The background, the scope
as well as the significance of the study is also discussed. Chapter two
explores the review of literature; the third chapter reviews the research
methodology and theoretical framework to be used. The fourth chapter presents
the result of the analysis data and trend of Dangote activities in Nigeria
during the years under review; while chapter five presents the conclusion,
summary and recommendation of the study.
1.9 HISTORICAL
BACKGROUND OF DANGOTE CEMENT INDUSTRY
Dangote
Group of Companies was established in May 1981 as a trading business with, an
initial focus on Cement, the group diversified overtime into a Conglomerate
trading, salt, flour, sugar and fish. By the early 1990s, the Group had given
into one of the largest trading conglomerate operating in the country.
In
November 1992, Dangote Cement was incorporated on 4th, it was formally known as
the Obajana Cement Plc and it was commissioned in 2003 as the largest cement
plant in sub-Saharan Africa.
In
comparison to local peers, Dangote Cement Plc significantly outplays other
cement manufacturers, as it presently control about 57% of local manufacturing
capacity, this is expected to rise even further to about 67% on completion of
Ibese plant and Obajana’s 3rd and 4th by Q1.11 combining manufacturing
(excluding BCC) and imports, Dangote Cement accounted for about 40% of total
Cement supply as at 2009; overall market share rose to about 49% with the
inclusion of BCC.
In
line with Nigeria’s Millennium Development Goals, the huge deficit in
infrastructure especially adequate housing and transportation – roads, rails
and ports, present a major case for continuing growth in cement consumption in
Nigeria over the next 10 years at least. Based on a broad base argument that
cement demand is more likely to continue rising. In the medium to long term,
we
assess in this report, the key scenario, undergirding our expectation for
cement demand in Nigeria, and present our outlook for Dangote cement’s revenue
and profitability in the near to long term.
The
company was granted a pioneer status for a period of 3 years with effect from
January 1st 2009. The company is therefore exempted from payment of income tax
in respect of profit accruing from manufacturing and sales of cement during the
period to December 1st 2011.
1.10 DEFINITION OF TERMS
1. BREAK EVEN POINT: This is the level of
operations at which a business revenue and expired costs (expense) are exactly
equal.
2. BUSINESS: A commercial activity engaged
in as a means of livelihood or profit, or an entity which engages in such
activities. It is also the activity or the organized effort of an individual or
a group of individuals making use of resources in the environment to provide
and distribute goods and services at a profit.
3. COST: Cost denotes the amount of money
that a company spent on the creation of production of goods or services. It
does not include the mark-up for profit; it is also total money time and
resources associated with a purchase or activity.
4. DIVIDEND: It is a taxable payment
declared by a company’s board of directors and given to it’s shareholders out
of the company’s current or retained earnings, usually quarterly. Dividends are
usually given as cash (cash dividend), but they can also take the form of stock
(stock dividend) or other property.
5. EFFICIENCY: Efficiency is the
comparison of what is actually produced or performed with what can be achieved
with the same consumption of resources
(money, time, labour etc). It is an important factor in determination of productivity.
6. INVESTMENTS: Is an asset or an item
that is purchased with the hope that it will generate income or appreciate in
the future. In economic sense, an investment is the purchase of goods that are
not consumed today but are used in the future to create wealth. In finance, an
investment is a monetary asset purchased with the idea that the asset will
provide income in the future or appreciate and be sold at a higher price.
7. MARKET: Market is a regular gathering
of people for the purchase and sale of provisions, livestock, and other
commodities. It is actual or normal place where forces of demand and supply
operate, and where buyers and sellers interact (direct or through
intermediaries) to trade goods, services, or contracts of instrument, for money
or barter.
8. ORGANISATION: Is an elements or process
of management concerned with the growth or change of the structure. It is a
process of dividing and accountability within and external to the sections, the
whole being coordinated to achieve the overall objectives.
9. PRODUCTS: Product is an article or
substance that is manufactured or refined for sale. It is also a good or
services that most closely meets the requirement of a particular market and
yields enough profit to justify its continued existence.
10. PROFIT: The surplus remaining after
total costs are deducted from total revenue, and the basis on which tax is
computed and dividend is paid. It is the best known measure of success in an
enterprise.
11. PROFIT MARGIN: The amount by which
revenue from sales exceeds costs in a business. It is also a ratio of
profitability calculated as net income divided by revenues or net profits
divided by sales.
12. RESOURCES: Resource is an economic or
productive factor required to accomplish an activity, or as means to under take
an enterprise and achieve desired outcome. Three most basic resources include
land,labour and capital; other resources include; energy, entrepreneurship,
information, expertise, management and time.
13. SALE MIX: This can be defined as the
relative proportions in which a company’s products are sold. The idea is to
achieve the combination or mix that will yield the greatest amount of profits.
14. SHORT RUN: This is a period during
which the quantity of at least one input is filled and the quantity of the
other input can be varied.
15. TRANSFER PRICING: This is the rate of
prices that are utilized when selling goods or services between divisions.
Click “DOWNLOAD NOW” below to get the complete Projects
FOR QUICK HELP CHAT WITH US NOW!
+(234) 0814 780 1594
Login To Comment