PROFIT MAXIMIZATION: A STRATEGIC TOOL FOR SURVIVAL OF BUSINESSES IN NIGERIA (A Case Study of Dangote Cement Industry)
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.
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.
data used was gathered with the aid of a questionnaire and Chi-Square
) method of data analysis was applied in analyzing the data.
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.
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
Title Page i
Table of Content vi
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
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
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
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
FIVE: Summary, Conclusion And Recommendation
5.0 Introduction 55
5.1 Summary 55
5.2 Conclusion 56
5.3 Recommendation 57
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
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.
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.
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.
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.
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
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
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.
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
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
To find a way of making use of scarce
resource in order to achieve profit maximization.
To highlight the importance of profit
using cost volume profit analysis over other forms of technique.
To identify the problems encountered
in the economy that leads to lack of practical application of profit
To evaluate the extent to which the
use of profit maximization on Dangote Cement Plc has been efficient.
1.3 RESEARCH QUESTIONS
Does your organization use cost volume
profit analysis as a tool for profit planning and control?
Apart from cost volume profit
analysis; what other techniques do you employ in the profit planning and
What problems does Dangote Cement Plc
encounter in the profit planning and control?
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
H1: The application of cost volume profit
analysis has helped Dangote Cement Plc to be efficient and effective in its
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
and control apart from cost volume profit analysis.
1.5 SIGNIFICANCE OF THE STUDY
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.
students are to be aware of the role played by profit maximization in business
organization. Profit maximization is an essential tool in all business
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:
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.
is useful to the state since it is used by government in making decision for
improvement of the states.
is useful to the economy as a whole since it is used by policy makers to
maximize profit in the economy.
is a basis for understanding, contribution, margin pricing, related short run
decisions and transfer pricing.
1.6 SCOPE OF THE STUDY
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
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:
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.
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
these constraints were taken care of and with limited errors and