THE CONCEPT OF PROFITABILITY FACTORS AS A GUIDE TO POLICY DECISION

THE CONCEPT OF PROFITABILITY FACTORS AS A GUIDE TO POLICY DECISION

CHAPTER ONE

 1.1       INTRODUCTION

The concept of profitability can be defined as that concept which provides management with alternative course of action according to the various degree of profitability sating clearly in relevant cost accounting from the cost and benefits associated with individual project which enable management to select the most profitable. The origin of this concept can be traced to the era of this industrial revolution.

Before the industrial revolution, industries were run by family concerned just to maintain a status. Due to increase in trade brought about by the industries revolution, most business grew from the usual family arrangement to large group. Resources were pulled together and handed over to other people to manage for the owners.

Naturally, resources owner must expect a profitable reform from their investments. The urgent obligation forced management to seek way of carrying the activities so as to make profitable returns to the resources owners.

The growth and complexity in the industrial sectors gave rise to the need for policy statement or decision on certain  Issues.

Materials must have to be bought in enough quantity to avoid stock out and at the same time check over stocking. Labour which is one of the factors of production, labour prior to commencement of expansion, general ecological consideration must be reviewed thereafter site is acquired structures. Erected, machines and equipment installed.

1.2       BACGROUND OF STUDY :

The nature of this research work requires theoretical approach and analysis which will cover the three dimensional focus of the research. The study of these factors will help the researcher to determine the effect of these factors on the profit position and make sub-sequent recommendations. The frame work for analyzing the factors affecting the concept of profitability are:-

1. Theory for location industries, which states that nearness to raw materials, availability of labour, affects the profitability of manufacturing industries. E.g. the location of extractive industries depends on where the raw materials are found.
   1. Theory of nearness to market which shows that heavy goods are expensive to transport to the market. Because of this, the theory therefore states that such goods be produced near the market.
   2.   Other general Economic factors:- There most be a ready supply of labour especially skilled labour. There most be good transport facilities for movement of both raw materials and finished goods.
   3. Location of other industries:- industries are often set up near others in order to take advantage of external Economic, and industries enjoyed being close to other industries in the same trade or business.

1.3      PROBLEM ASSOCIATION WITH SUBUJECT MATTER :-

The researcher embanked on this study in order to ascertain:

1. The cause of the unfulfilment of profit objective of the selected industries.
2. The policy decision of some firms / and industries and the factors that affect their execution.
3. Whether the profitability of industry encourage them to embank on social and economic responsibility in term of growth and development

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THE CONCEPT OF PROFITABILITY FACTORS AS A GUIDE TO POLICY DECISION