THE RAMIFIED FACTORS AFFECTING THE CONCEPT OF PROFITABILITY AS A GUIDE TO POLICY DECISION IN ACCOUNTING
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Before delving into this issue, Let us look from the realistic pomt of view, the concept of profitability- it can be seen as that concepts which provides management with alternatives course of action according in the various degree of profitability, stating dearly in relevant cost accounting from the costs and benefit associated with individual projects which enables management to the most profitable. Majority of the policy decision of manufacturing industries are generally directed towards profitability. Policy decisions made under this concept has direct effect on increasing and enhancing the general profitability of the manufacture industry concerned. Unfortunately, this laudable guide has been relegated to supportive role in some manufacturing industries because of certain factors million against . Such factors have in most cases affected the profit position of industries and in extreme cases to huge losses, which sometime ding such companies involved for unexpected liquidation.
Hence, this project work tried to know those factors affecting the concept and respective effects on the profit position of the selected industries. In view of covering the three dimensional focus of the research the project focused on three major areas:
1. The exogenous factors affecting the concept of profitability.
2. The endogenous factors affecting the concept of profitability.
3. The political factors affecting the concept of profitability.
These three areas combined to give a broader view of the factors militating against the concepts of profitability.
The concept of profitability can be defined as that concept which provides management with alternative course of action according to the various degrees of profitability stating dearly in relevant cost accounting forms, the costs and benefits associated with individual project which enable management for select the most profitable. It is obvious that majority of the policy decisions of manufacturing industries are generally directed towards profitability. The policy decision made under this concept has direct impacts on increasing and enhancing the general profitability of the manifesting industries concerned. The origin of this concept can be traced back to era of industrial revolution most business grew from the usual family arrangement to large groups. Resources were pulled together and handed out to other people to manage for the real owners. Naturally, resources owners must expect a profitable return from their investments. The urgent obligation forced management to seek ways of carrying the activities so as to make profitable reforms to the resource owners. The growth and completing in the individual sectors gave rise to the needs 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 turn check over stocking. Labour which is one of the factors of production, must be allowed to operate in a conducive environment so as to reap the benefit of hiring labour. Prior to communication general ecological consideration must reviewed. There after site is augured structures erected, machine and equipment installed. One take of the manifesting industry must more the champing technology, meet its social responsibilities, operates under government regulations, pay tax as of and when due, meet the expectations of the shareholders. Moreover, high administrative cost of champing technology, hence competitions, cost of government restrictions, poor capital base and the needs for maximization of shareholders wealth must be highlighted and adjusted in such a way that the total cost of manufacturing a product will not only be less than sales revenues but also gives a good profit margin.
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