BANKING AND FINANCE

AN ANALYSIS OF COST-VOLUME-PROFIT AND PROFITABILITY TARGET

55 years ago

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

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1.2 STATEMENT OF THE PROBLEM

Cost-volume-profit (CVP) analysis is a managerial tool and can be used to achieve corporate profitability in any organization. Cost-volume-profit (CVP) analysis is a tool that can be used in firms that are faced with problems having cost, volume and profit implications. It is a true fact that certain cost elements of a firm not only vary but are usually large in proportion e.g. material and labour. Therefore, the main concern of this research study is to profer solution to the following problems:

. Non-employment of sales value in the determination of profitability in     firms.

. Lack of relationship between sales value and total cost of firms.

. Non-incorporation of sales value in investment decision in firms.

. Inadequate financial data for cost and profit analysis in firms.

1.2  OBJECTIVE OF THE STUDY

This research study will be focused on cost-volume-profit analysis and profitability target (A survey of some selected firms listed in Nigerian Stock Exchange). The main objective of this study are as follows:
. To determine the effect of sales value on the profitability in firms.
. To know the relationship between sales value and total cost of firms.
. To make provision for the incorporation of sales value in investment decision of firms.
. To justify the need for adequate financial data for cost and profit analysis in firms.

1.3  RESEARCH QUESTIONS

. What is the effect of sales value on profitability in firms?

. What is the true relationship between the sales value and total cost of firms?

. How will firms incorporate sales value in making investment decision?

. Why is there financial data inadequacy for cost and profit analysis in firms?

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