ANALYTICAL STUDY OF PROFIT PLANNING AND BUDGETING

ANALYTICAL STUDY OF PROFIT PLANNING AND BUDGETING (A CASE STUDY OF UNILEVER  NIGERIA PLC.)

ABSTRACT.

This study is focused on the analytical study of profit planning and budgeting in an organization. The research was centered on Unilever Nigeria Plc. The research work is divided into five chapters. The purpose of the study is to know what it takes to plan for profit and the importance of profit planning and budgeting to an organization. The review of related literature was used to expose what authors, writers, individuals and cooperate bodies have said about the topic under study. In the course of the study the researcher uses both primary and secondary sources of data. The primary sources of data were through interviews, observations and questionnaires distributed among the various departments containing fifteen (15) questions and the secondary sources of data, were drawn from text books and journals. The data collected was analyzed, tabulated and presented using simple percentages. A sample size of (80) questionnaire were drawn, out of which (70) were returned. The researcher concluded by giving suggestions and recommends that for a profit planning to function well in an organization; every body in the organization must be educated on the importance of profit planning there by participating fully from the beginning of the plan to the implementation of the plan.

CHAPTER ONE

INTRODUCTION

This first chapter introduces readers to the importance of profit planning and budgeting in an organization including the meaning of the subject matter clearly defined, how they act as an aid to an organization and also stating the purpose of the study. It also embraces the brief history of the company. The statement of the problem with research question also stated.

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  • BACKGROUND OF THE STUDY.

A business, whether it is newly set up or a going concern needs funds for obtaining as sets and provision of working capital. A major problem of business is the mobility to keep enough and adequate fund flowing through the business. A business that is starting newly must first and foremost estimate how much finance is needed and how it should be raised. In adequate finance may lead to business into adopting productive system that is potential, efficient, effective and profitable.

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A business that is poorly financed will not be able to sufficiently finance turnover for maximum profitability. This may lead to total business failure or to delay payment or to excessive interest charges. This is true because finance is the life blood of any business.

According to Pandley I.M (1999) financial planning indicate a firm growth, performance investment and requirement of funds during a given period of time. He also described financial planning as the preparation of projected or perform a profit and loss account, balance sheet and flow statement account further more profit planning also know as budgeting is a detail plan of action a period of one year of less

Profit planning helps a firms financial manager to regulate flows of funds, which is his primary work. Profit planning also known as budgeting or short term assets and liability and usually they are easily convertible. Profit planning and budgeting is very important in the growth of an enterprise because a firm can easily identify extremely valuable capital investment opportunities. Find the precise optimal debt ratio, and follow the perfect dividends policy.

Through profit planning and budgeting is not easy to write but it will be treated base on the following.

  1. What is profit planning
  2. Objective of profit planning
  • Essentials of profit planning
  1. Types of profit planning
  2. Budgeting definition objective
  3. Importance of profit planning and budgeting in an organization
    • STATEMENT OF PROBLEM

This study was to identify, analyze and evaluate the problems and prospects of profit planning and budgeting in an organization.

The statements of the problems are as follows:

  1. Is profit planning and budgeting an effective management decision making tool?
  2. Does profit planning and budgeting affects profitable of an organization?
  • Does profit planning and budgeting aid firms in fund sourcing?
    • PURPOSE OF THE STUDY.

The purpose of this research work is to assist management of some organization that have not yet known what it takes to plan for profit and the importance of budgeting.

This work will also enable financial managers to know and play their primary role of planning for profit and budgeting and to enable them achieve organization goals through proper planning controlling, communicating, innovating and coordinate of both human financial and physical material resources available.

  1. To determine how management use profit planning and budgeting in decision making.
  2. To examine how profit planning and budgeting help the firm to know how to source for fund
  • To examine how profit planning and budgeting affects profitability of an organization.
    • RESEARCH QUESTION.
  1. Is profit planning and budgeting an effective management decision making tool?
  2. Does profit planning and budgeting affects profitability of an organization?
  • Does profit planning and budgeting aids firm in funds sourcing?
    • SIGNIFICANCE OF THE STUDY.
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Profit planning and budgeting are important to an organization in the following ways:

  1. Making investment decision: by investment we mean the acquisition of an asset with the hope that benefits are to realize in the future. In terms of budgeting, budgeting helps the financial mangers to plan for the finance of the project or investment, it worth whileness and the benefits that will accrue from the investment.

The benefits associated with investment s are profits interest, income, dividends or capital gain depending on the type of investment since investment involves risk, so every investment must be evaluated in relation to their expected return and risk, using appropriate techniques.

  1. Making financial decision: having determined the assets to invest on the next decision is the financial decision in taking this decision, the manager, whether in the private or public sector of the economy examines the following:

-What is the capital structure of economic unit concern?

– Will the funds be borrowed or will they be missed through issue of share?

-Will they be of short, medium of long term nature?

-Will the funding option chosen increase or decrease the cost of funds to the firm.

iii. Asset structure management decision: the financial manager determines the type and composition of current and fixed assets required by the firm to achieve its objective as well out replacement programme of the assets structure.

  • SCOPE/ LIMITATION OF THE STUDY.

The study is concerned with the importance of profit planning and budgeting of n organization. A case study of unilever Nigeria. P.l.c. so the study is limited to importance of profit planning and budgeting of unilever Nigeria P.l.c.

The study was conducted in Nigeria P.l.c most respondents were dawn from the financial manager/ account and accounting officers in unilever. Nigeria Plc, the choice of the organization was made due to the fast spreading in the nation.

1.7 DEFINITION OF TERMS.

  1. Profit: This is the difference between revenue and expenditure. It can also be seen as any advantage benefit or gain realized from an investment.
  2. Planning: This involves mapping out a directional path action, which will help achieve a particular goal.
  • Financial managers: This is a person who manages the finance of a business in such a way that the financial objective of the firm will be met.
  1. Management: This refers to a body that directs or makes decision in an organization.
  2. Budget: Refers to a financial and or quantitative statement prepared and approved prior to a defined period or time, of the policy to be pursued during that period for the purpose of attaining a given objective etc.
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