THE EFFECT OF MARGINAL COST ELEMENTS ON THE FINANCIAL PERFORMANCE OF PHARMACEUTICAL COMPANIES IN NIGERIA
CHAPTER ONE
INTRODUCTION
1.9 BACKGROUND OF THE STUDY
Recently the common concern to every participant in a market economy is the magnitude at which price of goods are multiplied in recent time in Nigeria. This is in addition to the multiplier effects associated with the process of transacting business in Nigeria for instance as customers complain bitterly of exorbitant prices likewise pharmaceutical companies remain worried about how profitability returns in the face of ever increasing competition. Even low buying power of customer, low capacity utilization and international market that are characterized by differentiated products. As a result customers shift from one product to another in search of value that rarely comes despites their reaches to purchase. They are all confronted with higher price low quality adulteration and at times temporary scarcity in place of value for money objectives they pursue. The management of different companies also seeks for cover everywhere to justify low profitability return while trying to checkmate competition and its resultant effect on financial performance caused by product proliferation and limitations.
To satisfy the above multifarious requirement, pharmaceutical companies are advice to apply marginal cost elements which refer to the value of what is given up in order to produce that additional unit which are practically applied by evaluation of performance, profit planning through calculation of present value (PV) ratio of company to plan the activities in such a way that the profit can be actualized fixation of selling price decision making and cost control which help to increase profitability of a company. Therefore, it cost management is to be there should be added up and be managed by competent hands. Financial performance of a pharmaceutical company uses financial statement analysis as the most objective way to evaluate financial performance.
Financial analysis involves assessing the leverages profitability operational efficiency and solvency for company financial ratios are the principal tools used to conduct the analysis and the challenge knows which ratios to choose from and how to interpret the results.
1.10STATEMENT OF THE PROBLEM
This research is primarily carried out by marginal cost elements available to some pharmaceutical companies in Nigeria more also it goes ahead to relate the financial performance of these pharmaceutical companies to direct material direct labor and overhead respectively. Hence the research aims at evaluating financial performance of pharmaceutical companies using the marginal cost element as a yard stick.
Marginal costing is a techniques used in reporting costs and profit of a firm. There should be separation of cost into fixed and variable costs. In marginal costing product cost include variable production cost such has direct material, direct labor, direct production overhead expenses. It ignores fixed cost and semi-variable cost. The separation of cost into fixed and variable cost is difficult, in reality manufacturing can’t take place without plant facilities and equipment hence fixed manufacturing cost are part of the production and should not be excluded.
Marginal costing fail as to take into consideration that in the long run, fixed cost will be part of the total cost of production than of a unit of an item. It is therefore not an appropriate tool in making pricing decision of a firm.
In the preparation of profit and loss account, the use of marginal cost is limited to the internal parties of a firm such as the management. In computing profit for tax purpose, marginal costing is not accepted method, because it does not include all cost used in production process. Therefore in preparation of profit and loss account meant for external uses such as shareholder investors, government and the public, using marginal costing will not present true and fair view of the financial affairs of the firm.
1.11OBJECTIVES OF THE STUDY
The primary objective of the study is to evaluate the effect of marginal cost element on financial performance pharmaceutical companies in Nigeria using Glaxosmithkline consumers’ plc, may and baker Nigeria plc, Neimeth international as case studies as well as determines its impact with respect to their profitability.
Above all, this study aims at highlighting the various marginal cost elements and it contributions to the effectiveness and efficient running of pharmaceutical companies.
The specific objectives of the study are
1) To ascertain the relationship between cost of sales and financial performance to pharmaceutical companies in Nigeria.
2) To determine the relationship between research and development expenses and financial performance of pharmaceutical companies in Nigeria.
3) To determine the relationship between selling and administration expenses and financial performance of pharmaceutical companies in Nigeria.
1.12RESEARCH QUESTION
The following question would be consider relevant for the study based on the objectives of the study:
1) What extent is cost of sales related financial performance?
2) What kind of relationship exists between research and development expenses and financial performance of pharmaceutical companies in Nigeria?
3) To what extent is selling and administered expense related to financial performance of pharmaceutical companies in Nigeria?
1.13RESEARCH HYPOTHESIS
In this research work the researcher formulated a number of research hypothesis in which the study will be based on. The hypothesis used includes null hypothesis “Ho” and alternative hypothesis “Hi”.
Ho: There is no significant relationship between cost of sales and financial performance pharmaceutical companies in Nigeria.
Hi: There is a significant relationship between cost of sales and financial performance pharmaceutical companies in Nigeria.
Ho: There is no significant relationship between research and development expenses and financial performance of pharmaceutical companies.
Hi: There is a significant relationship between research of pharmaceutical companies.
Ho: There is no significant relationship between selling and administration expenses and financial performance of pharmaceutical companies in Nigeria.
Hi: There is significant relationship between selling and administration expenses and financial performance of pharmaceutical companies in Nigeria.
1.14SIGNIFICANCE OF THE STUDY
The aim of this study is to stimulated the interest of people on the implication of marginal cost on the financial performance of pharmaceutical companies and how it would further serve as a guide or reference for the younger and future researcher who may carryout research investigation in this area of study. It will in no doubt be of no importance to the companies using case studies of Glaxosmithkline consumers plc, may and Baker Nig. Plc, Neimeth international, because the findings will assist the companies in the following areas: increases the company’s profit marginal, help in reduction of marginal costs, help in the proper classification of the marginal cost into variable and fixed costs.
1.15SCOPE AND LIMITATION OF THE STUDY
This research work is central on the effect of marginal cost element on the financial performance of pharmaceutical companies specifically Glexosmithkline consumer plc, may and Baker Nigeria plc, and Neimeth international and will endeavor to show all relevant information that will enhance the actualization of the research objectives put into place. The researcher would have carried out research work into a big and well known company but for the constraints that confronted there she limited her research works to the nearest pharmaceutical company specifically. The researcher was constrained by the following problems.
a) <span style="user-select: text !important; font-size: 14.
NOT THE TOPIC YOU ARE LOOKING FOR?
Once payment is made, kindly send us your project topic, email address and payment name to +234 810 144 4147
Once payment is confirmed, Project materials will be sent to your email
Human trafficking research is critical to ensuring proper prevention, protection, and support for trafficked individuals, as well as the punishment of the perpetrators.
This study is significant as it has the potential to contribute to the literature on leadership and community development.
Effective research into this area of work, as well as subsequent prescriptions for problems that may be found in the research findings, will not only improve the proper handling of industrial conflicts in Ebonyi state universities, but will also act ...
Development plans must be articulated, and a more sustainable and formidable program must be developed that caters to all of the rural people's requirements.
This study is significant as it will provide the institution's management with firsthand information of how employees see politics inside the organization which will assist them in addressing the weaknesses that the workers have highlighted.
The study is significant in several ways as it serves as a guide for Ghana's Metropolitan, Municipal, and District Assemblies.
The study will be significant to the legislative arm, civil service and other public parastatal. The study advocated the concept of value Money Audit, due process and cost Audit.
This study will be significant as it will bring to the fore an awareness on the various unethical practices by organizational administrators.
The findings of this research work will undoubtedly provide the much needed information to government organizations, ministry of education and academia.
The study will be significant to the government, law makers and the reading citizens as it aims at examining the national experience through a review of the establishment and work of the institution as a national human rights and Ombudsman institutio...
Message Us on WhatsApp »
