Appraisal of financial control system on organizational profitability. (A study of selected manufacturing companies in ikorodu, Lagos).
This study was on appraisal of financial control system on organizational profitability. (A study of selected manufacturing companies in ikorodu, Lagos). The total population for the study is 200 staff of selected manufacturing companies in ikorodu, Lagos. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up managers, production managers, supervisors and junior staff was used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies.
- Background of the study
Every firm, be it profit or non-profit making organization, will have some objectives which it deem attainable. For profit seeking organizations, their key goal is to maximize shareholder value while the non-profit making organization goal is to satisfy the citizenry’s social need. In order to achieve these purposes, supervision usually plays an important role in the organization. Sometimes it is hard for the management of these organizations to provide first hand and personal supervision of operation due to the size, nature and scope of the organization. The basic components of organizational governance are risk management and financial performance. Therefore, for an organization to achieve this it needs to ensure effective and efficient operations, reliable information (both financial and non-financial) and compliance of rules and regulations
Profitability is a concept that has received serious attention all over the globe, this is because the growth and development of any profit-oriented organization depend on its ability to remain profitable at all times, even in the period of the visible current financial crunch of the world economy. Siyanbola and Raji, (2013) stated that profitability has attracted considerable importance in finance and accounting literature. Also, Malik, (2011), have emphasized profitability has been one of the primary objectives of financial management and control which is to maximize the owners’ wealth. Hence, profitability is cardinal determinants of performance for wealth maximization. A business that is not profitable cannot survive in the long run. Furthermore, the current intensity of competition in the business environment has made running a successful business a function of its ability to be profitable and survive. Therefore, the ultimate goal of a business is to earn enough profit to ensure sustainability in prevailing market conditions. (Adebayo and Onyeiwu, 2018).
Moreover, the effectiveness and efficiency of a firm’s utilization of resource can be measured by its profitability. Profit is a key factor. This is because the more profit reflects a more effective and efficient utilization of resources and vice versa. Low profitability can slow the rate at which a firm progresses and certain obligations and at times target might not be met (Adebayo and Onyeiwu, 2018). It is, therefore, to achieve effectiveness and efficiency that Harley and Emery, (2016) concluded that a detailed control over a number of parameters is required to access the financial condition and situation of the business in detail. They also recommended that to organize an effective system of financial control, management should delegate their power to the subordinate who is conversant with facts in cost management.
Statement of the problem
The application of these financial control mechanisms has generated a lot of argument (with some scholars arguing in favor of while others against) it use. This is because, while financial control has been adopted by the world of management as a tool for achieving organizational performance (Ajonbadi et al, 2014) others have viewed the effect as a hindrance to free workflow process. The high rate of corporate failure and low contribution to GDP could be attributed to the poor performance of the manufacturing sector due to lack of adequate financial planning and control. It has been mentioned that some manufacturing firms do not have a financial plan talk less of a financial control framework. This absence has resulted in reckless spending, wastages and fraud culminating into poor performance (Uwuigbe, et al, 2011). In addition, the manufacturing sector in this contemporary time of globalization is inundated with myriad problems but have a bright prospect for development. There is therefore the need for the application of financial control mechanisms to solve some of these problems in order to realize the anticipated prospects for growth and development
Objective of the study
The objectives of the study are;
- To investigate the relationship between the use of financial control system and profitability in selected manufacturing companies in ikorodu, Lagos
- To ascertain the establish some of the financial control system that significantly contribute to the profitability performance of selected manufacturing companies in ikorodu, Lagos
- To Suggest some measures that will enhance the effectiveness of the use of financial control system for better profitability performance of the selected manufacturing companies in ikorodu, Lagos
The following have been put forward for testing
H0: there is no relationship between the use of financial control system and profitability in selected manufacturing companies in ikorodu, Lagos.
H1: there is relationship between the use of financial control system and profitability in selected manufacturing companies in ikorodu, Lagos.
H0: there are no measures that will enhance the effectiveness of the use of financial control system for better profitability performance of the selected manufacturing companies in ikorodu, Lagos
H1: there are measures that will enhance the effectiveness of the use of financial control system for better profitability performance of the selected manufacturing companies in ikorodu, Lagos
Significance of the study
The study will be very significant to students and manufacturing companies. The study will give a clear insight on the appraisal of financial control system on organizational profitability. (A study of selected manufacturing companies in ikorodu, Lagos). The study will also serve as a reference to other researcher that will embark on the related topic
Scope and limitation of the study
The scope of the study covers Appraisal of financial control system on organizational profitability. (A study of selected manufacturing companies in ikorodu, Lagos). The researcher encounters some constrain which limited the scope of the study;
- a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
- b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
- c) Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
1.7 DEFINITION OF TERMS
Financial control: Financial controls are processes, policies and procedures that are implemented to manage finances. They play a role in achieving an organization’s financial goals and meeting obligations of corporate governance, fiduciary duty and due diligence.
Organizational profitability: Organizational profitability provides a view of the true profitability of a branch, department, or region, allowing for a comparison of allocated expenses as they relate to their income, and showing an accurate view of their adjusted earnings