Project File Details


3,000.00

File Type: MS Word (DOC) & PDF

File Size:  633KB

Number of Pages:196

 

ABSTRACT

 

Many factors have been fingered and blamed for low productivity of Nigerian
economy, prominent among which is the weak industrial base. And this
weakness is indicated by the low level of the index of capacity utilization in the
manufacturing sector and general high rate of business failure in Nigeria.
Having considered the problems from the accounting point of view, the
researcher formed an opinion that EXPANDED (OR QUICK) PROFIT MOTIVE is a
fundamental factor for failure of entrepreneurial efforts; this opinion considers
the proper management of available resources – especially financial resource –
as a primary factor that will make for success of a business venture.
This expanded profit motive manifests in various forms, which include (a) lack of
compliance to loan repayment schedule, (b) venturing into business without
business ideas. (c) Over-pricing of products, (d) Employment of unskilled labour
and high labour turnover etc.
But whatever form(s) such manifestation may take, ultimately they culminate
into poor discharge of business functions.
Accordingly, this research was driven by the investigation and assessment of
various manifestations of Expanded profit motive as to establish the truth or
otherwise and the extent of their contributions to business failure. The
investigation was carried out on the basis of five (5) stated hypotheses about
which the research revolved.
Besides the data collected from ALO Aluminum Company inform of responses
obtained from questionnaires, the researcher visited some other establishments
which are considered to be in position to have a store of data and numerical
information that would have been useful for comparative analysis.
Those organizations visited did not permit the researcher to avail the required
data, and this made it difficult to use standard statistical technique, such as
correlation coefficient and distributions in the analysis of data. Consequently,
the researcher resorted to the use of simple percentage, published and verbal
information as basis for conclusion. The research result suggests that every
rational business owner/manager should strike a balance between profit motive
and need for business survival.
vii

 

TABLE OF CONTENTS

 

COVER PAGE i
TITLE PAGE ii
CERTIFICATION iii
DEDICATION iv
ACKNOWLEDGEMENTS v
ABSTRACT vi
TABLE OF CONTENTS vii
CHAPTER ONE
1.1: BACKGROUND TO THE STUDY 1
1.2: STATEMENT OF THE PROBLEM 22
1.3: RESEARCH HYPOTHESIS 23
1.4: PURPOSE OF THE STUDY 25
1.5: SIGNIFICANCE OF THE STUDY 25
1.6: SCOPE OF THE STUDY 27
1.7: LIMITATION OF THE STUDY 27
REFERENCES 30
viii
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.0: INTRODUCTION 31
2.1: TYPES OF PROFIT 32
2.2 DEFINITION OF TERMS 34
2.3 ENTREPRENEURSHIP: Notes on Historical Perspective 41
2.4 ENTREPRENEURIAL TRAITS 52
2.5: DEFINITION OF ENTREPRENEUR 60
2.6: THE ETHIC OF ENTREPRENEURSHIP 62
2.7: FINANCIAL PRUDENCE AS SUSTAINING FACTOR 66
2.8: FINANCE MANAGEMENT 72
2.9: PROFIT MAXIMIZATION AND GROWTH
OF BUSINESS ORGANIZATION 87
REFERENCES 95
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 SOURCE OF DATA COLLECTION 98
3.2: POPULATION OF THE STUDY 99
3.3: DATA COLLECTION PROCEDURE 100
3.4: Method of Data Analysis 101
ix
CHAPTER FOUR
4.0: DATA PRESENTATION AND ANALYSIS 103
4.1: DATA PRESENTATION 104
4.2 DATA ANALYSIS 123
4.2.1: HYPOTHESIS 1 124
4.2.2: HYPOTHESIS 2 127
4.2.3: HYPOTHESIS 3 130
4.2.4: HYPOTHESIS 4 133
4.2.5: HYPOTHESIS 5 135
REFERENCES 141
CHAPTER FIVE: DISCUSSION OF RESULT
5.1: IMPLICATION OF RESEARCH RESULT 144
5.2: MANAGEMENT FUNCTION 147
5.3. BUDGETING AND SOURCING FOR BUSINESS FINANCE 151
REFERENCES 156
CHAPTER SIX
6.1 SUMMARY OF FINDINGS 157
6.2 CONCLUSION 159
6.3: RECOMMENDATIONS FOR FURTHER STUDY 164
x
BIBLIOGRAPHY 165

 

CHAPTER ONE

 

1.1: BACKGROUND TO THE STUDY
Since I became an accounting student and gradually came to
be deeply sensitized on the issue of business management theories
and practice, I became generally interested in studies related to
Entrepreneurial Development, but particularly excited at the enquiries
into the causal factors of both success and failure of Entrepreneurial
Effort.
The desire for this enquiry is partly driven by my personal
aspirations but mainly sustained by what I consider as easily
observable poor state of private sector of Nigeria economy, poor
contribution of this private sector to the growth of the economy and
poor state of industrial development in Nigeria.
All these, by extention, mitigate the national quest for job
creation with the attendant well known negative consequences for
the socio-economic wellbeing of Nigerian Nation.
In this present research effort, I would generally discuss the
importance of a widespread culture of entrepreneurship business
xi
actions in the establishment and sustenance of a private sector
driven economy especially in this introductory chapter.
The investigation proper is intended to seek and reveal the
causes of failure of most of the entrepreneurial efforts and focus
particularly on the extent of the contribution of ‘Expanded profit
motive (objective)’ to the failure of entrepreneurial ventures
(small/medium business).
Looking at the present nature of the economy of Nigeria more
holistically many concerned economics and business management
scholars have received with great concern and lamentations, the
present near total reliance on export of crude oil and raw material as
sole source of sustenance for the economy. For this, the economy
lacks in strength (viability) and stability since it is being operated
without the requisite viable technological and industrial base.
For many years running now, Nigeria has expressed and
preached her desire to achieve some scientific and technological feat
which will help her effort to industrialize. It is to be acknowledged
that the effort is still on-going, though at a very slow pace. But in
keeping with the opinion of Animalu (2000; iii), for Nigeria to return
xii
to the (right) course, we (Nigeria) shall begin with a statement of the
problem of development in the contemporary world (Nigeria) in terms
of the concept of a plan perspective cycle of a modern society which
relates (military) security to political stability, political stability to
economic strength, economic strength to scientific knowledge,
scientific knowledge to technological know how) to (military) security.
“The different between an industrialized and a developing
society is shown to lie in the degree of establishment of the plan
perspective cycled in the society and to be the underlying principle
behind the current strategic planning methodology in Science,
Engineering and technology (SET)-driven enterprises..”.
“On August 19,1999, the united Nations Development
programme (UNDOP) launched its 1998 and 1999 Human
Development Report at Nigeria’s Federal Capital Territory, Abuja.
With an overall Human Development Index (HDI) i.e. longevity,
education and income of 0.400; Nigeria ranked 137th out of a total of
174 countries in the world in 1993. Speaking on the occasion,
President Olusegun Obasanjo stated that the problem before the new
democratic administration of Nigeria is to fine-tune policies and
xiii
programmes to ensure a balance between macro-economic stability
and human centered development. Observing that poverty is the
denial of choices and basic opportunities to live a tolerable life
materially, psychologically, politically, socially and culturally (and) he
declared that ‘policies must not depend solely on market forces—’
“Our task— is to conceptualize, analyze and proffer solution to
myriad of problems, by examining how other countries have
performed in trying to achieve our own higher HDI through
industrialization and what we must do to achieve our own.
Industrialization is about manufacturing of product by companies that
empower people economically by offering them employment.
Therefore industrialization relates to how people in a society are
organized for productive work which impacts on the society’s quality
of life. Technically speaking, industrialization is a product of
manufacturing technology and industrial engineering—.
To a very good extent, “the fact that Nigeria has not been able
to produce the required organization for industrial take off is largely
and rightly blamed on our leadership or— on the (neo-colonial)
political organizations that we have inherited from our erstwhile
xiv
colonial masters and the war leaders of the post-independent military
dictatorship era. We shall conceptualize this type of organizational
problem by an inverted pyramid (see fig 1.1) signifying an unstable
system, on its head (military dictatorship) which despite all types of
promises of change, has produced in the end only (a) fiscal
indiscipline (b) corruption and daunting national debt burden (c)
religious intolerance and ethnic strife (d) labour unrest and cultism,
ignorance and disease, comprising the four vertices at the base of
the inverted pyramid.
(Figure 1.1).Military Dictatorship
In line with the above analysis Ugwoke (Lecture on Historical
Development of Public sector Accounting) had explained, —with oil
Boom of 70s, Nigeria had to engage in export of crude oil in very
b
a
d c
xv
large quantities. During the period, Nigeria found itself with so much
wealth that people abandoned private sectors for public sector.
Also during the long military rule the public sector continued to
grow as every body wanted to sell to the government where money
was, unlike the private sector. It was such that everybody abandoned
the private sector and queued behind the military.
Within this dispensation corruption rose to the stage where
people now relaxed and amassed wealth. This further reduced the
size of private sector as more people preferred taking one post or the
other in government to engaging in private productive (economic)
ventures.
The major macro-economic consequences of these problems
according to Animalu (op cit) are;
(a) drastic decline in production of goods and services as a result
of;
(b) low capacity utilization of privately owned manufacturing
outfits or out right cessation of operations (of such outfits)
and
(c) Huge external debt burden.
xvi
“— The beginning of the (era of) Industrial Revolution which is
usually put at 1770 has the remarkable feature that it began initially
in the village (rather than in Universities or Research Institutes). The
men who made it were craftsmen-the millwright, the watchmaker,
the canal builder the blacksmith and its characteristics were
increasing use of machinery and steam power in factories for
manufacturing of goods that had previously been made by hand by
people working at home. Although the industrial Revolution took
place throughout the western world, Britain easily led the way
because of her resources of the necessary coal and iron ore, the fact
that British inventors designed many of the new machines
themselves and growing empire (including USA) also gave Britain
large overseas markets — in Nigeria’s case the available resources
are sold for the foreign exchange they earn. Nigeria ingenious
investors are discouraged by the uncertainty and chaos in our
political terrain; and Nigeria’s markets are flooded by imported luxury
goods. An antithesis to the pre-requisites for an industrial revolution.
‘Nigeria had a chance between 1971 and 1981 when the
“energy crisis” of the’70s brought in a stream of income that made
xvii
the country buoyant; another opportunity came for Nigeria to embark
on a more fundamental approach to economic development during
the 1991Iraq war with a stream of unexpected income inform of
windfall profit from the supply of barrels of oil at a price well above
the budgeted price.
“But in the relevant time-frame, the Nigeria input into the
science and technology of the strategic oil resources was made
through the NNPC. Whatever may have been achieved failed to meet
the prescription of the south commission (made up of the third world
countries of Africa, Asia, south American and the Arab world), which
advised that as development proceeds states should plan to shift the
pattern of production and exports from raw materials to manufacture
in such a way as to produce products with high and medium research
development intensity, so as to counteract the adverse consequences
of the decline in the prices of raw material in the commodity market.
“As it is well known it is the collapse of oil prices in the first-half
of 1980’s that brought about the various austerity measures in
Nigeria and eventually led to the 1986 structural adjustment
xviii
programme (SAP) engineered by the international monetary agencies
(IMA) (Animalu Op Cit P17).
In the forward to his book fundamentals of small business
management, Eze (1999:iii) had corroborated, “there is no doubt that
Nigeria as a nation, has, since attaining independence in 1960, tried
to achieve meaningful economic development. (But) most of the
(relevant) policies, one must say, are centrally planned and
government dominated
“The resultant impact of this excessive government domination
of the economy left much to be desired leading to massive
development in the 1970’s by the government. This is done under
the economic policy of privatization and commercialization.
“This shift in emphasis thus created a challenge of building a
capable dynamic and resourceful entrepreneurs to take the baton of
economic revitalization from government. These entrepreneurs
incidentally have to fulfill this onerous task through the establishment
of business that could mainly be classified as small and median scale
in nature. It is pertinent to add here that the aforementioned task is
a difficult one for obvious reasons; for one, the dwindling state of the
xix
economy has made it difficult for people to save and thereby little
capital accumulated for investment. Further, our private sector is long
underdeveloped making experienced entrepreneurs and small
business managers scarce.
To drive his point home, Eze (op cit:) had informed “—there is
a growing consensus among policy makers, academic, industrialist
and economic planners that the development of local entrepreneurs
and encouragement of the establishment of small business is the only
panacea to our economic problems. This conclusion came as a result
of our three decades of positioning government as the sole provider
of all that makes life worth living-employment, basic infrastructure,
public utilities, goods and services etc – on which huge national
resources were spent. But all these turned out to be waste pipes
through which out national resources are being drained as it was
discovered that what Nigerians have been receiving from such
enormous government investment efforts are gross inefficiency,
massive unemployment, dwindling foreign exchange earnings,
epileptic supply of utilities etc.
xx
The foregoing led to the adoption of Structural Adjustment
Programme (SAP) and, subsequently, the deregulation exercise.
Under this new policy and programme, emphasis was shifted from
government direct control to encouragement of private sector
participation and development of entrepreneurs who are expected to
establish small businesses as a more effective substitute for providing
needed catalysts for our economic engineering.
In the foregoing statement, certain agreement is revealed,
which is to the effect that to heal Nigerian economy-which for long
has been suffering from instability and consequently unable to
provide for the basic economic and social needs of Nigerians there
has to be deliberate and vigorous pursuit of private sector
development which, in turn, mandates the vigorous pursuit of
entrepreneurial development, and consequently, the encouragement
of the establishment of small and medium scale industries (business)
as the basic ingredient of economic growth.
In his introductory statement while discussing the situation of
small business development in the United Kingdom, Dewhurst and
Burns (1993:1-3) had remarked: In all the short history of modern
xxi
business there is nothing so strange as this. On the one hand we
have the traditional belief in the rightness and power of size –
economy of scale rule the business world. In the United Kingdom we
say we must be big to stand up against the ruthless cost effective
multinational corporations based in the U.S.A, Pacific basin and
Japan. And indeed in the United Kingdom we have gone further
along this road of concentration than any other country in the world.
Yet this predilation for economic orthodoxy has not brought economic
success.
An alternative view point argues that economic success is not
the sole criterion by which we should judge all things. Perhaps people
matter, perhaps a society should be concerned to some extent with
the quality of life, job satisfaction and good human relationship –
some evidence has been produced recently that people working in
small business units in a civilized society are more committed than
those working in large, amorphous corporations.
As a solution, Fritz Schumacher, in Dewhurst et al (op cit.)
suggested that intermediate technology should be developed.
xxii
This is a technology that is simpler, very much cheaper to
acquire and very much easier to maintain than the highly
sophisticated technology of the modern West; and this suggestion
presupposes that for comparatively rural, primitive societies, like the
Nigerian constituent communities, intermediate technology (rather
than a forced sudden transformation to highly sophisticated and
intricate type of technology) development would provide the
necessary fillip and serve the needed basis for small business
establishment and operation.
Schumacher had concluded, … small business is beneficial, it is
flexible, it can adapt to new situation more easily than large
corporations, it is innovative, it readily makes a good contribution and
with efficient control and management techniques the benefit it gives
can be greater.
The word ‘small’ is not used (here) in tight restrictive sense
with reference to the operation and growth of established enterprise.
A successful small business can grow into a medium sized business
whilst still retaining those desirable characteristics of personalized
control and managerial flexibility.
xxiii
Yet Dehurst et al (op cit) in a feat of dis-impression pointed
out: but it is now realized that much of the resources allocated in the
past in the United Kingdom for start-ups has been wasted. The vast
majority of the start-ups in the 1980s began as one person
enterprises and finished up that way … only a small number of such
enterprises have generated jobs”.
The information contained in the analysis presented above
would serve to set a stage for enquiries into our own situation here in
Nigeria where numerous successful efforts have been made resulting
in the establishment of many small scale enterprises. It is also true
that there are many businessmen out there striving hard to establish
one form of small business or the other. But no sooner when success
is achieved, then failure.
Consequently, our collective hope of establishing a vibrant
economy, driven by small business units, spread all over Nigeria,
usually dims when we take a look at the history of Nigerian Economy
and the approaches to business operation, the attitude of Nigerian
businessmen to productive business organization, the resource
management, government policy implementation and the present
xxiv
widespread distrust based on the fact of widespread corruptpractices-
the probability of failure of entrepreneurial efforts is then
very high.
Also in an expression of dis-impression Ezeh (op cit, p7) had
corroborated; ‘Nigeria is a country greatly endowed with many
natural and human resources. The business environment apparently
offers opportunities for many entrepreneurial ventures. Ironically,
despite these endowments her state of economic development leaves
much to be desired.
‘Whereas entrepreneurship may not be the missing factor
alone, it is without doubt an important component in the process of
economic development. In fact the start-up and development of
small business remains one of the major ingredients of continued
growth in any national economy. Consequently, in the quest for
Nigeria’s economic development the role of indigenous
entrepreneurship is likely to be much more important in small
business than in large undertaking that were generally favoured in
the past.
xxv
Perhaps it is the realization of these facts that prompted both
the federal and state governments to have since been vigorously
impressing (harping) on the establishment of small business. As a
result there has been an appreciable rise in the start up of varieties
of business ventures especially the owner manager concerns. Many
such business ventures rose sharply and fell, others still struggling to
keep their heads above water, while others have managed to make
some headway.
Incidentally, one would affirm that the cause of failure of small
businesses are many and varied. And as a matter of fact some
business fail before they are started.
The truth of the foregoing statement was corroborated by
William Macfarlane in Eze (op cit:53) when he remarked; the field of
business probably offers more freedom and fewer restriction to the
would-be-business owner than almost any other (sources of
livelihood). Despite this freedom, many business are started each
year on a shoestring with little more than money and ambition. (And)
since freedom of opportunity does not guarantee success thousands
of new businesses fail each year.
xxvi
Looking at the problems of small business enterprises from the
accounting and or managerial point of view. Sullivan and Nnaemeka
in Amuchieazi (op cit) had observed; the indigenous component of
the industrial sector is made up, in the main, of small scale
enterprises … In terms of number of business establishment small
business probably accounts for over 80% of the total number of
enterprises in the country. Despite this numerical strength it is
doubtful whether the small enterprises added value is up to 30% of
aggregate added value of all enterprises … The reason for this is
obvious; poor and backward management in matters of planning,
accounting, personnel, market research and technology. These
problems persist as insoluble problems because of low credit ratings
of small business among banks and other lenders.
Inherent in the statement above is the importance of such
factors as accounting and managerial competence to the success of
small business.
If, as Macfarlene observed, many business are started each
year with little more than capital and ambition (to make quick
financial gains), and, as Sullivan et al had concluded, the low
xxvii
productivity results from poor and backward management in matters
of planning, accounting etc, then failure results from the absence of
proper planning as a beginning Faculty step in business
establishment and operation.
Availability of capital and ambition which is sustained by high
appetite for quick profit (financial gain) hasten the initial decision and
continually quicken and direct the application of resource and further
actions. It is such that this motive for quick profit beclouds the
judgment of most Nigerians who have the will to venture into small
business enterprises.
By this also the necessary caution which results from careful
planning and deliberate effort at discharging other managerial
functions of organizing, directing and coordinating, control and
review is not usually applied. And by extension, the money, the
material, the men and the machines (the 4ms) are not properly
managed. So, even if the business exists there may be no growth or
at best the growth would be stunted. It is a popular maxim within the
business management circle that he who fails to plan, plans to fail.
xxviii
Ultimately, the discharge of all management functions
necessitate decision making. And it is a common knowledge within
the business management profession that no decision taken in the
process of discharging any of the management functions is cost free.
As a matter of fact, most business owners avoid the
implementation of relevant business decisions because of the cost
implication. But failure to implement relevant business decision as a
way of conserving fund is not in any way a show of wisdom in
business management practice. Prudence should be the guiding
concept. Prudence in decision making, prudence in implementation
and prudence in the application of resources of every kind.
The concept of prudence mitigates the excessive expansion of
profit motive, prudence in business management prompts the
business owner to continually plough back the profit (or part of the
profit) to pay for the cost of management function decision
implementation, to renew the machine, to retrain the workers (to
motivate them), to repay loans, and or pay dividends, to seek for
new markets for raw material and products sale, to employ and pay
for highly skilled labour and to expand the business. On the other
xxix
hand, the drive for quick profit mitigates the discharge of
management functions as it intimately constitutes a clog on the
wheel of management actions.
The figure below shows the demonstration of the negative
effect of expanded profit motive to profit objective itself and
growth of the business.
Ordinarily when an effective management practice is being
applied in the administration of a business organization, the wheel of
management will be in normal rotation and so permits the proper
discharge of all management functions including timely decision
making and decision implementation. In the course of this rotatory
motion, the synergy achieved among the various aspects of
management actions mandates the management functions to make
reasonable contributions continuously to the achievement of the
objective of entrepreneurial actions-value addition and profit making.
Usually, the desire for profit is at the center of the wheel and
prompting the rotation. Then as the desire or motive for profit keeps
expanding the rotatory motion keeps slowing down as a result of
frictions generated and ultimately, the system comes to a halt when
xxx
the expansion of profit motive gets to its peak. Below is the diagram
that attempts to illustrate the foregoing analysis.
The management chain
in rotatory motion with
function contributing to
net profit.
· Increased size of profit
centre
· Reduced opportunity
region slowing down.
At a very highly blown profit
centre (depending
excessively expanded profit
xxxi
motive), the opportunity
region which serves as a
buffer for the rotary motion
is completely closed
signaling the stoppage of
operation and winding up of
a business enterprise.
It should be understood that the peak of the expansion of profit
motive is defined by the point in the operational life cycle of any
business organization when as a result of the attitude of “the owner
takes it all”, the investor or the entrepreneur (whether as individual
or group) fail the expectations of other stake holders – the
employees are not motivated again as salaries, allowance training
and promotion are denied, as the business owner fails to employ
skilled workers, as the management fail to repay loans, as the
management fail to dedicate fund for the service or renewal of
machines, as the credit worthiness becomes in doubt, as the
organization fail to pay taxes and discharge other social
responsibilities and as the business owner is distracted by some other
selfish interests and the business organization is weighed down by
xxxii
negligence and lack of dedication because of what the owner may
have considered as “financial self fulfillment or because of the
philosoph high profit and saving drive,” out of share greed and
diversion of fund.
On the other hand, the negligence and distraction may result
from outright lack of competence in management and therefore the
inability to sustain the existence and growth of the business.
Generally, in order to perform well in the management of profit
oriented business organization it is suggested that a business ownermanager/
entrepreneur should possess some good knowledge for
analyzing and interpreting accounting information in order to enable
him take a cost effective decision in every situation especially
regarding the issue of profit management.
Accounting information would help the business manager
against what Eze (op cit) called cumulative losses. According to him,
a small business enterprise can fail ultimately if the manager
continues to overlook or cause some little losses to himself, (the
small business), especially in the hope that he is enjoying the benefit
of an increasing profit margin.
In agreement with above statement, Macfarlane (op cit) stated,
in several cases serious losses were traced to a series of seemingly
xxxiii
insignificant little leaks. Collectively, these dribble amounted to the
equivalent of a substantial breach in the financial dike.
To conclude in the words of Dewhurst and Burn (op cit pg 6),
without good control of financial resources and without proper
financial planning, including sustaining a reasonable measure of net
profit achievement and application no business can prosper.
1.2: STATEMENT OF THE PROBLEM
Born today but died yesterday; is a maxim that apply describe
the fate of most small businesses that spring up in various places at
various times year after year in Nigeria out of entrepreneurial efforts
of Nigerians, individual and government, but on a shoestring with
little more than money and ambition.
Failure of entrepreneurial efforts results partly from faulty start
due to lack of patience and spending needed to articulate and
establish a good business plan before going into operation, but
xxxiv
mainly as a result of poor knowledge of general and particularly
financial management. Quick Profit Motive is then implicated as
major factor that erodes most entrepreneurs of what the researcher
may call proper managerial sensibilities: the effect of it all is that the
chick yet in the hatchery is being forced to start laying its own eggs
and in the process the chick dies or fails to grow or at best
experience stunted growth. Generally, given this impatience revealed
by lack of planning and desire for Quick Profit success of
entrepreneurial efforts is hampered or postponed indefinitely.
Expressed in a broad business term this problem could be
referred to as ‘lack of good Business Management’, but the
researcher has chosen to situate the problem from the accounting
point of view as lack of financial prudence.
In researcher’s view expanded profit motive works against the
application of prudence in business, but particularly, financial
management. Financial prudence presupposes ability to save financial
earnings by living an enabling life style-not spending profit before it
is earned nor denying various stakeholders the benefit of the added
value achieved by the business in the course of its operation-source
xxxv
for needed fund at minimum cost, choose investment options that
will yield maximally at minimal risk of looses.
Incidentally, most people who have the interest, will, and
courage to venture into self employment exercise lack these financial
management abilities and ultimately the effect is high rate of small
business failure.
1.3: RESEARCH HYPOTHESIS
The research revolves around the desire to determine the level
of contribution of prudent profit (financial) management or lack of it
(quick profit motive) to the success or failure of entrepreneurship.
Entrepreneurship here is represented by the established small and
medium scale enterprises. The required result will be determined on
the basis of the outcome of the test of the following hypothesis.
1. Ho: All the successful entrepreneurs usually start off
without feasibility study and without business plan.
Hi: All successful entrepreneur usually start off with well
articulated feasibility study and business plan.
2. Ho: All the successful entrepreneurs do not make the
xxxvi
fulfillment of the management financial obligations a
priority.
Hi: All successful entrepreneurs make the fulfillment of
management financial obligation a priority.
3. Ho: All successful entrepreneurs do not employ and
maintain skilled labour.
Hi: All successful entrepreneurs do employ and maintain
skilled labour.
4. Ho: All successful entrepreneurs do not maintain good
accounting system.
Hi: All successful entrepreneurs do maintain good accounting
system.
5. Ho: All successful entrepreneurs do not adopt reliable
and cost saving financing mix.
Hi: All successful entrepreneurs do adopt reliable and cost
saving financing mix.
1.4: PURPOSE OF THE STUDY
This research effort is meant to investigate the level of
contribution of prudent profit (financial) management to the success
xxxvii
of small businesses and establish the level and implication of
expanded profit motive to the failure of small business.
It will reveal the extent to which poor management of profit
works against the success of small business. To make this study
more meaningful and convincing the researcher would seek the
assistance of and source data from growing successful private
business enterprise, Alo Aluminum Ltd, National Directorate of
Employment (NDE) office and some banks; First Bank Plc and
Nigerian Agricultural Cooperative and Rural Development Bank Plc
branch offices in Enugu on rate of repayment of loans granted for
establishment and operation of small business. Degree and causes
of failure of such enterprises.
1.5: SIGNIFICANCE OF THE STUDY
Here, the researcher wish to start by emphasizing the
conclusion drawn by William Macfarlane (op cit) concerning the
causes of business failure. He had stated, the field of business
probably offers more freedom and fewer restrictions to the would-be
business owner than almost any other field. Despite this freedom,
many businesses are started each year on a shoe-string with little
xxxviii
more than money and ambition. Since freedom of opportunity does
not guarantee success, thousands of new business fail each years”.
The result of this study is meant to redirect the attitude of and guide
the approaches to be adopted by the would-be entrepreneurs in an
effort to establish and nurture one form of business enterprise or the
other, paying great attention to the use of the instrumentality of
prudent generation and application of profits. In the end, the study
will establish the degree (1 or 0) of the benefit of knowledge of
prudent financial (profit) management to the success of small
business operations, as against the effects of Quick Profit Motive.
This study will benefit National Directorate of employment
(NDE) National Poverty Eradication Programme (NAPEP) First Bank
Plc, NACRBA Plc and other financial institution, which grant loan
facilities and subsidies to assist budding entrepreneurs and promote
small and medium scale business establishment and operation and
such other facilitating institutions as Nigeria Export Import Bank
(NEXIM), as it will reveal the characteristics that make for successful
entrepreneurship.
xxxix
1.6: SCOPE OF THE STUDY
The research results will be obtained from the collation and
analysis of data from First Bank Plc, and Nigerian Agric Corporative
and Rural Development Bank (NACRDB) Plc, Enugu main offices at
Okpara Avenue and Presidential Road Independence Layout
respectively, as long standing financiers of and participants in small
and medium scale industrial development programme; other sources
of data would be the Nigeria Export Import Bank (NEXIM Bank) with
Headquarters at Abuja, National Directorate of Employment (NDE)
Enugu Office, and the information obtained from Alo Aluminum
(Nigeria) Ltd Head Office on Enugu –Abakaliki Express Way, Emene
Enugu, to give direction of profit management approaches that keep
such budding medium scale business organization operating and
growing.
1.7: LIMITATION OF THE STUDY
1 (a) The researcher has limited the assessment of Alo
Aluminum
xl
Ltd financial management approaches to the analysis of
the
nature of financing mix in use by the enterprise,
(b) Rate of labour turnover, motivational instruments fund
application to maintenance and replacement of machines
as determinants of profit deployment mode, and the
adequacy of
(c) Debt instruments in use, sources and degree of
adherence to repayment agreement (programme)
2. Data collected from banks, NEXIM and NDE will be used only
for the determination of the degree of default on loan
repayment schedule, the cause of default and the place of poor
attitude of profit making (management) in the failure of the
management of borrowing enterprises to keep to the
repayment schedule.
3. Knowledge of intended business venture will be revealed in the
feasibility study submitted (if any). Hence the data from NDE
will also reveal those who source loan based on naked ambition
and desire for quick profit.
xli
The researcher is constrained by time required for the
completion of this study to narrow down the coverage of the study to
selected institutions in Enugu Metropolis. Those institutions consulted
spread across manufacturing, training, promotional and facilitating
areas of entrepreneurship development programme. They include:
(i) A medium scale Aluminum manufacturing company – the Alo
Aluminum Nig Ltd.
(ii) The Nigerian Directorate of Employment (NDE)
(iii) The Nigerian Agricultural and Cooperative Bank (NACB)
(iv) The First Bank Plc Enugu Main Office, Okpara Avenue Enugu
(v) The Central Bank of Nigeria, Enugu Office, Garden Avenue
Enugu.
xlii
REFERENCES
1. Amucheazi E.C.(1980) – Readings In Social Services: Issues in
National Development. Fourth Dimension
Publishers Co. Ltd, #179 Zik Avenue, Enugu
Nigeria, pp 7 & 151
2. Animalu, A.O.E.(2000) – Education Science and Technology.
Agenda For Nigeria In 21th Century:
Academy
of science, Unilag Lagos Nigeria pp. vii,
14,37-38
3. Deeji R.(2003) – 30 Banks seek SEC Approval on Venture
Capital Business Times February 10th – 16th
pg. 4
xliii
4. Eze J.A. (1999) – Fundamental of Small Business
Management: Glanic Books #52 Rehab Road
Emene Enugu Nigeria pp iii v, and 7
5. Kodjo S.N.(2002) – Cost and Management Accounting (A
Selected Emphasis) Oktek Publishers 4/8
Osadebe Street, Ogui New Layout, Enugu,
Nigeria pg. 121
6. Modum U. (1995) – Management Information System

Analysis and Design, Fourth Dimension
Publishing Co. Ltd. 16 fifth Avenue, City layout
New Haven Enugu Nigeria, pg. 71-72

GET THE FULL WORK