Reference code: C056
ABSTRACT
This study investigated the impact of inventory valuation methods applied by manufacturing firms operating in Rivers State as well as it impact on the profitability of the firms. For the purpose of the study, data was collected from primary sources through the issue of structured questionnaires to a sample of 50 manufacturing companies resident in Rivers State. Two hypotheses were proposed and the collected data was analyzed using Pearson Correlation with the statistical tool SPSS version 21. From the data analyses, the findings showed that there is a positive and statistically significant relationship between inventory evaluation methods and gross profit margin. The findings also revealed that there is positive and significant relationship between inventory evaluation methods and earnings per share of manufacturing companies in Rivers State. Form the findings, it was concluded that: Inventory evaluation methods are very important issues which must be given the due considerations in order to reduce waste and obsolescence and improve profitability of the firm. Inventory evaluation methods can also help to improve the earnings per share of manufacturing companies by reducing inventory management costs. Finally, the study concludes that there is a significant impact of inventory valuation methods and techniques on the profitability of manufacturing firms in Rivers State. On the bases of the findings and conclusions, we make the following recommendations: Manufacturing companies should use valuation method(s) that suit their mode of operation provided it is in line with the rules and regulations of both the Financial Reporting Council of Nigeria (FRCN) and the Nigerian Tax Authorities; At regular intervals, companies should go on market survey so as to know the prevailing prices of material which they, in the course of their operations, do hold in stock. By so doing, adjustment will be made from time to time on the cost of material issues and receipts so that the rate of variation in prices will be reduced to its barest minimum.
The primary purpose of financial statement is to provide information for decision makers. Decision makers such as investors, creditors and management that realize that, the financial statement is prepared under generally accepted accounting principles. Ukpia (1999) money is a measuring unit used in the preparation of purchasing power available to acquire and purchase good and services. Most Nigerian companies tie a lot of their resources to their inventories and because the basis of valuation of these inventories have a direct effect on the final income statement of the firm, any distortion in the former leads to a distress in the company’s profitability.
Accounting for inventory cost flows complicated by the fact that, the cost inventory often fluctuates, sometimes quite significantly. It is also very necessary because of its role in the determination of profit. The gross margin on sales is computed by deducting cost of goods sold, that is measure, by the reduction of the ending inventory, which shows the goods available for sale, this is because of the relationship that shows higher cost of closing inventory the lower the cost of goods sold will be and the higher the resulting gross margin.
Conversely, the lower the value of assigned closing inventory the higher the cost of good sold will be and the lower the gross margin. In effect the value assigned to the ending inventory determines which proportion of the cost of goods originally available for sales will be deducted from net sales as cost of goods sold and at what proportion that would be carried to the next period as beginning.
The process of assigning cost to inventory is known as inventory stock valuation. A number of ways or methods are available for costing inventory. It is possible to assign the most recent cost to the inventory on hand on the assumption that first in first out (FIFO) is the appropriate cost flow on the other hand, it is also possible to assign the most recent cost on the stock used or sold. In this case last in first out (fifo) inventory cost flow occurs. Other assumption such as weighted average cost are also possible.
The choice of FIFO, LIFO or a weighted average cost depends only on the assumption about cost flows and the best way to satisfy the matching concept. Though each of the various methods of inventory pricing stated, is acceptable for the use in publish financial standards, each has its own advantages and disadvantages and non can be considered best or perfect. The factors that should be considered in choosing an inventory valuation method is the effect of each method on the financial statement (and by extension on the determination of profit) among others. ............... FOR ACCESS TO THE FULL PROJECT WORK, USE THE ORDER NOW! BUTTON BELOW
INTRODUCTION
................. Generally, production firms have three stages of inventories raw materials, to be used in used in making of product (opening stock of raw material) partly completed products (often called work in progress) and finished goods ready for sale (closing stock). The classification and measurement of inventories are important to many firms because of the resources tied in them, and the value of inventories that have a direct effect on the final income statement and cash flow statement of the firm.The primary purpose of financial statement is to provide information for decision makers. Decision makers such as investors, creditors and management that realize that, the financial statement is prepared under generally accepted accounting principles. Ukpia (1999) money is a measuring unit used in the preparation of purchasing power available to acquire and purchase good and services. Most Nigerian companies tie a lot of their resources to their inventories and because the basis of valuation of these inventories have a direct effect on the final income statement of the firm, any distortion in the former leads to a distress in the company’s profitability.
Accounting for inventory cost flows complicated by the fact that, the cost inventory often fluctuates, sometimes quite significantly. It is also very necessary because of its role in the determination of profit. The gross margin on sales is computed by deducting cost of goods sold, that is measure, by the reduction of the ending inventory, which shows the goods available for sale, this is because of the relationship that shows higher cost of closing inventory the lower the cost of goods sold will be and the higher the resulting gross margin.
Conversely, the lower the value of assigned closing inventory the higher the cost of good sold will be and the lower the gross margin. In effect the value assigned to the ending inventory determines which proportion of the cost of goods originally available for sales will be deducted from net sales as cost of goods sold and at what proportion that would be carried to the next period as beginning.
The process of assigning cost to inventory is known as inventory stock valuation. A number of ways or methods are available for costing inventory. It is possible to assign the most recent cost to the inventory on hand on the assumption that first in first out (FIFO) is the appropriate cost flow on the other hand, it is also possible to assign the most recent cost on the stock used or sold. In this case last in first out (fifo) inventory cost flow occurs. Other assumption such as weighted average cost are also possible.
The choice of FIFO, LIFO or a weighted average cost depends only on the assumption about cost flows and the best way to satisfy the matching concept. Though each of the various methods of inventory pricing stated, is acceptable for the use in publish financial standards, each has its own advantages and disadvantages and non can be considered best or perfect. The factors that should be considered in choosing an inventory valuation method is the effect of each method on the financial statement (and by extension on the determination of profit) among others. ............... FOR ACCESS TO THE FULL PROJECT WORK, USE THE ORDER NOW! BUTTON BELOW
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
1.1 Overview of Study……………..........………1
1.2 Statement of the Problem……………………4
1.3 Purpose of the Study……………… ………7
1.4 Research Questions………………………….9
1.5 Research Hypotheses…………………… ….9
1.6 Significance of the Study………………… ..9
1.7 Scope and Limitation of Study…………….10
1.8 Definition of Terms………………………11
1.9 Organization of the Study……………… .12
CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction……………………………….14
2.2 Theorical Framework………………………14
2.4 Conceptual Framework……………………15
2.4 Empirical Review………………………….19
2.5 Inventory Valuation Methods………………41
CHAPTER THREE: RESEARCH DESIGN METHODOLOGY
3.1 Introduction………………………… … .55
3.2 Research Design………………………….56
3.3 Population for Study………………… …56
3.4 Sample and Sample Technique………… 56
3.5 Nature/Sources of Data………………….57
3.6 Method of Data Collection…………….. 58
3.7 Data Analysis Techniques……………….58
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 Introduction …………………………59
4.2 Data Presentation……………………59
4.3 Data Analysis and Intrepretation ……60
4.4 Testing of Research Hypothesis…….63
4.5 Discussion of Research Findings……67
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Introduction……………… ..68
5.2 Summary of the Study… …..68
5.3 Conclusion…………………..69
5.3 Recommendations…………..70
Bibliography …………… ……..72
Questionnaire …………………..74
Reference code: C056
Reference code: C056
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82 Pages
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