STOCK VALUATION AND PROFITABILITY (A STUDY OF UNILEVER NIGERIA PLC)

ABSTRACT

The survival of a business organization depends on the degree and accuracy of keeping proper accounting records, most especially the records that determine the profit of the firm.

One of the assets of a business that calls for adequate record keeping is the current asset of stock. This is because, it constitutes the largest portion of the current assets of a company being it a trading or manufacturing concerns. Before a business starts materials, work stock either in the form of raw materials, work in progress or finished goods. Stock is therefore the principal source of revenue for any business enterprise. Beside, the asset of stock is particularly significant because it may materially affect both the income statement and the balance sheet. To determine the net income, the cost of stock sold or produced is the largest deduction from sales, considering the importance of stock in a business; care should be taken in counting and pricing the stock at the year and since a small error in the valuation of the closing stock may have a material effect upon the net income. The motive behind this research project therefore is to investigate with the help of discussion, questionnaires and review of related literature on how business enterprises account for their stocks, the problems confronting them and the effects of improper stock valuation on profitability with particular reference to Unilever Nigeria plc.

TABLE OF CONTENTS

Title page                                                              i

Approval page                                                        ii

Certification                                                           iii

Dedication                                                             iv

Acknowledgement                                                  v

Abstract                                                                viii

Table of contents                                                    ix

CHAPTER ONE

1. Introduction                                                    1
   1. Background of the study                                   2
   1. Statement of problem                                      6
   1. Objective of the study                                      8
   1. Research question                                            9
   1. Statement of hypothesis                                   10
   1. Significance of the study                                   10
   1. Scope of the study                                           11
   1. Limitation of the study                                     11
   1. Definition of terms                                           12

CHAPTER TWO

• Literature review                                             17
  • Historical background                                       17
  • Definitions                                                      18
  • Stock management                                          20
    • Classification of stock                                22
    • Essentials of stock management                 25
    • Needs for stock keeping                             26
    • Stock checking and stock taking                 28
    • High level of stock                                    29
  • Cost Influencing stock                                      31
    • Stock level classification                             33
  • Cost flow assumption                                       36
  • Basic rules to stock valuation                            42
  • Methods of establishing stock quantitative           44
  • Choosing stock costing methods                        45
  • Effects of errors in stock valuation                     47
  • Chapter summary                                            50

CHAPTER THREE

• Research methodology                                     53
  • Introduction                                                    53
  • Research design                                              54
  • Source of data collection                                   55
    • Primary sources of data                             55
    • Secondary sources of data                         56
  • Population and sample size                               56
  • Sample techniques                                           59
  • Validity and reliability of measuring instrument    60
  • Method of data analysis                                    61

CHAPTER FOUR

• Presentation and analysis of data                       63
  • Introduction                                                    63
  • Data presentation, classification and conclusion   66  
  • Analysis of data according to research hypothesis 69
  • Analysis of data to test hypothesis                     78
  • Interpretation of result                                     87
  • Analysis of question                                                92

CHAPTER FIVE

• Summary, Conclusion and Recommendation        93
  • Introduction                                                    93
  • Summary                                                       93
  • Recommendation                                             96
  • Areas of further study                                      97

Appendix 1                                                    

Appendix 11

Reference

CHAPTER ONE

1. INTRODUCTION

Stock is one of the largest and most valuable current assets of any trading or manufacturing concern. They are items of value held for use or sale by a firm which include goods awaiting sales, most at times called finished goods, goods in the course of production, also called work in progress (WIP) and goods to be consumed in the course of production, called raw material. Conversely, it excludes long term assets subject to depreciation, called fixed assets and those that are subject to amortization, called intangible assets.

Nevertheless, stock of manufacturing firms constitutes the second largest item after fixed assets in the balance sheet in terms of monetary value; hence it is paramount to attach importance to the control and management of stock and its usage by the firm.

Valuation is a measurement process, hence by stock valuation, we refer to the assignment of monetary value to stock the value attached to stock at the end of every financial year would go a big was to determine the level of profitability of a firm at the particular year.

This research work therefore, centers on investigating the relationship between stock valuation and profitability and improper stock records maintenance in a firm with reference to Unilever Nigeria Plc as a study.

1. BACKGROUND OF THE STUDY

This study in based on Unilever Nigeria plc, which outfit is located at Aba, Abia state. It was formally known as the West Africa Soap Company Limited in 1923 initial its change to Unilever Brother’s Nigeria limited in 1955.

It first started with importing cold water detergent into counting which was white in colour with some blue greenish sparkles. In 1947, the firm introduced the OMO blue detergent which completed with cold water test. The firm started diversity its manufacturing plant which leads to the establishment of Aba Plant in 1949.

Initially, the firm manufactures scope was based on local palm oil and now they have strengthened to foot hold and drink business by merging with Lipton Nigeria Limited in product industries on December 1988 and become giant in personal production process.

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