Determinants of Bank Profitability in Nigeria
CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND INFORMATION TO THE STUDY
The study of profits is important not only because of the information it provides about the health of the economy in any given year, but also because profits are a key determinant of growth and employment in the medium-term. Changes in profitability are an important contributor to economic progress via the influence profits have on the investment and savings decisions of companies. This is because a rise in profits improves the cash flow position of companies and offers greater flexibility in the source of finance for corporate investment (i.e. through retained earnings). Easier access to finance facilitates greater investment which boosts productivity, productive capacity, competitiveness and employment.
The existence, growth and survival of a business organization mostly depend upon the profit which an organization is able to earn. It is true that when Profitability increases the value of shareholders may increase to considerable extent. The term profitability refers to the ability of the business organization to maintain its profit year after year. The profitability of the organization will definitely contribute to the economic development of the nation by way of providing additional employment and tax revenue to government exchequer. Moreover, it will contribute the income of the investors by having a higher dividend and thereby improve the standard of living of the people.
In order for a business entity (whether public or privately owned) to continue to prosper, there is need for its earnings to be relatively stable for its expansion and growth over time. In addition to its level of earnings, its external environment must also be carefully understood and reliably anticipated (Burns and Mitchell, 1946).
Earnings and business environments are so serious issues that a business must study and understand in order to face its opportunities and threats with vigor and determination. Where for
INTRODUCTION
1.0 BACKGROUND INFORMATION TO THE STUDY
The study of profits is important not only because of the information it provides about the health of the economy in any given year, but also because profits are a key determinant of growth and employment in the medium-term. Changes in profitability are an important contributor to economic progress via the influence profits have on the investment and savings decisions of companies. This is because a rise in profits improves the cash flow position of companies and offers greater flexibility in the source of finance for corporate investment (i.e. through retained earnings). Easier access to finance facilitates greater investment which boosts productivity, productive capacity, competitiveness and employment.
The existence, growth and survival of a business organization mostly depend upon the profit which an organization is able to earn. It is true that when Profitability increases the value of shareholders may increase to considerable extent. The term profitability refers to the ability of the business organization to maintain its profit year after year. The profitability of the organization will definitely contribute to the economic development of the nation by way of providing additional employment and tax revenue to government exchequer. Moreover, it will contribute the income of the investors by having a higher dividend and thereby improve the standard of living of the people.
In order for a business entity (whether public or privately owned) to continue to prosper, there is need for its earnings to be relatively stable for its expansion and growth over time. In addition to its level of earnings, its external environment must also be carefully understood and reliably anticipated (Burns and Mitchell, 1946).
Earnings and business environments are so serious issues that a business must study and understand in order to face its opportunities and threats with vigor and determination. Where for