The determinants of profitability in the Tanzanian Cigarette Company limited (1975-1985)

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University of Dar es salaam
The Tanzania Cigarette Company (TCC) is one of the manufacturing industries in Tanzania. It is the only legal manufacture and seller of cigarettes in the country. The company plays an important role in the Tanzanian economy in aspects relating to the provision of market for agricultural and non-agricultural products, creation of employment opportunities and generation of revenues to the Government. In many industries profitability is constrained by a falling productivity. However, in TCC Ltd, there observed the contradicting trends between that of the falling productivity and that of the increasing profitability for the period of 1975-1985. The problem area of this study is therefore to identify the determinants behind the increasing trend of profitability in the situation of the falling productivity in the Company. The study is interesting because profitability is the main source of the Government revenues composed of dividends and taxes, and thus the identification of determinants of profitability in the company is helpful in improving the revenue of the Company itself and the Government. The study employs both qualitative or descriptive and econometric (quantitative) methods of analysis using the time series data covering a period of 1975-1985. A single equation model using the ordinary least Squares (OLS) method of estimation is used to estimate the functional form in an attempt to separate the influence on the profitability of the factors hypothesized to have considerable effects. These factors are average price of cigarettes, net current assets, equity capital and capacity utilization. The regression results indicate that average price of cigarettes. Liquidity position, equity capital and capacity utilization are the significant determinants of profitability trend in the company for the period under study. All the explanatory variables except capacity utilization are positively related to profitability because of the observed contradicting trends between that of the falling capacity utilization and that of the increasing profitability in the company for the period 1975-1985. Basing on the empirical findings of this study, in order to achieve the rising trends of productivity and profitability in the company and other industries under similar conditions, the productive capacities and efficiency in those industries should be raised by allocating enough foreign exchange for importing raw materials and spareparts used by industries, the monopoly status enjoyed by some public enterprises should be aggressive in collecting their debts and should have the strong capital bases. However, this study was found to have limitations in aspects relating to availability, accuracy and reliability of data, scope and estimation. Still the findings are expected to be useful to the planners, policy makers and academicians.
Available in print form, East Africana Collection, Dr.Wilbert Chagula Library, class mark (THS ECO HB601.H3)
Profit-Tanzania, Tanzania Cigarette Company
Haule, L.S.M (1988) The determinants of profitability in the Tanzanian Cigarette Company limited (1975-1985), Masters dissertation, University of Dar es Salaam, Dar es Salaam.