Income and Profitability in Mining and Manufacturing

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Income and Profitability in Mining and Manufacturing
Table of Contents
Introduction..............................................................................................................................2
Conceptual Framework............................................................................................................ 2
Income and Profitability relationship.................................................................................................2
Manufacturing Industry.....................................................................................................................3
Mining Industry.................................................................................................................................4
Literature Review.....................................................................................................................6
Research Plan........................................................................................................................... 8
Data Collection..................................................................................................................................8
Data Analysis....................................................................................................................................9
Gantt Chart........................................................................................................................................9
References................................................................................................................................ 9

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Income and Profitability in Mining and Manufacturing
Introduction
The aim of this research is to explore relationship that exists between income and profitability
of an organization considering the mining and manufacturing industries. The research would
answer a key research question, which is – Does the income and profitability relationship
differ in thee cases of mining from manufacturing sector in Australia? It has been observed
that in past five years, the two sectors show differential growth patterns and the research
would make an attempt to understand the causes behind these differences. For this, a
secondary data would be collected from Australian Bureau of statistics on the two industry
from the year 2006. The data would include income and operating profits before tax.
This data would be collected into two variables including the income as independent and
profit as the dependent variable and the statistical procedures would be run to determine the
extent to which income and profit variations relate with each other. For this, a correlation and
regression procedures would be used between the two variables. However, before this can be
done, it is essential to study the background of the research and thus, the report would first
explore the conceptual framework of this research to understand the fundamentals and then
would explore existing researches conducted on the same subject to explore what is already
known. The literature study gaps would be analysed which would justify the chosen approach
for this research (Walliman, 2011).
Conceptual Framework
This section explains the concepts that are the foundation of the current research. These
include an understanding of the relationship between income and profitability of an
organization or industrial sector and exploration of the two major industries including mining
and manufacturing in Australia to assess their performance in the country with respect to
revenues and profitability. This conceptual foundation would reveal insights that would help
make a decision on what data has to be collected to be able to attain the objective of the
current research (Yong, 2015).
Income and Profitability relationship
Revenue or income refers to the total amount that an organization earns through sales.
However, in the process, the company also incurs certain expenditures. These expenses have
to be deducted from the income to arrive at the figure of profit. On top of it, the company also
needs to pay taxes that are further reduced from the profit amount to get to the final figure of

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Income and Profitability in Mining and Manufacturing
the net profit. Net profit margin can be calculated by dividing the net profit by the total
income generated for a specific duration. An organization takes decision on what revenues to
be generated based on how the profits are achieved for every dollar gain. For instance, if the
profit margin of a product were 7%, the product would be able to earn $1 as profit if $14 is
obtained as a revenue (Greener, 2008).
Manufacturing Industry
Manufacturing sector in Australia has seen a decline in past few years because of its reducing
contribution to GDP because of reduced output. The graph below shows how share of
manufacturing in GDP product has been declining continuously over the years in Australia
(Deloitte , 2016).
Figure 1: Manufacturing industry’s share of GDP (Clark, et al., 2000)
Profitability can be obtained from the gross operating profit margin as certain percentage of
income generated from the sale of goods and services.
Figure 2: Gross operating profit margin–manufacturing (Stanford, 2016)

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Income and Profitability in Mining and Manufacturing
Gross profit margin of the industry has also reduced during the same time from 9.55 in 2001
to 7.8 in 2014 in the manufacturing sector unlike other business sectors where profit margins
are increased. As the graph shows, all the other industries put together, the gross profit
margin increased from 10.9 to 12.7% during the same time (Kryger, 2014).
Mining Industry
The mining sector has experienced price falls but its sales volumes are increasing as the
industry transitions into production. Before 2015, the economy faced an investment boom
which has reduced in 2016. The year 2016 was dominated by service sector that gives the
largest share of the output. In contrast, the mining sector is into the production phase and
exports are increasing. During the same time, the Australian dollar fell from its peak of $1.08
USD to $0.71 USD (Cottarelli, 012).
Figure 3: Australia’s exchange rate Fluctuations (Backer, et al., 2015)
In recent years, a drastic decrease in the productivity of the mining sector observed because
of certain factors like increase in commodity prices that lead to increase in expenses incurred
during production work. It was initially predicted that mining would be on the top among
industries in Australia after it entered into the production phase moving away from
investment phase. The actual result was an increase in the output of mining and thus, an
increase in the export caapcities of the sector (Prepare for Australia, 2017).