ANALYSIS OF FINANCIAL RATIO AS AN AID TO ECONOMIC ANALYSIS

TABLE OF CONTENT

Title page

Approval page

Dedication

Acknowledgment

Abstract

Table of content

CHAPETR ONE

1.0   INTRODUCTION 

1.1        Background of the study

1.2        Statement of problem

1.3        Objective of the study

1.4        Research Hypotheses

1.5        Significance of the study

1.6        Scope and limitation of the study

1.7       Definition of terms

1.8       Organization of the study

CHAPETR TWO

2.0   LITERATURE REVIEW

CHAPETR THREE

3.0        Research methodology

3.1    sources of data collection

3.3        Population of the study

3.4        Sampling and sampling distribution

3.5        Validation of research instrument

3.6        Method of data analysis

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS AND INTERPRETATION

4.1 Introductions

4.2 Data analysis

CHAPTER FIVE

5.1 Introduction

5.2 Summary

5.3 Conclusion

5.4 Recommendation

Appendix

 

 

 

 

 

 

 

 

 

 Abstract

This study is on analysis of financial ratio as an aid to economic analysis. The total population for the study is 200 staff of Union bank PLC Nigeria, Enugu state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made accountants, human resource managers, customer care officers and marketers were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies

 

 

 

 

 

 

 

 

 CHAPTER ONE

INTRODUCTION

• Background of the study

Management should be particularly interested in knowing the financial strengths of the firm to make their best use and to be able to spot out the financial weakness of the firm to take suitable corrective actions. Thus, Economic analysis is the starting point for making plans, before using any sophisticated forecasting and budgeting procedures. The strength and weakness of the firm need to be understood, so that the firm will be at equilibrium through the use of the strengths. To proper advantage and taking corrective actions against any weakness observed or reigned. Although, emphasis is focused on outsider users such as creditors and owners, management is aware that their performance will be received by these external parties and for other reasons. For example the basic financial statements are used to assess the effectiveness of management in planning and controlling operations as well as for decision-making. Management also recognizes that the evaluation of past operation as revealed by the analysis of the basic statements, represent a good starting point in future operations and serves as an important means of assessing past performance, and in forecasting and planning future performance. Published financial statements are properly oriented towards the long term earning power. Short-term creditors such as major suppliers or banks are usually more interested in the short-term ability of corporations to satisfy its obligations as they fall due. As regards to union Banks, they use mostly financial ratios to obtain clue as to future performance. This project has been embarked on mainly to give a general idea on how to make use of financial ratios aids in economic analysis. It also hopes to point out certain deficiencies associated with it and the view pints of different people working with union bank of Nigeria PLC Enugu.

 

1.2 STATEMENT OF THE PROBLEM

The importance of financial ratios can never be over – emphasized. An efficient use of financial ratios goes a long way in carrying out this function. This fact notwithstanding, I find out a lot of people in the banking sector are not even aware of financial ratios. Its functions and how it can aid the analysis and decision of the economy. In an under developed economy like ours, the need for this ratios is paramount if the economy is expected to be improved upon. Another problem associate with the use of ratios is that ratios do not have much use if they are not analyzed over years. The ratios at a moment may suffer from temporary changes. This problem can be resolved by analyzing the trend of ratios over years. This is a major problem or set back in the economy. It is obvious that utilization of the financial rations is at stake and if nothing is done now. It could gradually be eroded.

1.3 OBJECTIVE OF THE STUDY

 The objectives of the study are;

1. To ascertain financial ratio as an aid to economic analysis
2. To ascertain the importance of financial ratio to business world
3. To ascertain whether creditors form depends on financial ratios to know the liquidity margin of the firm
4. To ascertain the relationship between financial ratio and economic analysis

1.4 RESEARCH HYPOTHESES

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

H₀: financial ratio is not an aid to economic analysis

.H₁: financial ratio is an aid to economic analysis

H₀²: there is no relationship between financial ratio and economic analysis

H₂: there is relationship between financial ratio and economic analysis

1.5 SIGNIFICANCE OF THE STUDY

This study is useful to bankers and other firms in decision-making. It also helps them take corrective measures where there is deficiency or weakness. Bankers use proper ratio analysis before they grant any short or long term loan. Investors and creditors also benefit from this study since the subject matter of this study gives them the general picture of the firm. They are dealing with and also the capacity of the firm to met its obligations.

With the help of ratios we can determine:

• The ability of the firm to meet its current obligations
• The extent to which the firm has used its long term solvency by borrowing funds.
• The efficiency with which the firm utilizes its various assets in generating sales revenue and
• The overall operating efficiency and performance of the firm.

1.6 SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers analysis of financial ratio as an aid to economic analysis. The researcher encounters some constrain which limited the scope of the study;

1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
3. c) Organizational privacy: Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities.

1.7 DEFINITION OF TERMS

FINANCIAL RATIO: Financial ratios are categorized according to the financial aspect of the business which the ratio measures. Liquidity ratios measure the availability of cash to pay debt. Activity ratios measure how quickly a firm converts non-cash assets to cash assets. Debt ratios measure the firm’s ability to repay long-term debt.

ECONOMIC ANALYSIS: A systematic approach to determining the optimum use of scarce resources, involving comparison of two or more alternatives in achieving a specific objective under the given assumptions and constraints. Economic analysis takes into account the opportunity costs of resources

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study

 

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