Select Currency
Translate this page

USES OF ACCOUNTING RATIOS IN BUSINESS DECISIONS

Format: MS WORD  |  Chapter: 1-5  |  Pages: 75  |  705 Users found this project useful  |  Price NGN5,000

  DOWNLOAD THE FULL PROJECT

USES OF ACCOUNTING RATIOS IN BUSINESS DECISIONS

 

ABSTRACT

Accounting ratio is the most important factor used by management, creditors, investors and other users of financial statement in carrying out most business decisions.  It uses an application in making most business decisions remain inevitable.This study has, therefore been divided into five chapters; the first chapter briefly introduced the topic by looking at the definition of accounting ratio; it contains the statement of problems, the objective of the study and the limitation of the study.The second chapter, which contains the profile of Nigerian Breweries PLC deals with the review of related literature on the topic.Chapter three deals with the method of carrying out the research methodology.Chapter four appraises the analysis and interpretation of data collected from respondents.Finally, chapter five included the summary, recommendations and conclusion. Any errors either by omission or commission are entirely unintentional and deeply regretted.

 

CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF THE STUDY

Omuya (1990) defined “Accounting as a language of business, it is used in the business world to describe the transaction entered into by all kinds of organization. An analysis of the above definition shows that Accounting centres on transforming data into information that would be useful to many users.  It takes care of the financial communication of the entry as it supplies the financial information in a way and, form so desired by the users.

In a similar case Millichamp (1992) defined Accounting as “the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are in part at least of financial statement”.  These users include owners, (shareholders) managers, suppliers, customers, government employees, etc.  The users of these statements are expected to read, interpret and analyze them.  Objectives of financial statements are not accomplished when many users of the statement cannot understand them, let alone interpret and analyze them.

The information the users attempt to gain from financial statement are:

(i)                           The ability of the business to pay its way and survive in the long run.

(ii)                         The quality of management and the rightness of decision made.

(iii)                      Information that guide the future.

Regrettably, the inability of users of these financial statements to comprehend, interpret and analyze the and still has always contributed to harmful business and investment decision by the users of these statements.  As a result of these wrong business decisions, many users of these statements have been rendered poor, whereas others are afraid and show indifference to investment and business opportunities.  Cases abound where these financial statements users, individual and corporate, have lost millions of Naira merely because of wrong business decisions.

Admittedly, faulty business decisions do not only affect management and investors, it also affects the entire economic growth and development.

Indeed, these problems of wrong investments and business decisions therefore prompted this research work and topic.   Reason behind the topic is the discovery that many victims of wrong business decisions are people and firms who do use analytical tool otherwise known as Ration Analysis in their decision making process.

“Ratios are simply mathematical expression of relationship of one figure to another which may come from the same statement or from different statement (Atman Edward 1968).  Accounting ratios, by their very nature serve as indicator of the performance of a company both past and present.

According to Millichamp (1992) “Ratio Analysis is used to assess performance and liquidity and to forecast the future by extra piloting trend” thus ratio analysis is analytical technique used in making business decisions in the centre of this research work.

1.2            STATEMENT OF THE PROBLEMS

Currently, many users of financial statements are not yet equipped, analytically to make good business decisions, notwithstanding companies and workshops on the benefit of accounting ratios.  Efforts have been made to enlighten and educate financial statement users that their future business predictions are based on accounting ratios, which use historical data.

However, these efforts have not made any meaningful charge because the number of wrong decision makers is on the increase. Some times this attributed to total disregard of ratio analysis by financial statements users.  Perhaps, ratio analysis itself confuses them more and increases their tendency of becoming victims of inadequate business decisions.

Against this background, these situations become puzzling and have constituted research problems.

1.3            OBJECTIVE OF THE STUDY

The objective of this research is to assist in identifying and disclosing the extent to which accounting ratios help in decision making in business.

The writer has in mind that the research will help to strengthen the weakness faced by the companies in their business decisions and at the same time find solutions to the following problems.

(1)                             How accounting ratios confuse financial statement users and increase their tendency of becoming victims of inadequate business decisions.

(2)                             The ignorance of importance of accounting ratio is responsible for detective business decisions by users of financial statements.

(3)                             The negligence and disregard of ratio analysis responsible for wrong business decision by users of financial statement.

1.4            RESEARCH QUESTIONS

The questions this research work is seeking the answers are as follows:

(a)                              Do accounting ratio confuse financial statement users and increase their tendency of becoming victims of inadequate business decisions?

(b)                              Is ignorance of importance of accounting ratio responsible for defective business decisions by users of financial statements?

(c)                               Are negligence and disregard of ratio analysis responsible for wrong business decisions by users of financial statement?

(d)                              Do financial statements contain differences and trouble that misdirect their users?

(e)                               Do users of these statements require more enlightenment campaigns and workshops to enable them comprehend their importance?

(f)                                To what extent do accounting ratios used for financial analysis and a tool for business decisions?

1.5            SIGNIFICANCE OF THE STUDY

Many scholars have written about the importance of financial analysis to business world. Others have also written on ratio analysis as a test to firms’ solvency.

However, no attempt has been made that wrong or inadequate business decision-making process.  This, of course, is where this research work is different from these other writings.

Additionally, ratio enables prospective leaders to decide whether to provide assistance to a evaluate results and to use them as a guide in controlling their firms.  With the help of accounting ratios, creditors are well positioned to know whether their firms are able to pay their debts as they fall due. Stockholders know the performance of their firm, while investors are able equipped to predict the financial future of a particular firm before going into investment.  The study also serves as a source of data for future research on this topic and related topic.

1.6            FORMULATION OF HYPOTHESIS

The researcher wishes to test eight hypotheses in this research work.

HYPOTHESIS 1

H0:    Accounting ratio is not useful in making business decisions.

H1:     Accounting ratio is useful in making business decisions.

HYPOTHESIS 2

H0:    Accounting ratio does not accelerate business decision-making process.

H1:    Accounting ratio accelerates business decision-making process.

HYPOTHESIS 3

H0:    Management does not appraise their efficiency and effectiveness in using resources with the aid of accounting ratios.

H1:    Management does appraise efficiency and effectiveness in using resources with the aid of accounting ratio.

HYPOTHESIS 4

H0:    Negligence of accounting ratio does not result to risky and illogical business decisions.

H1:    Negligence of accounting ratio results to risky and illogical business decisions.

HYPOTHESIS 5

H0:    Do you think that management, investors, creditors do not use computed ratio in decision-making?

H1:    Do you think that management, investors, creditors use computed ratio in decision-making?

HYPOTHESIS 6

H0:    Accounting ratio does not provide information about unproductive department.

H1:    Accounting ratio provides information about unproductive department.

HYPOTHESIS 7

H0:    The Company does not compute the accounting ratios.

H1:    The Company computes the accounting ratios.

HYPOTHESIS 8

H0:    Accounting ratios do not help to discover strength and weakness of a company and causes, which have contributed thereof.

H1:    Accounting ratio helps to discover strength and weakness of a company and causes which have contributed thereof.

1.7            SCOPES AND LIMITATION OF THE STUDY

The  researcher concentrated on accounting ratios in a manufacturing company.  This study will examine the classification of five accounting ratios; Liquidity ratio, profitability ratio, activity ratio, leverage ratio and debt to equity ratio. However, there are some other ratios, which will be discussed in this research work but could be mentioned later.  Ratios are limited to Nigerian Breweries PLC.

The researcher in the course of this research was subjected to some constraints. These constraints include:

(i)                                        Time: The researcher moved form place to place and time was not on his or her side to reach all the information she required.

(ii)                                     Finance: Being a student, the researcher did not have the required cash outlay for data collection and stationary procurement.

(iii)                                   Insufficient information: Some officials believe that their financial documents and information is not for external use.

(iv)                                   Changes in price level make the analysis invalid: There are decreases and increases in result of fall and rise in the prices.

(v)                                     The ratios at a point in time is meaningless unless when compared with another.

(vi)                                   The ratios are calculated on account of historical (past) financial statements and are not good indicators of the future.

(vii)                                The differences in situations of two firms or one firm over a period of time make comparison cumbersome.

(viii)                              Differences that abound on definitions of terms in the balance sheet and profit and loss account make interpretations difficult.

 

  DOWNLOAD THE FULL PROJECT

USES OF ACCOUNTING RATIOS IN BUSINESS DECISIONS

Not The Topic You Are Looking For?



For Quick Help Chat with Us Now!

+234 813 292 6373

+233 55 397 8005


HOW TO GET THE COMPLETE PROJECT ON USES OF ACCOUNTING RATIOS IN BUSINESS DECISIONS INSTANTLY

  • Click on the Download Button above.
  • Select any option to get the complete project immediately.
  • Chat with Our Instant Help Desk on +234 813 292 6373 for further assistance.
  • All projects on our website are well researched by professionals with high level of professionalism.

Here's what our amazing customers are saying

Stancy M
Abia State University, Uturu
I did not see my project topic on your website so I decided to call your customer care number, the attention I got was epic! I got help from the beginning to the end of my project in just 3 days, they even taught me how to defend my project and I got a 'B' at the end. Thank you so much iprojectmaster, infact, I owe my graduating well today to you guys...
Excellent
MATTHEW NGBEDE
Ahmadu Bello University
I wish I knew you guys when I wrote my first degree project, it took so much time and effort then. Now, with just a click of a button, I got my complete project in less than 15 minutes. You guys are too amazing!
Excellent
Abubakar Iliyasu Hashim
Federal college of education pankshin affiliated to university of jos
I am highly impressed with your unquantifiable efforts for the leaners, more grace to your elbow.I will inform my colleagues about your website.
Very Good
Abdulrahman Jibrin
Nti Abaji
Nice one work prompt delivery tanx
Very Good
Abraham Ogbanje
NATIONAL OPEN UNIVERSITY OF NIGERIA
At first I was afraid.. But I discovered they are legit. I will bring more patronize
Very Good
Oluchi From Michael Opara University
If you are a student and you have not used iprojectmaster materials, you are missing big time! iprojectmaster is the BEST
Excellent
Merry From BSU
I am now a graduate because of iprojectmaster.com, God Bless you guys for me.
Excellent
Musa From Ahmadu Bello University
Thank you iprojectmaster for saving my life, please keep it up and may God continue to bless you people.
Excellent
Azeez Abiodun
Moshood Abiola polytechnic
I actually googled and saw about iproject master, copied the number and contacted them through WhatsApp to ask for the availability of the material and to my luck they have it. So there was a delay with the project due to the covid19 pandemic. I was really scared before making the payment cause I’ve been scammed twice, they attended so well to me and that made me trust the process and made the payment and provided them with proof, I got my material in less than 10minutes
Very Good
JONNAH EHIS
Ajayi Crowther University, Oyo
I was scared at first when I saw your website but I decided to risk my last 3k and surprisingly I got my complete project in my email box instantly. This is so nice!!!
Excellent

FREQUENTLY ASKED QUESTIONS

How do I get this complete project on USES OF ACCOUNTING RATIOS IN BUSINESS DECISIONS?

Simply click on the Download button above and follow the procedure stated.

I have a fresh topic that is not on your website. How do I go about it?

How fast can I get this complete project on USES OF ACCOUNTING RATIOS IN BUSINESS DECISIONS?

Within 15 minutes if you want this exact project topic without adjustment

Is it a complete research project or just materials?

It is a Complete Research Project i.e Chapters 1-5, Abstract, Table of Contents, Full References, Questionnaires / Secondary Data

What if I want to change the case study for USES OF ACCOUNTING RATIOS IN BUSINESS DECISIONS, What do i do?

Chat with Our Instant Help Desk Now: +234 813 292 6373 and you will be responded to immediately

How will I get my complete project?

Your Complete Project Material will be sent to your Email Address in Ms Word document format

Can I get my Complete Project through WhatsApp?

Yes! We can send your Complete Research Project to your WhatsApp Number

What if my Project Supervisor made some changes to a topic i picked from your website?

Call Our Instant Help Desk Now: +234 813 292 6373 and you will be responded to immediately

Do you assist students with Assignment and Project Proposal?

Yes! Call Our Instant Help Desk Now: +234 813 292 6373 and you will be responded to immediately

What if i do not have any project topic idea at all?

Smiles! We've Got You Covered. Chat with us on WhatsApp Now to Get Instant Help: +234 813 292 6373

How can i trust this site?

We are well aware of fraudulent activities that have been happening on the internet. It is regrettable, but hopefully declining. However, we wish to reinstate to our esteemed clients that we are genuine and duly registered with the Corporate Affairs Commission as "PRIMEDGE TECHNOLOGY". This site runs on Secure Sockets Layer (SSL), therefore all transactions on this site are HIGHLY secure and safe!