TABLE OF CONTENTS
Title Page
Certification
Dedication
Acknowledgement
Abstract
Proposal
Table of
content
CHAPTER ONE
1.0 Introduction
1.1 Statement of Problem
1.2 Purpose of the Study
1.3 Research Methodology
1.4 Significant of Study
1.5 Definition of Terms
1.6 Limitation, and Scope of
Study
1.7 Plan of the Study
CHAPTER TWO
2.1 Literature Review
2.2 Uses of Financial Ratio
2.3 Basis of Comparison
2.4 Advantage of Using Ratio
2.5 Classification of Ratio
2.6 The Usefulness of
Financial Ratio in Prediction
2.7 Interpretation of Ratio
CHAPTER THREE
3.0 Research Methodology
3.1 History of Texaco Nigeria Plc.
3.2 Re-Statement of Research Question
3.3 Formation of Hypothesis
3.4 Study Population
3.5 Data Collection Method
3.6 Description of Research Instrument
3.7 Analytical Procedure
3.8 Statistical Formulations
3.9 Limitation of the Methodology
CHAPTER FOUR
4.0 Analysis of Data and
Presentation of Finding
4.1 Introduction
4.2 Computation and Presentation of Ratio
4.3 Capital Structures
4.4 Market Value Ratio
CHAPTER FIVE
5.0 Summary, conclusion and
recommendation
5.1 Summary
5.2 Conclusion
5.3 Recommendation
5.4 Suggestion for further
Studies
CHAPTER ONE
1.0
INTRODUCTION
Accounting
essential to all advance civilization which has moved beyond barter or counter
trade is a means of each exchanging and has devised some sort of monetary
system of payment. Geofficy white led
(1994p.89) individuals, corporate bodies and government (Local, State ad
Federal) adopt one system of accounting r other which ranges from proper
recording of income and expenditure to easy determination of profit or less
from their business activities.
According to
Geofficy white head (1741p1) accounting is the controlling a business by
keeping account book – keeping records measuring on interpreting “accounting
ratio” and communicating these result to management and other interested
parties.
To American
institution of certified public accountant is an art of recording classifying
and summarizing significance manner and in term of money transaction event
which are input at lead of financial character and interpreting, the result
there of from the above definition, it is evident that statistic called
“accounting ration” are prepared from the financial statement. Balance sheet and trading profit and loss
account.
Financial
statement shows the financial position of the firm at a particular time, it
show the performance of resources invested and communicates economic
measurement to the user of financial information to enable them predict,
compared and evaluate the firms earning power its potential. Enable this item to be regarded in their
proper perspective vickery B.G.
Accounting
ratios are only of the value if they are uses for comprise which reveals
conditions and trends and trends that cannot be detracted by inspection of the
individual components of ratio and it they are properly interpreted they can
also point the way to area where further investigation are reajuired. The use of accounting ratio differs from the
view bint of the users.
i.
Management:- Ratio are used to evaluate the overall performance of the
business, since management concern is to ensure that the while business
achieves a satisfactory level of profit in relation to the capital employed.
ii.
Shareholder: It enables the
shareholder or potential investors to determine the return, then they will
obtain their investment and decide whether it worth investing in such business.
iii.
Creditors: It enable both the long and short term creditors assess the
ability of the firm to pay interest and repay the capital sum on due date.
iv.
Government:- Since the government is interested in business profit to
asses the tax liabilities and other information such as statistics on
employment and wages level. Accountancy
into provides information on the health of the business entity which enable the
government to take necessary
v.
Employees:- Accounting ratio are used by the employee to determine long
term stability of the firm to meet their wages demand.
vi.
Competitors:- It also enables the competitor to compare and interpret
significant features in financial statement.
1.1 PURPOSE OF THE STUDY
The purpose of this
study are as follows:
1.
To identify different enterprise of accounting ratio and many different
ratio within the categories.
2.
To determine how ratio analysis can used to present a detailed insight about
firm performance such as:-
i.)
Measure the firm ability to meet current obligation
ii.)
Show the proportion of debt and equity in financing the firms asset.
iii.) Reflect the firm’s
efficiency is utilizing its asset
iv.) Measure the overall
performance and effectiveness of the firm.
v.)
To interpret the result of financial ratios to various users of
accounting information.
1.2
STATEMENT OF PROBLEM
According to
chairman statement in 2000 annual report and account of Texaco Nigeria Plc.
Petroleum Industry in Nigeria
has continued to decline due to various level of disrepair of all four
refineries in the country. This had a
negative impact on the economics growth.
The government embarked upon the policy of partial deregulation of the
petroleum marketing industry. This led
to the increase in the pump price of refined product. The increase in margines initiated by this
policy was leveled up by the rise in cost and inflation oil marketing companies
were given permission to import refined product to cope with the problem of
fuel scarcity.
Despite
these general problem above, the use of accounting ratio in measuring corporate
performance accordingly to pandey I.M (1979.p1.36) may be limited by
- Difficult in deciding on the proper basis of comparism
- Changing in price the makes the interpretation of ratio
invoid.
- The difference in
definition of item in the balance sheet profit and loss statement makes the
interpretation of ratio difficult.
- The ratios calculated at a
point in term are less informative and defective as they suffer from short term
changes.
- The ratios are generally
calculated from financial statement and this are to indicator of future.
However,
those limitations had a serious impact on the use of nation analysis as an
instrument for measuring performance.
1.3
RESEARCH METHODOLOGY
The research
instrument used together to gathered the information have two division.
i. The primary source of
data: Research instruments like personal interview with the finance experts of
the fuel station was made use of.
ii. Secondary data: This include
the consultation of relevant textbooks journal and published annual reports the
fuel station.
1.4
RESEARCH QUESTION
1. The following research
questions will be used for this study.
What are the different categories of accounting ratio?
2. What are the ratios that
measures the firms ability to meet its current obligation?
3. What are the ratios that
measure the performance of company management and identify whether company is a
worth while investment opportunity.
4. What are the ratios that
measure the efficiency of the firm
5. What are the ratio that
assets the ways in which a company finance activities?
6. What are the ratio that
evaluate the performance of a firm in relation to price of its share dividend
and number of share in issue?
1.5
SIGNIFICANCE OF STUDY
The study of
great significance and relevance to the society at Large and users of
accounting information in particular considering the important roles of
“accounting ratio” play in measuring corporate performance.
1)
The study will explain the benefit that can be derived from the
application of ratio analysis.
2)
It helps to high various area of interest which includes profitability
trends and control financial strengths, borrowing potential gearing interest
cover and dividend cover.
3)
It shows the benefit and defect of accounting ratio as do for measuring
company performance. This will in turn
determines the extend to which reliance can be placed on accounting ratio.
4)
It will help the firm evaluating performance over series of accounting
period and measure its performance in the industry in operates.
1.6
LIMITATIONS AND SCOPE OF
STUDY
This study
deals with the application of accounting as a tool for measuring corporate
performance. Therefore the study is
limited in scope to the accounting of Texaco Nigeria Plc. Over the period of five years (1966 – 2000).
1.7
PLAN OF THE STUDY
The research
work will be divided into five chapters.
Each chapters contain the following.
Chapter one will contain the introduction of the study
purpose of the study, statement of problem, research methodology, research
questions, significant of the study, limitation and scope of study and
definition of terms.
Chapter two will contain the literature review, users of
financial ratio basis of comparison, advantages of suing ratio, classification
of ratio the usefulness of financial ratio in prediction ad interpretation of
ratio.
Chapter Three will contain the history of Texaco Nigeria Plc,
re-statement of research question, formation of hypothesis, study population,
data collection method, description of research instrument analytical
procedure, statistical formulations and limitation of the methodology.
Chapter Four will contain the analysis of data and
presentation of finding, introduction, computation and presentation of ratio
figures, capital structures and market value ratio.
Chapter Five will contain summary, conclusion and
recommendation and suggestion for further studies.
1.8
DEFINITION OF CONCEPTS
TERMS
Analysis separation into
paints and the interpretation of figures.
Asset: Economic
resources owned by a going concern of business entity.
Balance sheet:- A
statement of firm assets liability capital at a specific data usually at the
end of account period.
Budget: A comprehensive
and co-ordinate plan expressed in financial terms of the activities goals in a
give period two.
Capital structure: The
inter - relationship between long terms debt preference share capital add net
worth: Sometime distinction is made between capital structure and financial
structure the latter term include current liabilities.
Common ratio: These are
selected ratio that are widely used.
Comparative statement:
financial statement for several years that are presented side by side for
comparative purpose.
Current liabilities:-
Liabilities that are payable within the current accounting year or operating
cycle.
Equity:- The net worth
of a business consisting of share capital share premium and reserves suratus
common equity is that part of the
ordinary shareholder total equity will
include preference share capital.
Debenture:- A long terms
investment that not usually secured on a mortgage or a specific property.
Financial average:- The
magnification of returns to common shareholders through the use of debts.
Fixed asset:- These
assets whose useful life extend beyond an accounting period.
Liquidity: Ability of
the company to need its current financial obligation.
Shareholder: The owner
fop the company
Shareholder: The owner
of the company
Solvency: Ability of the
company to meet its long term obligations.
Ratio Analysis:-
Analytical tools designed identify significant relationship between two
financial statements.
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