TABLE OF CONTENTS
Title page i
Certification ii
Dedication iii
Acknowledgement iv
Table of content v
CHAPTER
ONE:
1.1 Background of the
study 1
1.2 Statement of the
problem 5
1.3 Objective of the study
7
1.4 Research Question 9
1.5 Significant of the
study 9
1.6 Scope and Limitation
of the study 10
1.7 Research Method 11
1.8 Definition of Terms 12
CHAPTER
TWO:
2.1 Literature Review 14
2.2 Need for Financial
Analysis 18
2.2.1
Financial Ratio Analysis 20
2.2.2
Uses of Financial Ratio 23
2.3 Profitability Analysis
26
2.4 Types of Profitability
Ratio 29
2.5 Uses of Standard in
Ratio Analysis 36
2.6 Limitation of Financial
Ratio 39
CHAPTER
THREE:
3.1 Historical Background
of United 42
Bank for Africa Plc
3.2 Mission and Vision of the Bank 44
3.3 Accounting Policies
Operated by the Bank 45
3.4 Data Specification 46
3.5 Research Instrument 47
3.6 Techniques of Investment 47
3.7 Personal Interview 48
3.8 Data Analysis 50
3.9 Limitation of
Methodology 51
CHAPTER
FOUR
4.1 Presentation and
Analysis of Data 52
4.2 Summary of Financial
Statement for the 52
part five years of UBA
Plc.
4.3 UBA Plc Trend Analysis
Table 64
CHAPTER
FIVE
5.1 Summary of Finding 65
5.2 Recommendations 67
5.3 Conclusions 69
5.4 Appendix 71
5.5 Journals 79
5.6 Bibliography 80
CHAPTER ONE
1.1
BACKGROUND OF THE STUDY
The extent
of which corporate objective are achieved depends on the quantum and quality of
resources as its disposal. We all know
that resources are not only scare relative to the demand for them but also
waiting assets. For example, plants
become absolute, land loses it fertility, money get spends and executives (men)
get old. The scenario implies that resources
must be constantly aquired used efficiency and replaced” (Asien, 2000).
The fact
that activities mentioned above cost money implies that the survival of the
firm depends on the profit realized by it.
Profit can therefore be defined as the excess of income over expenditure.
The
definition of profit depends on the information needs of the company. If the underlying profitability of the
business the objective review a company’s, result, then it is an operating
profit. i.e gross profit less expenses.
According to
Ellis (1993) says that “Financial reporting of profit provides a key measure of
the performance outcome, associate with performance outcome associated with an
organization strategy”. This means that
before the performance of a business can be evaluated a proper profit measure
approach must be operated by the organization.
Therefore, the function of financial manager is to include profit
planning.
The term
profit planning refers to the operating decision in the area of pricing, costs,
volumes of out pout and the firms selection of product brings. Profit planning is therefore a pre-requisite
for optimizing investment and financing decisions (Mao and James 1969).
The major
aim of establishing a business is to make profit unless adequate (net profit)
are generated and used for the replacement of resources, the firm will
eventually be run down., profit analysis
in business have the following advantages:-
i.)
It helps to increase the equity control of shareholders through
retained earning.
ii.)
It also helps to raise the loss absorptive capacity of the organization.
iii.) The ability of the
companies to pay its dividends depends on the size of its profits.
A company
should earn profits to survive and grow other a long period of time. Profits are essential, but it would be wrong
to assume that every action initiated by management of company should be earned
at maximizing profits, irrespective of social consequences. Although, profits is the ultimate output of a
company, and it will have no future say if it fails to make sufficient for a
firm and the reporting of its in the financial statement is not just sufficient
but to show the weak and strength of a real accounting system that is in the
usefulness of its application rather than information or data gathering processing
aspect (Paul et al, 1972).
In this
view, the financial manager, should, continuously evaluate the efficient of its
company as to achieve its targeted goal i.e profits. Financial statement of companies are tools
which produces a means through which this evaluation can be carried out. Meaning that financial statement should be
used to examine the statement of success of the business over the period. Also willsmore (1971). Confirm this statement
that management use financial statements as working tools with which to obtain
the most effective results in the control of business affairs so as to ensure
the adequacy of the over all result, in the profitability and financial
strength of the business as whole “financial ratio are therefore employed as
means of paper evaluation for the business.
1.2
STATEMENT OF THE PROBLEM
Organization
is expected to keep records of their transaction over the year. Adequate and proper records should be kept in
order to measure financial performance of the business.
Over the
years, it has been realized that financial statement i.e the profit and loss
account and balance sheet are not well prepared which as a result of liability
of most organization to meet their financial obligation.
This may be
as result of the following reason:
i.) Poor Management or
managerial control over the business affair.
ii.) Lack of proper and adequate
recording and keeping of books account.
iii.) Inefficient use of the
firm’s financial assets over the years
iv.) Window dressing at top
management level of the organization.
v.) Change in according
policies operated by the company.
vi.) Changes in the general
price level and increase economic fluctuation over the years.
The problem
of this study is to determine how financial statement=s can serve as a better
tool for measuring the performance of a business over the years, so that night
decision can easily be taken by the users.
It financial statements help in knowing how profitable business has been
by various interested parties. For
example shareholders, creditors, bank and customers.
1.3
OBJECTIVES OF THE STUDY
Companies
are required to publish this annual account which is made up of the balance
sheet, profit and loss account as users of financial statement are interested
in the information’s provided in three types of information. Information about past performance (used in
assessing the success of the business and effectiveness of management),
information about the present before investing find in the business and also
information about the future in order to know which their wealth will be
maximized.
The basis
objectives of companies in line with the users are to ensure that the
profitability of the company is increase given the competitive factors and also
to ensure the sustenance of it impressive profitability.
Based in
this fact the objectives of measuring the profitability of the bank include.
i.) To indicate the
effectiveness with the management has employed both total assets and the net
assets a recorded on the balance sheets.
ii.) To indicate the bank
performance and relation to the owners equity.
iii.) To indicate the risk and
opportunities for the company under review.
iv.) To reflect the efficiency
with which management provides each level of their source or product.
v. To indicate management efficiency
in administration and selling of the services or products of the bank.
1.4
RESEARCH QUESTION
The research questions that were asked are:-
i.
How profitable is the company
ii.
Is the profitability
iii.
Are the profitability ratio of the company increasing or decreasing
over time.
1.5
SIGNIFICANCE OF THE
STUDY
Considering
the extent of reliance on the accuracy of financial statement and profitability
of the company by potential investors, management, shareholder, debenture
holder and inland revenue. The relevance
of this study cannot be over emphasized as this research will serve as a tool
in assessing the profitability.
1.6
SCOPE AND LIMITATION OF
THE STUDY
This study
has examined the United Bank for Africa Plc, Summary of the financial statement
for 2001, 2000m and 1999.
Based on
this fact, the research work that was conducted was restricted to the summary
of the last three years financial statements of the Banks.
The research
was also affected or limited to the information made available to me by the
bank. Therefore, information that was
made available for this research is limited to what was given to me by the
management of the bank.
1.7
RESEARCH METHODOLOGY
The research
instruments used to gathered information have to two divisions.
i.) The primary source of
data: Research instruments like personal interview with finance exports of the
bank was made use of.
ii.) Secondary data: This
includes the consultation of relevant textbooks, journal and published animal
reports of the banks. Analysis of data collected was based on the consumption
of all relevant profitability ratios.
iii.) Profitability in relation
to sale
iv.) Profitability in relation
to investment.
After the
consumption of all relevant profitability ratios for al the three years, the
trend in its was studied so as to know whether is increasing or decreasing and
at what rate is it changing. This analysis was done using a trend analysis
technique of financial analysis.
1.8
DEFINITION OF TERM
i.
RATIO:- This is relationship between two or more
figure.
ii.
TREND ANALYSIS:- This indicate the direction of
change over a period of year.
iii.
BALANCE SHEET:- This is the statement of the
affairs of a company.
iv.
PROFIT AND LOSS ACCOUNTS:- This is an
account
containing the summary of profit and loss,
indicating the profits and losses that are made at the end of an
accounting period.
v. PUBLISHED ACCOUNT:- It is an account
containing
the summary
of the profit and loss account, cash flow statement value added statement and
the balance sheet of a company.
vi.
REVENUE:- This is the total annual income
generated by a company.
vii. EXPENSES:- There are
company’s expenditure incurred in form of payment made.
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