TABLE
OF CONTENTS
CHAPTER ONE
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
1.2
STATEMENT OF THE PROBLEM
1.3
OBJECTIVES OF THE STUDY
1.4
RESEARCH METHODOLOGY
1.5
SCOPE OF THE STUDY
1.6
PLAN OF THE STUDY
1.7
DEFINITION OF TECHNICAL TERMS
CHAPTER TWO
LITERATURE REVIEW
2.1 DEFINITION AND TYPES OF ACCOUNTING RATIO
2.2
ACCOUNTING
RATIO AS A TOOL FOR FINANCIAL ANALYSIS
2.3
USER
OF ACCOUNTING RATIO
2.4
SIGNIFICANT OF ACCOUNTING RATIO
2.5
LIMITATION OF ACCOUNTING RATIO
CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 RESEARCH DESIGN
3.2 POPULATION OF THE STUDY
3.3 SAMPLE AND SAMPLING TECHNIQUES
3.3.1 SAMPLING TECHNIQUE
3.4 METHOD OF DATA COLLECTION
3.5 SOURCES OF DATA COLLECTION
3.6 METHOD OF DATA ANALYSIS INTERPRETATION
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.1 LIQUIDITY RATIO
4.2 LEVERAGE OF CAPITAL
STRUCTURE RATIO
4.3 ACTIVITY RATIO
CHAPTER FIVE
SUMMARY CONCLUSION AND
RECOMMENDATION
5.1 SUMMARY
5.2 CONCLUSION
5.3 RECOMMENDATION
BIBLIOGRAPHY
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Interpretation of account
is the art and science of translating the figures, this is such a way as to
reveal the financial strengthen and weaknesses of a business.
Ratio analysis is a
powerful tool of accounting analysis. A ratio is defined as the indicated
quotient of two mathematical expressions as the relationship between two or
more things.
In accounting analysis, a
ratio is used as index or yardstick for evaluating the financial position and
performance of a firm or company.
More so ratio analysis
involves company figures in terms of relation to another figure. It is computed
by dividing one number, that is it base into another ratio analysis facilitates
the evaluation of accounting information by educating such data into a smaller
unit. One of the utility of accounting analysis is that it is not affected by
the relative size of the activities or department being compared. Thus it
allows for comparison between small and large firm within the same industry.
Ratio analysis in addition to providing us the means by which we test for the
efficiency of various features of the business as presented by the financial
statement, it also make it possible for the management to compare the
performance of a firm with those of other firm in the same industry and within
the same organization between different years.
The performance of an
organization can be measured from its income statement and balance sheet.
Therefore, the balance sheet and income statement to revaluate the company
performances. The compilation of trading, profit and loss account and the
balance sheet present the end product of series of transaction, which have
taken place over a particular period and the balance sheet, the users need to
analyze and interpret the meaning before making any conclusion.
The first stage in the
analysis is the development of a systemic review of the accounting data with
the aid of accounting ratio, which shows the relationship of the results of the
firm activities. The interpretation of the final accounts and the balance sheet
could thereafter be carried out using the accounting ratio so obtained from the
result of the activities but before any interpretation is undertaken, the
profit of view of the person requiring the information must be understood.
1.2 STATEMENT OF THE PROBLEM
We shall play an attempt
on all problem faced by a firm and all attempt by the management to solve this
problem towards their satisfaction.
It is also discovered
that most of the performance of the compared organization cannot be measured by
another management because of the method used in carrying out their ratio
analysis.
This can be traced to the
development of a systematic review of their accounting data with the aid of
accounting ratio.
1.3 OBJECTIVES OF THE STUDY
The basic objective of
this project s to facilitate the ratio decision, that are taken in the business
organization of different situation at a point in time.
The research work will
study the use of accounting ratio as a measure of organization performances and
efficiency stressing the reason why various business activities embark upon by
business organization have been so uncreative for the continuous existence of
the business.
1.4 RESEARCH METHODOLOGY
The research method used
in gathering data for purpose of this project was both primary and secondary
data. The primary data was collected through some personal interview with some
staff and management of the establishment. The secondary data was collected
through libraries’ and some relevant available post and present journals,
textbooks, monthly reports as well as past projects.
1.5 SCOPE OF THE STUDY
This particular project
will attempt to disclose and limit itself to accounting ratio in the business
organization with particular reference to Texaco Nigeria Plc.
It will also show how
important business decision are taken based on adequate business information
that is readily available derived from accounting ratio analysis.
Furthermore, this project
will enumerate some of the reasons why business activities of organization have
been so interesting to prospective investors to subscribe for shares of this
company.
1.6 PLAN OF THE STUDY
The organization of the
project will be structured into five chapters i.e chapter one to five. The
summary of each chapter is briefly state below.
Chapter one of these
study contain the general description of the project which include scope of the
study, objective of the study as well as the plan of the study.
Chapter two contains
review of literature, here many write up based on accounting ratio for
financial analysis and the users of accounting ratio.
Chapter three contains
research methodology that is the source and the description of the instruments.
Chapter four on analysis
of accounting ratio and their users in business organization.
Chapter five contain the
comprehensive summary of the project as well as suggestion and recommendation.
1.7 DEFINITION OF TECHNICAL TERMS
The terms attributed to
accounting ratio as a means of measuring the efficiency in an organization are
as follows:
BALANCE SHEET:
this is a statement of the company showing the wealth of such company. This
balance sheet is not an account, it shows the assets and liabilities of a
company at a particular date.
ASSETS: this
is normally computed in two halves fixed assets and current assets.
FIXED ASSETS: this
include freehold, premises, motor vehicles, goodwill e.t.c. it is usually shown
at original values. In most cases the depreciation of any is usually less from
its original value.
CURRENT ASSETS:
these are assets which can be changed to cash. It is not as durable as fixed
assets. It comprises of closing stock, debtor, cash, bank e.t.c.
LIABILITIES:
this shows the amount which the company own to outsider. It also includes
capitals, creditors e.t.c.
LONG TERM LIABILITIES: loan debentures. We also have current liabilities, which
accrued for only a year. It include short term trade creditor, payment,
interest on loan e.t.c.
INCOME STATEMENT: this is computed to show the net earning of the company. It is then
divided up between debentures holder and other supplies of long term loans.
However, income statement shows that changes in wealth during a given period
due to the interaction of cost and revenue.
In
addition, the information which the company needs for decision making, would be
determined from the accounting ration that has been completed.
Login To Comment