Use Of Accounting Ratio In Business Decision

A Case Study Of Nigeria Breweries Plc

114 Pages 12,072 Words 1 – 5 Chapters Download Complete Material

The Use Of Accounting Ratio In Business Decision (PDF/DOC)

Abstract

Accounting ratio is the most important factor used by management, creditors, investors and other users of financial statement in carrying ant most business decision. It uses an application in making business decision 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 the problem, the objective of the study and the limitation of the study.;
The second chapter which contains the profile of Nigeria 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 includes, summary recommendations and conclusion. Any errors either by emission or commission are entirely unintentional and deeply regretted.

Chapter One
  1. BACKGROUND OF STUDY

Omuya:  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 shows that Accounting centers on transforming raw data into information that would be used 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, transaction and events which are in part at least of a financial statements provide necessary information to users 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 interpreting and analyzing them.

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

  1. The ability of the business to pay its way and survive in the long run.
  2. The quality of management and the rightness of decision made.
  3. Information that guide the future

Regrettably, the inability of users of these financial statements to comprehend, interpret and analyze them 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 render poor, where as others are afraid and show indifference to investment and business opportunities.  Cases are abound where these financial statement 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 investor.  It is also affect 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 wro9ng business decision are people and firms who do use analytical tool otherwise known as Ratio 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.”  (HMAN EDWARD 1968).  Accounting ratios, by their very nature, serve as indicator of the performance of a company both past and present.
According to Mill Champ (1992).  “Ratio analysis is used to assess performance and liquidity and to forecast the future is analytical technique use making business decision in the center of this research work.

1.2    STATEMENT OF THE PROBLEM
Currently, many users of financial statements are not yet equipped, analytically to make good business decisions, notwithstanding companies and workshops on the been made to enlighten and Educate financial statements users that their future business predictions are based on accounting ratios, which use historical data.
However, these efforts have not made any meaningful change because the number of wrong decision makers is on the increase sometimes this attributed to total disregard of ratio analysis by financial statements users.  Perhaps, ratio analysis their tendency of becoming victims of inadequate business decisions.
Against this background, these situation become puzzling and have constituted research problems.

1.3    OBJECTIVE OF THE STUDY
The objective of this research 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 the companies in use accounting ratios in the business decision and at the same time find solutions to the following problems.

  1. How accounting ratios confuse their tendency of becoming victims of inadequate business decisions.
  2. The ignorance of importance of accounting ratio is responsible for detective business decisions by the users of financial statements.
  3. The negligence and disregard of ratio analysis responsible for wrong business decisions by users of financial statements.

1.4    RESEARCH QUESTIONS
The questions this research work is seeking the answers are the following:

  1. Do accounting ratios confuse financial off becoming victims of inadequate business decisions?
  2. Is ignorance of importance of accounting ratio responsible for defective business decisions by users of financial statement?
  3. Are negligence and disregard of ratio analysis responsible for wrong business decision by users of financial statement?
  4. Do financial statement contain differences and trouble that misdirect their users?
  5. Do users of these statements require more enlightenment campaigns and workshops to enable them comprehend their importance?
  6. To what extent do accounting ratios used for financial analysis and business decision?

1.5    SIGNIFICANCE OF THE STUDY
Many scholars have written about the important of financial analysis to business world.  Others have also written ratio analysis as a test to firm solvency.
However, no attempt has been made that wrong process.  This, of course, is where this research work is different from the other writings.
Additionally, ratio enables prospective leaders to decide whether to provide assistance to a evaluate results and to use them as guide in controlling the firms.  With the help of accounting ratios, creditors, are well positioned to know whether their firms are able to pay their debts as the fall due.
Stock holders know the performance of their firm, while inventor are ably 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 topics.

1.6    FORMULATION OF HYPOTHESIS
The researcher wishes to test four hypothesis in this research work.

HYPOTHESES   1
Ho:   Accounting ratio is not useful in making business decisions.
Hi:   Accounting ratio is useful in making business decisions.

HYPOTHESES   2
Ho:  Accounting ratios accelerates business decision making process.
Hi:   Accounting ratios accelerates business decisions making process.
HYPOTHESES   3
Ho:  Management do not appraise their efficiency and effectiveness in using resources with the aid of accounting ratios.
Hi:   Management do appraise efficiency and effectiveness in using resources with the aid of accounting ratio.

HYPOTHESES   1
Ho:  Negligence of accounting ratio does not result to risky and illogical business decision.
Hi:   Negligence of accounting ratio results to risky and illogical business decisions.

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 ratio liquidity ratio, profitability ratio, activity ratio, leverage ratio and debt to equity ratio.  However there are some other ratio which will not be mentioned.

Computation and analysis of these ratio research was subjected to some constraints.  These constraints includes:

  1. Time:  The researcher moves from place to place and time was not on his side to reach all the information he requires.
  2. Finance:  Being a students, the researcher did not have the require cash outlay for data collection and stationery procurement.
  3. Insufficient information:  Some officials believe that their financial documents and information is not for external use.

1.8    DEFINITION OF TERMS
a.      Ratio:       The quotient of two mathematical expression.

  1. Shareholders: owners of firm
  2. Financial statements:  This  include balance sheet, profit and loss statements, statement of sources and application and five years financial summary.
  3. Accounting period:  A period of 12 months usually starting from 1st January to 31st December for many firms.
  4. Analysis:  Separation into two parts and interpretation of figures.
Chapter Two

2.0 LITERATURE REVIEW
2.1 Introduction
The chapter presents a review of related literature that supports the current research on the Use Of Accounting Ratio In Business Decision, systematically identifying documents with relevant analyzed information to help the researcher understand existing knowledge, identify gaps, and outline research strategies, procedures, instruments, and their outcomes…

Table of Contents

Title Page
Approval Page
Dedication
Acknowledgement
Abstract
Table Of Content
Proposal

Chapter One
1.1 Background Of Study
1.2 Statement Of Problems
1.3 Objectives Of The Study
1.4 Research Questions
1.5 Significant Of The Study
1.6 Formulation Of Hypothesis
1.7 Scopes And Limitation
1.8 Definition Of Terms
Reference

Chapter Two
2.0 Literature Review
2.1 Profile Of Nigeria Breweries Plc
2.2 Standard Of Comparism
2.3 Ration As Predication Of Business Failure An Empirical Approach
2.4 Classification Of Accounting Rations
2.5 Type Of Rations
2.6 Signification Of Ration
2.7 Limitations Of Accounting Rations
2.8 Inflation And Accounting Rations
2.9 Criteria For Accounting Rations
Reference

Chapter Three
3.0 Research Design And Methodology
3.1 Sources Of Data
3.2 Interview Questions (Collection Instrument Method)
3.3 Determination Of Sample Size
3.4 Method Of Investigations
3.5 Statistical Method Used For Data Analysis

Chapter Four
4.0 Data Presentation And Analysis
4.1 An Over – View
4.2 Distribution Of Response
4.3 Testing Of Hypothesis

Chapter Five
5.0 Summary, Conclusion And Recommendation
5.1 Summary
5.2 Conclusion
5.3 Recommendations
Bibliography
Appendix

How To Download Complete Material (PDF/Doc)

This Research Work On “Use Of Accounting Ratio In Business Decision” Complete Material Can Be Downloaded Through Whatsapp, Email Or Download Link. Click The Below Button To Proceed:

You may like these topics

Impact Of Employees Participation In Decision Making And Organisational Productivity.

Decision is the point at which plans, policies and objectives are translated into concrete action. It is noted that Managers, do consider decision making to be the heart of their job in that they must always choose what is to be done, they influences the ordinary employees in decision making. The objective of the research is to know the impact of employees participation in decision making on organizational productivity in Nigerian publ […]

Design And Implementation Of Computerized Accounting System Of A Non-Profitable Organization.

It is a well-established fact, that proper financial management and adequate planning is the bedrock of every successful organization. Reports generated from the accounts are among the major tools used by the management of any establishment for policy formulation, major decisions taking etc. Account is the statement of money paid out or to be paid out by an organization, and the ones received or to be received. Due to the trend toward […]

Accounting Information And Management Decision Making.

1.1 BACKGROUND OF THE STUDY According to Reece, (1975), the accounting profession essentially involves the supply of information to decision makers. Hence, it is not surprise that accountants have always been involved in many information related problems. The need for this involvement is underscored by the avowed aim of accounting which according to the American association committee to prepare A statement of basic accounting theory (S […]

Effectiveness and uses of accounting information for decision making in public sector organization.

INTRODUCTION 1.1 BACKGROUND OF STUDY One of the most effective uses of accounting information is decision making. Decision making has being described as a purposeful choosing from a number of alternative causes of action. The accounting information provides managers with the necessary information they need. In this case, it is the accountants that provide the information with which the management uses for its decision making. Manageme […]

Effects Of Financial Accounting Reporting On Managerial Decision Making.

INTRODUCTION 1.1 BACKGROUND OF THE STUDY Financial reports provides an overview of a business profitability and financial condition in both short and long term. They are necessary sources of accounting information about companies for wide variety of users. In. every business, there, needs information. This information needs ranges from financial, production, marketing etc. Generally, the larger the organization the greater the managem […]

Effect Of Financial Accounting Reporting On The Management Of A Business.

INTRODUCTION 1.1 BACKGROUND OF THE STUDY: Financial accounting encompass activities related to the preparation of certain reports, which is known as financial statement. These statement reports the financial position of a firm at a particular time, the firms activities and resulting profit or losses during the most recent period, and the flow of resources occurring within the firm during the same period. WALGERNBAC and Co (19) defined […]

Roles Of Central Bank And Merchant Banks In Financial International Trade.

  In classical economic theory, trading is good for you. You are better off concentrating on producing and selling the commodities for the production of which you have a comparative advantage and buying from others those commodities you need which they can produce relatively more cheaply. This through the market mechanism, a high level of output of goods and services is attained and shared to the benefits of energy particip […]
References
Here are some related references that may be useful to you. Download the full material to view the references cited in this research work.

Penman, S. H. (2013). Financial statement analysis and security valuation (5th ed.). Pearson Education.

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2019). Financial accounting: Tools for business decision making (8th ed.). Wiley.

Higgins, R. C. (2012). Analysis for financial management (9th ed.). McGraw-Hill Education.

Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2018). Managerial accounting (16th ed.). McGraw-Hill Education.

White, G. I., Sondhi, A. C., & Fried, D. (2003). The analysis and use of financial statements (3rd ed.). Wiley.

Fridson, M. S., & Alvarez, F. (2011). Financial statement analysis: A practitioner’s guide (4th ed.). Wiley.

Solomon, D. H., & Barlow, S. (2016). Financial management for public, health, and not-for-profit organizations (2nd ed.). Wiley.

Palepu, K. G., Healy, P. M., & Bernard, V. L. (2003). Business analysis and valuation: Using financial statements (2nd ed.). South-Western.

Scott, W. R. (2015). Financial accounting theory (7th ed.). Pearson Education Canada.

Block, S. B., & Hirt, G. A. (2009). Foundations of financial management (13th ed.). McGraw-Hill Education.

Koller, G., & M. (2020). Valuation: Measuring and managing the value of companies (6th ed.). Wiley.

Tennent, S. (2020). Analyzing financial statements: A guide for small businesses. Business Expert Press.

Langfield-Smith, K., Thorne, H., & Hilton, R. W. (2018). Management accounting: Information for creating and managing value (7th ed.). McGraw-Hill Education.

Ross, S. A., Westerfield, R., & Jaffe, J. (2016). Corporate finance (11th ed.). McGraw-Hill Education.

Disclamer:

This study on the Use Of Accounting Ratio In Business Decision is solely for academic research purposes only and should be used as a research guideline or source of ideas. Copying word-for-word or submitting the entire project work to your school is unethical academic behavior and “UniProjects” is not part of it.