USES OF ACCOUNTING RATIO AS A MEASURE OF MANAGEMENT PERFORMANCE AND EFFECTIVENESS
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1.1 BACKGROUND OF THE STUDY
Interpretation of account is the art and science of translating the figures there in such a way as to reveal financial strength and weakness of a business. Ratio analysis is a powerful tool of accounting analysis.
A ratio is defined as the indicated quotient of two mathematical expressions and the relationship between two or more things.
In accounting analysis a ratio is used as index or yardstick for evaluation the financial position and performance of a firm or company. More so, ratio analysis involves comparing none figure in terms or in relation to another figure.
It is computed by dividing one number that is the base into another. Ratio analysis facilitates the evaluation of accounting information by educing such data into smaller unit. One of the utility of accounting ratio as a tool of accounting analysis to that not effected by the relatives size of activities or department being compared thus it allows for comparison between small and large firm with the same firm.
Ratio analysis in addition of providing us the means by which we teot the efficiency of various pleasures of the business as prevented by the financial statement.
It is also make it possible for management to compare the performance of a firm with those of other firms in the same industry and/ with the same organization. We can compare different department or the performance of the organization between years.
The performance on organization can be measured from the income statement and balance sheet.
Therefore, this accounting ratio uses the financial data from balance sheet and income statement to evaluate the company performance. The compilation of trading profit and loss account: and balance sheet present and produce of series of transaction, which we have taken place over a particular period of time.
In order to make use of information presented in the final, account and balance sheet the users need analysis and interpret the meaning before making any conclusions.
The first stage in analysis in the development of a systematic review if accounting data with the aid of accounting ratio, which show the relationship of the results of the firms activities.
The interpretation of the final account and the balance sheet could thereafter of being carried out using the accounting ratio so obtained from the result of the activities but before any interpretation is undertaken the print of view of the person requiring the information must be understood.
1.2 STATEMENT OF THE PROBLEM
In business world today, the matter of mal-administration management in effectives and wider-utilization of resources by management given the business owners no other option but komeasure the through the usage of accounting ratio.
These ratio are adopted so as to improve the management performance efficiency.
The research, therefore seek lo measure the management performance
and efficiency in Texaco Nigeria Pic,
1.3 OBJECTIVE OF THE STUDY
The use objective of the project r.ie to facilitate the ratio behind various decisions that are taken in the business organization on different situation at a point in term.
This research work will study the use of accounting ratio a measure or organization performance and efficiency. Stressing the reason why various business activities embark upon business organization have been so unicredilive for continues existence of business.
1.4 SIGNIFICATION OF THE STUDY It enable interested parties to know how profitable a business is. It help to ascertain the extent to which a firm has used its long-term
Solvency by borrowed found.
The ability of a firm to meet its current obligation can be measured. The ratio is a means of communicating or giving information to the public of what has happened from are period to another.
COPE AND LIMITATION OF THE STUDY SCOPE
This particular project will attempt to disclose and limit itself to uses of accounting ratio in the business organization with particular reference to Texaco Nigeria P!c. ‘
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 reason why business activities or organization have been is interesting to prospective investor to subscribe for shares of the company.
It is difficult to decide on the basis for comparison
Ratio calculated over or at a point in term may less informative and defective as they suffer from short-term charge
Definition of terms in the balance sheet and income statement different, interpretation of ratio of two companies or of one company over years comparism to rendered difficult.
1.6 PLAN OF THE STUDY
The research work has been subdivided into five chapters.
Chapter one contains the introduction of the whole topic and other chapters in this project work.
The second chapter deals with various writers point of views, it also contains theoretical details, practical illustrations and interpretations drawn out by the researcher in the shream of this study.
Chapter three covers the historical background and information of Global soap and Detergent Company. In this chapter, data are specified, collected, analyzed and interpreted.
The method use for the data analysis and the company capital budgeting procedures are corporateiy outlayed in this chapter.
Chapter four deals with various techniques used in analyzing the data collected.
The last chapter which is chapter five summarized the research study and the conclusion down from the research with recommendations.