The impact of ratio analysis on management decision making in organization

Thesis Overview

<p> <b></b></p><p><b><b>INTRODUCTION</b></b></p><p><b><b></b></b></p><b><b><p><b>1.1 &nbsp; &nbsp; <br></b><b>Background<br>of the study</b></p><p><b></b></p><b><p>In every organization irrespective of its size, ownership,<br>structure, impact of ration analysis on management decision making occupy a<br>crucial position. However given this centrality can be said that behind every<br>successful organization the process in which the management arrive at decision<br>making is very important as far as financial management is concerned in the<br>private sector of the economy and specifically in a banking institution like<br>united bank for Africa (U.B.A). In a nutshell the impact of ration analysis is<br>the most preoccupation of this research work is referred to the manner through<br>which the management of organization takes decision suitable for profit as<br>possible future planning, controlling current performances and future<br>development through and activity analysis. Significance change has taken place<br>in recent years in the size and complexity of both private organization and<br>public organization because of this management is faced with evaluation in<br>technical, social political and economic forces. As a result, the methods of<br>arriving at the decision have become more difficult management especially in<br>accounting activity of the organization. &nbsp;This research is devoted to examination of<br>some major impact of ration analysis in financial institution (united bank of<br>African).</p><p><b>1.2 &nbsp; &nbsp; <br></b><b>STATEMENT<br>OF THE PROBLEM</b></p><p><b></b></p><b><p>The<br>part of ration analysis as a tool for decision-making has following area of<br>concern. 75 ratio analysis useful in investment appraisal.</p><p>1. &nbsp; Whether management rely on ratio<br>analysis for decision making</p><p>2. &nbsp; Does ratio analysis really determine<br>the wealth maximization of shareholder?</p><p>3. &nbsp; It ratio analysis or management tool<br>or technique use in determining the liquidity, stability profitability and<br>efficiency &nbsp; of the organization?</p><p>4. &nbsp; Whether ratio analysis can be used<br>to determine the trend of development and performance of the<br>organization over time</p><p>At the time of choose this topic the<br>above was what the researcher have in mind and therefore pushes to find out<br>what is the need for ratio analysis n banking institution like united bank for<br>African.</p><p><b>1.3<br>OBJECTIVE OF STUDY</b></p><p>The<br>primary objective of this researcher is to find out how efficient and<br>effectiveness does the management evaluate its financial position. Also the<br>performance of the institution on with regards to the financial a quantitative<br>judgment about the institution financial position and its achievement which<br>includes it is further generalized as the following:</p><p>1. &nbsp; To ascertain the effective<br>implementation of traditional function of banking acceptances of deposit to<br>find lending.</p><p>2. &nbsp; To ascertain the efficient financial<br>resource mobilization without inflation money supply expansion for economic<br>development especially &nbsp;when external borrowing is viewed as a last<br>resort.</p><p>3. &nbsp; To ascertain the Increasing sense of<br>commitment and identification with the institution and it’s good by<br>institutional design and activates of people and adopting a participating<br>or democratic style of management.</p><p>4. &nbsp; To ascertain the Maintaining accountability<br>of asset.</p><p><b>1.4 RESEARCH HYPOTHESES</b></p><p><b></b></p><b><p>For<br>the successful completion of the study, the following research hypotheses were<br>formulated by the researcher; </p><p><b>H0:<br></b>&nbsp;there is no application of ratio analysis useful when<br>it comes to decision making in the organization.</p><p><b>H1:<br></b>&nbsp;there is application of ratio analysis useful when it<br>comes to decision making in the organization.<b></b></p><b><p><b></b></p><b><p><b>H02:<br></b>there<br>is no extent ratio analysis help the chief<br>executive of bank in decision making</p><p><b>H2:<br></b>there<br>is extent does ratio analysis help the chief<br>executive of bank in decision making</p><p><b>1.5 SIGNIFICANCE OF THE STUDY</b></p><p><b></b></p><b><p>The<br>significance impact of ratio analysis in financial institution cannot be over<br>emphasized. It is therefore expected that, this research work is bound to be<br>beneficial to the following:</p><p>1. &nbsp; <b>a. &nbsp; Management: </b>Most management decision is based on<br>information from ration analysis. Management planning is also supported by<br>vital information from ratio analysis.</p><p>2. &nbsp; <b>b. &nbsp; Shareholders: </b>For shareholders to determine their<br>wealth maximization, they rely on information from ratio analysis such as<br>stability ratio and leverage ratio.</p><p>3. &nbsp; <b>c. &nbsp; Potential<br>Investor:</b>&nbsp;for<br>potential infestation is and for them to know or ascertain the organization is<br>based on vital information from ratio analysis.</p><p>4. &nbsp; <b>d. &nbsp; Employees: </b>The interest of employee is the<br>organization is how their welfare can be improved. They are able to obtain<br>information for the agitation for improvement on their welfare through ratio<br>analysis such as profitability ratio.</p><p>5. &nbsp; <b>e. &nbsp; Student: </b>It is expected that students mostly<br>undergraduate stand to benefit from this research work because it serve as<br>a sources of ratio analysis.</p><p>6. &nbsp; <b>f. &nbsp; &nbsp;Government: </b>Government also relies on<br>information from ratio analysis in the assessment of the organization for tax<br>purpose such as profitability and liquidity ratios.</p><p><b>1.6 SCOPE AND LIMITATION OF THE<br>STUDY</b></p><p><b></b></p><b><p>The scope of this research work be<br>specially restricted to United Bank for African Plc, Ilorin Branch. The<br>researcher encounters some constrain which limited the scope of the study;</p><p>&nbsp;<b>a)<br>AVAILABILITY OF RESEARCH MATERIAL:</b><br>The research material available to the researcher is insufficient, thereby<br>limiting the study</p><p><b>b) TIME:</b>&nbsp;The time frame allocated to the study does not<br>enhance wider coverage as the researcher has to combine other academic<br>activities and examinations with the study.</p><p><b>c) Organizational privacy</b>:<br>Limited Access to the selected auditing firm makes it difficult to get all the<br>necessary and required information concerning the activities. </p><p><b>&nbsp;1.7 DEFINITION OF TERMS</b></p><p><b></b></p><b><p>The<br>trilogies used in this study are defined below for the better understanding of<br>this work so tat research will not be misinterpreted.</p><p>1. &nbsp; <b>Bank:</b>&nbsp;it is a financial institution<br>which primarily holds out itself to accept deposited from consumers and payout<br>on demands.</p><p>2. &nbsp; <b>Ratio Analysis: </b>Ratio analysis refers to the<br>determination of the significant relationship which exist between firs as show<br>in a firms performance.</p><p>3. &nbsp; <b>Profitability: </b>This measure indicates whether the<br>company is performing satisfactorily. They are used among other things, to<br>measure the performance of management to identify whether a company may be a<br>worthwhile investment opportunity and to determine a company’s performance<br>relative of its competitor.</p><p>4. &nbsp; <b>Management: </b>Management can be described as the<br>art of working particularly through people for the achievement of the board<br>goals of an organization.</p><p>5. &nbsp; <b>Liquidity: </b>Liquidity measures the ability of a<br>business to meet short term obligation on.</p><p>6. &nbsp; <b>Activity: </b>Activity helps assess the efficiency<br>of manager’s actions.</p><p>7. &nbsp; <b>Return on capital employed</b>: this is the yardstick employed to<br>measure the efficiency of the management in utilizing the assents of the<br>business.</p><p>&nbsp;<b>1.8 ORGANIZATION OF THE STUDY</b></p><p><b></b></p><b><p>This<br>research work is organized in five chapters, for easy understanding, as follows</p><p>Chapter one is<br>concern with the introduction, which consist of the (overview, of the study),<br>historical background, statement of problem, objectives of the study, research<br>hypotheses, significance of the study, scope and limitation of the study,<br>definition of terms and historical background of the study. Chapter two<br>highlights the theoretical framework on which the study is based, thus the<br>review of related literature. Chapter three deals on the research design and<br>methodology adopted in the study. Chapter four concentrate on the data<br>collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and<br>recommendations made of the study</p></b></b></b></b></b></b></b></b></b></b></b> <br><p></p>