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