The Impact of Ratio Analysis on Management Decision Making in Organizations
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Chapter one on The Impact of Ratio Analysis on Management Decision Making in Organizations
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 has 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).
STATEMENT OF THE PROBLEM
The part of ration analysis as a tool for decision-making have following area of concern. 75 ratio analysis useful in investment appraisal.
1. Whether management rely on ratio analysis for decision making.
2. Do 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 fine out what is the need for ratio analysis n banking institution like united bank for African.
OBJECTIVE OF STUDY
The primary objective of this researcher is to find out how efficient and effeteness 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 include it is further generalize as the following:
1. The effective implementation of traditional function of banking acceptances of deposit to find lending.
2. Efficient financial resource mobilization without inflation money supply expansion for economic development specially when external borrowing is viewed as a last resort.
3. Increasing sense of commitment and identification with the institution and its good by institutional design and activates of people and adopting a participating or democratic style of management.
4. Maintaining accountability of asset.
For the purpose of this study the following question are raised to enable the researcher find possible solution to the identified problem if properly answered.
How is the application of ratio analysis useful when it comes to decision making in the organization?
In what way is the application of ratio analysis useful in evaluating the financial performance of the organization?
How do interested parties in united bank for Africana apply and use ratio analysis in evaluating the bank before taking their decision?
How is ratio analysis of importance when it comes to granting of loan and advances to customer?
To what extent does ratio analysis help the chief executive of bank in decision making?
How is ratio analysis of importance to the balance short of the bank.
SIGNIFICANT 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:
a. Management: Most management decision are based on information from ration analysis. Management planning is also supported by vital information from ratio analysis.
b. Shareholders: For shareholders to determine their wealth maximization, they rely on information from ratio analysis such as stability ratio and leverage ratio.
c. Potential Investor: for potential infestation is and for them to know or ascertain the organization is based on vital information from ratio analysis .
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.
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.
f. Government: Government also rely on information from ratio analysis in the assessment of the organization for tax purpose such as profitability and liquidity ratios.
SCOPE OF THE STUDY
The scope of this research work be specially restricted to United Bank for African Plc, Ilorin Branch; with regard to its accounting ratio which help in:
The assessment of profitability;
Assessment of activity;
Assessment of failure.
LIMITATION OF THE STUDY
In search of data, problem were faced by the researcher despite all the explanation of the purpose of the study.
1. In the first place respondent did not react to the question sentto them is insufficient data.
2. Also cost and time has a great impact on the study since no adequate means were available and time under consideration was short.
PLAN OF THE STUDY
The bank ground of the study, the statement of research on ratio analysis is primarily used to compare a company as well as management organization and firms.
Analysis that help financial analysis implement in bonuses decisions.
The proper use of information is an important part indecision making therefore the researches carried out to show ratio analysis help managers. The significances of this study is that on its completion the following benefit will be derived.
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.
Bank: it is a financial institution which primarily holds out itself to accept deposited from consumers and payout on demands.
Ratio Analysis: Ratio analysis refers to the determination of the significant relationship which exist between firs as show in a firms performance.
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.
Management: Management can be described as the art of working particularly through people for the achievement of the board goals of an organization.
Liquidity: Liquidity measures the ability of a business to meet short term obligation on.
Activity: Activity helps assess the efficiency of managers actions.
Return on capital employed: this is the yardstick employed to measure the efficiency of the management in utilizing the assents of the business.
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