THE CRITICAL EVALUATION OF THE  USES F FINANCIAL  RATIONS IN FINANCIAL STATEMENT ANALYSIS. A RESEARCH PROJECT MATERIAL ON ACCOUNTING

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THE CRITICAL EVALUATION OF THE  USES F FINANCIAL  RATIONS IN FINANCIAL STATEMENT ANALYSIS. A RESEARCH PROJECT MATERIAL ON ACCOUNTING

ABSTRACT

            Financial ratios provide managers with insights into the existing strengths and weakness and equally disclose warning indicators  of impending failures.  Mangers primary objective now is to plan against the flows and improve for the future prospect of the enterprises.       There are many aids to intelligent analysis of statement but financial ratio is an important analytical procedure at the mangers disposal in the bid for planning financial ratios are wildly used as a basis for predication especially in the aspects of solvency determination and profitability  evaluation.  Above all, financial analysts want to assess future earning and dividend paying prospects. If analysts are  investigating senior securities they are concerned with the adequacy with  which earning cover, interest payment  and related annual cash requirement short-term creditors are less interested in long –run earning powers. Their concern is to know the urgent out look of smooth payment and earnings per-share seems to be the single number that get wide attention as a measure of company performance.

 

CHAPTER ONE

INTRODUCTION

1.1              BACKGROUND OF THE STUDY

 

Financial statement is one of the most important documents used by the management of a firm in making decisions.   It shows vividly the  strengths and weakness of the firm, which in the process helps management to appraise the past performance of the firm and project into the  future.

Financial Ratio analysis employs basic financial data taken form the analysis of financial statements (Balance sheet and income statements) which is the primary financial report of mechanism of an entity both internally and externally.  An analysis of the financial information communication by the statement should include the computation and interpretation of financial ratios.  Although emphasis is focused on outside users such as creditors and owners management is aware  that their performance will be reviewed by these external parties and for other reasons. For  example, the basic  financial statements  are used to assess the effectiveness of management in planning  and controlling operations as well as for decision making.  Management also recognizes that the evaluation of past operations as  reveled by the analysis of the basic.  Statement represents a good staring point in planning future operations and serves as an important  means of assessing past performance  and in forecasting and planning future performance. Published financial  statement are properly oriented towards the long-term investor, who is mainly interested in  long-term earning power.

Short-term ability of their firm to satisfy   its obligation as they fall due. The amount of information an analyst seeks depends on the size of the investment he is considering and on his general familiarity with the springboard for their view.  He uses financial history  to help him obtain dues as to future performance.

 

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THE CRITICAL EVALUATION OF THE  USES F FINANCIAL  RATIONS IN FINANCIAL STATEMENT ANALYSIS. A RESEARCH PROJECT MATERIAL ON ACCOUNTING

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