THE USE OF FINANCIAL RATIOS FOR THE ASSESSMENT OF THE PERFORMANCE AND THE PROFITABILITY OF A FIRM. A RESEARCH PROJECT MATERIAL ON BANKING AND FINANCE

posted on October 18, 2018

THE USE OF FINANCIAL RATIOS FOR THE ASSESSMENT OF THE PERFORMANCE AND THE PROFITABILITY OF A FIRM. A RESEARCH PROJECT MATERIAL ON BANKING AND FINANCE

PROPOSAL

The researcher intends to write on the topic “A study of the use of financial ratios for assessments of the performance and profitability of a firm”.

Presently, most lending bankers are faced with the problem of loan default as a result of in appropriate study or appraisal of the financial statements of the borrowing firm with the help of financial ratio analysis. Therefore, the proposed objective of the study is to identify the various ratios, roles and problems with the use of financial ratios in assessing the performance and profitability of a borrowing firm

However, the researcher also intends to source her data through the secondary means of data collection, which implies the review of relate textbooks, journals, magazines, etc.

Furthermore, the researcher intends to emphasis or limit her topic on the aspect of bank lending in relation to the use of financial ratio analysis to assess the performance and profitability of a borrowing firm.

Conclusively, in respect to the plan for the review of relevant literature, the researcher intends to elaborate more on the concept of financial ratios, various kinds of financial ratios, their uses and importance, as well as limitations on their uses or application.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The significance of Financial ratios and its analysis can not be over emphasized. According to Iloh (2001), a good financial planning for any functional organization has to be related to the existing strength and weakness of such organization. In the effort to discover the aforementioned factors, it becomes necessary to evaluate the performance of such organization over a given period. Financial Ration analysis is therefore one of the methods used in determining the level of performance of an organization. It can be explained as the techniques of reducing aggregate financial data into meaningful quotients, which are compared to other existing financial data.

However, the researcher has developed interest in this particular topic in order find out the impact of financial ratio analysis, mostly to a lending banker. This is because, the issue of credit extension is not an easy task and is of technical in nature, one of the criteria for a successful lending is the review of the financial statements of a borrowing firm. This is actually carried out with help of ratio analysis.

Furthermore, the analysis of such financial statements will enable a lending banker to access the viability of such borrowing firm, in the area of liquidity, profitability as well as the nature of its funding.

Conclusively, having indept knowledge of the above concepts mentioned above through Financial Ratio analysis, the lending banker will now be able to take appropriate decision on either to accept or reject a given loan proposal or request.