CHAPTER ONE
INTRODUCTION
1.1. BACKGROUND OF THE STUDY
Banks and non-bank financial institutions, supported by efficient money and capital markets ensure the successful operation of the financial system in an economy. The performance of the banking industry plays a crucial role in achieving sound and accelerated economic growth since it is a critical part of the financial system in every economy (Galbis, 2016). This implies that inefficiencies in the banking sector will impact negatively on the economy by slowing growth. The banking industry has a critical role to play in the economic development process, serving as the main intermediation channels between savings and investments in an economy. Banks as financial intermediation channels provide interest earning avenues for depositors and passing on their deposits to businesses and even government that will utilize them on their operations and developmental projects, leading to business expansions and economic development. Sokoto has a diverse financial system, made up of foreign and local major banks, rural and community banks, savings and loans companies, microfinance institutions, leasing companies, discounting houses and insurance companies. Financial statement analysis is a method used by interested parties such as investors (current and potential), creditors and management to evaluate the past, current and project conditions and performance of the firm and use to compare the strengths and weaknesses in various firms.
Ratio analysis is the most common form of financial analysis .It provides relatives measures of firm’s conditions and performance. Financial statement discloses the internal structure of the firm. It indicates the existing relationship between sales and cash income statement account. It shows the mix of assets that produce income and the mix of the source of capital, whether by current or long term debt or by equity funding. In countries where financial instability is rife and financial intuitions are becoming popular, when it comes to investing, the sound analysis of financial statements is one of the most important elements in the fundamental analysis process. At the same time, the massive amount of numbers in a company’s financial statement can be bewildering and intimidating to many investors, creditors and those who are concern with the financial statement. However, through financial ratio analysis, the study would be able to work with these numbers in an organized fashion and present them in a concise form for easily understandable to both the management and other stakeholders.”……… ratios constructed to judge comparative performance