Uses Of Accounting Ratio As A Measure Of Management Performance And Effective (A Case Study Of Texaco Nigeria Plc)
Table of Content
- Title Page
- Table Of Content
- 1.1 Background of the Study
- 1.2 Objective of the Study
- 1.3 Statement of the Problem
- 1.4 Significance of the Study
- 1.5 Scope and Limitation of the Study
- 1.6 Research Methodology
- 1.7 Plans of the Study
- 1.8 Definition of Terms
2.0 Literature Review
- 2.1 Definition and Types of Accounting Ratio
- 2.2 Accounting Ratio as a Tool for Finance Analysis
- 2.3 Interpretation of Debt to Equity Ratio
- 2.4 Uses of Accounting Ratio
3.0 Research Methodology
- 3.1 Source of Data and Data Collection Technique
- 3.2 Method of Data Analysis
- 3.3 Profit of the Case Study
4.0 Presentation and Analysis of Data
- 4.1 Data Presentation and Analysis
- 4.2 Liquidity Ratio
- 4.3 Leverage of Capital Structure Ratio
- 4.4 Activity Ratio
- 4.5 Profitability Ratio
5.0 Summary Conclusion and Recommendation
- 5.1 Summary
- 5.2 Conclusion
- 5.3 Recommendation
1.1 Background of the Study
Interpretation of account is the art and science of translating the figures there in such a way as to reveal financial strength and weakness of a business. Ratio analysis is a powerful tool of accounting analysis.
A ratio is defined as the indicated quotient of two mathematical expressions and the relationship between two or more things.
In accounting analysis a ratio is used as index or yardstick for evaluation the financial position and performance of a firm or company. More so, ratio analysis involves comparing none figure in terms or in relation to another figure. It is computed by dividing one number that is the base into another. Ratio analysis facilitates the evaluation of accounting information by educing such data into smaller unit. One of the utility of accounting ratio as a tool of accounting analysis to that not Affected by the relatives size of activities or department being compared thus it allows for comparison between small and large firm with the same firm. Ratio analysis in addition of providing us the means by which we tool the efficiency of various pleasures of the business as prevented by the financial statement.
It is also make it possible for management to compare the performance of a firm with those of other firms in the same industry and with the same organization. We can compare different department or the performance of the organization between years.
The performance on organization can be measured from the income statement and balance sheet.
Therefore, this accounting ratio uses the financial data from balance sheet and income statement to evaluate the company performance. The compilation of trading profit and loss account: and balance sheet present and produce of series of transaction, which we have taken place over a particular period of time. In order to make use of information presented in the final, account and balance sheet the users need analysis and interpret the meaning before making any conclusions.
The first stage in analysis in the development of a systematic review if accounting data with the aid of accounting ratio, which show the relationship of the results of the firm activities.
The interpretation of the final account and the balance sheet could thereafter of being carried out using the accounting ratio so obtained from the result of the activities but before any interpretation is undertaken the print of view of the person requiring the information must be understood.
1.2 Objective of the Study
In business world today, the matter of mal-administration management in effectives and wider-utilization of resources by management given the business owners no other option but measure the through the usage of accounting ratio.
These ratios are adopted so as to improve the management performance efficiency.
The research, therefore to measure the management performance and efficiency in Texaco Nigeria plc
1.3 Statement of the Problem
The basic objectives of the project are to facilitate the ratio behind various decisions that are taken in the business organization on different situation at a point in term.
This research work will study the use of accounting ratio a measure or organization performance and efficiency. Stressing the reason why various business activities embark upon business organization have been so uncreditive for continues existence of business. 1.4 SIGNIFICATION OF THE STUDY It enables interested parties to know how profitable a business is done. It helps to ascertain the extent to which a firm has used its long-term
Solvency by borrowed found.
The ability of a firm to meet its current obligation can be measured. The ratio is a means of communicating or giving information to the public of what has happened from period to another.
1.5 Scope and Limitation of the Study Scope
This particular project will attempt to disclose and limit itself to uses of accounting ratio in the business organization with particular reference to Texaco Nigeria Plc.
It will also show how important business decision are taken based on adequate business information that is readily available derived from accounting ratio analysis.
Furthermore, this project will enumerate some of the reason why business activities or organization have been is interesting to prospective investor to subscribe for shares of the company.
It is difficult to decide on the basis for comparison
Ratio calculated over or at a point in term may less informative and defective as they suffer from short-term charge
Definition of terms in the balance sheet and income statement different, interpretation of ratio of two companies or of one company over years comprise to render difficult.
1.6 Research Methodology
This is the source of material used in this project is from both primary and secondary data. The primary data employed include question and interview while secondary data include textbook, internet, newspaper, and current annual report and project etc the method used to analysis the data of interference statistics and description of analysis
1.7 Plan of the Study
The research work has been subdivided into five chapters.
- Chapter one contains the introduction of the whole topic and other chapters in this project work.
- The second chapter deals with various writer point of views, it also contains theoretical details, practical illustrations and interpretations drawn out by the researcher in the stream of this study.
- Chapter three covers the historical background and information of Global soap and Detergent Company. In this chapter, data are specified, collected, analyzed and interpreted. The method use for the data analysis and the company capital budgeting procedures are corporately outlay in this chapter.
- Chapter four deals with various techniques used in analyzing the data collected.
- The last chapter which is chapter five summarized the research study and the conclusion down from the research with recommendations.
1.8 Definition of Terms
The term attributed to accounting ratio as a means of measuring efficiency in organizing are as follows.
Asset i.e Fixed and current
Long-term liabilities income statement.
This is a statement of a company showing the wealth such the asset and liabilities of a company at a particular data.
This is normally computed in fixed values fixed asset and current Asset.
This includes freehold promises, motor vehicle, good will etc. it is usually show at original value.
As the name implies is an assets, which can be charged to cash, it is not as durable as fixed asset, it comprises the closing stock, debtor cash at bank and cash in hand.
This shows the amount which the company own to outsiders, it include capital creditors etc.
Long Term Liabilities:
Loan we also current liabilities which accrued from only a year. It includes short-term loan short-term loan trade creditors etc.
This is computed to show the net earning of the company. It is divided up between the debenture holders other supplies of long-term loans.
However, income statement shows the charges in wealth during a given period due to interaction of cost and revenue.
In addition, the information which the company need for decision making should be determined from the accounting ratio that has been computed.
5.0 Summary, Conclusion and Recommendation
Chapter one of the project deals with the introduction aspect, background of the study, statement of problem, objective of the study, significance of the study, scope and limitation of the study, plan of the study, and definition of terms.
Further more examination of this project brought about various types of accounting ration and its uses for various purpose. The projects also talk about the profile of the case study (Texaco Nigeria Plc).
In the conclusion the company has not been able to operate five despite its huge profit, which should have been higher, if the company is able to generate by term loans for its operation.
Having gone through the chapter two and chapter four the reader must have been to understand what accounting rations are all about. Almost the reader must have known the various users of financial statement and its significance.
I would therefore, recommend that the company should intensity effort on getting long term for its effective operation because it is likely to run in to problem if it has to be making use of the short term creditors.
Texaco Nigeria Plc must also increase the interest coverage because the interest coverage ratio determines the willingness of the creditors to give out short term loans. Effect should be made to stabilize inventory for its obligation.
Most importantly, the company should also Endeavour to stabilize its profitability ratio because the ratios are paramount in the mind of management and outsiders. Since any increase in the ration will increase the willingness of prospective investors.
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