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ACCOUNTING RATIO AS A MEASURE OF MANAGEMENT PERFORMANCE AND EFFICIENCY

Dept: ACCOUNTING File: Word(doc) Chapters: 1-5 Views: 8

Abstract

The Project File Details Name:ACCOUNTING RATIO AS A MEASURE OF MANAGEMENT PERFORMANCE AND EFFICIENCY Type: PDF and MS Word (DOC) Size: [140KB] Length: [62] Pages

RATIO analysis is a powerful tool of financial analysis. According to Kennedy and Macmillan, RATION  is defied as the indicated quotient of two mathematical expressions” and as the relationship  between two or more thing” in financial analysis  a ration is used as an index or yardstick for evaluating the financial position and performance  of a firm.

The compilation of trading, profit and  of  loss account and balance  sheet represent the end product  of a series transaction which have taken place over a particular period  of time in order to make use of the information presented  in all final  account and the balance sheet, the user  needs to analyze and  interpret the meaning before  making any  conclusion. The accountant normally comments on final account and  balance sheet either prepared by him or by other and interpret their significance doing so, he may find out that the accepted form of accounts and balance sheet are not easily followed by the Lyman: therefore , he re- design the form  so hat the figure becomes more intelligible to those with out expert knowledge in accounting. The first stage in the analysis is the development of a systematic review of the accounting data with the aid of accounting ratios, which shows the relationships of the result of the firm’s activities.

The interpretation of the final account and the balance sheet could there after be carried out using he accounting ratio so obtained from the result of the activities.

A ratio is meaningless unless interpreted against some standard. Two standard are used.

1. Trend analysis and
2. Comparative analysis

Trend analysis involves` the behaviours or ratio for  a period of time, while comparative analysis requires the compassion of a ratio in a particular  firm to another firm.

The ratio analysis involves comparism for a useful interpretation of the financial statement. A single ratio is itself does not indicate favorable on unfavourable condition. It should be compared with some standards.

Ratio calculated from past financial statement of the some firm.

Ratio of some selected firms specially the most progressive and successful at the point in time.

Ratio of the industry to which the firm belongs.

Ratio analysis in addition provide us the means by which we test the efficiency of various features of the business as presented by the financial account, it also or the performance of the organization between different. Years.

The performance of any organization can be measured form it income statement and balance sheet. Therefore, the accounting ratio uses the financial data from balance sheet and income statement to evaluate the company’s performances

Many question had been raised as to how to measure the managerial performance of a company from year to year, which is t he goal of financial manager to provide meaningful financial information about the business.

 

• PURPSE OF THE STUDY

The basic aim of this project is to facilitate the ratio behind various decisions that are taken in the business organization, in a difference situation at a point in time. The purpose of the study also is to find out how coca-cola plc, fared in the past two or three year in term of profitability, efficiency and effectiveness.

The study will also attempt a practical application of what the theory postulates in terms of performance evaluation.

This particular research aims at studying the use of accounting ratio as a measure of organization. It will also stress reasons why various business activities embark on by business organization have been uncreative for the continues existence of business.

 

• THE SCOPE AND LIMITATION OF THE STUDY

This project will limit itself to an exhaustive analysis  of the financial  statement of coca-cola plc for a period of two to three years, using accounting ratios at tools from analysis.

This project will also show important business decisions a re taken because of adequate business information that is available.

Furthermore, this project will be limited to ratio analysis and the ratio that will be studied includes to following.

1. profitability ratios
2. liquidity ratios
3. leverage ratios
4. activity ratios

Accounting ratios through an efficient tool in measuring management performance and efficiency have some setback which would limit the extent  to which users that is management can  rely on it for weighing  their  performance  limitation includes:

1. It is difficult to decide on the proper basis for comparison, because of differences in situation of two companies, or rendered difficult.
2. Price level hanger makes interpretation of ratio invalide.
3. Ratio calculated at a point in time may be less informative and defective as hey suffer from short term changes.
4. Definition of items in balance sheet and income statement differ, hence interpretation of ratio becomes difficult.
5. Ratio is generally calculated from post financial statement and this are no indication of the future.
   • STATEMENT OF THE PROBLEM

There are a lot  problem faced in carrying  out  this research work out of which are :

1. Problem of transportation
2. Time
3. Finance
4. TRANSPORTATION: The road that leads to coca-cola Ilorin plant is not all that motorable. You either wait for hours before you get a car, or trek.
5. TIME: There is no enough time to go to other plant to obtain more is limited to Ilorin, plant only.

iii.    FINANCE: Due to the problem of this country. There is no enough money to carry out this research work and to visit other plants, because money is the  root and determination of every thing.

• SIGNIFICANCE OF THE STUDY

The  topic of the project “ the use of accounting  ratio  as a measure of  management performance and  efficiency  is a kind of study that can be   available  by used of financial  statement especially  the management , investor’s creditor and others,

If affords them to get a better insight about financial strength and weakness of the firm.

The following are the significant of accounting ratio.

1. It enables interested parties to know how profitable a business is.
2. The extent to which a firm has used its long term solvency by borrowing found can be ascertained.
3. The ability of firm to meet its current obligation can be measured.
4. The efficiency at which a firm is utilizing its various assets I n generating sales revenue can be ascertained.
5. Communication is vital imparting knowledge with in and outside business organization. Ratio analysis plays a vital role informing the public of what has happened from one period to another.

1.5   DEFINITION OF TERMS

To facilitate proper assimilation of this research work, the following information terms are explained briefly:

1. ACCOUNTING: Deal with recording analysis describing and report the financial affairs of business corporations and other entity.
2. EFFICIENCY: In this study mean systems which consist of an action or process taken to gain certain aids or objectives.
3. MEASURE: In this study means a system which consist objectives.
4. MANAGEMENT PERFORMANCE: In this study means how a business organization ahs excelled or achieve its objectives.
5. ACCOUNTING RATION: A ratio is one number express inter s of another number to show the relationship between the two number.

• ORGANIZATION AND PLAN OF THE STUDY

This study has been divided into five chapters, chapter one deals with the introduction of the project work. Chapter two covers the literature review of relevant materials on accounting ratio. Chapter three deals with research method of the study, Chapter four contain data analysis, result and discuss and lastly, chapter five is the summary, conclusion and recommendation.