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Relevance of Financial Ratio Analysis in the Appraisal of Small Scale Business

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Relevance of Financial Ratio Analysis in the Appraisal of Small Scale Business.

ABSTRACT

This research work examined the relevance of financial ratio analysis in the appraisal of small scale business with particular reference to Mr. Biggs fast food in cross river state.

The study examined the establishing of the extent to which accounting ratio can be used to interpret accounting records of small scale business, finding and analysing the meaning of financial ratio analysis to the researcher knowledge and understanding of financial statement of the company, to establish the effect of ratio analysis on the users of financial statement and to highlight available ratios for measuring the true state of performance of company.

The data were collected from both primary and secondary sources, while primary data was collected by the use of questionnaires; the secondary data were based on readings from textbooks, internet and journals.

Data from the response to questionnaire was presented using the statistical tool Chisquare. From the analysis, the findings showed that non-challant attitude in the use of financial statement affects small scale business; obsolete use of data affects small scale business and also that lack of competent management affect small scale business.

It was however recommended that the retained earnings of the small scale business should be properly invested in order to have more capital for business

TABLE OF CONTENT

vii
Title page i
Approval Page ii
Certification iii
Dedication iv
Acknowledgement v
Abstract vi

CHAPTER ONE: INTRODUCTION
1.1 Background of the study 1
1.2 Statement ofthe problem 2
1.3 Objectives of the Study 2
1.4 Research questions 3
1.5 Research Hypothesis 3
1.6 Significant of the study 4
1.7 Scope of the study 4
1.8 Limitation of the study 5
1.9 Historical background of the case study 5

CHAPTER TWO: LITERATURE REVIEW
2.1 Coherent Literature review (Academic review) 7
2.2Financing of small scale business 9
2.3 The nature and scope of financial ratio analysis1 2
2.4 Financial analysis and its uses to firm 15
2.5 Tools for financial analysis 17
2.6 Ratio analysis and standard of comparison 19
viii
2.7 Types of financial Ratio
2.8 Relevance of financial Ratio analysis 28
2.9 Inflation and financial analysis 30
2.10 Limitations of Ratio analysis 31

CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research Design 33
3.2 Sources of Data 33
3.3 Area of Study 34
3.4 Population of the study 34
3.5 Sample and sampling techniques 34
3.6 Viability of the instrument 35
3.7 Reliability of the instrument 36
3.8 Method of data analysis 36

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1 Analysis and interpretation of responses 37
4.2 Analysis of questionnaire 40
4.3 Test of Hypotheses 50

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of findings 61
5.2 Conclusion 62
5.3 Recommendations. 63
Appendix 65
ix
Bibliography 66

INTRODUCTION

1.1 BACKGROUND OF STUDY

Financial ratio analysis assumes that there is a relationship between certain aspects of the activities of the firm as revealed in the income statements, Accounting figures reported in the financial statement do not provide Profit and loss account and the balance sheet, which established a pattern of behaviour.

The information contained in the financial statement of a company is connected with the financial well being and performance of the reporting entity, organized to enable users of financial statement to draw a conclusion meaningful understanding of the performance of the financial position of a firm, except the figure are analyzed with other relevant information through the use of financial ratio analysis.

Having established the fact that a ratio is useful and reliable in measuring the relationship between two things, this then gives rise to the need to study the relevance of the financial ratio in the appraisal of small scale business.

BIBLIOGRAPHY

Bull, R. J. (2010). Accounting in business. London: Butter Worth & Co. limited.

Hampton, J. J. (1992). Financial Decision making concepts problems and case. (4th ed.). Delhi: The New publishers.

Ikeagwu, E. K. (1998). Ground work of research method and procedure. Enugu: University of Nigeria Enugu Campus.

Lawrence, I. (2009). Principles of financial management. Cambridge: Withroop publishers incorporated.

Meigs, W., et al. (2003). Financial accounting. (3 rd ed.). New York: McGraw Hill Company Ltd.

Obasi, F. (2008). A hand book on research proposal writing. Enugu: Ruwil Nudas Publishers. Obodizie, F. O. (2002). Modern textbook of research methodology. Enugu: Academic Publishers. Oshagbemi, T. A. (2006). Small scale business management. Lagos: Longman Publishers. Osuala, E.C. (2005). Introduction to research methodology. Enugu: AFP First Publisher Ltd.

Ozo, J.U., et al. (1999). Introduction to project writing for business. Onitsha: Chinedu Publication. Pandey, I. M. (2002). Financial Management. Onitsha: Greenland Press.

Prasanna, C. (2001). Basic quantitative methodology and operation research. (1 st ed.) Port Harcourt: Goson Book Press.

Ubesie,M. C. (2003). Research and scientific writing. (1 st ed.). Enugu: Jodek Press

Udeh, S.O. (2000). Business finance. Enugu: Malik Enterprise.

 

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