FINACIAL RATIO ANALYSIS AS A TOOL FOR INVESTMENT DECISION (A CASE STUDY OF GUINNESS NIGERIA PLC IKEJA, LAGOS)

INTRODUCTION

According to Pamela Peterson Drake accounting reports contains information that would aid users of such report in their judgment or decision about economic matters. The information is expressed primarily in monetary terms. Reports in the financial statements are considered individually they are generally of limited usefulness.

Significantly relationship may not be apparent from a view of absolute naira amount because no indication is given of whether a particular item is good or bad from the firm.

In other to appreciate the significant changes and relationships, the naira amount reported in the financial statements are frequently converted into percentages or ratios by the statement users.

STATEMENT OF THE PROBLEM

The study examined critically what exactly is meant by Ratio Analysis and how it can be used by the management in investment decisions. It assesses how accounting ratio in the interpretation of financial statement and reports would be useful to users of investment decisions.

OBJECTIVES OF THE STUDY

The objective of this study are to:

  1. Suitability trends and accounting ratio of the chosen company
  2. Highlight constraints upon the use of ratio analysis for investment decision in real business life.

iii. To suggest other improvement in practical terms.

RATIONALE FOR THE STUDY

The identification of the scope of the study is an important integral part of a research work. The scope of the study implies the area covered by the research since the focus of the study is the financial ratio analysis as a tool for investment decision.

HYPOTHESIS

The limitations to this study are factor which serves as constraints to this research work.

However, costs for a broader and effectives scope of study is one of the limiting factors. Therefore, conducting the research would cost a lot of money and, materials that the researcher cannot afford. The researcher will combine this study with academic work simultaneously. Therefore limited to Guinness (Nig.)

Plc, Ikeja Lagos.

CHAPTER TWO

2.0 Literature review reflect many theoretical process which has been carried out on the financial accounting, financial management and economic auditing.

2.1 Summary of review

2.2 Problem recognition and information search in financial ratio analysis for investment decision.

2.3 Evaluation of Alternatives.

2.4 Cognitive dissonance and its control in financial ratio in investment decision.

2.5 Insight from the social science.

CHAPTER THREE

METHODOLOGY

This chapter is aimed at analysis of the statistical methodology by which the study will be conducted.

RESEARCH DECISION

The research specifies the frame work on which the project is base.

POPULATION SAMPLES AND SAMPLING TECHNIQUES

The term population refers to the whole units that posses the same basic and clearly defined characteristics. The population is limited to the Guinness (Nig.) ltd.

DATA COLLECTION

Data are basic raw materials for statistically investigation analysis. This study relied on the use of questionnaire as a chief method of gathering data.

CHAPTER FOUR

PRESENTATION OF DATA

Since all data used for this research study were collected through the use of questionnaire, there is a need to present the data collected.

CHAPTER FIVE

SUMMARY

This research was embarked upon to examine the impact of financial ratio analysis as a tool for investment decision to provide indicators of a company’s past performance and near present financial conduct.

RECOMMENDATION

Having identified the problems facing financial ratio in investment decision to survive in a depressed economy. Certain recommendation were made to act as future guidelines for the managers or entrepreneur.

With respect to observation that can be decided from the research, I will like to recommend the following:

  1. Experienced professionals and workers such as accountant, auditors, bankers etc. should be involved in financial ratio analysis.
  2. Financial ratio should be seen as a way of contributing to the evaluation of performance.

CONCLUSION

Based on the analysis computed, it could be concluded that ratio analysis can help in measuring company performance and relative strength. Without a shadow of doubt, ratio analysis is truly important as a tool for investment decision making.

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