THE IMPACT OF RATIO ANALYSIS ON MANAGEMENT DECISION MAKING IN AN ORGANISATION

THE IMPACT OF RATIO ANALYSIS ON MANAGEMENT DECISION MAKING IN AN ORGANISATION (A CASE STUDY OF ZENITH BANK PLC, ILORIN BRANCH)

TABLE OF CONTENT

Title Page                                                                                                        

Certification                                                                                                              i 

Dedication                                                                                                                ii

Acknowledgement                                                                                                   iii

Table of Content                                                                                                      v

CHAPTER ONE

1.1      BACKGROUND OF THE STUDY                                                                   1

1.2      STATEMENT OF THE PROBLEM                                                                   4

1.3      OBJECTIVE OF THE STUDY                                                                          5

1.4      RESEARCH QUESTION                                                                                  6

1.5      SIGNIFICANCE OF THE STUDY                                                                    7

1.6      SCOPE OF THE STUDY                                                                                  8

1.7      LIMITATION OF THE STUDY                                                                        9

1.8      DEFINITION OF TERMS                                                                                 9

CHAPTER TWO

LITERATURE REVIEW

2.1      PREVIEW                                                                                                       12

2.2      CONCEPTUAL FRAMEWORK OF RATIO ANALYSIS                               12

2.3      APPROACHES TO USE OF RATIOS                                                             14

2.4      CLASSIFICATION OR TYPES OF RATIOS                                                  15

2.5      PLACE OF RATIO ANALYSIS IN AN ORGANIZATION  

           OR FINANCIAL INSTITUTION                                                                    22

2.6      EXPECTED ROLE OF MANAGERS IN RATION TO

           RATIO ANALYSIS                                                                                        23

2.7      CONTRIBUTIONS OF INVESTORS TO

           ADMINISTRATIVE PERFORMANCE IN TERMS

           OF FINANCIAL RATIO ANALYSIS                                                             24

  •      CONTRIBUTION OF RATIO ANALYSIS IN

           DECISION MAKING IN AN ORGANIZATION                                            25

CHAPTER THREE

3.0      RESEARH METHODLOGY                                                                           30

3.1      PREAMBLE                                                                                                   30

3.2      POPULATION SIZE                                                                                       30

3.2      SOURCE OF DATA                                                                                       31

3.3.1   PRIMARY SOURCE                                                                                      31

3.3.2   SECONDARY SOURCE                                                                                31

3.4      RESEARCH INSTRUMENT                                                                           33

3.5      DATA ANALYSIS PROCEDURE                                           35                      

CHAPTER FOUR

4.0      DATA PRESENTATION ANALYSIS AND INTERPRETATION 36                    

4.1      INTRODUTION                                                                                             36

4.2      DATA PRESENTATION AND ANALYSIS                                                   37

4.3       COMPUTATION OF SOME SELECTED RATIO USING

           THE ZENITH BANK STATEMENT OF ACCOUNT AS

           BELOW BALANCE SHEET AS AT DISMEMBERS 31st

           2011                                                                                                              43

4.4      SUMMARY OF FINDINGS                                                                            49

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

5.1      SUMMARY                                                                                                    51

5.2      CONCLUSION                                                                                               52

5.3      RECOMMENDATION                                                                                   52

CHAPTER ONE

1.1      BACKGROUND OF THE STUDY

           In every organizing irrespective of its size, ownership, structure, impact of ration analysis on management decision making occupy a  crucial position.

           However, given this centrality, it can be said that behind every successful organization, the process in which the management arrive at decision making is very important as far as financial management is concerned in the private sector of the economy and especially in a banking institution like ZENITH BANK.

In a nutshell, the impact of ration analysis on management decision making which is the most preoccupation of this research work is referred to the manner through which the management of organization takes decision suitable for profit as possible, future planning, controlling current performance and future development through liquidity analysis, leverage analysis and activity analysis.

Significance change has taken place in recent years in the size and complexity of both private organization and public organization because of this management is faced with evaluation in technical, social political and economic forces. As a result, the methods of arriving at the decision as become more difficult to management especially in accounting activity of the organization.

This research is devoted to examination of some major impact of ratio analysis in financial institution (ZENITH BANK OF AFRICAN).

Zenith Bank was established in May, 1990. It became a Public Limited Company in July, 2004, and had an initial public offering on the Nigerian Stock Exchange (NSE) on October, 21 of that year. Also in 2004, credit rating agency fetch ratings identified its credit as AA on their long-term scale. The Bank has been in a series of controversies regarding its labour practices. The bank developed a penchant for mass terminations of staff employment without regard to due process. A series of court cases instigated against the bank by ex-employees adds credence to this view. In 2010, the Bank was defrauded of about N7.5Billion by a staff and was made to make provisions for it by Nigeria’s Reserve Bank.

Employees

Jim Ovia is the company’s pioneer Chief Executive Officer, Pter Amangbo is the Managing Director, Adaora Umeoji, Ebenezer Onyeagwu and Sola Oladipo are Executive Directors. Jim Ovia is Chairman of the Board. The company has a total of 3,911 employees in January, 2010 the Board of Directors of the Bank announced a change. The Board of Zenith Bank Plc announced the appointment of Peter Amangbo as Managing Director/Chief Executive Officer designate of the Zenith Bank.

Awards Won

2007: African Bank of the Year (Awarded by African Investor Magazine)

2007: Quoted Company of the Year (Awarded by Nigerian Stock Exchange)

2007: Socially Responsible Bank of the Year (Awarded by African Banker Magazine)

2005: Most Respected Bank in Nigeria (Awarded by Price water house Coopers)

2005: African Bank of the Year (Awarded by the Banker Magazine)

1.2      STATEMENT OF THE PROBLEM

The part of ratio analysis as a tool for decision making have the following area of concern. 75 ratio analysis useful in investment appraisal?

  1. Whether management relies on ration analysis for decision making?
  2. Do ration analysis really determine the wealth maximization of shareholder? Or
  3. It ratio analysis or management tool or technique use in determining the liquidity, stability profitability and efficiency of the organization?
  4. Whether ratio analysis can be used to ascertain the strength, weakness, opportunity and treat of the organization.
  5. Whether ration analysis can be used to determine the trend of development and performance of the organization over time.

At the time of chooses this topic the above was what the researcher have in mind and therefore pushes to fine out what is the need for  ratio analysis in banking institution like ZENITH BANK PLC

1.3      OBJECTIVE OF THE STUDY

The primary objective of this researcher is to fine out how efficient and effectively does the management evaluate its financial position. Also the performance of the institution with regards to the financial analysis or ration analysis in making a quantitative judgment about the institution financial position and its achievement which include. It is further generalized as the following:

  1. The effective implementation of the traditional function of banking acceptance of deposit to find lending.
    1. Efficient financial resource mobilization without inflationary money supply expansion for economic development especially when external borrowing is viewed as a last resort.
    2. increasing sense of; commitment and identification with the institutional and it’s good by institution a design and activities of people and adopting a participating or democratic style of management
    3. Maintaining accountability of assets.

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