USES OF ACCOUNTING RATIO AS A MEASURE OF MANAGEMENT PERFORMANCE AND EFFECTIVE (A CASE STUDY OF TEXACO NIGERIA PLC)

CHAPTER ONE

INTRODUCTION

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 effected 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 teot 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 firms 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   STATEMENT OF THE PROBLEM

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 komeasure the through the usage of accounting ratio.

These ratio are adopted so as to improve the management performance efficiency.

The research, therefore seek lo measure the management performance

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and efficiency in Texaco Nigeria Pic,

1.3   OBJECTIVE OF THE STUDY

The use objective of the project r.ie 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 unicredilive for continues existence of business. 1.4      SIGNIFICATION OF THE STUDY It enable interested parties to know how profitable a business is. It help 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 are period to another.

COPE 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 P!c. ‘

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 comparism to rendered difficult.

1.6     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 writers point of views, it also contains theoretical details, practical illustrations and interpretations drawn out by the researcher in the shream 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 corporateiy outlayed 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.

1.7     DEFINATION OF TERMS

The term attributed to accounting ratio as a means of measuring efficiency in organizing are as follows.

Balance Sheet Asset i.e Fixed and current

Asset liability long-term liabilities income statement.

BALANCE SHEET:- This is a statement of a company showing the wealth such the asset and liabilities of a company at a particular data.

ASSET:- This is normally computed in fixed values fixed asset and current Asset.

FIXED ASSET:- This includes freehold promises, motor vehicle, good will

etc. it is usually show at original value.

CURRENT ASSET:- 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.

LIABILITIES:-  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.

INCOME STATEMENT:- 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.

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