CHAPTER ONE
1.1 INTRODUCTION ]
Management should be particularly interested in knowing the financial strengths of the firm to make their best use and to be able to spot out the financial weakness of the firm to take suitable corrective actions. Thus, Economic analysis is the starting point for making plans, before using any sophisticated forecasting and budgeting procedures. The strength and weakness of the firm need to be understood, so that the firm will be at equilibrium through the use of the strengths. To proper advantage and taking corrective actions against any weakness observed or reigned. Although, emphasis is focused on outsider users such as creditors and owners, management is aware that their performance will be received by these external parties and for other reasons.
For example the basic financial statements are used to assess the effectiveness of management in planning and controlling operations as well as for decision-making. Management also recognizes that the evaluation of past operation as revealed by the analysis of the basic statements, represent a good starting point in future operations and serves as an important means of assessing past performance, and in forecasting and planning future performance. Published financial statements are properly oriented towards the long – term earning power. Short-term creditors such as major suppliers or banks are usually more interested in the short-term ability of corporations to satisfy its obligations as they fall due. As regards to union Banks, they use mostly financial ratios to obtain clue as to future performance. This project has been embarked on mainly to give a general idea on how to make use of financial ratios aids in economic analysis. It also hopes to point out certain deficiencies associated with it and the view pints of different people working with union bank of Nigeria PLC Enugu.
In so doing, this project has been divided into different chapters, each discussing vital point or aspects. The first chapter centers mainly on the purpose of the study, its objectives, significance and limitations associated with it. It will help to highlight problems relating to the ratios and it’s use. The next chapter is just a simple discussion on the financial ratios. It is the literature review of this project. It tells us what different authors have said on in relation to this topic and also their points of view on the topic. Chapter three is a belief narration on how the research of this project has been carried out, the difficulties encountered and the type of facts and sampling, I here based this project on. The last two chapters on the other hand is pre – detailed analyzed here are datas gotten from union bank of Nigeria PLC, Enugu. From this, I was able to draw some conclusion and deduced facts which have all been summarize in the last chapter. Various means have embarked on to make this project possible.
1.2 STATEMENT OF PROBLEM.
The importance of financial ratios can never be over – emphasized. An efficient use of financial ratios goes a long way in carrying out this function. This fact not withstanding, I find out a lot of people in the banking sector are not even aware of financial ratios. Its functions and how it can aid the analysis and decision of the economy. In an under – developed economy like ours, the need for this ratios is paramount if the economy is expected to be improved upon. Another problem associate with the use of ratios is that ratios do not have much use if they are not analyzed over years. The ratios at a moment may suffer from temporary changes. This problem can be resolved by analyzing the trend of ratios over years. This is a major problem or set back in the economy. It is obvious that utilization of the financial rations is at stake and if nothing is done now. It could gradually be eroded.
