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.