ACCOUNTING RATION IN MEASURING BUSINESS PERFORMANCE.

ACCOUNTING RATIO IN MEASURING BUSINESS PERFORMANCE (A STUDY OF UAC NIGERIA PLC)

ABSTRACT

This study aimed to examining the role of accounting ratio in evaluating the companies’ performance through the use of financial analysis methods in evaluating the performance of UAC Nigeria Plc. The analytical approach, which is based on the analysis of the financial statements for ten years was adopted in this study and the Analysis of the balance sheets, the income statements and Financial Ratios, which were the most recent between 2003-20012, were applied. The analysis of the liquidity ratios clarifies that these companies have the ability to meet its commitment on time, cover its liabilities but it should be known the extent of the company’s preservation of the amount of the current assets especially the cash to face its commitments and the increase of cash in the company may lead to the risk of not utilizing the current assets. And the current assets ratios should be the double of the current liabilities so as the company can meet its commitments on time. More so Market ratios of the companies fluctuated which is considered as a negative indication that leads to a decrease in the number of investors in the company and the opportunities in the company as well. Hence, the companies have to increase their profits so as to increase the share’s profit and so there will be an increase in the return distribution ratios , and this gives a positive image of the three companies to the investors which increase the company’s investments , its profits and its sales. The study concluded by analyzing the financial statements of the companies under study lead to identify and explain the deviations and the undesired extreme results. And through training the employees, it is possible to use other methods to analyze the deviations that help in evaluating the company through identifying the causes for these deviations. I recommended establishing an independent department for the management accounting in the company to evaluate its performance through analyzing the deviations and treat them and to provide qualified employees; scientifically and practically to do the work of the company.