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PROJECT TOPIC: ACCOUNTING RATIO AS A MEASURE OF MANAGEMENT PERFORMANCE AND EFFICIENCY (A CASE STUDY OF COCA – COLA PLC)

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CHAPTER ONE

RATIO analysis is a powerful tool of financial analysis. According to Kennedy and Macmillan, RATION  is defied as the indicated quotient of two mathematical expressions” and as the relationship  between two or more thing” in financial analysis  a ration is used as an index or yardstick for evaluating the financial position and performance  of a firm.

The compilation of trading, profit and  of  loss account and balance  sheet represent the end product  of a series transaction which have taken place over a particular period  of time in order to make use of the information presented  in all final  account and the balance sheet, the user  needs to analyze and  interpret the meaning before  making any  conclusion. The accountant normally comments on final account and  balance sheet either prepared by him or by other and interpret their significance doing so, he may find out that the accepted form of accounts and balance sheet are not easily followed by the Lyman: therefore , he re- design the form  so hat the figure becomes more intelligible to those with out expert knowledge in accounting. The first stage in the analysis is the development of a systematic review of the accounting data with the aid of accounting ratios, which shows the relationships of the result of the firm’s activities.

The interpretation of the final account and the balance sheet could there after be carried out using he accounting ratio so obtained from the result of the activities.

A ratio is meaningless unless interpreted against some standard. Two standard are used.

1.     Trend analysis and

2.     Comparative analysis

Trend analysis involves` the behaviours or ratio for  a period of time, while comparative analysis requires the compassion of a ratio in a particular  firm to another firm.

The ratio analysis involves comparism for a useful interpretation of the financial statement. A single ratio is itself does not indicate favorable on unfavourable condition. It should be compared with some standards.


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