1.1 BACKGROUND OF THE STUDY
Omuya (1990) defined “accounting as a language of business, it is used in the business world to describe the transaction entered into by all kinds of organization. An analysis of the above definition shows that accounting centres on transforming data into information that would be useful to many users. It takes care of the financial communication of the entry as it supplies the financial information in a way and, form so desired by the users.
In a similar case Millichamp (1992) defined accounting as “the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are in part at least of financial statement”. These users include owners, (shareholders) managers, suppliers, customers, government employees, etc. The users of these statements are expected to read, interpret and analyze them. Objectives of financial statements are not accomplished when many users of the statement cannot understand them, let alone interpret and analyze them.
The information the users attempt to gain from financial statement are; the ability of the business to pay its way and survive in the long run, the quality of management and the rightness of decision made, information that guide the future.
The management accounting is considered one of the most important components of the system of the administrative information in the company by providing the economic and financial information and collecting information taken from other systems of information in the company so it looks as accounting for inner affairs that helps the administration in making decisions, planning, controlling and evaluating the performance of the company’s activities , therefore it is not restricted to the known accounting principles but it depends on basis and regulations concerning the content and the shape of the inner reports (Al-Matarna, 2003).
1.2 STATEMENT OF THE PROBLEM
Regrettably, the inability of users of these financial statements to comprehend, interpret and analyze the and still has always contributed to harmful business and investment decision by the users of these statements. As a result of these wrong business decisions, many users of these statements have been rendered poor, whereas others are afraid and show indifference to investment and business opportunities. Cases abound where these financial statements users, individual and corporate, have lost millions of naira merely because of wrong business decisions.
The manufacturing sector consist of strings of financial activities whose major end is profit making, over the years the means and manner of measuring this financial performance remain issue of concern, the variables to use in the measurement of this performance is germane to growth and stability, the issue therefore is determining the variables to use in financial performance measurement and how well do these variables can measure the performance in the manufacturing sector.
1.3 OBJECTIVES OF THE STUDY
The objectives of this study are to find out the following:
i) To find out the impact of accounting ratios in the management decision making
ii) To examine whether accounting ratio aid in the effectiveness of an organization.
iii) To determine the techniques used in analysis financial statements.
iv) To identify the usefulness of accounting ratios in measuring and predicting the performance of Guinness Nigeria Plc.
v) The make useful recommendations based on the findings of this study.
1.4 RESEARCH QUESTIONS
The following research questions were formulated to guide this study:
i) What are the impacts of accounting ratios in the management decision making?
ii) Does accounting ratio aid in the effectiveness of an organization?
iii) What are the techniques used in analysis financial statements?
iv) Does the usefulness of accounting ratios in measure and predict the performance of Guinness Nigeria Plc?
1.5 RESEARCH HYPOTHESES
H0: There is no significant relationship between the impacts of accounting ratios in the management decision making in Guinness Nigeria Plc.
H1: There is a significant relationship between the impacts of accounting ratios in the management decision making in Guinness Nigeria Plc.
H0: There is no significant relationship between accounting ratio and the effectiveness of an organization.
H1: There is no significant relationship between accounting ratio and the effectiveness of an organization.
1.6 SIGNIFICANCE OF THE STUDY
The significance of this study is that on its completion, the following benefits will be derived:
The study will help management of Guinness Nigeria Plc and others to know how ratio analysis can help them understand the financial contained in financial statements and enhance their business decisions.
The findings of the research and the supportive reference materials will be of immense help to students in tertiary institutions and other researchers to investigate further in the area of study.
It is hoped that the result of the research will facilitate optimal business decisions when the recommendations are complied with.
The study will encourage businessmen, investors, managers, and government authorities to appreciate quantitative techniques like financial ratios when making economic and business decisions.