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PROJECT TOPIC: THE ROLE OF FINANCIAL RATIOS ON BUSINESS DECISIONS

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CHAPTER ONE INTRODUCTION 1.1 BACKGROUND INFORMATION Accounting is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating of financial information in order to enhanced informed judgement and economic decision by users of the account. This can be making possible when the financial information is made available to the users. American

Accounting Association (AAA) defined accounting as “the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by the user of information”. Financial information can be derived from the financial statement. The standard practice for businesses is for them to present their financial statements which adhere to regulatory framework and conceptual framework established in order to ensure uniformity of information and presentation across international borders. The financial statements comprise collection of reports about an organisation’s financial result and condition which is presented in a clear and concise manner as it contains useful financial information that is hidden in figures. Its major components are; Statement of Financial Position, Statement of Cash Flow, Statement of in Equity, Statement of Profit or Loss and Other Comprehensive Income and Notes to the Accounts.


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