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PROJECT TOPIC: USE OF ACCOUNTING RATIO IN BUSINESS DECISIONS

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CHAPTER ONE

INTRODUCTION

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.


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