1.1 Background of the study 

1.2 Statement of the research problem

1.3 Justification for the study 

1.4 Objective of the study 

1.5 Research hypothesis

1.6 Scope of the study 

1.7 Plan of the study 

1.8 Limitation of the study 

1.9 Definition of term 


2.1 Theoretical framework 

2.2 User of Financial Statement 

2.3 Management of an organization 

2.4 Performance evaluation 

2.5 Management control system 

2.6 Method of performance evaluation 

2.7 Analysis and interpretation of financial statement  

2.8 Definition and relevance of financial ratio 

2.9 Classification of ratio analysis 


3.1 Introduction

3.2 Types of Data 

3.3 Population and sample size

3.4 Method of data collection 

3.5 Method of data analysis 

3.6 Brief History of First Bank of Nigeria Plc. 


4.0 Introduction 

4.1 Socio – demographic characteristic of response 

4.2 Presentation of Questionnaire response

4.3 Testing of hypothesis

4.4 Result and Analysis of Liquidity ratio


5.1 Summary 

5.2 Conclusion 

5.3 Recommendation 




The concept of business entity in accounting practices which defines business as a separate entity from the owner brings forth stewardship reporting and accountability in any organization.  Mores, the going concern concept anticipates a continuous life a firm within a foreseeable future.  That is why the ultimate determined of the remain perpetually.

Moreover, the aim or objective of financial manager is to provide meaningful financial information about business enterprises to the outside world and for internal control and management in decision making.  These financial information are presented in financial statement.  They are means of conveying to the management interested outside a concise picture of the profitability and financial position of a business.  They constitute a report of managerial performance attesting to the managerial success or failure and flashing warning signal of inpending difficulties.  (Meigs and meigs 1979), so financial statement obviously important to enable the user that have a clear picture of the position of organization.  It reports the liquidity and solvency of the company and the claim of these resources i.e debt owned, the equity of the owner and presents cash present cash position of the company.

It comprises comparative balance sheet, profit and loss account, income statement, cash flow statement, auditors report and some other necessary information base on year’s assessment.

Despite the fixation of financial statement, many user often fail to comprehend fully the information it intended to pass across, thus their desire one not met.  This is due to the ambiguity of the financial statement where by the where by the volume of the data and figure mislead the users.  In this sense, the analysis and interpretation of the statement are imperative.

Financial statement can be converted and interpreted using three techniques.

1. Vertical or Static Analysis:-  It examines relationship within a statement.  It deals with the relative percentage value of the statement.

2. Horizontal or Dynamic Analysis:-  This involves comparison of financial statement in respect of two more years.  A weakness of this analysis is that comparism with the past does not afford any basis for evaluation in absolute terms.  

3. Ratio analysis: Is a commonly used technique in analyzing financial statement and it involves these of two difference economic units to ascertain performance. 

It is obviously paramount since it practically evaluate performance that is check how strong or weak a company is.  Therefore its interpretations are easily understand by the users.


Financial Ratio Analysis is a widely used took assessing the performance of an enterprises.

Financially statement is prepared in terms of historical costs.  They do not fully reflect economic resources and managerial, hence poor decision may be made.  The users of financial information are carried away by the figures displayed in the financial statement observing the trends of the financial investment while over – looking the performance of management as assess whether their resources have out to effective use.  The analytical comparism of a large information is a problem to the users (The management of the company and the external users. Investors, analyst, creditor government and public.


Ratio analysis being what it is are the production of relations for internal and external financial reports are important to summarize key relationship and results in order to appraise financial performance.

In this assessment this research will be of immense value in recent knowledge of at the enterprises and managerial achievement.  This research is very useful to user of account and financial information.  It is also to supplement the existing of the user of financial ratio as guide towards deterring company’s achievement as well as to show how financial ratio analysis can identity the strength and weakness of a company. 

The research work can also serve as a material for students who are interested in the study of financial rations as a tools for performance appraise.


The study into financial ratio analysis as a tool for appraising performance is to assist the use of financial information make decision predict the future and monitor possible irregularities in managerial behaviours in business.  Thus the main objective of study are:- 

1. To determine the strength, weakness and opportunities based on the firms financial statement or performance and the threats to the continued existence of the organization.

2. To assess the extent to which ratio analysis serves as techniques aid in decision making by management. To find out the extent, which the management.  To find out the extent, which the management of the company has been able to run and control effectively and efficiently, the assets and owners equity between the period under review.

3. To find out the extent to which the trends indicated ratio are useful for prediction of the future last to make recommendation to the company.


Hypothesis is assumptions upon which the research base his finding for a data collected.  The hypothesis basically formatted to be tested.

Ho – Ratio analysis cannot serve as a tool for measuring managerial performance.

Hi – Ratio analysis can server as a tool for measuring managerial performance.

Ho – Ratio analysis can not serve as tool for measuring managerial performance.

Hi – Ratio analysis can serve as a tool for measuring profitability and efficient of a firm.

While chi-square is used to test validity of the hypothesis.


This study has been limited five years financial summarize of First Bank of Nigeria PLC.  Profit and loss account the value added statement using ratio and adequate interpretation was analyzed.

The study is carried out base on the fact that account represents a true and fair view of the company’s affair and not misleading.

Moreover, financial ratio will be compared with that of previous years using common size of statement, treads analysis i.e reaction of the economic unit overtime of the firm horizontal analysis.

The period was choosing because of its available financial statement representing its operation within the period 2002 to 2006.   


The research is written to examine financial ratio analysis as a tool for performance appraisal.

The study begins with chapter one that deals with background of the study statement of problem justification of the study and definition of terms.  Chapter two deal.  With the literature review of the work of other author related to this research.  Chapter three emphasizes on research methodology: type of data population and sample size, method of data collection, method of data analysis and brief history of First Bank of Nigeria Plc, Ilorin Chapter.  Chapter Four embraces the data presentation and analysis testing of hypothesis result and analysis of liquidity ratio.  Chapter five deal with summary, conclusion and recommendation.


In the cause of carrying out the research the following limitation are encumbered.  The limitation of the study is majority the limited available and strick access to some data’s demanded by the research from the appropriate body in the organization as a result of high work schedule but however due to continuous patronage the data was later discharge.

Another problem that limited against the smooth conduct of this research work was the high cost of transportation and also strick assess to other schools library but with the help of financial support both from our parent and school authority, the stress or limitation was over come.


Performance: Is the ability to operate as well as action or achievements consider in relation to how it is (Oxford Advance Learners Dictionary 1995).

Financial statement: Are the instrument panel of a business enterprises and constitute a report on managerial performance attesting to managerial failure or success and flashing warming signal impending difficulties (Meigs and Meiga, 1979).

Ratio: Is a simple mathematical expression as well as one member expressed in term of another to show the relation between them and is the most widely use tool in analysis and interpretation of financial statement.

Balance sheet: A statement that show the financial position which summary or the nature and amount of company asset and liabilities and net worth of company in particular year.

Profit and Loss account: Is an account that shows either the net or profit of the company usually in a year where by the income of such company are credited while their expenses are debited during the preparation of their account

Working capital: Is the excess of current asset over current liabilities of the business enterprises.

Cash flow statement: Is a financial information which provide information about the cash receipts (cash inflow) and cash payment (cash outflow) of an enterprises over a given period of time or in a given accounting year




Financial ratio analysis is defined by pandey (2001) to be process of identity the financial strength and weakness of a firm by properly establishing relationships between the items of the balance sheet and the profit and loss account.

Ishola (1995) started the ratio analysis involves comparing one figure against another to produce ratio and assessing whether the ratio indicate a weakness or strength in the company’s affair.

According to Olowe (1995) ratio analysis is the relationship between financial data in the financial statement to aid financial condition and performance of a firm by properly establishing relationships between the items of the balance sheet and the profit and loss account.

Ishola (1995) stated the ratio analysis involves comparing are figure against another to produce ratio and assessing weather the ratio indicate a weakness or strength in the company’s affair.

According to Olowe (1995) ratio analysis is the relationship between financial data in the financial statement to aid financial condition and performance of a firm.

While Lucky (1998) stated ratio analysis is the systematic production of ratio from both internal and external as to summarize the key relationship and result in order to appraise financial performance. 

From the above definitions ratio analysis is powerful tool to compare ascertain and evaluation the ability of accompany and aid economic and investment decision planning and control as well as performance appraise so that the objective of company could be met.  But a ratio analysis can not be done without basically the se of financial statement which provides basic information of the position of the company.  The fundamental components of financial statement which are commonly used to evaluate business financial condition are:-

1. The cash flow statement:- A statement showing how cash has been generated and disposed off by an organization it is useful for preparing cash budget ( F. Wood and a sanster 1999).

2. The balance sheet:- Its shows the financial position of the firm by showing its asset and liability.

3. The profit and loss account:-  Its shows the profit ability of the company as that period.




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