FINANCIAL RATIOS AS EVALUATORS OF BUSINESS
FINANCIAL RATIOS AS EVALUATORS OF BUSINESS
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Date
1995-10
Authors
SOJE, BEN OBAMO
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Abstract
ABSTRACT
Evaluation of the performance of a business is important to both Management and
Investors if the business must guide against human and material distress. Since
performance is an indication of how efficiently resources are being utilized, it is
pertinent to note that the import of its evaluation must be carefully and rigorously
studied.
This project is thus aimed at studying, interpreting and evaluating the performance
Of Peugeot Automobile Nigeria Limited, a multi-National company jointly owned by
Nigerian (60%) and Automobile Peugeot of France (40%) using twenty (20)
Financial Ratios as a tool of Financial Analysis.
The study revealed that out of the Financial ratios adopted for Peugeot Automobile
Nigeria Limited, Three ratios gave possible reasons for the various problem of the
company, ranging from (inflation, stringent credit squeeze, inefficient use of fixed
assets, slow moving incentives, under trading and operating losses), while others
ratios indicated various problems and their effect on various aspects of the
company's productivity levels. Six of the twenty ratios namely; Fixed asset turnover,
Sales to working capital, Gross profit margin, Net profit margin, Stock Turnover,
Interest cover ratios are good evaluators of the company's performance. While
others indicated various problems and their effect on various aspects of the
company's productivity levels.
The result of the Multiple Discriminant Analysis of the Altman Model also indicated
financial difficulties. Among this are; excessive fixed assets, slow-moving
incentives, hyper-cost push inflation, stringent credit squeeze etc.
Important recommendations were made for the improvement and management of
the company business risk. The resulting ratios will assist the company's creditors
and investors to identify and quantify risks, as well as quantifying the management's
ability to handle such risks.
Description
Submitted in partial fulfillment of the requirements
for the award of the Degree of Masters in
Business Administration (MBA)
ABU, Zaria.
Keywords
FINANCIAL,, RATIOS,, EVALUATORS,, BUSINESS,