Appraisal the effectiveness of financial ratios as a tool for measuring financial.pdf - Accounting Appraise the effectiveness of financial ratios as a

Appraisal the effectiveness of financial ratios as a tool for measuring financial.pdf

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1 Accounting Appraise the effectiveness of financial ratios as a tool for measuring financial performance CHAPTER ONE 1.1 INTRODUCTION An important feature of a typical business organization is the separation of ownership from management, for instance, a limited liability company, it is therefore expedient for management to render stewardship accounts to the owners of the business organization for evaluating the performance of the organization as whole. THE ORGANIZATIONS AS A WHOLE The stewardship accounting, which is usually, called the financial reports: contain information that would aid users of such reports in their judgments or decisions about economic and financial matters, especially of the organization concerned. The information is expressed monetary terms. When the absolute naira amount of most data items reported in the financial statements are considered individually, they are generally of limited usefulness. Significant relationship may not be apparent from a view point of absolute naira amount because no indication is given of whether a particular item is good or bad for the firm. In order to appreciate the users of the report frequently convert significant charges and relationship, the naira amount reported in the financial statement into percentages and ratios by the users of the report. Therefore, a ratio is a measure used to describe the relationship between two figures which can be expressed as a percentage or a rate in quotient. Taken in isolation, a ratio is meaningless unless it is compared with other ratios and only
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