Relevance Of Financial Ratio Analysis In The Appraisal Of Small And Medium Scale Business (A Study Of Selected Small And Medium Scale Company In Abia State)

ABSTRACT

This research work examined the relevance of financial ratio analysis in the appraisal of small and medium scale business with particular reference to Aba textile mills in Abia state. The study examined the establishing of the extent to which accounting ratio can be used to interpret accounting records of small and medium scale business, finding and analyzing the meaning of financial ratio analysis to the researcher knowledge and understanding of financial statement of the company, to establish the effect of ratio analysis on the users of financial statement and to highlight available ratios for measuring the true state of performance of company. The data were collected from both primary and secondaiy sources, while primary data was collected by the use of questionnaires; the secondary data were based on readings from textbooks and internet. Data from the response to questionnaire was presented using the multiple regression analysis. From the analysis, the findings showed that ratio analysis is an important tool for an organization in measuring their progress towards reaching their goal; ratio analysis have an effect on the users of financial statement and also that lack of competent management affect small and medium scale business. It was however recommended that the retained earnings of the small scale business should be properly invested in order to have more capital for business and also financial ratio analysis should be properly appraised in the small and medium scale businesses in order for the management to identify the strength and weakness inherent in the system.