Impact Of Financial Ratios As A Tool For Evaluating The Performance Of Companies For Investment Decision (A Study Of Selected Firms)

ABSTRACT

The study is to investigate the impact of financial ratios as a tool for evaluating the performance of companies for investment decision. The problems encountered in this research were financial statements shows the financial position of a company at the end of a financial period but they don't present accurate performance on the level of performance or efficiency of operations of a firm at the end of financial period. The main objective of this project is to assess the impact of financial ratios as a tool for evaluating the performance of companies for investment decision and the specific objectives are to ascertain the reliability of financial ratios as a tool for evaluating the performance of companies, to find out if managers employ financial ratios in the performance and evaluation of investment. To achieve this objective, expose facto design was adopted. The researcher adopted secondary data in getting the required 1nf0rrn2tion. Data in. Guaranty Trust Bank plc and First Bank plc was used with the aid of multiple regression analysis. The findings revealed that there is a significant relationship between return on asset and investment decision, return on equity and the performance of companies. The researcher concluded that financial ratios are tools used to analyze financial conditions and performance of every business organization and it exposes the position of the firm in terms of performance and efficiency of operations. It also recommended that financial ratio analysis should be properly appraised in companies and financial statements should be more detailed in the presentation of facts for the management.