THE USEFULNESS OF INTERPRETED ACCOUNTS IN DECISION MAKING BY MANAGEMENT

ABSTRACT

In this project, the usefulness of interpreted Accounts in decision making by management helps an organization to determine the profitability (profit position) of operations in a production and marketing company, subject to some limitations is formulated. This study used data from the financial statement and published account of a large bottle and drinks production and marketing company. The result of the model shows that an organization should have enough liquidity demands. Most importantly it is now clearly seen that the case study on interpreted position of 7up bottling company plc reveals; a glance of real financial position of a company in relation and get the management information of their past performance. So it enables them to take corrective actions in predicting the future operation of the company.

TABLE OF CONTENT

Title Page

Approval                                                                            ii

Dedication                                                                   iii

Acknowledgement                                                               iv

Abstract                                                                      v

Table of content                                                           vi

CHAPTER ONE

Introduction                                                          1   

Background of the study                                 2

Statement of the problem                               5   

Objective for the study                                   5    

Research Question                                          6   

Significance of the study                                 7   

Scope of the study                                         7   

Limitation of the study                                    9   

Definition of terms                                          10

CHAPTER TWO

Review of related literature                                    13 

Introduction                                                   14 

Financial ratio analysis                                    16 

The significance of accounting ratio analysis      17

Limitation of accounting ratio analysis              18

Criteria for interpretation of management

 Account                                                        21               

 The impact of modern development of

 Interpreted accounts in Nigeria                      22 

CHAPTER THREE

Research Design and methodology                         38

Introduction                                                  38 

Research design                                             39 

Sources/ Methodology of data Collection           40 

Population and Sample size                             41

Sample Techniques                                         41

Validity and reliability of measuring Instrument 42

Method of data analysis                                         44

CHAPTER FOUR

Presentation and analysis of data                                  46 

Introduction                                                   46 

Presentation of data                                       47

Analysis of data                                              48 

Interpretation of result.                                         54               

CHAPTER FIVE

Summary/conclusion and recommendation              57  

Introduction                                                   57    

Summary of findings                                       58 

Conclusion                                                     60 

Recommendations                                          61                                 

References                                                     63           

Appendix

CHAPTER ONE

1.0 INTRODUCTION

Interpreted account as the name implies is more than mere figure into their appropriate look of account. It involves the use of collected information and data in the assessment of efficiency in addition.

The study of interpreted account would enable one’s monitor the performance of the business, with the view of taking appropriate corrective measures as at when necessary.

My concern here is to the usefulness into which one can put the data that are usually available in the interpreted account of organization.

Some of these data are already made available in the interpreted account while others might have to be made using the accounts.

BACKGROUND OF THE STUDY

 This research is about the usefulness of interpreted account in decision making by management. Decision making is the most important element in management activities of all kinds of enterprise, profit oriented, non profit oriented and public institution. This research is carried out in public oriented enterprise where decisions are made based on different aspects among which the use of accounting ratios should have a great impact.

The use of financial reporting is the main aspect in decision making. According to (Charus H. Cusonm 1989:10) financial reported is not the end in itself but it is intended to provide information that is useful in making business and economic decision. It is in this regard the researcher was motivated in funding the extend to which management dealers may depend on accounting ratios in decision making. The main objective of this chapter is to introduce the researcher’s topic and it content include, background of the study, research questions, significance of the study, scope of the study and organization of the study. As an Act management has been practiced since the early beginning of twentieth century. It had got a great evolution at the time of industrial revolution which started in England around mid-eighteenth century prior to this most of business enterprise were characteristised by craftsmanship rate than mechanization or technology and faced the problem much simpler than those faced  today’s form much in air complex industrial and technological society.

With reference to this industrial revolution till nowadays with social and technological environment tend to generate industrial growth and economical environment development that prompt entrepreneurs to react.

At the same time in the form of management especially in managerial strategies for decision making this generate separation of ownership of the business and its management.

In consequences, managers had to look for the means of discharging their stewardship responsibility; this can be obtained through the use of accounting ratios.

The use of interpreted account is a time-tested method of analyzing a business. Wall street investment firms, banks, loan officers and knowledgeable business owners all use interpreted accounting information and ratio analysis to learn more about a company’s current financial health as well as its potential (P. Veranimn 2006).

Interpreted account simplified, summarized and systematized a long array of accounting figures. Its main contribution lies in bringing out the inter relationship which exists between various segment of business. Ratio are more of a diagnostic tool that helps to identify problem areas and opportunity within a country.

STATEMENT OF THE PROBLEM

The following are statement of research problem to be researched;

whether the profit realized over the period are adequately related to the capital employed

whether the company is solvent enough to meet its current liabilities out of it current asset

whether the company has been efficient in operation over the year.

1.3 OBJECTIVE OF THE STUDY

The main objective of the study is to provide financial information of the organization involves was follows:

To provide information to the users so as to enable them make relevant decision for management.

 To find out the relationship between the capital employed and the resulting profit realized during the period .

To summarize its performance in terms of profit

To ascertain the solvent of the company as at when due

To know whether the analysis gives useful interpretation as to efficiency.

To help show the relative strength and weakness of the company.