Paper Title :The Contribution of Financial Ratios Analysis on Effective Decision Making in Commercial Banks
Author :Habimana Theogene, Tom Mulegi, Niyompano Hosee
Article Citation :Habimana Theogene ,Tom Mulegi ,Niyompano Hosee ,
(2017 ) " The Contribution of Financial Ratios Analysis on Effective Decision Making in Commercial Banks " ,
International Journal of Management and Applied Science (IJMAS) ,
pp. 33-40,
Volume-3,Issue-6
Abstract : Financial ratio analysis is important to the management, owners, customers, suppliers, competitors, regulatory
agencies, tax payers and lenders each having their views in applying financial statement analysis in their evaluations and
making judgments about the financial health of organization, while some authors found that financial ratios analysis is not an
adequate method by which to evaluate the overall performance of an organization; also the balanced scorecard is more
efficient than financial ratios analysis. The general objective of this study was to analyze the contribution of financial ratio
analysis on decision making in commercial banks in Rwanda. Specific objectives were to analyze the contribution of
liquidity ratio analysis in effective decision making in BK; to determine the effect of efficiency ratio analysis on the effective
decision making in BK; to measure the extent to which asset quality ratio analysis affects decision making in BK and to
assess the role of profitability ratio analysis on the effective decision making in BK. The findings should enable management
of banking institutions come out with realistic policies for ratio analysis aimed at improving the quality of their decision.
This research was descriptive and correlational design and used both qualitative and quantitative methods. The population
under study was comprised of 139 employees of BK and then, the sample size of the study was 104 employees. This study
employed the stratified random sampling technique. This research used regression analysis to establish relationship between
variables under study. The Statistical Package for Social Sciences (SPSS) version 16 was used in this study. The data was
presented in forms of frequency and percentages. The study revealed that if efficiency ratio increased by one per cent, the
effective decision making also increased by 0.910. Hence, there is a positive effect of efficiency ratio analysis on effective
decision making and if asset quality ratios analysis increased by one per cent, the effective decision making also increased by
16.935. Hence, there is a positive effect of asset quality ratios analysis on effective decision making. The study concluded
that ratios analysis is a good way to evaluate the financial results of bank in order to measure its performance. Ratios allow
the bank to compare its business against different standards using the figures on its financial statements. This research
recommends National Bank of Rwanda to speed up the sensitization campaign of the Rwandan commercial Banks to focus
on ratios analysis as among the best tool to the effective decision making in commercial bank.
Type : Research paper
Published : Volume-3,Issue-6
DOIONLINE NO - IJMAS-IRAJ-DOIONLINE-8426
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Published on 2017-08-29 |
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