Abstract:
This study was intended to ascertain whether ratio analysis could serve a
functional managerial approach to measuring and comparing management and corporate
performance in firms of the same industry, using Guinness Nigeria plc, Nigeria Breweries
plc, Life Breweries Co. Ltd and Premier Breweries Co. Ltd, as case studies. It was
undertaken to seek solutions to the despondent nature of corporate organizations through
sensing danger areas and making amends before the spelt doom is experienced, through
the use of Financial Analytical tool — Ratio Analysis.
A five-year analytical review of the inter-firm financial ratios was taken and
compared. The ratios chosen to aid this analysis were — the liquidity ratio, the efficiency
ratio, the Leverage ratio, the investibility ratio and the profitability ratio. The data
analytical tool applied in the study is Robertson Multivariate Ratio Analytical Model, and
the Chi-square which was used to test the hypothesis. A comparison of the four firms
being studied was done through the use of tables and trend analysis, to clearly show the
computation and enhance quick understanding of the whole analysis.
It was found that a careful application of ratio analysis would, serve a functional
financial tool for measuring and comparing corporate performance; provide progressive
insight into the financial strengths and weaknesses of the firm; serve as warning indicator
to impending failure, for early solution to be sought; motivate managers to fully exploit
the profit potentials of their firms, and facilitate planning ahead to meet the challenging
forces of our variable economy.
The recommendations resulting from this research work were that; ratio must not
be used as the only criterion for analyzing firm's performance; consistency and
constancy should be maintained in employing ratio for perforrnance analysis; absolute
reliance on accounting figures alone may be misleading due to its insufficiency; ratios
should always form an essential reference document especially during periodic
management planning; and a greater attention is required to be paid on the modalities of
finance.The study concludes that, adequate application of ratio analysis serves as an effectwe
functional managerial tool for measuring and comparing management and corporate
performance in firms of the same industry, but must be applied alongside other functional
financial techniques to avoid conflicting results.
