CHAPTER 2

In this chapter I have present the research question, the purpose of this research and the key

contribution towards this research. Both side of arguments are mention with strength and

weakness. Finally, the limitation of the study.

this study is aimed at finding out the effect of ratio analysis on business performance of

manufacturing company. Cases study: BRALIRWA ltd.

1.3 Research Questions

The research study aimed at finding out the solution for the following questions:

1. What is the importance of using financial ratios in measuring business performance?

2. What different financial ratios used in measuring business performance?

3. What the suggestions for further improvement?

1.4 Research Objectives

The main objective of the study will be to assess the extent to which the financial ratio analysis

contributes to the performance of business BRALIRWA ltd. The specifics objectives are:

1. To understand the importance of using financial ratios in measuring business performance

2. To identify the different financial ratios used in measuring business performance.

3. To provide suggestions for further improvement.

1.5 Significance of the Study

The study is of paramount importance to the researcher, BRALIRWA ltd, other researcher and

Government
1.5.1. To the researcher

To the researcher, this study enabled him to obtain a perfect knowledge on the impact of ratio

analysis of BRALIRWA ltd.

1.5.2. To the BRALIRWA ltd

It will be easier for the company to measure their financial soundness, finding out the factors and

their impacts of financial performance and measures will be taken depending on its severity. The

research also highlights suggestions and recommendation on how it can improve its performance.

1.5.3. To the others researchers and INILAK community

This study will serve as literature to others researcher and INILAK community in general, but

specifically it will assist student who will be interested in same area.

1.5.4. To the government

The findings and recommendations of the researcher will help in building a strong and better

accounting practices that will help in the assessment of business performance in RWANDA, if

taken seriously by government and the general public.

1.6 Conceptual Framework

A conceptual framework is an analytical tool with several variations and contexts. It is

used to make conceptual distinctions and organize ideas. Strong conceptual frameworks capture

something real and do this in a way that is easy to remember and apply.
 Ratio analysis Business
performance

- Liquidity ratios
- Effectiveness
- Asset management
ratios
- Efficiency
- Liquidity ratios
- Leverage ratios
- Financial
- Profitability ratios
viability

1.7 Scope of the study

This study was conducted in BRALIRWA ltd. Under this study, the financial statement of

the cooperatives and companies namely (Balance sheets and income statements) of five financial

years 2009-2013 were considered to determine the financial position of BRALIRWA ltd. In this

study, the ratios of liquidity that will be used are current ratio, quick ratio and cash ratio. Asset

management ratio is quantify into five categories for BRALIRWA company such as account

receivable turnover, average collection period, inventory turnover, account payable turnover and

account payable turnover in days and debt coverage ratio includes debt to total assets and debt to

total equity. The profitability ratios that will be used are net profit ratio, return on equity, net profit

margin, gross profit margin and operating profit margin.

1.8 Limitations of the Research

In the course of research, the researcher met some problems. However, she tried to by all means

to minimize the effects of those problems that culminate the success of this study. The bellows are

some of the limitations encountered and how they were controlled: Mostly,