final year project

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Recommended: Literature review on financial ratio analysis

This study is examines the empirical relationship and effect between financial ratios and financial performance in Malaysia banking industry. There are many methods are used to measure the bank’s financial performance, financial ratios are one type of methods which is used by company to indicate the fundamental causes underlying a company’s strengths and weaknesses. Financial ratios can be divided into two types which is primary and secondary. Primary which consists of net sale to worth ratio and net income to net sales ratio whereas secondary consists of current assets to current liabilities ratio and current liabilities to net worth ratio. This secondary is used to indicate a company’s financial structure and competitive position. Besides that, financial ratio also consists of leverage ratio, liquidity ratio and profitability ratio. As for the whole, financial ratios such as capital ratios, liquidity ratios, assets and liability portfolio mix and overhead expenses can be defined as an investment that is made by investors on any property asset in order to generate income.

According to Hassan, Ali and Muhammad (2011), they stated that financial ratios can be divided into four categories which are efficiency or profitability ratios, liquidity ratios, capital or leverage ratios and asset quality ratios. Profitability ratios include profit margin ratio, return on asset (ROA) ratio, return on equity (ROE). Liquidity ratios contain quick ratio, current ratio, net working to capital-to-total assets ratio whereas leverage ratios include total debt to total assets ratio, total debt to total equity ratio.

Pouraghajan, Mansourinia, Bagheri, Emamgholipour and Bahareh (2013) studied that financial ratios are used to understand the cur...

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...ered on the bank’s profitability, since in order to stay in existence it must be profitable.
Therefore, a set of financial ratios will be used to measure the financial performance of the banks by analyzing the relationship between financial ratios as independent variable and the financial performance of a company as dependent variable. Then, it is interested to study the relationships between the impact of financial ratios and financial performance of a company.
The remainder of the study is organized as followings. In chapter 2, literature review will be discussed on various views of previous researches which relate to our topic. Research methodology and the data collection will be present in chapter 3 while chapter 4 will discuss about the result and discussion on the result. A conclusion and policy implication will be discussed in the final chapter of this study.

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