RATIO ANALYSIS AS A BANK LENDING TOOL (A CASE STUDY OF UNION BANK OF NIGERIA, ENUGU)

ABSTRACT

This study seeks to study the bank lending functions in Nigerian banks, with a view to ironing out the factors militating against the attainment of sound lending which contribute in no small measure to the non-recovery of loans.  Investigating the extent to which ratio analysis assist bank managers in their decision in lending.  Bank lending is merely the assessment and evaluation of bankable proposition with the objective of extending credit facilities on terms and conditions acceptable to both lender and borrower.  The rationale behind bank lending is presumably the desire to attain social and economic objectives for the society and profit for the banks.

Over the years, there has been a transition from an era of paper profits to an era of losses.  In fact, many banks no longer lend delinquent debtors to honour their obligations.  All these and many more are discussed in this project because one of the most important tasks of ratio analysis is assisting the financial managers to achieve efficiency through the provision of suitable financial information.

In carrying out the above mentioned functions, research questions were used in analysis formulated.  Relevant tables were built on the data collected and percentages were used in analysizing the data.  The hypothesis which states that “RATIO ANALYSIS does not help financial managers or does not serve as a lending too” was tested from the responses and found to be wrong.  Based on the findings, some recommendations were put forward which, if adopted will go a long way in enhancing the effectiveness and reliability of using ratio analysis in evaluating the financial performance of a given institution in a given period before lending.

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