Financial Ratio Analysis Assignment | Concept of Financial Ratios
Added on 2020-01-28
45 Pages10074 Words37 Views
How the financial ratios and performance
affects the Customers of the banking
industry in the greater London
affects the Customers of the banking
industry in the greater London
ACKNOWLEDGEMENT
First and foremost, I would like to express my gratitude to my mentor who has assisted
me in providing knowledge and enough support for carrying out the research in an effective
manner. Next in the series, I would like to thank my friends, colleagues and family members
who have assisted me at every stage of thesis. With their support, I was able to complete my
dissertation effectually. Lastly, I would also like to acknowledge my team members who have
helped me in gathering information and analyzing it later.
First and foremost, I would like to express my gratitude to my mentor who has assisted
me in providing knowledge and enough support for carrying out the research in an effective
manner. Next in the series, I would like to thank my friends, colleagues and family members
who have assisted me at every stage of thesis. With their support, I was able to complete my
dissertation effectually. Lastly, I would also like to acknowledge my team members who have
helped me in gathering information and analyzing it later.
ABSTRACT
Financial information is very important for different types of users. These users include
customers, employees, government, suppliers and many other stakeholders. It acts as an aid in
fulfilling different types of business goals and objectives. The concept of financial ratios is
referred as the one that presents the relationship examined from financial information of
organization. In addition to this it is being used for the purpose of making comparison. The role
of financial ratios has been greatly viewed towards expressing the association among items of
financial statements.
In the present study, researcher aims at evaluating how financial ratios and performance
affects the customer of banking industry in greater London. For this, investigator undertakes
various tools and techniques so that entire study can be carried out effectively. Under present
research positivism philosophy has been selected. Further inductive approach has been selected.
In the present study, both primary and secondary methods has been employed and 50 sample size
has been selected. Moreover qualitative method has been used to present the findings in which
thematic analysis will be carried out by making different themes on the basis of questionnaire so
that responses of respondents can be analysed effectively and efficiently.
From the above study it can be concluded that financial ratios are good indicator of
financial performance of an organization. The customers in the baking industry takes a good
interest in the performance as they are required to take different types of decisions. The financial
performance can be judged by making use of the tool called ratio analysis. This technique has
been considered as the effective technique in reflecting what the company has done.
Financial information is very important for different types of users. These users include
customers, employees, government, suppliers and many other stakeholders. It acts as an aid in
fulfilling different types of business goals and objectives. The concept of financial ratios is
referred as the one that presents the relationship examined from financial information of
organization. In addition to this it is being used for the purpose of making comparison. The role
of financial ratios has been greatly viewed towards expressing the association among items of
financial statements.
In the present study, researcher aims at evaluating how financial ratios and performance
affects the customer of banking industry in greater London. For this, investigator undertakes
various tools and techniques so that entire study can be carried out effectively. Under present
research positivism philosophy has been selected. Further inductive approach has been selected.
In the present study, both primary and secondary methods has been employed and 50 sample size
has been selected. Moreover qualitative method has been used to present the findings in which
thematic analysis will be carried out by making different themes on the basis of questionnaire so
that responses of respondents can be analysed effectively and efficiently.
From the above study it can be concluded that financial ratios are good indicator of
financial performance of an organization. The customers in the baking industry takes a good
interest in the performance as they are required to take different types of decisions. The financial
performance can be judged by making use of the tool called ratio analysis. This technique has
been considered as the effective technique in reflecting what the company has done.
TABLE OF CONTENTS
Chapter- 1 Introduction....................................................................................................................4
1.1 Background of the research ..................................................................................................4
1.2 Background of the banking industry in London ...................................................................4
1.3 Research Aim & Objectives ................................................................................................5
1.4 Research question..................................................................................................................5
1.5 Significance of the study........................................................................................................5
1.6 Chapter structure....................................................................................................................5
CHAPTER- 2 LITERATURE REVIEW ........................................................................................7
2.1 Introduction............................................................................................................................7
2.2 Different types of financial ratios calculated by the companies in the banking industry.....7
2.3 Impact of Ratio analysis & performance on behavior of customers in the banking industry9
2.4 Usefulness of company’s financial information to the customers in the banking industry. 10
Chapter- 3 Research Methodology................................................................................................12
3.1 Introduction..........................................................................................................................12
3.2 Research Philosophy............................................................................................................12
3.3 Research Approach..............................................................................................................12
3.4 Research Strategy................................................................................................................12
3.5 Data collection methods.......................................................................................................13
3.6 Sampling..............................................................................................................................13
3.7 Data Analysis.......................................................................................................................13
3.8 Ethical Consideration...........................................................................................................14
3.9 Limitations ..........................................................................................................................15
CHAPTER – 4 DATA ANALYSIS..............................................................................................16
4.1 Introduction..........................................................................................................................16
4.2 Qualitative analysis..............................................................................................................16
Thematic technique....................................................................................................................16
Chapter- 5 conclusion and recommendation..................................................................................25
5.1 Conclusion...........................................................................................................................25
5.2 Recommendation.................................................................................................................26
References .....................................................................................................................................28
APPENDIX ...................................................................................................................................29
Chapter- 1 Introduction....................................................................................................................4
1.1 Background of the research ..................................................................................................4
1.2 Background of the banking industry in London ...................................................................4
1.3 Research Aim & Objectives ................................................................................................5
1.4 Research question..................................................................................................................5
1.5 Significance of the study........................................................................................................5
1.6 Chapter structure....................................................................................................................5
CHAPTER- 2 LITERATURE REVIEW ........................................................................................7
2.1 Introduction............................................................................................................................7
2.2 Different types of financial ratios calculated by the companies in the banking industry.....7
2.3 Impact of Ratio analysis & performance on behavior of customers in the banking industry9
2.4 Usefulness of company’s financial information to the customers in the banking industry. 10
Chapter- 3 Research Methodology................................................................................................12
3.1 Introduction..........................................................................................................................12
3.2 Research Philosophy............................................................................................................12
3.3 Research Approach..............................................................................................................12
3.4 Research Strategy................................................................................................................12
3.5 Data collection methods.......................................................................................................13
3.6 Sampling..............................................................................................................................13
3.7 Data Analysis.......................................................................................................................13
3.8 Ethical Consideration...........................................................................................................14
3.9 Limitations ..........................................................................................................................15
CHAPTER – 4 DATA ANALYSIS..............................................................................................16
4.1 Introduction..........................................................................................................................16
4.2 Qualitative analysis..............................................................................................................16
Thematic technique....................................................................................................................16
Chapter- 5 conclusion and recommendation..................................................................................25
5.1 Conclusion...........................................................................................................................25
5.2 Recommendation.................................................................................................................26
References .....................................................................................................................................28
APPENDIX ...................................................................................................................................29
CHAPTER- 1 INTRODUCTION
Title: How the financial ratios and performance affects the Customers of the banking
industry in the greater London
1.1 Background of the research
Financial information is very important for different types of users. These users include
customers, employees, government, suppliers and many other stakeholders. It helps in fulfilling
different types of business goals and objectives (Cadle and et.al., 2010). The information can be
produced in different forms such as reports, budgets, statements, declarations etc. This kind of
data is also very useful for one of the most important stakeholders that are customers. They keep
an interest in it as they want to know how the company is performing, what is its position, what
is the market share etc. The background of this study deals with the behavior of the customers in
the banking industry (Harrison and Horngren 2007). It makes an attempt to find out it how the
ratios and business performance can affect the decisions of the banking customers.
1.2 Background of the banking industry in London
At present the banks in United Kingdom have refined their services. Many of them are
offering similar services. The differentiation can be seen only in terms of different interest rates.
Recently a trend noticed in the industry has been to not to advertise interest rates. It helps the
bank in avoiding to offer such advertised rates at least 60% of their customers. Over the last 40
years the banking system in UK has acknowledged a dramatic shift with total assets increasing
from 100% of GDP to 450% (UK Banking Industry Structure, 2014). It is expected that the
industry will continue to grow in the upcoming future. The sector is dominated by banks such as
Lloyds Group, Barclays, Royal Bank of Scotland and HSBC. The market is clearly of oligopoly
nature because of different categories of business. It is having comparative advantages in the
international banking services. London has been identified as the major centre for the financial
services for the customers. The sector is widely perceived to be dominated by the London. Hence
it can be said that the city is significantly known for banking services (Rasid and et.al., 2011).
1.3 Research Aim & Objectives
The major aim of the research study is to analyze how the financial ratios and
performance affects the Customers of the banking industry in the greater London. Following
objectives have been framed:
5
Title: How the financial ratios and performance affects the Customers of the banking
industry in the greater London
1.1 Background of the research
Financial information is very important for different types of users. These users include
customers, employees, government, suppliers and many other stakeholders. It helps in fulfilling
different types of business goals and objectives (Cadle and et.al., 2010). The information can be
produced in different forms such as reports, budgets, statements, declarations etc. This kind of
data is also very useful for one of the most important stakeholders that are customers. They keep
an interest in it as they want to know how the company is performing, what is its position, what
is the market share etc. The background of this study deals with the behavior of the customers in
the banking industry (Harrison and Horngren 2007). It makes an attempt to find out it how the
ratios and business performance can affect the decisions of the banking customers.
1.2 Background of the banking industry in London
At present the banks in United Kingdom have refined their services. Many of them are
offering similar services. The differentiation can be seen only in terms of different interest rates.
Recently a trend noticed in the industry has been to not to advertise interest rates. It helps the
bank in avoiding to offer such advertised rates at least 60% of their customers. Over the last 40
years the banking system in UK has acknowledged a dramatic shift with total assets increasing
from 100% of GDP to 450% (UK Banking Industry Structure, 2014). It is expected that the
industry will continue to grow in the upcoming future. The sector is dominated by banks such as
Lloyds Group, Barclays, Royal Bank of Scotland and HSBC. The market is clearly of oligopoly
nature because of different categories of business. It is having comparative advantages in the
international banking services. London has been identified as the major centre for the financial
services for the customers. The sector is widely perceived to be dominated by the London. Hence
it can be said that the city is significantly known for banking services (Rasid and et.al., 2011).
1.3 Research Aim & Objectives
The major aim of the research study is to analyze how the financial ratios and
performance affects the Customers of the banking industry in the greater London. Following
objectives have been framed:
5
To discuss different types of financial ratios calculated by the companies in the banking
industry
To evaluate the impact of Ratio analysis & performance on behavior of customers in the
banking industry
To find out how the company’s financial information is useful for the customers in the
banking industry
1.4 Research question
To identify whether ratio analysis is an effective tool for judging the financial
performance of an organization or not?
1.5 Significance of the study
Every research is carried out with a motive. This research study has been performed to
analyze the behavior of the customers in the banking industry. Information produced from the
financial statements is very useful for the customers as they are able to take different financial
decisions (Melville, 2008). This research finds out how the ratio analysis can prove to be useful
for the customers. It discovers in what manner it affects their respective investment decisions.
The results of the study can be very useful especially for the people who plans to make
investment in the shares of a particular company. Further it will be beneficial for the other
researchers who wishes to perform research on the same subject.
1.6 Chapter structure
The present research possess combination of several chapters that plays effective role in
completion of thesis in an effective manner. The chapters that would be discussed in the present
thesis have been stated as under: Chapter 1 Introduction: It is considered as initial part of the dissertation that
demonstrates overview of the subject matter in the investigation. The chapter effective
provides framework relating with the phenomenon utilized within research. This section
starts with the overview of the topic on which investigation has be done. Along with this
it also involves aim and objectives of the research that is on the basis of research
questions. Lastly tools and techniques that would be utilized are included along with its
importance. Chapter 2 Literature review: This is another major crucial part of the thesis that includes
viewpoints of various authors in relation to impact of financial ratios and performance on
6
industry
To evaluate the impact of Ratio analysis & performance on behavior of customers in the
banking industry
To find out how the company’s financial information is useful for the customers in the
banking industry
1.4 Research question
To identify whether ratio analysis is an effective tool for judging the financial
performance of an organization or not?
1.5 Significance of the study
Every research is carried out with a motive. This research study has been performed to
analyze the behavior of the customers in the banking industry. Information produced from the
financial statements is very useful for the customers as they are able to take different financial
decisions (Melville, 2008). This research finds out how the ratio analysis can prove to be useful
for the customers. It discovers in what manner it affects their respective investment decisions.
The results of the study can be very useful especially for the people who plans to make
investment in the shares of a particular company. Further it will be beneficial for the other
researchers who wishes to perform research on the same subject.
1.6 Chapter structure
The present research possess combination of several chapters that plays effective role in
completion of thesis in an effective manner. The chapters that would be discussed in the present
thesis have been stated as under: Chapter 1 Introduction: It is considered as initial part of the dissertation that
demonstrates overview of the subject matter in the investigation. The chapter effective
provides framework relating with the phenomenon utilized within research. This section
starts with the overview of the topic on which investigation has be done. Along with this
it also involves aim and objectives of the research that is on the basis of research
questions. Lastly tools and techniques that would be utilized are included along with its
importance. Chapter 2 Literature review: This is another major crucial part of the thesis that includes
viewpoints of various authors in relation to impact of financial ratios and performance on
6
customers of banking industry. The chapter makes evaluation of the knowledge and
information that exists in the prevailing piece of literature in secondary source form.
Moreover it also includes importance of financial ratios to the customers. Based upon the
published data, depth analysis relating with the phenomenon under subject would be
carried out. Chapter 3 Research methodology: On the basis of research objectives, this particular
chapter of thesis demonstrates tools that can be employed by the researcher when
conducting the research. The section involves the tools that will be applied by the
analysts towards carrying out the investigation. In addition to this justification regarding
selection of specific tool would be provided with the aim to offer in-depth knowledge
regarding subject matter under investigation. Chapter 4 Data analysis and findings: This chapter presents that data which is being
collected by the means of primary and secondary sources. This chapter will analyze the
data collected. With the assistance of such analyst would be able to get suitable resultant
from the research. This chapter is significant as in this researcher would attain
appropriate outcomes through investigation.
Chapter 5 Conclusion and Recommendation: It is the last chapter of thesis that presents
the outcomes that have been attained by making analysis of data gathered. In addition to
this the specific section includes suitable recommendations that can acts as an aid in
addressing various issues in the investigation.
7
information that exists in the prevailing piece of literature in secondary source form.
Moreover it also includes importance of financial ratios to the customers. Based upon the
published data, depth analysis relating with the phenomenon under subject would be
carried out. Chapter 3 Research methodology: On the basis of research objectives, this particular
chapter of thesis demonstrates tools that can be employed by the researcher when
conducting the research. The section involves the tools that will be applied by the
analysts towards carrying out the investigation. In addition to this justification regarding
selection of specific tool would be provided with the aim to offer in-depth knowledge
regarding subject matter under investigation. Chapter 4 Data analysis and findings: This chapter presents that data which is being
collected by the means of primary and secondary sources. This chapter will analyze the
data collected. With the assistance of such analyst would be able to get suitable resultant
from the research. This chapter is significant as in this researcher would attain
appropriate outcomes through investigation.
Chapter 5 Conclusion and Recommendation: It is the last chapter of thesis that presents
the outcomes that have been attained by making analysis of data gathered. In addition to
this the specific section includes suitable recommendations that can acts as an aid in
addressing various issues in the investigation.
7
CHAPTER- 2 LITERATURE REVIEW
2.1 Introduction
After introduction chapter another part of dissertation is referred to as literature review. It
is considered as most imperative part of thesis. In this chapter, opinions of various authors
relating to subject matter under investigation are presented with effectiveness. The information
that is being demonstrated in this section is collected by the means of secondary sources. Such is
referred to as the base that assist in conducting the investigation in forward direction. Literature
review section plays critical role in analyzing the gap that has occurred in the past researches.
Such gaps are resolved in the present investigation with the aim to draw valid outcomes. In
addition to this the present chapter critically evaluates opinions of several researchers in brief
manner. Thus this acts as an aid in development of sound theoretical base with respect to
phenomenon under subject. In the present thesis, literature review section demonstrates the
concept of financial ratios and its importance for the customers of UK banking in industry.
Along with this it analyze the manner in which customers decisions are developed through
analysis of company's performance.
2.2 Different types of financial ratios calculated by the companies in the banking industry
The concept of financial ratios is referred as the one that presents the relationship
examined from financial information of organization. In addition to this it is being used for the
purpose of making comparison. The role of financial ratios has been greatly viewed towards
expressing the association among items of financial statements. In accordance with the views of
Rodríguez-Ruiz, Rodríguez-Duarte and Gómez-Martínez, (2016) it has been examined that there
is presence of several kind of financial ratios that are being used by the banking industry so as to
disclose their financial position in the internal and external market. Management can make use of
ratios in order to make identification of internal strengths and weaknesses. Further it assist in
estimating financial performance of bank in future course of time. Investors can make use of
ratios for the purpose of comparing performances of the company that are operating in the
similar industry. The financial ratios that are being used by banking industry has been
enumerated in the manner stated as such: Liquidity ratios: It is referred to as the one that offers information relating to the
organizations ability in meeting short term financial obligations. Liquidity ratio is the
measure that examines the adequacy of current as well as liquid assets. In addition to this
8
2.1 Introduction
After introduction chapter another part of dissertation is referred to as literature review. It
is considered as most imperative part of thesis. In this chapter, opinions of various authors
relating to subject matter under investigation are presented with effectiveness. The information
that is being demonstrated in this section is collected by the means of secondary sources. Such is
referred to as the base that assist in conducting the investigation in forward direction. Literature
review section plays critical role in analyzing the gap that has occurred in the past researches.
Such gaps are resolved in the present investigation with the aim to draw valid outcomes. In
addition to this the present chapter critically evaluates opinions of several researchers in brief
manner. Thus this acts as an aid in development of sound theoretical base with respect to
phenomenon under subject. In the present thesis, literature review section demonstrates the
concept of financial ratios and its importance for the customers of UK banking in industry.
Along with this it analyze the manner in which customers decisions are developed through
analysis of company's performance.
2.2 Different types of financial ratios calculated by the companies in the banking industry
The concept of financial ratios is referred as the one that presents the relationship
examined from financial information of organization. In addition to this it is being used for the
purpose of making comparison. The role of financial ratios has been greatly viewed towards
expressing the association among items of financial statements. In accordance with the views of
Rodríguez-Ruiz, Rodríguez-Duarte and Gómez-Martínez, (2016) it has been examined that there
is presence of several kind of financial ratios that are being used by the banking industry so as to
disclose their financial position in the internal and external market. Management can make use of
ratios in order to make identification of internal strengths and weaknesses. Further it assist in
estimating financial performance of bank in future course of time. Investors can make use of
ratios for the purpose of comparing performances of the company that are operating in the
similar industry. The financial ratios that are being used by banking industry has been
enumerated in the manner stated as such: Liquidity ratios: It is referred to as the one that offers information relating to the
organizations ability in meeting short term financial obligations. Liquidity ratio is the
measure that examines the adequacy of current as well as liquid assets. In addition to this
8
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