Thesis: The Impact of Financial Ratio Analysis on Financial Decisions

Sample Thesis Paper


The objective of the current study is to estimate the impact of financial ratio analysis on financial decisions for financial institutions and investors who invest in their publicly listed stocks.

1.3       Rationale for Objective

The purpose of the current study is to develop further on previous researches carried out regarding the use of financial ratio analysis for evaluation of companies’ performance. The subject topic is an interesting one as this will examine use of financial ratios by both financial institutions and private investors in an emerging economy of Pakistan. The banking sector in Pakistan has grown tremendously over the last 10 years after induction of banking reforms. Therefore a study of one of the largest banks in Pakistan along with competitive analysis would provide the reader a thorough insight into the correlation of publicly listed company’s financial performance and its stock prices.

1.4       Project Aim

The objective clearly sets out the project aim for the current dissertation. The study will cover the financial ratio analysis highlighting different ratios which are commonly used by companies and shareholders to evaluate the financial position of the company at any point in time. However, the availability of up to date companies’ information is somewhat limited for its external users. This restricts the use of financial ratio analysis by shareholders. Management of a company is considered as internal user and shareholders or investment companies or research analysts are considered as external users. The study will estimate the impact of financial ratios on financial decisions of both internal users and external users of information. A case study of Muslim Commercial Bank, a local bank incorporated in Pakistan would be investigated and compared with its competitor bank – Habib Bank Limited that is also based in Pakistan. Both primary and secondary sources will be collected and subject to different analytical procedures. For primary results Likert modeling will be used to determine the level of impact on financial decisions. While on the other hand secondary sources will be used for performing a financial ratio analysis of the banks under review. Overall conclusions regarding the topic will be presented in the final chapter of the current dissertation.

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