Performance Ratio Analysis and Management Effectiveness

Key performance ratios indicate the underlying level of performance and health of the enterprise. Therefore, understanding the components of the final accounts and their performance ratios is important because of the crucial nature of ROE. Even though PRA represents one of the best ways to compare the performance of a business and its peers in the same industry it could be highly distorted due to taxation challenges, hidden gains or losses as well as the issues of window-dressing. Generally, ratios look at the path an enterprise appears to be moving towards as well as its recent performance and current financial situation so as to guide management actions with the aim of enhancing ME. The exploratory research design was used for the study. There were 66 participants in the study and data were collected from both primary and secondary sources. The multiple method of data generation made it possible for data of the study to be compared and contrasted with each other. Data were analyzed through descriptive and regression statistical methods. The result showed a strong positive correlation between PRA and ME. The study was not exhaustive; therefore, further study could examine the relationship between PRA and Trade Debt in Nigeria as a way of helping firms chart a way of meeting their debt obligations. On the basis of the result of this study it was suggested that management of companies should institutionalize effective PRA mechanism adequate enough to track performance at regular intervals.