CHAPTER 1

1.0 Introduction

In this chapter, I have present the background of the company along with problem

statement and how it is relevant. Their competitors and their financial report. The discussion also

contains the motivation of this research.

BRLIRWA ltd

BRALIRWA, which is a part of the Heineken Group, is a proudly Rwandan company with

roots in the country that date back over 50 years to 1959 when the Companys flagship Rwandan

beer brand, Primus, was first produced in Gisenyi. BRALIRWA has since grown into one of the

largest companies in Rwanda.

It seeks to play a key part throughout Rwandan society through the application of its core

values to its business: Passion for Quality, Enjoyment for Life, Respect for the People, Society

and Environment. The Companys mission is To become a world class sustainable beverage

producing company in Rwanda with high quality brands that satisfy needs and give enjoyment to

our consumers, while respecting our people, society and environment we live in.

3.3 Research Design

Redman and Mory (1923) defined research as a systematic effort to gain new knowledge

According to Clifford Woody research comprises defining or redefining problems, formulating

hypothesis or giving solutions, collecting, organizing, evaluating the data, making deductions and
reaching conclusions and at carefully testing the conclusion to determine whether they fit the

formulating hypothesis. The research design used in this project is a descriptive research in which

events are recorded, described, interpreted, analyzed and compared/contrasted.

Statement of Problems

The management of enterprise is depending on financial information for taking various

strategic decisions. Financial statements provide such information. This information is made useful

by analyzing and interpretation of financial statements with help of financial analysis techniques

among which the common and easy technique to use is financial ratios also known as accounting

ratios. (Prof. Harvey B. Lermack, 2003).

(James C. Van Horne and John M. Wachowicz, 2005: 132) say to evaluate the firm's

financial condition and performance, the financial analysis needs to perform checkups on various

aspects of a firm's financial health. A tool frequently used during these checkups is financial

ratios.

Accounting ratios are important tools in the management for decision making. (R.K.

Sharma, Shashi K. Gupta, 2001: 4.4), financial statements are prepared primarily for decision

making, but the information provided in financial statements is not an end and no meaningful

conclusion can be drawn from these statements alone. Ratio analysis helps in making decisions

from the information provided in these financial statements. Thus, the proper use of accounting

ratios assists management in communicating information which is pertinent and purposeful for

decision makers to ensure the effectiveness of management in the enterprise. In modern business

environment, which is becoming more competitive, the survival of firms, be it small or large;
depend upon the strategic decisions made by management. This is however done with the help of

accounting ratios, which is a big challenge to most countries having shortage of professional

accountants as it is the case to our country.

1.3 Research Questions

The research study aimed at finding out the solution for the following questions:

1. What is the importance of using financial ratios in measuring business performance?

2. What different financial ratios used in measuring business performance?

3. What the suggestions for further improvement?

Research Design

Redman and Mory (1923) defined research as a systematic effort to gain new knowledge

According to Clifford Woody research comprises defining or redefining problems, formulating

hypothesis or giving solutions, collecting, organizing, evaluating the data, making deductions and

reaching conclusions and at carefully testing the conclusion to determine whether they fit the

formulating hypothesis. The research design used in this project is a descriptive research in which

events are recorded, described, interpreted, analyzed and compared/contrasted.

3.4 Population and Sampling Techniques

3.4.1. Population and sample method

This study is based only on secondary data, there is no need of population and sampling

method.
3.4.2. Research instruments

Secondary Data

The study employed secondary data collection. Secondary data is the information which is

collected already and it is used for some other studies by different researcher. In this study will use

secondary data for the analyses of ratio in order to know the effect of ratio analysis on performance

evaluation of BRALIRWA ltd for the financial periods 2009 to 2013 from the annual reports

maintained by the company. Data are collected from the companys website, books and journals

pertaining to the topic.

3.5. Methods of Data Collection

Data are collected from the annual financial reports of BRALIRWA ltd from 2009 to 2013.

These data are published by BRALIRWA on its website. The financial statements for ratio analysis

that are used are: balance sheets and income statement of BRALIRWA ltd from 2009 to 2013.

3.6 Data Analysis Techniques

The data were collected from the financial statement of BRALIRWA after their collection;

data were processed and analyzed through ratios and Microsoft Office Excel 2007. The analysis

was on the effect of ratio analysis on the performance evaluation of BRALIRWA and the following

ratios were used for analysis: liquidity ratios, assets management ratios, leverage ratios and

profitability ratios. See appendices A, B, C, D, E, F.

3.7 Ethical considerations

According to Finnis (1983), ethics is a branch of philosophy, said to have been initiated by

Aristotle, which takes human action as its subject matter. It means that considering the morals or

the principles of morality, the right and wrong of an action, prior to acting. Considering whether
or not it is within the rules or standards of right conduct or practice, especially the standards of a

profession. (Seale et al, 2004:116). This thesis uses only the secondary data, great care was taken

to ensure that informations used correspond to those published by BRALIRWA, there is no

harmful information used.