1. i
AN ANALYSIS OF THE PROFITABILITY AND LIQUIDITY AS
TOOLS FOR PERFORMANCE EVALUATION IN BANKS
(A Case Study of Union Bank Plc.)
By
OHWOTA PAUL EDIRIN
MAT. NO. DSPT/BAF/1314/13992
BEING A PROJECT REPORT SUBMITTED TO THE DEPARTMENT
OF BANKING AND FINANCE, SCHOOL OF BUSINESS
STUDIES,DELTA STATE POLYTECHNIC,OTEFE- OGHARA.
IN PARTIAL FULFILLMENT OF THE REQUIREMENT
FOR THE AWARD OF NATIONAL DIPLOMA (ND) IN
BANKING AND FINANCE
OCTOBER. 2015.

2. ii
CERTIFICATION
This is to certify that this project was carried out by OHWOTA PAUL EDIRINin
the department of Banking and Finance, Delta state Polytechnic, Otefe-Oghara.
_____________ ______________
Signature Date
MR. AGUNUWA E.V.
Project Supervisor
_____________ ______________
Signature Date
MR. IGHOAGWONOR W.O
Head of Department
(Banking and Finance)

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DEDICATION
This project is dedicated to God Almighty who had guide me through my studies.

4. iv
ACKNOWLEDGEMENT
I wish to express and recognize the tremendous assistance of my project supervisor
Mr. AgunuwaEkokotu Vincent for his audience and all other necessary
contribution for making this project a successful one.
Also to Mrs. Grace Borke, for her financial assistance, my big brother
Mr.VokeBorke, for his guidance and orientation throughout the years of my study.
I acknowledge my good friends, my brother Ohwota Anthony, and my sistersfor
their love, financial support and encouragement and also my uncle Mr. Sada
Solomon for his love and financial support through the period of my study.
I am once again very grateful to my parent Mr. and Mrs. Borke for their parental
care through all this years.
Finally, I must acknowledge our rector Dr. (MRS) C.E. Sogbaike for the
upliftment of the institution my special thanks goes to Almighty God for his
guidance and protection for making it possible.

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ABSTRACT
This purpose of this study among others is to examine the effectiveness of
profitability and liquidity ratio as tools for performance evaluation in banks
through the analysis of financial statements and to suggest a standard for
summarizing the performance of a bank. In this regard, union bankof Nigerian Plc
is used as a case study.Personal interview formed the basic source of primary
information. In trying to achieve the purposes of the study assumption were made
concerning relationship between profitability and liquidity, profitability and gross
earnings and assets employed. Two hypothesis were formulated and tested. The
findingsof this research among other things are that the profitability of bank is not
determined solely by its asset base. Bank profitability directly related to its
liquidity. Theprofitability of a bankis not bound to increase as its gross earning. A
bank’s gross earnings is directly dependent on its asset.In the light of the above
findings, recommendations were made which among other include:
That the EPS should be the standard tool for criterion for assessing the
performance of the bank. That the bank should be more conscious in determining
its’ liquidity position in order not to impair its profitability etc.Finally, it was
concluded that qualitative factors such as management quality, asset quality e.t.c.
Has to be considered along with ratio analysis if a true performances evaluation
must be achieved.

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TABLE OF CONTENTS
Title page - - - - - - - - - i
Certification - - - - - - - - - ii
Dedication -- - - - - - - - - iii
Acknowledgment - - - - - - - - iv
Abstract - - - - - - - - - v
Table of Contents - - - - - - - - vi-vii
CHAPTER ONE:-INTRODCUTION
1.1 Background of Study - - - - - - - 1
1.2 Statement of the problem- - - - - - - 2
1.3 Objectives of the study - - - - - - - 4
1.4 Research questions- - - - - - - - 5
1.5 Research hypothesis - - - - - - - 5
1.6 Scope and limitation of the study- - - - - - 6
1.7 Significance of the study - - - - - - - 6
1.8 The organization study - - - - - - - 8
1.9 Definition of terms- - - - - - - - 8
References- - - - - - - - 9
CHAPTER TWO :-LITERATURE REVIEW
2.1 Introduction - - - - - - - - - 13
2.2 History of Union Bank Plc- - - - - - - 13
2.3 Users of financial statement; their information needs - - 15
2.4 Ratio analysis - - - - - - - - 17
2.5 Ratio analysis and performance evaluation - - - - 20
2.6 Trend analysis - - - - - - - - 21
2.7 Significance of ratio analysis - - - - - - 23
2.8 Inflation and Accounting Ratios - - - - - 25
2.9 Validity of ratio analysis - - - - - - - 28
2.10 Limitation of ratio analysis - - - - - - 29

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2.11 Categories of ratio analysis - - - - - - 31
References
CHAPTER THREE:-RESEARCH METHODOLOGY
3.1 Introduction - - - - - - - - - 39
3.2 Research design - - - - - - - - 39
3.3 Types/Source of Data - - - - - - - 39
3.4 Research instruments - - - - - - - 40
3.5 Samples and sampling technique - - - - - 41
3.6 reliability and validity of research instrument - - - - 41
3.7 Limitation of the study - - - - - - - 42
References
CHAPTER FOUR:-PRESENTATION AND ANALYSIS OF DATA
4.1 Introduction - - - - - - - - - 44
4.2 Data presentation - - - - - - - - 44
4.3 Test of hypothesis - - - - - - - - 51
References 55
CHAPTER FIVE: FINDINGS, CONCLUSION, SUMMARY AND
RECOMMENDATION
5.1 Introduction - - - - - - - - - 56
5.2 Summary of findings - - - - - - - - 56
5.3 Conclusion - - - - - - - - - 60
5.4 Recommendations
Reference
Appendix
Questionnaire

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