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Financial statement analysis

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Financial statement analysis
FINANCIAL RATIOS AND THE STATE OF HEALTH OF NIGERIAN BANKS

Onyeiwu Charles University of Lagos, Lagos State, Nigeria Email: chasonyeiwu@yahoo.com Tel: 2348023206015.

And Aliemeke Goodluck Guarranty Trust Bank Plc, Nigeria Email:goodluck.aliemeke@gtbank.com

Abstract
This study investigates the use of financial ratios to ascertain state of health of Deposit Money Banks in the Nigerian financial services sector using the multivariate analysis propounded by (Altman 1968). Twenty-three banks constitute the sample of which eight, have been indicted as weak, by Central Bank of Nigeria within the year of investigation (CBN 2009).The study applied a Multivariate technique to Nigerian banks to ascertain its ability to discriminate between weak and healthy banks. The audit report for year ended 2009 formed the basis of the calculation. The Z score of each of the banks is found to be below 1.80 indicating ill health. However, it is observed that the banks can be disaggregated into two distinct classes i.e. Those with positive Z score which rightly fall into category of banks that have not been indicted by the Central Bank of Nigeria and those with negative Z score which fall into category of banks which have been indicted by CBN within the past one year resulting in 100 percent correct classification. The study provides the regulatory authorities insight on how the Z score can be used to improve their supervisory oversight function.

Keywards: Financial ratios, Z score, Nigerian banks and financial health

1.1 INTRODUCTION
Financial statement analysis is important to the management, owners, personnel, customers, suppliers, competitors, regulatory agencies, tax payers,



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