Pre and Post M&a Performance in Accounting Ratio
CHAPTER 1: INTRODUCTION
Background of pre and post M&A performance in accounting ratio
There are loads of tools to measure the performance of a financial performance of an entity but financial ratios is probably the best known tool which is mainly to analyze the performance of an entity by comparing the present to the past relative figures taken or composed from the financial statement . The few categories of ratios are liquidity ratios, profitability ratios, efficiency ratios, debt ratios and market ratios which will be able to describe the entity’s characteristics. Ratios show the true performance and position of the entity. In order for investors to determine their choices of entity to invest in, financial ratios play an important role in providing sufficient information to users about the entity’s characteristic. We predict that companies are performing better after merger and acquisition and there will be an increase in profit of companies pre merger and acquisition compare to post merger and acquisition activities. However, the global merger and acquisition (M&A) market is expected to experience a modest increase this year following significant revisions in earnings expectation for 2009. Studies relatively prove that ratios are important but which ratios, among the loads of ratios which can be computed easily from the available financial statement, should be used to analyze to obtain a wise decision (Kung & Thomas, 1981); (Maretno & Howard, 1996).
Problem statement
Accounting ratios usage in merger & acquisition are not understood very well as to whether companies or investors are using accounting ratios to analyze performance pre and post decision making for M&A. Therefore, this study will try to find out as to whether merger and acquisition activities are caused by the use of accounting ratio when management tries to expand a company’s operation. Accounting ratios is wide in variety and is known for its diversities in calculating different ratios,
Background of pre and post M&A performance in accounting ratio
There are loads of tools to measure the performance of a financial performance of an entity but financial ratios is probably the best known tool which is mainly to analyze the performance of an entity by comparing the present to the past relative figures taken or composed from the financial statement . The few categories of ratios are liquidity ratios, profitability ratios, efficiency ratios, debt ratios and market ratios which will be able to describe the entity’s characteristics. Ratios show the true performance and position of the entity. In order for investors to determine their choices of entity to invest in, financial ratios play an important role in providing sufficient information to users about the entity’s characteristic. We predict that companies are performing better after merger and acquisition and there will be an increase in profit of companies pre merger and acquisition compare to post merger and acquisition activities. However, the global merger and acquisition (M&A) market is expected to experience a modest increase this year following significant revisions in earnings expectation for 2009. Studies relatively prove that ratios are important but which ratios, among the loads of ratios which can be computed easily from the available financial statement, should be used to analyze to obtain a wise decision (Kung & Thomas, 1981); (Maretno & Howard, 1996).
Problem statement
Accounting ratios usage in merger & acquisition are not understood very well as to whether companies or investors are using accounting ratios to analyze performance pre and post decision making for M&A. Therefore, this study will try to find out as to whether merger and acquisition activities are caused by the use of accounting ratio when management tries to expand a company’s operation. Accounting ratios is wide in variety and is known for its diversities in calculating different ratios,
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