3 0 Introduction
This chapter explains methods and instruments used to
collect, analyze and to test the hypothesis the use of accounting ratios guides
management as an effective tool in decision making.(Kenneth R. HOOVER, 1988:
33) says «the scientific method is the method that seeks to test thoughts
against reality in a disciplined manner with each step in the process made
explicit». This section covers the methods that the researcher is going to
use to obtain the necessary data to achieve the objective and to come up with a
suitable conclusion.
3 1 Research Design
Research design refers to outline, plan or strategy
specifying the procedure to be used in investigating the research problem.
(Christensen, 1991: 269). In the due course the researcher collects relevant
data needed to test the researcher hypothesis. The design of the study is
analytical in nature.
3 1 1 The analytical research
According to (Jill and Roger Hussey, 1997: 11) the analytical
research design is continuation of the descriptive research. The researcher
goes beyond merely describing the characteristics to analyzing and explaining
why and how it is happening. Thus, this research aims to understand the use of
accounting ratios by measuring causal relation among them in decision
making.
In this study the researcher adopted a case study approach,
where by AMAZI YA HUYE was particularly chosen. According to (CHRISTENSEN,
1991: 92), a case study is an intensive description and analysis of single
individual, organization or event, based on information obtained from a variety
of sources. It is in this regard AMAZI YA HUYE was chosen because the
researcher was interested in manufacturing enterprises.
3 2 Population of the Study
As (Grinnell and Williams, 1990: 118), put it that, «a
population can be defined as the totality of persons or objects with which a
study is concerned». The population was comprised sorely the staff
managers and accountant of AMAZI YA HUYE, financial statements and other
records available of the 5 year period, which are from 2003-2007.
Table 3 1 Total population of Management and
Accounting departments of AMAZI YA HUYE Description Population Sample
selected Technique used Basic for
selection
Source: Primary data 3 3 Sources of
Data
Data source refers to any material consulted or used in the due
course of the study. Both the primary and secondary data were used in the
study.
3 3 1 Primary Data
As put forward by (HAGOOD and PRICE, 1952: 20) «if a
person or agency that has published data has earlier been collected or
supervised the collection of data, the publication is called a primary
source.» (Audrey et al, 1989: 57) adds that «primary sources come
straight from people or workers you are researching and therefore the most
direct kind of information you can
collect». That is the reason why primary data were first
hand gathered by the researcher himself as a result of the researcher's
investigation.
3 3 2 Secondary Data
Roth further states that these are one step removed from the
original and are often an examination of a study someone else has made on a
subject or an evaluation of commentary, or summary of primary materials,
journal articles, critical reviews are the most common secondary sources.
The secondary sources of data for this study included financial
statements, company records, internet publications, library books and
memoires.
3 4 Data Collection Techniques
Documentary review (library, internet search and financial
statement) was used to collect secondary data while primary data was obtained
through interview guide
3 4 1 Documentary Review
A number of documents available in the library, on the
internet, memoires and financial statements of the company chosen as a case
study, were consulted for the purpose of obtaining secondary information
relevant to the subject matter.
3 4 2 Document Analysis
(Paige Wilson, 1989:3) stated that a document analysis
«is a system which formally acknowledges the sources consulted for
researcher». The document review was based on the consultation of the
company's annual reports, journal and other documents. The researcher used the
balance sheets and income statements of the five year period to analyze,
interpret and comment on different types of accounting ratios. The advantage of
this method is that the researcher got useful information about the company's
financial health which would be difficult to acquire using other instruments
3 4 3 Interview Guide
This technique involves exchange of ideas between the
interviewer (researcher) and the interviewee (managers) to get the opinion of
the interviewee on the use of accounting ratios in decision making. During the
course of interview, notes were taken after asking questions on any information
relevant to the study by the interviewer.
3 4 4 Sample size and selection
According to (William G. Cochran, 1997: 126) a sample is a
part of population which is deliberately selected for the purpose of
investigation. For our case study, the sample size is 6 people. The researcher
selected two respondents from the top management and four from financial
executives. The researcher chooses them because they are only respondents who
can provide relevant information concerning the use of accounting ratios n
decision making (AMAZI YA HUYE as the case of the study).
3 5 Sampling technique
The sampling technique that the researcher will use in this
study is universal sampling. According to (Richard & Margaret, 1990: 125)
«Universal sampling refers to the selection of sample where not all the
people in the population have the same profitability of being included in the
sample and each one of them, the probability of being selected is unknown.
The researcher preferred to use universal sampling technique
to select respondents from the top management and finance department because
they are the ones who may provide the useful information to test the hypothesis
of this research.
3 6 Data processing and analysis
(Nachimias D. and Nichimias C., 1976: 143) argue that
«data processing and analysis involves the transformation of data gathered
from the field into a systematic categories and the transformation of these
categories into codes to enable quantitative analysis and tabulation; the data
collected was classified into a meaningful manner for easy interpretation and
understanding.
This involves preparing data collected into some useful,
clear and understandable data. The whole exercise involved calculations of
different types of ratios to analyze, liquidity, debt, efficiency, sales and
profitability, compute the trend analysis and the multiple discriminant
analysis for the secondary sources.
While for the first hand information the researcher has
summarized the recorded interview (discussion).
3 7 Study limitations
Some limitations were encountered during the process of data
collection; however salutation were sought in order to make the findings of the
study available as planned. The following are the limitations that were
encountered:
· Financial constraints as funds provided by the National
University for the research were delayed.
· Access to the financial statements of companies in Rwanda
is not easy Solutions to the above limitations:
· The researcher has to borrow funds from friends and ask
support to his family members in order to accomplish the research in time
· A letter of authorization from the university was used
by the researcher as evidence to the management staff of AMAZI YA HUYE to prove
that the research is conducted for the academic purpose
