Accounting Ratio is a way of expressing the relationship between one accounting result and another, which is\nintended to provide a useful comparison. Accounting ratios assist in measuring the efficiency and profitability of a\ncompany based on its financial reports. Accounting ratios are important for financial decision making irrespective of the\nsize of the institution. The Bank of Ghana has the constitutional mandate to oversee the activities of all financial institutions\nin Ghana including the Microfinance institutions. This core mandate of Bank of Ghana is basically guided by the use of\naccounting ratios. The ratios per their style have the power to determine the risk exposure of financial institutions. Over\nthe past five years the Ghanaian economy has witnessed the collapse of certain microfinance institutions that the public\nassumed to be highly visible in the financial market. The study therefore provided a logistic regression model with 117\nobservations to determine whether accounting ratios have the power to predict the fortunes of microfinance institutions\nin Ghana. An increase in the current ratio reduces the log-odds of a firm's survival by -1.461987. An increase in the acid\ntest ratio improves the log-odds of survival by 6.847345. An increase in the debt equity ratio increases the chances of\nsurvival of a firm by 1.055941. Current ratio and acid test ratio were statistically significant at 10 percent whilst debt\nequity ratio was statistically significant at 5 percent. The study implies that microfinance institutions should be mindful of\nthe current ratio, acid test ratio and the debt to equity ratio.
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