Description
ABTRACT
Corporate organizations owe a duty to fully disclose matters concerning their
operations so as to aid investors in making investment decisions because
Investment decision makers rely on information obtained from financial
statements to predict future rates of return. Without the financial statement,
there will be a problem of how to determine the profit of a company, and
evaluation of performance of a company. The general objective is to ascertain the
role of financial statement in investment decision making. The study will be based
on survey and questionnaire will be used to gather information. There is a total
population of 70 personnel but the sample size is 60 using Taro Yamane’s
formula. The methods used in analysing this study are simple percentage and chi-
square. We discovered from the test of hypotheses that financial statement is
relied upon in investment decision making and financial statements are useful for
forecasting company’s performance. Concluded was drawn based on the findings
that financial statement plays a vital role in investment decision making and
recommends that no investment decision should be taken without the
consideration of a company’s financial statements.
TABLE OF CONTENT
Cover page i
Title page ii
Certification page iii
Dedication iv
Acknowledgement v
Abstract vi
Table of content vii
CHAPTER ONE
Introduction 1
Historical background 2
Statement of the problem 3
Objective of the study 4
Research hypotheses 5
Research questions 6
Significance of the study 7
Scope of the study 8
Limitation of the study 8
CHAPTER TWO: LITERATURE REVIEW
Introduction 10
Features of financial statement 12
Functions of financial statement 12
Objectives of financial statement 13
Analysis of financial statement 14
Users of financial statement 14
Attributes of an ideal financial statement 18
Types of financial statement 21
Definition and nature of investment decision 29
Importance of investment decision 32
Types of investment decision 34
Investment evaluation criteria 36
The role of financial statement in investment decision making42
2.13 Types of ratios and their uses 43
Reference
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction 49
Research design 49
Area of the study 50
Population of the study 50
Sample size and sample technique 50
Instruments for data collection 52
Sources of data collection 52
Methods of data collection 53
Method of data presentation and analysis 54
Validity of instrument used 56
Reliability of the instrument used 56
Reference
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
Data presentation 58
Data analysis 58
Test of hypotheses 67
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 Summary of findings 72
Conclusion 73
Recommendations 74
Bibliography 76
Appendixes 78
CHAPTER ONE
INTRODUCTION
Corporate organizations owe a duty to fully disclose matters
concerning their operations so as to aid investors in making investment
decisions. Both large and small organizations in addition to satisfying
the legislating requirement tend to retain existing investors and to
attract potential ones through the publication of their financial
statements where the capital stock of a corporation is widely held and
its affairs are of interest to general public relations. The discussions and
illustrations of the study will be centered on the financial statement
presented to shareholders and also available for potential investors,
bond holders and trade creditors as a tool of information for
investment decision. Financial statement based on result on past
activities are analyzed and interpreted as a basis for predicting future
rate of returns and assessment of risk.
Financial statement provides important information for a wide
variety of decision, investors draw information from the statement of
the firm in whose security they contemplate investing. Decision makers
who contemplate acquiring total or partial ownership of an enterprise
expect to secure returns on their investment such as dividends and
increase in the value of their investment [capital gain]. Both dividends
and increase in the value of shares of company depends on the future
profitability of the enterprise. So investors are interested in future
profitability. Past income dividend data are used to forecast returns
from dividend and increase in share prices.
HISTORICAL BACKGROUND
For the purpose of this research, first bank plc. Anyigba branch
kogi state is selected as a case study for academic purpose
According to google.com [electronic library] first bank of Nigerian
Plc. was established in 1894 as the first bank in Nigeria, a premier in
West African and the leading financial service solution provider in
Nigeria. From being the only bank for decades, weathered the banking
exposure of the 1930,s to 1950s followed by the era of government
ownership and control to a flurry consolidations and then gradual
growth in number banks up to the early 1980s, then yet another
industry growth spurt in early 1990s when the banking sector was
deregulated, leading to an industry shake-up in the late 1990s, which
reduced the number of banks from 126 to 77. At later resuscitation and
growth to 89 banks leading al through the seasons, first bank plc has
remained resilient dependably dynamic and truly the first.
Based on the researchers’ oral interview with the bank officials,
the Anyigba branch of first bank plc. was established in the then kwara
state in the 1978. They render other services than safe keeping of
money like giving loan to their customers and hire purchase. The
branch presently has about 288 customers.
STATEMENT OF THE PROBLEM
It is observed that the role of financial statements in investment
decision making in Nigeria has some problems to both investors and
managers of business organizations who are either not aware of the
importance of interdependence relationship that exist between
investors and business organizations. Such problems include;
i. How analytical tools are set to aid prospective investors in
accessing the financial position of the corporate organization.
ii. Evaluation of performance of a company in investment decision
making.
iii. How to determine the profitability of a company.
The above listed problems are the problems to look into in this
research work. The problems analyzed tend to scare away both existing
and potential investors. The reason of this study is to adequately look
into the above problems and suggest possible solution to any of them.
Nevertheless this research will find possible key factors to solving these
problems because financial statement in investment decision making in
Nigeria is the life blood of every organization to the potential investor.
OBJECTIVE OF THE STUDY
The general objective is to ascertain the role of financial
statement in investment decision making. The specific objective is as
follows;
i. To examine how a set of analytical tools will aid prospective
investors in assessing the financial position of the corporate
organization.
ii. To evaluate the performance of a company for investment
decision making.
iii. To determine the profitability of the company.
iv. To appraise the fundamental use of financial statement
information, this is to provide information for investment decision
making.
RESEARCH HYPOTHESE
Hypothesis according to the English dictionary is an unproved
theory, proposition sent forth as an explanation of something, often as
the basis for further investigation. Hypothesis is the guides for the
investigators in the entire process of research endeavor and they keep
the researcher on the main line of the study, in this research, the
following hypothesis are formulated for the study;
H o ; financial statements are not used to be relied upon in investment
decision making in a company.
H 1 ; financial statement are used to be relied upon in investment
decision making in a company.
H o ; financial statements are not useful for forecasting company’s
performance.
H 2 ; financial statements are useful for forecasting company’s
performance.
H o ; financial statement does not determine the profitability of a
company.
H 3 ; financial statement determines the profitability of a company.
H o ; financial statement does not project new investors.
H 4 ; new investors are projected by financial statement.
RESEARCH QUESTIONS
According to Uzoagulu [1998; 96], research questions guide the
researcher in constructing the questionnaires. Therefore the researcher
raised the following research questions to guide her in constructing her questionnaire which are instruments in the study.
The questions are as follows;
i. To what extent is financial statements used in the investment
decision making in a company?
ii. Are financial statements useful for forecasting company’s
performance?
iii. Do financial statements determine the profitability of an
organization?
iv. Do financial statement projects new investors?