TABLE OF CONTENTS
Table of Contents xi
Statement of Problem 2
Objective of Study 4
Significance of Study 4
Research Methodology 5
Scope of the Study 6
Definition of Terms 7
Literature Review 10
What is Financial Statement? 10
Objective Financial Statement 13
Regulatory Framework of Financial Statement 14
Limitation of Ratio Analysis 21
Research Design 25
Research Strategies 25
Definition of the Population and Sample 26
Method of Data Collection 26
Data Analysis 27
Research Instrument 27
Personal Interview 27
Method of Analyzing data
Data Analysis and Presentation 29
Data Presentation 29
Testing and Interpretation 29
Summary, Conclusion and Recommendation 41
Accounting information statement has been prepared over the
centuries to serve as a means of communicating the transaction of business
entities to users and to educate the investors on the impact of financial
statement in no doubt, must have been prepared over the ages, and infact there
is no business entity that does not prepare financial statement for it’s
Financial statement has various definitions it can be
defined as a means of conveying concise picture of the profitability and
financial position of a business entity.
A financial statement is a detailed report that shows the
managerial performances and financial stand of a business enterprises for a
particular period of time, year and prepared and presented by the management in
accordance with adopted accounting policy of the company, statutory requirement
and professional regulation.
Lewis (1979) defined financial statement as means of
communicating financial to the users of according information. Another
definition says financial statement serve as a means of providing information
about the financial position of the enterprises which is utilized by a wide
range of users to the information in making investment decision. It is often
necessary to interpret as a set of financial statement in order to identify the
strength and weakness of the organisation and high light any underlined trend
in operation for example shareholders and other investment analysis required
information from the analysis of financial statement to make investment
Management should be more interested in all aspect of
financial statement analysis than outside suppliers who evaluate financial
statement to boost his own payment capabilities.
There are various tools with which to analysis a set of
financial statement. They include accounting ratio, cash flow statement etc.
Each of these has limitation in its uses as a tool of
analyzing financial statement. Thus, the impact of financial statement provides
useful information to all investors.
STATEMENT OF THE
It was gathered that management ability to interpret the
financial statement was slightly ineffective. This arise because of the various
limitation of financial statement which include its being historical being
expressed in monetary term, which does not reveal enough information and also
not take effect of inflation into consideration.
The banking industry has experienced various decree, which
had hindered the investors from undertaking capital investment. The
introduction of indigenization decree of encourage investors in investing in
the investment is not justified. Fluctuation in the interest rate from one
period to the other had endangered the investment decision great number of
investors could not interprets tied down or involved in a big loss of capital.
The capital commercial banks have from time to offered investors with interest
rate which are not or far too risky to undergo a safe investment. The
investment opportunities are still centralized that is still within a little
set of investors and the interpretation of the financial statement that is not
know to many had hindered free entry and exist from financial market.
In view of the fact that investment decision entails high
financial statement involvement, if marched against it’s attendant risk, a
study of the factors influencing investment decisions become necessary. Since
investors expect to generate from their investment returns appropriate to their
intention an examination of the extent of shareholders reliance on the
financial statement in their investment decision making becomes imperatives.
OBJECTIVES OF THE
The objective of this
research is to enable investors appreciate the full important statement and the
role its play in investment decision.
Also the need to
prevent or safeguard the investors from inventing in an organisation where the
yield or return or investment is too low or not encouraging.
Identify those areas
in the financial statement that are particular interest for investment purpose.
And also to identify,
if any limitation as to the use of financial statement by investors.
To identify the
purpose to which financial statement may put into by investors, knowing the
meaning of financial statement and investor.
This study is carried out to show whether or not financial
statement provides information for decision making. Furthermore, the study will
be of importance to the organisation in the method of evaluating can be either
the use of accounting rate or return, internal rate of return, net present
value and use of cost of capital.
The study will also be useful to the investor in
interpretation of financial statement so as to increase the level of investment
in the economy. As a result of increase in the level of investment which will
lead to increase in capital employed and also enhance employment to the
The basic objectives of the methodology employed in this
survey is to test the hypothesis and answer the research question stated, the
methodology covers the research design, characteristics of the study
population, research strategy description of research instrument method of data
collection and method of data analysis.
The design was classified according to the nature of the
research objectives and sample survey of selected department of the bank
Population in this aspect means the total respondents that
were interview during the course of carrying out this research, data collected
from both primary and secondary source. The quantitative data obtained from the
questionnaire and interviews conducted were analyzed using recognized scientific
The instruments used in the research were questionnaire,
personal interview and observation. This consists of a set of questions
designed by the researcher to gather information or data for analyzing the
result which were used to answer the research question and the data use for the
test of hypothesis.
SCOPE OF STUDY
The study intended to evaluate the impact to which
financial statement have had on investment decision with emphasis laid on some
The research will attempt to give an insight into financial
statement in banking industry, it will also discuss the impact of financial statement
on investment decision. It will also analyse the uses of accounting ratio for
investment purpose. However, the computation of financial statement and their
analysis and the study in general shall be limited to Lagos Branch of Union
Bank of Nigeria Plc.
Debts Pay Back
Period: This concepts is called “payout”
or pay off period. It is the number of years which a debt have to be paid.
This is the comparison of the operation of
the enterprises for two or more years or between similar firms within the same
industry could assist merge consideration.
Statement: This cash flows statement
duplets on overall state of cash flows and out flows of an enterprises during a
special period of time.
of Return: This methods comprises the
average of the after tax profit figure with the average amount invested.
Net Present Value:
Under this concepts, the cash flow are
discounted at specified return rate.
Cost of Capital
There are two concept of cost of capital these are average
cost of capital, marginal cost of capital. The former relate to the weighted
average cost of each constituent of the capital structure. The constituent is
the source of capital and include ordinary share capital reference share
capital and debenture. The latter represent the cost of an additional or next
increment of capital to be introduced into a business.
Decision: According to A.J. Curly (1979)
defined investment decision as the planning, executing and controlling of event
in order to achieve certain selected objectives.
Decision: This is the process after the
best alternative investment has been recommended, the next step is how to
Dividend Policy: This is the principles adopted by limited liability company
to determine the amount given to the shareholder as a form of return on their
investment in the company.
According to A.J. Curit (1979) defined investment decision
as the planning executing and controlling of event in order to achieve certain
Decision: This is the process after the
best alternative investment has been recommended the next step is how to
Dividend Policy: This is the principle adopted by limited liability company
to determine the amount given to the shareholders as a form of return on their
investment in the company.
Portfolio: Is the investment of an investors or a firm.
Business Risk: Is the threat that an event or action will adversely affect
a business ability to achieve its on going objectives.
Systematic Risk: This is a risk that caused by external factors in an
Specific Risk: This is an investment risk usually caused or within the
control of the management.